Asia-Pacific Islamic Finance Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

Asia-Pacific Islamic Finance Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

The COVID-19 pandemic has provided another opportunity for Islamic finance to prove its potential and shine. The Islamic financial system is based on the principles of risk-sharing, ethics and morality, which equip it to act as a potential warrior to safeguard the interest of the poor and vulnerable under crisis.

The Islamic finance industry has grown substantially in Asia over the last two decades. The Muslim population in different Asian countries, especially in Southeast Asia, is increasing. Rapid Muslim population growth and improving living standards may enhance the popularity of Islamic finance as a keen alternative to conventional financing mechanisms. In addition, investors from the Middle East and Asia are increasingly seeking to invest in products that are in line with their religious beliefs.

In Asia, the strong growth of Islamic finance is led by Bangladesh, Brunei Darussalam, Indonesia, Malaysia, and Pakistan. Azerbaijan, Hong Kong, China, Kazakhstan, Singapore and Thailand also have a growing niche in the Islamic finance sector. Around 65% of the global Muslim population resides in Asia, with Indonesia as the most populous Islamic country in the world. This can further drive the growth of Islamic finance products and services in the region.

The industry’s continuous expansion resulted in Islamic finance reaching systemic significance in a number of countries in Asia, including Brunei, Bangladesh, and Malaysia; these are countries where Islamic finance has achieved at least 15% market share in the domestic banking sector. Countries that do not have a predominantly Muslim population are also beginning to open their doors to Islamic finance. Luxembourg, Hong Kong, China, United Kingdom and South Africa have debuted sovereign sUnited KingdomUnited Kingdoms (Islamic trust certificates, similar to conventional bonds), with all issuances being at least twice oversubscribed, demonstrating a strong demand for SCF globally.

Significantly, ADB has 14 member countries that have a majority Muslim population and has 5 of the 10 countries with the biggest Muslim population globally. Asia requires infrastructure investments of an estimate of $747 billion a year to sustain its growth trajectory. Given the demographic composition of its member countries and realizing the region’s vast investment needs, ADB recognizes the potential role of Islamic finance in promoting inclusive growth and achieving sustainable development in the region, through funding infrastructure and green and ethical investments.

ADB recognizes the potential role of the Islamic financial sector in supporting ADB’s agenda of achieving inclusive growth, sustainable development and financial stability within the region. Islamic finance provides financial services for all segments of the population and can help increase financial inclusion. Islamic finance also serves as an alternative source for funding infrastructure and as a means of diversifying funding and risk exposures of investors.

Supporting the development of international best practices in prudential standards and corporate governance for Islamic Financial Institutions through technical assistance programs, participating in high level committees developing international standards including the Core Principles for Islamic Finance Regulation Working Group, and assisting DMCs, through program loans and technical assistance, to strengthen their legal, regulatory and institutional frameworks to enable securities market operations, bolster the capacity of their regulatory authorities and improve governance and self-regulation of stock exchanges.

The report covers major international players operating in the Asia-Pacific Islamic Finance Market. In terms of market share, some of the major players currently dominate the market. However, with technological advancement and product innovation, mid-size to smaller companies are increasing their market presence by securing new contracts and by tapping new markets. Maybank Islamic, Bank Rakyat, CIMB Islamic Bank, RHB Islamic Bank, Bank Islam Malaysia, Public Islamic Bank, AmBank Islamic and MBSB Bank are a few of the major market players.

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support