APAC Islamic finance chases Gulf dominance with 22% share

Malaysia, Iran, and Saudi Arabia account for 72% of assets under the reporting framework.

East Asia and the Pacific holds 21.9% of the world’s Islamic finance market, which is forecasted to reach $9.7t in assets by 2029.

The London Stock Exchange Group and the Islamic Corporation for the Development of the Private Sector (LSEG-ICD) project the assets to maintain a steady 10% annual growth through 2029, according to CoinLaw’s report. Whilst the Gulf Cooperation Council (GCC) continues to hold the largest regional asset block at 53.1%, the 10% annual growth pace projected by the LSEG-ICD highlights a steady, long-term upward trajectory for Sharia-compliant finance globally.

This long-term forecast follows a strong performance in 2024, where total Islamic financial services industry assets reached $3.9t, marking a 14.9% year-on-year increase according to the Islamic Financial Services Board (IFSB).

The expansion was driven by a 17.1% growth rate in Islamic banking, which remains the cornerstone of the industry by accounting for 71.6% of all assets. 

Sukuk (Islamic bonds) make up the second-largest segment at 23.3%. Malaysia remains a primary engine of this momentum, sitting alongside Iran and Saudi Arabia as the world's three largest Islamic finance markets. 

Together, these three nations control $4.3t, or 72% of total assets under the LSEG-ICD reporting framework. 

Individually, Malaysia commands a 12% share of global Sharia-compliant assets, leading all nations outside the Middle East, whilst regional neighbours Indonesia and Pakistan each hold a 2% global share.

The APAC region also maintained its position at the centre of the fixed-income market. Malaysia remains the world's largest cumulative issuer of sukuk, utilising both local ringgit and US dollar programmes. 

Alongside Indonesia, it led non-Arabic sovereign issuance in 2024, contributing heavily to the $205b in global sukuk issued during the year. 

Total outstanding global sukuk reached $902.8b, whilst Environment, Social, and Governance (ESG) sukuk surpassed $50b in outstanding value following $15.4b in new issues.

Outside the capital markets, the wider APAC region is a key hub for digital expansion. Ten countries, including Malaysia and Indonesia, house 80% of the world's 484 Islamic fintech companies. 

This global fintech sector generated $198b in transaction volume over the 2024/25 period and is projected to reach $341b by 2029.