Businesses are Bullish on Prospects for Sharia-compliant Products and Services
A global survey of C-level and senior executives shows that demand for Sharia-orientated products and services is strong, and expected to grow, according to research by Economist Intelligence Unit (EIU). Among the reasons: expanding Muslim populations, rising purchasing power, shifting consumption patterns, and a broader range of products and services on offer. The range of Sharia-orientated products and services is broadening, from food and Islamic finance products to pharmaceuticals, fashion and tourism, among others.
The EIU carried out 13 in-depth interviews with executives of companies from the Sharia industry to produce the report, ‘The Sharia-Conscious Consumer: Driving Demand’, which is commissioned by Kuwait Finance House. “The research highlights the global nature of this business and the evolving dynamics across different regions,” said Trevor McFarlane, senior editor for continental Europe, the Middle East and Africa for the EIU, who directed the study.
The study is based on an online survey of 398 executives worldwide. Here are the key findings of the report:
Islamic finance is seen as an important enabler for the broader industry. More than a half (55%) of survey respondents cite access to Sharia-compliant finance as important to their business. An even higher percentage (58%) says that easy access to such finance is crucial for their customers as well.
Demand for Islamic bonds (or sukuk) is expected to grow. Nearly 30% of survey respondents say they expect demand for sukuk to grow strongly, a view shared especially by those who work in finance. With international banks, particularly European ones, providing less loan capital in order to meet stricter risk management guidelines, banks and other lenders in the Middle East and north Africa (MENA) are expected to take up the slack. Their Sharia-compliant lending is expected to focus on financing infrastructure and construction. This points toward growing future demand for Islamic bonds to finance large-scale projects, particularly around the Gulf.
In future, firms will have to show that they share the values of integrity and community to which Muslims aspire if they are to win the Islamic market. When considering what best promotes demand for goods and services that comply with Sharia, over half (52%) of survey respondents point to a reputation for honesty and integrity on the part of the company offering the goods or services.