Diversification of Islamic Financial Insturments
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slowdown globally as these sectors have suffered the most. A brief snapshot of percentage of
non-performing assets of total Islamic financing is presented below for first half of 2016.
Table 6. Islamic Banking Sectorial NPF by Country
Source: Author’s estimation through Bankscope and IFSB data
Islamic banks worldwide traditionally offer four categories of financial contracts: Deposits,
Lending, Treasury and Trade Finance. The following Table provides a comparative evaluation
of Islamic Banking products offerings across geographical regions. Briefly the comparative
analysis of the main markets and the products used highlights that amongst deposits a general
conformity of products exists between Malaysia and Indonesia and then within Middle East
and North Africa. This is understandable owing to the geographical proximity and the religious
school similarities between these pairs. While the variety of products on deposit side are, vast
and cover almost all needs of the Islamic finance consumers North Africa and Indonesia still
need to expand more as some categories haven’t been offered yet.
Similar trend is prevalent on the financing side products of Islamic banking amongst these
major jurisdictions. While Malaysia and Indonesia have a wider product offering, Middle
Eastern Islamic banks are diversifying their product offerings which are prevalent in Malaysia
and Indonesia but not there. This trend has picked up over the last decade fueled by
internationalization of Islamic banks. While the Trade financing products are relatively similar
across different regions, the product base is standardized amongst them. The treasury
products, on offer by Islamic banks globally are similar in nature, but Malaysian banks have a
more diversified portfolio on the back of a well-developed Islamic money market which allows
them to offer more products to service customers than other regions. A huge opportunity
exists for further expansion through cross-learning between regions.
Real Estate Manufacturing Household Construction
Bahrain 29% 10% 13% 13%
Bangladesh 6% 30% 1% 3%
Brunei 22% 11% 10% 20%
Indonesia 15% 10% 8% 6%
Jordan 12% 8% 52% 6%
Malaysia 11% 11% 35% 15%
Oman 10% 1% 64% 25%
Saudi Arabia 1% 11% 30% 15%