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Ethics and financial stability attract investments in Islamic Finance

Rapid Muslim population growth and improving living standards may enhance the popularity of Islamic finance as a keen alternative to conventional financing mechanisms.


ADB Last Updated at 30 Jul 2018, 10:07 IST
Ethics and financial stability attract investments in Islamic Finance
  • Islamic financial products have an ethical focus (notably excluding investment in alcohol and gambling) with a risk profile that appeals to wider ethically conscious investors. (Image Credit: Twitter)

The Islamic finance industry has grown substantially in Asia over the last 2 decades. The Muslim populations in different Asian countries, especially in Southeast Asia, are increasing.

Rapid Muslim population growth and improving living standards may enhance the popularity of Islamic finance as a keen alternative to conventional financing mechanisms. In addition, investors from the Middle East and Asia are increasingly seeking to invest in products that are in line with their religious beliefs.

The governments and financial authorities in several Asian countries have played active roles in promoting the development of Islamic financial markets in line with the efforts to boost investments and achieve sustainable funding to enhance economic growth by tapping the huge liquidity from oil and commodity-producing countries.

The ethical character and financial stability of Islamic financial products may increase their attraction. Islamic financial products have an ethical focus (notably excluding investment in alcohol and gambling) with a risk profile that appeals to wider ethically conscious investors.

Given that in Islamic banking returns on investments are based on underlying economic activities and/or assets that structure the contractual relationship between transacting parties, it is possible to use the asset-based nature and risk-sharing aspects of Islamic finance for greater integration with the real economy and to improve the overall economic balance between the real and the finance sector.


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