DUBAI – The $1trillion global Islamic finance industry is set to double in size between 2011 and 2015 with the sector increasingly viewed as a real alternative to conventional finance, according to Standard & Poor's (S&P). The global prospects for the Islamic finance industry will be the subject of a conference to be hosted by S&P in Dubai Tuesday. “The global crisis faced by conventional finance has led to Islamic finance increasingly being viewed as a credible alternative. Issuers and investors have realized that the risk-reward balance in both conventional and Islamic finance are not fundamentally different,” said Stuart Anderson, Managing Director & Regional Head, Middle East at Standard & Poor's. According to S&P, Islamic finance growth is currently led by countries in the GCC and Asia, which represent half of the global industry. Young, fast-growing Muslim populations, robust macroeconomic environments, and large infrastructure projects that require financing are the main drivers of this increasing growth. Malaysia leads the global industry while Saudi Arabia leads in the GCC. A key development expected to drive globalization and expansion of Islamic banking outside Asia and the GCC is the increasing attractiveness of sukuk among global investors. At a time when conventional banks' appetite for term loans is declining, S&P believes that sukuk could become a key funding source. Sukuk issuance looks set to cross the $100 billion threshold in September 2012, and is projected by S&P to grow 25 percent over 2012-2015 to reach about $200 billion a year in 2015. Malaysia, Indonesia, and the GCC are expected to account for a combined 85-90 percent of issuance mainly to finance infrastructure-related projects. This year, new GCC issuance (as of September 17) has totaled $19.9 billion across all asset classes compared with $19.4 billion of new issuance in all of 2011. Asia, meanwhile, has seen sukuk issuance worth $57.9 billion year-to-date, compared with $64.9 billion in 2011. In terms of number of issuances this year, the GCC has accounted for about 50 and Asia for 430 issuances (as of September 17) compared with 44 and 437, respectively, for 2011. S&P's Islamic finance conference, titled “The Globalization of Islamic Finance: Connecting the GCC with Asia and Beyond”, will explore how enhanced links between GCC and Asia can drive greater convergence and globalization in the industry. Other key subjects that will be discussed at the event include the prospects for Islamic banks in the GCC when compared to their Asian counterparts; the varying applications of Takaful in Asia and GCC; and how greater use of sukuk can boost GCC and Asian economies. A key theme at S&P's Islamic finance event will be increasing cross-border transactions between GCC and Asian Islamic finance markets. A recent S&P report sees growing infrastructure sukuk issuances by GCC companies in Malaysian ringgit providing a significant impetus to the development and globalization of the sukuk market. S&P rates four of the 10-largest Islamic banks worldwide, including the top two. It added Qatar Islamic Bank (A-/Stable/A-2) to its coverage in April 2012. – SG
