Market Trends of Islamic Finance Industry
Malaysia is the top Score Value for Islamic Finance Development Indicator
Malaysia has developed a comprehensive regulatory framework that supports the growth of Islamic banking and finance. This includes the establishment of Shariah-compliant financial institutions and instruments. Bank Negara Malaysia, the central bank of Malaysia, has been proactive in promoting Islamic finance. It has introduced policies and initiatives to create an enabling environment for Islamic financial institutions. Malaysia offers a wide range of Islamic financial products and services, including Islamic banking, takaful (Islamic insurance), sukuk (Islamic bonds), and Islamic investment funds.
The regulatory environment in Malaysia provides clarity and consistency for Islamic financial transactions. Regulatory bodies work to ensure compliance with Shariah principles while fostering innovation in the industry. Malaysia has invested in education and research to develop expertise in Islamic finance. Educational institutions offer specialized programs in Islamic finance, contributing to a skilled workforce in the industry. Malaysia has positioned itself as a global hub for sukuk issuance. The country has been successful in attracting international issuers and investors to its sukuk market.Malaysia has actively developed its Islamic capital market, with a focus on sukuk and Islamic fund management. This contributes to a vibrant ecosystem for Islamic financial instruments
Growth in Takaful Industry
The takaful industry is the smallest part of Islamic finance. It is only worth US$73 billion, or 2% of all Islamic finance assets around the world.The sector hit double-digit growth of 17% in 2021, a single percent higher than the year before. In places like the GCC, there is a lot of competition between companies that follow Islamic law and those that don't.The rise in medical and auto claims in markets like Saudi Arabia, where many takaful operators reported losses, is one thing that is making the market more competitive.The takaful sector is undergoing consolidation.
Most recently, in July 2022, Dar Al Takaful and Watania, both based in the United Arab Emirates, merged to become one of the largest insurance companies in a market that is very fragmented. Mergers and consolidations will reduce operators' fixed costs. In Saudi Arabia, SABB Takaful and Walaa Insurance received the regulator's nod in August 2022 to merge. However, Enaya's shareholders rejected the proposal to combine Enaya and Amana. In Bahrain, Solidarity completed its merger with T'azur in January 2022.
