Islamic banking projected to grow annually over 10%

By Yunus Turk

ISTANBUL (AA) – Islamic banking, which was once mostly seen in Muslim-majority countries, is expanding across the globe, with assets projected to reach $5 trillion over the next year, with an annual rate of growth at 10% to 12% in 2024 to 2029, according to a recent report compiled by Anadolu.

The UK, South Africa, and Luxembourg, which do not have Muslim-majority populations, are also contributing to the expansion of Islamic banking with compliant financial products.

The report states that one of the primary drivers for the growth of Islamic banking is that it is based on ethical investments, attracting Muslim and non-Muslim investors by attaining global attention due to its ethical investment principles.

The UK stands out as a leading country in adopting Islamic banking, as London in particular is a center for Islamic banking and finance.

Additionally, the UK government repeatedly issued Sharia-compliant bonds, also called “sukuk.”

Meanwhile, in South Africa, the country’s banks offer Sharia-compliant financial products appealing to Muslims and non-Muslims alike.

Luxembourg became the first country in the eurozone to issue a Sharia-compliant bond of approximately $216.3 million with a five-year maturity, significantly contributing in facilitating cross-border Islamic financial transactions in the region.

As of last year, the total value of Sharia-compliant financial assets was estimated at approximately $2 trillion, and this figure is estimated to more than multiply by 2026.

Islamic banking is following through with the recent developments in technology, as fintech and the blockchain have the potential to drastically improve it by reducing uncertainty in transactions and providing transparency.

- Islamic banking ‘in line with UN’s sustainable development goals’

Metin Toprak, professor of economics at Istanbul Sabahattin Zaim University, told Anadolu that Türkiye has the potential to be a key player in the intersection of Africa and Asia with the rise of Islamic banking worldwide, thanks to the country’s geographical location and culture.

Toprak stated that Türkiye needs to strengthen its role and develop its potential to become a center of attraction in the region.

He noted that Islamic banking is in line with the sustainable development goals of the UN with its environmentally friendly, ethical, and transparent approach to finance.

“Primary issues preventing the expansion of Islamic banking are the complexities of the regulatory framework, the double regulatory burden, lack of transparency and trust, and the fact that economic actors lack awareness on this issue, as well as the lack of international standards set for Islamic banking and transparency in the innerworkings of capital markets,” he said.

“The current situation just reduces the confidence of domestic and foreign investors, inhibiting growth, and for Türkiye to be a key player, the regulatory framework needs to be simplified and made more transparent to raise awareness of Islamic banking, and operate in compliance with international standards and institutions,” he added.

*Writing by Emir Yildirim