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How is Islamic finance helping economies recover during COVID-19?

Shereen Mohamed
Shereen Mohamed
Senior Research Analyst, Islamic Finance Refinitiv

Although COVID-19 took its toll on different global economies in 2020, the Islamic Finance Development Report highlights the resilience of the Islamic finance industry and how it is helping economies advance during this period.


  1. Islamic finance assets saw double-digit growth to US$3.37 trillion in 2020 and is projected to rise to US$4.94 trillion by 2025.
  2. Malaysia, Indonesia, Saudi Arabia, Bahrain and UAE rank as the most developed countries globally in the industry.
  3. Overall development for the industry is improving, albeit slowly. Fintech and ESG remain two areas of expansion.

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There is no doubt that 2020 was a difficult year for many economies around globe after the World Health Organization declared COVID-19 a pandemic on 11 March. This led global markets to brace themselves for crises that could potentially paralyse their essential sectors, including finance industries.

However, there was a silver lining for the finance industry from the last global financial crisis. Governments and authorities had learned many lessons and were better prepared.

Substantial stimulus packages and extraordinary measures were put in place to ensure that financial institutions could prioritise lending to support businesses and individuals through the crisis.

Refinitiv Eikon – Islamic Finance Development Indicator

This applied to Islamic banks as well, which hold around 70 percent of the world’s Islamic financial assets according to the Islamic Finance Development Report 2021.

By the end of 2020, the profitability of these Islamic banks were reduced because of non-performing loans, but the sector managed to stand its ground by registering a year-on-year double-digit growth in assets of 14 percent.

Sukuk, the second-biggest sector in Islamic finance, grew by 16 percent in 2020 as it helped sovereigns and corporations, especially in the GCC and Southeast Asia, to cope with difficulties presented by the pandemic.

When combining these with other sectors and asset classes, such as Islamic insurance operators, Islamic financing companies, Islamic funds and others, the Islamic finance industry posted a double-digit growth for the second year in a row, albeit by a slower 14 percent compared to 15 percent in 2019, to reach US$3.37 trillion by the end of 2020.

Source: Islamic Finance Development Indicator

Ecosystem growth in Islamic finance markets

Not only the report investigates the different asset classes of the industry, but it also looks into the industry’s overall ecosystem as well through its Islamic Finance Development Indicator (IFDI).

The indicator is the most comprehensive barometer of the state of the Islamic finance industry, with rankings provided for 135 countries around the world based on their performance in 2020.

Image from the Islamic Finance Development Indicator app. Click the image to request product details.
The Islamic Finance Development Indicator app. Click the image to request product details

It draws on five indicators considered to be the main drivers of development in the industry: Quantitative Development; Knowledge; Governance; Corporate Social Responsibility; and Awareness.

By measuring changes in these indicators over time and across countries, the IFDI provides a vital tool in guiding policy within the industry. Considering all of these, the IFDI score for this period improved marginally, which is still an achievement in an unprecedented pandemic year.

In 2020, we tracked a greater focus on Governance, as well as an increase in Islamic finance events as reflected in the Awareness indicator.

For instance, in February 2020 Saudi authorities strengthened Shariah governance measures for local banks. This, along with other improvements in the Kingdom, pushed its IFDI score and improved its ranking from fifth in IFDI 2020 to third in IFDI 2021, just behind Malaysia and Indonesia.

Indonesia is on an upward trajectory as well as it works hard to enhance academic and industry know-how, as well as improve Islamic finance literacy for its citizens.

In the last three years or so, Indonesia substantially upped its game supported by the efforts of a central government committee that has a direct line to both the country’s vice-president and president.

With the pandemic accelerating the digitisation of finance, Islamic fintech grew in visibility across the globe by getting into services such and buy-now-pay-later and crowdfunding.

We expect more similar developments in the coming years and not just in the core Islamic finance markets. At the same time, some of the key jurisdictions have not eased up on sustainability and ESG policies and initiatives. We expect these markets to continue expanding the nascent Islamic ESG space and doing so beyond the Islamic capital market.

The IFDI projects the size of the Islamic finance industry to rise to US$4.94 trillion in 2025, an average growth of 8 percent in the next five years. We have already seen strategic moves by Turkey, Saudi Arabia and Indonesia to drive this forward and these large markets have the potential to really spur the growth of the industry in the coming years.

Accessing IFDI raw data

The 2021 data for the Islamic Finance Development Indicator (IFDI) has been released through its app as part of Refinitiv’s Islamic finance offerings on our leading platforms, Eikon and Workspace.

Global Islamic finance industry landscape

At Refinitiv, we have focused on collecting and distributing financial and qualitative information on the industry. Our Islamic Finance Development Indicator (IFDI) is a comprehensive database that provides Excel sheets with the details of every Islamic institution that discloses its financials with a dollar-by-dollar breakdown of the industry.

It also provides profiles of over 1,500 institutions and information on more than 500 Islamic banks, 300 takaful entities, 12,000 outstanding sukuk and 1,300 Islamic funds. In addition, through the interactive map you can also view the underlying data for several countries within the universe.

The database provides policymakers, academics and market practitioners with precise numbers that reflect the indigenous values of the industry. It also assists economic policy decisions in relation to the industry and its effects on, and links within, the wider economic ecosystem.

Read the Islamic Finance Development Report 2021: Advancing Economies

To access the IFDI Database