Business in the month of Ramadan

The lunar month of Ramadan sees Muslims the world over fasting during daylight hours for 29-30 days each year. So how does the fast affect productivity and performance in the workplace – and what is the broader impact on business?

Overview

The holy month of Ramadan is a time when all followers of Islam (with the exemption of those who are ill, elderly, pregnant or menstruating), forgo eating, drinking and smoking between sunrise and sunset as a sign of faith.

As most will rise early to eat breakfast before daybreak and stay up late to break their fast as night falls, it is commonplace to have shorter sleeping hours during Ramadan.

Effects on business

Fewer hours sleep and shorter working hours combined with daytime fasting has an inevitable effect on the workforce in Muslim majority countries during Ramadan, with economists estimating a drop in productivity of 35-50%. The reduction in efficiency during this period also means important meetings and decisions are often postponed until the following month, another factor that could possibly incur losses.

Because Ramadan is based on the Islamic lunar calendar, its timing is determined by the sighting of the new moon, which means it arrives approximately two weeks earlier each year.

It’s natural to assume that the longer the period of fasting, the greater the effects, which means it has the potential to cause more disruption when it falls during the summer months, due to the longer daylight hours.

A recent survey by growth strategy firm Dinar, estimates that in the Organisation of Islamic Cooperation countries the working day during Ramadan is reduced by an average of two hours.  Working on the assumption that there are 21 working days in the month means a total of 42 hours, or 2.5% reduction of output per year.

However, how Ramadan is observed in the workplace can differ from country to country. For example, many businesses are closed each year in Algeria for failing to comply with the strict rules regarding fasting during the day, while in In Saudi Arabia, employees holding senior posts are not entitled to work reduced hours and must work the hours that are necessary to carry out their duties in full.

The effect of Ramadan on food retailers, restaurants and cafes is perhaps less detrimental than you might think. Despite not selling food or drink in the day, or with sales limited to non-muslims in more relaxed or tourist-friendly regions, the Holy Month does not necessarily lead to a fall in demand for food. In fact, the majority of eateries see an increase in profits during Ramadan, thanks to the tradition of heading out after nightfall for Iftar, with many people gathering with friends and family to enjoy a meal.

As well as a surge in cafe culture, retail spending also often increases during Ramadan, with higher consumption of goods and services during the Holy Month. As gifts are exchanged and traditional costumes are worn to celebrate Eid-ul-Fitr, the three-day festival that marks the end of the fast, sales for relevant goods usually see a notable spike just beforehand.