Arab News, Thurs, Nov 30, 2023 | Jumada Al-Uola 16, 1445
Global Islamic banking sector to hit $4tn by 2026
RIYADH: The global Islamic banking
sector is set to be worth $4 trillion by 2026, driven primarily by Gulf
Cooperation Council countries, according to recent data.
In their State of Fintech report, red_mad_robot, a digital enabler,
highlighted that the Islamic banking sector saw a massive surge from 2018 to
2021, growing from $1.8 trillion to $2.8 trillion.
“The leading role in the development of Islamic banking belongs to the GCC
countries. They account for 43 percent of global Islamic banking assets,
followed by other countries in the Middle East and North Africa region at 40
percent. Meanwhile, 59 percent of total assets are controlled by just two
jurisdictions — Iran, 37 percent, and Saudi Arabia, 22 percent,” the report
stated.
Furthermore, the report highlighted that the Islamic fintech market
witnessed significant growth, with estimated transactions reaching around
$79 billion in 2021.
It is projected to grow at an average rate of 18 percent annually,
potentially hitting $179 billion by 2026. Major players in this market
include Saudi Arabia, Iran, and Turkey, as well as the UAE, Malaysia, and
Indonesia. Indonesia is at the forefront in terms of the number of Islamic
fintech firms.
Promising areas for the sector’s digital evolution include crowdfunding,
investment platforms, and robo-advisors. Additionally, there is a focus on
payment services, digital banks, and smart contracts, as well as blockchain
technology and cryptocurrencies. The report also highlighted the
significance of financial sector information security and insurtech.
Moreover, Asia is home to 42 of the top 100 Islamic banks. These banks
account for 29 percent of the total assets of these leading institutions,
highlighting the dynamic nature of the sector’s landscape across different
regions.
Saudi Arabia’s Al-Rajhi Bank is distinguished as the leading Islamic bank in
the world, showcasing the influence and strength of Islamic banking within
the Kingdom.
Several factors are fueling the demand for Islamic banking services. These
include the growth of the Muslim population, the digitization of the Islamic
economy, and an increasing global demand for halal products.
On the supply side, the expansion of Islamic banking is influenced by
national strategies, government regulation, and enhanced trade activities
within the Organization of Islamic Cooperation, the report stated.
These elements collectively contribute to the growth and diversification of
Islamic banking services, affirming its significance in the global financial
landscape.