Diversification of Islamic Financial Insturments
5
Table 1 Selected Countries in the Study
Established Leaders Emerging Leaders Potential Leaders Tail Enders
Arab Asian African Non-OIC
Bahrain Malaysia Nigeria United Kingdom
Sudan Indonesia
Oman Pakistan
Turkey
Bangladesh
Source: GIFR 2016
United Kingdom in included in this Report as a representation of the Islamic finance industry
in non-Muslim countries. As per the 2016 EY Islamic Finance report, the presence of Islamic
banking, Islamic capital markets (particularly Sukuk) is very significant today in the
international world in non-OIC member countries including UK, USA, China and Hong Kong,
Singapore, Germany etc. The United Kingdom has a very significant Islamic banking and ICM
market, and has had licensed Islamic banks since 2004. London is also recognized as one of the
major financial hubs for the Islamic finance industry. Hence, it should be reflected on the
overall Policy Recommendations and presentation of Islamic financial products’ diversification
used in the world today.
Other than this, the majority of the study focuses on the OIC world. More countries are selected
from the Asian Group, as they have represented the global Islamic banking industry for a
significantly longer time. Nigeria represents the African countries.
Pakistan, Malaysia, Indonesia, Turkey and Bangladesh are presented from the Asian group,
as these countries show a fast growing Islamic banking industry, strong central bank support,
and show significant presence of the capital markets and/or Takaful sectors The Islamic
Finance Country Index (IFCI) marked Pakistan as one of the Potential Leaders in the Islamic
finance industry – a list that also included Sudan, Bangladesh, Turkey and the United Kingdom.
Sudan, Oman and Bahrain represent the Arab Group. It was appropriate to include one case
study from the two countries in the world (Iran and Sudan) that constitute a 100% Islamic
banking market. Oman can be an example of an emerging Islamic banking and finance market
with a fairly recent entry (2012) and a relatively strict approach to Islamic finance products. It
also debuted issuance of Sukuk in 2015. Bahrain is one of the earliest entries into the Islamic
banking, Takaful and capital markets industry with a well-developed framework, known for its
Shariah compliance and product development. According to the IFSB Report 2016, the ‘top ten
Islamic banking jurisdictions by assets’ comprised of Iran, Saudi Arabia, Malaysia, UAE, Turkey,
Bahrain, Bangladesh, Indonesia, Kuwait and Qatar, and we have selected five of these for our
case studies.
Bahrain and Indonesia are also labelled as one of the Emerging Leaders in the Islamic
financial industry (IFCI 2015). Indonesia, representing the Asian Group with Malaysia,
Pakistan and Bangladesh, is also home to the largest Muslim population in the world (with
Pakistan being second). Indonesia is also important in the Islamic capital markets industry
(IIFM 2016 Sukuk Report), having had a total of 37 short-term Global Sukuk issues alone (till
December 2015), compared to Pakistan’s 8, Bahrain’s 275 and Malaysia’s 2231 issues.
According to the IFSB Sustainability Report 2017, Pakistan, Malaysia, Indonesia and
Bangladesh were among the main contributors of Asia’s share of total Islamic banking assets.
Apart from Iran and Sudan, the IFSB 2016 report categorized Brunei, Qatar, Malaysia and
Bangladesh as having a systemically important Islamic financial industry, having more than