UAE among advanced Islamic finance markets

29 November, 2018      323



The outlook for the Islamic finance market is promising with the UAE and other GCC leading the market, analysts said on Wednesday.

According to industry analysts, total Islamic finance assets is projected to grow 58 per cent from $2.4 trillion last year to $3.8 trillion by 2023, a growth of 58 per cent.

Malaysia, Bahrain and the UAE are most developed markets while Saudi Arabia, Malaysia, and the UAE lead in terms of total assets.

"We see strong potential for Islamic finance industry and though it remains underrepresented in global financial system, long-term potential for Shariah-compliant financing is strong," said Nitish Bhojnagarwala, vice-president, Moody's Investors, UAE, at World Islamic Banking Conference in Bahrain on Wednesday.

More than 1,300 people from 50 countries attended the 25th edition of the 3-day conference concluded on Wednesday.

Umera Ali, partner, DWF Middle East, said the security comes from risk-sharing and in a transaction under Islamic finance, parties have mutual interests; therefore, it is not just one party that is making the money. And that gives better sense of security to the investors.

Andrew Naylor, director for central banks and public policy at World Gold Council, said safety is one of the biggest perception behind investing in Shariah-compliant. "Around 62 per cent investors will either invest in Islamic finance or increase their asset allocation in Islamic finance. And this move is largely towards safety in current global economic situation because generally sharing comes with a less risk and under Shariah law, you're sharing the risk," Naylor said.

Issam Abousleiman, regional director, GCC countries, World Bank, noted that Islamic finance industry growth going to continue.

"Islamic finance is a growth story because it asset-backed. It is a good asset class but the regulations are unfortunately lagging behind and this is where the industry should focus in the next few years so the regulation at par with the global standards," Abousleiman said at the World Islamic Banking Conference in Bahrain on Wednesday.

Shaima Hasan, research and product development manager, Refinitiv, said the Islamic finance industry will continue to grow in the coming years, driven by Malaysia, Bahrain the UAE while the new growth frontiers are emerging such Morocco, Nigeria, the UK, Hong Kong, Russia, Luxembourg and Kazakhstan.

She said that Shariah-compliant firms' assets topped $2.4 trillion in 2017, growing 11 per cent year-on-year with Malaysia, Bahrain and the UAE are the key leaders. It is expected to reach $3.8 trillion by 2023.

"We are expecting the market to keep growing with Islamic Fintech bringing a big shift to Islamic finance industry. We've seen that 71 per cent - or $1.7 trillion - of total Islamic asset come from banking and 17 per cent from the sukuks which reached $426 billion in 2017," she said while addressing the World Islamic Banking Conference in Bahrain on Wednesday.

According to Islamic Finance Development Indicator 2018, Malaysia is the most developed market followed by Bahrain, the UAE, Pakistan, Saudi Arabia, Jordan, Oman, Kuwait, Brunei and Indonesia.

Saudi Arabia, Malaysia, and the UAE lead in terms of total assets held by Shariah-compliant companies at $509 billion, $491 billion and $222 billion, respectively.

"We expect Islamic finance to grow massively in the UK in terms of sukuk issuances. While Luxembourg is friendly towards Islamic funds and tax-friendly for the region. Russia has high potential growth with 25 million Muslim population. Hong Kong is another bright and good growth prospects with $22 million assets currently held there and it is looking to establish sustainable finance market," Hasan said at the conference.

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