Islamic Finance Report 2020

#IFDI2020
ICD-REFINITIV
Islamic Finance Development Report 2020
PROGRESSING
THROUGH
ADVERSITY
Islamic Corporation for the

Development of the Private Sector
ISLAMIC FINANCE OVER
DEVELOPMENT +1,000
INDICATOR ISLAMIC FINANCIAL
INSTITUTIONS
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.
+8 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 135 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.
+1,700 +1,100 +960 +430

Islamic funds Shariah scholars Islamic finance Islamic finance
data from 28 data and their board education providers events information
To learn more jurisdictions representation data
Please contact the Islamic finance team on
IFG@Refinitiv.com
Or visit Refinitiv Islamic finance website users through the IFDI and Islamic Finance Overview pages.
www.refinitiv.com/en/islamic-finance
2 Islamic Finance Development Report 2020
04 FOREWORD
CONTENTS
06 EXECUTIVE SUMMARY
Global Islamic Finance Industry Landscape
11 GLOBAL ISLAMIC FINANCE DEVELOPMENT INDICATOR

Top IFDI Markets and Global Average IFDI Values for 2020
21 ISLAMIC FINANCE OVERVIEW

Global Islamic Finance Landscape EXECUTIVE
INSIGHTS
Islamic Banking
Takaful
Other Islamic Financial Institutions
Sukuk
18
Islamic Funds
Interview with
Ayman Amin Sejiny
49 ISLAMIC FINANCE ECOSYSTEM Chief Executive Office
Islamic Corporation for the Development of
Islamic Finance Governance
Islamic Finance Corporate Social Responsibility the Private Sector (ICD), part of the Islamic
Islamic Finance Knowledge Development Bank
Islamic Finance Awareness
46 Interview with
69 METHODOLOGY AND APPENDIX
Concept and Background
Ahsan Ali
Managing Director and Head of Islamic Origination
Key Objectives Standard Chartered Saadiq
Country List
71 CONTRIBUTORS 54 Women in Islamic Finance

Prof. Dr. Engku Rabiah Adawiah
The International Islamic University Malaysia
Islamic Finance Development Report 2020 3

F O RE WO R D

The Islamic Corporation for the Development of Private Sector, the private sector development arm
of the Islamic Development Bank (IsDB) Group, and Refinitiv, the world’s largest provider of financial markets data and infrastructure,
are proud to present the eighth edition of the Islamic Finance Development Report.
The report derives its analysis from the Islamic Finance Development Indicator (IFDI) based on statistics from 135
countries around the world. The database is not just limited to financial data for different Islamic finance sectors and asset classes, but
also looks at the knowledge and awareness of the industry, as well as its governance and corporate social responsibility.
Among the main findings of the 2020 report is that global assets for the industry returned to double-digit growth in 2019, rising 14% to
US$2.88 trillion, thus demonstrating its resilience even as sustained low oil prices weighed on the main Islamic finance economies.
The report also serves as an up-to-the-minute guide on the impact that Covid-19 has had and continues to have on Islamic
financial markets. Governments and multilateral organizations have introduced a stream of wide-ranging measures to defend their
economies and societies. These include some extremely large government stimulus packages that have stretched fiscal deficits to
the limit. Central banks are turning to debt to shore up their fiscal positions and sukuk are proving an increasingly popular choice of
instrument. Meanwhile, Islamic financial institutions have been responding to the crisis by stepping up their digital services and using
Islamic social finance instruments to support those who are struggling financially as a result of the crisis.
The impact of the coronavirus on Islamic finance is analysed in the report not just in terms of the different sectors
of the industry but also covers the disruption to the industry’s supporting ecosystem such as education.
We believe that the analyses and information provided in this report will serve as a vital reference point for the state
of the Islamic finance industry during this difficult time 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
Chief Executive Officer, Mustafa Adil
Islamic Corporation Head of Islamic Finance,
for the Development Refinitiv
of the Private Sector

EX E CU T I V E
SUM MA RY
According to the Islamic Finance
Development Report 2020, the Islamic finance
industry saw double-digit growth of 14% in 2019 to a total
US$2.88 trillion in assets. This happened despite the
uncertainty felt across the largest Islamic finance markets
over the past few years due to sustained low oil prices and
subdued industry growth in 2018.
The report provides a detailed look at the current state

of the industry based on the Islamic Finance Development
Indicator (IFDI) which considers five key indicators in the
development of Islamic finance: Quantitative Development;
Knowledge; Governance; Corporate Social Responsibility;
and Awareness. Our analysis of these five areas of the industry
across 135 countries around the world showed that
the overall global indicator value remained constant
at 10.8, with improvements in the Knowledge and
Corporate Social Responsibility indicators offset
by declines in the other three.

Islamic capital markets, funds and banking were main
drivers of assets growth Outlook uncertain while COVID-19 pandemic remains
The 14% growth in global Islamic finance industry assets was due in part to elevated levels Despite the strong expansion seen in 2019, industry growth is forecast to slow to the single
of sukuk issuance in the traditional markets in the GCC and Southeast Asia. Green and SRI digits, reaching US$3.69 trillion by 2024, as the world attempts to deal with the Coronavirus
(socially responsible investment) sukuk grew in prominence in the UAE and Southeast Asia pandemic that erupted on a global scale in the first quarter of 2020. While the total impact of
and have continued to grow in popularity in 2020 with the entrance of new issuers such as the pandemic on the industry cannot be measured quantitively before the end of 2020, at the
Saudi Electricity Co. time of writing several Islamic financial institutions including Islamic banks had reported losses
or a drop in profits caused by a Covid-related increase in loan impairments.
Authorities in Kazakhstan and Uzbekistan are also preparing regulations that will allow green
sukuk to be issued there too. Other industry firsts include Egypt entering the sukuk market for The pandemic has, however, led to growth in some areas of the industry. Some regulators
the first time in 2020 and the issuance by Qatar Islamic Bank of the first-ever Formosa sukuk have turned to Islamic finance to mitigate the economic impact, such as Algeria, which plans
in Taiwan. to use it to attract local savers. Sovereign sukuk are also being used to aid financial recovery
in the GCC and Southeast Asia. Corporate sukuk issuance has also picked up after a cautious
Islamic funds also made a significant contribution to the industry’s growth. The asset class
halt in the first quarter of 2020, as companies seek to take advantage of low borrowing costs
rose 30% in 2019, mainly in the GCC, with new launches of Islamic exchange traded funds
to shore up their finances while the pandemic continues to batter trade and economies. Quasi-
(ETFs) in a number of countries and of ESG-related investment assets made available through
sovereigns such as Islamic multilateral organizations have also stepped in to support countries
digital media that appeal in particular to millennials.
reeling from the pandemic. Sustainability has also become a more important consideration
The strong growth in industry assets was also driven by continued growth in Islamic banking during the pandemic, and new product launches reflect this, such as ESG-based Islamic
assets, which account for most of the industry’s assets. The fastest expansion was seen in investments targeting social issues such as mass unemployment.
the non-core markets such as Morocco, where ‘participatory banking’ was introduced in
2017. Other markets likely to see further expansion in Islamic banking include Turkey and the
Pandemic leading rapid growth in digital solutions
Philippines. A new Islamic banking law passed in the Philippines in 2019 will allow domestic The pandemic has also been a game changer in that several Islamic financial institutions have
and foreign banks alike to establish Shariah-compliant banking windows. moved to offer their products via digital platforms so as to better serve their locked-down
customers, thereby speeding the advance of technology within Islamic finance. Although Islamic
Islamic finance assets remain concentrated in the three leading markets of Iran, Saudi Arabia FinTech had already been making headlines in recent years, digital-based financial institutions
and Malaysia, however, which between them accounted for 66% of global assets in 2019. have become much more popular during the pandemic, just as digital solutions have leapt
ahead in other economic sectors around the world.
Indonesia jumps to second in IFDI rankings backed by
For example, Islamic challenger or digital-only banks are emerging in non-core markets such
government Islamic finance masterplan as the UK, Malaysia, Kenya and Australia. Demonstrating both technology and the rise in social
Indonesia showed one of the most notable improvements in the IFDI country rankings, moving finance, a new insurance technology, or InsurTech, development in Malaysia uses blockchain to
into second spot for the first time as its Knowledge and Awareness indicators were boosted channel waqf funds towards making takaful more affordable to lower income consumers.
by the country’s large number of Islamic finance education providers and high numbers
of research papers produced and Islamic finance-related events hosted. This reflects the Sovereigns such as Malaysia also issued first digital sukuk though online channels such as
ongoing implementation of the Islamic Economic Masterplan 2019–2024 introduced by the mobile platforms while Indonesia also issued retail sukuk that can be subscribed through online
government’s National Sharia Economy and Finance Committee (KNEKS). channels to appeal to the young generation.
Other notable improvers in the IFDI country rankings were Syria, the United States, South Digital-based Islamic financial institutions other than banks and takaful operators are also
Africa and Thailand. accelerating the evolution of the industry in Africa and Southeast Asia, including Islamic wealth
management services targeting the millennial investor.
The online transformation of the industry is not limited to its institutions, but to its surrounding
ecosystem as well. Islamic finance education is being increasingly offered online or through
distance learning as the Covid pandemic makes it harder for students to attend classes, while
events such as conferences and seminars are also being hosted increasingly online. These
developments also make it easier for students or industry stakeholders from other countries to
take online courses or attend Islamic finance events, which will help the industry to grow further
and wider in the future.
GLOBAL ISLAMIC FINANCE INDUSTRY LANDSCAPE
Islamic Finance Assets Growth 2012 - 2019 Global Islamic Finance Asset Distribution 2019
(US$ Billion)
4,000
3,500
3,693 69% Islamic Banking
US$ 1,993 Bn
19%
2,875
2,500 2,513 Sukuk
US$ 538 Bn
2,461
2,307
2,000 2,201
5%
2,060
1,975
Other IFIs
US$ 153 Bn
1,500 1,761
1,000
5% Islamic Funds
US$ 140 Bn
500
2%
2024
Projected
2012
2013
2014
2015
2016
2017
2018
2019
Takaful
US$ 51 Bn
-
What helped in shaping the Islamic finance industry during 2019?
US$
46
Countries with Islamic
1.16 Billion
CSR Funds Disbursed

2,566
Islamic Finance
12,181
News on Islamic
Finance Regulations by Islamic Financial Research Papers Finance
Institutions
1,526
Islamic Financial
1,170
Shariah Scholars
972
Islamic Finance
463
Islamic Finance
Institutions Representing Islamic Education Providers Events
Financial Institutions

ISLAMIC FINANCE DEVELOPMENT INDICATOR 2020
Low IFDI High IFDI

Value Value
MOST DEVELOPED COUNTRIES IN ISLAMIC FINANCE
Malaysia Indonesia Bahrain UAE Saudi Arabia

1 2 3 4 5

Digital Economy Enabler
in member countries Member of the Islamic
Development Bank Group

GLOBAL ISLAMIC FINANCE
DEVELOPMENT INDICATOR
The global Islamic Finance Development Indicator (IFDI) provides the

industry’s various stakeholders with a detailed analysis of the key factors
driving growth in the Islamic finance industry. It is the definitive barometer
of the state of the Islamic finance industry in 2020, with rankings provided
for 135 countries around the world.
It draws on five indicators considered to be the main drivers of development

in the industry. By measuring changes in these indicators over time and
across countries, the IFDI provides a vital tool in guiding policy within
the industry. The IFDI evaluates the strength of the ecosystem behind
the industry’s overall development as well as the size and growth of the
different Islamic finance sectors within the many countries where it has a
presence.
The five main indicators for the IFDI are: Quantitative Development,
Knowledge, Governance, Corporate Social Responsibility, and Awareness.
This chapter summarizes the current state of the global Islamic finance
industry through these indicators and highlights its top-ranking countries
according to the IFDI.
The full methodology is detailed in the appendix. The database on

Refinitv’s Eikon offers a wealth of additional information on the indicator
and its rankings.

TOP IFDI MARKETS AND GLOBAL AVERAGE IFDI VALUES FOR 2020
Indicator Value
Country Ranking IFDI 2020 Quantitative Knowledge Governance Awareness CSR

Development
Malaysia 1 111 94 185 86 149 41
Indonesia 2 72 27 181 67 60 23
Bahrain 3 67 38 68 88 103 38
United Arab Emirates 4 66 31 67 79 91 60
Saudi Arabia 5 64 59 52 41 50 119
Jordan 6 53 14 75 51 29 99
Pakistan 7 51 18 80 74 53 31
Oman 8 45 14 46 66 73 25
Kuwait 9 43 48 13 63 48 42
Qatar 10 38 28 19 63 52 29
Brunei 11 36 13 44 51 61 9
Maldives 12 34 22 21 70 22 34
Nigeria 13 32 5 26 60 17 51
Sri Lanka 14 30 11 36 42 11 48
Syria 15 28 31 15 45 14 36
Global Average 11 6 11 14 17 7

Global Development: Overall IFDI constant despite Qatar enters top ten rankings
movement in its components The top ten rankings were little changed other than Indonesia’s
The global IFDI value for 2020 remained constant at 10.8 after averaging improvement and the replacement of Brunei in the list by Qatar. This
the Islamic finance development indicators across the 135 countries was due to Qatar’s improvements in both Governance and Quantitative
examined. However, there were movements in each of its five main Development, particularly within the Islamic Funds, Sukuk, and Corporate
indicators as Knowledge and Corporate Social Responsibility moved Governance sub-indicators. The launch of an Islamic ETF and higher
higher from the year before, while Quantitative Development, Awareness, sukuk issuance enhanced the country’s Islamic capital markets presence
and Governance each declined. The same was also the case by country, and thus its Quantitative Development indicator value.
some of which improved while others fell in value.
Malaysia retains its commanding lead but others
Indonesia jumps to second rank, supported by are capable of rising in rankings
Knowledge and Awareness There remains a wide gap between Malaysia and other countries with
Indonesia has risen into the top three of the IFDI country rankings for the a presence in Islamic finance in terms of IFDI value. This is reflected
first time since the series was introduced in 2012, since when there had in the country holding first place in three of the five main indicators
never been a change to the three leading positions. Indonesia has risen (Quantitative Development, Knowledge, and Awareness) and being
to number two spot behind Malaysia, pushing Bahrain and the UAE down second in Governance. There are also wide gaps between Malaysia and
to third and fourth, respectively, due to the country’s growing strength in the second-ranked countries in individual indicators, suggesting it could
the Knowledge indicator value. take years for others to catch up.
Indonesia is ranked first in the Islamic finance Education sub-indicator and There are much smaller gaps between the other countries in the top five,
second in Research, supported by a large number of education providers however, meaning some are capable of improving their rankings if they
and a prolific output of Islamic finance research papers and peer- can show improvement in their lagging indicators. Saudi Arabia has the
reviewed journal articles. Also, the country’s Awareness sub-indicator biggest opportunity to improve on its ranking, currently number 5, if it
almost doubled in value as a result of a threefold increase in the number attends to the areas where it falls behind such as Governance.
of Islamic finance events hosted as part of the government’s National Outside the top ten, the most notable improvers in rankings included
Sharia Economy and Finance Committee’s (KNEKS) implementation of Syria, the United States, South Africa and Thailand.
the Islamic Economic Masterplan 2019–2024. Indonesia is also strong in
terms of the Governance indicator, with a full set of regulations covering
all aspects of the Islamic finance industry covered by the IFDI definitions.

ISLAMIC FINANCE DEVELOPMENT INDICATORS 2020
200 1st
2nd
180
1st
160
140
1st
120 1st
Indicator Value
2 nd
2nd
1st
3rd
100 2nd 1st
3rd 3rd 3rd
4th 2 2nd 4th
4
th 4th
80 3rd 4th
nd
5
th 5
th
5th
5th 5th
3rd
60 4th
5th
40
20
-
IFDI Value Quantitative Knowledge Governance Awareness CSR
Global Malaysia Indonesia Bahrain UAE Saudi Arabia Jordan Iran

Average
UAE Kuwait Oman South Africa Maldives Brunei Nigeria Pakistan

Sukuk sub-indicator declines due to lack Spread of Islamic banking
of new entrants and exit of non-conventional in Central Asia sees biggest gainers
players during 2019 in Quantitative Development
Despite the growth in global Islamic finance assets to US$2.88 trillion The biggest increase in Quantitative Development indicator values were
in 2019, the Quantitative Development indicator declined in value over recorded by the Central Asian nations Uzbekistan and Tajikistan after they
the year. This was largely due to a fall in the Sukuk sub-indicator value, each introduced Islamic banking. This follows the earlier development of
despite sukuk issuance and outstanding values exceeding those of Islamic finance in the region by their neighbors Azerbaijan, Kazakhstan
previous years. Issuers such as Luxembourg and Singapore dropped to and the Kyrgyz Republic.
a sub-indicator value of zero as there was no new issuance to replace
the sukuk that matured during 2019. New issuances in 2019 were
concentrated in the traditional markets, so with no increase in values in
new markets the global average was forced lower. Malaysia remains by
far the biggest contributor to development in the field.
QUANTITATIVE DEVELOPMENT SUB-INDICATORS 2020

180
1st
160 1st
140
Global Syria
120 Average
1
Indicator Value
st
1st 2nd 3rd 2nd

100 2nd
1st
2nd
3rd
80 3rd Bahrain Kuwait
3rd
60 2nd
3rd
40
Iran US
20
-
Malaysia Saudi Arabia
Iran
Islamic Banking Takaful Other Islamic Fiancial Sukuk Islamic Funds

Institutions
Islamic finance education meeting growing Indonesia and other countries rise in Awareness
African demand rankings after staging more events
Each sub-indicator in the Knowledge category – Research and Education Awareness sub-indicator’s News rose again in value as several countries
– achieved a maximum indicator value of 200. The Education sub-indicator recorded notably high scores, particularly Malaysia, Pakistan and the
was boosted by new educators in mainly African nations including nations of the GCC. The Seminars and Conferences sub-indicators
Tanzania, Kenya, Gambia, Tunisia and Libya. Research remained constant remained constant. Indonesia rose to second place in the Seminars
in value despite the renewed interest in the industry through research rankings, contributing to its rise to second spot in the overall IFDI table.
as shown in markets such as Uganda, Yemen and Iraq, as in some other Oman also saw a large increase in its Seminars sub-indicator value and in
countries the sub-indicator valued fell back. Still, some countries have Conferences, reflecting growing interest in developing the industry there.
failed to publish any new research papers over the past three years and Other notable gainers in Awareness included South Africa, Morocco,
so have dropped out of the sub-indicator rankings. Japan, and the Kyrgyz Republic.
KNOWLEDGE AND AWARENESS SUB-INDICATORS 2020
250
1st 1st 1st

1st 2nd
200
2nd
2nd 3rd Global Average Indonesia
150
Indicator Value
2nd 1st
3rd
Bahrain Brunei
100 3rd 2nd
3rd
3
rd
UAE Jordan
50
- Malaysia Qatar
Pakistan
Education Research Seminars Conferences News

Regulation increases contribution to Islamic Higher settlement of zakah claims in Saudi Arabia
finance development places kingdom at top of CSR indicator
Reguation remains the highest sub-indictor in the Governance group, with The CSR Funds sub-indicator remained low in value because there are
46 countries now having at least one type of Islamic finance regulation, few countries contributing to it. By far the biggest contributor was Saudi
up from 44 the previous year. Seven countries have a full set of Islamic Arabia as the settlement of outstanding zakah claims by Islamic banks
finance regulations as determined by IFDI. resulted in a higher dispersion of zakah funds over 2019. While CSR
Activities decreased slightly in value as some countries disclosed fewer
The Shariah Governance sub-indicator was slightly improved in value, as CSR items, other countries improved on their scores, notably Syria and
was Corporate Governance. Egypt.
GOVERNANCE AND CSR SUB-INDICATORS 2020

250
1st
200 Global Average South Africa
Indicator Value
150 Saudi Arabia

2nd Nigeria
2nd 1
st
3
rd
2
nd 1st
1st
3rd
100 2nd 1
st
3rd Maldives Jordan
3rd
50
Malaysia Siri Lanka
-
Bahrain Pakistan
Qatar Sudan
UAE Indonesia
Regulations Sharia Corporate CSR Funds CSR Activities
Governance Governance
Siri Lanka

INTERVIEW COVID-19 has impacted many sectors including Islamic
finance in many countries around the world. How do you see
Islamic finance having performed in the face of the pandemic,
and has it shown any signs of resilience?
The COVID-19 pandemic will have a more severe and deeper impact on Islamic finance,
as the current crisis is affecting aggregate demand, small and medium enterprises (SMEs),
Ayman Amin Sejiny and low-income individuals particularly hard. Compared to conventional banking, Islamic
Chief Executive Officer
finance has a larger exposure to SMEs, microfinance and retail lending, especially in
Islamic Corporation for the Development Asia. With SMEs facing multiple issues (lower revenues, cash flow issues, high levels of
of the Private Sector (ICD), leverage, short-term financing obligations, etc.), this will increase the quantum of non-
part of the Islamic Development Bank performing financings and vulnerability of Islamic banks’ portfolios.
On the bright side, banks entered the pandemic crisis with much stronger liquidity than
in 2007-08, and because of this, as well as substantial external liquidity support from
central banks and robust government incentives, it is unexpected that there will be broad
confidence issues in banking systems.
Extraordinary measures including a range of regulatory and supervisory responses have

been rolled out by Islamic finance jurisdictions to preserve resilience of relevant financial
systems and the continued provision of financial services to the real economy. These
Mr. Ayman Amin Sejiny is the CEO of the Islamic include payment moratoria and Shariah-compliant government guarantees on bank
Corporation for the Development of the private sector exposures to certain sectors in receipt of Islamic financing.
(ICD), the private sector arm of Islamic Development bank Group.
Mr Ayman is highly accomplished financial industry leader. To ensure Shariah compliance, the Islamic Financial Services Board (IFSB) has had to issue
public statements and provide technical guidance related to the extraordinary measures
He served as Chief Executive Officer of Ibdar Bank BSC, when calculating the capital requirements of institutions offering Islamic financial services.
Bank Alkhair, Barclays Capital Saudi Arabia and as the Chairman This is in line with treatments prescribed by the International Accounting Standards Board
of Open-Silicon, Inc and Bahrain Financing Company Group as well
(IASB), the Basel Committee on Banking Supervision (BCBS) and the Accounting and
as a Board member of Unicorn Bahrain.
Auditing Organization for Islamic Financial Institutions (AAOIFI).
Mr. Sejiny has in-depth knowledge and more than 24 years’
experience in investment and corporate banking in the local, regional and In any case, Islamic banks should have adequate buffers for loss absorption to meet
international markets. He held a senior role in a number of regional and near-term challenges, but risks to asset quality and profitability are envisaged should the
international financial institutions, including Citi Bank and Covid-19 outbreak be prolonged.
ABN AMRO affiliate in Saudi Arabia (Saudi American Bank
“SAMBA” and Saudi Hollandi Bank). Multilateral organizations have played a big role in cushioning the pandemic’s
impact on member countries. What are some of the upcoming initiatives
Mr. Sejiny is Board and C-Level performer with vast experience
in innovating financial processes and products. planned by ICD as part of its continuing support?
Mr Ayman holds a BA in Finance from
In a bid to extend support, shore up demand, and protect people’s jobs and livelihood,
Eastern Michigan University, United States.
ICD has set up a dedicated US$ 250 million stimulus package to aid SMEs and the private
sector in affected countries. The emergency funding will mainly be in the form of medium-
to long-term financing instruments to alleviate the economic burden faced by existing and
new clients.
There is also a role for those companies that have a direct hand in combating the governance of an Islamic bank. Solvency and liquidity stress testing should not
pandemic through the provision of healthcare or access to basic goods and ser- only cover severe but plausible scenarios, but also reverse stress testing (the
vices. We are closely assessing opportunities to invest in this type of business. stresses that would cause a bank to fail).
ICD will be aiding the private healthcare industry of affected member countries
to meet the surging need for services, equipment and medicines. How does the pandemic affect the future of Islamic finance and do
we expect to see more alignment between Islamic finance and other
ICD will also step forward and channel much-needed liquidity to local banks
to enable them to support their business customers. ICD will work closely with sectors such as ESG?
more than 100 local and regional financial institutions in our network to provide
The COVID-19 outbreak has prompted financial institutions across the globe to pay
the necessary support so they can continue to finance SMEs in affected sectors
greater attention to ESG risks in order to build greater resilience in their business
within the markets they operate in.
operations and supply chains, and we believe that Islamic finance markets will see
a similar trend as well.
Moving forward, we are at the stage where it is important to think about what
more resilient economies should look like in the future and the ways we can
There is also an opportunity for the reemergence of certain strong Islamic
support them as a private sector multilateral institution. The investment commu-
instruments, such as zakat and waqf, which could once again play a role in
nity has an opportunity to focus on investing in growth and in businesses that
reducing the impact on the most vulnerable segments of the population or on
are sustainable, with high levels of environmental, social and governance (ESG)
poor countries. This would not only be in line with the ultimate goals of Shariah
standards, and that are aligned to the SDGs, for example.
but also create a new growth channel for the industry.
If anything, the COVID-19 pandemic has highlighted that humanity will continue
The pandemic may serve as an impetus for further innovation in the Islamic capital
to face various global challenges, and investors are realizing that the corporate
markets, with instruments specifically ring-fenced to mitigate the health and
sector can and must participate in meeting them.
economic impact of the coronavirus and aid recovery.
In that regard, I believe that ICD will step up efforts in increasing awareness on
To this end, issuance by the Islamic Development Bank (IsDB) of sustainability
this front and will work together with current and future clients to ensure that
Sukuk to tackle the effects of the pandemic in its member countries has set a
the type of support we give will lead to gains in growth and well-being that are
stellar example. The proceeds will be exclusively deployed by IsDB towards social
sustainable in the long term.
projects under its Sustainable Finance Framework, with a focus on ‘access to
What lessons can the disruption bring to Islamic finance so that essential services’ and ‘SME financing and employment generation’ categories
under the umbrellas of ‘SDG-3: Good Health and Well-Being’ and ‘SDG-8: Decent
the impact of such a crisis can be minimized in the future? Work and Economic Growth’ for its 57-member countries.
The COVID-19 crisis is undoubtedly an opportunity for financial intermediaries to
transform themselves and improve their long-term positions. The crisis is shifting In general, Islamic banks should identify use cases for effective partnership in
the dynamics in the industry and has put in motion new opportunities for Islamic focus areas. For example, financial technology, or FinTech, will continue to play a
finance markets by accelerating trends such as digitalization, socially responsible significant role in the industry’s development in coming years by improving access
investing, the Islamic finance industry’s social role, and recommitment to sustai- to financial services and transforming the industry, and it would be ideal to form
nability. partnerships with FinTech firms as no single organization is likely to have the full
suite of digital capabilities under one roof.
On digitalization, for example, digital acceleration and the development of a digi-
tal strategy is key to creating a nimbler industry. Islamic banks can take this oppor-
tunity to implement aggressive and permanent measures to transform business
models in order to offer clients a full digital experience.
In addition, the pandemic has put significant emphasis on the role of stress-testing
within risk management. Stress testing should form an integral part of the overall
I SL A MI C
FI N A N CE
OVE RV I E W
In order 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 overall Islamic finance
industry and its different sectors. It also looks into key
trends and opportunities across its five main sectors:
Islamic Banking; Takaful; Other Islamic Financial
Institutions; Sukuk; and Islamic Funds.

GLOBAL ISLAMIC Islamic Finance Assets by Region 2019
FINANCE LANDSCAPE (US$ Billion)
US$
2.88
Trillion
Total Islamic
Finance Assets
in 2019
755 685 1,253 96
14 % Annual Growth Other MENA Southeast Asia GCC Europe

of Islamic Finance
Assets in 2019
1,526
Total Islamic
Financial 3 73 8 2
Institutions
Americas South Asia Sub - Saharan Other Asia

Africa
Islamic Finance Assets Growth 2012 - 2019 Distribution of Global Islamic Finance Assets 2019
(US$ Billion) (US$ Billion)
4,000 Share
of Islamic Number Number
3,693 Size Finance of Institutions of Countries
(US$ Billion) Assets / Instruments Involved
3,500
2,875
Islamic
1,993 69% 526 74
2,500 2,513 Banking
2,461
2,307
2,201
2,000 2,060
1,975
Sukuk 538 19% 3,420 25
1,761
1,500
Other IFIs 153 5% 645 54
1,000
Islamic
140 5% 1,749 629
Funds
500
2024
Projected
2012
2013
2014
2015
2016
2017
2018
2019
takaful 51 2% 336 47
-
Top Countries in Islamic Finance Assets 2019 (US$ Billion)
Total Assets (US$ Billion)
800
700
698
629
600
570
500
400
300
234
200
144
132
100 99 96 63 45
Iran Saudi Arabia Malaysia UAE Qatar Kuwait Indonesia Bahrain Turkey Bangladesh
*Including Windows
Countries with Highest Islamic Finance

66%
Assets to GDP 2019
Top 3 Markets’ Share
of Global Islamic Finance Assets in 2019
124%
Fastest Growing
Markets in Islamic 53%
Finance Assets 47%

43%
in 2019 40%
Morocco Tajikistan Nigeria
Bahrain Malaysia Iran Kuwait Qatar

Industry returns
to double-digit growth
in 2019
The Islamic finance industry’s assets

grew by 14% in 2019 to US$2.88 trillion,
returning to its long-term pattern of
strong growth after the slowdown in 2018,
OVERVIEW when the industry expanded by a more

moderate 2%.
The Islamic finance industry’s The strong growth in 2019 was aided by
performance is measured through five large issuances of sukuk in the tradition
sub-sectors: Islamic Banking; Takaful; Islamic finance markets of Saudi Arabia,
Malaysia, Iran, Qatar, Bahrain, and the
Other Islamic Financial Institutions (OIFIs)
UAE. There was a surge in Islamic banking
such as investment or micro-finance assets, up by US$248 billion on year,
companies; Sukuk; and Islamic Funds. particularly in the largest Islamic markets
such as Saudi Arabia and Iran. Islamic
Financial institutions are considered funds saw the fastest growth overall, with
the backbone of the industry given double-digit growth recorded in Malaysia,
Indonesia, Iran, Saudi Arabia, Turkey, and
their size and track record, while capital Luxembourg.
market asset classes including sukuk and
Islamic funds are important investment Islamic finance assets remain
instruments. concentrated in the three leading markets
– Iran, Saudi Arabia and Malaysia – which
between them accounted for 66% of
global assets in 2019.

Algeria following Morocco’s Countries shifting to Islamic Further industry
footsteps in developing Islamic finance to combat the financial transformation expected
finance industry impact of Covid-19 post-Covid-19
North Africa contributed US$28 billion in Islamic Algeria’s financial reforms are just one example Despite the larger role being played by Islamic
finance assets in 2019. Morocco was the world’s of how countries are utilizing Islamic finance finance in shoring up ailing economies, Islamic
fastest-growing market in 2019 following the to help revive their economies after the onset financial institutions are struggling with the
opening in 2017 of the country’s first ‘participative of Covid-19, just as they did after the oil crisis pandemic’s impact. Several Islamic banks
banks’, as Islamic banks are termed there. The of 2014 and the global financial crisis six years reported losses or reduced profits in the second
experience of Morocco’s participative banks has earlier. Various Islamic multilateral organizations quarter of 2020 when compared with the same
shown there needs to be greater awareness have also stepped in to support countries reeling period the previous year. This reflected higher
among consumers of what Islamic finance offers from the pandemic. In April 2020, the Islamic loan impairments reported by the banks in
if the industry is to continue growing there and Development Bank (IsDB) allocated US$2.3 expectation of large credit losses and weakened
a larger offering of Islamic finance products to billion to member countries through its Strategic asset quality.
increase its appeal. However, following the Preparedness and Response Programme. As of
approval in 2019 of Shariah-compliant insurance, September 2020, it had deployed emergency However, the pandemic proved to be a game
there is likely to be a greater acceptance of support to 23 different member organizations changer for the industry’s digital transformation
Islamic finance products in Morocco in the future, in North and sub-Saharan Africa and in Central as many Islamic financial institutions moved
as previously Islamic banks had only offered Asia totaling US$687.1 million. quickly to offer more and better digital products
uninsured car and real estate loans. and services for their locked-down customers.
IsDB subsidiary the International Islamic Finance FinTech-based Islamic financial institutions are
Taking inspiration from Morocco and to combat Trade Finance Corporation (ITFC) also provided becoming increasingly attractive for consumers,
the economic blow from Covid-19 and the US$850 million in emergency financing to its especially those who are spending less and
resulting collapse in oil prices, neighbour Algeria member governments, to be used for healthcare, saving more in response to the pandemic and
is also looking to attract local savers through the energy and food requirements. This was an initial thus looking for suitable investment avenues.
introduction of Islamic finance. Islamic banking contribution and is expected to be scaled up.
products were formerly offered in Algeria only Some recovery is expected in the main Islamic
by foreign banks, but with the approval of the One Islamic finance tool being used to finance financial markets led by Malaysia and the
country’s first home-grown Islamic finance recovery programs is sukuk, as seen in Malaysia, GCC given the technological innovations of its
products by National Bank of Algeria in August Indonesia, Bahrain, and the UAE, while the financial institutions and large liquidity injections
2020, local banks are set to play a prominent Maldives is also considering issuing a sovereign from central banks. It is expected the industry
role in the industry in coming years. Other sukuk to cushion the economic blow from will see on average single-digit growth across
banks in Algeria, both state-run and foreign, are massively reduced tourism. While there has the years to 2024 to reach US$3.69 billion in
planning to follow suit. The Algerian government been a slowdown in corporate sukuk issuance as global assets.
is also planning to issue regulations on takaful the pandemic has made them appear high-risk,
with a view to introducing Islamic insurance as issuance was expected to pick up again before
part of its reforms to tackle the financial impact the end of the year given low borrowing costs
of Covid-19. and mounting economic pressure on corporate
entities including Islamic financial institutions.

ISLAMIC BANKING
Islamic Banking Assets Growth 2012 - 2019
2
(US$ Billion)
US$ Total Islamic Banking
2,500 Assets in 2019
Trillion
14
2,000
1,745
1,993
% Annual Growth
of Islamic Banking Assets
1,727 in 2019
1,673
1,600
1,500 1 ,560
6
1,444
%
Share of Islamic Banking
Assets in Total Global
Banking Assets in 2019**
1,500 **in 50 countries that reported
Islamic banking assets
1,305
500
526
Total Islamic Banks*
in 2019
*including windows
2012
2013
2014
2015
2016
2017
2018
2019
-
Morocco
Fastest Growing Market
in Islamic Banking Assets in 2019
Number of Islamic Banks by Type 2019
Commercial 428 Wholesale 22
Investment 57 Specialized 19

Top Countries in Islamic Banking Assets 2019
Total Assets (US$ Billion) Number of Islamic Banks*
700 45
641 41
600 40
36 35
Number of Islamic Banks

500 33 32
477 30
400
25 25
24
300 20
297
16
200 15
194
125 10,
123
100
7 87
6 49 6 41 38 5
- -
Iran Saudi Arabia Malaysia UAE Kuwait Qatar Bahrain Turkey Bangladesh Indonesia
*Including Windows
63%
Top 3 Markets’ Share of Global

Islamic Banking Assets in 2019
Countries with Highest Share of Islamic Countries with Highest Share of Islamic Banking
Banking Assets to GDP 2019 to Total Banking Assets 2019
111%
100% 100%
79%
63%
57%
37%
31% 49%
24%
Bahrain Iran Kuwait Qatar UAE Iran Sudan Saudi Arabia Brunei Kuwait
Islamic banking bounces back; highest Other deals have included the merger of Qatar’s Masraf Al Rayan with
Al Khaliji Commercial Bank to create another major Islamic bank, with
growth in non-core markets assets valued at US$45 billion. In Bahrain, Bank of Bahrain and Kuwait
Islamic banking contributes the bulk of the industry’s assets. The sector is expected to aquire Ithmaar Bank. Also, the Indonesian government
grew 14% in 2019 to US$1.99 trillion in global assets. This compares with announced a planned three-way merger of the Islamic subsidiaries of
just 1% growth in 2018 and an average annual growth of 5% over the state-owned banks: BRI Syariah, Syariah Mandiri, and BNI Syariah. The
years 2015 to 2018. new bank, worth US$14 billion in assets, is intended to support post-
Covid economic recovery and accelerate Indonesia’s Islamic economy
The fastest expansion was seen in countries outside the core Southeast development through project and SME financing.
Asian and GCC markets, particularly Morocco, where assets more than
doubled in 2019. Islamic, or ‘participatory’, banking in Morocco was first Possibly the most anticipated deal in the global industry, however,
launched in 2017, but has since seen exponential growth averaging Kuwait Finance House’s merger with Bahrain’s Ahli United Bank, was
an annual 120%. Islamic banking growth in the core markets has been postponed to December 2020 due to the circumstances imposed by
much slower, however, though still showing improvement over 2018. Covid-19. The region’s first major cross-border bank deal would have
created the world’s largest Islamic bank, with assets of about US$101
Sector growth is likely to be muted in 2020 as Islamic banks around billion. In addition, the National Commercial Bank’s expected merger
the world move to preserve their capital bases rather than expand with Samba could introduce a new Islamic banking heavyweight into
operations as they face the economic fallout of Covid-19. Although the industry in Saudi Arabia and globally.
the bottom lines of Islamic banks in core markets have taken a hit
during the pandemic, this will be countered by liquidity injections from Turkey eyes ambitious growth
government bailout packages. As global economies recover over the Turkey is a rising star in Islamic finance, with one of the industry’s fastest
next five years, Islamic banking assets are projected to reach US$2.44 growth rates in 2019. Participatory banking assets in Turkey reached
trillion by 2024. US$48 billion in 2019, a figure which is set to double over the next
decade, according to Moody’s Investor Services.
Covid-19 spurs new consolidation wave
Consolidation among both Islamic banks and the conventional banking Asset growth for participative banks has outpaced that of conventional
sector is showing no signs of easing, with a new wave set in motion banks in recent years despite market volatility, reflecting the creation of
by the economic impact of Covid-19. This trend is likely to continue in three new state-owned Islamic banks since 2015.
the core Islamic finance markets, mainly the GCC countries, Malaysia
and Indonesia, as banks face shrinking lending demand, lower profit The government granted license to Emlak Bank as an Islamic lender in
margins, and higher numbers of non-performing loans. 2019, making it Turkey’s sixth Shariah-compliant bank. It had previously
established Ziraat Katilim in 2015 and Vakif Participation Bank in 2016,
Recently closed mergers and acquisitions of Islamic banks include Dubai aiming to increase the share of Shariah-compliant banking assets to
Islamic Bank’s acquisition of Noor Bank. This resulted in a combined 15% of the country’s total by 2025. Participative banking accounted for
assets of US$75 billion, making it one of the world’s largest Islamic 6.3% of banking assets in 2019.
banks. Also, the conventional Oman Arab Bank acquired Alizz Islamic
Bank to boost its Shariah-compliant portfolio. For the same reason,
National Bank of Bahrain took a 78.8% stake in Bahrain Islamic Bank.

Philippines passes new law to expand Halal robo-advisory Wahed Invest and newly launched gold trading
platform Minted have also announced plans to establish Shariah-
Islamic banking offering compliant digital banks as soon as the first quarter of 2021 However,
A new Islamic Banking Act passed by the Philippines government in 2019 these would be deposit taking-only operations supplementing their
has opened the door for both domestic and foreign banks to establish core investment businesses, with no plans to provide loans in the future.
Shariah-compliant windows or subsidiaries in the country, tapping a Similarly, the Saudi Arabian Monetary Authority (SAMA) issued licensing
potential market of 11 million Muslims. As most of these Muslims remain guidelines for digital-only banks early in 2020, including conditions that
under- or un-banked, the law is hoped to increase financial inclusion as they should be set up as locally incorporated joint-stock companies and
well as attract foreign investment. Although the Philippines was an early maintain a physical presence in the kingdom. It has been reported that
adopter of Islamic finance, establishing its first and only Islamic bank in two entities have applied for a digital banking license with the regulator.
1973, this remains limited in size and in its scope of operations. The only bank to date with a digital presence in Saudi Arabia is Meem,
the Islamic banking arm of Gulf International Bank, which mainly
Several local banks in the Phillipines are preparing to set up Islamic operates online while leveraging its physical presence.
banking windows, while some Malaysian Islamic banks have shown
interest in expanding into this new territory. The government is also
partnering with market players in the GCC, mainly Qatar, to develop the
Islamic banking sector.
Rise of the Islamic challenger bank
Financial technology, or FinTech, has been playing a fast-expanding
role in Islamic banking over the past two years, even more so since
the outbreak of Covid-19. The global lockdown has forced customers
to only use digital channels for their day-to-day banking needs, and
this has presented digital banks with the opportunity to expand their
business while many traditional banks have scrambled to develop their
own digital services.
Shariah-compliant challenger, or digital-only, banks have begun to

emerge, particularly in the UK, posing a threat to traditional Islamic banks
in their non-core markets. These new banks offer a lifestyle-focused
banking experience for the more than 3 million Muslims resident in the
UK. Two Shariah-compliant challenger banks were launched in the UK
early in 2020 – Rizq and the mobile-only Niyah. Four more digital banks
are currently in the pipeline, based in the UK, Malaysia and Kenya.

TAKAFUL
51
Takaful Assets Growth 2012 - 2019
Total Takaful (US$ Billion)
US$
Assets in 2019
Billion
60
51
10%
50
Annual Growth
of Takaful Assets 47 48
46 46
in 2019
40
36 36
30 31
336 Total Takaful

Operators * in 2019
*including windows 20
10
Turkey
2012
2013
2014
2015
2016
2017
2018
2019
Fastest Growing Market -
in Takaful Assets in 2019
Number of Takaful Operators by Type 2019
General 124 Family 76
Composite 115 Retakaful 21

Top Countries in Takaful Assets 2019
Total Assets (US$ Billion) Takaful Operators*
18 60
17
16
52 50
14
Number of Takaful Operators

14
12 40
37
10 10
30
8
26 24
6 20
21 19
18
4
3 3 10 10
2 8 9
1 1 1
- 0,5 0,4 -
Saudi Arabia Iran Malaysia UAE Indonesia Qatar Turkey Bangladesh Pakistan Bahrain
*Including Windows
Countries with Highest Takaful Assets to GDP 2019
80% 1.12%
0.95%
0.93%
Top 3 Markets’ Share
of Global Takaful Assets in 2019
0.87%
0.54%
Brunei Iran Bahrain Saudi Arabia Bahrain

Recovery in contribution growth ended by Covid-19 Channelling waqf to offer takaful to unserved
Global takaful assets grew 10% to US$51 billion in 2019, expanding on segments
just 1% growth in 2018. Takaful contributions rose 8.8% in Saudi Arabia, A recent innovation in the InsurTech space that has received attention
the world’s largest market for Islamic insurance, providing the industry in 2019 is Wakaful – a Malaysia-based platform that uses blockchain to
with a much-needed boost after several years of losses. New business channel waqf funds towards making takaful products more affordable to
mainly came from the medical line following the introduction in 2018 of low-income consumers. The platform pools CSR funds from corporates
mandatory cover for dependents of Saudi nationals. into trust funds and then offers low-cost takaful coverage to consumers
who either cannot afford or have no access to traditional takaful products.
Takaful operators in other GCC markets saw even higher growth in 2019,
with contributions rising 14% over the year. Growth was seen across Increasing capital requirements spur wave of
several business lines and there was an improvement in profitability consolidation in Saudi Arabia
of investments. However, this growth proved to be short-lived once
the Covid-19 pandemic took hold, as the lockdowns and closures of Takaful operators in the GCC are facing challenges on multiple fronts –
businesses significantly reduced insurance and takaful sales and profits. from the economic slowdown, greater competition, and raised minimum
capital requirements. This is likely to lead to industry consolidation,
Takaful expansion via online aggregation platforms particularly in Saudi Arabia, which accounts for 85% of the region’s
takaful contributions.
Although the global takaful industry has stagnated in recent years, new
insurance technology, or InsurTech, promises to transform the sector Some Saudi insurers have sustained losses in recent years that eroded
through improved efficiency and the ability to reach greater numbers of their capital, leading almost 10% of companies to cease operations. In
consumers. The disruption caused by InsurTech has centred on online addition, a planned five-fold increase in minimum capital requirements
insurance aggregators, which has led several jurisdictions such as by the insurance regulator would require almost 90% of insurers in
Bahrain and Saudi Arabia to begin regulating insurance aggregation. the kingdom to raise new capital, consolidate through mergers and
acquisitions, or exit the market entirely.
Oman’s first online insurance and takaful platform – Bima – was launched
in July 2020. The platform has already partnered with eight insurance The first-ever merger within the Saudi insurance and takaful sector came
and takaful providers, offering auto and domestic helper coverage and in March 2020, between Walaa Cooperative Insurance and Metlife AIG
plans to introduce travel, property and term life coverage. ANB Cooperative Insurance.
At the same time, AlAhli Takaful and Chubb Arabia Cooperative Insurance
entered into preliminary merger discussions. In June, a binding merger
agreement was also agreed between Al-Ahlia Insurance and Gulf Union
Cooperative Insurance. Aljazira Takaful Taawuni Co. signed a similar
agreement with Solidarity Saudi Takaful Co. in August.

Renewed interest from Indonesian government
Insurance and takaful penetration in Indonesia remains low at just 1.5% of
GDP. The contribution from takaful has shrunk in recent years, mainly due
to a lack of consumer awareness and understanding. However, renewed
support from the Indonesian government under the government’s Islamic
finance economic masterplan, including a relaxation of takaful foreign
ownership laws, promises to create new growth opportunities.
In January 2020, the government issued an amendment to its foreign-

shareholding rule to allow spun-off takaful windows exemption from the
statutory 80% foreign ownership limit. This will make it easier for the 50
insurers that must spin off their Islamic units by 2024 as mandated by the
2014 Insurance Law to comply with the requirement.
Each spin-off would require a minimum capital of IDR 100 billion (US$6.79
million) – double that for a takaful window. This would make separating
many of the takaful windows from their parent companies unfeasible.
However, the amendment has offered these spin-offs the option to
propose raising additional foreign capital when seeking regulatory
approval.
Indonesia’s takaful sector is also set to benefit from the government’s

Islamic Economic Masterplan 2019-2024. One of the key recommendations
is to introduce a government policy directing government entities and
state-owned enterprises to offer their employees takaful options for their
insurance cover, thus providing takaful operators a level playing field
with conventional insurers.

OTHER ISLAMIC
FINANCIAL INSTITUTIONS
153
Number of OIFIs by Type 2019
US$ Total OIFI
Assets in 2019
Billion
Investment Firms
6 % Annual Growth 288

of OIFI Assets
in 2019
Financing Company
645
Total OIFIs*
in 2019
*including windows
125
Maldives
Fastest Growing Market
in OIFI Assets in 2019 Other
107
OIFI Assets Growth 2012 - 2019
(US$ Billion)
160
153 Leasing
145
140 141 142 142
66
130
120
119
107
100 Microfinancing
80 35
60
40
Modaraba Company
20
2012
2013
2014
2015
2016
2017
2018
2019
24
-

Top Countries in OIFI Assets 2019
Total Assets (US$ Billion) Number of OIFIs*
60 80
75 76
54 70
71
50
60
Number of OIFIs
56
40 50
38
33 48
40
30
30
20
17 20
11
10 10 13 10
9 6 2 3
3 1
- 1 1 -
Malaysia Iran Saudi Arabia UAE Kuwait Qatar Switzerland Brunei Senegal Indonesia
*Including Windows
72%
Top 3 Markets’ Share of Global Takaful Assets in 2019
Total OIFI Assets by Category 2019 (US$ Billion)

70
60
59
56
50
40
30
20
12
10
9 9 5 2
-
Investment Financing Real General Financial Mortgage Leasing Others
Firms Company Estate Services

The Maldives sees fastest growth in OIFI With OIFI assets estimated at US$54 billion in 2019, Malaysia is
competing to become the global hub for Islamic FinTech. There were
sector assets several Islamic FinTech players in the country in 2019, supported by
The ‘other Islamic financial institutions’, or OIFI sector, saw a 6% increase the government’s two-decade-old digital strategy. By 2020, the digital
in total assets in 2019, to US$153 billion. This sector consists of financial economy contributed around 18% of the country’s GDP. In addition,
institutions other than Islamic banks and takaful operators, such as Malaysia’s Securities Commission signed an agreement with Indonesia’s
financing, mortgage, leasing and factoring companies. Finacial Services Authority (Otoritas Jasa Keuangan) in August 2020 to
establish a collaborative framework for developing FinTech ecosystems
The fastest growing market in OIFI in 2019 – with total assets rising 62% in each of their countries.
to US$44 million – was the Maldives, which has been working in recent
years to diversify its economy. The rapid growth in assets was a result Islamic FinTech can be expected to derive further impetus from the
of government and regulatory support for developing frameworks Covid-19, where lockdowns and social restrictions have necessitated a
for the Islamic finance industry. Shariah-compliant housing financing much faster take-up of technological solutions in all economic sectors
has gained popularity in the Maldives’ retail market. The Housing around the world, including consumers who are increasingly using
Development Finance Corporation (HDFC) saw a 31% increase in such online channels to manage their finances.
assets over the year, boosted by rising demand for scarce housing
units, particularly in the capital Malé. UK expanding Shariah-compliant financing
Islamic FinTech transforming OIFI sector around offerings through OIFIs
the world Active government support for the promotion and development of the
Islamic finance industry has seen sector assets in the UK reach an IFDI
FinTech has accelerated the evolution of the Islamic finance industry estimate of US$22 billion. OIFIs play a particularly large role. In 2019,
over the past year, nowhere more so than in the OIFI sector, where it can the UK’s first Shariah-compliant bridging lender, Offa, was launched in
provide both simplification and innovation. In Saudi Arabia, the Saudi Birmingham and London. The company provides Islamic residential and
Arabian Monetary Authority (SAMA) in 2019 launched its Regulatory commercial bridging finance among other products.
Sandbox Framework to attract local and international financial innovators
as part of its drive to transform the Saudi market into a smart financial Islamic start-up funding for small and medium-sized enterprises (SMEs)
centre. As of April 2020, there were 30 businesses operating under the will be boosted by the launch in 2020 of an Islamic P2P crowdfunder:
framework. Similarly, Indonesia posted a five-fold growth in financing Qardus. The launch will provide an additional avenue of financing other
for Islamic FinTechs in 2019, with 12 registered platforms in 2019. than the big-ticket funding required by Islamic banks. This places it
alongside other UK-based Islamic crowdfunding FinTechs such as the
Islamic FinTech is also expanding outside of the industry’s core markets. property-focused Yielders.
Malaysia-based Islamic savings platform HelloGold in 2019 partnered
with African digital financial inclusion group Baobab to develop
products for consumers in several countries across the contnent.
HelloGold’s gold-backed savings and products will help Baobab expand
its financial services to Africa’s unbanked and underserved. HelloGold
also launched its Islamic savings platform in Thailand in 2019.

Bahraini wholesale banks converting
to investment firms
Investment firms made up 45% of OIFIs in 2019. Bahrain had 19 OIFIs,
mostly investment firms, with a total $693 million in assets. Several
Bahraini wholesale banks, including Ibdar Bank and Gulf One Bank,
converted their licences to Category 1 Investment Business Firms in
2019, and GB Corp along with Al Baraka Banking Group followed suit
in 2020. This follows previous similar transformations such as Ithmaar
Bank’s 2016 structural reorganization that saw it establish an investment
subsidiary (IB Capital) so as to benefit from new opportunities in the
market while reducing the risk profile of the banking entity.
There could be more conversions still to come of wholesale Islamic

banks or conventional banks with Islamic windows as they seek
to realign with the Central Bank of Bahrain’s regulatory framework.
Investcorp, which has an Islamic window, also converted its license to
that of an investment firm. It concluded that if its client deposit-related
activities are not carried out by Investcorp, then a wholesale banking
license is not required and an investment firm license would be more
suitable.

SUKUK
538
Number of Sukuk Issued by Structure 2019
Total Sukuk
US$ Outstanding
Value in 2019
Billion
Murabaha
15 % Annual Growth
of Sukuk Value
in 2019
308
Ijara
3,420 Number of Sukuk
Outstanding in 2019
293
Brunei
Fastest Growing Market in Sukuk
Assets in 2019 Mudaraba
235
Sukuk Value Outstanding Growth 2012 - 2019
(US$ Billion)
600
Other Sukuk
538
229
500
470
426
400 Hybrid Sukuk
342 345
225
300
284 299
260
200 Salam
156
100
2012
2013
2014
2015
2016
2017
2018
2019

Top Countries in Sukuk Outstanding 2019
Sukuk Outstanding Value (US$ Billion) Number of Sukuk Outstanding
300 3,000
Sukuk Outstanding Value (US$ Billion)
2,576
250 2,500
Number of Sukuk Outstanding

242
200 2,000
150 1,500
118
100 1,000
50 57
500
110 288 39 79 52
66 20 56 14 14 9 20 20
6 5 12
- -
Malaysia Saudi Arabia Indonesia UAE Qatar Turkey Iran Bahrain Kuwait Oman
69%
Top 3 Markets’ Share of Global Sukuk Outstanding
Value in 2019
Countries with Largest Sovereign Sukuk Issued 2019
Total Sovereign Sukuk Issued (US$ Billion) Share of Sovereign Sukuk to Total Sukuk
70 100%
Total Sovereign Sukuk Issued (US$ Billion)
94%
Share of Sovereign Sukuk to Total Sukuk

66 93%
60 90%
80%
50 72%
70%
40 60%
50%
30 40%
26 35% 40%
20 21 30%
13 11 20%
10
10%
- -
Malaysia Saudi Arabia Indonesia Turkey Kuwait

Sukuk maintains double-digit growth Sovereign issuance in Saudi Arabia totalled US$18 billion over the first
The sukuk market grew 30% in issuance value to US$162.1 billion in half of 2020 as part of government efforts to shore up the economy
2019, from US$124.8 the year before, maintaining the double-digit after oil prices collapsed in March. Issuance is likely to increase further
growth in the sukuk industry seen across of the past five years. Sukuk in the second half to provide funding for the national budget deficit and
remained the debt instrument of choice for sovereign issuers in offset losses from reduced oil revenues.
Malaysia, Indonesia and Saudi Arabia to finance budget deficits and
maintain liquidity levels as the Covid-19 pandemic weighed heavily on Other sovereigns to have issued sukuk to soften the economic downturn
economies. include Bahrain, Dubai and Oman. The Maldives has also announced
plans to issue sukuk to support the government budget.
Indonesian sukuk issuance rose 37% in 2019 as the government ramped
up domestic issuances in order to finance its state budget and broaden Corporate issuers rethinking strategies amid
the investor base. Domestic corporate issuance remained a challenge market turmoil
in Indonesia, however, due largely to poor secondary market liquidity.
There was a small drop in the number of corporate and sovereign sukuk
This was despite government efforts to improve liquidity through its
issuances in the first half 2020. However, there was a slight pickup in the
own sukuk issuances, as many investors hold on to their sukuk until
second quarter from corporates that had postponed issuance earlier in
maturity.
the year during the initial market turmoil caused by the Covid pandemic.
Dubai Islamic bank successfully closed a US$1 billion sukuk issuance in
In Malaysia, the central bank’s resumption of its short-term murabaha
June 2020 that had originally been intended as a US$750 million issue
sukuk programme to maintain domestic liquidity levels boosted activity
during the first quarter but was postponed due to unfavourable market
in the sovereigns market.
conditions caused by the pandemic.
Covid-19 pandemic and tumbling oil prices In Indonesia, national carrier Garuda Indonesia secured majority
hamper H1 sovereign issuance approval to extend the maturity of US$500 million sukuk by three years
The first two quarters of 2020 saw high levels of volatility in global past its original date of June 2020, giving the airline time to produce
markets as the Covid-19 pandemic took hold and oil prices crashed. positive cashflow to pay back its investors after global travel restrictions
Some of the largest sukuk issuers, often from oil-exporting countries, slashed passenger volumes by 90%. Malaysian Airlines also deferred
held off from issuing sukuk during the first quarter amid the market payments to holders of its US$362.5 million sukuk by six months to
turmoil. March 2021 due to the impact of the pandemic on the travel sector.
Governments around the world introduced sweeping stimulus measures

to defend their economies, with the result that budget deficits ballooned,
and some countries began to issue sukuk to help finance their deficits.
The Malaysian government issued US$13 billion worth of sukuk during
the second quarter. In August, it issued its first digital retail sukuk, with
a target issuance of US$119.4 million. This sukuk could be subscribed
to through digital channels such as mobile banking platforms, with 27
banks participating in the scheme. The Indonesian government made a
similar move, issuing retail sukuk in the same month amounting to IDR5
trillion (US$342 million).

Green sukuk come to prominence to meet New sukuk markets emerge in 2020
UN’s SDGs as investor base expands
Green and socially responsible investing (SRI) sukuk came to the fore Egypt entered the sukuk market in April 2020 with an inaugural
in 2019 as governments and corporates step up efforts to achieve the corporate issuance from Talaat Moustafa Group, an Egyptian real
United Nations’ Sustainable Development Goals (SDGs), a trend which estate developer, valued at US$127 million. This was followed in July
is expected to accelerate in the years ahead. Green sukuk issuance 2020 by another Egyptian corporate, finance company Sarwa Capital,
totalled US$4.4 billion in 2019, comprising issuances from Indonesia announcing that it planned a US$156 million sukuk for later in the year.
and countries of the GCC. However, Egyptian aviation leasing company CIAF was forced to cancel
a US$50 million sukuk as the Covid-19 pandemic led to many aircraft
The Indonesian government and Dubai holding group Majid Al Futtaim orders being postponed until global travel returns to normal.
both issued their first green sukuk in 2019. Indonesia’s issuance of two
green sukuk totalling US$2 billion was in line with a strategy under Elsewhere, the world’s first Formosa sukuk were issued early in 2020
the government’s economic masterplan to seek innovative sources of by Qatar Islamic Bank. The issuance was raised to US$800 million from
financing for domestic infrastructure projects. Indonesia issued another an initially planned US$650 million to meet strong investor demand.
green sukuk in June 2020 worth US$750 million to finance sustainable The issuance followed a revision of the Taiwan Financial Supervisory
development projects and cushion the blow of the Covid-19 pandemic. Commission’s rules that had previously only allowed conventional
Majid Al Futtaim’s US$600 million sukuk issuance was used to finance issuers to access the Taipei market.
and refinance renewable energy projects and projects related to energy
efficiency.
During the first half of 2020, Islamic Development Bank (IsDB) issued
its debut sustainability sukuk valued at US$1.5 billion to support various
social projects undertaken by member countries affected by the Covid
pandemic. This was the first ever AAA-rated sustainability sukuk to be
issued on the global capital markets. IsDB launched its first green sukuk
in December 2019, valued at EUR 1 billion (US$1.17 billion), to finance
climate change-related and green projects among its member countries.
Elsewhere, Saudi Electricity Company (SEC) raised US$1.3 billion from
the sale of a dual-tranche green sukuk in September 2020. This was
the first green sukuk from a Saudi issuer. It was intended to raise capital
for various green projects such as smart meters.
Further green sukuk issuances are being considered by Uzbekistan

and Kazakhstan. In Malaysia, water company Air Selangor has said it
plans to issue a MYR10 billion (US$2.4 billion) sustainability sukuk to
fund development of Selangor state’s water infrastructure.

ISLAMIC FUNDS Islamic Funds Outstanding Value by Universe 2019
(US$ Billion)
Mutual Funds
US$
140 Billion
Total Islamic
Funds Outstanding
Value in 2019
Pension Funds
1,555
30 % Annual Growth
of Islamic Funds
Value in 2019
86
Insurance Funds
1,749
Number of Islamic
Funds Outstanding 76
in 2019
Exchange Traded Funds

Iran 29
Fastest Growing Market in Islamic
Funds Assets in 2019
Islamic Funds Value Outstanding Growth 2012 - 2019 (US$ Billion)
140 140
120 120
108
100 99
80
71
66
60 61
58
40
20
2012
2013
2014
2015
2016
2017
2018
2019
-

Top Countries in Islamic Funds Outstanding 2019
Islamic funds Outstanding AuM (US$ Billion) Number of Islamic Funds Outstanding
50 500
45 450
44
Islamic Funds Value (US$ Billion)
440
40 400
Number of Islamic Funds

35 35 350
32
30 300
25 250
206 234
20 200
165 161 178
15 150
14
118
10 100
91
5 50
3 3 3 6 2 2 1 18
- -
Iran Saudi Arabia Malaysia United Kingdom Indonesia Luxembourg United States South Africa Pakistan Kuwait
78%
Top 3 Markets’ Share of Global Islamic

Funds Outstanding Value in 2019
Islamic Funds Outstanding Value by Type 2019 (US$ Billion)
60
50 49
40 40
30
28
20
12
10
6 4 1
0.3 0.1
-
Sukuk Money Equity Other Real Mixed Alternatives Mixed Commodity
Market Estate Assets
Islamic funds grow at fastest pace in a decade, In Malaysia, Public Bank unit Public Mutual in 2019 launched the Public
led by GCC e-Islamic Sustainable Millennial Fund (PeISMF). This targets investors,
particularly millennials, who want to include sustainability considerations
Total assets under management (AuM) for Shariah-compliant investment in their investments while achieving long-term capital gains.
funds saw their highest growth in the last decade, rising 30% to $140
billion, from US$108 billion in 2018. In all, 127 funds were launched Islamic investment platforms such as these tap into the concerns of
in 2019, including Shariah-compliant mutual funds, pension funds, younger investors about where and how their wealth is invested, and
insurance funds, and exchange-traded funds (ETFs). Mutual funds, which reports suggest many would be interested in sustainable investing. A
comprise the largest share of managed assets, soared 97% in 2019 to 2019 Morgan Stanley survey found that 90% of people aged 24 to 39
US$125.4 billion. By type, Islamic bonds (sukuk), had the highest value would prefer to tailor their investments to their values.1
of the mutual funds, followed by money market funds. The latter grew
the fastest of all mutual fund types, rising 54% from the previous year. Malaysia leading expansion in Shariah-compliant
Southeast Asia had the highest regional value of Islamic funds in 2019, ESG investing
followed by the GCC. However, the GCC saw the highest growth in Demand is growing for ESG-related investment assets such as green
Islamic funds, up 35%. Among individual countries, Saudi Arabia saw bonds and there is a high degree of complementarity between Islamic
the most rapid growth in Islamic funds, rising 43%, making it the world’s and ESG investing. This is making Islamic financial products increasingly
largest investor in Shariah-compliant assets. The outperformance by attractive to investors who are not Muslim.
Saudi Arabia and the GCC as a whole may have been due partly to
recent regulatory changes that improved market efficiency, liquidity and Malaysia is a leading presence in both Islamic funds and ESG investment
investor security while attracting foreign investors. Most GCC countries and has seen several initiatives in this space. BIMB Investment
have made regulatory changes to attract foreign investors since 2014, Management Bhd (BIMB), an arm of Bank Islam Malaysia, launched its
when falling oil prices made economic diversification a key priority. Global Shariah-ESG Equity fund for retail investors in October 2019.
BIMB also in April 2020 launched its BEST Invest robo-intelligence app
However, Covid-19 and renewed weakness in oil prices are putting to help investors build their portfolios, offering a range of Islamic and
pressure on Islamic asset managers, particularly in the GCC. Many sustainable unit trust funds. Other such initiatives include the above-
investors in the region depend on oil as a key source of revenue. Still, mentioned launch of the Public e-Islamic Sustainable Millennial Fund
asset managers are benefiting from economic and regulatory reforms by Public Mutual, and an Islamic-ESG fund – the Maybank Global
in the GCC countries aimed at attracting domestic and international Sustainable Equity-I Fund – by Maybank Asset Management in 2020.
investors looking to invest in a more diverse pool of products and asset
classes. More Shariah-ESG funds are likely to be launched in coming years, in
line with growing issuance of green and sustainable sukuk. In addition,
New tools for Islamic investment products the global economic slowdown caused by Covid-19 will lead to greater
targetting millennials in Indonesia and Malaysia numbers of social instruments being launched by Islamic financial
There is a growing trend for Islamic investment products targetting institutions to tackle issues such as mass unemployment. The pandemic
millennials, as has been seen in Southeast Asia. Indonesia had the could be a turning point for the asset management industry as many
second largest number of funds in 2019, mostly mutual funds investing businesses are betting on sustainability to tackle the challenges it is
in the country’s fast-growing sukuk market, and in 2019 a new online presenting.
marketplace was launched employing a business aggregator model
for Shariah-compliant mutual funds. The application, Halalvestor, is
aimed at millennials seeking both comprehensive market information
and investing convenience. Use of such applications also presents
investment managers with better marketing opportunities as they can 1
Morgan Stanley Institute for Sustainable Investing:
reach younger, more digitally savvy investors. Sustainable Signals -- The Individual Investor Perspective

Islamic ETFs becoming increasingly
popular globally
Islamic exchange traded funds (ETFs) were the second biggest in value
after Islamic mutual funds, having risen 37% to over $12 billion in 2019
from $9 billion the year before. Three ETFs have launched in the Islamic
finance market in the United States: the Wahed FTSE USA Shariah ETF
(HLAL) by Wahed Invest, and the S&P 500 Sharia Industry Exclusions
ETF (SPUS) and SP Funds Dow Jones Global Sukuk ETF (SPSK) by SP
Funds. The HLAL and SPUS each invest in Shariah-compliant equities.
In the GCC, which had the second-highest regional value of ETFs in

2019 after Europe, Abu Dhabi Securites Exchange and Dubai Financial
Market both listed a Shariah-compliant ETF by asset management
firm Chimera Capital in August 2020. Qatar is likely to see more such
products after the launch of its first, the Al Rayan Qatar ETF, in 2018, as
part of efforts by its stock market to boost foreign investment. Qatar is
also expected to see similar listings of Islamic pension funds and real
estate investment trusts (REITs) once a suitable listing framework is
drawn up for these types of funds.
Elsewhere, Pakistan’s first Shariah-compliant ETF was launched in

September 2020, by Al Meezan Investment Management. This followed
the introduction of the country’s first ETFs six months earlier.

INTERVIEW What will be the overall impact of the COVID-19 pandemic
on sukuk issuance? What are the key economic metrics that
will drive issuance going forward?
The pandemic triggered major uncertainty in the markets during the first
quarter 2020, bringing new international issuance almost to a standstill by
March. Although jurisdictions such as Saudi Arabia, which has the benefit of
established domestic debt markets, issued SAR15 billion in sukuk in March,
Ahsan Ali global issuance volumes fell in the first quarter from 2019.
Managing Director and Head
of Islamic Origination However, the international dollar sukuk market picked up pace in May and
Standard Chartered Saadiq June, led by sovereigns such as Bahrain, Sharjah and Indonesia, resulting in
significantly higher transaction volumes. This was an indication of a stabilising
market, which saw investors and issuers come back strongly in the second
half, highlighting robust demand dynamics for sukuk. The market has since
seen high levels of activity, with global sukuk volumes in the first nine months
of the year set to equal or even surpass levels for the same period 2019. This
has been driven mainly by sovereigns, Islamic banks, and high-quality corpo-
rates tapping the international sukuk market and achieving very successful
transactions.
Ahsan is responsible for Islamic Commercial, We expect this market momentum to continue for Q4 2020 and going into
Corporate & Institutional Banking business globally at next year, as issuers lock in long-term funding at historically low rates. Inves-
Standard Chartered Saadiq, the bank’s Islamic banking arm. tor demand is also intact, driven by huge liquidity injected by central banks
In this role, he oversees the delivery of Islamic banking services around the world. Sovereign and quasi-sovereign supply from the GCC is
to clients across multiple geographies and products, including likely to remain strong to cover for the higher fiscal needs caused by low oil
financial markets, corporate finance, and transaction banking. prices and for refinancing purposes.
Since joining Standard Chartered Bank in March 2004, An interesting trend is emerging in Saudi Arabia where
Ahsan has played a key role in building the bank’s Islamic business from
the country has issued more sukuk than bonds in the past
inception and has led several award-winning and industry-defining deals.
He has over 27 years’ experience in the financial services industry, few years. What has contributed to this shift and will this trend
of which the last 16 have been in Islamic banking. Prior to joining continue and expand to other markets?
Standard Chartered, he worked at Citi.
Saudi Arabia has very ambitious economic plans, which have been set in mo-
Ahsan holds a Master’s in Business Administration from the Indian tion by the Saudi Vision 2030 and which will ultimately have huge capital and
Institute of Management, Calcutta, and a Degree in Mechanical funding needs. Add to that the recent low oil price environment resulting in
Engineering from the Indian Institute of Technology, Delhi. budget deficits that will need to be financed by accessing the debt capital
He is also a Chartered Financial Analyst (CFA). markets – both domestic and international. Given that Saudi Arabia is the lar-
gest Islamic finance market in the world, it is but natural that sukuk would be
the preferred route, especially when it comes to accessing local investors.The
Saudi Arabia Ministry of Finance, acting through the country’s National Debt
Management Center, established in 2017 the first-ever unlimited SAR-denomi-
nated sukuk programme with the aim of diversifying its funding sources.

This programme provides a deeper pool of Shariah-compliant securities to What is the role for technologies such as blockchain in providing
facilitate liquidity management for domestic Islamic financial institutions, and
with various tenors of up to 30 years this programme has helped to further a smoother issuance process to address the multifaceted investor
develop the local Islamic market by establishing a domestic benchmark sukuk demand without adding cost, complications or delays for issuers?
yield curve.
Once the structure and documentation are standardised across markets, we
Taking the cue from the sovereign programme, Saudi financial institutions can then use the true potential of technologies such as blockchain, which
and corporates have followed suite in accessing domestic and international would help in automating the process of sukuk issuance, especially for retail
markets through sukuk. We expect this trend to continue and also expect issuance. This would certainly help bring down the cost of issuance, as well
other countries in the GCC and the broader Islamic world to do the majority as help the sukuk market move away from the currently largely institutional
of their local debt issuances in an Islamic format. market to the retail space.
There has been a lot of hype around green sukuk, yet its I think we’ll need to take a step back and see where the bottlenecks for such
development and growth has been limited, with few issuances technological solutions might be. One such challenge is standardisation of
sukuk documentation. While it is true that differing Shariah principles across
to date. What is holding back issuers and is there a genuine jurisdictions have held back such developments, there is now a concerted
appetite from investors for green sukuk? effort by industry bodies such as IIFM (International Islamic Financial Market)
to standardise some of the frequently used sukuk structures.
The Shariah principles which underline Islamic economics and finance en-
courage wholesome and sustainable development of communities, countries
and the world. This is pretty much aligned with the goals of sustainable, green
and social financing, and therefore provides a natural fit between Islamic and
sustainable financing.
However, it is true that green and sustainable financing within Islamic finance
is still at an early stage and hasn’t yet been explored to its full potential. One
challenge has been the availability of suitable green assets or of projects big
enough to be used in structuring a green sukuk. But this should ease soon as
governments, quasi-sovereign entities and large corporates are increasingly
embedding green and sustainability principles as their core objectives. Also,
while we haven’t seen many dedicated Islamic green investors, the aware-
ness is certainly increasing on that front too.
Nonetheless, the green and sustainable sukuk market has seen many land-
mark transactions, led by sovereigns such as the Republic of Indonesia, which
issued its first sovereign green sukuk, worth US$1.25 billion, in 2018, followed
by US$750 million in 2019 and most recently a US$750 million green sukuk in
June 2020. Also there have been multilateral institutions such as the Islamic
Development Bank, which issued its first-ever green sukuk, worth EUR 1 bil-
lion, in 2019 and followed this with the first-ever COVID-19 response sustaina-
bility sukuk in June 2020, worth US$1.5 billion. We have also witnessed a few
corporates riding the green wave. Majid Al Futtaim issued a US$600 million
green sukuk – the world’s first corporate green sukuk – and most recently
Saudi Electricity Company issued a dual-tranche US$ 1.3 billion green sukuk.

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RE1246572/11-20
I SLAM I C
FINANCE
ECO SYST EM
Measurement of the development
of the Islamic finance industry goes beyond just
measuring core business components such as financial
performance. There is also a need to investigate the
industry’s infrastructure, including its management
components (Governance and Corporate Social
Responsibility) and industry ecosystem (Knowledge
and Awareness) to see whether it is heading in the right
direction, whether globally or in individual countries.
This chapter investigates the other elements

deemed important for the development of the industry
and will look into key trends and opportunities within
each element.

ISLAMIC FINANCE
GOVERNANCE Top Countries by Number of Shariah Scholars 2019
184
1,170
Total Scholars
Representing Islamic
Financial Institutions 173
in 2019
14 Countries with Central

Shariah Boards
133
77
76
45 Females
Representing
Shariah Boards
39% out of 70 Items

Average Global Financial
Reporting Index in 2019
Malaysia Bangladesh Indonesia Sudan Iraq
Number of Countries with Islamic Countries with a Full Set of Islamic Top Countries with IFIs Represented by
Finance Regulation 2019 Finance Regulations 2019 at Least 3 Shariah Scholars 2019
46 42 83
Islamic Finance Countries Islamic Banking Countries
64
62
32 Bahrain Nigeria
59
55
Accounting/Auditing Countries
31 21 Indonesia Pakistan
Specific Shariah Countries Sukuk Countries
Governance
22 12 Malaysia Qatar
Takaful Countries Islamic Funds Countries Indonesia Pakistan Saudi Arabia Kuwait Malaysia

Countries with Females Representing Shariah Top Countries in Average FRDI Score 2019*
Boards 2019
78%
26
68% 68%
64%
61%
8 8
Malaysia Bangladesh Iraq Brunei Palestine Nigeria Sri Lanka South Africa Syria
*The Disclosure Index covers 70 items that need to be disclosed in 2019 annual or financial reports
of Islamic Financial Institutions
Global Islamic Finance Shariah Scholar Institutional Representation 2019
885
Single Representation
200
2-3 Institutions
63
4-9 Institutions
22
10 or More Institutions

UAE to develop unified
global legislative framework
for Islamic finance
In 2019, 46 countries had regulations
covering Islamic finance, increasing by
two from 2018. The number of countries
with a comprehensive regulatory system
covering each of the industry’s six sectors
– accounting; Islamic banking; Shariah
governance; takaful; sukuk; and Islamic
GOVERNANCE funds – remained at six. The other countries’
regulations covered one or more of these
OVERVIEW sectors.
Governance provides an important The UAE in 2019 introduced new regulations

indicator of the health of the Islamic finance related to banking, takaful and sukuk in
industry’s infrastructure. Appropriate controls will order to improve its existing regulatory
maintain consumer and investor confidence in the framework, which had not covered all
industry. areas of the industry. The UAE also in May
2020 launched an initiative to develop a
Indeed, recent scandals and the collapse unified global legal framework for Islamic
of financial institutions whether in leading Islamic finance, as greater standardization would
finance regions or elsewhere tell us that strong be likely to facilitate further expansion
governance and regulations will provide legitimacy of the Islamic economy. Dubai Islamic
to Islamic financial institutions’ operations. Economy Development Centre (DIEDC) will
Governance is assessed through regulations, use Accounting and Auditing Organization
corporate governance, and Shariah for Islamic Financial Institutions (AAOIFI)
governance. standards as a reference in building --the
international legal framework.

African countries turning CIS nations to create New central Shariah board
to Islamic finance to boost regulatory framework established in Kuwait and to be
economies for green sukuk established in Qatar
Countries around the world are enhancing their Kazakhstan has permitted Islamic finance since There were 14 countries with central Shariah boards
Islamic finance ecosystems as the multifaceted 2009 in order to encourage foreign investment in 2019, the same as in the previous year, but that
industry continues to expand, and many of these in the country. The Astana International Financial number is likely to grow with the planned additions
countries are in Africa. One such is Tanzania, where Centre (AIFC) was founded in the country’s capital of boards in countries such as Qatar. Central Shariah
despite rapid growth in Islamic finance there are no city, Nur-Sultan, in 2018 with the aim of establishing boards allow the principles and structures of Islamic
specific regulations to govern the sector other than Kazakhstan as a financial hub for Central Asia, the finance to be harmonized at a national level and
for takaful, for which regulations were approved Eurasian Economic Union, the Caucasus, West thereby promote its acceptance and growth.
in 2019. The Tanzanian government announced China, Mongolia and Eastern Europe, as part of
in December 2019 that it was working to draw up which it is working to develop its Islamic finance Kuwait, which ranks 9th overall in the IFDI report,
a regulatory framework to develop the still-nascent industry. The AIFC in 2019 also started work on approved a draft law in February 2020 to establish
industry there. creating a regulatory framework for green finance a Shariah board overseeing the country’s Islamic
and a potential issuance of the country’s first green finance and banking activities. Under the law, the
In North Africa, Tunisia approved a draft law for sukuk. country’s Central Bank will take charge of supervising
participatory financing in July 2020 that will help the banking sector and ensure it complies with
efforts to develop new sources of financing for start- Uzbekistan also has plans to sell its first green Islamic law. In October, it appointed the central
up and SMEs. A digital platform developed by a sukuk. In July 2020, the country’s Capital Markets Shariah board to underpin the governance of Shariah
specialist in participatorty financing will provide the Development Agency (CMDA), the United Nations supervision. Islamic finance plays a large role in the
link between the public, companies, and projects Development Programme, and Islamic Development country’s financial industry, and Islamic banking
in need of funding. Tunisia also in May 2020 Bank signed a statement of intent to work together grew more strongly last year than did conventional
inaugurated the country’s first zakat fund since to introduce Islamic finance in Uzbekistan, which will banking.
independence was achieved in 1956. support CDMA in its efforts to create an enabling
Countries are increasingly turning to Shariah- environment for green sukuk. The CDMA stepped Qatar is also set to establish a centralized Shariah
compliant financing instruments such as zakat and up its efforts to develop alternative financing board, with the aim of enhancing consistency and
sukuk to help in their responses to the economic, instruments after the Covid-19 pandemic outbreak, integrity within the Islamic finance sector. The
health and social impacts of the Covid pandemic. while also committing to the UN’s Sustainable current decentralized Shariah governance structure
Algeria is another country looking to Islamic finance Development Goals agenda to help the country has raised concerns around potential conflicts of
as a new source of funding as the country’s economy recover from the crisis. interest.
reels from the coronavirus and collapsed oil prices.
Shariah-compliant financial services were approved The Philippines is seeking to tap into the growing
in Algeria in August 2020. National Bank of Algeria popularity of Islamic banking worldwide and in
was the first to be granted a certificate of Shariah- December 2019 it approved a Shariah Governance
compliance, with more financial institutions to follow. Framework that set out a number of requirements,
measures and policies for Islamic banks and units.
The guidelines are aimed at encouraging both
domestic and foreign financial institutions to invest
in Islamic banking operations. Expanding ties with
leading Islamic finance players in major industry
regions such as the GCC would also drive the
industry forward in the Philippines.

THE ROLE OF WOMEN
IN ISLAMIC FINANCE EXECUTIVE INSIGHTS
Islamic finance has grown in leaps and bounds in the past five to six decades.
In the product development space, industry practitioners have worked closely
with Shariah scholars to devise workable and innovative solutions that meet
both commercial demands and Shariah compliance requirements. As the market
grows, so the number of players has expanded, and product knowledge and
development have become more extensive and diversified. In terms of gender
Prof. Dr. Engku participation, although Islamic finance is male dominated, which is common
Rabiah Adawiah for the finance industry in general, the ratio of female participation seems to
The International Islamic
University Malaysia
have improved, perhaps due to policy-driven actions towards better gender
representation.
Women’s participation in Shariah scholarship is a major area where male

domination is more entrenched. Even outside of Islamic finance, Shariah
scholarship roles are dominated by men. There are undoubtedly women scholars,
too, but in terms of numbers and reach, male scholars are more dominant. Part
of the reason is perhaps less access to education and training opportunities for
women in some parts of the Muslim world, certain religio-cultural norms that
Dr Engku Rabiah Adawiah is a professor restrict female participation to a women-only environment, and other invisible
at the IIUM Institute of Islamic Banking and Finance, barriers that are not spoken of but exist in reality.
International Islamic University Malaysia. She is also a member
of the Shariah Advisory Council of Bank Negara Malaysia, Securities To some extent, Malaysian women are perhaps more fortunate. Women in
Commission Malaysia, Labuan Financial Services Authority, and Malaysia generally enjoy equal access to education, as well as job opportunities
Employees Provident Fund. She also sits on the Shariah boards at most workplaces. There is also a conscious policy for better gender inclusion,
of Labuan Re, Gen Re, Amanah Ikhtiar Malaysia, and Yayasan where the target of a minimum 30% female participation is propagated across
Pembangunan Ekonomi Islam Malaysia. the board. Nonetheless, in many organisations, actual implementation is not as
simple as policy announcements and rhetoric. A lot of other enabling strategies
Dr Adawiah has been recognized as the Most Outstanding must be implemented to overcome barriers that are impeding this effort.
Individual Contribution to Islamic Finance by Deloitte in 2004 and
again in 2014. As a pioneer female Shariah scholar in Islamic finance, In relation to Shariah scholarship in Islamic finance, regulatory moves in
Dr Adawiah has featured numerous times in lists of influential women Malaysia have created a sustained demand for Shariah experts. The demand
in Islamic finance, including: Top 10 Women in Islamic Finance was immediately felt after the introduction of a structured Shariah Governance
(2014 and 2017); Top 10 Most Influential Women in Finance (2017); Framework (SGF) in 2004. This framework for the first time limited the work of
and the 300 Most Influential Women in Islamic Finance an individual Shariah advisor to just one institution within a particular segment of
2018 and 2019, where she was ranked No. the Islamic finance industry, preventing multiple Shariah advisory engagements.
3 during the WOMANi Gala Dinner hosted Before then, just a handful of Shariah experts had advised almost all Islamic
by Cambridge IF Analytica. financial institutions (IFIs) in Malaysia. The restriction created an immediate
demand to meet the new regulatory requirement of at least three Shariah
committee members per institution. Between 2004 and 2010, the number of
Shariah committee members grew from 10 active advisors to around 100.

When the SGF was strengthened in 2011, the minimum number of Shariah issues to the relevant Shariah principles; and (c) an ability to suggest solutions
committee members was increased to five, creating still further demand for or alternatives. A scholar who has all three criteria is much valued and highly
Shariah scholars. This led to the addition of another 50-60 persons, with the sought after by the industry. Someone with one or two of the traits is acceptable.
number of advisors now totalling around 160. The SGF 2011 also required the Normally, any gap will be complemented by other members on the committee or
setting up of various Shariah governance functions within the IFIs, entailing the by the IFI’s own team. A scholar who does not possess any of the three criteria
need to employ trained Shariah personnel to undertake the jobs under each does not meet the mark and will be excluded or sidelined. This statement is true
function. The enforcement of the new Shariah Governance Policy Document regardless of the gender of the scholar.
of 2019 has raised once again the demand for Shariah expertise within IFIs in
Malaysia. Hence, upskilling and training are necessary to prepare scholars from both sides
of the gender divide to acquire the required skill-sets for them to be chosen for
As far as the Malaysian IFIs are concerned, anyone who meets the job requirements Shariah advisory or other Shariah-related jobs in Islamic finance. The Association
in terms of competency and talent, whether male or female, is welcome. It seems of Shariah Advisors (ASAS) has done a good job in developing modules to upskill
that throughout these years, demand has consistently exceeded supply. Despite Shariah scholars as part of their continuous education program. Other education
this, the IFIs are becoming increasingly choosy in picking the talent they want. and training providers have also played a role.
This is understandable. Given that Shariah compliance governance is becoming
more demanding, IFIs want to ensure that capable persons are helming the job When I was first involved in Shariah advisory work, about two decades ago,
so as to avoid difficulties later. similar expectations were perhaps there, but the circumstances were a bit
different. The market was relatively young. Many of the participants were at the
Does gender play a role in IFIs’ choice? To some extent, yes, and it is perhaps early learning phase. Both practitioners and scholars were actively learning from
more than positive discrimination. Many IFIs would be happy to have women each other, and the learning curve was admittedly steep and fast-paced. Scholars
scholars on board to meet the country’s policy of 30% female representation. at this phase were literally growing together with the industry in developing
Unfortunately, the number of women in Shariah committee membership is still the market and innovating new products and solutions. They understood the
under 20%. There are to date 25 women out of a total 160 Shariah committee storyline behind the products and had valuable insights about the instruments.
members, down from an earlier 33 out of 160. The ratio of men to women on
Shariah committees is quite fluid due to retirement, expiry of terms, and new Now, Islamic finance has developed. Expertise has been built, both on the
appointments. This suggests that there are fewer women compared to men who practitioners’ as well as the scholars’ side. Understandably, newcomers may
are interested or have the necessary competency to serve as Shariah advisors. feel overwhelmed by the wealth of knowledge about Islamic finance that they
are expected to master, with such a diverse product range and other technical
Frankly speaking, despite the increase in demand, there is a feeling that the complexities. Nonetheless, they should take this as an opportunity rather than a
supply of quality and competent Shariah expertise may be slightly lagging behind. threat. With a keen interest in the subject, backed by an inquisitive and analytical
Undoubtedly, many of the scholars involved in Islamic finance advisory are good mind, new scholars, irrespective of gender, will find themselves quickly adapting
and competent. Yet there are some who do not meet the mark. Competency to the demands of Shariah advisory and scholarship in Islamic finance.
does not depend on gender. Both genders have their shares of good and not-
so-good members. Ultimately, what matters is the actual ability and merits of the
individual in proving his or her worth.
There are at least three key criteria that must be developed in an aspiring scholar
to ensure acceptance into the increasingly competitive Shariah advisory market:
(a) an ability to identify issues; (b) the ability to analyse, relate and apply the

ISLAMIC FINANCE CORPORATE
SOCIAL RESPONSIBILITY
Top Countries in CSR Funds Disbursed 2019 (US$ Million)
US$
1.16
Billion
Total CSR Funds
Disbursed by IFIs
in 2019 699
US$
1.03
Billion
Total Zakat and Charity
Funds Disbursed by
IFIs in 2019
141
US$
129
Total Qardh Al Hasan 113
Funds Disbursed by IFIs
in 2019
Million 63
37
328 IFIs that Reported CSR

Activities in 2019
Saudi Arabia UAE Jordan Kuwait Qatar
Top Countries in Zakat Funds Disbursed 2019 Top Countries in Qardh Al Hasan Funds Disbursed 2019
(US$ Million) (US$ Million)
699 111
141 8
7
55
37 2
34 0.1
Saudi Arabia UAE Kuwait Qatar Malaysia Jordan Kuwait Indonesia Pakistan Nigeria

CSR Disclosure Scores by IFIs 2019 (Out of 11 Items)
146 1 Item
84 2 Items
46 3 Items
20 4 Items
10 5 Items
9 6 Items
6 7 Items
2 8 Items
1 9 Items
3 10 Items
Number of Institutions
Top Countries in CSR Disclosure Score 2019 CSR Performance by IFIs 2019
(Out of 11 Items)
986 153
36%
32%
102
30% 72
91
85
25%
23%
Islamic Banks Takaful OIFI

South Africa Nigeria Sri Lanka Palestine Syria
CSR Funds Disbursed (US$ Million) Number of Institutions Reporting CSR Activities

Sustainability drive
could boost CSR reporting
Although CSR reporting by Islamic financial institutions

remains low, with just 52% of companies reporting one
or more CSR activities in their 2019 financial statements.
The current trend for reporting on ESG criteria is likely to
result in an improvement in CSR disclosure outcomes.
On average, Islamic financial institutions reported on
CSR just 1.5 of the 11 CSR categories in 2019. A handful of
the categories dominated reporting, such as zakat,
OVERVIEW which is mandatory for inclusion in financial statements
in some countries including Saudi Arabia and Kuwait.
Corporate Social Responsibility (CSR) In Bahrain, the UAE and Indonesia, financial institutions
is assessed through two components: normally report amounts disbursed to charities in
a separate note, while in Pakistan and Bangladesh
disclosed CSR activities and CSR funds disbursed.
donations are reported in notes attached to income
statements, even for Islamic windows.
CSR activities are measured using an index derived
from information provided in Islamic financial However, this could all change as ESG reporting grows
institution annual reports and based on the AAOIFI in prominence. Qatar, for example, is developing
Governance Standard for Islamic Financial Institutions a sustainability index for its listed companies and
No. 7. the Qatar Stock Exchange is planning to make ESG
reporting mandatory for its listed firms within two
CSR funds include charity, zakat and qard years. Saudi Arabia’s Tadawul stock exchange is
al-hasan (benevolent interest-free loans) also planning to launch an ESG index, in conjunction
disbursed by these institutions. with global index provider MSCI. An ESG index has
already been established in Malaysia, a country at the
forefront of efforts to bring together Islamic finance and
sustainability. Bursa Malaysia launched the FTSE4Good
Bursa Malaysia (F4GBM) back in 2014 in parternship
with the UK’s FTSE Russell.
As ESG reporting becomes more commonplace, this

could enhance CSR disclosure by Islamic financial
institutions, which in turn could boost the Islamic funds
market, as has been seen in Malaysia, by attracting
investors who want to incorporate sustainability factors
into their investments. This has become an even more
prevalent consideration during the Covid-19 pandemic.

Social welfare targeted Voluntary charity contributions New developments in
by UK-based waqf funds likely to grow in 2020 to combat cryptocurrency and blockchain-based
impact of Covid-19 pandemic Islamic social finance
Two new social waqf funds were established in Global CSR funds disbursed by Islamic financial Over the past few years, there has been a steady
the UK in 2020 with a focus on capacity building. institutions around the world in 2019 surpassed rise in the number of FinTech companies offering
The One Endowment Trust will invest in real estate, the US$1 billion mark for the first time. Saudi Arabia Islamic social finance solutions such as awqaf,
private equity, and sukuk and Islamic funds, and was the main contributor, with US$699 million charity and zakat. By 2020, many of these providers
reinvest in sustainable social projects. The National disbursed by 67 Islamic financial institutions, mainly were able to bypass social distancing restrictions
Waqf Fund (NWF) will also invest in real estate as in zakat funds. Part of the reason for the large zakat with services accessible through digital platforms,
well as other asset classes such as start-ups. The contribution was an accounting change under and a growing number of these charities now accept
NWF will establish a central fund, to manage awqaf Saudi law which raised the figures for Saudi banks, Bitcoin contributions. GlobalSadaqah, a Malaysian-
on behalf of other organisations, and create a particularly Al-Rajhi Bank. This was in addition to based Islamic social finance platform, is one such
virtual centre of excellence for Islamic endowments. a large settlement with the Saudi tax authority in service, enabling zakat and waqf payments through
Previously existing waqf funds in the UK were more December 2018 over historic zakat payments that cryptocurrency donations. These donations must
charity-focused, supporting bodies such as the East will be spread over a number of years. still be converted to fiat money before distribution,
London mosque or aid organizations such as Islamic and that can only be done through regulated crypto-
Relief and Muslim Hands. Disbursal of zakat funds can be expected to fall this currency exchanges, and not all countries have such
year as Islamic financial institutions in Saudi Arabia exchanges.
There is likely to be a greater need for awqaf in the and elsewhere cope with the financial fallout of the
immediate future to tackle the issues caused by the Covid-19 pandemic. On the other hand, the massive Another firm that accepts cryptocurrencies to channel
Covid pandemic. The UK-based International Waqf health and social impacts of the coronavirus could zakat to charities is Blossom Finance. Indonesian
Fund directed some of its profit towards its Covid-19 see a larger amount of voluntary charity contributions. microfinance institution BMT Bina Ummah issued
response program, for example, providing hygiene It was reported in May 2020 that a group of Saudi the world’s first blockchain sukuk in October 2019
kits combined with Ramadan food parcels for families banks, including Islamic banks, and insurance via Blossom’s SmartSukuk platform. The sukuk
in Gaza and Niger. companies were among 300 companies in Saudi rewarded investors with a 15.5% annualized profit as
Arabia that had donated a total SAR1 billion (US$ 267 of August 2020, helped by a focus on sectors less
million) to the country’s Health Endowment Fund. impacted by the Covid-19 pandemic such as food
Bahrain also received contributions from Islamic distribution and farming. As of that month, the sukuk
and conventional financial institutions to its ‘Feena had funded 234 individual micro-businesses.
Khair’ national campaign to combat the coronavirus
and its social impacts. Similar contributions have Elsewhere, the Islamic Corporation for the
been made by Islamic financial institutions in other Development of the Private Sector (ICD) entered
countries, including Malaysia and the UAE. into an agreement in May 2020 with Singapore
blockchain-based Islamic applications provider
Finterra to use the latter’s SadaqahChain,
WAQFChain and ZakatChain platforms to aid
crowdfunding operations in OIC member countries.
This is aimed at raising financial inclusion levels
and a more efficient mobilization of funds, which
has become increasingly vital during the Covid-19
pandemic.

ISLAMIC FINANCE Top Countries by Number of Islamic Finance Education
KNOWLEDGE
Providers 2019
347
972
Total Islamic
Finance Education 65
Providers in 2019 55
52
45
379
Total Islamic
Finance Degree
Providers in 2019
Indonesia Malaysia United Kingdom UAE Pakistan
Top Countries by Number of Islamic Finance Degree

Providers 2019
2,566 Islamic Finance Research

Papers Produced between
2017 and 2019 178
1,742
Islamic Finance
Peer-Reviewed Journal
35
Articles Produced between
2017 and 2019
19 19
12
963
Total Affiliations
Producing Islamic Finance
Research Papers
Indonesia Malaysia United Kingdom Pakistan UAE

Top Countries with Affiliations Producing Research Top Topics Covered in Islamic Finance
Papers between 2017 and 2019 Research Papers 2019
Research Papers Peer-Reviewed Journal Articles

700
Islamic Banking
900
581
836
Islamic Finance
800 576
CSR
700
219
Sukuk
600
582
574
140
500 Takaful
Top Countries Covered in Islamic Finance
Research Papers 2019
400
391
475
300 460
200
148
114
114 112
100
99
80
56 56
49
Malaysia Indonesia Pakistan Saudi Arabia United Kingdom Malaysia Indonesia Pakistan Nigeria Bangladesh

Southeast Asia maintains
lead in Islamic finance education
and research
Indonesia hosts the world’s largest number of
Islamic finance education providers. As part
of a strategy to develop the human capital
required by the country’s Islamic finance
industry, Indonesian government body Komite
Nasional Economy dan Keuangan Syariah
(KNEKS) joined with the School of Business
KNOWLEDGE
and Management ITB to launch the Centre for
Islamic Economy and Finance in May 2020. The
OVERVIEW centre will have two divisions: Islamic finance

studies for the development of human capital;
and Islamic business studies to develop the
Islamic finance knowledge is assessed halal products and services sector.
through education and research, the main building
In all, 214 different universities and other
blocks for any knowledge-based industry.
educational institutions in Indonesia produced
research papers on Islamic finance. State
These are the input factors needed to achieve depth Islamic University Syarif Hidayatullah Jakarta
and efficiency in the Islamic finance industry, and and Airlangga University together contributed
to provide the foundation on which a fully qualified 13% of the papers. The Indonesian government’s
workforce can spur economic growth. intention under its 5-year economic masterplan
to further develop the country’s already active
Islamic finance industry are the chief reasons for
the large number of educational establishments
producing research papers.
Malaysia produced the highest number of

papers. There were around 100 educational
bodies in Malaysia producing research papers
on Islamic finance, with around 45% of them
produced by International Islamic University
Malaysia, Universiti Utara Malaysia, and the
International Centre for Education in Islamic
Finance (INCEIF). Malaysia’s position at the
forefront of Islamic finance product innovation
has made it an attractive area of research for
students.

Islamic financial institutions Islamic finance Covid-19 pandemic to emerge
forging partnerships with educators education goes digital as leading theme in Islamic finance
to develop industry professionals amid lockdown research papers
If the Islamic finance industry is to continue to The shutting down of educational institutions amid Islamic banking and general Islamic finance were
develop and grow it will need more and better the Covid-19 pandemic has resulted in a much the most covered topics in Islamic research papers
trained professionals. A major challenge for the greater role for digital learning. Before Covid-19, released between 2017 and 2019, followed by CSR
industry, however, has been a lack of placement many Islamic finance education institutions provided and Islamic social finance-related topics such as
opportunities for Islamic finance graduates. Islamic courses that could be accessed by unlimited numbers zakat, qardh al hasan, and waqf.
financial institutions still prefer to hire candidates of students in any part of the world. These ‘massive
with conventional banking experience, but their lack open online courses’ (MOOCs), hosted on platforms However, it is likely that a large number of research
of experience in the specific rules governing Islamic such as Edx and Coursera, soared in popularity as papers and journal articles from 2020 and the
finance often necessitates the institutions having to the Covid-19 pandemic caused distance learning to years ahead will look at the impact of the Covid-19
invest in additional training. move into the mainstream. pandemic on the Islamic finance industry. Some
journals are already focusing on the ‘Pandemic Crisis’,
Some providers of education in Islamic finance The pandemic had made necessary education with calls for researchers to consider solutions to
have thus engaged in strategic partnerships with providers who can teach Islamic finance to degree the challenges the pandemic poses for the industry.
Islamic financial institutions to create placement or certification level online. This could help spread There are also some special journal issues being
opportunities for Islamic finance graduates and Islamic finance education to countries where prepared. Topics will include the impact of the crisis
training for existing employees. In Pakistan, the IBA previously it was unavailable. Greater take-up of on Islamic financial markets; Islamic social finance
Centre for Excellence in Islamic Finance in 2019 digital education would also increase competition solutions; the impact on Islamic banks; comparisons
partnered with Meezan Bank, the country’s largest between universities as students seek a more with the earlier impact from the global financial crisis;
Islamic lender, to provide courses on Shariah- tailored learning experience that is more in line and the potential for new innovation.
compliant financing. with the practical aspects of Islamic finance, which
could also help close some of the gaps between the
academic and practical views of the industry.
The Islamic financial education industry’s digital

revamp is likely to necessitate more strategic
partnerships between education providers and
Islamic financial institutions.
While some universities may already have strong

online systems, smaller institutions may struggle
under the weight of soaring demand. University
course creators will need to work closely with
IT departments to ensure their programs can be
supported online.

ISLAMIC FINANCE
AWARENESS
Top Countries that Hosted Islamic Finance Conferences 2019
143
24
Islamic Finance
Conferences in 2019
17
10 10
463
Islamic
Finance Events
in 2019
Malaysia Indonesia United Kingdom UAE Turkey
Top Countries that Hosted Islamic Finance Seminars 2019
320 Islamic Finance

Seminars in 2019
93
66
26
12,181 Exclusive Islamic

Finance News in 2019
15 14
Indonesia Malaysia Pakistan UAE United States

Top Countries Covered in Islamic Finance News 2019
2,500
2,325
2,150
2,000
1,881
1,670
1,500 1,537
1,000
500
UAE Saudi Arabia Malaysia Bahrain Pakistan
Top Islamic Finance Awareness Topics 2019
140 7,000
125 6,411
120 6,000
Number of News
Number of Events
100 5,000
80 4,000
75
60 3,139 3,000
58
40 42 2,000
20 1,004 1,000
11 19 16 13 14
679 8 136 67 5
0 5 0
Islamic Finance Islamic Banking Islamic Capital Shariah, Legal CSR Takaful
Markes and Governance
Conferences News Seminars

Indonesia increases
efforts but still has much
to do to raise public
awareness
Islamic finance events were hosted in
53 countries around the globe in 2019.
These were mostly seminars and most
were hosted in Indonesia and Malaysia.
Indonesia surpassed Malaysia in
terms of number of events for the first
AWARENESS time. Most events in Indonesia were

domestically focused and covered
OVERVIEW general Islamic finance as a topic,

with Islamic banking the second-most
covered and takaful also taking centre
Awareness is measured by assessing stage. Most events were in the form of
three components: seminars and workshops.
conferences; seminars; and news volume.
The Indonesian government is aiming
to increase public literacy levels in
A rise in number of any of these components would Islamic finance as awareness remains
contribute to the growth of a country’s Islamic finance low around Shariah-compliant
industry and improve the quality of products and financial products, particularly Islamic
banking. The effort is being pushed
services offered by its institutions.
by the National Shariah Economy and
Finance Committee (KNEKS) as part
of the Islamic Economic Masterplan
2019-2024, and there are a number
of Islamic finance education providers
able to support their aims. According
to the Islamic Economy Literacy Index
compiled by Bank Indonesia, just
16.3% of the sampled population were
well versed in Islamic finance in 2019,
leaving plenty of scope to raise public
understanding.

Events transformed Philippines Coverage of green Covid-19 impact
online amid Covid-19 and Egypt stand out sukuk and sustainability to dominate news
pandemic in news coverage gathers pace in 2020
Before the Covid-19 pandemic struck in News on Islamic finance was published Another topic that received wide Much of the news during 2020 has
2020, there were already a number of in 73 countries, mainly concentrated in coverage during 2019 was green been on the impact of Covid-19 on
Islamic finance events hosted online, the GCC, Malaysia and South Asia. sukuk, which are growing in popularity Islamic financial institutions. So far,
with 16 webinars or e-workshops in line with the global rise in green this news has focused on the impact
offered in 2019. These were organized One country that received widespread bonds. There was substantial reporting on financial performance, downsizing
by different institutions based in coverage was the Philippines after the on the surge in green sukuk issuance plans, investment in FinTech, and
Singapore, Malaysia and the United introduction and approval of an Islamic and how it will impact the wider Islamic support for local SMEs and affected
States and covered a variety of topics banking bill. Articles considered the finance industry. Several events also communities. While many financial
aimed at increasing awareness around law’s impact on financial inclusion had green sukuk on their agendas, institutions reported losses or declines
basic Islamic finance concepts such as and whether other sectors of Islamic whether through dedicated seminars in profits, others emerged stronger,
Shariah governance, Islamic finance finance will be added in the future. on the subject or sessions within such as some takaful operators.
contracts, and Islamic social finance. conferences.
Egypt also saw increased coverage, Much of the news will also look at
The number of virtual events is likely to particularly on plans to issue the Major news in this area included the delays in sukuk issuance that had
have mushroomed over the course of country’s first corporate sukuk, UAE-based holding group Majid Al been planned for the year, such as an
2020 as the world went into lockdown. which required an amendment to Futtaim’s issuance of the world’s first issue by Dubai Islamic Bank that was
Some of these events used customized the country’s Capital Market Law. green corporate sukuk, continued intended for the first quarter of 2020
online platforms with features such as However, an intended issuance by issuance of green sukuk in Indonesia, but delayed in issuance until the
real-time Q&A sessions and polling CIAF Leasing failed to materialize as and a debut green sukuk from Islamic second quarterof the year.
and could be accessed from different the Covid-19 pandemic forced the Development Bank – the first quasi-
devices. company to cancel its plan and look sovereign green sukuk ever issued. News concerning sovereign sukuk
to alternative financing possibilities. issuance is also prevalent as
The advantages of online events for A unit of real estate developer Talaat Sustainable Islamic finance also governments use the instrument to
attendees and organizers include Moustafa did manage to issue the received more attention during 2019. fund their various stimulus programs.
reduced costs and prices, an ability to country’s first corporate sukuk in April There were seven dedicated events
catch up on missed sessions, and the 2020, however, but this did not receive on sustainable finance or on achieving
potential to capture a global audience. so much coverage. the United Nations’ Sustainable
Some events were broken down into Development Goals through Islamic
different sessions at different times, finance. There was also wide coverage
which further increased audience of socially responsible investing (SRI)
reach. One disadvantage, however, or sustainability sukuk.
is that attendees miss out on the
networking opportunities that are
only possible when visiting events in
person.

Concept and Background
The Islamic finance industry operates within a wider financial environment that
is always evolving. For the industry to prosper it therefore will need to constantly
advance and innovate, not merely to maintain the strength of the core industry but to
stay ahead of the curve. Islamic financial institutions, market players, regulators and
other authorities have made determined efforts to seek one another out in order to
improve industry cooperation and alignment. Thus, reliable information and data are
essential to the success of these efforts.
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 on different elements of the industry into a single,
composite indicator. The index assesses the performance of each of the industry’s
Methodology key areas in line with its inherent faith-based objectives, with data for their national
and industry-level components. The different components that make up the
and Appendix 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 Country Specific
The indicator is a product of Indicator Level Indicator Level Indicator Level
a number of key indicators Present one single indicator to show Assess the current state Measure growth within different
and sub-indicators the pulse of the global Islamic finance and growth potential of Islamic finance key areas of the industry
industry’s overall health within each country
measuring particular Enhance Islamic finance market
aspects of the industry. Provide an indicator that is reliable transparency and efficiency
Highlight the performance of Islamic
and unbiased finance institutions in particular markets
Breaking down the data Identify issues that are preventing
into these different areas Inform Islamic finance stakeholders growth within the industry
and investors about the industry’s Track progress and provide
reveals the disparities and performance comparisons across different countries Help market players formulate practical
and regions solutions to face current obstacles
movements that are less
Gauge future industry growth
visible in the wider-ranging, Assist in setting new targets,goals,
standards for Islamic finance
aggregated numbers. institutions and regulators

GCC Europe Other Asia Sub-Saharan
(Gulf Cooperation Council)
Albania Australia Africa
Country Bahrain
Kuwait
Austria
Belgium
Azerbaijan
China
Angola
Benin
List
Oman Bosnia and Herzegovina Hong Kong
Botswana
Qatar Bulgaria Japan
Burkina Faso
Saudi Arabia Croatia Kazakhstan
Burundi
IFDI 2020 covers 135 countries United Arab Emirates Cyprus Kyrgyzstan
Czech Republic Cameroon
and dependencies with a presence New Zealand
in Islamic finance either directly Southeast Asia Denmark Russia Chad
Brunei Darussalam Finland South Korea Comoros
or in other metrics such as news,
Cambodia France Taiwan Djibouti
education or events on the industry.
Indonesia Georgia Tajikistan Ethiopia
These countries are divided into Germany
Malaysia Turkmenistan Gabon
eight broad regions. Greece
Myanmar Uzbekistan Gambia
Guernsey Ghana
Philippines Vietnam
Hungary Guinea
Singapore
Thailand
Ireland Americas Guinea-Bissau
Italy
Bahamas Ivory Coast
South Asia Jersey
Latvia
Bolivia Kenya
Afghanistan Brazil Liberia
Liberia
Bangladesh Canada Malawi
Liechtenstein
India Cayman Islands Mali
Luxembourg
Maldives Macedonia Chile Mauritius
Nepal Malta Guyana Mozambique
Pakistan Netherlands Mexico
Niger
Sri Lanka Norway Suriname
Nigeria
Poland Trinidad and
Rwanda
Other MENA Portugal Tobago
Senegal
(Middle East and North Romania United States
Seychelles
Africa Excluding GCC) Serbia
Sierra Leone
Slovakia
Algeria Mauritania Somalia
Slovenia
Egypt Morocco Spain Somaliland
Iran Palestine Sweden South Africa
Iraq Sudan Switzerland Tanzania
Jordan Syria Turkey Togo
Lebanon Tunisia Ukraine Uganda
Libya Yemen United Kingdom Zambia
Zimbabwe

CONTRIBUTORS
Report Report IFDI

Authors Consultants Team
Shereen Mohamed Mustafa Adil Mohamed Al Salman

Senior Research Analyst Head of Islamic Finance
Project Leader
Redha Al Ansari
Abdulaziz Goni Head of Islamic Finance Research
Senior Research Analyst
Farah Alanzarouti
Jinan Al Taitoon
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.
#IFDI2020
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Islamic Finance Development Report 2020
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+1,700 +1,100 +960 +430

11 GLOBAL ISLAMIC FINANCE DEVELOPMENT INDICATOR

21 ISLAMIC FINANCE OVERVIEW

71 CONTRIBUTORS 54 Women in Islamic Finance

Islamic Finance Development Report 2020 3

4 Islamic Finance Development Report 2020

Islamic Finance Development Report 2020 5

The report provides a detailed look at the current state

6 Islamic Finance Development Report 2020

What helped in shaping the Islamic finance industry during 2019?

CSR Funds Disbursed

8 Islamic Finance Development Report 2020

Low IFDI High IFDI

MOST DEVELOPED COUNTRIES IN ISLAMIC FINANCE

Malaysia Indonesia Bahrain UAE Saudi Arabia

Islamic Finance Development Report 2020 9

10 Islamic Finance Development Report 2020

The global Islamic Finance Development Indicator (IFDI) provides the

It draws on five indicators considered to be the main drivers of development

The full methodology is detailed in the appendix. The database on

Islamic Finance Development Report 2020 11

Country Ranking IFDI 2020 Quantitative Knowledge Governance Awareness CSR

Malaysia 1 111 94 185 86 149 41

United Arab Emirates 4 66 31 67 79 91 60

Saudi Arabia 5 64 59 52 41 50 119

12 Islamic Finance Development Report 2020

Islamic Finance Development Report 2020 13

IFDI Value Quantitative Knowledge Governance Awareness CSR

Global Malaysia Indonesia Bahrain UAE Saudi Arabia Jordan Iran

UAE Kuwait Oman South Africa Maldives Brunei Nigeria Pakistan

14 Islamic Finance Development Report 2020

QUANTITATIVE DEVELOPMENT SUB-INDICATORS 2020

1st 2nd 3rd 2nd

Islamic Banking Takaful Other Islamic Fiancial Sukuk Islamic Funds

KNOWLEDGE AND AWARENESS SUB-INDICATORS 2020

1st 1st 1st

Education Research Seminars Conferences News

16 Islamic Finance Development Report 2020

GOVERNANCE AND CSR SUB-INDICATORS 2020

150 Saudi Arabia

Islamic Finance Development Report 2020 17

Extraordinary measures including a range of regulatory and supervisory responses have

This chapter highlights the financial growth,

Islamic Finance Development Report 2020 21

14 % Annual Growth Other MENA Southeast Asia GCC Europe

Americas South Asia Sub - Saharan Other Asia

Countries with Highest Islamic Finance

Finance Assets 47%

Morocco Tajikistan Nigeria

Bahrain Malaysia Iran Kuwait Qatar

Islamic Finance Development Report 2020 23

The Islamic finance industry’s assets

OVERVIEW when the industry expanded by a more

24 Islamic Finance Development Report 2020

Islamic Finance Development Report 2020 25

Number of Islamic Banks by Type 2019

Commercial 428 Wholesale 22