Making Cooperation Work COMCEC STRATEGY€¦ · Table 3. Breakdown of IFSI by Sector and by Region...

Dr. Mücahit ÖZDEMİR

Making Cooperation Work

For Building an Interdependent Islamic World

COMCEC

FINANCIAL OUTLOOK

COMCEC STRATEGY

13th Meeting of COMCEC Financial Cooperation Working Group

October 17th, 2019

Ankara, Turkey

2For Building an Interdependent Islamic World

COMCEC STRATEGYMaking Cooperation Work

OUTLINE

Recent Global Economic Developments

Financial Outlook of the OIC Countries

Islamic Finance



Global Economic and Financial Developments

Expectations towards the performance of the

global economy are slightly deteriorated.

First interest rate cuts by FED since 2008 Global

Crisis, to promote economic activities.

The trade war between the US and China

increases tensions and uncertainty for the global

economy.

Oil prices increase amid political disputes.

Figure 1. GDP Growth Rates of Selected Country Groups (%)

Source: World Bank Global Economic Prospects, June 4, 2019

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

Euro Area Advancedeconomies

East Asiaand Pacific

Europe andCentral Asia

LatinAmerica and

theCaribbean

Middle Eastand North

Africa

South Asia Sub-SaharanAfrica

World

2017 2018 2019f 2020f 2021f



Global Economic and Financial Developments

OIC countries average growth rate has slightly

increased to 3.8 percent in 2018, as compared to 3.6

percent in 2017.

OIC countries growth rate is expected to increase to

4.8 percent in 2020 and 4.7 percent in 2021.

Figure 2. GDP Growth Rates for OIC Country Groups (%)

Source: World Bank Global Economic Prospects, June 4, 2019

0,0

1,0

2,0

3,0

4,0

5,0

6,0

OIC OIC-Low IncomeGroup

OIC-Lower MiddleIncome Group

OIC-Upper MiddleIncome Group

OIC-High IncomeGroup

2016 2017 2018e 2019f 2020f 2021f



OUTLINE



Islamic Finance




World Bank The Global Financial Development Database is used. The database includes measures of;

size of financial institutions and markets (depth),

degree to which individuals can and do use financial services (access),

efficiency of financial intermediaries and markets in intermediating resources and facilitating financial

transactions (efficiency)

stability of financial institutions and markets (stability)

In order to achieve a well-functioning system, financial markets require financial depth, access, efficiency

and stability.




These indicators used to measure the characteristics of the financial markets are given in the table below:

Indicator

Code

Name of the Indicator

DEPTH

GFDD.DI.01

GFDD.DI.02

GFDD.DM.01

Private credit by deposit money banks to GDP (%)

Deposit money banks' assets to GDP (%)

Stock market capitalization to GDP (%)

ACCESS

GFDD.AI.01

GFDD.AI.02

GFDD.AM.02

Bank accounts per 1,000 adults

Bank branches per 100,000 adults

Market capitalization excluding top 10 companies to total

market capitalization (%)

EFFICIENCY

GFDD.EI.02

GFDD.EI.05

GFDD.EI.06

Bank lending-deposit spread

Bank return on assets (%, after tax)

Bank return on equity (%, after tax)

STABILITY

GFDD.SI.02

GFDD.SI.03

GFDD.SI.05

Bank nonperforming loans to gross loans (%)

Bank capital to total assets (%)

Bank regulatory capital to risk-weighted assets (%)

Table 1. Selected Indicators




Source: https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups, access date: 15 September 2019.

Categories CountriesNumber of

Countries

OIC-Low income group(1,025 USD or less)

Afghanistan, Benin, Burkina Faso, Chad, Guinea, Guinea-Bissau, Mali,Mozambique, Niger, Sierra Leone, Somalia, Syrian Arab Republic, GambiaThe, Tajikistan, Togo, Uganda, Yemen

17

OIC-Lower middle-income group(1,026 USD to 3,995 USD)

Bangladesh, Cameroon, Comoros, Cote d'Ivoire, Djibouti, Arab Rep. ofEgypt, Indonesia, Kyrgyz Republic, Mauritania, Morocco, Nigeria, Pakistan,Palestine, Senegal, Sudan, Tunisia, Uzbekistan

17

OIC-Upper middle income(3,996 USD to 12,375 USD)

Albania, Algeria, Azerbaijan, Gabon, Guyana, Iran, Iraq, Jordan,Kazakhstan, Lebanon, Libya, Malaysia, Maldives, Suriname, Turkey,Turkmenistan

16

OIC-High income group(12,376 USD or more)

Bahrain, Brunei Darussalam, Kuwait, Oman, Qatar, Saudi Arabia, UnitedArab Emirates

7

OIC Member Countries have been categorized in four major groups according to the World Bank Income Grouping Methodology:

Table 2. World Bank Country Groups



Financial Depth

Figure 3. Private Credit by Deposit Money Banks to GDP (%)

0

10

20

30

40

50

60

70

80

2012 2013 2014 2015 2016

Figure 4. Deposit Money Banks' Assets to GDP (%)

0

20

40

60

80

100

120

OIC-LIG OIC-LMIG OIC-UMIG OIC-HIG OIC-Average WorldAverage

2012 2013 2014 2015 2016

Figure 5. Stock Market Capitalization to GDP (%)

0

10

20

30

40

50

60

70

80

OIC-LMIG OIC-UMIG OIC-HIG OIC-Average World Average

2012 2013 2014 2015 2016



Financial Access

Figure 6. Bank Accounts Per 1,000 Adults

Figure 7. Bank Branches Per 100,000 Adults

0

200

400

600

800

1.000

1.200

2012 2013 2014 2015 2016

0

5

10

15

20

25

OIC-LIG OIC-LMIG OIC-UMIG OIC-HIG OIC-Average World Average

2012 2013 2014 2015 2016

Figure 8. Market Cap. Excluding Top 10 Companies to Total Market Cap. (%)

0

10

20

30

40

50

60

OIC-LMIG OIC-UMIG OIC-HIG OIC-Average World Average

2012 2013 2014 2015 2016



Financial Efficiency

Figure 9. Bank Lending-Deposit Spread (%)

0

1

2

3

4

5

6

7

8

9

OIC-LMIG OIC-UMIG OIC-HIG OIC-Average WorldAverage

2012 2013 2014 2015 2016

Figure 10. Bank Return on Assets (%, after tax)

0,0

0,5

1,0

1,5

2,0


2012 2013 2014 2015 2016

Figure 11. Bank Return on Equity (%, after tax)

15,713,8

8,6

11,412,6

02468

1012141618


2012 2013 2014 2015 2016



Financial Stability

Figure 12. Bank Regulatory Capital to Risk-Weighted

Assets (%)

0

5

10

15

20

25

2012 2013 2014 2015 2016

Figure 13. Bank Non-Performing Loans to Gross Loans (%)

0

5

10

15

20


2012 2013 2014 2015 2016

Figure 14. Bank Capital to Total Asset (%)

0

2

4

6

8

10

12

14

16


2012 2013 2014 2015 2016



OUTLINE



Islamic Finance



Islamic Finance Islamic financial sector continued its growth performance in 2018 but at a steady pace.

The total asset size of the Islamic finance sector has slightly increased from USD 2.05 trillion [2017] (that was the first time the industry recorded USD 2 trillion) toUSD 2.2 trillion in 2018 with 7.0% YoY growth rate [2017: 8.5%].

The relatively poor growth performance can be attributed to the depreciation in the local currencies of some emerging economies against the dollar.

Source: Compiled from IFSB 2019 and IFSB 2018.

Table 3. Breakdown of IFSI by Sector and by Region (USD billion)

Islamic Banking Outstanding SukukIslamic Funds

AssetsTakaful Contributions Total

Region 2017 2018 YoY 2017 2018 YoY 2017 2018 YoY 2017 2018 YoY 2017 2018 YoY

Asia 232.0 266.1 15% 239.5 323.2 35% 24.8 24.2 -2% 3.3 4.1 24% 499.6 617.6 24%

GCC 683.0 704.8 3% 139.2 187.9 35% 26.8 22.7 -15% 12.6 11.7 -7% 861.6 927.1 8%

MENA (ex-

GCC)569.0 540.2 -5% 17.8 0.3 -98% 0.1 0.1 0% 9.5 10.3 8% 596.4 550.9 -8%

Africa (ex-

North)27.1 13.2 -51% 2.0 2.5 25% 1.6 1.5 -6% 0.7 0.0 -99% 31.4 17.2 -45%

Others 46.4 47.1 2% 1.5 16.5 1000% 13.3 13.1 -2% 0.0 0.0 0% 61.3 76.7 25%

Total 1,557.5 1,571.3 1% 399.9 530.4 33% 66.7 61.5 -8% 26.1 27.7 6% 2,050.2 2,190.0 7%



Islamic Finance


Figure 15. Breakdown of IFSI by Region (%) Figure 16. Breakdown of IFSI by Islamic Finance Segments (%)


The concentration of Islamic finance in terms of the region was not changed in 2018. Total Islamic finance worth of the GCC region increased by 8% andreached USD 927.1 million [2017: USD 861.6] in 2018 that figures kept the region as being the largest domicile for Islamic finance assets.

Asia is one of the most potential regions to grow in Islamic financial market, however only Asia’s market share declined in 2018 to 16.9% [2017: 24.4%], eventhough total assets of the region significantly increased in the same period.

Islamic banking has been still the dominant segment of the industry in 2018, although its share was slightly decreased to 71.7% as compared to the 76.0%share in 2017.

24,4

42,0

29,1

1,53,0

16,9

44,9

34,4

0,83,0

Asia GCC MENA (ex-GCC) Africa (ex-North) Others

2017 2018

19,5

76,0

3,3 1,3

24,2

71,7

2,8 1,3

Sukuk Islamic Banking Islamic Funds Takaful

2017 2018



Islamic Finance - Banking Total assets of the Islamic banking in 2018 slightly increased from USD 1.557 trillion to USD 1.571 trillion [2017], and share of the

Islamic banking in the Islamic finance industry recorded 71.7% [2017: 76.0%].

In 2018, 12 countries where Islamic banking comprises more than 15% of total domestic banking sector assets, accounting for 91% of

the global Islamic banking assets.

Source: IFSB, 2019

Figure 17. Islamic Banking Share in Total Domestic Banking and Global Islamic Banking Assets (%)

100,0 100,0

63,6

51,5

40,6

26,5 25,220,6 20,1

15,6

32,1

0,7 0,5

20,2

6,310,8

6,29,8

1,9 0,7

Islamic Banking Share in Total Banking Assets by Country

Share of Global Islamic Banking Assets



Islamic Finance – Capital Markets

Source: IIFM, 2019

Figure 18. Global Sukuk Issuances (2001-2018, USD million)

In 2017, the sukuk market observed double-digit growth rates thanks to the large issuances; however, this performance did not

continue in 2018.

Total global issuance increased 5% in volume from USD 116.7 billion in 2017 to USD 123.2 billion in 2018.

Malaysia continued to dominate the sukuk market. The green sukuk issuance continued in 2018.

66,8

50,2

24,3

37,9

53,1

93,2

137,6 136,3

107,3

67,8

87,9

116,7123,2

2001-6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



Islamic Finance – Capital Markets

Source: IFSB 2019

Figure 19. Assets under Management of Islamic Funds (USD billion)

Despite the significant increase in the number of Islamic funds in 2018 [1,292], assets under management (AuM)

almost kept steady and reached USD 67.4 billion.

The top five jurisdictions, three of which are non-OIC countries, accounted for %85 [2017: 88%] of the industry’s

AuM as at the end of 2018, i.e. Saudi Arabia 34% [2017: 37.10%], Malaysia 32% [2017: 31.66%], Ireland 9.0%

[2017: 8.62%], the US 5% [5.25%] and Luxembourg 5% [2017: 4.76%].

75,871,3

56,1

66,7 67,4

1.161

1.220

1.167 1.161

1.292

1.050

1.100

1.150

1.200

1.250

1.300

1.350

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

2014 2015 2016 2017 2018

Assets Number of Funds (RHS)



Islamic Finance – Takaful

Source: IFSB, 2019

The takaful industry continued its upward trend in most countries.

The global takaful contributions reached USD 26.1 billion in 2017 and were mainly driven by the GCC region, which

had USD 11.7 billion takaful contribution.

The top four countries that are holding 87% of the total takaful contributions in 2017 has not changed: Saudi

Arabia, Iran, Malaysia, and UAE.

Figure 20. Global Takaful Contributions Growth (USD Millions)

15,2

18,7 19,2

22,223,4

25,1 26,1

2011 2012 2013 2014 2015 2016 2017

Thank You

Making Cooperation Work

For Building an Interdependent Islamic WorldCOMCEC STRATEGY

13th Meeting of COMCEC Financial Cooperation Working GroupOctober 17th, 2019

Ankara, Turkey

Making Cooperation Work COMCEC STRATEGY€¦ · Table 3. Breakdown of IFSI by Sector and by Region...

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