Growing global concerns for achieving sustainable and environment-friendly development has led to a sharp uptake in green projects. The likes of the World Bank, European Commission, United Nations Environment Programme and other international agencies have all championed the cause for achieving a cleaner, resilient and sustainable world economic ecosystem.

Having reached USD1.91tln in the first half of 2014, the Islamic finance industry’s assets are expected to surpass the USD2tln asset mark globally during 3Q14. Driving this growth have been proactive efforts by national regulatory bodies in providing a facilitative, and largely cohesive, global environment for the industry. As many as 70 countries, and more than 600 financial institutions, offer Shariah-compliant financial products; firmly establishing Islamic finance as an alternative financial system.

The sukuk sector of Islamic finance has witnessed the emergence of a new growth driver in the form of Basel III compliant sukuk instruments for satisfying Basel III capital adequacy standards. Particularly, the Islamic finance industry had to innovate a new breed of sukuk instruments that have features of loss absorption to satisfy the AT1 and T2 requirements of Basel III.

Global Primary Sukuk issuances have soared in 1H2014, with some notable events adding new opportunities to the sukuk marketplace. The world’s first takaful sukuk and one of the very few real estate and investment trust (REIT) sukuk have demonstrated that innovation is thriving. The corporate sukuk sector recorded a tremendous revival with 66% quarter-on-quarter increase in volume; but perhaps the most notable highlight during 2Q14 was the debut of the United Kingdom in the sovereign sukuk market. In total sukuk were issued in 13 currencies during the first half of 2014, which shows great promise of things to come.

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Opportunities for Islamic finance abound across Africa, as development proceeds apace across the continent. Africa is fast becoming an important contributor to the global economy, with growth expected to be at 5.3% in 2014. However, productivity continues to be hampered by factors such as an infrastructure gap of USD48 bln per year. At the same time, low numbers of people who currently enjoy access to credit and bank accounts present an opportunity for Islamic financial institutions to capture the potential market for retail banking and small business financing across the continent.

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Sovereign and quasi-sovereign issuers are expected to drive growth in the global sukuk market throughout the year. New entrants such as Maldives made their debut in the market this year, with more expected to follow by the end of the year. Having recorded a new sukuk issuances volume of USD31.14bln in 1Q14, the global sukuk market continues to exceed the average quarterly volume, since 1Q12, of USD31bln. Malaysia continues to lead the way with more than 60% of the share of new sukuk issuances worldwide every quarter since 1Q12, followed by the GCC countries.

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The six-member Gulf Cooperation Council (GCC) and Malaysia are well-positioned to take the initiative to advance Islamic finance. By cooperating on various regulatory aspects, the two leading global Islamic finance hubs are creating new business opportunities that build upon strong existing ties. As a result, a surge of Shariah-compliant trade and investments is now in progress.

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Malaysia’s proactive approach to developing a holistic Islamic finance ecosystem has emphasised Shariah compliance in all aspects of legal, prudential, operational and governance matters. Malaysia’s regulators and the Malaysian finance industry have worked continuously and collaboratively for over 30 years to develop policies, guidelines and frameworks with an emphasis on robust shariah compliance, including the recently gazetted Islamic Financial Services Act 2013, regarded by many as a “landmark law” for its multifaceted regulatory objectives and its contribution towards the sector’s financial stability.

Elevating Board Effectiveness in a Financial Institution Boardroom

15% y-o-y growth in gobal takaful contributions for 2013 adds another successful year to the industry’s continuous double digit expansion since 2009. Forecasts for 2014 predict equally strong growth, while lessons learned from Malaysia’s response to some of the industry’s pressing challenges could drive the industry to greater heights.