of Islamic Baking

Introduction to
Islamic Financial
Centers
Wasim Akram
Munawwar Husain Khan
Md Faiz Khan
Overview of Islamic Finance
Islamic financial centers are hubs for the practice and development of Sharia-
compliant banking and investment. These centers play a crucial role in promoting
the growth and innovation of the global Islamic finance industry.
Principles Products Growth
Islamic finance is based on Common Islamic finance The Islamic finance industry has
principles such as the prohibition products include Murabaha experienced rapid growth, with
of interest (riba), avoidance of (cost-plus-profit financing), Ijara assets estimated to exceed $3
excessive uncertainty (gharar), (leasing), and Sukuk (Islamic trillion globally.
and the need for assets to have bonds).
intrinsic value.
Key Hubs of Islamic Finance
1 Dubai
Dubai, UAE, stands out as a crucial hub in global Islamic finance, anchored by the Dubai International
Financial Centre (DIFC). This financial free zone, founded in 2004, boasts a strong regulatory framework
overseen by the Dubai Financial Services Authority, attracting investors worldwide. The UAE hosts a
range of Islamic financial institutions, including banks and capital markets players. In 2018, the central
bank established the Higher Shariah Authority (HSA) to standardize Islamic finance practices across the
country. Dubai's stock exchanges, along with other platforms like the Dubai Gold & Commodities
Exchange, further support this ecosystem by offering shariah-compliant products and fostering
innovation and education.
2 Malaysia
Kuala Lumpur boasts a sophisticated Islamic finance ecosystem supported by robust regulation and
infrastructure. Malaysia's strategic focus on Islamic finance is evident in its economic plans, with
significant banking assets totalling $650 billion. Islamic financing constitutes a substantial portion of
Malaysia's banking sector, growing to 41% of total loans by 2022. Bank Negara's Islamic Financial
Services Act provides stringent oversight, backed by the Shariah Advisory Council. Kuala Lumpur hosts
key organizations like Bursa Malaysia and the Islamic Financial Services Board, driving innovation and
harmonization in the industry. Additionally, the city is home to the International Centre for Education in
Islamic Finance, nurturing expertise through education and research initiatives.
3 London
London serves as Europe's primary Islamic finance hub, with robust ties to key markets like the UAE. The city
offers specialized services and a strong regulatory framework, supporting its four British Islamic banks and
significant Islamic banking assets. The Bank of England's Alternative Liquidity Management Facility (ALF) aids in
liquidity management for Islamic banks. London's capital markets, notably the London Stock Exchange, attract
international sukuk listings, totalling $50 billion. The UK is also active in Islamic asset management, with 37
shariah-compliant funds managing $19.6 billion. Notable transactions include the UK Government's sovereign
sukuk issuances and UK Export Finance's involvement in Islamic finance deals like Emirates Airlines' sukuk.
4 Riyadh, Saudi Arabia

Riyadh is emerging as a key Islamic finance hub, aligned with Saudi Vision 2030's Financial Sector Development
Program (FSDP) to position the city as a global Islamic finance capital by 2030. Saudi Arabia holds substantial
Islamic assets, with plans to significantly increase Islamic finance's contribution to GDP by 2025. The country is a
major sukuk issuer in local and USD markets. Al Rajhi Bank leads four Islamic banks, benefiting from strong retail
support. Tadawul introduced the TASI Islamic Index to attract equity investors, aiding in shariah-compliant
investment analysis. Saudi Arabia targets $100bn FDI by 2030, offering diverse opportunities in real estate,
infrastructure, and energy.
5 Istanbul Turkey
Turkey has witnessed significant growth in Islamic finance in recent years, with Istanbul emerging as a key Islamic
financial center in the region. The country has a growing Islamic banking sector and is active in sukuk issuance
and Islamic asset management
6 Indonesia
Indonesia is the largest Muslim-majority country globally and has a thriving Islamic finance industry. Jakarta
serves as the primary Islamic financial center in the country, with a growing Islamic banking sector, sukuk market,
and takaful industry.
Challenges and Opportunities
1 Regulatory Harmonization
Achieving global harmonization of Islamic finance regulations remains a key
challenge, as different jurisdictions have varying Sharia interpretations.
2 Product Innovation
Developing innovative Sharia-compliant products that can compete with
conventional finance offerings is an ongoing opportunity for the industry.
3 Talent Attraction
Attracting and retaining top talent with specialized knowledge in Islamic finance is
crucial for the industry's continued growth.

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Introduction to

Principles Products Growth

4 Riyadh, Saudi Arabia

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