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

Gulf Times Business - - ISLAMIC FINANCE - By Bernardo Viz­caino

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.

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