Global Islamic finance assets reached $1.3 trillion in 2011
A new report from TheCityUK’s UK Islamic Finance Secretariat (UKIFS) indicates that Islamic finance assets worldwide continued a long run of growth to reach an estimated USD$1.3 trillion in 2011, 150% up over the previous five years.
Despite political unrest in some countries the industry has continued to expand, not only in its core markets of the Middle East but also in South East Asia and offshore jurisdictions such as Bermuda.
Islamic funds, for example, reached a new high of USD$58bn in 2010, with the available pool about ten times larger at over USD$500bn. Even so, competition is fierce, with average management fees worldwide down from 1.5% in 2006 to 1.0% in 2011.
Keith Phillips, Executive Director, UKIFS comments: “Our report once again shows that the UK continues to maintain its position as the leading Western provider of Islamic finance with assets of USD$19bn.”
Phillips adds: “The UK also benefited from a globally buoyant sukuk market in 2011, with issuance up 60% to USD$84bn. This was reflected in ten new sukuk listings on the London Stock Exchange’s markets in 2011 and two in early 2012. There are now 37 sukuk with a combined value of USD$20bn listed on the London Stock Exchange’s markets. Additionally, seven exchange traded funds and two exchange traded products are also listed on these markets.”
In the UK, banks, sukuk issuance and exchange traded products are buttressed by the strong infrastructure of professional support for Islamic finance deals and transactions. This includes over 25 major law firms and the largest four professional services’ firms, and this has yet to be seriously rivalled by any other European financial centre.
The UK is also making an increasing contribution to the development of Islamic finance education and skills with four professional institutions and 10 universities and business schools offering qualifications. These include the Chartered Institute of Management Accountants, Cass Business School, the University of East London and Durham University. With sharia compliant finance utilised for the redevelopment of Chelsea Barracks and the construction of the Shard of Glass in London, Islamic finance also has a crucial role to play in infrastructure development in the UK.
Considerable potential exists for expansion of the industry worldwide, although appropriate legal and regulatory structures are crucial for its development in individual countries. The work that is now being undertaken through UKIFS with its six practitioner-led workstreams covering topics from wholesale banking to skills is looking to address these issues by creating more efficient structures and processes and applying greater innovation to drive market development.