التمويل الإسلامي لآسيا: التنمية والآفاق والنمو الشامل / Islamic Finance for Asia: Development, Prospects, and Inclusive Growth

The financial crisis of 2007-2008 that led to the global crisis, brought a sharp contraction in the growth rates of global gross domestic product and, of aggregate global financial assets. 

The Islamic financial services industry, however, grew at an estimated compound annual growth rate of 20% per annum during 2007–2013, partly due to its limited exposure to risky financial instruments, growth from a low base as well as inherent strengths, to reach estimated total assets of USD1.8 trillion as at year-end 2013. The Islamic banking sector, which represents approximately 80% of total Islamic financial assets, was a major driver of this growth.

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 of Islamic finance. 

The strong growth of Islamic finance in Asia has been exemplified by the emergence of large Islamic banks and the issuance of Sukūk, a capital-raising instrument that provides undivided ownership over underlying assets, as an attractive Sharī`ah-compliant asset in the region. At the end of 2013, Islamic banking and Sukūk in Asia represented 49% and 45%, respectively, of the global Islamic finance assets.

This growth can be witnessed not just in the size of total assets and the number of Islamic finance institutions and products, but also in the development of underlying financial infrastructure supporting the industry, such as legal and regulatory frameworks and human capital development.

Broadly speaking, the growth of Islamic finance has underscored its potential as an alternative financing source for infrastructure and economic development in Asia, a source of investment financing in both advanced and emerging economies, and as a means for diversifying funding and broadening risk exposures at both institutional and macroeconomic levels. An additional dimension of Islamic finance is that it provides financial services for all segments of the population, thus improving financial inclusion, including for those who are currently unbanked or not inclined to use other financial products.

Further development of Islamic finance needs to address challenges related to the capacity-building needs of supervisory authorities and market players, as well as the development of legal and regulatory frameworks that can cater to the specificities of the Islamic finance industry.
The Asian Development Bank (ADB) and the Islamic Financial Services Board (IFSB) organized a conference on Islamic Finance for Asia: Development, Prospects and Inclusive Growth and a Roundtable Session for Regulators on 4–5 November 2013 at the ADB Headquarters in Manila, Philippines. This joint publication of the two organizations, which is authored by selected presenters of the conference and roundtable, is produced against the backdrop of the growing importance of Islamic finance in ADB’s member countries.

The authors have presented their views on various aspects of Islamic finance, namely the growth and development of Islamic finance in Asia, legal and regulatory issues, financial inclusion, the role of Sukūk, implementation of the global prudential standards, initiatives undertaken by governments and the public sector, and the way forward for Islamic finance in Asia. The conference has increased the awareness of Islamic finance among ADB’s developing member countries, as a potential source for cofinancing projects The ADB and the IFSB would like to thank the contributors to this publication for their efforts.

The publication has benefitted from the review of a team at the IFSB Secretariat, headed by Assistant Secretary-General Zahid ur Rehman Khokher; a team at the ADB headed by Assistant General Counsel and Islamic finance practice leader Ashraf Mohammad and Sani Ismail, Team Leader for the ADB-IFSB technical assistance and Kuwait Finance House Research.

The Islamic Finance for Asia: Development, Prospects and Inclusive Growth is a useful resource for better understanding the Islamic financial services industry in Asia, and a valuable reference for jurisdictions in other regions that aim to understand, introduce and develop Islamic finance.