Khaled Al Aboodi, CEO of ICD said: “The ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI) is the only numerical measure representing the overall health and development of the Islamic finance industry worldwide. It is an unbiased, multi-dimensional barometer that considers the progress of the Islamic finance industry beyond measurement of profits and assets growth.
"In 2013 we saw awareness of Islamic finance spread worldwide. The next step is to translate that awareness into action. The ICD will continue to facilitate the use of Islamic financial products and services in order to empower the private sectors in Organisation of Islamic Cooperation (OIC) countries.”
Key findings from the ICD Thomson Reuters Islamic Finance Development Indicator 2014 report are:
• 2013 global Islamic finance assets = US$1.658 trillion; Malaysia overall leader
• 2013 global Islamic banking assets = US$1.214 trillion; Sudan best performing
• 2013 global takaful assets = US$27.8 billion; Qatar best performing
• Gap between the awareness indicator (most developed) and quantitative development (weakest)
• Twenty-eight countries have Islamic finance regulations. Only Bahrain, Malaysia, Nigeria and Pakistan have regulations covering all sectors.
• For global financial centres, Singapore is the most developed.
- Singapore is in the sukuk top 10
- Singapore and the UK are in the corporate governance top 10
- Singapore is in the conferences top 10
- UK is in the knowledge and seminars top 10
The IFDI measures five key components that combine to depict the bigger picture of the state of Islamic finance: quantitative development, governance, corporate social responsibility (CSR), knowledge and awareness.
The IFDI global average development value is 10. Malaysia is the most developed Islamic finance nation out of 92 countries, scoring 93. Bahrain (76) and Oman (64) are second and third, respectively. The other four GCC countries are also ranked in the top 10, along with Jordan, Pakistan and Brunei.
The awareness indicator has a high global average value of 29 development points for the news sub-indicator, which assessed 92 countries. The other two sub-indicators for awareness are: seminars (global average value seven) and conferences (global average value nine). There were 231 Islamic finance seminars and conferences and 14,490 exclusive news announcements in 2013.
There is a gap between awareness development and quantitative development, which scored the lowest global average of six. Significantly, the awareness indicator saw the lowest percentage of countries – 21% – scoring higher than the global average. This indicates that while awareness about Islamic finance is widespread, it is not deeply-rooted enough to be translated into action.
Islamic finance activities are still largely concentrated in the GCC and Malaysia, with Jordan, Pakistan and Brunei also in the top 10. Action is needed to move all other countries from awareness to quantitative development.
Moving from awareness to knowledge is one challenge for the Islamic finance industry worldwide. Globally, 66 countries contributed to this indicator. There were 477 institutions providing Islamic finance courses and degrees and1,363 research papers were published between 2011 and 2013.
Moving from awareness to knowledge is one challenge for the Islamic finance industry worldwide. Globally, 66 countries contributed to this indicator. There were 477 institutions providing Islamic finance courses and degrees and1,363 research papers were published between 2011 and 2013.
There is greater interest on Islamic finance in Sub-Saharan Africa, which closely trails leaders Europe and other MENA in the courses category and is home to more institutions offering degrees than Southeast Asia. In Southeast Asia and the GCC, more institutions offer degree programmes than courses, which reflects a focus on longer-term human capital development.
The global average score for the quantitative development stands at a very low six development points. There is a highly uneven development of Islamic finance worldwide, even among the top 10 most developed nations. Fifty-three points separate Malaysia in first place and fifth-placed Qatar, and there are 64 points between Malaysia and tenth-placed Brunei.
The global average score for the quantitative development stands at a very low six development points. There is a highly uneven development of Islamic finance worldwide, even among the top 10 most developed nations. Fifty-three points separate Malaysia in first place and fifth-placed Qatar, and there are 64 points between Malaysia and tenth-placed Brunei.
The global aggregate value of Islamic finance assets reached US$1.658 trillion at the end of 2013 mainly from Islamic banking assets which accounted
for 73% of the total, followed by sukuk that contributed US$279.8 billion. Other Islamic finance institutions (OIFIs) contributed US$85.5 billion while Islamic funds and takaful assets stood at US$50.7 billion and US$27.8 billion, respectively. Islamic finance assets are expected to reach up USto $2 trillion within a couple of years.
Governance considers regulations, shari'ah governance and corporate governance. The global average value for governance is 12 development points. Only 28 out of 92 countries have Islamic finance regulations. Unsurprisingly, the overwhelming majority of jurisdictions (86%, 24 countries) with regulations are Muslim-majority countries. Of the remaining four, Nigeria has a significant Muslim population and three Muslim-minority countries round off the top 10: Mauritius, Singapore and the Philippines.
Governance considers regulations, shari'ah governance and corporate governance. The global average value for governance is 12 development points. Only 28 out of 92 countries have Islamic finance regulations. Unsurprisingly, the overwhelming majority of jurisdictions (86%, 24 countries) with regulations are Muslim-majority countries. Of the remaining four, Nigeria has a significant Muslim population and three Muslim-minority countries round off the top 10: Mauritius, Singapore and the Philippines.
Only four countries have full coverage of regulations: Bahrain, Malaysia, Nigeria and Pakistan. Bahrain pips Malaysia to the top spot with its superior shari'ah governance score.
The CSR Indicator considers CSR Funds Disbursed and CSR Disclosure. Overall, average disclosure for financial reporting is high but there is a low level of CSR disclosure; on average only 30% of items are disclosed. There is particularly a lack of disclosure of training and employee welfare activities. Oman was the best performer for CSR disclosure but distributed a far lower amount of CSR funds than Jordan and Bahrain.To download the report, click here.
*The ICD Thomson Reuters Islamic Finance Development Indicator is a composite weighted index that measures the overall development of the Islamic Finance industry by providing an aggregate assessment of the performance of all its parts, in line with the objectives of Islamic principles.
It is a global level composite indicator with country and unit specific level indicators. The composite indicator is released annually, featuring a full report detailing each country and unit specific level indicator and their raw numbers.
Each indicator within the composite indicator's constituents will be equally weighted and aggregated, i.e. all variables are given the same weight. In addition, normalisation is required prior to any data aggregation as the variable indicators in a data set have different measurement units.
For the country composite indicator level, country indicators are normalised to allow for meaningful comparisons over time for a given country and between countries. Various economic indicators (e.g. population size) will be considered while measuring the health of the Islamic finance industry in each country.