The Islamic finance industry is now worth close to $1trn and spans the globe. From Kuwait to Kuala Lumpur, the industry has attracted significant investor interest due to Islamic banks’ tendency to avoid excessive leverage and risk-taking Islamic finance, which requires financial products from mortgages to savings accounts to be structured to comply with sharia law under the Koran, is attracting sustained interest from non-Muslims as well.
The Gulf region is a natural destination for sharia-compliant cash from all over the world, according to consultancy deloitte & Touche. around 80 per cent of Islamic financial institutions globally are said to be based in the GCC. Furthermore, 60 per cent of assets held by Islamic financial institutions globally are concentrated in the GCC.
“The potential for Islamic finance in the Gulf is extremely encouraging,” says dr Mohamad nedal alchaar, secretary general of the accounting and auditing Organisation for Islamic Financial Institutions (aaOIFI), the international standard-setting organisation for Islamic finance.
“This largely reflects the improving economic conditions in the region, and we believe that the supply and demand for credit in the Gulf will increase in the coming years.”
According to dr alchaar, supply of credit is likely to expand as liquidity rises. Meanwhile, demand for credit will grow in tandem with increased economic activity, including major investments in infrastructure across the region, as well as renewed efforts towards economic diversification.