KUALA LUMPUR – The Islamic Financial Services Board (IFSB) projected that the total Islamic financial assets will reach US$3 trillion by 2030.
The Islamic financial assets value for the second quarter (Q2) of 2018 amounted to US$2.19 trillion, a 6.9 percent increment from the US$2.05 trillion for the same quarter in 2017.
However, according to the Secretary-General of IFSB, Dr Bello Lawal Danbatta, the total assets was lower than expectation as it was affected by the trade wars between the United States of America and China besides the fluctuations of the global oil prices.
Such factors had caused the other financial systems to be affected as well.
“If you look specifically into the Muslim countries which dominate productions and primary products of oil related exports – when the prices of oil is affected, indirectly, the investment flow, including business transactions will be affected too, although there was no crisis in 2007.
“Recently, several major active economies suffered a hit in their currencies, thus, they contribute towards a lower growth.
“However, Islamic finance is still stable and we managed to achieve a growth of over 6 percent,” he told MalaysiaGazette.
For Q2 2018, the banking and capital market as well as the insurance (takaful) have seen a stable grown from year to year with the Islamic banking recording a growth of over 15 percent.
According to him, since the global financial crisis in 2008, the Islamic finance has gone through rapid growth compared to the conventional system and this performance is expected to continue to grow.
The encouraging growth was due to the unique Islamic finance, based on the foundation of its assets and it is not very exposed to the trade derivatives or hedge and non-assets transactions.
“It really depends on the actual economic and it provides stability compared to the conventional system,” he said while acknowledging that despite its challenges, Islamic finance is performing very well.
Answering the question from the journalist, Bello predicted that the trade and geopolitical wars will not give a major impact to Islamic finance due to the demands of new sukuk issuance.
The capital market grew 26.9 percent in 2017 until 2018 and now it receives new interest for sukuk issuance – not just the traditional sukuk issuance for infrastructure but also on the green sukuk issuance for climate change and social responsibility initiatives.
“So, we will see a lot of demands due to the lack of infrastructure in most of the economies, besides the lack of capital or budget deficit. These drive the capital market issuance as that instrument pave ways for a stable growth.
“I expect more opportunities for the Islamic finance in the future compared to what we have now. Therefore, we are not worried about the geopolitics tensions,” he said.
Nevertheless, according to him, the year to year growth for the banking sector between 2017 and 2018 was lower, which was only 1 percent while the average growth of the insurance sector was 4.3 percent.
Besides that, Bello further added that the technological and innovation advancement also provides opportunities to explore into a more inclusive new Islamic finance, including those not offered by takaful.
“Therefore, we believe that the future of Islamic finance is very bright and will continue to grow. We hope that the Islamic financial assets will reach US$3 trillion by 2030 although it is not an expectation.
“We predict that there will be more issuance and interests from the new markets to introduce Islamic finance. This is due to the interests towards Islamic finance among the Muslim-minority countries as a source of alternative finance,” he said. -MalaysiaGazette