Moody’s Investors Service has released a research announcement saying thatIslamic financing will expand faster than conventional loans across Southand Southeast Asia.
“Islamic banks in South and Southeast Asia have sufficient capital andliquidity to meet [the] increased demand for financing as economies recoverfrom the COVID-19 pandemic”, the statement by Moody’s read.
The credit rating agency also said that young, growing populations andgovernment efforts to develop the sector would support long-term growth.
Moody’s analyst, Tengfu Li, said in the statement that although theprofitability of Islamic banks in the two regions weakened in 2020, theircapital buffers remained mostly robust, supported by government measures tosoften the impact of the pandemic.
He said that strong capitalization would, in turn, enable the banks to meetthe increased demand for financing as economies recovered.——————————
“Liquidity has also eased or remained stable because of strong growth inlow-cost deposits as consumers and businesses cut spending, and as centralbanks, relaxed reserve requirements and carried out open marketoperations,” he said.
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Moody’s expects Islamic financing to expand faster than conventional loansacross South and Southeast Asia.
It said prime-age populations, or people aged 25 to 54 years, will boostthe long-term expansion of Islamic banking, especially given thesecountries’ large untapped markets.
“Key to the growth of Islamic banking are efforts by governments of majorIslamic banking markets to develop the sector, given its role in increasingfinancial inclusion and inherent alignment with environmental, social andgovernance (ESG) principles, which are growing in relevance amid thepandemic. Additionally, Islamic banking is part of a halal ecosystemgovernments want to create to spur economic development,” the statementsaid.
