Global Islamic financial assets rose 150% over five years registering $1.3 trillion in 2011, a report by UK Islamic Finance Secretariat (UKIFS) said.
According the report, Malaysia, Iran and the Gulf remain fertile ground for future growth, but considerable potential also exists for expansion as more countries look to cultivate Islamic banking operations, including Australia, Azerbaijan, Nigeria and Russia.
The figures were based on UKIFS growth estimates projected on end-2010 figures from a survey of the top 500 Islamic Financial Institutions conducted by The Banker publication.
“Considerable potential exists for expansion of the industry worldwide, although appropriate legal and regulatory structures are crucial for its development in individual countries,” the report noted.
Morocco is also looking to launch its first fully-fledged Islamic bank in 2013, Reuters reported on Monday
A lack of global standardization among Islamic institutions has been one of the main challenges for the Islamic finance industry. While regulatory bodies such as AAOIFI in Bahrain and IFSB in Malaysia have attempted to provide standards for sharia-compliant transactions, they are guidelines rather than enforceable rules. The long-term impact of the Arab spring uprisings as new countries open up to Islamic finance remains to be seen and any further spread of political unrest could negatively affect prospects in some Middle Eastern countries, the report said.
Egypt, for instance, has raised the possibility of issuing a sovereign sukuk (Islamic bond), while Tunisia has set up a working group that will study how to develop Islamic finance in the country.
Sukuk issuance globally increased 62 percent to $84 billion in 2011, with Malaysia accounting for two thirds of that.
Islamic funds under management reached a high of $58 billion in 2010, with the available pool about 10 times larger at over $500 billion, the report found. Fierce competition, though, has driven down management fees worldwide from 1.5 percent in 2006 to 1 percent in 2011.
The new figures are higher than those predicted by Ernst and Young in a report in November, in which the consultancy estimated Islamic finance assets could climb 33 percent from 2010 levels to $1.1 trillion by the end of 2012.
Islamic assets represent only around 1 percent of the global financial market.
UKIFS is a wholly-owned subsidiary of TheCITYUK, a lobby group composed of members across the financial services sector, including lawyers, bankers and asset managers.