Kuala Lumpur: The Shariah-compliant banking assets have surged in Asia in the last year which assures that the next decade will see 15 percent increase every year in the Islamic Finance industry.
According to the estimation by a global standards-setting body, the Islamic Finance industry will grow at rapid pace of 15 percent annually due to surge in the Islamic banking assets in Asia.
As per data of the central bank, holdings in Malaysia rose 27 percent to RM344 billion during the 12 months to April 30, 2012.
The official figures show that in Indonesia, they climbed 43 percent to 144.3 trillion rupiah ($15.2 billion).
The Secretary General of the Kuala Lumpur-based Islamic Financial Services Board (IFSB), Jaseem Ahmed, said last month in an interview that rising consumer demand for banking services is helping drive the market.
The CEO at HSBC Amanah Malaysia Bhd, Rafe Haneef, said, “Government spending programs in the key Islamic centers of Asia and the Middle East are bolstering economic growth and bringing in more funds for lenders.”
According to a report from Ernst & Young LLP, Industry assets may reach $1.1 trillion in 2012, compared with $826 billion in 2010.
Haneef said in an interview, “Islamic banking assets worldwide have been growing at an average rate of 15-25 percent annually.”
“More and more countries, such as Egypt, are shifting to Islamic banking,” he added.
The data from the monetary authorities show Shariah banking in Indonesia accounted for 3.8 percent of the total in April, while the ratio was 24 percent in Malaysia.
The Deloitte Middle East Islamic Finance Centre in Manama, Bahrain, issued a report last month which showed that Saudi Arabia’s $94 billion of financial assets that comply with religious tenets represent 26 percent of the market in the six-member Gulf Cooperation Council (GCC).
A law firm, Lee Hishammuddin Allen & Gledhill, claimed that the lenders’ assets have potential to grow further as more countries adopt Islamic financing and sell sukuk.
HSBC’s Haneef stated, “Oman and Hong Kong are in the process of drafting legislation, while Turkey, Afghanistan and South Africa are planning sukuk sales. Egypt is looking to introduce Islamic banking in a big way.”
Issuance of bonds that comply with Islam’s ban on interest climbed to $20.8 billion in 2012 from $14 billion in the same period in 2011, led by the Middle East. HSBC Bank predicts full-year offerings will surpass 2011’s record of $36.7 billion.
A partner and Head of the shariah-compliant finance practice at Hishammuddin Allen, Megat Hizaini Hassan, said, “The outlook is positive for Islamic finance, with growth being primarily focused on consumer demand. The emergence of new markets would be the main driver.”
The IFSB predicted in 2007 that the global Islamic Finance industry would reach $2.8 trillion by 2015. Jaseem declined to give a new prediction. He said, “The industry is strong and growing and it’s expanding geographically.”
The Executive Director for Islamic capital markets at the Securities Commission, Zainal Izlan Zainal Abidin, stated, “Islamic finance has developed not only in traditional Muslim markets like Malaysia and the Middle East, but also in conventional markets.”
“There are a growing number of jurisdictions across the globe at various stages of developing their capabilities in Islamic finance,” he concluded.