In 2020, 63.5 percent of the Malaysian population professed to be of the Islamic faith. The second-largest religion in Malaysia in that year was Buddhism, adhered to by 18.7 percent of the population.

This statistic presents the results of a survey on perceived percentage of the Muslim population in Malaysia as of 2018. According to data published by Ipsos, Malaysian respondents slightly overestimated the proportion of Muslim population in their country. On average, the respondents thought that around 69 out of every 100 people in Malaysia were Muslims, when the actual share of Muslim population was around 61 percent in Malaysia.

In 2023, it was estimated that approximately 87 percent of the Indonesian population were Muslim, accounting for the highest share of Muslims in any Southeast Asian country. Indonesia also has the world's largest Muslim population, with an estimated 229 million Muslims.

Demographics of Indonesia

The total population of Indonesia was estimated to reach around 290 million in 2028. The median age of the population in the country was at an all-time high in 2020 and was projected to increase continuously until the end of the century. In 2020, the population density in Indonesia reached its highest value recorded at about 145.7 people per square kilometer.

Shopping behavior during Ramadan in Indonesia

Nearly all Muslims in Indonesia celebrated Ramadan in 2022. During the month of Ramadan, 60 percent of Indonesian users utilized online applications to order food. Many Indonesians planned to shop online or offline during Ramadan, with around 76 percent of online users planning to purchase fashion wear and accessories. Shopee was the most used app for shopping purposes during that period.

In 2023, the number of non-Muslim marriages registered in Malaysia was approximately 48,000. This was an increase compared to the previous year. Muslims make up the majority of the population in Malaysia, while other major religions in the country include Christianity, Buddhism, and Hinduism.

In 2022, Indonesia has the largest population of Muslims worldwide with around 241.5 million. This was followed with around 225.6 million Muslims in Pakistan and 211.16 million Muslims in India.

As of July 2024, 70.4 percent of the Malaysian population were classified as Bumiputera, 22.4 percent were classified as ethnic Chinese, and 6.5 percent as ethnic Indians. Those who do not fall under these three main ethnic groups are classified as ‘Other’. Malaysia is a multi-ethnic and multi-religious society with three main ethnicities and language groups. Who are Malaysia’s Bumiputera? Bumiputera, meaning sons of the soil, is a term used to categorize the Malays, as well as the indigenous peoples of Peninsular Malaysia, also known as orang asli, and the indigenous peoples of Sabah and Sarawak. As of July 2023, the Bumiputera share of the population in Sabah was 89 percent, while that in Sarawak was 76.1 percent. Thus, the incorporation of the states of Sabah and Sarawak during the formation of Malaysia ensured that the ethnic Malays were able to maintain a majority share of the Malaysian population. Bumiputera privileges and ethnic-based politics The rights and privileges of the Malays and the natives of Sabah and Sarawak are enshrined in Article 153 of Malaysia’s constitution. This translated, in practice, to a policy of affirmative action to improve the economic situation of this particular group, through the New Economic Policy introduced in 1971. 50 years on, it is questionable whether the policy has achieved its aim. Bumiputeras still lag behind the other ethnic two major groups in terms of monthly household income. However, re-thinking this policy will certainly be met by opposition from those who have benefitted from it.

According to Cognitive Market Research, the global Halal market will be USD 2151.5 million in 2024 and expand at a compound annual growth rate (CAGR) of 5.8% from 2024 to 2031.

North America held the major market of more than 40% of the global revenue with a market size of USD 860.60 million in 2024 and will expand at CAGR or a compound annual growth rate of 4% from 2024 to 2031.
Europe accounted for a share of over 30% of the global market size of USD 645.45 million.
Asia Pacific held the market of around 23% of the global revenue with a market size of USD 494.85 million in 2024 and will expand at CAGR or compound annual growth rate of 7.8% from 2024 to 2031.
Latin America's market will have more than 4% of the global revenue with a market size of USD 107.58 million in 2024 and will expand at CAGR or a compound annual growth rate of 5.2% from 2024 to 2031.
Middle East and Africa held the major market of around 2% of the global revenue with a market size of USD 43.03 million in 2024 and will expand at CAGR or compound annual growth rate of 5.5% from 2024 to 2031.
The Food and Beverage segment held the highest Halal market revenue share in 2024.

Market Dynamics of Halal Market

Key Drivers of Halal Market

Growing Muslim Community to Increase the Demand Globally

One major factor propelling the halal food business is the exponential rise in the Muslim population worldwide. The need for halal-certified goods is growing along with the Muslim population. It is anticipated that the number of Muslims worldwide will increase by about 50% by 2050 to 2.76 billion people. This change in the population closely correlates with an increase in the demand for halal cuisine in several different geographical areas, including both Muslim-majority nations and those with sizeable Muslim minorities. The global Muslim population is growing, which is driving market development. The market is expected to grow due to Muslims' desire for halal-certified food due to initiatives promoting food safety and cleanliness.

Increasing Customer Consciousness to Propel Market Growth

Even among non-Muslim communities, consumer knowledge of halal dietary needs has increased. People are increasingly pickier about what they eat, expecting high-quality, ethically sourced goods and demanding openness in food production. Due to their association with high ethical and quality standards, halal-certified food items are becoming increasingly preferred due to this awareness. Demand for halal products in non-Muslim nations is rising as a result of non-Muslim customers' growing interest in halal cuisine due to its perceived health and safety benefits. The governments of several nations, with a majority of Muslims, are moving to encourage the expansion of the halal food sector. To become a worldwide leader in the halal industry, the Malaysian government, for example, established the Halal Industry Master Plan 2030.

Restraint Factors Of Halal Market

Insufficient Standardisation to Limit the Sales

A significant obstacle confronting the worldwide halal food industry is the need for uniformity in the certification procedure. Different nations' various halal certification processes can be confusing and hinder firms' efforts to enter new markets. Specific slaughter techniques may be mandated by certain nations, while handling and processing of halal goods may be subject to extra regulations in others. Furthermore, there needs to be more clarity on the ingredients that make up halal food, further impedes market expansion. For example, it sometimes needs to be clarified which ingredients are halal and which aren't. This and the usage of non-halal components in halal cuisine may need to be clarified for customers and producers.

Impact of COVID-19 on Halal Market

The interruption of the food supply chain brought on by the spread of COVID-19 has a detrimental effect on the global halal food business. Leading producers experienced workforce shortages and interruptions in the halal food import and export market, substantially impacting the food's suitability for consumption and sales. Concerns about safety and cleanliness during the epidemic also contributed to a decline in the market's demand for beef products. Moreover, COVID-19 has also influenced restaurant and food outlet closures. For example, the pandemic caused eateries and food outlets to c...

In 2023, the number of Muslim marriages registered in Malaysia amounted to around 140,000. This was a decrease from around 168,000 Muslim marriages registered in the previous year. Muslims make up the majority of the Malaysian population.

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Islamic Banking Software Market Size 2024-2028

The islamic banking software market size is forecast to increase by USD 3.28 billion at a CAGR of 11.53% between 2023 and 2028.

The market is experiencing significant growth, driven by the increasing issuance of smart cards by Islamic banks and the adoption of blockchain technology. These trends are transforming the industry by enhancing security, efficiency, and transparency in Islamic financial transactions. However, challenges persist, including the lack of expertise, awareness, and training in Islamic banking software. 
Cloud-based solutions, artificial intelligence, and blockchain technology are transforming Islamic finance by streamlining processes, enhancing security, and enabling real-time transactions. Regulatory initiatives and fintech partnerships are further driving the adoption of advanced technology In the banking industry. Retail sector players are also leveraging Islamic banking software for asset administration and cellular banking services.
Addressing these challenges will require ongoing investment in education and technology to ensure the continued growth and success of the Islamic banking sector. The market analysis report provides a comprehensive overview of these trends and challenges, offering valuable insights for stakeholders seeking to capitalize on the opportunities presented by the market.

What will be the Size of the Islamic Banking Software Market During the Forecast Period?

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The market caters to the unique needs of financial institutions offering Sharia-compliant products and services. Unlike conventional banking, Islamic banking operates on the principles of profit-and-loss sharing, asset-backed financing, and avoidance of interest. To meet the growing demand for automation and efficiency in Islamic banking operations, software providers offer solutions for risk administration, analytics and reporting, smart cards, and sukuk issuances. The market is expected to witness significant growth due to the increasing number of financial institutions offering Islamic banking services and the need for more sophisticated technology to manage complex financial transactions.

How is this Islamic Banking Software Industry segmented and which is the largest segment?

The islamic banking software industry research report provides comprehensive data (region-wise segment analysis), with forecasts and estimates in 'USD million' for the period 2024-2028, as well as historical data from 2018-2022 for the following segments.

Application

  Retail
  Corporate
  Others


Deployment

  On-premises
  Cloud


Geography

  Middle East and Africa



  APAC



  Europe



  North America



  South America

By Application Insights

The retail segment is estimated to witness significant growth during the forecast period.

The retail segment of the market caters to the unique needs of Islamic banks, offering compliant solutions for various retail banking products and services. These software platforms and modules facilitate savings accounts, current accounts, term deposits, personal loans, mortgages, auto loans, credit cards, and wealth management services, ensuring adherence to Islamic Shariah law. Automation and streamlining of retail banking procedures are achieved through these software solutions, providing consumers with a seamless experience.

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The Retail segment was valued at USD 1.51 billion in 2018 and showed a gradual increase during the forecast period.

Regional Analysis

Middle East and Africa is estimated to contribute 67% to the growth of the global market during the forecast period.

Technavio's analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period.

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The market In the Middle East and Africa (MEA) is experiencing significant growth due to the region's large Muslim population, driving the demand for Sharia-compliant banking solutions. Notable institutions, such as Dubai Islamic Bank, have played a pivotal role In the debt capital markets, with SUKUK investments increasing from 14.2% in 2016 to 24% in 2022. This banking powerhouse has overseen 45 transactions worth over USD2 8 billion in Environmental, Social, and Governance (ESG) SUKUK deals, solidifying its position as a market leader. In Bahrain, ila Bank alburaq, an Islamic banking portal, ensures regulatory compliance by maintaining a distinct organizational structure for Shariah-compliant activities.

Asset-backed financing, automation, risk administration, analytics and reporting, integration skills, asset administration, cellular banking, fintech partnerships, data protection, cybersecurity, s

In 2022/23, the market size for Islamic fintech in Malaysia amounted to around 11.1 billion U.S. dollars, an increase of approximately six billion U.S. dollars compared to the market size recorded in 2021. The value of the Islamic fintech market in the country was forecasted to exceed 23 billion U.S. dollars by 2027. Vast potential in Islamic banking Islam is the majority religion in Malaysia, with around 63.5 percent of the population belonging to this religious group. The country also has a dual legal system, with Quranic-based Sharia law mainly governing the personal or family matters of the Malay Muslim population. Thus, there is a large market for Islamic finance in Malaysia. In 2022, the Southeast Asian country was the third-leading country with the largest Islamic banking assets in the world, after Iran and Saudi Arabia. Call for innovation in Islamic finance Acknowledging the potential of Islamic fintech, the current Prime Minister Anwar Ibrahim pledged 100 million Malaysian ringgit in May 2024 to foster innovation in Islamic finance. This financing has the potential to stimulate further growth in the country’s Islamic fintech market. As of 2023, there were 17 Islamic fintech companies in Malaysia. With support from the government, more Sharia-friendly fintech startups will likely flourish in the coming years.

As of July 2024, the population of Selangor was estimated at approximately 7.4 million. Selangor is Malaysia's most populous state, as well as the state with the largest economy in terms of gross domestic product. The Golden Peninsula Malaysia is comprised of 13 states and three Wilayah Persekutuan (WP) or federal territories, which include Labuan, an offshore financial center on the east; the nation’s capital, Kuala Lumpur; and the administrative center, Putrajaya - both on the west. The aforementioned two federal territories on the west are enclaves within Selangor. In addition to that and the many points of interest it has to offer, Selangor is Malaysia’s most visited state among domestic tourists. Darul Ehsan – The Abode of Sincerity Selangor is a sultanate, ruled by Sultan Sharafuddin Idris Shah since 2001. Located on the west coast of the Malaysian peninsula, the state hosts the country’s two main transportation hubs: Kuala Lumpur International Airport and Port Klang, the country’s largest port.The state is also Malaysia’s largest economy, which contributes a big part to Malaysia’s overall GDP per capita. With the prime location, good infrastructure, and two federal territories within, Selangor will continue to attract more people for work, travel, or more.

In a survey conducted in Malaysia in 2016, around 36 percent of respondents stated that they personally knew someone from the LGBT community. This contradicts the statement made by Malaysia’s tourism minister in March 2019 that there are no gay people in Malaysia.

The state of LGBT rights in Malaysia
Homosexuality is illegal in Malaysia, and its roots go back to Malaysia’s colonial past, when it inherited British laws against sodomy known as Section 377. While India ruled to decriminalize this law in 2018, Malaysian society’s attitudes towards LGBT persons suggests that this is still a long way off. Censorship of movies and books that contain LGBT themes are still commonplace, and a 2016 poll revealed that almost half of all Malaysians do not believe same-sex marriage should be legal.

Religion and its influence on policing sexuality
As a Muslim-majority society, religion, specifically Islam, has had a large influence on politics and societal norms. Many Malaysians believe homosexuality to be incompatible to their religious beliefs. Furthermore, Muslims in Malaysia are governed by a parallel system of Sharia law, and officials from the religious department (JAKIM) are known to conduct moral policing targeting Malay-Muslims caught flouting Islamic norms, such as engaging in ‘homosexual acts’. This adds another layer of persecution faced by the Malaysian LGBT community.

The market demand for clothing in Malaysia was estimated to reach seven billion U.S. dollars in 2018. This is in part fueled by demand from the growing middle-class with more disposable income to spend on consumer goods such as clothing. Malaysia’s clothing market demand is also fueled by the growth of the modest fashion industry.

Boom in modest fashion
In 2015, Muslim women globally spent 44 billion U.S. dollars on modest wear - clothing that is contemporary and fashionable, while still meeting the religious requirements for Muslim women. With 61 percent of its population as of 2018 being Muslim, Malaysia is one of the biggest markets for modest fashion, not only as consumers and importers, but also as exporters. In 2017, Malaysia’s halal-conforming clothing exports to the Organization of Islamic Cooperation (OIC) countries amounted to 0.37 percent of all apparel exports there. While this is a modest share, the rise of homegrown Malaysian modest wear designers, many of whom have showcased on renowned catwalks such as the London Fashion Week, helps to contribute to a positive outlook for the Malaysian clothing market.

A survey conducted in May 2022 revealed that 31 percent of Muslim women in Indonesia and Malaysia owned between 20 and 50 hijabs. In contrast, six percent of the surveyed women stated to own between one and five hijabs.

The Hajj to Mecca in Saudi Arabia is considered the world’s largest human gathering with almost 1.84 million pilgrims in 2023. The Saudi government restricted Hajj to residents in Saudi Arabia only during the COVID-19 pandemic in 2020. The number of Hajj pilgrims dropped to about 58.7 thousand in 2021. Like other religious pilgrimages, Hajj is considered an annual rite of passage to renew ones moral and spiritual connection. Approximately a quarter of the human population identify themselves as Muslims . According to their faith of Islam, it is one of their five religious duties to perform the Hajj at least once in their lifetime.

Who are the pilgrims?

According to Islamic tradition, any Muslim who has reached maturity is due to perform the Hajj. During the last Hajj season before the COVID-19 pandemic, about two thirds of the pilgrims to Mecca came from outside of the Saudi Arabian Kingdom. The government of Saudi Arabia issues each years’ Hajj visas on a country quota system, based on the size of the Muslim population .

Financial aspects

 
One main condition for a mature Muslim to qualify to perform the Hajj is to be free of debt and other financial and social obligations. Many Muslims around the world spend a significant amount of their life-savings to be able to make this spiritual journey. As an example, the cost of performing Hajj for a Malaysian Muslim was calculated at about 22.45 thousand Malaysian ringgits. For first time Hajj pilgrims, the Malaysian government subsidizes more than half of that amount.

Some Muslims who can’t afford the financial or physical challenges of the Hajj sometimes perform the smaller Islamic pilgrimage to Mecca called Umrah, which can be attempted all year round.

In 2023, the fertility rate for Bumiputera women between the ages of 15 to 49 years in Malaysia was around 2,086 per 1,000 women. By comparison, the fertility rate for Chinese women in that year was 884 births per 1,000 women.

In 2023, there were approximately 44,000 international students from China studying in Malaysia. A large share of international students in Malaysia come from Muslim countries, a majority of whom were enrolled in private higher education institutions.