Islamic finance or Shari’ah compliant financing (SCF) is one of the fastest growing segments of the global financial system with an estimated compound annual growth rate of 17% since 2009. As of 2015, the industry’s global assets have reached at least $1.9 trillion. The industry’s continuous expansion resulted in Islamic finance reaching systemic significance in a number of countries in Asia, including Brunei, Bangladesh, and Malaysia; these are countries where Islamic finance has achieved at least 15% market share in the domestic banking sector. Countries that do not have a predominantly Muslim population are also beginning to open their doors to Islamic finance. Luxembourg, Hong Kong, China, United Kingdom and South Africa have debuted sovereign sukuks (Islamic trust certificates, similar to conventional bonds), with all issuances being at least twice oversubscribed, demonstrating a strong demand for SCF globally.
Significantly, ADB has 14 member countries that have a majority Muslim population and has 5 of the 10 countries with the biggest Muslim population globally. Asia requires infrastructure investments of an estimate of $747 billion a year to sustain its growth trajectory. Given the demographic composition of its member countries and realizing the region’s vast investment needs, ADB recognizes the potential role of Islamic finance in promoting inclusive growth and achieving sustainable development in the region, through funding infrastructure and green and ethical investments.
Asia undoubtedly stands at the forefront of significant developments in Islamic finance and ADB will continue playing a major role, including:
- assisting the development of regulatory and supervisory frameworks and the use of best international standards by assisting through technical assistance (TA) and cooperation with standard-setting organizations such as Islamic Financial Services Board;
- advising and assisting, through TAs and loans, on capital market developments for financial institutions; and
- working with developing member countries and cofinanciers toward financial innovation.
See a summary of ADB’s current projects involving Islamic finance in developing member countries in the country profiles.
Islamic Finance Working Group
ADB’s Islamic Finance Working Group is responsible for steering ADB's strategic direction with respect to its Islamic finance operations. The group is comprised of members of financial sector and investment specialists, economists, procurement specialists and counsels from various departments in ADB.
This multi-departmental group is specifically tasked with operationalizing and mainstreaming Islamic finance in ADB, including integrating Islamic finance within ADB's financial strategy in key developing member countries. The group examines which projects and sectors would be most suitable for Shari'ah-compliant financing and determines ADB's potential role in these transactions. The group also actively liaises with key Islamic international institutions, including Islamic Financial Services Board and Islamic Development Bank, to explore opportunities for collaboration on strategic projects. The group ensures that ADB stays abreast of meeting the evolving and differing demands of developing member countries for Shari'ah-compliant financing within the framework of achieving inclusive growth and promoting sustainable development.
For more information, please contact:Ashraf MOHAMMED (Mr) Practice Leader - Islamic FinanceAssistant General Counsel, Office of the General Counsel E-mail Asghar Ali SYED (Mr) Senior Counsel, Office of the General Counsel E-mail Mohd Sani Mohd ISMAIL (Mr) Financial Sector Specialist (Capital Markets)Financial Sector and Trade Division, Southeast Asia Department E-mail Mohammed Azim HASHIMI (Mr) Investment SpecialistInfrastructure Finance Division 1, Private Sector Operations Department E-mail