Islamic finance industry to continue expanding this year but lose momentum in 2018, says S&P

PETALING JAYA: The Islamic finance industry will continue to expand this year but is expected to lose momentum in 2018, said S&P Global Ratings.
Senior director and global head of Islamic finance Dr Mohamed Damak said several trends that will shape the industry’s growth in the second half of 2017 and 2018 have been spotted, including subdued economic performances in Islamic finance core countries primarily because of low but stabilising oil prices.
“Fragmentation and the lack of integration by business line and geography is another factor impeding growth. Despite positive strides in the past few months, the absence of a strong response to the long-standing debate about standardisation will continue to stymy the industry,” he said in a statement yesterday.
Damak said Islamic finance has much to offer the world’s economy, with a natural connection between Islamic finance principles, responsible finance, sustainable development goals and impact investing.
“All these aim to create a more equitable financial system that has a positive tangible impact on the economy and population,” he said, adding that the contribution of Islamic finance has so far been limited by the industry’s relatively small size and structure.
At year-end 2016, the industry’s assets reached US$2 trillion, slightly below S&P Global Ratings’ September forecast due to local currency depreciation and tepid economic performances in some core Islamic finance countries.
Meanwhile, sukuk issuance accelerated in the first half of 2017, which portends a good year.
“However, we think that 2018 is less certain as we don't see some of the large issuances of last year repeating next year,” said Damak.