SINGAPORE, July 5: Islamic banking and finance is likely to continue growing in the Asia Pacific region. The industry is set to develop its own identity separate from conventional banking as new Islamic financial products are rolled out, said the report by Financial Insights, a company under market research and analysis firm International Data Corp (IDC).“The future for Islamic banking and finance in Asia looks bright and continued support by government authorities should ensure this future is grounded in strong, sensible regulation,” said Financial Insights analyst Abhishek Kumar.

He noted, however, that the industry's growth in recent years has occurred during a period of economic expansion, and there are concerns over how it would perform during a major financial crisis.

“How the system handles a major financial crisis or recession will be the true test of its sustainability,” Kumar said.

Conventional banking systems in several Asian countries crumbled during a financial crisis in 1997, exposing the industry's weaknesses and excesses. They have since recovered.

Islamic financial assets under management are currently valued at more than $400bn worldwide, with the industry growing at double digits annually, the report said. As the industry matures, there is likely to be a shift from Islamic banking products that resemble conventional ones to completely new offers, helping it to develop its own unique identity, the report added.

“The... industry has reached a point where, in some product areas, it can provide a credible alternative to traditional banking products,” it said, adding this will be complementary rather than competitive.—AFP