By Nana Phiri and Ebrahim Moolla, Rand Merchant Bank
The Islamic finance sector is the largest component of the halal economy. The halal economy comprises industries that conduct themselves in compliance with Shari’ah (Islamic law) requirements and is estimated to have been worth US$4tr in 2015, as published by Reuters Zawya in its annual report of the state of the halal economy. Islamic finance makes up $2tr (50%) of this market, and is expected to grow at a CAGR of 9% to reach $3.5tr in 2021.
Financial institutions have a great opportunity to participate in this market and some have responded to meet the demand for Islamic finance by diversifying their service offering and, at the same time, include a population of 1.6 billion Muslims into the financial system. Islamic finance comprises the following sectors, with banking leading the way: