Manama: An estimated $1 trillion worth of additional Sharia-compliant assets are scattered across segments like small savers, affluent wealth management, pension and retirement plans, Awqaf, infrastructure and trade finance, a top industry thinker has said.

According to Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) board of trustees chairman Shaikh Ebrahim bin Khalifa Al Khalifa, this was in addition to the more-structured $2trn Islamic finance industry that exists today.

Speaking at the opening of the AAOIFI-World Bank Annual Conference on Islamic Banking and Finance at the Ritz-Carlton Bahrain Hotel and Spa, Shaikh Ebrahim said the prize was sizeable and industry stakeholders needed to urgently focus on completing this financial circle.

He said this was key to the industry transforming from being a “start-up” industry to more of a “growth play”.

The two-day conference is organised in partnership with the World Bank and under the auspices of the Central Bank of Bahrain (CBB).

“Amongst the various aspects of the financial business, you will see that we have made impressive progress when it comes to Islamic commercial and retail banking.

“There is some respectable and ongoing progress on Takaful and capital markets front as well,” he added.

Shaikh Ebrahim said he expects the industry to grow in the future to serve 250 million customers, be at least five per cent of the world’s financial economy and employ 2m professionals and bankers, almost twice of today’s level.

“In regions with greater presence of Islamic finance or greater demand for Islamic finance, there is huge infrastructure development and opportunities.

“Additionally, the economic development levels for such regions are far below saturation point.

“This provides a great potential for leveraging the Islamic financial services, and bridging the demand and supply gap.”

Moreover, he said, in a number of developing countries, particularly with large Muslim populations, a majority of the public still remains underserved or unserved by the financial services segment.

“Today, the Islamic banking industry has less than 90m consumers.

“In contrast, the quick-win Muslim consumers are more than 1.7 billion and the total GDP of Organisation of Islamic Co-operation (OIC) markets is now in excess of $7trn.”

According to him, public access to financial institutions accounts averaged around 14pc in the Middle East and was very low as compared to the rest of the world.

“I believe, we need to revisit the industry’s purpose of existence and the impact we are making today.

“For example, we need to ask ourselves which economic sectors will have the highest impact for our people, towards generating employment and economic activity,” Shaikh Ebrahim said.

“The prevailing oil prices require accelerated diversification of our economies.”

The question, he said, that needed to be asked was: Which sectors create the multiplier effect and were the least dependent on government subsidies?

“We, as an industry, then need to align Islamic finance more closely to help build these sectors.

“We also need to transform it to be more inclusive.”

The industry, according to him, had only focused on exclusions for a very long time.

“Yes, there is no compromise on leverage, interest, prohibited activities, etc. but then we equally need to have a positive focus on supporting those businesses that are socially responsible and create a stronger economic impact,” Shaikh Ebrahim said.

“Finance cannot be isolated from the wider ethical and moral codes.

“We need to build financial and business models that seek to share risk more fairly, between our and future generations.

“Renewable technologies, fair labour practices, healthcare, smart cities, education, transportation, and infrastructure are some of the themes that demand our attention.

“The question remains whether we have the criteria, the structures and the tools in place, to embed these in our decision,” he added.

avinash@gdn.com.bh