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A decade's journey: Mapping the Islamic economy & path ahead

The Islamic economy has endured a challenging ride over the past 10 years. While it has seen massive investments, strategic partnerships, and success stories, it has also faced its fair share of challenges. 

Overall, however, the Islamic economy has been on an impressive upward trend. According to the State of the Global Islamic Economy (SGIE) Report 2023/24, the global Islamic economy has grown from a $1.62 trillion consumer-spending market in 2012, to $2.29 trillion in 2023, at a growth rate of over 41%.

Much of this growth has been driven by a young and fast-growing population that extends beyond the core two billion Muslim consumers to encompass a wider global ethical consumer market.

Muslim lifestyle wins big

Various social, political, and technological developments have shaped the Islamic economy over the past 10 years, including the rise of digital entrepreneurship and the global social agenda. Macro developments led by Saudi Arabia’s Vision 2030, Dubai Expo, Qatar’s FIFA World Cup, and BRICS expansion, have also driven confidence in Islamic economy markets.

However, across the Muslim lifestyle economy, a whole genre of Islamic culturally themed entertainment icons - such as Omar and Hana from the Malaysian animated TV series, and Ertugrul, the hero of the Turkish historical fiction TV series - has been driving affinity toward the Islamic economy, especially among the youth.

In the same way, the growth of modest fashion, with the introduction of the Nike Pro Hijab in 2017 and Adidas' modest swimwear collection in 2021 to mainstream fashion shows, has fostered this affinity. 

“Modest fashion has done something to the Islamic economy that no other sector has done; it has really made it mainstream. We see brands from Dolce & Gabbana to our OIC [Organisation of Islamic Cooperation countries’] base of domestic brands, where a lot of entrepreneurships are emerging,” Rafi-uddin Shikoh, CEO and managing director at DinarStandard said during the 2023/24 SGIE Report launch.

Additionally, the proliferation of digital media has been strengthening faith-based identities. For example, prayer app MuslimPro reached almost 100 million users in 2023, up from 10 million in 2017, while Texas-based Yaqeen Institute’s video content achieved 300 million minutes of watchtime in 2022. 

These achievements have brought about more pride in the Muslim lifestyle economy, said Shikoh. 

“All of this has helped drive investment activity. It’s great to see those successes and how they’ve led up to where we are today.”

Islamic economy's socio-economic impact 

Given the Islamic economy’s principle of enabling a just and equitable economic system, it indeed can be a force for good in driving original solutions. Its reach in this regard has been limited to date. However, there are promising signs. 

For example, the Islamic finance sector has started to support clean energy investments with the issuances of multiple green sukuks globally. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has also issued its Environmental, Social, and Governance (ESG) standard for the industry, while Malaysia has issued Shariah-compliant carbon credit trading policies. 

Moreover, Islamic social finance mechanisms, especially those supported by social fintech platforms such as, are contributing to poverty alleviation. At the same time, sustainable solutions like Islamic micro-financing and crowdfunding, as well as social commerce platforms for SMEs, such as Malaysia’s Ethis and Indonesia’s Evermos, are enabling job creation and economic empowerment.

Promising growth across Islamic economy sectors

Over the past decade, global Islamic assets have more than doubled, growing from $1.35 trillion in 2012 to $3.96 trillion in 2022, according to the 10th edition of the SGIE Report.

In this period, Muslim spending on food increased from $1.08 trillion to $1.4 trillion; on modest fashion from $224 billion to $318 billion, and on cosmetics from $26 billion to $84 billion. 

In the pharmaceuticals sector, Muslim spending went up from $70 billion to $108 billion, and in media and recreation from $151 billion to $247 billion. 

Meanwhile, Muslim spending on travel continues to recover in the aftermath of the Covid-19 pandemic, having reached $133 billion in 2022, compared to $137 billion in 2012.

Mixed successes

The Islamic economy has recorded significant investment activity in the past decade. 

In the halal food sector, the establishment of the Halal Product Development Company by Saudi Arabia’s Public Investment Fund in 2022 has been a major indicator and is expected to further ignite activity in this space. 

Western halal food markets have also seen regular venture capital and private equity funding, with US-based American Halal Co., the UK’s Janan Halal Meats, and France’s Isla Delice showing a positive trajectory. 

New York-based The Halal Guys also represents a successful quick-service restaurant franchise model that now has almost 100 branches, as it continues to grow towards its goal of 400 worldwide outlets.

While the promise of technology-based halal products such as e-commerce and e-trade has attracted investments, few startups have managed to take off. Malaysia-based Zilzar, DagangHalal, AladdinStreet, and Serunai have all had mixed successes so far. However, select business models represent future areas of innovation, namely Switzerland-Singapore based B2B ecommerce platform OneAgrix.

Modest fashion has also shown strong investment activity over the past decade, driven by global e-commerce sales. Investments in Turkey’s Modanisa, Malaysia’s FashionValet, US’s Haute Hijab, and Indonesia’s Hijup indicate these growing segment opportunities.

A cautionary tale was the shutting down of Modist in 2020. The modest luxury-fashion brand faced structural challenges after raising over $15 million in venture capital.

Notably, the Islamic fintech startup ecosystem has become the most vibrant investment segment across the Islamic economy. With 375 Islamic fintechs tracked in the latest SGIE Report, the opportunity to serve the largely unbanked population of Islamic markets is ripe. Investments in US-based Shariah-compliant fintech Wahed, UAE P2P lending platform Beehive, German challenger bank Insha, and Canadian halal financial solutions provider Manzil, are all strong indicators.

SGIE Report’s contribution to the Islamic economy

Since its launch in 2013, the SGIE Report has been covering the global Islamic economy spread across seven sectors, presenting opportunities and challenges. 

Produced by DinarStandard with the support of Dubai’s Department of Economy and Tourism, the report has become a global reference point on the Islamic economy, having reached more than 101,000 readers across 85 countries. 

“When we launched the first SGIE report, 30% of our conviction was based on data from actual case studies and 70% was based on an intelligent 'hunch' – connecting the dots of the fundamentals and market demand associated with the Muslim lifestyle, also known as the Islamic economy. Reflecting on the last 10 years, I would say our hunch is playing out as we imagined,” Dr. Sayd Farook, senior partner for Oceania and GCC at DinarStandard tells Salaam Gateway.

“From shaping economic strategies of countries such as Indonesia, Malaysia, Morocco, Nigeria to Saudi, Bahrain, and the UAE, to driving start-up business models, we've seen the full range of implementation and mobilisation of capital like any other major sector. This means there is something there as is evident from the numerous investments made in this space.” 

By providing empirically verified data of the Islamic economy’s demand drivers, SGIE reports have given the confidence to start-ups, investors, and governments to build their propositions addressing the Islamic economy.

“We've seen hundreds of start-ups build their business cases based on SGIE data. Some of these start-ups have now reached valuations upwards of $300 million and some have secured more than a million customers,” explains Dr. Farook. 

What will the next decade bring?

In the next 10 years, the Islamic economy is expected to be an even bigger enabler of socio-economic prosperity, bringing unique solutions to global inequities, according to the report. 

This vision builds on the successes of the past decade and leverages the potential anchored by a universally relevant, ethical economic system as well as an estimated 25% of the world’s population. 

Consequently, we are likely to see the development of a global food supply chain that adopts halal ethical labor and animal welfare practices, one that is environmentally sustainable, and champions healthy consumption. 

We may also see the evolution of an Islamic financial ecosystem that enables equitable financing across enterprises of all sizes and increases financial inclusion. 

Furthermore, lifestyle sectors are set to become anchored in digital media services, fashion, and tourism to champion family-friendly content and destination innovations.

Finally, the report foresees more Islamic economy partnerships with other faith-based communities to collaboratively solve global socio-economic challenges.


Islamic Economy
Halal food