Diversification of Islamic Financial Instruments
12
2 EVALUATION OF THE ISLAMIC FINANCIAL INDUSTRY BY
SEGMENTS
2.1 INTRODUCTION: THE STATE OF ISLAMIC FINANCE
As Chapter 1 earlier showed in the Table showing the breakdown of Islamic financial industry
by segments, the size of the global Islamic banking industry (2016, IFSB 2017 report) was
estimated at USD 1.49 trillion, with outstanding Sukuk amounting to USD 319 billion, Islamic
fund assets USD 56 billion, and Takaful at USD 25.1 billion. The growth of the Islamic finance
industry over the last decade has been steady and relatively fast even with the economic
challenges the world witnessed, ranging from energy price crash, geo-political conflicts,
exchange rate depreciations and an asset sell-off spree in emerging markets. After sustaining
double digit growth for nearly half a decade, in 2016, the Islamic financial sector witnessed a
slight slowdown, although IFSB 2017 reported a slight reversal of earlier decline in global
outstanding Sukuk, increasing from USD 300.3 billion in 2015 to USD 318.5 billion by the end
of 2016. The Takaful industry witnessed gross contributions increasing by 13.1% to reach USD
25.1 billion by the end of 2015 (refer to the Table on Breakdown of Islamic finance industry by
Segments, in Chapter 1).
2.2 GEOGRAPHICAL DISTRIBUTION OF ISLAMIC FINANCE
Islamic finance has been dominating primarily in the Asian and GCC markets. The figures
reported by Islamic Financial Services Board for 2016 highlighted the GCC markets as nearly
being 40% of the global Islamic financial markets with another 20% coming out of Asian
markets. Within the GCC markets, Saudi Arabia has historically been the leader in Islamic
finance assets across all jurisdictions. With the decline in oil prices, Saudi Arabia has
introduced a new long term vision which plans on reducing the dependency on oil revenue by
2030. The diversification of the economy will be fueled by the banking sector, which bodes a
good omen for the Islamic banking sector. While in Asia, Iran has been the major contributor of
the Islamic financial world, and with the lifting of the sanctions in 2016, the Islamic banking
industry of Iran will re-enter the global financial market.
Figure 1. Top 10 Countries by Islamic Financial Assets (2015 estimates)
Source: ICD-Thomson Reuter Islamic Finance Development Indicator 2016
447 434 414
187
101 100 81
52 48 26
0
100
200
300
400
500
Saudi
Arabia
Iran Malaysia UAE Qatar Kuwait Bahrain Turkey Indonesia Bangladesh