The Islamic Corporation for the Development of the Private Sector (ICD), the private sector development arm of the Islamic Development Bank (IsDB), and Refinitiv, the world's leading provider of intelligent information for businesses and professionals, recently released the key findings of the seventh edition of the Islamic Finance Development Report at the Indonesia Shariah Economic Festival 2019. According to the Islamic Finance Development Report 2019, the Islamic finance industry's assets grew to $2.5 trillion in 2018 from $2.4 trillion in 2017, a rise of 3 percent. This growth slowed from previous years, however, this was particularly noticeable in some of the industry's main markets where the wider economy is sluggish. ICD CEO Ayman Sejiny said: "Despite the stressed global economic environment and sluggish growth which are impacting the industry, we have found that the dynamics in the industry are changing. Sukuk are leading the industry's growth, with global issuance since its introduction surpassing US$ 1 trillion in 2018 and continuing to grow. "The industry and surrounding ecosystem are also being constantly reshaped by innovation. This is particularly in the areas of financial technology and sustainability which aligns with the strategies of ICD." The report also collates an annual score for the overall health of the global Islamic finance industry. The Islamic Finance Development Indicator (IFDI) aggregates scores across five component areas — Quantitative Development, Knowledge, Governance, Corporate Social Responsibility, and Awareness — for the 131 countries where Islamic finance has a presence. Malaysia, Bahrain and the UAE continue to spearhead developments in the industry, while Uzbekistan, Ethiopia, Cyprus and Indonesia are among the biggest gainers in the rankings as a result of improvements in their financial and supporting ecosystem metrics. Growth in the industry's biggest sector, Islamic banking, slowed to 2 percent in 2018, largely in line with slowing growth for the global economy. Islamic banking assets totaled $1.76 trillion. Many Islamic banks or windows are also undergoing transformations through either reorganization or consolidation. Despite the slower growth, new banks and markets continue to enter the market, as seen in Ethiopia, Algeria and Afghanistan. Also, new liquidity tools are being developed to help grow existing Islamic banking markets, as seen in Oman, the UK and Pakistan. Takaful operators and other Islamic financial institutions (OIFIs) account for the remaining share of Islamic financial institution assets, with a respective $46 billion and $140 billion reported for 2018. Both sectors are seeing transformational activities in their main markets, which should lead to stronger growth in coming years, particularly in Saudi Arabia and the UAE. Developments in InsurTech and FinTech are also set to transform these sectors. In contrast with other sectors, the global slowdown did not impede the Sukuk asset class from continuing its strong growth, with a rise of 10 percent to $470 billion in 2018. Sukuk issuances in 2018 reached $125 billion, a similar total to the previous year. New innovative Sukuk forms and structures have emerged in 2018 and 2019 such as waqf, blockchain-based and gold-based Sukuk, in addition to green Sukuk, which were first introduced in 2017 in Malaysia and have since expanded into new markets. Islamic funds, which performed strongly in 2017, declined to $108 billion in 2018 as a result of weaker performances for most of the funds managed, in line with the global economic slowdown. Governments also played their part in developing roadmaps and regulations to advance particular sectors of the industry and their supporting ecosystems. One such example is Indonesia's Masterplan of Sharia Economy 2019-2024, which encompasses a development framework, strategies and action plans for the country's Islamic finance industry. Regulatory frameworks are also being enhanced. The UAE and Malaysia are currently working to improve Shariah oversight, while Morocco, the Philippines and Bangladesh have introduced new Islamic finance regulations in 2019. FinTech is another area that is actively changing the dynamics of the industry, as seen, for example, in the recent issuance in Indonesia of blockchain-based micro Sukuk — a world first — and in the role of Islamic FinTechs in promoting the industry in the UK and the US during 2018. Crypto-assets are also being looked into by Shariah scholars and regulators in developed Islamic finance markets such as Bahrain and Malaysia. Another notable development is the emergence of digital platforms for applications in Islamic social finance, which can help in achieving the UN's Sustainable Development Goals. One standout example of this development is the UNCHR's Refugee Zakat Fund, which has successfully enabled zakat funds to be raised online. — SG
