Islamic banking’s assets to reach USD5 billion within next year
Date
10/23/2024 8:12:55 AM
(MENAFN) Islamic banking, once predominantly found in Muslim-majority countries, is experiencing significant growth worldwide, with assets projected to reach USD5 trillion within the next year. According to a recent report by Anadolu, the sector is expected to expand at an annual growth rate of 10 percent to 12 percent from 2024 to 2029. This expansion is being fueled not only by traditional markets but also by countries like the UK, South Africa, and Luxembourg, which, despite not having large Muslim populations, are actively developing Islamic banking products that comply with Sharia law.
One of the key factors driving the growth of Islamic banking is its foundation on ethical investment principles. This characteristic appeals to both Muslim and non-Muslim investors, drawing increased global attention and interest in the sector. The emphasis on ethical and responsible finance resonates with a growing demographic that values sustainability and social responsibility in their investment choices, thereby enhancing the sector's appeal beyond traditional Islamic markets.
The UK has emerged as a frontrunner in the adoption of Islamic banking, with London establishing itself as a central hub for Islamic finance. The UK government has played a proactive role by issuing Sharia-compliant bonds, commonly known as sukuk, further legitimizing and promoting the Islamic banking framework within its financial system. This governmental support has encouraged a conducive environment for Islamic financial institutions to flourish and attract a diverse range of investors.
In South Africa, local banks are also introducing Sharia-compliant financial products, which cater to both Muslim and non-Muslim consumers, illustrating the sector's inclusive nature. Meanwhile, Luxembourg made a significant milestone by becoming the first country in the eurozone to issue a Sharia-compliant bond worth approximately USD216.3 million, with a maturity period of five years. This move has been pivotal in facilitating cross-border Islamic financial transactions within the region. As of last year, the total value of Sharia-compliant financial assets was estimated at around USD2 trillion, with projections indicating that this figure could more than double by 2026, highlighting the robust potential of this growing financial sector.
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