SGIE Report 2024/25: Islamic finance is in the ascendant, driven by investments, innovations  

The Islamic finance (IF) sector experienced continued growth in 2023/24, driven by strategic investments, and innovation across multiple markets. 

Islamic assets grew 9.2% to reach $4.93 trillion globally, with Islamic banking representing 72% of the pool. Islamic assets are forecasted to reach $7.53 trillion by 2027/28, at a compound annual growth rate (CAGR) of 8.9%, according to the State of the Global Islamic Economy 2024/25 Report.     

Multilateral organizations played a pivotal role in facilitating this growth. The Islamic Development Bank’s (IsDB) $1.15 billion investment in Kazakhstan’s water project was complemented by $3.25 billion in sukuk issuances. An additional €500 million sukuk supported sustainable development projects globally. 

The segment recorded 59 deals across mergers and acquisitions (M&A), venture capital and private equity funding in the 2023/24 period with a total value of $1.98 billion. The number of deals dipped 35.16% from previous year’s 91.

Ramping up local ecosystems
Muslim-majority countries announced initiatives to strengthen their domestic ecosystems. Pakistan introduced regulatory reforms and alternative Sukuk structures to undergird its Islamic capital markets.

Kuwait created regulatory roadmaps to promote Sukuk and Islamic investments, while Saudi Arabia facilitated digital banking advancements and regulatory improvements aligned with Vision 2030 objectives.

Across Southeast Asia, Malaysia emphasized digital transformation by establishing its first Islamic digital bank while Indonesia enhanced regional Sukuk regulations. 

The SGIE report outlined significant growth in green and sustainable Sukuk issuances, such as Warba Bank’s $500 million green Sukuk and Indonesia’s $600 million issuance. Initiatives in Tanzania and Afghanistan also deployed Islamic finance for social development and sustainability projects. 

Innovation is key
The momentum in sustainable finance bolstered innovation in the sukuk market, reflecting in Russia's inaugural digital Sukuk issuance leveraging blockchain technology, and Saudi Aramco’s $3 billion issuance.

Türkiye’s wealth fund’s $750 million Sukuk issuance also illustrated healthy investor appetite for innovative and sustainable financial instruments, according to the SGIE report. 

Innovation fostered growth and developments within Islamic fintech, suggestive from Saudi Arabia’s fintech licensing expansions, blockchain-based stablecoins in Indonesia, and digital investment platforms in Malaysia and the UK.

Takaful advancements incorporated regulatory enhancements and digital innovations, particularly in Saudi Arabia, Malaysia, and Indonesia.

On balance, continued expansion, innovation and investments within the Islamic finance sector highlight its essential role in fostering sustainable economic growth, financial inclusion, and technological advancement across global markets.

To download a copy of the State of the Global Islamic Economy 2024/25 Report, click here.