Islamic Finance 2019-2020: One Industry, Three Accelerators

We believe the Islamic finance industry will continue to grow slowly in 2019-2020. It expanded by about 2% in 2018 compared with 10% the previous year, according to our estimates (see chart 1), with strong support from the Sukuk market. In 2017, most of the growth stemmed from jumbo Sukuk issuance in some Gulf Cooperation Council (GCC) countries, but this was followed by an about 5% reduction in issuance in 2018. In 2019, we do not expect the market to fare much better given the significant volatility in key parameters such as oil prices and geopolitical risk. The growth of banking assets has also slowed down in almost all core Islamic finance markets. Of specific note, Turkey and Iran lead the decline under a trend that we expect will continue in the next 12-24 months. Malaysia, Indonesia, and the GCC countries were among the few sources of industry growth. As the economic cycle might turn at some stage, we believe a low-single-digit growth rate over the next two years is a fair assumption. However, we see three potential accelerators in the next few years: inclusive standardization, fintech, and the social role of Islamic finance. Read More