Islamic banking witnessed slow pace in Arab region during 2016

LAHORE -  Due to sharp declining trend in oil prices, slow economic pace and Arab spring, the trend of the Islamic Banking & Finance had been slow in 2016 in Middle East and Arab region, while a sufficient development was recorded in Africa, Central Asia and Far East, especially in African market.

Islamic finance industry is categorized into five major components; Islamic Banking, Sukuk, Islamic Fund/Asset Management, Takaful & Islamic Microfinance. Islamic Banking is the greatest contributor in Islamic Finance Industry, which contributes 80 percent to the total $2.3 trillion Islamic finance industry, while Sukuk contributing 14 percent volume in Islamic finance industry and ranked as second largest contributor, Islamic Fund/Asset management Industry with 3 percent is ranked as third, while Takaful Industry is contributing 2 percent with slow pace and Islamic Microfinance contributing 1 percent stands as last.

By 2017, the total volume of Islamic Finance Industry is expected to be $2.7 trillion. Indonesia, Malaysia, Turkey, Pakistan, UAE, Qatar, Saudi Arabia, Kuwait and Bahrain are prominent where the contribution of their total assets of Islamic banking is 82 percent to the Global Islamic Banking market. According to the increment in assets of Islamic banking, Kingdom of Saudi Arabia stands first, but as per new Islamic banking market entrance, Morocco, Uganda, China & Russia are expected to have a good start in Islamic banking by 2017.

According to a research by CIBE Chief Executive Officer Zubair Mughal, there will be a steady growth of approximately 13 percent to 15 percent in Islamic finance market during 2017 and the total volume of Islamic finance will crossed $3 trillion figure by 2020, which will be accompanied by a definite addition of Sukuk along with Islamic banking. While the Sukuk market in Malaysia, Pakistan, UAE, Turkey, Central Asian countries and Africa seem determined in 2017.

According to the prospects, Sukuk worth $78 billion approximately are expected to be issued which can define the total volume of outstanding Sukuk up to $350 billion. It should be clear that ICD will be rendering its contribution in flourishing Sukuk at global landscape especially in African countries.

It should be clear that Takaful Industry, unfortunately, has lacked far behind in 2016. While Takaful companies are found default in Pakistan, South Africa and some other countries due to lack of regulations, performance Issue & various Models etc. In spite of all these reasons, it is expected that the total volume of Takaful industry will reach up to $25 billion till the end of 2017. As far as Islamic Microfinance is concerned, certain positive changes have been seen in 2016, new microfinance models were introduced with the amalgamation of Micro-Takaful,

Fintech and social finance along with various Islamic microfinance products. It is expected that the volume of Islamic Microfinance could reach up to $2 billion globally by the end of 2017, while the total number of Islamic Microfinance Institutions will reach up to 400 institutions/banks.

Mughal said that in 2017, many new Islamic finance markets are seen to be emerging on the horizon in the world. “If we see on the regional basis, in East Africa, we find that Uganda has recently passed an Islamic Financial bill through Parliament, Islamic banking & Finance in Kenya and Tanzania is already flourishing very well. Morocco & Tunisia are emerging markets in North Africa while Nigeria, Senegal, Mauritania, Ivory Cost in West Africa has an organised system of Islamic finance, while Sukuk is also strengthening its roots in these regions,” he added.

After Brexit, David Cameron’s dream to make London as a hub of Islamic finance seem to get shattered and UK Islamic financial market will remain subjected to pressure and slow pace in 2017. Although Modi’s reign in India has exhibited a soft attitude regarding Islamic banking & Finance in 2016, but still there are no prospects of establishment of Islamic Banking in India in 2017. It seems that in India, with having 2nd biggest Muslim population in the world, Islamic banking is being treated as religious product instead of banking product, and a lot of bad politics and lack of religious harmony have been shown on this subject. While in 2017, China will enter properly in Islamic finance. China’s CPEC’s project with Pakistan and increasing tendency in Muslim world register the basic reasons to it.


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