Tap into Halal Economy with Islamic Financing Solutions

Muslims across the world spent USD2.07 (RM9.27 trillion) trillion back in 2021. Consumer spending on halal products is projected to hit USD4.96 trillion (RM22.34 trillion) by 2030. Datuk Seri Ahmad Zahid Hamidi, Deputy Prime Minister I and Minister of Rural and Regional Development, remarked that Malaysia’s domestic halal market is expected to grow to RM400 billion by 2030 – and contribute 11% of the country’s gross domestic product (GDP). To realise that goal, the Halal Development Corp Bhd (HDC) aims to assist up to 50,000 small and medium enterprises (SMEs) to get certified by 2030.


When it comes to the halal economy, food and beverage (F&B) as well as Islamic services come to mind. These services include Islamic finance, takaful, Islamic banking, and even Islamic Financial Technology (iFinTech) solutions providers. In recent years, the halal industry expanded into new sectors including logistics, fashion, travel, hospitality services, pharmaceuticals, healthcare, medical devices, and cosmetics. It is not surprising too that the demand for these products and services comes from both Muslim and non-Muslim consumers.


The Halal economy may have started as fardhu kifayah (a commandment not specific to every Muslim) meant to cater to the Muslims’ religious obligations. However, Halal assurance began to capture consumer interest. The halal certification assures that the whole processing system — spanning product development, purchasing, production, quality control, and warehousing — conforms to strict handling standards.


While the world entered into lockdown as a result of the COVID-19 pandemic, new frontiers present themselves to entrepreneurs and businesses. Among these new areas are halal cloud kitchens and halal food delivery services. In response to the proactive vaccination drives by the various governments, consumers – Muslim and non-Muslim alike – are much more aware of pharmaceuticals.


The future for the Halal economy – both global and domestic – is optimistic. SMEs would benefit from this opportunity as well as the Government’s policy for the Halal industry. This is even reflected by the RM167.5 million allocation in the 2023 Government Budget for various grants and programmes earmarked for the sector.


SMEs looking to expand their business and capabilities may also turn to Shariah-compliant financing products offered by Funding Societies. These financing products are open to any businesses whose principal activities comply with Shariah. That means the businesses cannot be engaged in activities deemed haram (impermissible) under Islamic law which includes trade, manufacturing, and distribution of alcohol, liquor, or even gambling.


With Funding Societies’ Trade Financing-i, SMEs do not need to prepare financing collaterals. The quick application provides SMEs with no hidden fees as well as flexible repayment tenures suitable for their business needs. Criteria that the SME needs to meet are: 



This Islamic trade financing facility would help SMEs better manage their cash flow by freeing up cash tied to invoices.


Besides that, SMEs can boost their working capital with Business Term Financing-i (BTF-i). To be eligible, the SME needs to be registered with the Companies Commission of Malaysia (SSM), at least 30% being owned by Malaysians, operating for at least 12 months, and register an annual revenue of at least RM1,000,000 annual revenue. Under the Micro Financing-i scheme, the SME may receive financing up to RM1 million without collateral. The profit rate of this facility is from 1% per month.


SMEs looking for a smaller quantum can consider the Micro Financing-i (MF-i). Under this financing facility, they may receive financing up to RM200,000 for a maximum tenure of 18 months. The profit rate for MF-i is from 0.8%. Akin to BTF-i, the SME needs to be registered with the Companies Commission of Malaysia (SSM), at least 30% being owned by Malaysians, operating for at least 6 months, and register an annual revenue of at least RM60,000.


Through this boost in working capital, SMEs may invest in the acquisition of new equipment to boost their capabilities. Some SMEs may consider using this financing to cover the costs of getting Halal certified by the relevant authorities.