Global Economic Rebound to Boost Islamic Finance Sector Recovery

According to Alpen Capital and Alpen Asset Advisers, a global economic recovery, fiscal and monetary easing, as well as liquidity made available by major governments and central banks should drive post-pandemic growth and demand for Islamic financial assets.

Other factors leading to increased appeal of Islamic products include a growing Muslim population seeking Sharia-compliant financial instruments, rising sukuk issuance and the global trend towards ethical consumerism, according to a report by the company.

“The Islamic finance and wealth management industry has faced the twin shocks of adapting to the pandemic and historically low oil prices in 2020,” Sameena Ahmad, managing director of Alpen Capital, said on Tuesday. , during an online seminar.

The International Monetary Fund’s optimistic outlook for the global economic recovery should drive a recovery in the sector

Sameena Ahmad, Managing Director of Alpen Capital

“While the industry has slowed during the year after seeing record growth in 2019, it has shown resilience and total Islamic finance assets in 2020 are expected to match the previous year’s figures. “

However, in a separate space report Released earlier this month, S&P Global Ratings said the global Islamic finance industry will grow at a slower pace as the volume of sukuk, also known as Islamic bonds, contracts and major markets are grappling with economic downturns caused by the Covid-19 pandemic.

The $2.4 trillion (8.81 billion dirhams) Shariah-compliant financial sector is expected to register “low to mid single-digit growth” this year and in 2021, the agency says rating. The industry grew 11.4% last year on higher-than-expected sukuk issuance, according to S&P Global.

“The International Monetary Fund’s upbeat outlook on the global economic recovery should spur a recovery within the sector,” Ms Ahmad said.

the IMF said the global economy would rebound and grow 6% in 2021, after contracting 3.3% last year.

“Sukuk is expected to maintain its position as a major growth engine for the Islamic finance industry,” said Hameed Mohamed, executive director of Alpen Capital.

In 2019, government and corporate sukuk issuance accounted for 19% of the global Islamic finance industry. Despite initial concerns about the effects of the Covid-19 pandemic on Islamic capital markets, sukuk issuance in 2020 matched levels seen in 2019, according to Alpen Capital.

Sukuk is expected to maintain its position as a major growth engine for the Islamic finance sector

Hameed Mohamed, Executive Director of Alpen Capital

“The emergence of new avenues such as green sukuk and socially responsible investing are likely to drive growth. Going forward, core markets in the Middle East, North Africa and Southeast Asia regions, as well as non-core markets such as Kazakhstan and Uzbekistan, may see emissions higher,” Ms. Ahmad said.

Covid-19 has also led to calls for normalization in the Islamic finance sector, experts told the roundtable.

The pandemic has allowed the Islamic finance industry to turn inward and normalize, Mohamed said. Governments have started talking to each other to develop a uniform standard to position the industry for growth in the future, he said.

Further consolidation is expected in the Islamic finance sector after the pandemic.

“More than 500 Islamic banks operate in the world. Many Islamic institutions are concentrated in Malaysia and the GCC,” said Amin Fateh, Managing Director of Minhaj Advisory.

Several new asset classes have opened up within Islamic investing, such as charitable trusts, private equity, exchange-traded sukuk funds, Sharia-compliant mortgage investment funds and mutual funds of halal investment.

Such offerings are expected to attract a wider consumer base, improving the demand outlook for Islamic instruments, according to Alpen Capital.

Updated: June 30, 2021, 8:55 a.m.

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