China’s Belt and Road initiative (BRI) is expected to spur development in Islamic finance sector globally. The BRI covers more than 100 countries including a number of Islamic nations where Islamic finance is popular,.
There is a connection established between Islamic finance and BRI, mainly as China seeks heavy investment to fund the construction of corridors stretching through the Middle East, Africa, and Europe.
Media reports said that a good portion of the BRI funds will be raised from Islamic finance products. Asian Infrastructure Investment Bank headquartered in China signed an MoU with the Islamic Development Bank to boost development in areas including Islamic finance.
Mohamed Damak, global head of Islamic finance at S&P Global Ratings said “some of the projects (that are) part of the (BRI) will go through some core Islamic finance countries and therefore might be financed in Sharia-compliant ways.”
Central Asian countries including Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan are good prospects for the BRI in the region. A Moody’s report found that those countries are backed by robust government support to make progress in developing legal and regulatory framework for Islamic finance.
The report identified that Muslims cover nearly one-third of the population in the CIS region. So there are higher chances for Islamic finance to develop in those countries along the Belt and Road initiative.
The sector is forecasted to grow $3.8 trillion by 2022, which is an increase from $2.2 trillion in 2016, based on Thomson Reuters data.
It appears that some of the Middle East countries are already taking note of the potential sector growth, in addition to infrastructure and economic development with the Belt and Road initiative, according to Adnan Chilwan, chief executive of Dubai Islamic Bank.
Massimo Falcioni, CEO of Etihad Credit Insurance said that the initiative will be crucial for Islamic financing and speed up halal trade.