Islamic economy: How have govt policies/regulations evolved in the past decade?

The Islamic economy has gone from strength to strength in the past 10 years. One key driving element has been a push from the top. 

The State of the Global Islamic Economy Report 2023/24 has identified that government stakeholders and authorities have been engaged for two primary purposes during the past decade. First is the support of regulatory and compliance integrity and the enablement of halal products and Islamic finance. The second has been to drive economic value through trade facilitation and the widening of financial inclusion coverage.

The report has identified select instances of government engagement through the past decade. These are as follows:

• The market and trade of halal products has been a truly global supply chain. The USA, Brazil, France, Germany, the UK, Thailand, and Australia have, for over a decade, been the leading exporters and continue efforts to strengthen the halal export markets.

Meanwhile, in the past decade, major OIC countries have also begun to engage in halal trade, on account of economic diversification, food security, and domestic job creation goals.

Saudi Arabia and Indonesia, in particular, are coupling their halal compliance regulations with economic development and investment agencies to drive the economic opportunity agenda. 

• Halal products compliance has been the second key concern of government policymakers, especially from the 57 Organization of Islamic Cooperation (OIC) member countries, for more than a decade now, with SMIIC (the multilateral body responsible for halal standards for OIC countries) struggling to get alignment toward a single halal standard for various reasons.

The result is that halal compliance is currently inefficient in facilitating competitive trade globally. The largest halal markets, however, are now developing various bilateral and multilateral mutual recognitions, with some coordinating with SMIIC, which should better facilitate trade. 

• The Islamic Finance space, which has been active since the last decade with an established regulatory ecosystem and enablers in the form of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Islamic Financial Services Board (IFSB), and IILM, has been addressing some key governance, innovation, and social impact areas.

AAOIFI’s Waqf governance standards, Sharia Standard 59, and Crowdfunding standards are a reflection of these developments.