ASEAN Islamic finance industry to cross $1t in 2026

Assets are concentrated in Malaysia, Indonesia, and Brunei with limited presence in other markets.

ASEAN’s Islamic finance industry is expected to cross US$1t by end-2026, after reaching nearly $950b by the end of June 2025, according to estimates from Fitch Ratings.

Malaysia, Indonesia, and Brunei will lead its growth due to their large Muslim populations, the ratings agency said. This enables regulations, access to sukuk, and potentially improvement of ties with Gulf Cooperation Council (GCC) countries.

Despite likely crossing the trillion-dollar mark, however, Islamic finance demand remains fragmented across ASEAN countries. It has limited presence in Singapore, the Philippines, and Thailand, and remains underdeveloped in Vietnam, Laos, Cambodia, and Myanmar.

Small Muslim populations and lack of regulatory frameworks contribute to the limited presence and underdevelopment in these markets.

“More interconnected ASEAN financial systems could support penetration,” Fitch Ratings wrote in a report in August 2025.

Malaysia is ASEAN’s largest Islamic banking market, with about $300b in assets, and Islamic financing represents 42% of total system financing at end-H1 2025.

Indonesia’s Islamic banking assets are at $56b in the first four months of 2025 or 7% of the banking system’s total.

Sukuk outstanding in ASEAN reached $475b or 16% of the debt capital market (DCM) at end-H1 2025, with Malaysia and Indonesia contributing to almost all of the issuance.

The two countries together represent 47% of the global sukuk market. Sukuk outstanding represent 59% of Malaysia’s DCM and 18% of Indonesia.

ESG sukuk is also concentrated in these two countries.

Brunei’s Islamic banks held nearly $10b in assets, making up 63% of its total banking assets as of end-2024.

The Philippines’ only Islamic bank had assets of about $20m; Thailand’s sole Islamic bank had $2.8b in assets as of end-Q1 2025.