Islamic Finance industry seems promising in 2024: Zubair Mughal

As the global financial landscape finds its footing after the tumultuous years of the pandemic, Islamic finance shines as a beacon of resilience and responsible growth. With assets expected to reach a staggering US$5 trillion by 2025, this ethical and sustainable financial system is not just recovering, but thriving.

“Islamic finance has shown remarkable resilience in the face of unprecedented challenges,” asserts Mr. Muhammad Zubair Mughal, CEO of AlHuda Center of Islamic Banking and Economics (CIBE). “While navigating initial disruptions, the industry has demonstrated its inherent strengths, emerging stronger and poised for significant growth.”

Islamic banks are witnessing a steady rise in profits, with figures reaching up to 40% in some regions. This positive trajectory is bolstered by increased regulatory support, with initiatives like Shariah-compliant investments further solidifying the industry’s foundation.

The issuance of Sukuk, Shariah-compliant financial instruments, has seen remarkable prominence. Mr. Mughal predicts that Sukuk investments will reach US$160-180 billion by 2025, driven by impactful sovereign and corporate issuances. This surge positions Sukuk as a vital engine for Islamic finance expansion.

Saudi Arabia and Indonesia are establishing themselves as regional Islamic finance powerhouses, with dedicated government support propelling their growth. Meanwhile, initiatives like Pakistan’s Roshan Digital Account, a Shariah-compliant investment platform, are fostering innovation and driving local industry progress.

Islamic FinTech is on the rise, with a predicted 20% growth in the coming year. This technology-driven wave is revolutionizing access to financial services, opening doors for previously unbanked populations and streamlining operations across the industry.

Governance within Islamic finance is evolving, with organizations like AAOIFI and IFSB leading the charge in developing robust Shariah governance standards. Additionally, many countries, including Malaysia and Indonesia, are exploring Green Sukuk to drive environmentally sustainable development.

“Islamic finance is not just about financial products,” Mr. Mughal emphasizes. “It’s about fostering a more just and equitable world, aligned with the UN Sustainable Development Goals. By bridging the financial inclusion gap and supporting poverty reduction, this system empowers individuals and communities.”

Crowdfunding solutions are gaining traction in Southeast Asia, offering essential support to SMEs. Similarly, Islamic microfinance holds immense potential in alleviating poverty, with Indonesia leading the way through innovative initiatives.

The emergence of social finance, with its focus on innovative approaches and reduced intermediary costs, presents exciting opportunities for Islamic finance. Mr. Mughal believes this disruptive force will attract significant investments, making financial services more accessible for even the most underserved communities.

The increasing issuance of Green Sukuk showcases the commitment of Islamic finance to environmental sustainability. These impactful instruments are essential for tackling climate change and building a greener future.

Mr. Mughal concludes, “The future of Islamic finance is full with possibilities. From crowdfunding platforms in Southeast Asia to Green Sukuk issuance, innovative ideas are constantly emerging, propelled by technology and a shared vision for a better tomorrow. The journey ahead is filled with promise, and AlHuda CIBE is proud to be a part of it, contributing to the growth and impact of this dynamic and inclusive financial system by providing full range of services from advisory, consultancy to the Islamic finance vibrant qualifications.”