IFSB issued the seventh edition of the financial stability report on the Islamic financial services industry. The report examines the implications, for the global Islamic financial services industry, of recent economic developments and changes in the global regulatory and supervisory frameworks. The report tracks developments and trends and examines the resilience of the three sectors of the Islamic financial services industry—Islamic banking, Islamic capital market, and Islamic insurance (takāful). For the analysis of the Islamic banking sector, the report utilizes data from the Prudential and Structural Islamic Financial Indicators (PSIFIs) database of IFSB.
The report tracks initiatives and developments in other international financial standard-setting bodies with emphasis on aspects that directly relate to the complementary role played by IFSB. Various initiatives of IFSB since the last report have also been highlighted, including a synopsis of the IFSB standards implementation survey, standards development, research and working papers, and various industry collaborations. The report covers emerging issues in the Islamic financial services industry, with a focus on the regulatory and supervisory concerns arising from the developments in blockchain technology. Included in the report are article contributions from the Central Bank of Kuwait, the Central Bank of Nigeria, and the Astana International Financial Center on the developments and prospects for the Islamic financial services industry in their respective jurisdictions. The key highlights of the report include the following:
- The Islamic banking sector retained its dominance in the global Islamic financial services industry. Out of the the 36 jurisdictions covered in the 2019 report, the domestic market share for Islamic banking in relation to the total banking sector continued to increase in at least 19 countries, remained constant in six, and declined in 11 jurisdictions.
- The performance of the Islamic banking sector grew by a mere 0.9% in 2018, compared to 4.3% in 2017. As at the second quarter of 2018, the sector accounted for 72% (76% in 2017) of the total value of assets of the Islamic financial services industry; this is mainly due to the depreciation of local currencies in terms of USD, especially in some emerging economies with a significant Islamic banking presence.
- The Islamic capital market sector, at end of 2018, accounted for 27% assets of the global Islamic financial services industry; this is supported by a positive performance due to the sovereign and multilateral ṣukūk issuances in key Islamic finance markets to support respective budgetary expenditures as well as a number of market debuts of sovereign issuance, including green sovereign ṣukūk to finance eco-friendly environment projects.
- The share of global takāful industry in the global Islamic financial services industry remained unchanged at 1.3%. Global takāful contributions grew by 4.3% (y-o-y and in nominal terms) in 2017, with a six-year (2012–17) compound average growth rate of almost 6.9%. At the end 2017, an estimated 306 takāful institutions, including retakāful and takāful windows, now offer takāful products in at least 45 countries.
Keywords: International, Banking, Insurance, Securities, Financial Stability Report, Islamic Financial Services Industry, Islamic Banking, Financial Stability, IFSB
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