How Far the Islamic Banking Sector Contribute to Halal Industry? The Comparison with Conventional Banks on Trade Finance Products

Malaysia is well known with Halal industry due to government’s efforts to facilitate the development of Halal industry. Halal industry in Malaysia is acknowledged due to its efficiency in the regulatory framework as well as its diversity of the sectors, ranging from products (food and beverages, consumer products, pharmaceuticals, cosmetics and others), and services (such as logistics, tourism and banking sectors). The Halal industry contributes 7.5 percent to Malaysia GDP in 2017. As the Halal practice should be applied in the whole chain of Halal production and distribution, the Islamic banking sector is proposed to support the whole halal industry through their funding. This support plays some roles towards the integration, and accelerating the growth of the Halal industry. While it is expected that conventional trade finance products are diverse and contribute more to Malaysia businesses, not much is known on the evolvement of the Islamic trade financing compared to conventional banks. This study explores the trends of growth in the usage of Islamic and conventional trade finance products.