Moody’s Investors Service says the growth of the Islamic finance sector will continue to outshine the conventional assets across core Islamic finance markets in coming years.

KUALA LUMPUR: The growth of the Islamic finance sector will continue to outshine the conventional assets across core Islamic finance markets in coming years, Moody’s Investors Service said.

It pointed out that the demand for Shari'ah-compliant financial instruments continue growing with Islamic banking penetration in the Gulf Cooperation Council (GCC) increased to 45 per cent as of September 2017 from 31 per cent in 2008.

It added that during the same period annual sukuk issuance more than doubled to US$100 billion (RM389 billion) from US$42 billion (RM163 billion).

Moody's vice president and senior analyst Nitish Bhojnagarwala said Islamic finance sector will be supported by governments, whose objective is to grow the industry both domestically and globally, as well as by continued demand for Islamic products.

“Islamic insurers' penetration into Southeast Asia and North Africa will also drive growth in the industry,” said Nitish, adding that the rapid growth is being driven largely by the country's late entry into Islamic banking

Nitish said globally, Saudi Arabia remains the largest market for Islamic finance overall with assets worth US$292 billion (RM1.14 trillion) as of September 2017, followed by Oman, recording a growth rate of 20 per cent for that period.

Sukuk issuances also grew 17 per cent in 2017 to US$100 billion (RM389.60 billion), driven largely by Gulf Cooperation Council (GCC) sovereigns.

Moody's expects a similar level of issuance in 2018, although the recent recovery in oil prices could lower financing needs for some sovereigns.

It said corporate and asset-backed sukuk activity was muted in 2017 due to more attractive conventional market opportunities and the trend is expected to remain the same this year.

Moody’s also said takaful’s growth momentum will continue this year over the medium term, spurred by strong growth prospects in Southeast Asia and North Africa.

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