The global Islamic finance industry, whose assets are estimated at USD 1.4tn, will sustain a double-digit growth in the coming two to three years, Standard & Poor’s said on Nov 28.

The industry’s growth has remained strong in 2013 despite the uncertain recovery elsewhere in the world's financial markets, S&P noted.

After more than a decade of strong growth, the Islamic finance industry “is still in a formative stage,” the ratings agency said. It is a matter of time, however, before the industry “achieves critical mass, as the pool of assets broadens and deepens, and enhances liquidity.”  

Islamic finance remains a demand-driven market with scarce supply, S&P said. The industry remains dented by a limited range of Islamic financial centres and their various regulatory frameworks. The expansion and enhancement of existing centres, coupled with a more transparent regulatory environment, could build the momentum for the growth needed to break into the mainstream, S&P underscored.

Such a scenario will likely take centre stage in 2014. S&P commended the fact that newcomers in the industry such as Oman, Turkey and Nigeria, have started to trace the footsteps of fast-growing pioneers, such as Malaysia. Several countries, mainly in Africa, are also seeking to boost their Islamic finance industry, according to S&P.

The gradual set up of local and regional regulatory frameworks and establishment of standards will minimise the barriers that are preventing the industry from achieving its full potential, S&P said. The two regional Islamic finance centres, Asia (mainly Malaysia) and the GCC, are set to lead the way. Ambitious regional powerhouses like Turkey may also help foster a more systematic approach to channelling and shaping growth in Islamic finance, S&P noted.