Malaysia’s halal industry’s contribution to the gross domestic product (GDP) is expected to rise exponentially from 7.8 per cent to 11 per cent by 2030. It is driven by its Muslim population of 20.8 million which is 63.5 per cent of its entire population—making it one of the beacons of economic growth and cultural pride – embodying the nation’s commitment to Islamic principles and global market competitiveness. The halal industry represents more than just a market segment, it encapsulates a multifaceted ecosystem where SMEs emerge as significant players in driving innovation and sustainability. 

As we dig deeper into the dynamics of the halal industry in Malaysia, we see that SMEs have a great influence, shaping market trends and consumer preferences while navigating the nooks and crannies of the regulatory frameworks and global trade opportunities.

Amidst the rising global demand for halal products and services, SMEs emerge as one of the sole players in injecting vibrancy and agility into the industry landscape. From family-owned enterprises operating halal food processing and servicing to tech startups revolutionising halal logistics – these businesses are embracing and adapting in a rapidly changing marketplace. 

The halal industry is here to stay as more and more people demand halal products and services, and business owners are to evolve and sustain the existing principles.

Market dynamics: Consumer preferences, frameworks, and global trade opportunities

As we look into the halal industry in Malaysia, we can see that there is a span of diverse sectors, ranging from food and beverages to cosmetics, pharmaceuticals, and logistics. The estimated global market value exceeds more than 2 trillion US dollars and is estimated to grow to 2.8 trillion US dollars in the coming years. 

The Islamic financial sectors lead in the halal segment in terms of value but food and beverages are commonly associated as prominent segments of the Muslim consumer markets. This is a major indication that the halal industry not only caters to the dietary needs of Muslims but also attracts non-Muslim consumers seeking ethical and hygienic products and services. Within the expansive ecosystem, SMEs act as the backbone, comprising over 80 per cent which is 7,306 SMEs are holders of Malaysia’s Halal Verification Certificate. From the nasi lemak, you bought near your house or office to the handcrafted hats you purchased from the antique boutique, 80 per cent chance they are halal certified. This showcases how SMEs diversify and authenticate their halal marketplace, reflecting the rich culture of Malaysian entrepreneurship.

Challenges and opportunities: Compliance with halal standards, access to financing, and market competition

Although it is a thriving industry, it also comes with great challenges. Navigating through the challenges and seizing opportunities are truly inherent to SMEs operating in the halal industry. One significant challenge is ensuring strict compliance with halal standards, which demands meticulous attention to detail throughout the production and manufacturing process. That is not the case with SMEs in Malaysia, as 80 per cent of the businesses are halal certified. SMEs must also invest in robust quality assurance measures and certification processes to uphold the integrity and discipline required for their products. 

A study found that a significant portion of SMEs in Malaysia, constituting 80 per cent, are halal-certified. Yet, an alarming 75 per cent falter in their initial certification attempts, primarily attributed to gaps in understanding and preparedness. This further proves the strict compliance with halal standards factors in the challenges faced by the business owners – and highlights the need for a more streamlined and comprehensible certification process. As mentioned earlier, the increasing global recognition of halal products, not just for their religious alignment but also for their safety, hygiene, and quality assurance offers a very lucrative market in Malaysia.

Government support and initiatives: Training programmes, financial assistance, and market development initiatives

Government support and initiatives come in handy for SMEs and business owners in achieving their halal qualification, which will help them bolster their capabilities and competitiveness within the halal industry. Through curated programmes, business owners can enhance their knowledge and skills in halal compliance, quality assurance, and business management. 

Not only that, these programmes are often facilitated by entities such as the Halal Industry Development Corporation (HDC), which helps business owners with the necessary tools and expertise to navigate regulatory requirements and ensure adherence to compliance with halal standards. The Malaysian government has also designated specific halal parks and zones, which provide infrastructure and facilities for these halal-certified businesses. SMEs that operate within these halal parks and zones benefit from a conducive environment for halal production and manufacturing and easier access to support their business services. By leveraging government support and initiatives, SMEs in the halal industry can overcome challenges, capitalise on opportunities, and contribute significantly to the sustainable development of Malaysia’s economy as part of the broader strategic vision for the halal industry’s growth and global prominence.

Collaboration between SMEs and the halal industry is the future

The empowerment of SMEs within Malaysia’s halal industry stands as one of the primary factors for sustainable economic growth and global competitiveness. The halal industry, which has been growing rapidly over the past years, signifies a cultural and economic resonance in Malaysia. Malaysia, the global leader in the halal industry that began as early as 1974, makes it the benchmark for other SMEs and businesses to pursue. 

Through leveraging innovation and technology, SMEs enhance production and manufacturing quality, streamline production processes, and access new markets in this case the halal industry. Collaborative efforts between SMEs, government bodies, and industry stakeholders are important in ensuring a conducive environment for SMEs to flourish and contribute to Malaysia’s global standing as a hub for halal products and services. 

As the halal industry continues to grow, the demand will continue to grow along, and the empowerment of SMEs specifically in the halal industry will foster and integrate different opportunities effectively. As we move forward, Malaysia will continue to be the benchmark and pioneer in the halal industry, to be the main example for other players within the industry. Through these efforts and a shared vision for development, SMEs will continue to be the driving force for Malaysia’s economic prosperity, solidifying its long-standing position as a leading player in the global halal market.