Islamic finance now holds roughly $6 trillion in assets, spanning close to 100 jurisdictions, according to a recent Standard Chartered study. The report, titled “Islamic Banking for Financial Institutions: The Islamic Finance Connector Era,” frames the sector as a growing conduit for capital, trade finance and digital infrastructure across a shifting global trade environment.
Liquidity flows from the Gulf to emerging markets
The analysis notes that liquidity in the Islamic finance system continues to deepen, yet the deployment of that capital is uneven. Gulf Cooperation Council (GCC) markets, rich in Shariah‑compliant funds, are positioned as primary sources of financing for fast‑growing economies in ASEAN, South Asia and Africa.
The study identifies three corridors—GCC‑centered, China‑centered, and a Middle East‑Türkiye route—as priority channels for trade, investment and working‑capital needs. Only about six percent of global sukuk issuance reaches South Asia and Africa, despite pressing infrastructure and development demands in those regions. This gap highlights a clear opportunity for financiers to bridge the funding shortfall.
New avenues and regulatory hurdles
Beyond traditional sukuk and loans, the document points to private credit and digital assets, including tokenisation, as expanding options for Shariah‑compliant capital. However, the growth of these instruments depends on the evolution of legal and governance frameworks that can accommodate digital‑first financing while respecting Islamic law.
Khurram Hilal, CEO of Group Islamic Banking at Standard Chartered, said the main obstacle is not a lack of liquidity but the difficulty of linking that capital to cross‑border opportunities. “Institutions building trusted links between capital, markets, and digital infrastructure will be best placed to support sustainable growth across emerging economies,” he said.
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In practice, the uneven deployment means some regions see a steady stream of sukuk proceeds, while others receive a fraction of the available pool. Improving connectivity—through better trade corridors and enhanced digital platforms—could rebalance the flow.
One cautious observation is that the success of these corridors will likely hinge on how quickly legal reforms keep pace with financial innovation. If regulators can provide clear guidance on tokenised assets, the sector may see a sharper rise in private‑credit deals, potentially narrowing the current disparity.
Standard Chartered’s findings also highlight the role of digital infrastructure in enabling efficient capital movement. As more institutions adopt blockchain‑based settlement systems, the speed and transparency of sukuk issuance could improve, making it easier for investors to target projects in underserved markets.
Meanwhile, the report warns that without coordinated policy support, the uneven distribution of Islamic finance capital could persist, limiting the sector’s ability to drive broader economic development.
