The Halal industry is witnessing an exponential growth with various projections stating the Halal economy as a multitrillion dollar opportunity. BILAL PARVAIZ delves deeper.
As the Halal industry continues to globalize, it should harness the socially responsible funding mechanisms of Islamic finance and strive to produce goods and services which are Halal Tayyab. By capitalizing on the synergies between the two industries, there is an opportunity to foster a truly sustainable Halal economy — an economy in which the sum of its parts is not only Shariah compliant but also placed in a divine order.
The supply of Halal goods and services is dependent on a robust Halal ecosystem, with the primary criteria being Halal compliant. The credibility and trust around the Halal certification are of utmost importance; with Malaysia taking the lead in terms of the development of a world-class Halal ecosystem via Halal Development Corporation under the Ministry of International Trade and Industry. This achievement by Malaysia not only provides a greater sense of credibility but also offers a holistic ecosystem of facilitations supplementing the growth of the Halal industry and offers a degree of standardization, hence ensuring consumer trust and confidence.
Standard Chartered Saadiq, as a leading international Islamic network spanning across Asia, Africa and the Middle East, launched the Halal360 proposition in 2020. With an aim to connect Halal trade corridors and ensuring businesses across geographies are able to leverage our unparalleled Islamic network, the Islamic supply chain solutions are a key enabler of this strategic intent.
This unique proposition, based on a fully digital, straight-through processing model, brings about the following benefits:
• Supports suppliers across various geographies
• Provides a digital platform with straight-through processing
• Eliminates physical documentation and allows for integration to various enterprise resource planning platforms
• Complies with environmental, social and governance (ESG) criteria whereby the bank and buyer can work with suppliers on improving ESG practices, moving toward a net-zero target achievement, and;
• Provides preferential treatment for SME vendors, hence creating economic sustainability and uplifting participation.
The adoption of ESG and increased awareness equally apply on Halal businesses, which have a natural advantage by being more ethically aligned and adopting practices around purification and cleanliness. The long-term sustainability of any business is not just dependent on the financial indicators but how well ESG practices are embedded into the corporate objectives and implemented into the standard operating model and the ecosystem. Building a sustainable and resilient supply chain is no longer optional. Instead, it is necessary and a vital part of creating a business model that enables a company and its ecosystem to thrive in the long term.
Case study
Malaysia Airports: A sustainable supplier finance solution
• Malaysia Airports Holdings (MAHB) is one of the largest airport operator groups in the world in terms of the number of passengers handled, managing 39 airports across Malaysia as well as an international airport in Turkey.
• Due to the COVID-19 pandemic and the ensuing lockdowns, MAHB was keen to set up a supplier finance program which enables its vendors to enjoy immediate liquidity at competitive pricing, ensuring economic sustainability for the suppliers during the pandemic.
• Standard Chartered Saadiq, as the sole mandated arranger of the program, has structured a Shariah compliant solution that meets MAHB’s requirement of enabling access to finance for the SME suppliers. This aligns with MAHB’s commitment to support its suppliers.
• Under the program, the SME suppliers enjoy preferential treatment over non-SME suppliers.
• Digital — The supply chain solution fully provides an end-to-end digital experience which is based on a straight-through-processing model with no physical documentation or manual processing involved.
• Sustainability — Preferential treatment to SME suppliers under the program is based on their SME classification, advocating positive impact on smaller suppliers. Eligible SMEs are assessed based on International Finance Corporation criteria.
• Shariah compliance — The supplier finance demonstrates the depth of Standard Chartered’s Islamic finance innovation and solution capabilities, delivering a seamless digital experience meeting MAHB requirements.
As a leader in trade finance, Standard Chartered continues to support its clients in their digitization and sustainability journey, as well as simplifying their trade processes, and delivering a seamless end-to-end financing experience.
This innovative sustainable supplier finance solution allows MAHB’s vendors access to quick liquidity at preferential financing rates while helping MAHB optimize its cash flow.
The solution promotes best practices in sustainability across MAHB’s ecosystem. It also reflects their commitment to support SME suppliers throughout challenging economic conditions while leveraging digital capabilities to deliver a straight-through process and a seamless client experience.
Bilal Parvaiz is an executive director of Islamic business and products at Standard Chartered Bank.