Islamic Assets to Grow by 20 Per Cent Annually

Bob Reynolds

22 October 2007

Islamic assets worldwide are expected to grow 15-20 per cent a year. This is the view of Malaysia's deputy finance minister Datuk Awang Adek Hussin. He estimated these assets to be worth now over $1 trillion. "The potential for sukuk financing is tremendous. Over the next five years, Asia is expected to spend $1 trillion, while the requirements in the Middle East are estimated to be $500 billion over the same period," he said. The global significance of Islamic finance has grown considerably and is now practised in over 75 countries, Dr Awang Adek said. He said the growth was being driven by growing demand for shariah compliant financial services and transactions worldwide. Shariah-compliant assets of Islamic banks and Islamic window-based conventional banks have exceeded $500 billion. The market capitalisation of the Dow Jones Islamic Index is now over $10 trillion while the aggregate issuance of Islamic sovereign and private debt sukuk has surpassed the $50 billion mark. "In the midst of rapid development in the international Islamic financial markets, players are also looking towards building greater intermediation and linkages between Asia and Middle East regions," Dr Adek said. This will expand inter-regional trade and cross border investments for mutual benefits and generate demand for financial instruments that conform to Islamic laws. "Malaysia continues to play a significant role in the Islamic world at both the political and business levels," he said adding that the private sector will play its role in shaping the international direction and growth. "We are one of the earliest to recognise the potential to create a financial system compatible with Islamic principles that provides an alternative to the conventional system," he said. As at end June 2007, the country's Islamic banking assets amounted to RM143 billion. Islamic deposits totalled RM107.5 billion and Islamic financing R81.5 billion, he said. "Takaful assets totalled RM7.6 billion or 6.2 per cent of total assets of the insurance industry as at mid-June 2007," he said.