An SME’s Guide to Halal Exporting

An SME's Guide to Halal Exporting

“Halal” refers to the Islamic law concept meaning “allowed”, “permissible,” or legal. In contrast to this is “haram” which means “prohibited” or “forbidden”. One way to ensure consistent halal goods is by obtaining halal certification.

Malaysia’s halal industry is expected to grow to USD 11.2 billion (RM500 billion) by 2030. It is likely to contribute to 8.1% of the country’s Gross Domestic Product (GDP) by 2025. Besides strengthening and growing the domestic economy, the Malaysian Government, through the Ministry of International Trade and Industry (MITI) and its agencies, are spearheading the Halal Industry Master Plan 2030 (HIMP 2030). 

Beyond Malaysia’s shores are almost 2 billion Muslims. Frost & Sullivan projects the global halal economy to hit USD 4.96 trillion (RM22.34 trillion) by 2023. Through HIMP 2030, the Government aims to encourage the participation of Malaysian SMEs to tap into this growing market. In 2021, Malaysia’s halal exports reached RM36.30 billion, an increase of 19% from the previous year. For SMEs in Malaysia, exporting halal products presents a significant opportunity. 

Understanding Halal certification

The Malaysian Halal Certification is a document issued by the Islamic Development Department of Malaysia (JAKIM) which certifies that products by the recipient confirm with hukum Syarak or Islamic law. Eligible applicants are involved in the food & beverage (F&B) as well as consumer goods supply chain including:

  • Manufacturers or producers;
  • Distributors or traders;
  • Sub-contract manufacturers;
  • Repacking businesses;
  • F&B premises; and
  • Abattoirs and slaughterhouses.

The Halal certification process involves rigorous auditing of the production process, ingredients, and packaging. This certification represents the assurance that the products meet the religious requirements of the target market. It also helps to build trust and credibility with customers.

Identifying target markets

Before exporting Halal products and services, SMEs must conduct extensive research to identify potential target markets and their requirements. SMEs should consider cultural and regulatory differences when adapting their products and services for different markets. 

While Islamic law is generally similar worldwide, one must understand the different nuances among adherents of the Syafie, Maliki, Hanbali, and Hanafi schools. In addition to that, in some countries, the Islamic administration is part of the government’s machinery. For example, Malaysia, Saudi Arabia, United Arab Emirates, Indonesia, Maldives, Singapore, and Brunei have government-backed Halal certifications. Other countries – for example, Australia, Bosnia & Herzegovina, Canada, China, Kazakhstan, Türkiye, and Pakistan – do not have such mechanisms. Instead, the certifications in these countries are issued by private organisations or entities. No doubt these entities are working together to develop a uniform certification requirement.

SMEs may seek the advice of export consultants, especially those focusing on Halal export, who stay abreast with the latest developments in the respective markets to keep them updated. Besides that, they can cultivate relationships with the Halal certification bodies, missions to Malaysia, as well as bilateral chambers of commerce. Halal trade shows, too, are good avenues to explore the market. Returning home, Malaysia has the Malaysia International Halal Showcase (MIHAS) organised by the Malaysia External Trade Development Corporation (MATRADE).

Meeting Halal export standards

Exporting Halal products and services requires SMEs to comply with the Halal import regulations of their target markets, including proper labelling, documentation, and Halal integrity throughout the supply chain. This includes verifying that all the ingredients and processes used in producing the product are Halal.

Meeting these standards may require additional investments in research and development (R&D), quality control, and supply chain management. However, these investments can help SMEs establish a strong reputation for Halal compliance and build trust with regulatory bodies and customers.

Building a strong Halal brand

Export denotes operating in a global market space. SMEs need to leverage digital marketing tools, such as social media and e-commerce platforms, which can also help them reach a wider audience. A solid online presence can help SMEs showcase their Halal products and certifications, engage with customers, and build relationships with potential partners and distributors.

Maintaining customer satisfaction and product excellence will lead to a positive reputation in the market. Certifications and testimonials can help SMEs build trust and reputation in the Halal market. SMEs should consider obtaining other relevant certifications, such as ISO 9001 or Hazard Analysis Critical Control Point (HACCP), which can demonstrate their commitment to quality and safety.

Financing Halal exports

Every year the Malaysian government offers various funding and incentives for Halal exporting through agencies such as MATRADE and the Halal Industry Development Corporation (HDC). Private financing complements government assistance. Financial institutions and alternative financing platforms offer long- and short-term financing options for SMEs looking to expand their working capital, and raise funds through equity crowdfunding (ECF), or trade financing. 

Besides taking into account the working and rotating capital requirements to manufacture and export their goods, SMEs need to continuously consider other financial risks often associated with Halal exporting. This includes currency fluctuations and payment defaults by customers. 

The other consideration is the logistics provider and packaging. While goods that enter the distribution channel are no longer in the control of the exporters, exporting SMEs need to manage contamination risk. It may be prudent to protect themselves against such risks through thorough contract negotiations and insurance protection.

As lucrative as this market may be, many things must be considered. This guide merely presents a broad overview of Halal exporting for Malaysian SMEs. There are different stages which one needs to complete beginning with examining the SME’s capacity to expand and grow. Obtaining the certification is the next milestone. That entails a lot of preparation such as training, vaccination, and documentation. A journey of a thousand miles begins with a single step. Resources and opportunities are aplenty.