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The IFSB Islamic Financial Services Industry (IFSI) Stability Report 2019

Date posted: 31 July 2019

31 July 2019, Kuala Lumpur - The Islamic Financial Services Board’s (IFSB) today issued the seventh edition of its annual flagship publication: the Islamic Financial Services Industry (IFSI) Stability Report 2019. The Report examines the implications for the global IFSI of recent economic developments and changes in the global regulatory and supervisory frameworks, tracks developments and trends as well as examines the resilience of the three sectors of the IFSI: Islamic banking, Islamic capital market and takāful.

The IFSB Secretary-General, Dr. Bello Lawal Danbatta stated that the IFSI Stability Report 2019 takes place a decade after the global financial crisis (GFC) and at a time when various financial reforms arising from the crisis are now being finalised and operationalised. He stated further that amidst the softened momentum of growth recorded in the global financial system in 2018 due to, among other reasons, increasing inflation and currency depreciation in a number of jurisdictions with significant presence of Islamic banking the global IFSI has recorded a 6.9% (y-o-y) growth rate, and is estimated to be worth about USD 2.19 trillion as at 2Q18.

Dr. Bello highlighted that based on various analyses contained in the IFSI Stability Report 2019, the global IFSI is well placed to maintain its positive growth trajectory, experiencing asset increases across all three of its main component markets. To achieve this, he remarked that the IFSI should be wary of the new challenges posed by evolving market structures due mainly to advancements in financial technology, increasing activities of the non-bank financial institutions, as well as increasing cyber risks among other operational issues.

Key highlights of the IFSI Report 2019 include:

• The Islamic banking sector retained its dominance in the global IFSI. 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 among the 36 jurisdictions covered in the IFSI Stability Report 2019.
• The Islamic banking sector’s performance grew by a mere 0.9% in 2018, compared to 4.3% in 2017, and as at 2Q18 accounts for 72% (76% in 2017) of the total value of IFSI assets mainly due to the depreciation of local currencies in terms of the USD, especially in some emerging economies with a significant Islamic banking presence.
• The ICM sector as at end of 2018 accounts for 27% of the global IFSI assets on the back of a positive performance due to the sovereign and multilateral ṣukūk issuances in key Islamic finance markets to support respective budgetary expenditures as well as number market debuts of sovereign issuances, including green sovereign ṣukūk to finance eco-friendly environment projects.
• The share of global takāful industry in the global IFSI remains 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%. As at end 2017, an estimated 306 takāful institutions, including retakāful and takāful windows, now offer takāful products in at least 45 countries globally.

The Report utilises data from the IFSB’s Prudential and Structural Islamic Financial Indicators (PSIFIs) database for the Report’s Islamic banking sector analysis.

The IFSI Stability Report 2019 is available for download from the IFSB website, www.ifsb.org.