Diversification of Islamic Financial Insturments
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The more promising part of their findings lie in the post financial crisis years where Islamic
financing continued to grow in double digits of over 10%, and Islamic deposits fared much
better with a CAGR of 15%. The factors which have contributed to this growth arises out of
number of factors.
a) Revival of financing by Islamic banks during the post-financial crisis years;
b) New Islamic banks have been established across the globe and more Islamic banking
friendly policies are in place. The expansion of Islamic banks has allowed to tap into
previously unexplored markets and this has resulted in higher levels of deposit
mobilization.
The major growth over the last few years has come from Muslim dominated markets within
the OIC like the UAE, Bangladesh and Pakistan. Pakistani Islamic banking industry seen
tremendous growth with Islamic financing growing at a phenomenal around 20% CAGR over
the last 3 years9 .
 This drive has been led by expansion of Islamic banking activities as well as
conventional banks actively pursuing Islamic banking opportunities through
establishment of Islamic banking subsidiaries. A few conventional banks are even in
the process of complete transformation to Islamic banks.
The Malaysian Islamic banking industry, which has been at the cutting edge of innovation and
human capital, has the benefit of a strong government motivation, where the target is a 40%
share for Islamic financing in the country’s banking sector by 2020.
 In the Malaysian context, a major factor has been the growing awareness of the benefit
proposition of the Shariah compliant instruments. The government and policy makers
have invested heavily in developing awareness amongst the masses as well as through
academia.
Similar factors have helped the Islamic banking asset side to grow in UAE and Bangladesh.
Several conventional banks in these two countries have opened Islamic banking windows and
subsidiaries.
 There are still concerns being raised whether allowing so many Islamic banks
providing financing activities may result in becoming overly competitive.
Jordan is one of the only member countries within the OIC which has experienced negative
rate of financing growth within Islamic banking industry in the last few years. This is mainly
owing to biases by one major Islamic bank in the sample.
Generally, Islamic banks are facing strong fundamentals in terms of their assets and liabilities.
They are expected to experience some challenges in the coming years, while facing numerous
risks. Most of the banking industry is concerned about the future as the outlook of the global
banking industry is riddled with challenges of the global economic uncertainty and civil and
9 SBP Bulletin December 2016.