Islamic banking and financial vendors are increasingly seeking diversification into foreign investments on account of strong growth prospects and higher investment returns. Technavio’s research predicts that the global Islamic financing market to record a CAGR of close to 19% during the 2015 to 2019 period.
The market is expected to witness an increase in the demand for shari'ah-compliant assets in Asian markets, including Malaysia, and Indonesia. Islamic banks located in Iran and GCC are also expanding operations in countries like Singapore to deploy Islamic funds strategically to corporates in the different regions across the globe, through Islamic bank financing, and sukuk issuances. Similarly, other countries offering strong political support with various tax incentives for institutional investors will attract significant investments through Islamic banking in the years to come.
Islamic banks will produce more customised products and services for the clients over the forecast period. Governments of different developing economies are also focusing on the regulatory intervention that help the key market players to expand their customer base. In countries like the UAE, the Islamic banking industry is estimated to grow at more than twice the rate of conventional banking which would considerably spur the growth of the Islamic banking assets over the next fore years.
The report predicts that global Islamic financing in Asia will be worth over US$985 billion by 2019, with the growth of Islamic financing in countries like Bangladesh, Indonesia, Malaysia, and Pakistan.
The asset-backed nature of Islamic financing is ideal for large-scale infrastructure such as highway networks and ports. An estimated US$800 billion worth of infrastructure financing will be needed each year in Asia over the next decade. During the forecast period, places such as Hong Kong, mainland China, and Thailand will also witness a growing Islamic finance segment.
Low market penetration of Islamic products in most of the emerging markets has created an attractive growth opportunity for the top market players. Market expansion strategies are crucial to the enhancement of Islamic products and services. To capitalise on the market opportunity, Frost & Sullivan says the leading players are expected to focus more on devising and developing effective marketing channels by affiliating with various distribution channels as per the forecast.
Key banks mentioned in the report include Al Rajhi Bank, Abu Dhabi Islamic Bank, Al Baraka Banking Group, Dubai Islamic Bank, and Emirates NBD.
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Read the Suroor Asia blog post on the outlook for the global takaful market, published by the Dubai Islamic Economy Development Centre (DIEDC), and ACRIE, a subsidiary of aafaq Islamic Finance.