4 million Muslims in the U.S. make up one of the highest earning demographics in the country. Unsurprisingly, they’re looking to invest in financial vehicles that mirror their own beliefs.
With assets growing at double-digit rates over the past decade, Islamic finance is ascending to greater prominence in the global financial system as it extends beyond predominantly Muslim countries into major economies around the globe.
Despite recent headlines, that certainly includes America. There are 4 million Muslims in the U.S. who make up one of the highest earning demographics in the country. Over 66 percent of American Muslims earn over $50,000 a year and 26 percent earn over $100,000 a year. Unsurprisingly, they’re increasingly looking to invest in financial vehicles that mirror their own beliefs.
Western and Middle Eastern interest in Halal-compliant investing has driven the Islamic Finance Stability Board to forecast that Shariah-compliant assets will grow to $6.5 trillion by 2020. The IMF has also responded to growing demand, forming an Interdepartmental Working Group to develop an institutional view on the industry,
build in-house expertise and better coordinate with different stakeholders.
At the same time, many institutions outside of the Gulf Cooperation Council — where a large portion of Islamic assets are concentrated — have adopted the basic principles of Shariah which include greater transparency, enhanced risk mitigation and profit-sharing.
This continued growth and recognition by organizations like the IMF will combine with several other catalysts in 2017 to fuel what could become a breakout year for Islamic finance. Let’s take a look at a few of the drivers behind the momentum.
Gold Becomes Shariah Compliant
In late 2016, The Accounting and Auditing Organization for Islamic Financial Institutions approved the Shariah Gold Standard — an important set of guidelines that will expand the variety and use of gold-based products in Islamic Finance.
This major development meant that gold became an acceptable investment in Islamic finance for the first time — joining equities, real estate, Islamic bonds (Sukuk) and insurance (Takaful) as vehicles approved for Islamic finance.
As many as 1.6 billion Muslims in the world, or nearly 25 percent of the population, will have greater access to the gold…