The global market for Islamic finance services increased has grown by 18% to $2 trillion between 2012-2015 and is expected to top $2.7trn by the end of 2018, and $3.5trn by 2021. (Islamic Finance Development report (2016), Islamic Corporation for the Development of the Private Sector and Thomson Reuters). This growth has been driven by financial inclusion, foreign direct investment, market diversification, financial resilience and economic growth strategies amongst other things.
The availability and effectiveness of Islamic finance within global jurisdictions is contingent upon the existence of a robust enabling framework. As a nascent industry the position varies both within secular and non-secular jurisdictions.
Despite Muslims accounting for around 25% of the population, with Sharia compliant assets make up only around 1% of the world’s financial assets, penetration of the industry is low.
The overall Muslim population is forecast to rise from 1.6 billion in 2010 to 2.8 billion in 2050 and, as awareness and understanding grow, demand will increase to present Islamic finance as a great opportunity for the future of the financial services ecosystem.
TheCityUK, in their “Global Trends in Islamic Finance and the UK Market” (2017), highlighted the following:
• Recent key trends in the industry include landmark debut sukuk issuances by governments and the expansion of Islamic finance into more countries.
• Islamic finance assets made split across: banking (73%), sukuk (17%), funds (3%) and takaful (2%)
• The industry’s assets remain concentrated in the Middle East region and a few Asian countries. Assets of Islamic funds and takaful also reached new highs in 2015, at $66bn and $38bn respectively.
• The sukuk market is the most rapidly growing Islamic finance sector, having expanded by 16% year on year to reach $342bn in assets at the end of 2015. However, compared to the conventional bond market, the Sukuk market is still relatively small.
• More countries are looking to expand their Islamic finance offering. New Islamic finance institutions in recent years have been reported in a number of countries including: Australia, Nigeria, Oman, Pakistan and Russia. Leading countries for Islamic finance should also provide fertile ground for future growth of the industry.