Diversification of Islamic Financial Insturments
13
Another major destination for Islamic financial sector is Malaysia which has dominated the
Sukuk markets with 46% of total assets based in the Sukuk markets. The ICD-Thomson
Reuters Islamic Finance Development Indicator has judged its Sukuk market as the most
developed in the world for last four years. The Islamic Financial Services Act (IFSA 2013),
which replaces the old Islamic Banking Act 1983 and Takaful Act 1984, is designed to improve
the observance of Shariah and operational compliance guidelines for Malaysia’s Islamic
financial institutions.
2.3 STATE OF ISLAMIC BANKING
While Islamic Banking has dominated the Islamic financial sector over the years, the relatively
slow growth of the sector over the last couple of years has come at a critical time. Multiple
factors have contributed towards the slowdown, with the exchange rate depreciations in key
Islamic finance markets; Iran, Malaysia, Turkey, and Indonesia being an important contributor
to the modest performance over the last two years.
Islamic Banking has developed to a level of systemic importance to 12 countries. The
classification of systemic importance for this report has been kept at Islamic banking being
15% or more of the total banking industry of a country. The latest addition to this club is
Jordan where Islamic banking assets surpassed 15% threshold in 2016.
Figure 2. Islamic Banking Share in Total Banking Assets by Jurisdiction (1H2016)
Source: IFSB 2017 Report.
Note: The countries that satisfy the criterion of having a more than 15% share of Islamic banking assets as a
proportion of their total domestic banking sector assets
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Iran
Sudan
Brunei
Saudi Arabia
Kuwait
Yemen
Qatar
Malaysia
UAE
Bangladesh
Djoubiti
Jordan