Halal Industry - Hussein Elasrag - ebook

The global halal market has emerged as a new growth sector in the global economy and is creating a strong presence in developed countries. The importance of this book comes from the importance of using halal and its effects on the material and spiritual life of the believers and its jurisprudential and religious dimensions on the one hand and the necessity to take advantage of new studies and modern technology in the production and monitoring of halal products on the other hand, as well as the development of exports and imports of various products labeled halal in the area of international trade and economics, and also international significant turnover in this field. This book provides a deep understanding of the Halal Industry and brings you the latest developments and trends from this economy while also highlighting the future direction of this industry.

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Halal Industry: Key Challenges and Opportunities

Hussein Elasrag

Copyright © 2017 Hussein Elasrag

All rights reserved.

The State of the Global Islamic Economy Report 2017/18 estimates that Global Muslim spend across lifestyle sectors was $2 trillion in 2016, while the Islamic Finance sector has $2.2 trillion in total assets. Food and beverage leads Muslim spend by category, at $1.24 trillion, followed by clothing and apparel at $254 billion, media and entertainment at $198 billion, travel at $169 billion, and spending on pharmaceuticals and cosmetics at $83 billion and $57.4 billion respectively. This book provides a deep understanding of Challenges and Opportunities  of the Halal industry .




Sources of Shari'ah law







Issues relating to interpretation and application of  Shari'ah law

Key Shari'ah principles and prohibitions relevant to finance


The Halal Economy and The Market Opportunity of the Muslim World


Key factors driving growth

Global Halal Standard

New Muslim consumers

The halal economy

A growing market force



Segments of the Halal Market


Global Halal Food: Key Challenges and Opportunities

Challenges  (Thomson Reuters and Dinar Standard 2016)

Opportunities (Thomson Reuters and Dinar Standard 2016)

Pharmaceutical and health products


Pharmaceuticals and Cosmetics Sector: Key Challenges and Opportunities

Challenges (Thomson Reuters and Dinar Standard 2016)

Opportunities (Thomson Reuters and Dinar Standard 2016)

Tourism and Travel

Tourism and Travel: Key Challenges and Opportunities

Challenges  (Thomson Reuters and Dinar Standard 2016)

Chapter 4

The Challenges of Developing the Halal Industry






It must first be stated that the Islamic dietary and consumption system is different and unique compared to other ethnic dietary systems. The world community has now begun to understand the importance of the Muslims requirement for food and other consumption known as halal. The market for certified halal food and products is growing robustly, both domestically and internationally. Although the term halal has never attracted as much attention as in recent times, today, wherever there are Muslim consumers whose tastes and preferences are governed by halal rules on food specification, a halal food market exists. Every Muslim must ensure that what they eat comes from a halal source. This does not mean only to check the ingredients per se, but also to ensure that the whole process is in accordance with Shari'ah principles. (Zakaria 2008)

Halal is an Arabic word meaning lawful and permitted. This Halal concept comes from the Holy Quran which it uses to describe objects and actions. Islam is a natural way of life and encompasses the concept of an economic system based on human cooperation and brotherhood, which is based on the consultation and dietary laws for all humanity. Halal consists of anything that is free from any component that Muslims are prohibited from consuming. This can be classified as 'pork free' in its physical existence, including food substances such as gelatin, enzymes, lecithin and glycerin as well additives such as flavorings and coloring.(Zakaria 2008, Hj Hassan 2013)

Halal is a Quranic term that means permitted, allowed, lawful or legal. Its opposite is haram (forbidden, unlawful or illegal). According to Shari’ah, all issues concerning Halal or Haram and even all disputes should be referred to Quran and Sunnah. Halal and Haram are universal terms that apply to all aspects of human life whether is related to his ibadat or muamalat or mua’sharah. Halal may be defined as an act, object or conduct over which the individual has freedom of choice and its exercise does not carry either a reward or a punishment. Halal may have been identified by explicit evidence in the Shari’ah or by reference to the presumption of permissibility (ibahah). At the global level, the Food and Agriculture Organization of the United Nations has prepared general guidelines for use of the term halal to be adopted by member countries. (Ager, Abdullah et al.)

Basic principles for Halal products are:(Malboobi and Malboobi 2012)

1. Being Halal or Haram products is the function of being lawful or unlawful with respect to Divine orders.

2. Assigning Halal or Haram depends on being beneficial or harmful, respectively.

3. In the context of the above concepts, assigned orders in Shari'ah are both fixed and variable rules based on the state of subjects on specific times and places.

4. Orders in Shari'ah are ranked based on the degree of being beneficial or harmful while the best choice is preferred whenever it is necessary.

5. Some controls and governing regulations such as “La zirar” (no harm to human), Haraj (the existence of serious threat and/or constraints), and urgency rules occasionally disapprove the orders.

Therefore, especially Muslims are responsible to embrace of this order more than anyone. This is a faith issue for them. Due to it is a faith issue of Muslims, non-Muslims can never deal with Halal and Tayyib standardization and certification. No one can abuse this for their commercial and ideology. Non-Muslims can never be involved in Halal and Tayyib certification as they can’t be an imam at the mosque in prayers.

It is thus important for the world community, both Muslim and non-Muslim, to recognize the potential of the Halal industry. This is because delving into an emerging billion-dollar industry such as the Halal industry could help to further develop the economy just as it would serve to solve some of the long-standing problems faced by the Muslim community. There are reasons why the Halal industry is important to world’s growth as a multi-racial society. Many Muslims and non-Muslims consumers still do not understand the spirit of Shari'ah governing these products. Halal principles are not confined to the strictly religious, but involve health, cleanliness and safety. This book will help to deepen understanding of the concept of Halal so as to familiarize non-Muslims about Halal principles and products.


Sources of Shari'ah law

Shari'ah law is derived from a number of primary and secondary sources.(Allen&OveryLLP 2009)


The Qur'an is a primary source of law and is believed by Muslims to contain the word of God as revealed to the Prophet Mohammed. Evidence found in other sources of Shari'ah law is subject to the Qur'an.


Sunnah literally means "well known path". The Sunnah is a primary source of law and comprises traditional accounts of what the Prophet Mohammed said or did during his life

Which have legal content. Sunnah also comprises the sayings of others tacitly approved by the Prophet's silence.


A further primary source of law is the narrative record of sayings and actions of the Prophet Mohammed known as hadith (plural ahadith). The extent to which sunnah is derived or differentiated from ahadith depends on the context and school of thought being considered.


Qiyas represents the process of reasoning whereby the principles found in the Qur'an and sunnah are extended to new cases by analogy.


Ijma represents the consensus of the Islamic community (whether at a local or global academic level) on a particular issue.


Ijtihad is the interpretation and the opinion of Islamic jurists on a particular issue. Qiyas,ijma and ijtihad are all secondary sources of Shari'ah law.

Issues relating to interpretation and application of  Shari'ah law

Since Shari'ah law is not a single codified body of law and is open to interpretation, the opinions of Shari'ah scholars may differ on the same question of Shari'ah law depending on the school of thought to which particular scholars belong. In addition, scholars' views on questions of Shari'ah law may change over time. This can lead to uncertainty and inconsistency of interpretation and application of Shari'ah law across the Islamic world.(Allen&OveryLLP 2009, Ayub 2009)

Key Shari'ah principles and prohibitions relevant to finance

There are a number of key Shari'ah principles and prohibitions relevant to finance and commercial transactions which distinguish Islamic finance from the conventional forms. For completeness, it should be mentioned that there are two main branches within Islam: sunnism and shiaism. The majority of Muslims are sunni and the following is limited to the discussion of the general Shari'ah principles relating to Islamic finance within sunni jurisprudence. The key Shari'ah principles which underpin Islamic finance, and have led to the creation of a separate finance industry, are as follows:(Allen&OveryLLP 2009)

Prohibition on usury and interest (riba)

Prohibition of interest. Prohibition of riba, a term literally meaning “an excess” and interpreted as “any unjustifiable increase of capital whether in loans or sales” is the central tenet of the system. More precisely, any positive, fixed, predetermined rate tied to the maturity and the amount of principal (i.e., guaranteed regardless of the performance of the investment) is considered riba and is prohibited. The general consensus among Islamic scholars is that riba covers not only Usury but also the charging of “interest” as widely practiced. This prohibition is based on arguments of social justice, equality, and property rights. Islam encourages the earning of profits but forbids the charging of interest because profits, determined ex post, symbolize successful entrepreneurship and creation of additional wealth whereas interest, determined ex ante, is a cost that is accrued irrespective of the outcome of business operations and may not create wealth if there are business losses. Social justice demands that borrowers and lenders share rewards as well as losses in an equitable fashion and that the process of wealth accumulation and distribution in the economy be fair and representative of true productivity.

Under the Shari'ah, it is not permissible to charge, pay or receive interest. The Shari'ah does not recognize the time value of money and it is therefore not permissible to make money by lending it. Money must be used to create real economic value and it is only permissible to earn a return from investing money in permissible commercial activities which involve the financier or investor taking some commercial risk. This prohibition is the main driving force behind the development of the modern Islamic finance industry. Riba can take one of two forms: riba al- naseeyah and riba al-fadl.(Dewar and Hussain 2011)

1- Riba al-naseeyah is the amount of excess received by a lender in addition to the capital amount lent. This type of riba is comparable to the traditional concept of interest in conventional lending


2- The second type, riba al-fadl, is excess compensation without any form of consideration in return.

In modern finance, riba al-fadl could be applicable to several exchange of commodities contracts.

The idea is that when compensation is paid, it should be justified or be set against a specific activity and the return should also be associated with a specific risk. Therefore when parties exchange commodities of similar value and one party pays excessive compensation to the other party, this is

Considered riba.

Prohibition on realising a gain from speculation (mayseer)

It is not permissible to earn a profit from speculation. Gambling is therefore not permitted under Shari'ah. Any contracts or arrangements which involve speculation are also not permitted. That said, it is accepted under the Shari'ah that there is an element of speculation in most commercial arrangements and, unlike the absolute prohibition of interest, it is a question of the degree of speculation involved and whether the intention behind the transaction is to realize a gain from some productive effort or purely speculation.

The distinction between prohibited speculation and legitimate commercial speculation is not always clear in practice and there are examples where it can be difficult to distinguish between the two. For example, it is generally accepted that it is permissible to make an equity investment in a company  Engaging in a business activity that is permissible under the Shari'ah with a view to realizing future dividends and capital gains on the investment. There is of course a degree of commercial speculation involved about the future prospects of the company when an investor makes an equity investment, but whether such speculation is permissible or not would depend on the intention of the investor, i.e. was the intention to make a quick profit by speculating in the likely movement of the share price over a very short period of time (as is arguably the case with day trading), or was the decision made on the basis of careful evaluation of the company's past results and future prospects? At the other end of the spectrum, equity derivatives such as index-linked derivatives are generally viewed as unacceptable under Shari'ah because they involve speculation on the movement of an equity index.(Allen&OveryLLP 2009)

No uncertainty (gharar) in commercial transactions

Certainty of terms in any transaction is a key requirement under the Shari'ah. Again, as with speculation, a degree of commercial uncertainty is acceptable but there must not be any uncertainty about the key terms of the transaction. For example, in a transaction for the sale of assets, the sale contract should set out a clear description of the assets being sold, the sale price and the time for delivering the assets to the purchaser. Similarly, a leasing contract needs to set out clearly the assets which are being leased, the duration of the lease and the rent payable under the lease. One of the reasons that conventional insurance contracts are not considered permissible under the Shari'ah is that there is no certainty as to when a claim will be paid, given that there is no way of knowing if and when the insured event will occur. In the context of modern day Islamic finance, key examples of gharar are:(Uusmani 2002, Allen&OveryLLP 2009)

(a)  Advising a customer to buy shares of a particular company that is the subject of a takeover bid, on the grounds that its share price can be expected to rise;

(b) Buying a house, the price of which is to be specified in the future;

(c)  When the subject matter or specifications to a contract are unknown; and