Shifting Dynamics: #IFDI2019
Shifting Dynamics: #IFDI2019
Shifting Dynamics: #IFDI2019
ICD-REFINITIV
SHIFTING
Islamic Finance Development Report 2019
DYNAMICS
ICD Refinitiv Islamic Finance Development THE DATABASE WILL PROVIDE ISLAMIC
Indicator (IFDI) is a composite weighted index
that measures the overall development of
FINANCE MARKET STAKEHOLDERS WITH
the Islamic finance industry by assessing the
performance of all its parts in line with its inherent
faith-based objectives.
+7 years +520 +330 +12,000
The information is comprehensively Islamic finance Islamic banks Takaful Operators Sukuk issuances
industry financial financial data across data across 47 data from over 24
gathered from a universe of 131 countries data 72 countries countries countries and in more
and measured across more than 10 key metrics than 12 structures
including Knowledge, Governance,
CSR and Awareness.
06 EXECUTIVE SUMMARY
Global Islamic Finance Industry Landscape
67 CONTRIBUTORS
The indicator remains the leading source for measuring the overall stance and development of the Islamic finance industry. Through the collation of industry statistics from
131 countries, the indicator measures each of the main Islamic finance sectors and asset classes, as well as management components such as governance and social
corporate responsibility, and the surrounding ecosystem including the industry knowledge and awareness.
Demand has been growing for Shariah-compliant products and services since the Islamic finance industry was born in the 1970s, and today global assets reached US$
2.5 trillion. We aim to continue supporting future growth through ICD’s provision of Islamic finance for private sector projects and Refinitiv’s solutions and insights.
Yet there remain challenges ahead for the industry given today’s volatile global economic environment and sluggish growth. The global economy continues to be under
significant stress, slowing down more than expected and raising fears of an abrupt downturn in economic activity. This is particularly marked in the main Islamic finance
markets, many of which have seen a slowing of their economies. Additionally, Islamic banking, the largest sector of the industry in terms of assets size, is a victim to the
same economic and social challenges that are impacting conventional banking around the world.
Nevertheless, the dynamics in the industry are also changing. The Sukuk product led the growth amongst all industry sectors. Global issuance surpassed the US$ 1 trillion
mark in 2018 for the first time. Sukuk are a key aspect of the Islamic finance industry and are expected to play a still more prominent role in coming years. In fact, many
markets are showing increasing interest in raising capital through sukuk structures, among both corporates and government agencies.
The industry and the surrounding ecosystem are also being continually reshaped by innovation, particularly in the areas of financial technology and sustainability. This is
in line with the UN’s Sustainable Development Goals (SDGs), and aligns with the strategies of both ICD and Refinitiv.
Ayman Sejiny
Chief Executive Officer, Mustafa Adil
Islamic Corporation Head of Islamic Finance,
for the Development Refinitiv
of the Private Sector
Iran, Saudi Arabia and Malaysia were the largest markets of the 61
countries that reported Islamic financial assets, with all three recording
more than US$ 500 billion in assets. The countries which saw the
fastest growth in assets were Morocco, Cyprus and Ethiopia.
Malaysia, Bahrain and the UAE continue to spearhead developments in the In terms of governance, governments are also enhancing their regulatory
industry, while Uzbekistan and Ethiopia are among the biggest risers in the frameworks to benefit the industry. The UAE, for example, is working to improve
rankings as a result of improvements in their financial and supporting ecosystem Shariah oversight in areas such as Islamic banking and sukuk, while Malaysia is
metrics. revising its takaful framework. Morocco, the Philippines and Bangladesh have
introduced new Islamic finance regulations in 2019.
Despite slowing growth in other sectors, sukuk
continues to power ahead Much is being done to increase Awareness in the industry with the emergence of
‘Islamic Finance Week’ models, where several Islamic finance-related are brought
Growth in the industry’s leading sector, Islamic banking, slowed to 2%, largely in together to increase participation in these events. Such mega-events were held in
line with slowing growth for the global economy. Islamic banking assets totaled 2018 in the UAE, the UK and Kazakhstan.
US$ 1.76 trillion. Many Islamic banks or windows are also undergoing continuing
transformation through either reorganization or consolidation. Despite the slowed Cross-border collaborations on Islamic finance between governments are another
growth, new banks and markets continue to enter the market, as seen in Ethiopia, trend, with such partnerships being announced in 2019 between Turkey, Qatar
Algeria and Afghanistan. Also, new liquidity tools are being developed to help and Malaysia and between Indonesia and Suriname.
grow existing Islamic banking markets, as seen in the UK and Pakistan.
Takaful and other Islamic financial institutions (OIFIs) account for the remaining FinTech continues to shape the industry,
share of Islamic financial institution assets with a respective US$ 46 billion and with new developments in digital social finance
US$ 140 billion reported for 2018. Although, takaful grew a mere 1% and OIFIs
even declined from 2017, both sectors are seeing transformational activities in their FinTech is another area that is actively changing the dynamics of the industry, as
main markets that should lead to improved growth in coming years, particularly seen, for example, in the issuance of blockchain-based micro-sukuk and in the
in Saudi Arabia and the UAE. Moreover, both sectors are taking in new entrants role of Islamic FinTechs in promoting the industry in the UK and the U.S. during
in new markets. Developments in InsurTech and FinTech are also set to transform 2018. Crypto-assets are also being looked into by Shariah scholars and regulators
these sectors. in developed Islamic finance markets such as Bahrain and Malaysia.
In contrast with other sectors, the global slowdown did not impede the sukuk Digital platforms are also beginning to be developed for applications in Islamic
asset class from continuing its strong growth, rising 10% in 2018 to US$ 470 billion. social finance, which can help in achieving the UN’s Sustainable Development
Sukuk issuances during the year reached US$ 125 billion, a similar figure to the Goals as seen in UNHR’s successful collection of zakat funds digitally. In addition,
previous year. New innovative sukuk forms and structures emerged in 2018 and Indonesia’s National Committee for Islamic Finance has partnered a centralized
2019 such as waqf, blockchain-based and gold-based sukuk. This is apart from QR code payment platform owned by four Islamic units of state-owned banks
green sukuk, which emerged in Malaysia in 2017 and has since expanded into to develop a digital platform for distributing Islamic social finance funds and to
new markets. help Islamic finance cooperatives better manage funds from zakat and waqf
payments. Indonesia also saw the launch of the world’s first blockchain-based
Islamic funds, which had a strong performance in 2017, declined to US$ 108 billion crowdfunding waqf.
in 2018 as result of negative performances for most of the funds managed, in line
with the global economic slowdown.
4,000 3,472
3,500
2,500 2,306 2,458
2,524
2,200
2,000 2,059
1,974
1,760
1,500
1,000
500
70% 19% 5% 4% 2%
- Islamic Banking Sukuk Other IFIs Islamic Funds Takaful
2024
Projected
2012
2013
2014
2015
2016
2017
2018
US$ 1,760 Bn US$ 470 Bn US$ 140 Bn US$ 108 Bn US$ 46 Bn
What supported the growth of the global Islamic finance industry in 2018 ?
The five main indicators for the IFDI are weighted indices
representing different sub-indicators, which are: Quantitative
Development, Knowledge, Governance, Corporate Social
Responsibility and Awareness. This chapter discusses the
overall development of the Islamic finance industry through
these indicators and highlights the top-ranked countries
according to the IFDI. The full methodology is detailed in
the appendix.
IFDI
Country
Value IFDI 2019 Quantitative Knowledge Governance CSR Awareness
Development
Malaysia 115 1 1 1 1 11 1
Bahrain 71 2 4 6 2 7 3
Indonesia 68 4 8 2 9 13 10
Saudi Arabia 60 5 5 8 20 2 7
Jordan 57 6 17 4 13 1 13
Pakistan 56 7 13 3 7 17 4
Kuwait 54 8 2 22 8 4 9
Oman 52 9 12 11 4 3 8
Brunei Darussalam 45 10 19 7 5 24 5
Qatar 44 11 11 17 15 5 6
Maldives 37 12 10 18 6 10 14
Bangladesh 33 13 7 19 12 12 24
Nigeria 32 14 25 12 10 9 41
Sri Lanka 30 15 14 13 16 8 23
Indonesia ranked fourth, on the back of its being home to the world’s largest number of education institutions providing courses or degrees on Islamic
finance and by the numerous research papers produced by those education institutions and other affiliations. Saudi Arabia remained in fifth position
due to the continuation of large sovereign sukuk issuances, which in turn encouraged high corporate issuance, and the large amounts of CSR funds
disbursed by its Islamic financial institutions.
Top Countries
Quantitative Knowledge Governance CSR Awareness
Development
1ST
2ND
Malaysia Malaysia Malaysia Jordan Malaysia
3RD
Kuwait Indonesia Bahrain Saudi Arabia UAE
4TH
Iran Pakistan UAE Oman Bahrain
Bahrain Sudan Iran Saudi Iran Bangladesh Indonesia Malaysia Jordan Malaysia Pakistan Bahrain Jordan Saudi Kuwait Malaysia Brunei Pakistan
Arabia Arabia
Iran Kuwait Malaysia Malaysia Bangladesh Saudi Malaysia Indonesia Pakistan Bahrain Malaysia Sudan Oman Sri Lanka Nigeria Malaysia UAE Bahrain
Arabia
Bahrain
16 16
14 14
12
11
10 10
8 8
6 6
4
1
The indicator value for 2018 has been restated as part of an ongoing revision of the indicator and its data.
The Quantitative Development indicator (QD), which measures the The Governance indicator – which is measured through three sub-
performance of the industry’s five main sectors, – Islamic banking, indicators: regulations, Shariah governance, and corporate governance
takaful, other Islamic financial institutions, sukuk, and Islamic funds – – edged up in value to 14 for IFDI 2019 from 13 for IFDI 2018. The rise was
grew only slightly, to 6 for IFDI 2019 from 5.8 the year before. Of the five mainly driven by corporate governance, with improvements in disclosure
sub-indicators, only Islamic banking, takaful and sukuk showed growth. by Islamic financial institutions in countries including Bangladesh, Bosnia
and Herzegovina, Ethiopia, Syria and Kenya.
Despite the slower growth in Islamic banking assets, especially in the
main markets, there were some noticeable improvements in other Regulations and Shariah governance, on the other hand, remained static.
markets, which supported the rise in sub-indicator value. The addition While some countries such as Suriname saw a rise in numbers of Shariah
of three new countries reporting Islamic banking assets – Suriname, scholars, others such as Kuwait and Bangladesh reported fewer scholars
Morocco and Ethiopia – improved their sub-indicator values. Ethiopia which in turn led to a decline in the number of institutions with at least
made a particularly marked contribution as it jumped from 44th to 32nd three Shariah scholars. On a positive note, this decline also reduced
in the Islamic banking sub-indicator. the number of scholars who were represented on five or more Shariah
boards in these countries.
Other than this, an improvement in performance by Islamic financial
institutions in certain countries pushed up some of the sub-indicators. The Corporate Social Responsibility indicator is measured through the
Indonesia made a contribution as the average return on assets achieved amount of CSR funds disbursed such as zakat and qardh, along with
by its Islamic banks was at the higher end of the spectrum. Other disclosure on 11 CSR activities including employees’ welfare, zakat
improved countries in the Quantitative Development indicator included policy, and waqf policy. The CSR indicator’s value remained static for
Syria, where there was a sizeable increase in return on assets for Islamic IFDI 2019, with no notable changes in its sub-indicators’ values. This is
banks and its sole takaful operator turned to profit in 2018. Rankings were despite growth in CSR funds disbursed of 23%, as there was a decline
also improved in countries where Islamic financial institutions turned to in average CSR activities disclosure from 3.09 in 2017 to 2.44 in 2018.
profit, such as Thailand, Singapore and Albania. Syria and Oman showed the biggest improvements in score, with more
CSR funds disbursed, while the Maldives, Kenya, India, Kazakhstan and
Sukuk also improved on the back of countries such as Kuwait, where Nigeria reported better CSR disclosure scores. Countries such as Sudan,
there was an increase in sovereign sukuk issuances in 2018 to manage however, saw less financial disclosure during 2018, which led to a lower
liquidity at Islamic banks, and Morocco, which issued its first sovereign CSR score.
sukuk. On the other hand, Islamic funds showed a small downturn due
to negative average growth in fund values and a negative average
cumulative performance in countries including Japan, Ireland and the
U.S.
The Knowledge indicator – which assesses the degrees, Despite the deceleration of growth in global Islamic finance
qualifications and courses provided by Islamic finance assets and in some of the industry’s main markets as shown in
education providers, as well as numbers of Islamic finance the Quantitative Development indicator, there may be growth
research papers produced – rose from 9 for IFDI 2018 to in non-core markets in coming years. Announcements of
10 for 2019. An output of 816 new research papers during interest in Islamic finance and the drawing up of roadmaps for
2018 pushed up the research sub-indicator’s values for its development in countries including the Philippines, Algeria
many countries including Spain, South Korea and Morocco. and Indonesia suggest scores may rise more strongly. These
Education continues to be driven by the large numbers of developments may also lead to increases in Awareness through
Islamic education providers in Indonesia, Malaysia, Jordan, news and events, improvements in regulatory oversight, or an
the UAE and Bahrain. increase in Knowledge of the industry through education and
research.
Awareness – which is measured through Islamic finance
news items and events such as seminars and conferences Institutions and regulators in Ireland may look into tapping
– increased in value from 15 for IFDI 2018 to 16 for IFDI 2019. potential demand from the Muslim community there for Islamic
The News sub-indicator increased the most, with increases finance products such as mortgages that are already available in
in news coverage in countries including Uzbekistan, the UK and Canada. A survey conducted by Dublin-based law firm
Afghanistan, Tunisia, Tajikistan and the Philippines. The sub- Philip Lee revealed sizeable demand for Islamic financial products
indicator rose from 30 to 33. in Ireland, and this could increase if the UK loses EU business
following Brexit. On the other hand, another survey conducted by
The conferences and seminars sub-indicators each rose UK Islamic bank Gatehouse Bank sees huge opportunity in the
from 7 for IFDI 2018 to 8 for IFDI 2019. Despite a reduction in UK given that almost half of British Muslim consumers do not use
the overall number of conferences in 2018, some countries Islamic finance products.
such as Pakistan, Saudi Arabia and Indonesia had large
increases, while 12 new countries held conferences during On top of this, collaborations between governments to mutually
the year. Seminars sub-indicator values increased in the U.S. develop the Islamic finance industry, such as those seen between
and the UK as Islamic FinTechs ran campaigns to promote Turkey, Qatar and Malaysia and between Indonesia and Suriname,
their services which in turn promoted the wider industry. are expected to further boost coming IFDI results. In addition, the
continued support given by multilateral development institutions
such as the Islamic Corporation for the Development of Private
Sector (ICD) will ensure further such collaborations in the future.
About the Author : institution. Baitul Mal is the social finance part of BMT which manages zakat,
waqf and other social religious funds, while Tamwil is the commercial side
where various forms of financing are offered to BMT customers and members.
Dr Sutan Emir Hidayat is Director of Islamic Financial Research
and Education at the National Islamic Finance Committee (KNKS) This model works well particularly in poorer regions where many people are
in Indonesia. unbanked and has done much to improve people’s lives. It is one which could
He obtained his PhD and MBA from International Islamic be replicated in many other countries with large, unbanked Muslim populations.
University Malaysia. He has published research papers in
international journals and edited papers for scientific journals. Another important point of difference is that Indonesia has more regulations
governing the Islamic finance industry than any other country. However, these
Dr Sutan is also an Islamic finance journalist with articles regulations are scattered among different regulators. Central Bank of Indonesia
published by Islamic Finance News and other sites, and has has a role in payment system of Islamic banking institutions while Financial
published two books as well as contributing chapters to several Services Authority (Otoritas Jasa Keuangan) has a function to regulate and
others. He has been recognized by IsFin as one of the 500 most supervise banking institutions, capital market, Islamic pension fund and other
influential personalities in the global Islamic economy. Islamic financial institutions. Other institutions also play an important role in
Islamic banking such as National Shariah Council (Majelis Ulema Indonesia)
which has the authority to issues fatwas related to Islamic banking and finance.
It is also likely that Indonesia has the biggest number of Islamic financial
Islamic
Islamic
Finance
Finance
Development
Development
Report
Report
20192019 19 19
20 Islamic Finance Development Report 2019
ISLAMIC
FINANCE
OVERVIEW
To assess the Quantitative Development of Islamic
financial institutions and markets, it is necessary to look
at all the sub-sectors of the industry and review their
quantitative dimensions. This chapter highlights the
financial growth, depth and performance of the Islamic
finance industry and its individual sectors. It will also look
into key trends and opportunities across its five main
sectors: Islamic banking; takaful; other Islamic financial
institutions; sukuk; and Islamic funds.
The performance of the Islamic finance Assets in Iran slipped 1% in value to US$ 575 billion as a result of the
continued depreciation of the rial caused by U.S. sanctions, even though
industry is measured through five sub-sectors growth for the country’s Islamic financial institutions was 17% in local
Islamic banking; takaful; other Islamic financial institutions currency terms. Iran’s Islamic funds also declined in value from 2017,
(investment companies, microfinance institutions, etc.); although sukuk outstanding increased significantly in line with a rise in
sukuk issuances.
sukuk; and Islamic funds. Financial institutions are
considered the backbone of the industry given their size The second-largest market, Saudi Arabia, saw 6% growth in Islamic finance
and track record, while capital market asset classes assets during 2018 to US$ 541 billion, a slight pullback from growth of 7%
in 2017. The slowdown can be attributed to a decline in Islamic funds and
such as sukuk and Islamic funds are its major lower growth in sukuk outstanding compared to the previous year. Saudi
investment instruments. Islamic financial institutions had mixed results as the Islamic banking and
takaful sectors grew while other Islamic financial institutions declined
slightly.
2
Total Islamic finance assets for previous years were restated as part of an ongoing process
while collecting data for the Islamic Finance Development Indicator.
Islamic funds’ assets, on the other hand, declined 10% to US$ 108
billion. This reflected negative performances in 24 of the sector’s 28
markets. Moreover, 84 Islamic funds were liquidated or merged during
2018, with a total AuM of US$ 407 million.
Islamic Finance Assets Growth 2012 - 2018 Distribution of Global Islamic Finance Assets
(US$ Billion) *Including Windows
2,458
2,306
US$
470 2,887
2,200 18% Sukuk 27
Billion Outstanding
2,000 2,059
1,974 Sukuk
1,760
US$
1,500
140 6% 592 54
Billion OIFIs*
Other Islamic
Financial Institutions
1,000
US$ 1,701
108 4% Funds
Outstanding
28
Billion
US$
335
- 46 2% Takaful 47
2012
2013
2014
2015
2016
2017
2018
2024
Projected
Billion Operators*
Takaful
600
575
65%
541 521
500
400
300
238
200 Fastest Growing Markets in
Islamic Finance Assets 2018
125
100 116
86 86
51
38
Morocco
- Cyprus
Iran Saudi Malaysia UAE Qatar Kuwait Bahrain Indonesia Turkey Bangladesh Ethiopia
Arabia
GCC Southeast Asia Other MENA Europe South Asia Sub-Saharan Other Asia Americas
Africa
1,123 621 620 79 67 7 3 3
Islamic Banking Assets Growth 2012 - 2018 Number of Islamic Banks by Type 2018
(US$ Billion)
2,500
2,175
2,000 Commercial 418
1,723 1,760
1,673
1,599
1,559
1,500
1,443 Investment 58
1,304
1,000
Wholesale 25
500
Specialised 19
-
2012
2013
2014
2015
2016
2017
2018
2024
Projected
62%
34
500
488 30
400 26
390 25 25
300 20
16
214 15
200
194
10
7
6 Fastest Growing Markets in
100 100
97
5 5 Islamic Banking Assets 2018
35 39
36 28
- -
Morocco
Iran Saudi
Arabia
Malaysia UAE Kuwait Qatar Bahrain Turkey Bangladesh Indonesia Cyprus
*Including Windows Total Assets (US$ Billion) Number of Islamic Banks* Ethiopia
GCC Other MENA Southeast Asia South Asia Europe Sub-Saharan Americas Other Asia
Africa
871 532 253 56 46 2 0.4 0.1
335
46
US$
Total Takaful Operators*
Total Takaful
Assets in 2018
Trillion 213 122
Full-fledged Takaful Operators (*Including windows) Windows
20
Life 78
10
- Retakaful 22
2012
2013
2014
2015
2016
2017
2018
2024
Projected
14 54
50
13
12
80%
40
36 9
8 30
26
25
6
20 20
17 19
4
3
3 10 Fastest Growing Markets in
2 8 9 Takaful Assets 2018
4
1 1 1
Maldives
0 0
- -
Saudi
Arabia
Iran Malaysia UAE Indonesia Qatar Turkey Bangladesh Pakistan Brunei Pakistan
*Including Windows Total Assets (US$ Billion) Number of Takaful Operators* Brunei
GCC Other MENA Southeast Asia South Asia Europe Americas Sub-Saharan
Africa
19 13 12 1 1 0.001 0.004
Another move which if enacted would have an impact on the takaful Nigeria in September 2019 granted licences to two new takaful operators,
market is opening it to foreign insurance operators, which would Cornerstone Takaful Insurance and Salam Takaful Insurance, bringing the
increase competition in the Saudi market while potentially introducing total number of takaful insurers in the country to four.
new ideas and technology.
592
140
US$
Total OIFI Total OIFIs*
Assets in 2018
Billion 465 127
Full-fledged OIFIs (*Including windows) Windows
80
Leasing 67
60
40 Microfinancing 36
20
- Modaraba Company 24
2012
2013
2014
2015
2016
2017
2018
2024
Projected
60 80
72
70 70 70
52
50
72%
Total Assets (US$ Billion)
60
Number of OIFIs
40 51 50
33
30 41 40
30
20
24
16 20
13
10 10 Fastest Growing Markets in
9 7 10
6
3 2
OIFI Assets 2018
2 1 1 1
- -
Australia
Egypt
Malaysia Iran Saudi Kuwait Qatar Switzerland UAE Brunei Indonesia Senegal
Arabia
Southeast Asia GCC Other MENA Europe Sub-Saharan South Asia Other Asia Americas
Africa
56 41 34 7 1 1 0.08 0.01
POTENTIAL THROUGH FINTECH the headwinds coming from technology, with large tech firms
entering the financial sector, and demand for a better customer
experience, especially from millennials. Financial technology,
or FinTech, is forcing a fundamental rethink and paradigm shift
in business models of banks and other financial institutions.
Business models are being challenged and transformed at
a speed that is unprecedented. It is possible for a traditional
business to do nothing wrong and still find itself out of business
Khalid Hamad within a short period of time. In such a scenario it is of critical
importance that the entire ecosystem works in harmony to
Executive Director achieve the desired results. In other words, the regulator, the
of Banking Supervision, industry and the tech companies ought to work hand in hand to
Central Bank of Bahrain adopt new technologies and serve the customers better while
maintaining stability and mitigating risks.
To help financial institutions reduce operational costs and This year we also introduced rules on digital financial advisory, also
encourage local and foreign investment we further enhanced known as robo-advisory, and have issued rules on crypto-asset
our rules on outsourcing of financial services. Today almost all services covering trading, dealing, advisory, portfolio management
the banks utilize the services of third-party processors. We also and custodial services.
allowed financial institutions to use cloud computing in 2017 for
the same purpose and in line with the Government of Bahrain’s Also, under the direction of the CBB, the BENEFIT Company launched
Cloud First policy. this year a nationwide e-KYC solution. This will reduce operational
cost for banks and facilitate their compliance with KYC, or Know
In line with our objective to further enhance financial inclusion in Your Customer, rules. It will also speed up the process of opening
Bahrain we issued crowdfunding rules in 2017 – both equity and new accounts and maintaining ongoing compliance. BENEFIT is also
debt-based – and for conventional as well as Shariah-compliant working on a tokenization project endorsed by the CBB to make still
segments. We modified these rules in 2018 in line with market more secure the use of cards for payment.
feedback. Through this initiative we aim to enhance financial
inclusion to where we expect it to be.
Islamic
Islamic
Finance
Finance
Development
Development
Report
Report
20192019 39 39
Sukuk
2,887
Number of Sukuk Outstanding in 2018
470
US$
Total Sukuk
Value Outstanding
in 2018
Billion 319 193 2,375
Sovereign Quasi-Sovereign Corporate
Sukuk Value Outstanding Growth 2012 - 2018 Number of Sukuk Issued by Structure 2018
(US$ Billion)
900
843 Murabaha 305
800
200 206
Hybrid Sukuk 134
100
-
Other Sukuk 115
2024
2012
2013
2014
2015
2016
2017
2018
Projected
250 2,500
2 136
78%
Total Assets (US$ Billion)
150 1,500
100 1,000
98
51
50 500
Fastest Growing Markets
35
212 101
18 81 in Sukuk Assets 2018
60
56 11 6 18 6 10 6 35 5 9
Kuwait
- -
Malaysia Saudi
Arabia
Indonesia UAE Qatar Turkey Bahrain Pakistan Iran Oman
Iran
Sukuk Outstanding Value (US$ Billion) Number of Sukuk Outstanding Nigeria
Southeast Asia GCC Europe South Asia Other MENA Other Asia Sub-Saharan Americas
Africa
1,701
108
US$ Number of Islamic funds Outstanding in 2018
Total Islamic
Funds Outstanding
Value in 2018
Billion
176 89
Islamic Funds Islamic Funds
Launched in 2018 Closed in 2018
Islamic Funds Assets Growth 2012-2018
(US$ Billion)
Islamic Funds Outstanding Value by Universe 2018
250 (US$ Billion)
216
200
Mutual Funds 97
150
Exchange Traded Funds 9
120
108
100 99
71 Insurance Funds 2
61 66
50 58
2013
2014
2015
2016
2017
2018
2024
Projected
350
77%
30
10 10 116
100
90
Fastest Growing Markets
5 50
in Islamic Funds Assets 2018
3 3 2 6 2 2 1 18
- 0 Qatar
Oman Malaysia Saudi UK Indonesia Luxembourg US South Pakistan Kuwait
Oman
Indonesia
Arabia Africa
Islamic Funds Outstanding Value (US$ Billion) Number of Islamic Funds Outstanding
Other MENA Southeast Asia GCC Europe Americas South Asia Sub-Saharan Other Asia
Africa
35 31 24 12 2 2 2 0.01
By far the weakest performance in the last decade, overall Islamic AuMs Recent sovereign sukuk issuances in the region have also attracted
fell 10% during 2018, compared to 23% growth in 2017. This is mainly the sizeable demand from foreign pension and insurance funds. Growing SRI
result of subdued global economic conditions in addition to the poor and green sukuk issuances will also provide a larger base for establishing
performance of Asian equities during 2018. Malaysia and Indonesia Islamic ESG funds, targeting investors with socially responsible mandate
are the two largest Islamic funds markets, and both their stock markets in addition to traditional Shariah-compliant investors.
suffered losses in 2018.
Islamic ETFs set to enter new territory
Iran, Malaysia and Saudi Arabia remained the largest Islamic funds ETFs have captured over US$3 trillion in AuM globally, but they remain a
markets, collectively accounting for 77% of global AuM. Each saw a niche market in the Shariah-compliant space. In a market dominated by
reduction in value of AuM during 2018. The UK and Indonesia have mutual funds, there have been only a handful of Islamic ETFs, and these
crept into the top five markets, replacing the U.S. and Luxembourg. have been concentrated in Malaysia.
Indonesia was the largest issuer of Islamic funds in 2018, with 59 new ETFs mostly follow passive strategies, making them low-cost investments
Shariah-compliant mutual funds launched. In 2015, Indonesia’s financial in addition to being more accessible to retail investors. This should
services regulator first allowed investment managers to include offshore potentially allow Islamic fund managers to tap new clients through
assets in their mutual funds in order to achieve wider diversification. As ETFs: investors from developed markets seeking exposure to emerging
a result, Indonesia has seen the launch of more than 40 new Islamic markets, and retail investors.
mutual funds each year since. Between 2015 and 2018, the number of
Islamic funds in Indonesia increased from 82 to 222. Total AuM rose The issuance of the world’s largest single-country Islamic ETF in 2018
more than threefold during this time, to US$2.97 billion from US$808 suggests this type of fund may soon become mainstream. The Al Rayan
million in 2015, despite poor overall performance over 2018. Qatar ETF (QATR), with initial assets of US$120 million, was launched by
Islamic bank Masraf Al Rayan as part of Qatar’s drive to increase foreign
Expanding investor base for GCC Islamic investments investment from Southeast Asia, the UK and Europe among others. The
The trends that began to emerge in the Islamic funds market during ETF tracks the QE Al Rayan Islamic Index of Sharia-compliant stocks in
2018 indicate that their investor base will no longer be limited to Shariah- Qatar. The Qatar Stock Exchange announced in 2019 that it will launch a
compliant investors. Several GCC stock indices, including of Shariah- second Shariah-compliant ETF, based on assets outside Qatar.
compliant equities, were upgraded to emerging market status on major
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136
44 Countries 79
77
Shariah Governance Have Islamic Finance Sukuk
30 Countries Regulation in 2018 19 Countries
42
38
12
Countries with
Number of Islamic Financial Institutions that
Reported Financials
188
Takaful Operators
243
OIFIs
30
Central Shariah Board
Global Islamic Finance Shariah Scholar Top Countries in Average FRDI Score 2018*
Institutional Representation 2018
868 54
Single Representation
48
47
211 46
42
2-3 Institutions
63
4-9 Institutions
24
More than 10 Institutions Oman Bahrain Sri Lanka Maldives Palestine
*The Disclosure Index covers 70 items that need to be disclosed in 2018 annual or financial reports
of Islamic Financial Institutions
CSR In March 2019, the Kingdom’s General Authority of Zakat and Tax
(GAZT) issued a law specifying zakat rules on financing activities by
OVERVIEW
companies licensed by the Saudi Arabian Monetary Authority (SAMA).
The Zakat By-Law also rules that zakat on sukuk issued locally by the
Ministry of Finance is borne by the government.
The law also states that the size of a bank’s taxable asset base that
Corporate Social Responsibility (CSR) is subject to a 2.5% zakat levy will be between four and eight times
is assessed through two components: disclosed CSR net profit, which could lead to banks paying as much as 10% to 20%
of net profit in zakat. This follows a longstanding dispute between
activities and CSR funds disbursed. CSR activities the GAZT and 12 Saudi banks which was ultimately resolved in 2018
are measured using an index derived from information by a settlement of SAR 17.9 billion (US$ 4.8 billion) for extra zakat
provided in Islamic financial institution annual reports covering the years back to 2002. The highest amount was paid by
and based on the AAOIFI Governance Standard for Islamic Saudi Arabia’s largest Islamic bank, Al Rajhi, with a payment of SAR
5.4 billion (US$ 1.4 billion). The payments will be spread over a number
Financial Institutions No. 7. CSR funds include charity, of years in order to prevent them from affecting the banks’ liquidity or
zakat and qard al-hasan (benevolent interest-free loans) profitability.
disbursed by these institutions.
Imposition of responsible finance principles
in Saudi Arabia could boost CSR disclosure
Although Saudi Arabia is ranked the world’s first in terms of CSR
funds disbursed, it is not among the top ranked countries in terms of
CSR disclosure. This might change, however, after SAMA in August
2018 began to insist that financial institutions in the Kingdom comply
with its responsible lending principles so as to meet the needs of
all segments of society. The principles can be seen as an equivalent
of AAOIFI’s requirement of disclosure of policy for dealing with
clients which stipulates “the due process and responsible terms and
conditions under which credit is extended to clients, including the
process by which the client’s ability to repay and the effect on the
client’s financial and overall well-being is assessed”.
Top Countries in CSR Funds Disbursed 2018 Top Countries in CSR Disclosure Index Score 2018
(US$ Million) (Out of 11 Items)
211
6.4
100 4.6
88 4.5 4.5
55 54 3.7
Saudi Arabia Jordan United Arab Qatar Kuwait Oman Sri Lanka Nigeria Maldives Turkey
Emirates
* The CSR Disclosure Index covers 11 items that need to be disclosed
in annual or financial reports
56 Islamic Finance Development Report 2019
CSR Disclosure Scores by IFIs 2018
(Out of 11 Items)
Number Number
of Items of IFIs
1 Items 108
2 Items 98
378
3 Items 45
4 Items 38
5 Items 39
6 Items 29
IFIs that Reported CSR
Activities in 2018 7 Items 13
8 Items 6
9 Items 2
18%
22%
526 75 73
Number of Institutions
38%
CSR Funds Disbursed (US$ Million) % Of Institutions Reporting CSR Activities
OVERVIEW 2018. Indonesia’s lead in this area is due to its government’s long-
term vision to raise financial inclusion levels among the world’s
largest Muslim population by promoting the development of Islamic
financial products. The country has been trying for some time to
grow its Islamic banking assets’ share of total banking assets
Islamic finance knowledge is assessed beyond 5%. The newly launched KNKS considers education an
through education and research, which are the main important pillar in achieving this target.
building blocks for any knowledge-based industry.
These are the input factors needed to achieve depth The KNKS in May 2019 signed a MoU with six education institutions,
including five universities, to develop education and research in the
and efficiency in the Islamic finance industry and field of Islamic economics as part of its Masterplan for Indonesian
provide the foundation on which a fully qualified Islamic Economy 2019-2024. The masterplan pointed to the
workforce can spur economic growth. opportunity that exists to grow literacy in Islamic finance in Indonesia
due to the large number of universities and other educational
institutions, particularly Islamic institutions.
Strategy 2: Improving the Quality and Quantity of Human Resources Increased Islamic economic literacy. Drawing up a standard
at Islamic Economics-Based Educational Institutions curriculum for Islamic Economics.
Strategy 3: Improving the Quality of Human Resources in the Religious A common vision for the development of Islamic economics in Islamic
Institutions of Islamic Economics organizations.
Pakistan short of Islamic finance education Islamic banking and finance education
needed to meet future demand promoted through waqf in the UAE
Pakistan is ranked third in Islamic finance research and fifth in the The UAE is ranked fourth in terms of Islamic finance education provision,
number of Islamic finance education providers, with 148 research papers with 49 providers in 2018. Of these, 12 provide Islamic finance degrees,
and 41 education providers in 2018. There are 18 universities in Pakistan mostly at Master’s level. In order to boost the study of Islamic banking
offering Islamic finance courses, while several offer Islamic finance as and finance in the UAE, one of the Islamic finance degree providers,
elective subjects and some make it a core requirement for business Ajman University, launched a waqf fund together with Dubai-based
degrees. Islamic finance degree and other qualification providers Islamic bank Noor Bank amounting to AED 3.2 million (US$ 871,000) in
totalled 25 in 2018. Universities mostly offered Master’s-level degrees. August 2019. The fund will support four scholarships at undergraduate
or postgraduate level and one professorship.
However, there are still too few entry-level professionals with an
education in Islamic finance. Given the State Bank of Pakistan’s (SBP)
aim of increasing Islamic banking’s share of the country’s banking
market to 20% and the expansion of branch networks in the country,
it is estimated that an additional 3,000 to 4,000 professionals will be
required by the industry over the next five years. There will need to
be more Islamic finance educational institutions offering entry-level
degrees and more universities providing Islamic finance as mandatory
courses in business degrees if this demand is to be met.
355
371 Degree
Providers
968
72
152
62
49
Qualification
Education Providers Providers 41
in 2018
445
Course-Only
Indonesia United
Kingdom
Malaysia United Arab
Emirates
Pakistan
Providers
Top Countries by Number of Islamic Finance
Top Covered Degree Subjects by Islamic Finance Degree Providers 2018
Education Providers 2018
186
39
Islamic Banking and Finance 143
24
18
Other 127 12
Islamic Finance 75
Indonesia Malaysia United Pakistan United Arab
Kingdom Emirates
2,550 876
604
Islamic Finance
Research Produced
between 2016
and 2018
465
1,786
343
148
112
Islamic Finance
127
Peer-Reviewed 107 79
73
Journal Articles
Produced between 2016
and 2018
431
Islamic Banking 889
CSR 378
102
Takaful 117
63
Governance 98
55
Shariah Governance 74
Islamic Economy 65
OVERVIEW
in Central Asia. In April 2018, Afghanistan approved its first full-fledged
Islamic bank, Islamic Bank of Afghanistan, which previously operated
as a conventional bank. The conversion is hoped to encourage
Muslims to take up banking services in a country where only 15% of
adults have bank accounts, a topic that has also been the subject of
extensive news coverage. Other than Islamic Bank of Afghanistan,
Awareness is measured by assessing there are eight conventional banks in the country offering Islamic
products and services.
three components : conferences, seminars, and
news volume. A rise in the number of any of these Meanwhile, Tajikistan’s first Islamic bank opened for business
components will contribute to the growth of the Islamic in September 2019. The bank was renamed Tawhidbank after it
finance industry in the relevant country and will improve converted from a conventional bank, Sohibkorbank, with the help of
the quality of products and services offered by its
the ICD. Tajikistan already has two other Islamic financial institutions:
a leasing and a microfinancing company that are both full-fledged
institutions. Islamic.
439
Events in 2018
Islamic Finance News
302 Published in 2018
Seminars
Top Countries that Hosted Islamic Top Countries that Hosted Islamic Top Countries Covered in Islamic
Finance Seminars 2018 Finance Conferences 2018 Finance News 2018
60 3,060
2.234
44
33
1.801
26 26 24
19 1.594
1.330
12 10
7
Saudi
Arabia
Malaysia Pakistan Indonesia UAE UK Malaysia UAE Indonesia Pakistan Turkey UAE Saudi Bahrain Pakistan Malaysia
Arabia
UK
3,716
80 3,500
70
3,000
Number of News
61
Number of Events
60
2,500
57
50 2,383
44 2,000
40
1,653
32 1,500
30
28
23 24 1,000
20 20
14 677
10 500
9 253 172
5 1
0
4 -
Islamic Finance Islamic Banking Islamic Capital Shariah, Legal Corporate Social Takaful Other
Markets and Governance Responsibity
*Other include Islamic Accounting, Islamic Economy, Education, Events, OIFI, Islamic Fintech
70 1,600
1,534
60 1,400
Number of Events
Number of News
1 287
1,215 1,200
50 1,192
1,121 1,092
1,044 49 1,035 1,000
40 1,080
993 817 35 33 800
32
30 30
685 25 27 600
24 23 24
20 18 20
20 400
15
11 13
10 200
4 8 3 8 9
6 1 1
0 -
January February March April May June July August September October November December
The Islamic Finance Development Indicator is the definitive barometer of the state of the industry
across its fundamentals. It introduces a new way of measuring development by combining data
METHODOLOGY on different elements of the industry into a single, composite indicator. The index assesses the
performance of each of the industry’s key areas in line with its inherent faith-based objectives, with
AND APPENDIX data for their national and industry-level components. The different components that make up the
Indicator – Quantitative Development, Governance, Corporate Social Responsibility, Knowledge
and Awareness – are of fundamental importance to the development of a global industry. The
optimal level of development in any of the indicators or sub-indicators is pegged to a maximum
value of 200.
The data employed in the Islamic Finance Development Indicator (when aggregating data and
computing indicator values) are based only on publicly disclosed information. This ensures both
reliability and consistency in the results.
Key Objectives Global Indicator Level Country Indicator Level Specific Indicator Level
The indicator is a product • Present one single indicator to show • Assess the current state and growth • Measure growth within different
of a number of key indicators the pulse of the global Islamic potential of Islamic finance within key areas of the industry
and sub-indicators measuring particular finance industry’s overall health each country • Enhance Islamic finance market
• Provide an indicator that is reliable • Highlight the performance of Islamic transparency and efficiency
aspects of the industry. and unbiased finance institutions in particular • Identify issues that are preventing
• Inform Islamic finance stakeholders
markets growth within the industry
Breaking down the data into these and investors about the industry’s
• Track progress and provide • Help market players formulate
different areas reveals the disparities performance
• Gauge future industry growth comparisons across different practical solutions to face current
and movements that are less visible countries and regions obstacles
in the wider-ranging, aggregated • IFDI 2019 Covers 131 countries with • Assist in setting new targets,
numbers. a presence in Islamic finance either goals, standards for Islamic finance
directly or in other metrics related institutions and regulators
to the industry.
Huda Al Nasser
Jinan Al Taitoon Redha Al Ansari
Senior Research Analyst Research Manager
Reem Ameer Aburwais
Zahra AlHaddad
Disclaimer
The data in this report is believed to be correct at the time of publication
but cannot be guaranteed. Please note that the findings and conclusions that the report
delivers are based on information gathered in good faith from both primary and secondary sources,
the accuracy of which we are not always in a position to guarantee. The findings, interpretations, and
conclusions expressed in this report do not necessarily reflect the views of Refinitiv. As such,
the information presented is intended to provide general information only and, as such,
should not be considered as legal or professional advice or a substitute for advice covering any
specific situation. Refinitiv specifically disclaims all liability arising out of any reliance placed on this material.
Refinitiv makes no representations or warranties of any kind, express or implied about the
completeness, accuracy, reliability or suitability of this material for your purposes.