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EDITORIAL BOARD
International Annual Conference on Islamic Economics and Law 2020
“Challenges and Opportunities for Developing the Halal Ecosystem
Through Synergy of Islamic Financial Institutions”
Organizing Committee :
Head of Organizer : Alan Su’ud Ma’adi
Secretary : Ahmad Makhtum
Treasurer : Luluk Hanifah
IT and Website : Hammam
Elya Farida
Publication : Muhammad Ersya Farabi
Muhammad Mahrus
Steering Committee :
Khoirun Nasik
Wit Diana
Trischa Relanda
Taufiqur Rohman
Reviewer :
Shofiyun Nahidloh, M.HI (University of Trunojoyo Madura, Indonesia)
Moh. Ali Hisyam, Ph.D (University of Trunojoyo Madura, Indonesia)
Lailatul Qadariyah, M.EI (University of Trunojoyo Madura, Indonesia)
Dr. Abdurrahman, M.EI (University of Trunojoyo Madura, Indonesia)
Editorial Board :
Prof. Ir. Sukoso, M.Sc, Ph.D (Ministry of Religios Affairs, Indonesia)
Ayang Utiriza Yakin, M.A., Ph.D. (Université Catholique de Louvain, Belgium)
Prof. Nurdeng Deuraseh (University Islam Sultan Sharif Ali, Brunei Darussalam)
Editor :
Muttaqin Choiri (University of Trunojoyo Madura, Indonesia)
Publisher :
Fakultas Keislaman Universitas Trunojoyo Madura
Editorial Staff:
Jl. Raya Telang PO Box 2 Kamal Bangkalan
(031) 3011146, Fax (031) 3011506
Email : aciel@trunojoyo.ac.id
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PROCEEDINGS INTERNATIONAL ACIEL 2020
Empowering Halal SMEs
Nurdeng Deuraseh, et all – Universiti Islam Sultan Sharif Ali
Abstract
Small and medium enterprises (SMEs) play a significant role in most developing countries.
The World Bank reported that in emerging economies, formal SMEs contribute up to 60% of total
employment and up to 40% of national income (GDP). These numbers are significantly higher
when informal SMEs are included. In line with the emerging markets, it is the right time to
empowering SMEs in Halal Industry since it is not only contribute for national economic growth
but most significantly the way forward to create job opportunities for the students who graduate
from Halal science. Malaysia and Brunei Darussalam as well as elsewhere continue its pursuit of
developing policies, initiatives, and programs that would intensify support for local SMEs.
However, as they are designed to assist SMEs in general, it is interesting to see if SMEs operating
in the halal environment can similarly benefit from them. The halal industry is growing rapidly,
covering a number of different industries, ranging from medicines to cosmetics. It is found that
SMEs could develop, progress, and sustain their business in global halal market if the business
excellence model could be adopted as way to improve their SMEs business. Furthermore, Halal
SMEs should seriously benchmarking with other suceessful companies for the purpose of
improving their business and service. Halal SMEs should be designed in line with “the concept of
Business excellence” and “the concept of Benchmarking”. Halal-entrepreneur should apply the
mentioned concepts seriously in halal industry business and market since its sector is growing from
time to time especially in Halal Food Industry, Pharmaceutical and health products, Halal
Cosmetics, Halal Tourism and Travel, halal audit and consultancy.
INTRODUCTION
Small and medium enterprises (SMEs) play a significant role in most developing economies.
The World Bank (2018) reported that in emerging economies, formal SMEs contribute up to 60%
of total employment and up to 40% of national income (GDP). These numbers are significantly
higher when informal SMEs are included. In emerging markets, most formal jobs are generated by
SMEs, which create 4 out of 5 new positions. Furthermore, SMEs are also expected to contribute
more to the developing country's export. Abdullah (2010) and Paula (2003) suggested that the
definition for SMEs changes from time to time based on their significant contribution to the
economic position of a particular country. Besides, global Muslim population increased by 1.84%
from 2016 (2.14 billion) to 2.18 billion in 2017, which will be excellent opportunities for SME’s
growing towards sustainability.
BUSINESS EXCELLENCE (BE)
Previous scholars stated that BE models are still evolving from measures perspective
(Enquist et al, 2015; Ringrose, 2013; Bolboli and Reiche, 2013; Talwar, 2011a; Talwar, 2011b;
Antony and Bhattacharyya, 2010; Angell and Corbett, 2009; Saunders et al, 2008; Klefsjo et al,
2008; Harrington, 2005; Garvare and Isaksson, 2001) due to the changing demand of today’s
business landscape. Bolboli and Reiche (2013) opined that the central process of the BE
implementation is to analyze the strategy. All factors in the abovementioned pillars are
interconnected; they impact one another in either a positive or negative way, and they need to be
considered as a part of the overall system for total organizational excellence (Ferdowsian, 2015)
In addition, there are internal and external issues that prevent long-term commitment toward
business excellence. Moreover, there are higher ignorance among organizations of their national
excellence framework (Grigg and Mann, 2008), but governments have become more concerned as
the value, besides being sustainable, are significant (Zhao, 2004). These obstacles can be overcome
by greater promotion of identified enablers, including better education, training, and higher senior
management involvement (Mann et al, 2011). Furthermore, BE also supports other quality
initiatives, but it should be well understood (Boys et al, 2005; Adebanjo, 2001). Angell and Corbett
(2009) and Brown (2013) supported through their research that over time, the extent of BE award
program drives continuous improvement within organizations toward higher business
performance (Dahlgaard et al., 2013).
BENCHMARKING
considerable attention among companies (Lasrado and Uzbeck, 2016). On the other hand, the roles
of management are essential in the process of benchmarking (Cassell et al, 2001). Different
countries have different definitions for SMEs due to a number of factors and demographic criteria
such as size, location, structure, age, number of employees, sales volume, and ownership through
innovation and technology (Zeinalnezhad et al, 2011). Various studies indicated that managers may
not quickly comprehend the appropriateness and applicability of benchmarking data in their
organization due to some incompatible factors involved in benchmarking. The managers’ roles are
beyond the exercise but also include growing dynamic changes that could push SMEs to be more
efficient toward innovation (Hong and Jeong, 2006). Kumar (2010) also posited that the leadership
in a company could determine the success rate of the exercise in the business. In addition, some
studies stressed the importance of benchmarking in major business investments even
though it meant different things to different people (Cassell et al, 2001; Deros et al, 2006).
Dattakumar and Jagadeesh (2003) brought to light the issues that were not satisfactorily researched,
such as cost, duration, human resource, and partner, that need to be considered in benchmarking
exercises. Scholars have recommended a number of tools for benchmarking (Rickards, 2007;
Thakkar, 2009; Razmi et al, 2000; Garengo et al., 2005; Bennett, 2007). Although Broderick et al.
(2010) and Lee et al. (2006) mentioned that benchmarking among different type of business is
important, it is difficult to apply in services. They also stated that benchmarking conducted among
firms of different scales have to be considered with the aim of meeting its specific industry
standards.
The areas of concern in these kinds of activities are operational performance in
manufacturing function, value management process, innovation and technology
management, quality assessment, customer satisfaction, and product development process (Deros
et al, 2006). Monkhouse (1995), on the other hand, reported that non-financial measures through
benchmarking activity support the management’s decision-making process. Sarkis (2001) also
agreed that there should be a set of widely acceptable characteristics to measure benchmarking
effectiveness. Optimization starts with the assessment of the current situation and benchmarking
of the best practices (Bolboli and Reiche, 2013). Brown (2013) and Ferdowsian (2015) proposed
that the stages of an organization pursuing business excellence (either implementation,
development, maturity and sustainability) should also be considered as factors that might be
relevant. The methods of scoring in BE are vital for benchmarking activities and for each criteria
of applying for awards associated with the models (Gomez-Gomez et al, 2016).
The importance of understanding “benchmarking” and its effects on a business has been
highlighted in previous studies (Alstete, 2008; Carpinetti et al, 2002). It helps organizations to
achieve and maintain their competitive advantage by striving for world-class performance (Shen et
al., 2000). Benchmarking these winning organizations thus provide insights into the various
techniques that make them successful (Lasrado and Uzbeck, 2016). The application of
benchmarking excellence is expected to raise the hope for organizations in maintaining their
competitive advantage and long-term profitability (Corredor and Goñi, 2011).
Halal SMEs could be developed faster with sustainable development if the business
excellence as discussed above, could be adopted as way to improve their business and at the same
time Halal SMEs should benchmark themselves with successful companies as well as seriously
involve directly in halal industry market since its sector is growing from time to time. The following
discussions, which basically as recommendation for SMEs to take a serious consideration and
action, are clearly evidence to show that SMEs should be empowered for better business
opportunity that available in modern market.
consumers in halal brands has been the most influential factor in their purchasing decision of these
products. These factors support the industry’s attempt to gain consumer trust and push product
penetration to even higher levels. (Noralis Ab Wahab, Nurdeng Deuraseh, et all, 2020).
Halal Cosmetics
The global halal cosmetic industry is estimated at USD13 billion with an annual growth rate
of 12%. At present the halal cosmetic market constitutes 11% of the total global halal industry. It
is found that the main driver for this huge demand in halal cosmetics and beauty products stems
from the demographic of young, religiously conscious, and dynamic professional Muslim
population. Furthermore, the market for halal cosmetics is booming in the Middle East and Asia.
Across the Middle East, halal cosmetics are registering a 12% annual growth reaching USD12
billion in total value of cosmetic related sales. Beside that, in Malaysia, halal cosmetics contribute
10% – 20% of the local cosmetics market. However, the global cosmetics industry is dominated,
and to a certain degree monopolized, by non-Muslims companies. This poses serious challenges to
the issue of halal ingredients in cosmetic products manufactured by the companies. (Thomson
Reuters, Dinar Standard, Dubai International Financial Centre. 2016).
Halal Auditors
Audit is an activity performed by a person who is technically competent. Systematic,
independent and documented process. Auditing examination of records or financial accounts to
check their accuracy. For the benefit of all Muslim consumers the Halal Auditing procedure should
be common to all certification authorities in order to develop a global standard. The protocol
involved in the auditing process should be universal, while the local interpretation and ‘fatwa’ could
still be incorporated provided that the integrity of the Halal status is maintained, and the
interpretation is not in self-interest.
The acceptance of a common auditing protocol should be regarded as a common language
and a starting point for a formalised Muslim Standard for Halal trade agreed by all parties. It will
form the basis of a standard auditing practice, whereby the auditors will have, or be able to develop,
a common checklist and auditing plan in their routine certification duties. There is great difference
between inspection and auditing. While inspection validates a specific Halal process during
inspection, auditing looks at evidence of compliance operating outside inspection times. This
approach will reduce auditing time and avoid unnecessary delays in issuing certificates, making it
more ‘industry friendly’ to meet the ever changing and increasing needs of the manufacturing
sectors. In developing a ‘system of implementation’ for a harmonized auditing system we are not
reinventing Halal, but how to implement it.
Halal Consultancy
In order to be Halal certified, products, production processes and the company’s production
areas must comply with precise criteria. The Halal Certification guarantees the products
wholesomeness, their traceability as well as the company respect of the Halal criteria. The Halal
Certification Consultant helps companies to start a self-monitoring and, in case, to identify the
possible adjustments to be carried out. The growth of Muslim consumers that travel and study
abroad has increased the demand for that professional position. Halal International Authority
(HIA) helps many companies to approach the Halal Certification. It has always put its own
competence and experience at companies’ disposal by holding training courses for Halal
Certification Consultants. The courses related conducted by halal consultants will help trainees to
acquire all the necessary skills in order to work with HIA in the companies auditing.
Halal- Entrepreneur
Halal entrepreneurship is a concept of entrepreneurship where halal is regarded as
“entrepreneurial process for innovatively using opportunities to obtain economic gains and society
equity on an equal footing” (Bustamam, 2012). Some called halal entrepreneurship as “halal driven
entrepreneurship” and “halal minded entrepreneurship”. It is significantly to find that halal
entrepreneurship has augmented tremendously in Malaysia. The country has been named as the
first country in the world for establishing halal food indicators before the United Arab Emirates
and Australia, which were identified as second and third respectively in 2015. The halal
entrepreneurship started with halal food and then extended to non-food products, for example,
personal care, cosmetics, tourism, pharmaceuticals, banking, financing and other services such as
hospitality and logistics. (Dali, N., et al., 2007).
CONCLUSION
This study had generally found that SMEs could develop, progress, and sustain their halal
products business in global halal market if the business excellence model could be adopted as way
to improve their business by implementing some improvements and developments to its business
by benchmarking itself with any successful business in the country and global brands. It was
undeniable that for the purpose of business sustainability, the entrepreneurs who has involved in
halal products business should improve their business operations by improving quality excellence,
operations, management and result. Furthermore, SMEs entrepreneurs should seriously involve
directly in popular and attractive halal industry market since its sector is growing from time to time
especially in Halal Food Industry, Pharmaceutical and health products, Halal Cosmetics, Halal
Tourism and Travel, halal audit and consultancy.
In addition to the above recommendation and towards sustainability business excellence,
SMEs should take a necessity stage by benchmarking itself with a successful organization
especially among SMEs as an important means to study its business progress especially today’s
business full with competition for success and sustainability. In line with this suggestion, Malaysia
and Brunei Darussalam as well as elsewhere continue its pursuit of developing policies, initiatives,
and programs that would intensify support for local SMEs. However, as they are designed to assist
SMEs in general, it is interesting to see if SMEs operating in the halal environment can similarly
benefit from them. The halal industry is growing rapidly, covering a number of different industries,
ranging from halal food to non-food product (i.e., halal consultancy), from halal medicines to
cosmetics, from halal education to halal tourism, etc.
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