Islamic finance: High growth potential but serious challenges persist
The Islamic finance industry has witnessed strong double digit growth in recent years, and yet serious problems persist that are likely to stop it from growing beyond a certain point. These include a lack of access to financial institutions in Muslim majority nations, general instability in large parts of the Muslim world, as well as a lack of concensus amongst the Islamic clergy from their various respective schools of thought, as to what exactly is "Islamic finance".
Covers the background of the Islamic finance industry
States the most common types of Islamic financial services
Outlines in which countries the industry has grown the most and where it has the potential to continue doing so
Assesses serious problems within the industry
Concludes that the strong growth potential of this industry cannot be achieved if these serious problems are not resolved.
Reasons To Buy
What is the Islamic finance industry?
Which types of Islamic financial services exist?
Where is this industry the most dominant?
Which serious problems still trouble the industry?
Whilst sharia compliant financial services have existed ever since the beginning of Islam in some shape or form, it is only in the 1970s that they were increasingly centralized and adapted to better fit the modern economic system.
According to one study around 40% of Muslims rejected non-sharia loans, which is around 700 million people, a massive number.
Despite strong growth potential, serious problems persist in this industry. These range from banks and financial institutions often finding themselves unable to reach large proportions of their customer base, to a general lack of scholarly consensus with regards to what qualifies as sharia compliant finance.
Islamic finance - The Basics
History of Islamic finance
Some major forms of Islamic finance
Islamic finance today - the numbers
Nine countries dominate the Islamic finance industry
Non-Islamic banks and countries increasingly opening up to Islamic finance
Strong Potential for Growth in the Islamic finance Industry
MENA (excluding GCC), West Africa and Central Asia largely untapped
Sharia compliant microfinance schemes have large potential, as a third of Muslims live in poverty
Problems the Islamic finance industry is facing
Lack of access to financial institutions in Muslim majority nations
Political instability discouraging interest
Differences amongst the clergy with regards to what amounts to sharia compliant finance
Strong growth potential in this industry if scholarly consensus, political stability and greater geographic reach can be
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Figure 1: Al Rajhi Bank, currently the world's largest Islamic bank based on assets
Figure 2: David Cameron speaking at the 'World Islamic Economic Forum' held in London, 2013
Figure 3: Countries by population living in urban areas, 2015
Secondary Research Information is collected from a number of publicly available as well as paid databases. Public sources involve publications by different associations and governments, annual reports and statements of companies, white papers and research publications by recognized industry experts and renowned academia etc. Paid data sources include third party authentic industry databases.
Once data collection is done through secondary research, primary interviews are conducted with different stakeholders across the value chain like manufacturers, distributors, ingredient/input suppliers, end customers and other key opinion leaders of the industry. Primary research is used both to validate the data points obtained from secondary research and to fill in the data gaps after secondary research.
The market engineering phase involves analyzing the data collected, market breakdown and forecasting. Macroeconomic indicators and bottom-up and top-down approaches are used to arrive at a complete set of data points that give way to valuable qualitative and quantitative insights. Each data point is verified by the process of data triangulation to validate the numbers and arrive at close estimates.
The market engineered data is verified and validated by a number of experts, both in-house and external.
REPORT WRITING/ PRESENTATION
After the data is curated by the mentioned highly sophisticated process, the analysts begin to write the report. Garnering insights from data and forecasts, insights are drawn to visualize the entire ecosystem in a single report.