ExamFinch.com My Study

Study guide

10.1 Overview of the Global Islamic Finance Industry

Practice this exam

IBFIM Associate Qualification in Islamic Finance AQIF

Track your progress as you read

Finished sections get a check mark.

1 Chapter 1: AQIF Orientation, Shariah Foundations & Rule-Making

1.1 About the AQIF Assessment & How to Use This Guide 1.2 Shariah Worldview, Fiqh & Legal Maxims 1.3 Primary & Secondary Sources of Shariah 1.4 Rule-Making in Modern Islamic Banking & Finance 1.5 Maqasid al-Shariah & Property Rights

2 Chapter 2: Islamic Economics, Core Prohibitions & Contract Essentials

2.1 Islamic Economics & the Fundamentals of Islamic Banking 2.2 Riba in Debts and Sales 2.3 Gharar, Maysir & Prohibited Activities 2.4 Contractual Essentials, Options & Unilateral Promises

3 Chapter 3: Exchange & Sale Contracts (Murabahah, Tawarruq, Salam & Istisna')

3.1 Murabahah & Bai Bithaman Ajil (BBA) 3.2 Tawarruq, Commodity Murabahah & BSAS 3.3 Forward Sales: Salam & Istisna'

4 Chapter 4: Leasing & Partnership Contracts (Ijarah, Mudarabah & Musharakah)

4.1 Ijarah & Ijarah Muntahiyah bi al-Tamlik (IMBT) 4.2 Mudarabah (Profit-Sharing Partnership) 4.3 Musharakah & Diminishing Partnership (MMP)

5 Chapter 5: Fee-Based, Security & Gratuitous Contracts (Wakalah, Kafalah, Rahn & Qard)

5.1 Agency & Service Contracts: Wakalah & Ju'alah 5.2 Security & Guarantee Contracts: Kafalah & Rahn 5.3 Gratuitous & Custody Contracts: Qard, Wadiah & Hibah

6 Chapter 6: Ethics in General, Islamic Ethics & Fiduciary Conduct

6.1 Ethics in General: Concepts, Sources & Theories 6.2 Foundations of Akhlaq in Islamic Finance 6.3 Market Conduct & Prohibited Trade Practices 6.4 Fiduciary Duties, Conflict of Interest & Confidentiality

7 Chapter 7: Treating Customers Fairly, VBI & Professional Standards

7.1 Treating Customers Fairly & Responsible Financing 7.2 Value-Based Intermediation (VBI) & Social Finance 7.3 Professional Conduct & AAOIFI Code of Ethics

8 Chapter 8: Malaysian Statutory Framework (IFSA & CMSA)

8.1 Islamic Financial Services Act 2013 (IFSA) Overview 8.2 Islamic Deposits vs. Investment Accounts under IFSA 8.3 Capital Markets and Services Act (CMSA) & Dispute Resolution

9 Chapter 9: Corporate & Shariah Governance in Islamic Financial Institutions

9.1 Corporate Governance in Islamic Financial Institutions 9.2 Two-Tier Shariah Governance Structure 9.3 Institutional Shariah Committee Roles & Operations 9.4 Shariah Control Functions & SNC Management 9.5 Issues & Challenges in Implementing Shariah Governance

10 Chapter 10: Islamic Finance Industry, Banking & Takaful Architecture

10.1 Overview of the Global Islamic Finance Industry 10.2 Islamic Banking System & Money Markets 10.3 Takaful Principles & Operational Models

11 Chapter 11: Islamic Capital Markets, Wealth Management & Contemporary Trends

11.1 Sukuk Structures & Market Mechanics 11.2 Shariah Equity Screening & Islamic Asset Management 11.3 Islamic Wealth Management, Social Finance & Contemporary Issues

10.1 Overview of the Global Islamic Finance Industry

Key Takeaways Explain This Topic AI

The IFSB's 2026 stability report puts global Islamic financial services industry assets at about USD 4.40 trillion (Q3 2025), up 13.4% year on year.

Islamic banking is the dominant segment at about 69% of industry assets. Sukuk outstanding passed USD 1 trillion, while Islamic funds (about 4%) and Islamic insurance (about 1.6%) remain small.

The GCC and the East Asia and Pacific region together hold about 75% of global Islamic finance assets. Islamic banking is the whole banking system in Iran, Sudan and Somalia, about three-quarters in Saudi Arabia, and about one-third in Malaysia.

Modern milestones include Mit Ghamr (1963), Malaysia's Tabung Haji (founded 1963), Dubai Islamic Bank and the Islamic Development Bank (1975), Bank Islam Malaysia (1983), AAOIFI (1991), and the IFSB (2002).

Industry infrastructure includes standard-setters (AAOIFI, IFSB, IIFM), a liquidity provider (IILM), a rating agency (IIRA), an industry body (CIBAFI), and the multilateral Islamic Development Bank Group.

Last updated: October 2026

Overview of the Global Islamic Finance Industry

Quick Answer: Islamic finance is now a global industry of about USD 4.4 trillion in assets, according to the IFSB's 2026 stability report (data to Q3 2025). Islamic banking makes up about 69% of that total, and sukuk outstanding have passed USD 1 trillion . Islamic funds (about 4%) and takaful (about 1.6%) are much smaller. The industry is concentrated in the GCC and East Asia and the Pacific , which includes Malaysia. It is supported by international institutions such as AAOIFI, the IFSB, the IIFM, and the IILM.

The AQIF description of Module 5 notes that the architecture's strength lies in giving customers options, but that it "still needs refinement and enhancement" to be as competitive as the conventional system. This section provides the big picture before the detailed sections on banking (10.2), takaful (10.3), the capital market (11.1–11.2) and wealth management (11.3).

1. How the Modern Industry Developed

  • Year Milestone
  • 1963 Mit Ghamr savings associations in Egypt (Ahmad al-Najjar), an early interest-free savings model

1963 Perbadanan Wang Simpanan Bakal-Bakal Haji founded in Malaysia; reorganised in 1969 as Lembaga Urusan dan Tabung Haji

1971 Nasser Social Bank, Egypt

1975 Islamic Development Bank (IsDB), Jeddah, begins operations; Dubai Islamic Bank, often described as the first modern commercial Islamic bank, is founded

  • 1977 Kuwait Finance House; Faisal Islamic Bank of Egypt
  • 1979 Islamic Insurance Company of Sudan, an early takaful company
  • 1983 Islamic Banking Act and Bank Islam Malaysia Berhad; Government Investment Issues (GII)
  • 1984 Takaful Act 1984 and Syarikat Takaful Malaysia
  • 1991 AAOIFI registered in Bahrain
  • 1993–1994 Malaysia's Islamic banking windows (1993) and Islamic Interbank Money Market (1994)

2002 IFSB established in Kuala Lumpur; Malaysia's first global sovereign sukuk (USD 600 million); IIFM established

  • 2010 International Islamic Liquidity Management Corporation (IILM) established in Kuala Lumpur
  • 2013 Malaysia's Islamic Financial Services Act
  • 2025 Global sukuk outstanding passes USD 1 trillion
  • 2. Components of the Islamic Finance Architecture

Loading diagram...

Each component depends on the others. Banks need sukuk and money-market instruments for liquidity. Takaful operators need Shariah-compliant assets to invest in. Wealth management uses funds, takaful and estate-planning tools. And all of them depend on Shariah governance and regulation.

3. Size, Composition and Geography (IFSB, 2026)

The IFSB's Islamic Financial Services Industry Stability Report 2026 reported:

  • Indicator Figure
  • Total industry assets About USD 4.40 trillion (Q3 2025), up 13.4% year on year
  • Islamic banking About 69.3% of the total; growth of 9.7%
  • Sukuk outstanding More than USD 1 trillion ; growth of 21.8%
  • Islamic funds About 4.1% of the total; growth of 25.6%
  • Islamic insurance (takaful) About 1.6% of the total; growth of 13.9%
  • Sukuk issued in 2025 About USD 234.5 billion
  • Concentration GCC and East Asia and the Pacific hold about 75% of global assets

Islamic banking's share of each domestic banking system (2025Q3, IFSB):

  • 100% in Iran, Sudan and Somalia;
  • about 75.8% in Saudi Arabia, 61.3% in Brunei, and 58.2% in Kuwait;

about 34.3% in Malaysia .

The IFSB counts 16 jurisdictions where Islamic banking is systemically important, with more than a 15% share.

Note

Different sources measure the industry differently. Some private estimates are higher because they include more types of institution. For exam purposes, remember the IFSB's broad picture: about USD 4.4 trillion , banking about 70% , sukuk over USD 1 trillion , and takaful the smallest segment.

4. International Infrastructure Institutions

Institution Base / founded Role

AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) Bahrain, 1991 Shari'ah, accounting, auditing, governance and ethics standards

IFSB (Islamic Financial Services Board) Kuala Lumpur, 2002 Prudential standards and guiding principles for regulators

IIFA (International Islamic Fiqh Academy) Jeddah; an OIC organ Fiqh resolutions on contemporary issues

IIFM (International Islamic Financial Market) Bahrain, 2002 Standardised documentation templates for Islamic capital and money markets

IILM (International Islamic Liquidity Management Corporation) Kuala Lumpur, 2010 Issues short-term US dollar sukuk that banks use for cross-border liquidity management

IIRA (Islamic International Rating Agency) Bahrain Credit and Shariah-quality ratings

CIBAFI (General Council for Islamic Banks and Financial Institutions) Bahrain Industry association: advocacy, research and training

  • IsDB Group Jeddah Multilateral development finance, trade finance and insurance for member countries
  • 5. Malaysia's Ecosystem

Malaysia is often described as having one of the most comprehensive Islamic finance ecosystems:

Regulators: Bank Negara Malaysia (banking, takaful, money market) and the Securities Commission (capital market), each with a statutory SAC.

Law: IFSA 2013 and the Central Bank of Malaysia Act 2009.

Markets: Bursa Malaysia, with Shariah-compliant equities and the Bursa Suq Al-Sila' commodity platform; the IIMM; and the world's largest local-currency sukuk market.

Safety net and redress: PIDM deposit and takaful benefit protection, and the Financial Markets Ombudsman Service.

Talent and research: IBFIM, INCEIF (founded by BNM), ISRA (the International Shariah Research Academy for Islamic Finance), and university programmes.

Dispute resolution: the civil courts' Muamalat bench and the AIAC i-Arbitration Rules.

6. Issues That Still Need Refinement

The IFSB and other observers highlight several structural issues:

Concentration: most assets sit in banking and in a few markets, so capital-market and takaful development lags.

Debt-based dominance: profit-and-loss sharing remains a small share of financing.

Liquidity management: there are still limited Shariah-compliant liquidity instruments and central bank facilities in many markets, despite the IILM and national systems such as Malaysia's IIMM.

Secondary markets: sukuk often trade with wider bid-ask spreads and less liquidity than conventional bonds.

Takaful pressures: rising claims and, in some markets, repeated qard support for deficit risk funds.

Standardisation: divergent Shariah interpretations across jurisdictions.

Governance and resilience: supervisory capacity, crisis management and resolution frameworks tailored to Islamic finance remain underdeveloped in many jurisdictions.

New frontiers: growth in Africa and Central Asia, digital and fintech business models, and sustainability-linked products such as green and SRI sukuk.

These issues reappear throughout chapters 10 and 11 and are typical material for AQIF questions on the strengths and weaknesses of the current architecture.