In conjunction with the G20 Summit held virtually in Saudi Arabia in November last year, the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank (IsDB) Group has launched a report on Islamic finance in Saudi Arabia.
Titled ‘Islamic finance in Saudi Arabia: Leading the way to Vision 2030’, the report represents the first comprehensive analysis of the Islamic finance sector in the kingdom.
Saudi Arabia, the largest economy in the Middle East, plays an important role in stabilising the global economy, said IRTI. The kingdom is undergoing socio-economic reforms under the Vision 2030, closely aligned with the core G20 objectives of macroeconomic stability, sustainable development, women empowerment, enhanced human capital, and increased flow of trade and investment. Saudi Arabia is in the third year of implementing Vision 2030.
The IRTI report found that Islamic finance has a promising future in Saudi Arabia, especially considering the country’s position in the global landscape.
According to the report, by the end of 2018, assets of the Islamic finance sector in Saudi Arabia reached $879.2bn, making the kingdom the largest Islamic finance market globally in economies with dual financial systems comprising both conventional and Islamic financial sectors.
With its vast natural and human resources, a unique position as a religious tourism centre, an advanced and resilient financial system, and visionary leadership, the kingdom has the necessary ingredients to tap into the immense value that Islamic finance can bring to economic progress and social prosperity, the IRTI said.
The report said that given the kingdom’s immense potential and its unique comparative advantages, Saudi Arabia could become a global leader in the Islamic financial services industry particularly by capitalising on its distinctiveness in two areas:
- Awqaf: As a spiritual destination for Muslims worldwide, Saudi Arabia offers favourable incentives and can benefit from sizeable opportunities in terms of investment and spending. Awqaf can be an ideal channel for investment as it requires sustainable income generation.
- SME: Mobilising resources for SMEs through sukuk, equity, crowdfunding, and venture capital, would give the Islamic finance industry an edge in innovation, diversity and economic impact. Since SMEs are the engine of job creation, investing in the SME sector is essential for sustainable economic growth. M