TY - JOUR
T1 - Halal certification for financial products: a transaction cost perspective
AU - Hayat, R.
AU - den Butter, F.A.G.
AU - Kock, U.
PY - 2013
Y1 - 2013
N2 - We argue that although halal certification could potentially reduce the high transaction costs related to buying Islamic financial products, in practice these costs are just replaced by transaction costs relating to the certification itself. It takes considerable time (2-3 months) and money (USD 122.000) to obtain a halal certification. Partially, this is because the market is highly concentrated and non-contestable. About 20 individual Sharia scholars control more than half the market, with the top 3 earning an estimated USD 4.5 million in fees per year. Moreover, this market seems plagued with problems, most notably a strong incentive for excessively lenient certification, lack of consensus on what is considered halal and sub-standard governance practices. We discuss solutions to these problems and conclude that a neutral non-profit government entity should assume the role of halal certifiers. © 2012 Springer Science+Business Media Dordrecht.
AB - We argue that although halal certification could potentially reduce the high transaction costs related to buying Islamic financial products, in practice these costs are just replaced by transaction costs relating to the certification itself. It takes considerable time (2-3 months) and money (USD 122.000) to obtain a halal certification. Partially, this is because the market is highly concentrated and non-contestable. About 20 individual Sharia scholars control more than half the market, with the top 3 earning an estimated USD 4.5 million in fees per year. Moreover, this market seems plagued with problems, most notably a strong incentive for excessively lenient certification, lack of consensus on what is considered halal and sub-standard governance practices. We discuss solutions to these problems and conclude that a neutral non-profit government entity should assume the role of halal certifiers. © 2012 Springer Science+Business Media Dordrecht.
U2 - 10.1007/s10551-012-1534-9
DO - 10.1007/s10551-012-1534-9
M3 - Article
SN - 0167-4544
VL - 117
SP - 601
EP - 613
JO - Journal of Business Ethics
JF - Journal of Business Ethics
IS - 3
ER -