Risk Management in
Islamic Financial Instruments
12
in conventional microfinance programs. A global CGAP survey estimated there to be 380,000
customers of Islamic microfinance in 2007. Operations are currently concentrated in
Indonesia, Bangladesh and Afghanistan. These three countries account for 80 percent of the
global Islamic microfinance market (Karim, Tarazi, and Reille 1).
1.5.1 Regional Islamic Finance Development
The MENA region is the apotheosis of Islamic finance and the majority of Islamic banks
residing in this region, which is understandable due to the majority Muslim population in the
region. GCC has a diverse sukuk market and the largest takaful market. Particularly, Saudi
Arabia possesses 33.2% of the global Islamic funds industry and 38.7% of the takaful market
amongst MENA countries (GIFF 2012 9).
The rapid growth of Islamic finance has resulted in Islamic finance institutions and practices
spreading to other parts of the world, especially Asia, Europe and Sub-Saharan Africa.
Possessing a large Muslim population, several countries in Asia offer Islamic banking. Malaysia
has the most developed Islamic banks in the region, representing 80.7% of assets under
management in the region and possessing a well-developed sukuk and takaful industry. There
are five Shariah-compliant Islamic banks in the UK. Both Germany and France now have
subsidiaries of Turkish and Moroccan banks, respectively.
In addition, France has made some progress in creating the legal infrastructure to allow for
Islamic banking operations. As of 2011, European Islamic funds constitute 8.3% of the global
Islamic funds. Sukuk listings and takaful products have also appeared in several European
countries. In Sub-Saharan Africa, there are 38 Islamic financial institutions, and governments
are making headway to reform laws to allow for Islamic financial practices. Five countries,
Gambia, Sudan, Kenya, and Egypt, have issued sukuks. South Africa has embraced Islamic
finance as well. The country has several Islamic funds and takaful services, and plans to issue a
sovereign sukuk (GIFF 2012 8-10).
Islamic finance has been spreading at a slower rate in North America. In the United States,
there are about 15 financial institutions that offer Shariah-compliant products and services.
Three corporations, the IFC, East Cameron Gas Company, and GE Capital, offer sukuk, and
Zayan Finance is the only takaful operator. The Dow Jones Islamic Market Index, the FTSE
Global Islamic Index Series, and the S&P Shariah Indices were created as well ( GIFF 2012 10).