Once again the close of the year has come around more quickly than we ever thought possible, and it is time again for our annual review and outlook of the Islamic finance industry with a comprehensive overview of the highs, lows, peaks and troughs of the last 12 months – and what turbulent months they have been.
The euphoric highs of 2014 saw an explosion of non-Muslim sovereign issuances push Islamic finance into the mainstream public eye and record Sukuk volumes drive the sector forward amid strong interest, robust retail performance and a burgeoning global asset management industry. Increasing awareness of the strength, stability and sovereign support for Islamic banking brought a wider reach and greater diversity to the table, while the sector also gained traction in a broad range of new markets and asset classes.
Yet 2015 brought a rather different flavor to the table. The year started strong with some major Sukuk issuances from the IDB, Dubai Islamic Bank, the government of Ras Al Khaimah and of course the groundbreaking UKEF-backed issuance from Emirates Airline. However, as the year progressed the markets became increasingly turbulent: with oil down over 60% since July 2014 and severe commodity price volatility. The economic outlook of the major economies remained a concern and China’s weak performance led to a global backlash that hit emerging economies and Asia particularly hard. With growth forecasts slashed and liquidity tightening, emerging markets saw a flood of capital outflows as foreign investors worried about a US rate hike and falling returns pulled out their cash – while domestic investors also fled to safer havens such as the US and Europe. The low oil prices have already begun to impact monetary policy – Saudi Arabia has pulled in billions of dollars in sovereign wealth investments overseas to plug its widening fiscal deficit, while government bank deposits in the GCC have fallen and public spending sharply contracted, leading to tighter credit conditions, limited liquidity for Gulf banks and an overall slowdown in the market.
However, the year has also seen some major steps forward. Successful talks led to the firm expectation of sanctions on Iran being lifted within the next few months, resulting in an inundation of interest toward the country. Saudi Arabia earlier this year opened the Tadawul to foreign investors in a move that could make for exciting times in the market. Over in Africa, IFN together with the IDB and ICD held the first-ever IDB Islamic Finance Africa Forum in the Cote d’Ivoire this September to massive success, representing the interest and excitement in the huge potential of this final frontier for Islamic finance. Indonesia is growing its capabilities and revising its regulations in order to make a real mark on the industry, while China is taking further steps into the market including a number of recent Sukuk issuances and IFN’s first-ever China Forum will be held in Beijing in March 2016 in collaboration with the ICD.
As we move forward into 2016, we leave behind us a year that was both challenging and groundbreaking: rewarding and volatile. The lessons we learned are the importance of collaboration, of corporate governance, and of remaining true to the spirit and principles of Shariah that underpin our industry.
The goal now is to continue to raise awareness, educate the market and offer clear and straightforward solutions to meet the needs of clients across all borders and classes. IFN looks forward to assisting in this goal both through our current platform and with a range of exciting new products in 2016: including the launch of IFN CORPORATE, a brand new publication designed to educate the corporate world on the opportunities in Islamic finance, presenting the industry from a simple, straightforward and commercial perspective and specifically designed to raise awareness and generate new business for the Islamic market.
As we move into a brand new year, the prospects are exciting and the horizon is infinite. I hope that you enjoy this comprehensive and content-rich IFN Annual Guide 2016, and I wish all our readers all the best for the coming year.