Saturday, January 23, 2021 / 1:00 PM /Bukola Akinyele- Yisau for WebTV / Header Image Credit: Growth Business
One of the bright spots for the growth of Islamic Finance globally is Malaysia, a South-East Asian economic tiger that has provided an enabling environment and leveraged the instruments to develop its economy.
Another positive development is the volume of Sukuk issuance, which according to the Fitch-ratings report increased by +12. 9% year-on-year to $118. 6bn at Q4,2020 of which about 33.6% is estimated to mature in 2021 -2023.
According to Moody's Investors Service, Malaysia remains the biggest Islamic finance market in Southeast Asia. Moody's says the industry's market share of total financing (excluding that of DFIs) in the country stood at 35.6% as at end-June, 2020 compared with 34.9% in 2019 and 23.2% in 2013.
Islamic finance from an economic perspective has played a critical role in infrastructure financing, funding for health, education and sustainable development which has brought significant impact for nations that adopted it. Nigeria, Africa's frontier economy is currently touted as the potential hub for Islamic Finance on the continent.
To achieve this the nation needs to set out a clear vison to reach and explore ways of increasing collaborations with countries like Malaysia, Indonesia, Qatar and United Arab Emirate, which are countries that are strategic hubs for Islamic Finance.
Malaysia has done a remarkable work of serving as a gateway for Islamic Finance and pivoting its growth across Asia, Nigeria can learn from this and develop a robust policy framework and regulation that encourages the growth of Non-Interest finance in Africa.
In 2021 there are three potential accelerators for the Islamic Finance industry, which include;
Key Expectation for Islamic finance In 2021;
It is important for all stakeholders to take the responsibility for emphasizing the value proposition of Islamic finance.
Islamic finance has the instruments that can assist a nation in fulfilling their social intervention objectives.
Fintech will really drive the development of Islamic finance but it will come through technologies such Blockchain, AI, Robotics amongst others.
Financial inclusion is necessary and the application of technology in delivering Islamic Financial services is very important. There is need for proper assessment as technology is deployed to deepen Islamic financial inclusion.
Fintech and financial inclusion should be the key driver for Islamic finance industry as there are several Muslim populations that are unbanked.
The expectation is that the Islamic banking industry will show low mid-single digit growth in 2021 after +11.4% in 2019 following the strong Sukuk market performance, also COVID-19 offered high degree of standardization and social Islamic finance instruments, and Fintech will enhance the industry.
Look out for our upcoming #IslamicFinanceWeekly video, an exclusive interview with the Head, Fixed Income FBN Quest Asset Management, Ifeoluwa Dixon, where she will discuss: "Islamic Finance, Economic Empowerment & Financial Inclusion"