IslamicFinance.de

The Islamic finance sector is a subset of the overall domestic financial sector. Governments face pretty much the same contingent liabilities with Islamic banks as they do with conventional ones. Some 73% of total Islamic finance assets are within Islamic banks. Takaful accounts for a mere 2%, while the remainder 25% constitute assets within capital market instruments such as sukuk, mutual funds and others. Thus, within the Islamic finance space, banking is at least three times the size of capital markets. Policymakers would be well advised to seek not just to grow Islamic finance, but focus on the capital markets component. This is not just good from a macroeconomic vulnerability viewpoint, but is also more in keeping with the Shariah philosophy of risk sharing.