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 from Jersey Finance – The Evolution of Wealth Management in the World of Islamic Finance 2019.
According to the report, promoters of Islamic wealth management, from providers to regulators, are gearing up to offer a greater array of Sharia-compliant wealth management products and solutions to a client base that is rapidly generating private wealth.
While those aged 50 to 70 currently use Islamic wealth management solutions the most (59%), in the next five years 60% of the increase in demand will come from those aged 25 to 50, says the report.
Individuals are forecast to account for more than half (55%) of this increase, versus 33% from family offices and 12% from institutions.
SRI increase
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.
Among respondents, 92% said 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 revamping their trust regimes and continuing to improve their regulatory framework and market initiatives.
Malaysia is currently the largest Islamic finance hub, with Dubai considered the second ‘most sought-after jurisdiction' and Jersey in third.
Joe Moynihan (pictured), Chief Executive Officer at Jersey Finance, commented: “Islamic finance is clearly on a growth trajectory, which will be driven by the next generation of high-net-worth individuals who are more focused on socially responsible investment – something that chimes 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.”
• The Evolution of Wealth Management in the World of Islamic Finance 2019 can be downloaded here