‘Islamic finance sees sustained growth, buoyed by capital markets’

The Islamic finance industry grew 11% year-onyear in 2017 and is set to sustain double-digit growth buoyed by capital market products and the adoption of financial technology, according to a Thomson Reuters study released last week. The industry is now represented in 56 countries by 1,389 Shariah-compliant financial firms, worth a combined $2.4tn in assets, the study estimated.

Islamic banks still retain the lion’s share of the industry, accounting for 71% of total assets, but their growth remained muted at 5%, with consolidation pressures mounting in its core markets of the Gulf and Southeast Asia. In contrast, capital market products such as Islamic bonds and investment funds fared better, posting 9% and 16% growth, respectively, the study showed.

The market for Islamic bonds, or sukuk, accounted for $426bn in deals outstanding in 2017, with 19 countries issuing sovereign sukuk worth a combined $85bn.

Malaysia remains the world’s largest market for sukuk and it is now opening to retail investors, while Saudi Arabia has added $26bn in new sukuk issuance in both domestic and international markets.

Islamic investment funds posted a 16% gain to reach $110bn in assets, concentrated mostly in Iran, Malaysia and Saudi Arabia.

The industry is poised for further change with the advent of fintech products including digitalonly Islamic banks, robo-advisers and digital wealth management services, the study added. Islamic finance follows religious principles that forbid interest and shun outright speculation, and as such is seen as an alternative to interestbased banking.