Global: Islamic finance set to extend growth to outpace conventional
Source: Middle East Insurance Review | May 2018
The growth of the Islamic finance sector will continue to outstrip the growth of conventional assets across core Islamic finance markets in the coming years, as demand for shariah-compliant financial instruments rises, said Moody’s Investors Service.
Islamic banking penetration in the GCC increased to 45% of the total banking market, as of September 2017 from 31% in 2008. During the same period, annual sukuk issuance more than doubled to $100bn from $42bn.
Sukuk issuances grew 17% in 2017 to $100bn, driven largely by GCC sovereigns. The ratings agency expects a similar level of issuance in 2018, although the recent recovery in oil prices could lower financing needs for some sovereigns. Corporate and asset-backed sukuk activity was muted in 2017 because of more attractive conventional market opportunities and Moody’s expects the same for this year.
The takaful sector continues to benefit from strong growth. The market attracted gross contributions of $14.9bn in 2015 and is estimated to attract over $20bn in 2017. The agency expects this growth momentum to continue in 2018 and over the medium term, spurred by strong growth prospects in Southeast Asia and North Africa.
“The Islamic finance sector will be supported by governments, whose objective is to grow the Islamic finance industry both domestically and globally, as well as by continued demand for Islamic products from individuals,” said Mr Nitish Bhojnagarwala, a vice president and senior analyst at Moody’s. “Islamic insurers’ penetration into Southeast Asia and North Africa will also drive growth in the industry.”
“Globally, Saudi Arabia (A1 stable) remains the largest market for Islamic finance overall, with Islamic financing assets worth $292bn as of September 2017, while Oman (Baa2 negative) is the fastest-growing Islamic banking market, logging a growth rate of 20% in the first nine months of 2017. This rapid growth is being driven largely by the country’s late entry into Islamic banking”, he said. M