UAE, Bahrain and Malaysia Lead Islamic Finance Development Report and Indicator Country Rankings

The UAE, Bahrain and Malaysia are leading the Islamic Finance Development Report and Indicator, IFDI, country rankings for the fifth consecutive year, according to Thomson Reuters.

In its report prepared in cooperation with the Islamic Corporation for the Development of the Private Sector, ICD, the private sector development arm of the Islamic Development Bank, IDB, the news agency released the key findings of the fifth edition of the IFDI at the World Islamic Banking Conference, WIBC, 2017 held in Bahrain.

The report studied key trends across five indicators, 'Quantitative Development', 'Knowledge', 'Governance', 'Corporate Social Responsibility' and 'Awareness', used to measure the development of the US$2.2 trillion Islamic finance industry.

It also compiled extensive statistics on the industry from 131 countries and highlighted the best-performing nations within each key area of performance.

The IFDI global average value, which acts as a barometer of the overall industry’s development, recovered to 9.9 in 2017 from 8.8 in 2016. This reflected improved performances in each of the five indicators.

The GCC remains the leading regional hub for the industry. Countries in the Commonwealth of Independent States, CIS, Europe, East and West Africa saw notable improvements in their IFDI values, demonstrating the continued growth of Islamic finance in non-core markets.

The report also highlights how Islamic finance can help countries adapt to difficult economic conditions.

Nadim Najjar, Managing Director of Thomson Reuters in the Middle East and North Africa, said, "We have seen that the Islamic finance industry can serve as a strategic tool for policymakers for sustainable growth to cope with the aftermath of the economic slowdown that impacted markets such as the Middle East.

Some markets had noteworthy improvements in their IFDI values when they improved or introduced Islamic finance to fit their economic needs and attract investments from Morocco, Tunisia and Iraq."

Khaled Al Aboodi, CEO of ICD, said, "Incorporating Islamic finance in different strategies can be seen in the many steps taken by governments across different IFDI indicators.

This was noticed when some authorities intervened in Islamic social funds management, raised literacy in the industry among potential market players through formal education systems, organised roadshows targeting potential market players, or built a roadmap to plot development of the overall industry."

Quantitative Development, which measures the performance of Islamic financial institutions and capital markets, advanced the most of the five indicators as a partial recovery in oil prices helped Islamic financial institutions and mutual funds regain strength.

Sukuk grew least in the Islamic finance sectors as some large sovereign issuers resorted to conventional bonds to ease the issuance process and lower costs.

The reversion to strength after last year’s oil price-led downturn saw total Islamic finance industry assets rise seven percent to $2.2 trillion in 2016 and it is expected that assets will continue to grow, to $3.8 trillion by 2022.

The Knowledge indicator, which encompasses education and research, also edged higher in the latest report.

There were 677 Islamic finance education providers in 2016, of which 191 provided a total of 322 Islamic finance degrees. Governments in Bahrain, Malaysia and Indonesia made particular efforts to push Islamic finance education and literacy.

The indicator for Corporate Social Responsibility, CSR, was another strong gainer, with improvements in both performance and disclosure by Islamic financial institutions.

The total CSR funds disbursed by different Islamic financial intuitions increased 18 percent over the year, to $683 million.

As governments turned their attention towards Islamic social financing, a growing number of conferences and seminars explored the common ground between Islamic and ethical finance, particularly in Europe.

This helped the Awareness indicator to edge higher, despite a slowdown in the growth of news articles on the industry.