Bahrain Leads In Islamic Finance Market

Bahrain was also ranked as having the best governance in Islamic finance in the world.

Dubai — Bahrain has been named the GCC’s leading Islamic finance market and second out of 92 countries worldwide for the second year in a row, according to the ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI).

Bahrain was also ranked as having the best governance in Islamic finance in the world, with the report praising the well-established regulatory framework covering all sectors, and high levels of disclosure. The kingdom was  highly ranked in terms of its commitment to research and training and local awareness of the industry.

The IFDI report, which was released at a panel session at the Global Islamic Finance Forum (GIFF 2014) in Kuala Lumpur, is the only numerical measure representing the overall health and development of the Islamic finance industry worldwide. The IFDI is a measure of five key components that combine to depict the bigger picture of the state of Islamic finance in 92 countries: Quantitative Development, Governance, Corporate Social Responsibility, Knowledge and Awareness.

Rasheed Al Maraj, Governor of the Central Bank of Bahrain (CBB), said in 2001, the Central Bank’s predecessor, the Bahrain Monetary Agency, played a leading role in the development of regulatory regimes for the workings of Islamic financial institutions for more than two decades and contributed to the introduction of sharia-compliant products and became the first central bank in the world to develop and issue sukuk and Bahrain has continued to play a leading role in the introduction of these products through issuances. “The ranking Bahrain has received is testament to the role we play in the Islamic finance industry.”

Kamal bin Ahmed, Minister of Transportation and Acting Chief Executive of the Bahrain EDB said Bahrain has received and the recognition of the investment that the kingdom has made in developing the industry both here and internationally.

“Islamic finance has an important role to play within the wider financial sector in Bahrain and the GCC and the growth that the sector has seen is testament to that. We are committed to helping the industry to grow in Bahrain, to working towards addressing ways of boosting international growth and also to working with countries across the world as they look to establish Islamic finance industries in their own markets,” said Ahmed.

Khalid Hamad, Executive Director of Banking Supervision, CBB, observed that  Islamic finance sector continues to expand rapidly, both regionally and internationally. “We are proud of the role we play in supporting its development, we will continue studying ways in which we can help to develop the industry — both here in Bahrain, by ensuring regulation continues to evolve and taking steps to strengthen the kingdom’s Islamic finance institutions and internationally, by working with countries that wish to introduce Islamic banking. For example, in April this year we agreed a joint framework with the United Kingdom to enhance collaboration on Islamic finance at the UK-Bahrain Islamic Finance Summit in London.”

The UAE is emerging as a serious player in the Islamic banking market with total Islamic banking assets growing to about $95 billion  in 2013 compared to $83 billion in 2012, according to a report by Dubai Chamber of Commerce and Industry based on a recent study by Ernst and Young.

The report shows that the compound annual growth rate (CAGR) for Islamic banking assets in the UAE is expected to be about 17 per cent over the period 2013-2018.

PricewaterhouseCoopers said in a report that over $16 billion of sukuks are expected to be issued by 2014 with Dubai already emerging as a centre for this asset class. The UK, which announced its maiden sovereign sukuk issue at the 9^th WIEF in London last year, has already completed the issue earlier this year. With so much activity in the sukuk market, development and implementation of laws and regulations for the issuance of sukuks has been introduced by a number of countries, including those in North Africa, PricewaterhouseCoopers observes.

According to the Dubai Chamber research note, global financial assets are dominated by Islamic banking assets, which accounted for about 80 per cent of the total assets in 2013 while sukuks made up just 15 per cent of the market. However, the good news is that Sukuk bond issuance has significantly grown over the last decade. The upward positive momentum is more pronounced from 2010 when the global sukuk market, having overcome the initial shock of the financial crisis, witnessed a very successful run. In 2012 it crossed the $100 billion mark with issues valued at about $137 billion, and in 2013, it surpassed $100 billion for the second consecutive year, despite slowing down 12 per cent compared to 2012 with issues worth $119.7 billion, the Dubai Chamber research note said.

Originally published on www.khaleejtimes.com