Islamic finance set to extend growth, says Moody's

A sign for Moody's rating agency at the company headquarters in New York, September 18, 2012. — AFP pic
A sign for Moody's rating agency at the company headquarters in New York, September 18, 2012. — AFP pic

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KUALA LUMPUR, March 14 — The growth of the Islamic finance sector will continue to outstrip that of conventional assets across core Islamic finance markets in coming years, as demand for Shariah-compliant financial instruments rises, said Moody's Investors Service.

In a statement today, the rating agency said Islamic banking penetration in the Gulf Cooperation Council (GCC) increased to 45 per cent of the total banking market, as of September 2017 from 31 per cent in 2008.

Vice President/Senior Analyst at Moody's, Nitish Bhojnagarwala, said the Islamic finance sector would be supported by governments, whose objective is to grow the Islamic finance industry both domestically and globally, as well as by continued demand for Islamic products from individuals.

“Islamic insurers' penetration into Southeast Asia and North Africa will also drive growth in the industry,” he said.

Sukuk issuances grew 17 per cent in 2017 to $100 billion, driven largely by GCC sovereigns.

Bhojnagarwala said Moody's expects a similar level of issuance in 2018, although the recent recovery in oil prices could lower financing needs for some sovereigns.

Corporate and asset-backed sukuk activity was muted in 2017 because of more attractive conventional market opportunities and Moody's expects the same for 2018.

“The takaful sector continues to benefit from strong growth. The market attracted gross premium contributions of US$14.9 billion (RM58.2 billion) in 2015 and we estimate it attracted over US$20 billion in 2017.

“We expect this growth momentum to continue in 2018 and over the medium term, spurred by strong growth prospects in Southeast Asia and North Africa,” Bhojnagarwala said. — Bernama

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