Socially responsible investing and next generation set to drive growth in Islamic finance
Demand for Islamic finance solutions is set to increase in the GCC and Middle East in the next five years, according to a new report ‘The Evolution of Wealth Management in the World of Islamic Finance 2019’, commissioned by Jersey Finance and Hubbis.
Formally launched last month at a series of events in Abu Dhabi and Dubai (19 and 20 November) attended by more than 250 wealth advisers, the report highlights that promoters of Islamic wealth management – from the providers to the regulators – are gearing up to offer a greater array of Sharia compliant wealth management products and solutions to a client base that is generating private wealth at a remarkable rate.
Significantly, whilst it is those aged 50-70 who currently use Islamic wealth management solutions the most (59 per cent), 60 per cent of the increase in demand in the next five years will come from those aged 25-50, according to the report. Individuals are forecast to account for more than half (55 per cent) of this increase, versus 33 per cent from family offices and 12 per cent from institutions.
In addition, the report finds that socially responsible investing (SRI) and products offering environmental, social and governance (ESG) standards are driving the increase in demand for Islamic wealth management solutions. 92 per cent of respondents said that incorporating new investment principles such as SRI and ESG would help boost the Islamic finance wealth management market.
Meanwhile, as demand grows, the report points to a need for “better structures and proper governance,” with Islamic finance hubs in the Middle East, such as Dubai and Bahrain, revamping their trust regimes and continuing to improve their regulatory framework and market initiatives. Today, Malaysia leads the ranks as the largest Islamic finance hub, whilst Dubai is noted as the second ‘most sought-after jurisdiction’ followed by Jersey in third.
Joe Moynihan (pictured), Chief Executive Officer, Jersey Finance, says: “Islamic finance is clearly on a growth trajectory, which will be driven by the next generation of high net worth individuals who are more focussed on socially responsible investment - something that chimes very well with the tenets of Sharia compliant finance.
“The industry as a whole will need to work together to overcome hurdles to this growth, in terms of governance and the interpretation of laws and principles. However, backed up by a flexible legal system, forward-thinking regulatory regime and tax neutral environment, Jersey's Islamic finance proposition remains highly sought after on the global stage, and we are well placed to meet the needs of an increasingly international client base.”
Richard Nunn, Regional Head – East at Jersey Finance, who hosted the event in Dubai, added: “Our events in Abu Dhabi and Dubai gave us a really good platform to discuss with a key audience some fundamental trends in the Middle East and Asian wealth management landscape. What the report shows is that Islamic finance is no longer a niche product for Muslim investors alone; rather, we’re seeing more non-Muslim families and institutional investors seeking both performance and long-term value, as an alternative to conventional products and solutions. Jersey’s ability to provide solutions in this space is really exciting.”