Global growth of the Islamic finance market has continued unabated this year, undeterred by the uncertain recovery elsewhere in the world’s financial markets, Standard & Poor’s said in a report titled “Islamic Finance 2014: We Expect Continued Double-Digit Growth, And A Push For Regulation And Standards.”
“We believe that worldwide, Shariah-compliant assets — which we estimate at upward of $1.4 trillion — are likely to sustain double-digit growth in the coming two to three years,” said Zeynep Holmes, Regional Head of Eastern Europe, Middle East & Africa at S&P.
Islamic finance remains a demand-driven market, with scarce supply, still hampered by a limited range of Islamic financial centres and their various regulatory frameworks.
Expansion and enhancement of existing centres, and a more transparent regulatory environment could build the momentum for the growth needed to break into the mainstream, said the report.
S&P said that it is only a matter of time before Islamic finance achieves critical mass, as the pool of assets broadens and deepens, and enhances liquidity.
The regulatory efforts to accommodate Islamic finance and the establishment of additional industry bodies at national levels will take centre stage starting in 2014, the report said.
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.
Right behind the newcomers, a long line of countries is aspiring to enter the market, with the continent of Africa in the forefront, S&P said.
“The gradual building out of local and regional regulatory frameworks and establishment of standards ought, in our opinion, to minimise 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.
In this respect, the two regional heavyweights and pioneers of the industry—Asia (most notably Malaysia) and the Gulf Cooperation Council (comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE) — are set to lead the way.
Aspiring regional champions, such as Turkey, may also help foster a more systematic approach to channelling and shaping growth in Islamic finance.