Islamic finance is the fastest-growing sector in the global financial services industry with a double digit growth rate over the past five years - and that is set to continue. But where is it centred? Our Malaysian MD argues her country is a good home.
Malaysia is fast becoming an international centre for Islamic finance thanks to its religious heritage, strategic location and progressive regulatory structure. And while Malaysia faces competition from financial capitals such as London and Dubai to become the premier global Islamic financial centre, it remains at the forefront of the development of this market.
Islamic finance is the fastest growing sector in the financial services industry with an impressive growth rate of 17.3% over the past five years despite the gloomy global economic outlook. The sector's growth rate is expected to accelerate to 19.7% over the next four years to 2019 taking its share of the entire financial services industry from 2 per cent (or US$2 trillion) to a sector with $3.5 trillion in total assets.
Much of the rapid growth in Islamic finance is fueled by the increasing demand for Sharia-compliant financial products and services by the more than 1.6 billion global Muslim population. If the Muslim communities spread across the globe were situated in the same country, it would be the fourth-most populous in the world (behind the United States, China and the European Union).
One country in Southeast Asia is set to benefit from the internationalisation of Islamic finance with its religious heritage, strategic location and progressive regulatory structure. Malaysia is a Muslim-majority country (more than 60% of its population) situated in the middle of the four countries with the world's largest Muslim populations: Indonesia, India, Pakistan and Bangladesh. This strategic geographical location is enabling the country to become a global platform for the facilitation of cross-border Islamic finance investment and trade.
Who's in Malaysia, and what makes an Islamic finance product?
Malaysia has a reputation in the Muslim world as an influential pioneer of Islamic finance. It was one of the first jurisdictions in the world to set up a Sharia-compliant deposit insurance scheme. In addition, the country has also established the world's first Sharia-based commodity trading platform on the domestic stock exchange (Bursa Malaysia). Malaysia is also in the midst of developing the world's first cross border Islamic investment...