Among the GCC countries and on a broader scale the OIC countries, the industry admits to seeing a lack of trade finance flows despite the obvious link between the Muslim countries, particularly in the Halal food and pharmaceutical sectors.
In light of this, global consultancy Ernst & Young is certain that ‘emerging rapid growth markets’ such as Turkey, Indonesia, Malaysia, Qatar, Saudi Arabia and the UAE will be the next beacon of hope for the Islamic trade finance sector. “These countries are emerging as hotspots for global businesses and they promise to permanently alter the global trade scene over the next 10 years,” consultants at EY said. This, they said, is attributed mainly due to their existing trade links with other main Islamic finance markets.
Gordon Bennie, EY’s MENA Financial services industry leader believes that this will directly contribute to core sectors within the Islamic finance sector: “Banking, insurance and other financial services sectors in these countries will grow as the economies mature and the middle classes expand, offering new opportunities for trade. Demand for more sophisticated financial services is already growing rapidly as wealth levels rise.”
As always, all initiatives are not without challenges, and Islamic banks, with their current small size and insular nature are first required to build international connectivity and scalable trade finance platforms to connect with cross-border businesses and financial institutions. Proper frameworks and awareness on Shariah compliant initiatives are also key to growing this sector. — NH