The regulators call for an inclusive approach, stressing the potential role of Shariah-compliant financial solutions beyond the Islamic world.
The Central Bank of the UAE (CBUAE) and the Islamic Financial Services Board highlighted the instrumental role of the Islamic financial industry in global economic recovery and stressed the need to develop a system that is prudent, resilient, sustainable and transparent.
At the 39th meeting of the IFSB Council hosted by the CBUAE in Abu Dhabi, the regulators called for an inclusive approach, stressing the potentially significant role of Shariah-compliant financial solutions beyond the Islamic world, because of its pure principles and ethical investment aspects that adhere to the environmental, social and corporate governance goals of global investors.
“Boosting the role of Shariah-compliant financial solutions was an important part of the UAE’s future financial plans. The CBUAE remained committed to the recuperation of global financial systems, in partnership with the IFSB, its members and counterparts, as banking sector liquidity returned to pre-Covid levels,” Khaled Mohamed Balama, governor of the CBUAE and chairman of the IFSB Council for 2021, said on Friday.
The global Islamic finance sector continues to grow at an accelerated pace because of stronger investments in halal sectors, infrastructure and sukuk bonds. S&P Global Ratings earlier this year said that the market is worth $2.2 trillion globally, and is expected to grow 10 per cent to 12 per cent over 2021-2022 owing to higher Islamic bond issuance and a modest economic recovery in the main Islamic finance markets.
The industry also grew last year despite the Covid-19 pandemic, although at a lower pace than in 2019. Global Islamic assets, S&P said, expanded 10.6 per cent in 2020 compared with 17.3 per cent the previous year.
Refinitiv data, meanwhile, pegged the Islamic finance industry to hit $4.94tn in 2025, with global assets maintaining double-digit growth, rising 14 per cent to $3.374tn in 2020. Sukuks, the second-biggest sector in Islamic finance, grew by 16 per cent in 2020, driven by the GCC and South-East Asia.
The expansion of the FinTech industry and digital banks, led by the UAE, Saudi Arabia, Bahrain, Malaysia and Indonesia, was a key trend.
The continued global economic recovery, fiscal and monetary easing, and liquidity made available by major governments and central banks, are expected to drive demand for Islamic finance assets, according to a recent report from Alpen Capital and Alpen Asset Advisers.
The IFSB Council considered plans to transform the board’s strategic directions and policies to continue to meet the industry’s expectations and achieve the desired impact in IFSB member jurisdictions and globally.
It also recognised the importance of the IFSB’s focus on addressing emerging risks and vulnerabilities associated with evolving global developments related to ESG, sustainability, climate change, the impacts of accelerated digitisation, cyber-resilience, the elimination of Libor and central bank digital currencies.
“Change takes courage. But as our agendas and new Strategic Performance Plan 2022-2024 make clear, business as usual will not mean that things will remain the same in the IFSB,” said Bello Lawal Danbatta, secretary general of the IFSB.
“Business as usual to us guarantees a future of economic and financial stability, policy and human capital transformation and many other initiatives. We hope that we can work together to chart a more positive course for the IFSB and the global Islamic finance industry.”
(Except for the headline, this story has not been edited by The Finance World staff and is published from a syndicated feed.)
