Islamic spend to boom

Propelled by a vibrant Islamic banking sector, global Islamic finance assets are forecast to reach $3.69 trillion by 2024, according to 2020 Islamic Finance Development Report.

The report, released by Refinitiv and the Islamic Corporation for the Development of the Private Sector (ICD), said global Islamic finance assets increased by 14 per cent year-on-year totalling $2.88 trillion in 2019.

With a $1.2 trillion in Islamic finance assets, the GCC accounted for a large share of the global total, followed by the Middle East and North Africa, excluding the GCC, at $755 billion, and Southeast Asia at $685 billion

The Islamic banking sector contributes the bulk of the global Islamic finance assets. The sector grew 14 percent in 2019, equating to $1.99 trillion in global assets. This compares with just one per cent growth in 2018 and an average annual growth of 5.0 per cent over the period from 2015 to 2018.

The top five developed countries in relation to Islamic finance are the UAE, Saudi Arabia, Malaysia, Indonesia, and Bahrain. This year, Indonesia displayed one of the most notable improvements in the Islamic Finance Development Indicator (IFDI), moving into second place for the first time due to its high knowledge and awareness ranking.

The latest report comes in the wake of the “State of the Global Islamic Economy Report 2020/21,” which ranks the UAE among top three countries in Global Islamic Economy Indicator 2020-2021. The report forecast that spending across these Islamic economy sectors, excluding family-friendly travel, would rebound by end-2021, and is slated to reach $2.4 trillion by 2024 after recording an eight per cent plunge in 2020. In 2019, Muslims spent $2.02 trillion on halal food, modest fashion, family-friendly travel, halal pharmaceuticals, halal cosmetics, and halal media and recreation, according to the report.

The UAE is also ranked in first place in two other sectors – Modest Fashion and Halal Media and Recreation.

“A lack of relevant, actionable data has held back the Islamic finance industry for too long. That’s why the Islamic Finance Development Indicator is now such an important tool for policy makers and market participants,” said David Craig, CEO of Refinitiv.

“This market is worth nearly $3 trillion already and I’m excited about its future, particularly when it comes to sukuk and because Islamic finance has so much in common with sustainable finance - one of the most significant trends in global business today,” said Craig.

“We believe that the analyses and information provided in this year’s report will serve as a vital reference point for the state of the Islamic finance industry during these difficult times and we remain convinced that Islamic finance can play a major role in alleviating the social and economic consequences of the COVID-19 pandemic,” Ayman Sejiny, the CEO of ICD, said.

The report covers 135 countries and is based on five key metrics comprising of Quantitative Development, Knowledge, Governance, Awareness, and Corporate and Social Responsibility.

Green and Socially Responsible Investments (SRI) increased in the UAE and Southeast Asia in 2020. The pandemic was a game changer as several Islamic banks reported losses and reduced profits throughout this year. The pandemic has also led to growth in some areas of the industry as some regulators turned to Islamic finance to mitigate the economic impact, the report noted.

The report said corporate sukuk issuance has also picked up after a cautious halt in the first quarter of 2020. The report indicates that companies are taking advantage of low borrowing costs to shore up their finances, while the pandemic continues to batter trade and economies. — issacjohn@khaleejtimes.com