The Value Benefit of Convergence

The global Halal industry (estimated at USD 2.3 Trillion) & Islamic Finance industry (estimated at USD 1.3 Trillion) have been in the spotlight for some time now due to the rapidly increasing size, need and purchasing power of the global Muslim community (as a primary driver of growth). As both industries reach dizzying heights of business volume, and elicit a great deal of interest, the question that still remains is one of the imminent convergence of these two industries.

Whilst, within the ambit of commercial business, a lot is being done with regards to standardisation that is meant to aid this convergence. The developments, unfortunately, are not communicated or known to the general public. This in itself, has a limiting effect on hastening the pace of the much needed convergence of these two industries.

Why is this so?

Looking back at both industries, from a strategic planning perspective, there’s one key gap area, common to both industries that stand out. And that’s the gap of a strong, consumer based, value benefit!

In both the industries, the extremely high emphasis on process i.e. –“halal certification & sharia compliance”—has led to, some extent, alienation of the consumer. There is a distinct lack of understanding, by businesses, of critical issues that affect the individual consumers, such as:

  • Consumer intelligence ( which provides insight for business  planning),
  • Comprehension by the consumers (of the value concepts that Halal and Shari’ah symbolise)
  • Understanding the consumers’ latent emotional need for a specific value benefit from the products and services

Businesses, in both industries, undertook what is required to make the product adhere to the given, respective, standards and approached marketing, inside out
i.e. product development, standard compliance and then communicating the compliance as the value benefit.
In the process, they left aside critical knowledge (of what the consumer needs and wants) which is vitally necessary for a business to grow.

Is there a way forward?

The consumer world has changed. Within that the global Muslim community (as the mainstay for both Halal and Islamic Finance) has undergone a paradigm shift in their attitudes, perceptions and behaviour!

For starters the two industries need to get consumer-centric and have respective industry bodies undertake intensive education, at a consumer and industry level, on the two basic terms–Halal & Shari’ah compliant– in order to clearly establish the value benefit emerging for the processes of both.

Why is this a necessity?

I looked into how these words/terms are actually comprehended and, surprisingly, I came across a few references of how often “halal” is not understood clearly, and is associated only with food and how Muslims consumers themselves are, a bit in the dark due to lack of transparent information.

Through social media, a quick dip-stick research targetting Muslim professionals from various industries, comprising of various nationalities and cultural backgrounds was done. It clearly brought to fore the fact that the common man’s usage and comprehension of the terms are not the same all over the world.

In fact, the perception is that, “Halal is the process of slaughtering and packing meat and poultry products according to the (respective) country’s halal certification process” & “Shari’ah is Islamic law that governs financial products”.

This perception in itself clearly shows the lack of awareness and clarity on the concepts that Halal & Shari’ah embody.

But Halal and  Shari’ah are much more than this current comprehension!

The questions that arise are:

  1. Are Halal & Shari’ah compliance only processes then?
  2. Or are they “value concepts” that can be used to develop sustainable business strategies that deliver benefits?

Intriguing questions,as in the spirit of Shari’ah, a business is deemed halal if it is, end to end, adhering to certain principles and not just the manufacturing or slaughtering process.For eg: if a food brand, marketing canned beef obtains the halal certification, but its business operations like financing is using conventional finance and its organisational culture is not based on Islamic ethics and its governance is more regulatory than civic responsibility oriented–Is it truly Halal?

Similarly, if a financial product re-words, re-processes the ‘interest’ component in its product make up and ‘complies’ with known Islamic financial legalities and becomes ‘shariah-compliant’ does that make the product halal?

Questions to which,perhaps, there will be clear answers  once organisations undergo a cultural shift and look at Halal and Shari’ah as (critically needed) ethical values and focus on being consumer-centric in their business planning in order to be sustainably competitive across time.

Such a change will provide organisations a new business model that would be fully value centric than the current practice of being stakeholder profit centric.

 

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3 thoughts on “The Value Benefit of Convergence

  1. Salam Joy,

    Can I suggest that you have a chat with Profs’ Shahul Hamid and Zubair Hassan.

    Both have written extensively on the subject. ZH’s “Structure – Object mismatch” gives a really good overview while SH’s “Allah’s bottom line” is most instructive.

    Sorry for delayed response. As you know, it’s final exams week at INCEiF and between trying to study and “holding the mutiny back,” its been quite a madhouse….;)

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  2. Salam Joy,

    You pose and interesting question. My quick answer is they both need a common denominator, that is, to both adopt AIIOFI accounting standards.

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    1. Salaam Ashraf,
      Thank you for the quick response. Agree with you that they both need a commmon denominator, but is that denominator accounting standards? or should it be more a standard that adheres or keeps to the spirit of halal & sharia-based?
      Perhaps such a standard is possible to be developed provided leading bodies in both industries work towards it.
      Or then again, perhaps, thats lofty thinking on my part.

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