“Islamic finance as an industry has been witnessing substantial growth in the past decade, but its growth rate has steadily declined since 2013 from 11.16% to 6.02% in 2017. After five years of declining trend, the industry has once again picked up to register annual growth in assets of 6.58% during 2018.” –Professor Humayon Dar
According to the 10th Global Islamic Finance Report (GIFR) 2019, the estimated figure for the global Islamic financial industry at the end of 2018 was US$2.6 trillion after recording a growth of 6.58%.
“Islamic finance as an industry has been witnessing substantial growth in the past decade, but its growth rate has steadily declined since 2013 from 11.16% to 6.02% in 2017. After five years of declining trend, the industry has once again picked up to register annual growth in assets of 6.58% during 2018,” explained Professor Humayon Dar, Director General of Cambridge Institute of Islamic Finance and Founder of GIFR.
The report also recorded a growing gulf between potential and actual size of the global Islamic financial services industry as the gap has now more than doubled. With the potential size of US$9.4 trillion against US$2.6 trillion, the catch-up time required for the industry to realise its potential is ever-increasing from an estimated 17 years (as reported in GIFR 2014) to well beyond 40 years at the present state of the industry.
Professor Humayon Dar presented the findings of the report at the launching ceremony of GIFR 2019 on October 17, 2019 in Jakarta, Indonesia. The GIFR 2019 was launched by Professor Bambang Brodjonegoro, Minister of National Development Planning of Indonesia (BAPPENAS) − in an event organised by the National Islamic Finance Committee (KNKS) and hosted by BAPPENAS. The event was attended by more than 300 distinguished government representatives, policymakers and industry players.
GIFR, the oldest yearbook in Islamic banking and finance, was first published in 2010 and is recognised as the most authentic source of market intelligence for the global Islamic financial industry. The report is published by Cambridge Institute of Islamic Finance (Cambridge-IIF) and produced by Cambridge IFA.
“With the growth in Islamic banking and finance declining year-on-year, a fresh solution is required with emphasis on the adoption of new business models that will ensure sustainable growth. This is expected to come in the form of Islamic financial technology (Fintech), which can provide the means in boosting interest in Islamic finance and increasing its accessibility to the wider Muslim world,” said Dr. Sofiza Azmi, Editor-in-Chief of GIFR 2019 and CEO of Cambridge IFA.
The focus of GIFR 2019 is on “Artificial Intelligence and Innovation in Islamic Finance”. This theme was chosen to highlight the transformative potential of Artificial Intelligence (AI) in Islamic finance and how the industry can harness innovation to drive sustainable development. “The GIFR 2019 focuses on the opportunities, innovations and challenges, and possible policy measures to promote the adoption of AI,” added Dr. Sofiza Azmi.
“With the growth in Islamic banking and finance declining year-on-year, a fresh solution is required with emphasis on the adoption of new business models that growth.” –Dr. Sofiza Azmi
The highlight of GIFR is the Islamic Finance Country Index or IFCI, which has been published annually in the report since 2011. As the oldest index for ranking different countries with respect to the state of Islamic banking and finance, IFCI was initiated with the aim to capture the growth of the industry and to provide an immediate assessment of the state of Islamic banking and finance in each country.
During the launching ceremony, Professor Humayon Dar announced the latest IFCI ranking that ranked Indonesia number one on the IFCI 2019, with a score of 81.93. Thus, making Indonesia the top-ranked country in terms of its leadership position and potential in global Islamic banking and finance.
With Indonesia taking the leadership position as the most influential country in the global Islamic finance industry, Malaysia is now placed 2nd on the IFCI 2019 rank, followed by Iran at number 3 and Saudi Arabia and Sudan are at number 4 and 5, respectively. At number 6 is Brunei Darussalam, UAE is at number 7, Bangladesh at 8, Kuwait at 9 and Pakistan at number 10.
Last year, Indonesia was ranked at 6th position in IFCI 2018. “Several factors led to its elevation to the top rank including regulatory developments with improved ecosystem for Islamic banking and finance, strong political support from the government and the huge potential that Islamic economy offers,” explained Professor Humayon Dar.
Professor Humayon Dar shared several factors that had contributed to the jump in Indonesia’s ranking on IFCI 2019. “The new wave of development, backed by strong political support, lends consideration to the building of a robust legal and regulatory framework for the development of a comprehensive Islamic finance ecosystem in Indonesia,” he said. He cited the establishment of KNKS by President Joko Widodo, which is mandated to lead, coordinate and synergise the efforts of all stakeholders within the Islamic economy.
In another development that showcased the strong political support from the government was the launch of the Indonesian Islamic Economics Masterplan 2019-2024 by BAPPENAS and KNKS. The master plan recommends four strategic steps for the development of the Islamic economy in the country, with the goal of elevating Indonesia’s leadership role as a major producer in the global halal industry by 2024.
“Indonesia has in placed a robust Islamic finance regulatory ecosystem,” added Professor Humayon Dar. “The ecosystem for Islamic banking and finance has improved significantly in the country. Halal tourism, zakat collection and distribution, waqf sukuk and the related regulatory framework are just a few examples of the impressive recent track record of Indonesia in Islamic banking and finance.”
In recent years, Islamic social finance in the country has seen expansion and significant development. The introduction of sukuk waqf and the release of the Waqf Core Principles by the government have already unlocked tremendous potential and offers a greater opportunity in bridging the financing gap to meet the UN’s Sustainable Development Goals.
“The results of the GIFR 2019 further strengthen the real role of Indonesia in the Islamic financial banking industry, revealing several factors that have pushed Indonesia’s position to the top of the list. These include the development of regulations, strong political support from the government, and also the great potential offered by Islamic economy,” said Professor Bambang Brodjonegoro in his address. He further added that this is an acknowledgement of the joint efforts of all parties, including the government, market players, academics, and the community in realising the Indonesian Islamic Economic Master Plan (MEKSI). “All of these efforts and achievements require a strong and integrated commitment from stakeholders in realising Indonesia’s vision to become the world’s leading Shari’a economic centre,” explained Professor Bambang Brodjonegoro.
The GIFR 2019 is supported by Bank Syariah Mandiri, Silverlake Group and DDCAP Group. Minhaj University Lahore serves as the Knowledge Partner and The Islamic Corporation for Development of the Private Sector (ICD), a member of the Islamic Development Bank Group, is the Multi-lateral Strategic Partner.
“With Indonesia taking the leadership position as the most influential country in the global Islamic finance industry, Malaysia is now placed 2nd on the IFCI 2019 rank.”
