INTRODUCTION Joint Cooperation between MAINSPWNS and Universiti Sains Islam Malaysia

The 2015 International Conference of Management Sciences ICoMS 2015, April 23, UMY, Indonesia | 163 Intengration of Halal Compliance and Islamic Financing : Analysis of Industry in Malaysia Nathasa Mazna Ramli , Nurul Aini Muhamed, Sumaiyah Abd Aziz, Nor Asiah Yaakub Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia USIM, 71800 Bandar Baru Nilai, Negeri Sembilan Corresponding author: nathasausim.edu.my ABSTRACT Based on Islamic perspectives, the principles of halal products industry and Islamic financing should complement each other. A holistic halal economy should exists, where the governance and supervision of these two industries are not being separated. In practice, however, the halal product and Islamic finance industries are govern by different entities. The focus of this study is to examine these two industries, focusing o n the industries’ principles, governance, supervision and development. In addition, this study looks on halal initiative and financing structure of a company that manufactures halal products. Based on a case study of a company listed on Bursa Malaysia, this study analyses whether the principle of halal compliance and Islamic financing are integrated in the operation of the company. Data of the study were collected from document reviews that are publicly available. The study provides initial indication on the integration of halal compliance and Islamic financing in company and offers potential research for development of holistic halal economy. Keywords : Halal Compliance, Islamic Financing, Islamic Finance, Halal Economy 1 ICoMS

1. INTRODUCTION

‘Halal’ is an Arabic word meaning lawful or permitted. The antonym term for ‘halal’ is ‘haram’ that refers to anything that is unlawful or prohibited. Halal and haram are universal terms that apply to all aspects of life. Under halal industry, the term ‘halal’ is more significant on producing goods and services that can fulfill the halal requirement. On the other word, this term usually used in relation to goods and services. While many things are clearly halal or clearly haram, there are some things which are not clear. Halal industry is a huge industry that involved of several sectors which are food, pharmaceuticals, services ie. transportation and logistics and, banking and finance. The government of Malaysia has puts its strong effort to establish Malaysia as a world halal-hub. There are several authority bodies have been given responsibilities to ensure halal compliance within halal industry and enhance stakeholders’ confidence. However, there is inconsistency when it comes to the financial aspect. The halal compliance not only restricted to the narrow perspective of halal ingredients and production proses only but it should also consider all. On the other word, halal industry should not only has focusing on production of the goods and services but also the financing. In generally, Islamic finance means the dealing with “interest-free” in all transactions. Looking at current situation, there is lack of collaboration between these two industries halal industry and Islamic financing. Concerns toward this disconnectedness, the industry has to integrate the halal industry and Islamic finance towards the developing bridging model. On the other word, the sources of financing from the Islamic banking product and finance industry should be channeled to halal industry. The Quran clearly stated where Allah has declared war upon for those who are do not shun dealing in interest. Besides, Quran also clearly condemns al dealings with interest as well as participation in and witnessing such transaction.

2. DEVELOPMENT OF HALAL INDUSTRY AND ISLAMIC FINANCE