Islamic Finance or Shari'ah compliant financing (SCF) is one of the fastest growing segments of the global financial system. Global Sukuk (Islamic trust certificates, similar to conventional bonds) outstanding is estimated at USD107 billion and is expected to grow at an annual rate in excess of 20% over the next few years. Asian countries, and in particular Malaysia and Indonesia, are seeing rapid growth in SCF, complementing the growth seen in the Middle East. It is estimated that by 2012, global SCF assets will reach about USD1.6 trillion.
ADB has 14 member countries that have a majority Muslim population as well as other members with a sizeable Muslim population, namely India, PRC, the Philippines, Sri Lanka and Thailand. ADB's Developing Member Countries (DMCs) represent approximately 80% of the world's Muslim population. A number of these DMCs have developed relatively sophisticated Shari'ah compliant financial services industries which complement their conventional financial services sectors.
Promoting Shari'ah compliant financing
ADB is well placed to play a catalytic role in the development of SCF in the region. ADB can assist in the development of best practice for prudential standards and corporate governance rules for central banks and securities regulators, to enable them to properly and fairly regulate Islamic financial institutions (IIFIs). ADB can also play a catalytic role in helping to meet the emerging demand for SCF from the private sector that is becoming evident in certain DMCs. ADB's participation in SCF will assist the development of the SCF industry during its formative early stages in DMCs, ensuring that SCF is being undertaken using best international standards.
ADB continues to play a significant role in the development of SCF in Asia. This has included:
- Supporting the development of international best practice in prudential standards and corporate governance for IIFIs, by assisting through technical assistance (TA) and cooperation, standards setting organizations such as Islamic Financial Services Board, and through knowledge dissemination activities e.g. workshops and conferences.
- Advising and assisting DMCs, through TAs and loans, capital markets development for Islamic financial institutions including development of appropriate supervisory and regulatory laws and frameworks.
- Promoting the use of SCF through cofinancing opportunities with IIFIs such as the Islamic Development Bank, and developing and participating in innovative financing structures such as the Islamic Infrastructure Fund and the International Islamic Liquidity Management Corporation.
- Providing credit enhancement in SCF non-sovereign transactions.
For more information, please contact:
Ashraf Mohammed, Assistant General Counsel, Practice Leader - Islamic Finance
For regional enquiries, please contact:
Central and West Asia Region:
Debra Kertzman, Director, CWPF
Private Sector Operations:
Michael Barrow, Director, PSIF1
South Asia Region:
Bruno Carrasco, Director, SAPF
South East Asia Region:
Shigeko Hattori, Director, SEPF