In October last year, I had a chance to attend to the Global Islamic Economy Summit. This is a summit that brings together stakeholders from regions and cultural boundaries to directly address the greatest challenges and opportunities in the Islamic economy. Islamic banking is the frontier of this economy in Africa. It continues to grow within the region, with emergence of full-fledged businesses under Islamic banking, as well as conventional banking players opening departments that deal in Islamic banking.
The Islamic Research and Training Institute defines Islamic Economy as that branch of knowledge which helps realize human well-being through an allocation and distribution of scarce resources that is in conformity with Islamic teachings without unduly curbing individual freedom or creating continued macroeconomic and ecological imbalances.
It is important to highlight that Islamic economy is not an exclusive consumers of Islamic faith. It is only the means of production / development and marketing that follows Islamic principles, but by and large, all consumers can try these products and services. For instance, there is a growing acceptance of Islamic banking, among non-Muslims. Hence, as consumers within the continent continue on the exposure journey to international, regional and local brands, Islamic economy is also an area of consideration.
In Africa, there are about 469 Million Muslims, making about up about 39%. With the growing interest in Islamic Economy, there is a need to address the consumer perspective. While, the number provides a ready and robust market for Islamic economy segment, it is important to understand how this interplays with rest of the economy. However, there is a need to continually:
- Educate the consumers within the continent that while Islamic products are based on Islamic principles, they are not meant only for Muslims. For instance;
- Halal products are procured and prepared in line with Islamic principles, but every consumer can purchase and consumer them.
- Halal cosmetics are manufactured in line with the Islamic principles, e.g. does not contain alcoholic ingredients. However, they are available for sale to all consumers.
Providing continuous education on the principles and procedures for offering consumer products in a halal compliant manner will help in addressing the current shortcoming across the continent.
- That Islamic finance (Islamic banking, Islamic Insurance / Takaful …etc.) are based on principle of profit sharing, not by interest – and customers, both Muslims and non-Muslims can use these products and services. This is a growing area, with a lot of interest across the continent. Islamic banking is gaining traction with uptake of products across consumer segments.
The consumer market within the continent therefore needs pathways to developing products and services that would meet the growing demand of the Islamic economy. At the moment, countries within the continent are trying to integrate and disseminate the products to consumers. Countries such as Sudan, Egypt, Somalia, Togo, Nigeria, are already at forefront of developing ecosystems that will support this area of the economy, as highlighted in the table below. Kenya could be a forerunner on the finance part with the admission of Capital Markets Authority (CMA) to the Council of the Islamic Financial Services Board (IFSB) as an associate member of the board.
Salam Gateway, the global reference for industry intelligence on Islamic Economy, highlights key sectors that are driving this economy. The table below provides an overview of the global market and how Africa market spans out.
|Sector||Global Muslim Market (2015)||Top Muslim Consumer in Africa||Best Developed Ecosystem in Africa|
|Halal Food||· $1,173 Bn
· 16.6% of Global Expenditure
|· Egypt – $77.5Bn
· Nigeria – $41.2Bn
|Islamic Finance||· Islamic Finance Assets – $2,004Bn
· Islamic Banking Assets– $1,451Bn
|Halal Travel||· Outbound travel – $151Bn
· 11.2% of Global expenditure
|· Nigeria – $4.2Bn||–|
|Modest Fashion||· $243Bn Existing Muslim market||· Nigeria – $16.13Bn
· Egypt – $10.88Bn
|Halal Media and Recreation||· $189Bn spends
· 5.1% of Global expenditure
|· Egypt – $6.1Bn||–|
|Halal Pharmaceuticals and Cosmetics||Pharmaceuticals
· 6.6% of Global Expenditure
|· Algeria – $3.6 Bn||· Egypt
· $56Bn – 7.4% of the Global Expenditure
Source: State of the Global Islamic Economy Report 2016/17; Thomson Reuters
Overall, there is a growing interest in the Islamic economy across sectors. This will not only provide the Muslim populations in Africa with a choice, but also the whole consumer landscapes a change to evolve.
As highlighted above, the continent still has a long way in meeting the demands for the Islamic economy. Creating and meeting local demand will be the initial and key factor to stir demand for such products, before attracting foreign interest. In other words, the local Muslim population should be the first to drive demand and growth for local halal products and services. For instance, the need to drive the demand for Islamic tourism products, before attracting tourist from the Middle East, Eastern Europe or countries such as Malaysia & Indonesia. North Africa is predominantly Muslim population. It is important as every country in Sub-Sahara Africa has a Muslim population, though in varying proportions. Nigeria, the largest economy within the continent, also has a significant population, and is also a key driver in pushing the Islamic economy within the continent.