Global Islamic Finance Assets up 10.5 pct to $2 tln- report

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Rise of Global Islamic Finance Assets

Somalilandsun :Global Islamic finance assets rose 10.5 percent to reach $2.004 trillion in 2015 from $1.814 trillion in 2014, according to the State of the Global Islamic Economy 2016/17 report released on Monday by Thomson Reuters, Dubai Islamic Economy Development Centre, and DinarStandard.

Islamic banking and sukuk continue to be the biggest sectors.

Islamic banks held 72 percent of global industry assets, valued at $1.451 trillion. This is an increase of 7.8 percent from 2014.

Sukuk outstanding stood at $342 billion, up 15.9 percent from the previous year.

LEADERS

On its Global Islamic Economy Indicator (GIEI), the report named Malaysia as the country with the best-developed ecosystem for Islamic finance, followed by the United Arab Emirates and Bahrain.

Malaysia, according to the report, once again leads the GIEI mainly due to the country having a large Islamic finance asset base, relative to its size, a large number of Islamic financial institutions and funds, in addition to having the strongest regulatory framework and highest awareness scores among the 73 countries studied.

GROWTH

The report projects global Islamic finance assets to reach $3.5 trillion by 2021, representing a 12 percent CAGR. It estimates Islamic banks to be the main driver of this growth, with assets expected to reach $2.7 trillion by 2021.

Overall, the report expects the industry to be driven by high-growth segments social impact sukuk, and Islamic fintech and crowdfunding.

Growth is also projected to come from emerging Islamic finance markets such as Australia and Azerbaijan, the re-entry of Iran into the global financial system, and Saudi Arabia’s Vision 2030 agenda.

INNOVATION

The report highlights Shariah-compliant pension funds as a strong driver for growth, specifically Malaysia’s Employees Provident Fund’s (EPF) new Islamic scheme.

It also highlights Islamic impact investing as a largely untapped opportunity that is ripe for development.

CHALLENGES

Key challenges for the industry still remain the low levels of public awareness and understanding of Islamic financial products and services, which contribute to the low penetration of the industry in certain markets.

The report also highlights the scarcity of Shariah-compliant monetary policy instruments and a lack of understanding of the monetary transmission mechanism.

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