Islamic finance to grow more

Issac John / 30 November 2013

$1.4b industry’s expansion seen at double-digits, with Malaysia and GCC to lead.

Islamic finance to grow more

Islamic finance to grow more

The industry in the GCC constitutes 28.7 per cent of assets at $445 billion as of 2012. — KT file photo.

Led by Malaysia and the GCC — the two regional heavyweights and pioneers of the industry — the $1.4 billion global Islamic finance industry is set for a double-digit growth.

“Undeterred by the uncertain recovery elsewhere in the world’s financial markets, global growth of the Islamic finance market has continued unabated this year,” Standard & Poor’s said.

In its report “Islamic Finance 2014: We Expect Continued Double-Digit Growth, And A Push For Regulation And Standards”, S&P said worldwide, Shariah-compliant assets are estimated at upward of $1.4 trillion are likely to sustain double-digit growth in the coming two to three years.

Despite more than a decade of heady growth, the industry is still in a formative stage. “But we believe it’s only a matter of time before it achieves critical mass, as the pool of assets broadens and deepens, and enhances liquidity,” said Zeynep Holmes, regional head of Eastern Europe of Middle East and Africa at Standard & Poor’s.

“Nevertheless, the speed at which the industry matures and joins the mainstream comes down to how market participants address a classic imbalance between supply and demand.”

S&P pointed out that Islamic finance remained a demand-driven market, with scarce supply, still hampered by a limited range of Islamic financial centres and their various regulatory frameworks.

“In our view, expansion and enhancement of existing centers, and a more transparent regulatory environment could build the momentum for the growth needed to break into the mainstream.”

The ratings agency said it believed that regulatory efforts to accommodate Islamic finance and the establishment of additional industry bodies at national levels will take centre-stage starting in 2014. Interestingly, newcomers in the industry — such as Oman, Turkey, and Nigeria, for instance — have started to trace the footsteps of fast-growing pioneers, such as Malaysia.

Rasameel confident on sukuk pipeline

DUBAI — Kuwait-based Rasameel Structured Finance expects a flurry of Islamic financing activity in the Gulf next year, in particular from corporations looking to tap the market for Islamic bonds, its chief executive said.

“There is an increase in activity, Dubai in particular and in the region in general, so we see a recovery coming up and I would expect to see more corporates come to market,” said Issam Al Tawari, Rasameel’s chairman and managing director.

The firm is working on corporate deals mainly in Kuwait and Dubai, including a sukuk for a healthcare company in the UAE that will fund the completion of hospitals and a research centre, he said in an interview. — Reuters.

“Right behind the newcomers, a long line of countries is aspiring to enter the market, with the continent of Africa in the forefront.”

“The gradual building out of local and regional regulatory frameworks and establishment of standards ought, in our opinion, to minimize the barriers that are preventing the industry from achieving its full potential. Globally accepted standards, we believe, are necessary for growth of the industry,” Holmes said.

According to Ernst & Young, Islamic banking assets are to grow to $1.8 trillion in 2013 and beyond $2 trillion by 2014. The industry in the GCC constitutes about 28.7 per cent of assets at $445 billion as of 2012 and registered a growth of 14 per cent over 2011.
Global sukuk issuances reached about $140 billion in 2012. Worldwide year-to-date issuance dipped 25 per cent from last year to $77.4 billion, as of September 22, 2013.

The global Takaful market is estimated at $12 billion as of 2011, and it is expected to touch about $25 billion by the end of 2015. Takaful insurance premiums in the GCC is expected to reach about $15.38 billion by the end of 2016.

TheCityUK’s UK Islamic

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