Diversification of Islamic Financial Instruments
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by 9% in the same period; the comparative growth figures in US Dollar terms for both
countries are just 1.4% and 0.01%, respectively.
Between 4Q2013 and 2Q2016, Islamic banking assets showed moderate growth in US Dollar
terms, expanding at a CAGR of 9.9% across 14 jurisdictions which together represent about
94% of the global Islamic banking industry.
According to IFSB reported data of May 2017, amongst the GCC markets the, Kuwaiti Islamic
banks recorded the lowest level of asset growth, in 2015 up to 2016Q2, posting 6.9% growth in
2Q2015 and a moderate 2.2% in 2015 (though in terms of Financing, they had 6.2% growth
between the second quarters of 2015 and 2016).
On the other hand, Turkish participation banks have consistently maintained strong growth in
assets and financing over the last few years. Another major Asian destination Iran has also
shown high growth rates over the last two years, particularly with deposits, which have
increased by 19.5%, 24% and 30.5% in quarters two and four of 2015, and in quarter two of
2016.
Malaysian Islamic banks and windows over 2016 continued to grow their aggregate deposit
base, which increased by 8.2% between 2Q2015 and 2Q2016; the comparative figure for
conventional Malaysian banks was 1.6%. Growth in Malaysian Islamic deposits can be
attributed to the recovery in value, and deposits share, of its profit-sharing investment
accounts (PSIAs).
Bangladesh and Pakistan maintained robust levels of growth in their assets, financing and
deposit portfolios. Pakistan, in particular, sustained a high level of financing growth in 2015
and 2016 with the second quarter of 2016 witnessing 31.8% increase in Shariah compliant
financing as compared to 12.7% in conventional financing.
2.3.1 ISLAMIC BANKING DRIVERS IN KEY MARKETS
The Islamic banking in general has grown at a compound annual growth rate (CAGR) of 15%8
in the last seven years (2009–2016). The growth has tapered off in the recent years and has
slowed down to 10% CAGR over the last three years globally (2013-2016). This slowing down
of growth in Islamic Banking has been caused by multiple factors across different jurisdictions.
Some key factors which have influenced this are as follows:
 Exchange rate depreciation in emerging markets
 Economic slowdown globally and a depressed outlook for the future.
 Prolonged low energy prices in world markets,
 Weaker investor and consumer confidence in the global economy. There have been
recent signs of a global recovery, which are expected to rejuvenate growth of Islamic
banking globally.
According to IFSB, the Islamic financing and deposit growth have fared reasonably well with a
compound annual growth rate (CAGR) of 9.9% between the last quarter of 2013 to June 2016.
8 Authors’ calculation through data from Bankscope