There are two news items highlighted in the local newspapers on the very first day of Ramadan this year. The first one is the launching of the ‘National Waqf Month’ by the Prime Minister of Malaysia. The other one is the increase in food prices.
Ramadan calls for Muslims to practice self-discipline and sacrifice, as well as to show compassion for the poor and less fortunate through fasting. Some may not realise that other than health and spiritual benefits, Ramadan also comes with economic benefits.
Ramadan is the only month in Islamic calendar that observes two out of five pillars of Islam, which are Zakat al-Fitr and fasting. Zakat is a form of compulsory almsgiving or ‘tax’ in Islam. In contrast to sadaqah or voluntary giving, Zakat al-Fitr is a charity taken for the poor and it is obliged upon Muslims to pay Zakat al-Fitr by the end of Ramadan.
Ramadan is considered a blessed month, in which the rewards for good deeds and generosity are multiplied. The Prophet (SAW) was the most generous of all the people and he used to become more generous in Ramadan.Thus launching the ‘National Waqf Month’ in conjunction with the holy month of Ramadan fits perfectly with Islamic values that encourage the act of charity and generosity during Ramadan.
The act of fasting is associated with less consumption of food. But how does it relate with the increase of food prices, when higher demand may have caused the prices to increase? Does it mean that Muslims demand more food during Ramadan?
I conducted a news analysis and discovered that the topic of rise in food prices during Ramadan was highlighted every year in the past five years. It is a recurring topic and it is possible for the topic to appear again in the next Ramadan.
Based on past news, some of the reasons for the rise of food prices include input costs rise, lack of supply, price manipulation by suppliers and high demand from customers.
Let us have a look on the Muslims consumption pattern during Ramadan. An analysis by Google on billions of searches on social media and a further interview with 1,500 people in a Muslim majority country about Ramadan and Eid revealed that food was the main theme in Ramadan. While women’s interest on food increased by 44% and the focus was on desserts and recipes, the men’s interest on food topic grew by 70% and it was more about barbeque and entertainment.
Ironically, food has been more commercialised during Ramadan than any other months. Food advertisement were massive and came with Ramadan specific promotions and offers. Many restaurants and cafes operate with extended late hours for Suhoor.
It was reported that 83% of families changed their food consumption habits during Ramadan. Food bills increased by 50-100% and food consumption in Ramadan accounts for 15% of annual food expenditure.
Food consumption has reached to a point of food waste. It is reported that there was an increase of 40 tonnes of waste collected in the first 10 days of Ramadan. During the Ramadan month, 20,088 tonnes of food were wasted daily, which is enough to feed one and a half times of Malaysian population.
Spending levels surged dramatically as Muslims shop on food, gifts and Eid clothing. Ramadan spending is estimated to worth more than £200 million to the UK economy alone and billions across the Muslim world.
In fact, the significance of Ramadan has also been studied in the stock market. A stock analysis based on 15 countries in 1989 to 2007 found that on average, stock returns are nine times higher than other times of year due to “Ramadan Effect”. In a later study in 2016 however, found a mix of positive and negative results within three distinct Muslim majority country groups.
To conclude, Ramadan has a significant impact on the economy. Despite the fact that Ramadan is a fasting month, there is a massive amount of food waste. It is no coincidence that the increase of food prices and high demand of food occurred in tandem during Ramadan. Food businesses may take advantage by exploiting the supply and increase the food prices. The lesson here is to identify a strategy to efficiently manage the food inventory and maintain price stability.
On the other hand, Muslims are also giving to charity as much as possible during Ramadan. The World Bank has estimated that global Zakat funds reach US$600 billion each year and 85 per cent was collected during Ramadan. This “Zakat liquidity” is crucial in times of economic difficulty and this billion-dollar stimulus Zakat package can be distributed globally to achieve Sustainable Development Goal 1 (no poverty).
“Ramadan Effect” is a reality, not an illusion. Ramadan proves that religion goes hand in hand with economy. Indeed, mosque and market go together and Muslims should take advantage of this spiritual capital in developing an ethical and sustainable economy.
