The temporary slowdown in the growth of Islamic finance as a result of the Covid-19 pandemic could help unlock the long-term potential of the industry.
This is the finding of a report from rating agency Standard & Poor’s (S&P) into the global Islamic finance industry.
After a stellar performance in 2019, helped by a dynamic sukuk market, there has been “a significant slowdown of core Islamic finance economics in 2020,” stated S&P Global Ratings head of Islamic finance Mohamed Damak. While there is expected to be a “mild recovery” in 2021, there is also an opportunity to undergo reforms that could accelerate the industry’s long-term prospects.
Access to sukuk and other Islamic finance products has become even more time consuming and more complicated than conventional instruments as government coffers have been depleted. However, there is a greater awareness of the importance of standardisation while lockdown measures have also shown the importance of better use of technology and social instruments to create a more efficient market.
“With the right coordination between different Islamic finance stakeholders, we believe the industry could create new avenues of sustainable growth that serve the markets,” said Damak.
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