Global interest in Islamic finance is projected to reach $3.69 trillion by 2024

By Puja Sharma

By 2024, Islamic finance is expected to reach $3.69 trillion worldwide. Fund manager Ocorian reports that capital-rich investors from the GCC region are most likely to choose the US over Malaysia as their destination.

Reports claim that both Muslim and non-Muslim countries are becoming increasingly interested in Shariah-compliant capital, which is expected to reach $3.69 trillion by 2024. The report also found that Islamic finance assets grew globally by 7.8% between 2014 and 2019.

As a result of the double-digit growth in assets in 2019, Islamic finance is attracting increasing attention from investors worldwide. The pandemic, last year caused several global financial markets to tumult. However, interest in Islamic finance continues to grow, due to 3 major factors – greater appreciation of the role Islamic finance plays in responsible investing, geographic interest in markets where Islamic finance is gaining influence, and digitalization, which allows Islamic investments to be widely accessible.

The global interest in this industry is on the rise

In countries with a large Muslim population, Islamic financing emerged 50 years ago to meet the requirements of Shariah and Islamic principles. Despite the global financial crisis, Islamic finance assets grew to $2.88 trillion in 2019, the fastest growth since 2009. By 2024, this is expected to reach $3.69 trillion, as reported by Bny Mellon.

The popularity of Shariah financing is partly due to its increasing appeal among non-Muslim countries as well, as Muslim countries have turned to it for capital.

The digitalisation of Islamic finance products and services has been accelerated by these new breeds of tech enablers, making them more accessible to investors globally and reinventing the client experience.

There have been numerous initiatives in Asia, Europe, the Middle East, and the U.S. aimed at developing Shariah-compliant fintech innovations, which are helping fuel this trend. To ensure Shariah compliance, new Islamic Robo-advisors will use artificial intelligence to determine optimal investments based on a set of criteria. Many initiatives have been taken by industry stakeholders to create Shariah-compliant digital assets and trading platforms.

Payouts and remittances using blockchain are already being tested or used by several Islamic banks. RegTech also has the potential to revolutionize Islamic finance. Using robust digital tools, it aims to overcome regulatory and compliance barriers and achieve Shariah compliance. By enhancing traceability of underlying assets, cash flows, and investors, smart contracts on the blockchain, for instance, provide transparency, as well as security and assurance.

The multi-trillion dollar industry which is Islamic banking is no longer operating on the fringes of global financial markets. In the next few years, Shariah-compliant assets are expected to keep growing, driven by rising interest from investors beyond Muslim economies due to:

• FinTech and digitalisation collaboration creating new avenues for development and enhance transparency
• Increasing demand for a sustainable, stakeholder-focused, and socially responsible financial system, emphasizing synergies between ESG investing and Islamic finance
• Opportunities for scalability and industry efficiencies via greater harmonization of Shariah practices and standards
• When moving in this direction, investors will require the infrastructure, insights, and related solutions to safeguard and manage their Islamic finance assets across every stage of the investment life cycle.