Islamic finance assets in Southeast Asia nearing $1T mark
Industry experts say Islamic finance becoming major force in global markets as Malaysia, Indonesia strengthen their roles in banking
SINGAPORE (MNTV) – Malaysia and Indonesia are reinforcing Southeast Asia’s position as a major hub for Islamic finance as global assets in the sector approach $6 trillion and industry leaders forecast continued rapid growth over the next five years, reports The Edge Singapore.
According to data from the London Stock Exchange Group (LSEG), global Islamic finance assets reached approximately $5.98 trillion in 2024, representing annual growth of 21%.
The industry, which includes Islamic banking, sukuk (Islamic bonds), Islamic funds and takaful (Islamic insurance), is expected to expand by around 10% annually through 2029, potentially reaching nearly $9.7 trillion.
The latest figures highlight the increasing importance of Southeast Asia, where Islamic finance assets are nearing the $1 trillion mark. The region’s growth is being led by Malaysia, which ranks first globally in LSEG’s Islamic Finance Development Indicator (IFDI), and Indonesia, which ranks fourth worldwide.
Saudi Arabia and the United Arab Emirates occupy the second and third positions, respectively.
Islamic banking remains the dominant segment of the industry, accounting for 72% of total assets globally.
However, analysts point to substantial growth opportunities in Islamic investment funds and takaful, which currently represent only 5% and 2% of industry assets, respectively.
Malaysia’s leadership position reflects decades of institutional development and regulatory support. One of its flagship initiatives is Value-Based Intermediation (VBI), developed jointly by Bank Negara Malaysia, the country’s central bank, and the financial industry to encourage Islamic financial institutions to generate positive social and environmental outcomes alongside financial returns.
Since the initiative was introduced in 2018, Malaysia’s Islamic finance sector has facilitated more than $154.4 billion in VBI-aligned projects. These have included support for micro, small and medium-sized enterprises, affordable housing programs, public infrastructure and renewable energy projects.
Indonesia, meanwhile, is benefiting from its large Muslim population and youthful demographic profile, making it one of the world’s most promising Islamic finance markets. Together with Singapore’s role as a regional wealth-management center, Malaysia and Indonesia form a growing ASEAN corridor for cross-border Islamic and conventional capital flows.
Industry observers say Islamic finance is increasingly being viewed not only as a faith-based financial system but also as a framework for risk management and sustainable investing.
“This is leading to an ever-closer union of Sharia and sustainable principles and products, and this has helped the Islamic finance industry weather some of the biggest storms of the global economy, whether the financial crisis of 2008 or the collapse in oil prices following the onset of regional conflicts,” said Mustafa Adil, LSEG’s head of Islamic finance, and Khalid Khalafalla, acting CEO of the Islamic Corporation for the Development of the Private Sector, in the foreword to the Islamic Finance Development Report 2025.
The report notes that while Islamic finance now operates in 98 countries, assets remain concentrated in a small number of key markets. The Gulf Cooperation Council (GCC) countries and the wider Middle East and North Africa region each account for roughly $2.34 trillion in assets, while Southeast Asia continues to expand its share of the global market.
Experts say demand is being driven by high-net-worth individuals and family businesses seeking more integrated wealth management, succession planning and cross-border investment solutions.
“Islamic finance is no longer peripheral — it is a globally relevant financial framework shaping the future of cross-border wealth and capital,” said Sazzali Sabandi, head of Islamic banking at Maybank Singapore.
According to Maybank, Islamic financial solutions are increasingly being integrated into mainstream investment, financing and risk-management strategies across multiple jurisdictions.
“Islamic solutions today are not standalone; they are fully integrated into how sophisticated clients structure, grow and preserve wealth across markets,” said Anurag Mathur, Maybank’s head of group Islamic wealth management.
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