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Islamic Finance Market Segmentation By Financial Sector (Islamic Banking, Islamic Insurance – Takaful, Islamic Bonds ‘Sukuk’, Other Islamic Financial Institutions (OIFI’s) and Islamic Funds) and Region – Industry Forecast 2023-2028

Published: March, 2023
ID: 13013
Pages: 150
Formats: report pdf report excel report power bi report ppt

Islamic Finance Market Size, Share, Growth (2023-2028)

Islamic Finance Market was worth US$ 2.2 billion in 2023 and is anticipated to reach a valuation of US$ 3.02 billion by 2028 and is predicted to register a CAGR of 10.2%.

Islamic Finance Market Overview:

Islamic finance is the practice of raising cash in line with Sharia, or Islamic law, by enterprises and individuals. Islamic finance is a one-of-a-kind approach to socially responsible investing. This branch of finance is still developing. Despite the fact that Islamic finance dates back to the seventh century, it has only been codified since the late 1960s. The vast oil wealth stimulated fresh interest in and demand for Sharia-compliant products and practices, which accelerated the process. Risk sharing is an important idea in Islamic banking and finance. Understanding the importance of risk-sharing in raising finance is critical.In Islamic law, loan with interest payments is viewed as a relationship that benefits the lender, who charges interest at the expense of the borrower. Money, according to Islamic law, is a means for determining worth rather than an asset. As a result, it is necessary that one cannot rely just on money for income. Interest is considered riba, and it is forbidden under Islamic law. It is haram, or forbidden, because it is deemed usury and exploitative. Islamic banking, on the other hand, exists to help an Islamic society achieve its socioeconomic goals.Because of strong investments in Halal sectors, infrastructure, and Sukuk bonds, the worldwide Islamic financial market industry is quickly expanding, particularly through electronic modes in all products and services.

Islamic Finance Market Drivers

Because of strong investments in Halal sectors, infrastructure, and Sukuk bonds, the worldwide Islamic financial business is quickly expanding, particularly through electronic modes in all products and services. Global Islamic Finance assets surged by double digits year over year in 2019, according to key industry stakeholder groups, across its three primary areas (banking, capital markets, and TAKFUL). The biggest contributor to this industry is the worldwide Islamic banking sector, which is worth USD 1.99 trillion and increasing at a rate of 14%. Islamic banking accounts for 6% of worldwide banking assets.We could see progress toward a uniform global legal and regulatory framework for Islamic finance, which would assist to address the industry's decades-long lack of standards and harmonization. In Saudi Arabia, where mortgages and corporate loans are likely to expand as the kingdom presses forward with aspirations to diversify its economy, the industry is expected to receive some help in the following two years. As a result of the factors fueling the Islamic Finance market's expansion, investment is being directed toward large development opportunities in promising Islamic sectors. According to key industry stakeholder groups, worldwide Islamic Finance assets increased by double digits year after year throughout its three primary areas (banking, capital markets, and TAKAFUL).


The pandemic has slowed the expansion of the Islamic finance industry. Sukuk is one of the worst-affected segments, with a slowing trend expected. The prolonged regularization process of Sukuk was one of the key reasons why many people chose regular bonds to raise money during the Pandemic.Sukuk growth is being hampered by the Covid-19 epidemic and falling oil prices. As the Covid-19 pandemic spread and oil prices plummeted, global markets experienced unprecedented levels of volatility in the first two quarters of 2020. During the first quarter, some of the largest sukuk issuers, often from oil-exporting countries, held off on issuing sukuk due to market turbulence.

Recent Developments:

  • The HBKU hosted a webinar titled "Islamic FinTechs and the Halal Economy," which discussed the prospects in the halal economy, which was valued $1.9 trillion in 2020 and is predicted to reach $3.2 trillion by 2024, generating significant opportunities in food, cosmetics, fashion, and tourism.

  • Fitch Ratings has raised Emirates Islamic Bank's (EI) Viability Rating (VR) to 'bb' from 'bb-' and affirmed its Long-Term Issuer Default Rating (IDR) at 'A+' with Stable Outlook. The VR has been upgraded to reflect increased asset quality that is now comparable to peers.

Islamic Finance Market Segmentation

Global Islamic Finance Market - By Financial Sector:

  • Islamic Banking

  • Islamic Insurance – Takaful

  • Islamic Bonds ‘Sukuk’

  • Other Islamic Financial Institutions (OIFI’s)

  • Islamic Funds

Islamic banking is the largest sector in the Islamic finance business, accounting for 69 percent of the industry's assets, or USD 1.992 trillion. Commercial, wholesale, and other sorts of banks contribute to the sector's success. Commercial banking, on the other hand, continues to be the primary driver of the sector's expansion. In 2019, there were 526 Islamic banks. The number of participants, on the other hand, is not always indicative of the size of the industry in terms of assets. The top three Islamic banking markets, Iran, Saudi Arabia, and Malaysia, accounted for 63 percent of global Islamic banking assets, with Morocco being the fastest rising market, with assets doubling in 2021.

As a result of the economic consequences from Covid-19, Islamic banks around the world chose to protect their capital bases rather than increase operations in 2020. While Islamic banks' bottom lines in key markets have suffered as a result of the pandemic, this will be offset by liquidity injections from government bailout packages. Islamic banking assets are expected to exceed US$5.44 trillion by 2027 as global economies recover during the next five years.

Islamic banking has two advantages over traditional banking. The first is the belief that Islamic banks must adhere to a higher moral code. They will not take on unacceptably high levels of risk or lavish bonuses on their top bankers. The second point is that earnings are derived from identifiable assets rather than a jumble of derivatives and securities. Because Islamic banks cannot profit from interest, they rely on links to tangible assets like real estate and equity, charging ‘rent’ rather than interest.

Islamic Finance Market Regional Analysis:

  • North America

  • The Middle East and Africa

  • South Asia

  • Asia-Pacific

  • Europe

Shariah-compliant assets account for a large share of the GCC's overall banking assets. Islamic Banking assets account for 14% of overall banking assets in the Middle East and North Africa (MENA). The market share of Islamic banking in the Gulf Cooperation Council (GCC) has surpassed 25%, indicating that Islamic banks have grown systemically important in these countries.

With new launches of Islamic exchange-traded funds (ETFs) in a number of countries and ESG-related financial assets made available through digital media that appeal to millennials, the asset class climbed 30% in 2021.

By 2022, GCC Islamic financial assets had grown to USD 1253 billion, accounting for 44 percent of total assets, with the MENA accounting for USD 755 billion, or 26.3 percent, Southeast Asia accounting for USD 24 percent, and Europe, Asia, America, and Africa accounting for the rest. In Kuwait, Saudi Arabia, and the United Arab Emirates, Islamic banking has reached systemic proportions, accounting for at least 15% of banking system assets, according to the IFSB's definition of systemic. With a 27 percent asset share in retail banking and a 13 percent asset share in total retail and wholesale banking, retail Islamic banking in Bahrain has reached systemic proportions. In late 2012, Oman became a member of the Islamic Banking Association.

With a higher degree of standardization, a better focus on the industry's social role, and meaningful integration of financial technology or fintech, COVID-19 provides a chance for more integrated and revolutionary growth.

Islamic Finance Market Key Players

  1. Bank Al-Rajhi

  2. Dubai Islamic Bank

  3. Kuwait Finance House

  4. Bank Mellat Iran

  5. Bank Meli Iran

  6. National Commercial Bank Saudi Arabia

  7. Bank Maskan Iran

  8. Qatar Islamic Bank

  9. Abu Dhabi Islamic Bank

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