Asia presents huge developmental potential for Islamic finance and is likely to be the main driver of Islamic banking growth in the near future, given the untapped potential in India, Bangladesh and Indonesia, a report said.
Islamic finance can be utilised for greater integration of financial markets with the real economy and for improvement of the economic balance between emerging and frontier markets, according to Kuwait Finance House Group report.
Islamic banking is banking that is consistent with the principles of Sharia which prohibits acceptance of specific interest or fees for loans of money. Originally dominated by Islamic banking products and services, Islamic finance has expanded its offerings around the world to cover Shari, a compliant insurance and capital market (which include principally Islamic bonds and Islamic fund management).
Having thus grown across all component segments in Asia too, as at end-2013 the region's Islamic finance assets totalled about $391.2 billion, equalling 22% of Islamic finance assets worldwide, the report said.
Asia's Islamic finance asset composition is characteristically balanced — in particular, among Islamic banking and Islamic bonds sectors — with Islamic banking accounting to 49% of aggregate Islamic financial assets in Asia, followed by financial certificates (45%), Islamic funds (5%) and takaful (1%), a co-operative system of reimbursement in case of loss.
However, the report did not provide details of Islamic banking operations in countries like India, Bangladesh and Indonesia. Driving the industry in the region is Malaysia, the global leader in Islamic finance, particularly in areas of Islamic banking, bonds and funds, it said.