According to new data from the Al Huda Center of Islamic Banking and Economics, global Islamic banking assets could hit $5 trillion by 2025.
The world is currently seeing a growing emphasis on ethical and sustainable finance. As the Islamic banking and finance sector promotes responsible financial principles, more people are enticed to avail of such products.
In a separate report by Standard & Poor’s (S&P), it is revealed that the Islamic finance sector could witness an annual growth rate of 10 percent for both 2023 and 2024. Leading the way are Saudi Arabia and Kuwait. These countries made up about 90 percent of the sector’s asset growth last year.
Islamic banking across the globe
The increasing popularity of Islamic banking assets in major parts of the globe is a noteworthy trend. In the United Arab Emirates (UAE), the Central Bank reported that the gross assets of Shariah-compliant banks grew 7.31 percent in the first quarter of 2023. Their value hit nearly $177 billion.
In the same quarter, credit provided by the country’s Islamic banks saw an increase. It reached $109 billion, reflecting a 2.51 percent surge.
In Malaysia, one of the leading issuers of sukuk, a Shariah-compliant bond, Islamic finance also continues to grow. According to Moody’s Investors Service, the growth of this sector has outpaced its conventional counterpart.
Now, Islamic banks constitute about 40 percent of Malaysia’s finance ecosystem. Over a decade ago, the figures only stood at roughly 20 percent.
Meanwhile, in Central Asia, the Eurasian Development Bank (EDB) announced its plan to issue sukuks worth $500 million in international markets. The news was unveiled at the recently held International Monetary Fund and World Bank Annual Meetings in Morocco.
Read: Saudi, Kuwait to lead growth in 3 trn Islamic finance sector in 2023-2024
Digital innovations in the sector
The Islamic banking sector also continues to evolve in terms of digital innovations.
Digital sukuk, a modern version of sukuk, continues to create traction as it eliminates the need for paper documentation and offers better efficiency. Last year, the global sukuk market was valued at $193.2 billion.
As emphasized in a report published in Research And Markets, the Islamic banking software market is also booming. The forecast shows that it could increase by $2.7 billion from 2022 to 2027 at a growth rate of 10.75 percent.
Several pivotal factors propel this growth. Besides the increasing sukuk issuance, these include the growing issuance of smart cards by Islamic banks and the continued shift toward increased mobility in the banking industry.
For more banking and finance news, click here.
