The lack of data and information required for strategic decision-making in Islamic finance has been an enduring challenge for the industry. How does the Islamic Finance Development Indicator (IFDI) enable users to solve these problems and foster growth in new markets?
- For more than 40 years, the Islamic finance industry has been accommodating increasing demand for Shariah-compliant finance.
- However, in order for the industry to expand and to grow into new markets, it needs to resolve the significant challenge of the lack of data and information that is necessary for strategic decision-making.
- Refinitiv, in collaboration with the Islamic Corporation for the Development of the Private Sector (ICD), has developed the Islamic Finance Development Indicator (IFDI) app as part of its Islamic finance offerings on Eikon.
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The Islamic finance industry has been accommodating growing demand for Shariah-compliant finance for more than 40 years. However, as it moves towards greater maturity, a simplified tracker of its ongoing development has become essential.
The lack of data and information for strategic decision making is one of the key structural challenges for the industry, along with the absence of awareness and access to information and expertise.
Unless these challenges are addressed, it is unlikely that existing and new markets will be able to foster industry growth.
The Islamic Finance Development Indicator (IFDI) addresses this need.
It has been developed by Refinitiv in collaboration with the Islamic Corporation for the Development of the Private Sector (ICD) — the private sector development arm of the Islamic Development Bank (IDB) — the Islamic Finance Development Indicator (IFDI).
As a quantified reliable indicator, the IFDI aims to help regulators and market leaders to further understand how the different parts of the market are developing over time and what can be done to achieve further growth.
How can the IFDI be used in Islamic finance?
The IFDI is a composite weighted index that measures the overall development and health of the Islamic finance industry.
The interactive IFDI map provides and compares the rankings and profiles of 131 countries, drawing on instrumental factors grouped into five broad areas including Knowledge, Governance, Corporate Social Responsibility (CSR) and Awareness.
Through the interactive map, you can also view the underlying data for several countries within the universe.
The overall objectives are simplification, quantification, and communication. The Indicator is intended to simplify the fragmented elements of the industry and make its whole, as well as the sum of its parts, quantifiable so that such information can be communicated to and understood by the wider world.
The scores are adjusted based on each country’s size, and the universe includes all Organization of Islamic Cooperation (OIC) countries and all non-OIC countries with a presence of Islamic finance.
The IFDI database provides Excel sheets with the details of more than 1,400 Islamic institutions with a dollar-by-dollar breakdown of the $2.5 trillion Islamic finance industry.
It includes the information of more than 400 Islamic banks, 300 takaful entities, 12,000 outstanding sukuk, 1,300 Islamic funds, and 500 other Islamic finance providers. This is to ensure our clients are empowered with the market information that they require.
The database will provide policymakers and market practitioners with precise numbers that reflect the indigenous values of the industry, and will assist economic policy decisions and the effects on and links within the wider economic ecosystem.
How does the IFDI measure development?
The IFDI aims to introduce a new way of measuring development by combining data of the different industry elements into a single composite indicator.
The Indicator does not just focus on the overall size and growth of Islamic finance sectors in different countries, it also evaluates the strength of the overall ecosystem that assists in the development of the industry, including the areas mentioned earlier — Knowledge, Governance, CSR and Awareness.
The IFDI database provides detailed infromation across the complete eco-system of Islamic finance. This includes not only the banks and financial institutions, but also over 600 islamic finance education providers, 1,000 Shariah scholars’ data, and a comprehensive set of data around news titles and events from the Islamic finance industry.
With the introduction of the IFDI App, Refinitiv aims to continue developing our leadership status as the premium provider of data, insights and expertise in the Islamic finance world.