In 2023, the market capitalization for Shariah compliant public listed companies in Malaysia reached more than 1,155 billion Malaysian ringgit, while the sukuk outstanding was at 1,271 billion Malaysian ringgit. Compared to 2019, the market capitalization was 1,096 billion Malaysian ringgit, while the sukuk outstanding amounted to 939 billion Malaysian ringgit.

Islamic Finance Market Size

The global Islamic Finance market is anticipated to expand rapidly, reaching an estimated value of USD 12.5 Trillion by 2033, up from USD 2.2 Trillion in 2023. This remarkable growth reflects a strong CAGR of 18.4% over the forecast period from 2024 to 2033. The expansion of the market is being driven by rising global interest in Sharia-compliant financial products, supported by growing populations in Muslim-majority countries and increased awareness of ethical finance principles.

In 2024, the Middle East and Africa (MEA) region maintained a commanding lead in the Islamic Finance sector, capturing over 53.4% of the global market, with revenues reaching approximately USD 1.1 Trillion. This dominance is strongly supported by deep-rooted cultural alignment, well-established Islamic banking institutions, and supportive regulatory frameworks in countries such as Saudi Arabia, the United Arab Emirates, and Malaysia.

As highlighted by Global Finance Magazine, the Islamic finance industry has reached a valuation of USD 3.9 trillion, with a presence in more than 80 countries, yet it remains highly concentrated, with nearly 95% of all Sharia-compliant assets held within just 10 markets. This geographic concentration underscores the pivotal role of a few economies in shaping the direction and growth of the global Islamic finance sector.

Saudi Arabia and Iran collectively dominate the industry, each accounting for an estimated 25% to 30% of total global assets. These two countries serve as anchors for Islamic financial activity, driven by longstanding institutional frameworks, deep-rooted religious practices, and government-backed Islamic banking systems. Malaysia, widely regarded as a global leader in Islamic capital markets, holds approximately 12% of total Sharia-compliant assets, supported by progressive regulation and innovation in sukuk issuance and halal investment products.

The United Arab Emirates maintains a strong foothold with around 10%, leveraging its position as a regional financial hub. Other key contributors include Kuwait and Qatar, each with about 5.5%, and Türkiye and Bahrain, with 3.5% apiece. Indonesia and Pakistan, despite their large Muslim populations, represent a smaller share - roughly 2% each - due to slower adoption and regulatory evolution.

Over the past decade, the Islamic finance sector has achieved an average annual growth rate of 10%, reflecting consistent demand for ethical, interest-free financial solutions. According to the 2023 State of Global Islamic Economy report, the total value of Islamic finance assets is projected to rise to approximately USD 5.95 trillion by 2026. However, this trajectory is highly dependent on the economic resilience and political stability of the aforementioned top 10 countries, which will remain central to the industry's global footprint in the coming years.

Asia-Pacific Islamic Finance Market is Segmented by Financial Sector (Islamic Banking, Islamic Insurance 'Takaful', Islamic Bonds 'Sukuk', Other Islamic Financial Institutions (OIFL's), and Islamic Funds), by Geography (Bangladesh, Pakistan, Sri Lanka, Indonesia, Malaysia and Rest of Asia-Pacific). The Report Offers Market Size and Forecasts for the Asia-Pacific Islamic Finance Market in Value (USD) for all the Above Segments.

Malaysia Funds Raised: Annual: Gross: Private: Debt Sec: Islamic Bonds data was reported at 2,713.423 MYR mn in 2017. This records an increase from the previous number of 2,581.000 MYR mn for 2016. Malaysia Funds Raised: Annual: Gross: Private: Debt Sec: Islamic Bonds data is updated yearly, averaging 347.500 MYR mn from Dec 1970 (Median) to 2017, with 48 observations. The data reached an all-time high of 13,829.097 MYR mn in 2002 and a record low of 0.000 MYR mn in 1993. Malaysia Funds Raised: Annual: Gross: Private: Debt Sec: Islamic Bonds data remains active status in CEIC and is reported by Bank Negara Malaysia. The data is categorized under Global Database’s Malaysia – Table MY.Z013: Funds Raised: Capital Market.

In 2022, the largest share of about 38.1 percent of the Islamic fund assets worldwide were in Malaysia. It was followed by Saudi Arabia, which had about 27.5 percent of the total Islamic fund assets. Islamic fund assets The Islamic funds segment has always been less popular than other conventional funds and are still under development with an opportunity for further growth. Many Muslim majority jurisdictions with a functioning Islamic finance regulatory framework and banking sector still have small Islamic funds segments. They are available in 28 jurisdictions, with five of those jurisdictions accounting for more than 90 percent of the total assets under management. Islamic funds have a limited scale as they are mostly concentrated in Saudi Arabia, Malaysia, and Iran. The Gulf Cooperation Council region held the largest value of approximately 36 billion U.S. dollars of Islamic fund assets in 2019. The most common Islamic fund asset worldwide is equity assets. The total value of assets under management of the Islamic funds sector has been increasing, supported by growth in the equity markets. Islamic financial services Islamic financial institutions offer a variety of Islamic financial services such as Islamic banking, sukuk, Islamic funds, and takaful. Islamic banking was the most popular service with a share exceeding 70 percent of the global Islamic banking services worldwide. The largest Sharia’ah compliant bank was Ayandeh Bank of Iran with assets exceeding 26 billion U.S. dollars in 2019. Further growth of the current Islamic services requires the simultaneous development of other segments of the Islamic capital market to offer a wider range of Islamic financial instruments for assets managers.

The Asia-Pacific Islamic finance market is experiencing robust growth, fueled by a rising Muslim population, increasing awareness of Sharia-compliant financial products, and supportive government initiatives across the region. The market's Compound Annual Growth Rate (CAGR) exceeding 3.50% indicates a sustained expansion trajectory throughout the forecast period (2025-2033). Key drivers include the increasing demand for ethical and socially responsible investments, the growing middle class with disposable income seeking Sharia-compliant financial solutions, and the development of innovative financial technology (FinTech) solutions tailored to the Islamic finance sector. This growth is further propelled by government policies promoting Islamic finance as a crucial sector for economic diversification and inclusive growth. While challenges such as regulatory complexities and the need for greater standardization exist, the overall market outlook remains positive. The market segmentation, encompassing various financial products and services like Islamic banking, Takaful (Islamic insurance), and Sukuk (Islamic bonds), demonstrates the market's multifaceted nature and contributes to its overall expansion. Major players like Maybank Islamic, CIMB Islamic Bank, and Bank Islam Malaysia are at the forefront of this growth, constantly adapting to evolving customer needs and market demands, leading to increased competition and innovation. The significant presence of established players indicates a mature market with considerable potential for further growth. The region's diverse economies present unique opportunities and challenges, requiring tailored strategies for individual markets. Future growth will be shaped by factors including technological advancements, evolving consumer preferences, and the regulatory landscape's responsiveness to the industry’s dynamic nature. The continuous development of innovative Sharia-compliant products and services will be crucial for maintaining momentum and capturing new market segments within the Asia-Pacific region. Furthermore, collaborations between Islamic financial institutions and FinTech companies can drive efficiency and reach a wider customer base, contributing significantly to the overall expansion of the market. The sustained expansion and considerable potential for further growth will likely lead to even higher market capitalization within the projected timeframe. Recent developments include: In February 2024, Telekom Malaysia Bhd (TM) and Maybank Islamic Bhd collaborated to provide the nation's first 5G-powered Islamic Banking as a Service (BaaS) solution. The partnership combines the best of TM's renowned Uni5G Postpaid Biz mobile products with the wide range of financial services offered by Maybank Islamic., In October 2023, Maybank Islamic Berhad and the digital software development company Synxsoft Sdn Bhd entered into collaboration to provide the Bank's Micro, Small, and Medium Enterprise (MSME) customers with a digitally frictionless process for obtaining Halal certification for their business.. Key drivers for this market are: Innovation and Product development in the Islamic Finance Industry, Government Support and Regulation expanding the market. Potential restraints include: Innovation and Product development in the Islamic Finance Industry, Government Support and Regulation expanding the market. Notable trends are: Emerging Islamic Finance Instruments in Asian Countries Drives the Market.

Malaysia Funds Raised: Gross: Private: Debt Sec: Islamic Bonds data was reported at 0.000 MYR mn in Oct 2018. This stayed constant from the previous number of 0.000 MYR mn for Sep 2018. Malaysia Funds Raised: Gross: Private: Debt Sec: Islamic Bonds data is updated monthly, averaging 116.085 MYR mn from Jan 1996 (Median) to Oct 2018, with 274 observations. The data reached an all-time high of 6,078.464 MYR mn in Sep 2012 and a record low of 0.000 MYR mn in Oct 2018. Malaysia Funds Raised: Gross: Private: Debt Sec: Islamic Bonds data remains active status in CEIC and is reported by Bank Negara Malaysia. The data is categorized under Global Database’s Malaysia – Table MY.Z013: Funds Raised: Capital Market.

The Islamic Financial Market report segments the industry into By Financial Sector (Islamic Banking, Islamic Insurance : Takaful, Islamic Bonds 'Sukuk', Other Islamic Financial Institution (OIFI's), Islamic Funds) and By Geography (GCC, MENA, Southeast Asia & Asia-Pacific, Europe, Rest of the World). Get five years of historical data plus five-year forecasts.

The Asia-Pacific Islamic finance market, encompassing Islamic banking, Takaful (Islamic insurance), and Sukuk (Islamic bonds), is experiencing robust growth, driven by a rising Muslim population, increasing awareness of Sharia-compliant financial products, and supportive government policies across the region. The market's Compound Annual Growth Rate (CAGR) exceeding 3.50% signifies a significant expansion projected through 2033. Malaysia, Indonesia, and Pakistan are key contributors, with established Islamic financial institutions and a strong regulatory framework. However, challenges remain, including the need for further product diversification to meet evolving customer needs and addressing infrastructural limitations in some regions. Growth is expected to be fueled by technological advancements, particularly in fintech, which can enhance accessibility and efficiency of Islamic financial services. The increasing integration of Islamic finance into mainstream finance also contributes to its overall expansion. The segmentation reveals a diverse landscape, with Islamic banking commanding the largest market share, followed by Takaful and Sukuk. While Malaysia currently holds a significant regional share, other countries like Indonesia, Pakistan, and Bangladesh show considerable growth potential due to their substantial Muslim populations and economic expansion. The “Other Fi” segment, encompassing various Sharia-compliant investment and financing vehicles, is expected to witness significant growth as the market matures and diversifies. Competition among established players like Maybank Islamic, CIMB Islamic Bank, and Meezan Bank, alongside emerging players, will intensify as the market expands, leading to innovative product development and improved service offerings. Further research and analysis are required to quantify the exact market size and growth projections for each segment and country, but the overall trend is strongly positive and indicates considerable opportunity for growth in the coming years. Recent developments include: In February 2024, Telekom Malaysia Bhd (TM) and Maybank Islamic Bhd collaborated to provide the nation's first 5G-powered Islamic Banking as a Service (BaaS) solution. The partnership combines the best of TM's renowned Uni5G Postpaid Biz mobile products with the wide range of financial services offered by Maybank Islamic., In October 2023, Maybank Islamic Berhad and the digital software development company Synxsoft Sdn Bhd entered into collaboration to provide the Bank's Micro, Small, and Medium Enterprise (MSME) customers with a digitally frictionless process for obtaining Halal certification for their business.. Key drivers for this market are: Innovation and Product development in the Islamic Finance Industry, Government Support and Regulation expanding the market. Potential restraints include: Innovation and Product development in the Islamic Finance Industry, Government Support and Regulation expanding the market. Notable trends are: Emerging Islamic Finance Instruments in Asian Countries Drives the Market.

The Asia-Pacific Islamic Finance Market was valued at USD 3.1 Trillion in 2024 is projected to reach USD 6.3 Trillion by 2032, growing at a CAGR of 9.4% from 2026 to 2032.

Asia-Pacific Islamic Finance Market: Definition/Overview

Asia-Pacific Islamic finance refers to financial processes and products that adhere to the principles of Islamic law (Sharia), with an emphasis on profit and loss sharing, asset-backed transactions, and the prohibition of interest (Riba) and speculative investments. Islamic finance has its roots in the greater region, which includes Muslim-majority Malaysia, Indonesia, and parts of the Middle East. This industry encompasses a wide range of financial services, including banking, insurance (takaful), capital markets, and investment funds, all designed to comply with Sharia law.

In 2022/23, the market size for Islamic fintech in Malaysia amounted to around 11.1 billion U.S. dollars, an increase of approximately six billion U.S. dollars compared to the market size recorded in 2021. The value of the Islamic fintech market in the country was forecasted to exceed 23 billion U.S. dollars by 2027. Vast potential in Islamic banking Islam is the majority religion in Malaysia, with around 63.5 percent of the population belonging to this religious group. The country also has a dual legal system, with Quranic-based Sharia law mainly governing the personal or family matters of the Malay Muslim population. Thus, there is a large market for Islamic finance in Malaysia. In 2022, the Southeast Asian country was the third-leading country with the largest Islamic banking assets in the world, after Iran and Saudi Arabia. Call for innovation in Islamic finance Acknowledging the potential of Islamic fintech, the current Prime Minister Anwar Ibrahim pledged 100 million Malaysian ringgit in May 2024 to foster innovation in Islamic finance. This financing has the potential to stimulate further growth in the country’s Islamic fintech market. As of 2023, there were 17 Islamic fintech companies in Malaysia. With support from the government, more Sharia-friendly fintech startups will likely flourish in the coming years.

In 2019, 24 Islamic finance conferences were hosted by Malaysia. In the same year, there were 463 events which consist of 143 conferences and 320 seminars. These events were part of the Islamic finance awareness campaign.

In 2018, the total assets of Shariah-compliant financing in Malaysia amounted to about 490.85 billion Malaysian ringgit. The Islamic finance industry in Malaysia is one of the most developed globally according to the Islamic Finance Development Indicator established by ICD and Thomson Reuters (2017).

The Islamic finance market, encompassing Islamic banking, Takaful (Islamic insurance), Sukuk (Islamic bonds), and other Islamic financial institutions (OIFIs), is experiencing robust growth, projected to maintain a Compound Annual Growth Rate (CAGR) exceeding 10% from 2025 to 2033. This expansion is driven by several key factors. The increasing global Muslim population, coupled with a rising awareness and acceptance of Sharia-compliant financial products, fuels significant demand. Furthermore, supportive government policies in many Muslim-majority countries actively promote the development of their Islamic finance sectors, creating a favorable regulatory environment. Technological advancements, such as the growth of fintech solutions tailored to Islamic finance principles, are also contributing to market expansion by improving accessibility and efficiency. Diversification within the industry, particularly the growth of Islamic funds and the increasing complexity of Sukuk instruments, further broadens the market appeal. While the market faces challenges such as fluctuating oil prices ( impacting some key regional economies), and potential regulatory hurdles in certain jurisdictions, these are largely outweighed by the positive growth drivers. The geographical distribution reveals strong concentration in the Gulf Cooperation Council (GCC) countries and wider Middle East and North Africa (MENA) region, but significant opportunities exist for growth in Southeast Asia and other regions with substantial Muslim populations. Major players such as Dubai Islamic Bank, National Commercial Bank Saudi Arabia, and others are leading this expansion, both organically and through strategic mergers and acquisitions. The long-term outlook remains positive, suggesting continued expansion and diversification within the Islamic finance landscape over the next decade. Recent developments include: January 2023: Abu Dhabi Islamic Bank (ADIB) has increased its ownership in ADIB Egypt to more than 52%. The UAE-based bank has acquired 9.6 million shares from the National Investment Bank (NIB), representing 2.4% of ADIB Egypt's share capital, the bank told the Abu Dhabi Securities Exchange (ADX). The deal has raised ADIB UAE's ownership in the Egyptian unit to 52.607%., July 2022: The Islamic banking group Kuwait Finance House (KFH) has agreed to buy Bahrain-based peer Ahli United Bank (AUB) through a share swap deal. With 115 billion USD in assets, the new bank is expected to be the seventh largest in the Gulf region. According to the revised terms, the Kuwaiti lender will offer one share for every 2.695 shares of Ahli United, implying an offer price of USD 1.04 per share.. Notable trends are: Malaysia is the top Score Value for Islamic Finance Development Indicator.

In 2019, 460 Islamic research papers have been covered in Malaysia. From 2017 to 2019, the Islamic finance research produced about 2.57 thousand research paper and about 1.74 thousand peer-reviewed journal articles.

In 2023, the Islamic Finance Development Indicator value score of Malaysia amounted to 103. In the same year, Malaysia was a strong leader in terms of indicator value to be ranked in the first position for all indicators other than corporate social responsibility (CSR) and governance.

Islamic Banking Software Market Outlook

The Islamic Banking Software Market size is projected to grow from USD 1.5 billion in 2023 to an estimated USD 3.5 billion by 2032, reflecting a robust CAGR of 9.7% during the forecast period. This significant growth can be attributed to the increasing demand for Sharia-compliant financial services, which are driven by a rapidly growing Muslim population and an increasing awareness and preference for ethical banking practices. The global push towards digital transformation in the banking sector, coupled with the need for efficient and compliant financial systems, further propels the demand for Islamic banking software solutions.

One of the key growth factors driving the Islamic Banking Software Market is the rising adoption of technology in the banking sector, especially in regions with a significant Muslim population. As banks and financial institutions look to modernize their operations and offer seamless services, the implementation of specialized software that adheres to Islamic laws becomes imperative. This digitalization wave is supported by favorable government policies in several countries that encourage the growth of Islamic finance and promote the integration of advanced technologies in banking operations. Additionally, the increasing penetration of smartphones and the internet across emerging economies is facilitating easier access to digital banking services, thereby boosting market growth.

Another crucial driver for the market is the growing awareness and acceptance of Islamic banking globally. With a significant portion of the global Muslim population seeking banking solutions that are aligned with their religious beliefs, there is a rising demand for banking products that do not involve interest (riba) and adhere to other Islamic principles. This has led to an increase in the number of Islamic financial institutions and Islamic windows in conventional banks, which, in turn, boosts the need for Islamic banking software to support Sharia-compliant operations. Furthermore, the global trend towards sustainable and ethical banking practices is also contributing to the growth of this market.

Furthermore, the competitive advantage gained by financial institutions through the adoption of advanced Islamic banking software is a significant growth factor. These software solutions offer enhanced operational efficiency, improved customer service, and the ability to customize products according to customer needs, which are crucial for retaining and expanding the customer base in a competitive market. Moreover, the integration of AI and machine learning technologies into Islamic banking software is enabling banks to offer personalized services, predictive analytics, and risk management solutions, thus enhancing the value proposition for end-users.

The evolution of Banking System Software has played a pivotal role in the modernization of Islamic banking. As financial institutions strive to offer seamless and efficient services, the integration of advanced software systems becomes essential. These systems are designed to handle complex banking operations, ensuring compliance with Sharia principles while maintaining high levels of security and reliability. The adaptability of banking system software allows institutions to customize their offerings, catering to the diverse needs of their clientele. This flexibility is crucial in a market where customer preferences and regulatory requirements are continually evolving. By leveraging cutting-edge technology, banks can enhance their operational efficiency, reduce costs, and improve customer satisfaction, ultimately driving growth in the Islamic Banking Software Market.

Regionally, the Middle East and Africa hold a dominant position in the Islamic Banking Software Market due to the high concentration of Muslim individuals and the presence of some of the world's largest Islamic banks. The adoption of Islamic banking in countries such as Saudi Arabia, UAE, and Qatar is significant, backed by supportive regulatory frameworks and government initiatives. The Asia Pacific region also exhibits substantial growth potential, driven by countries like Malaysia and Indonesia, where Islamic finance is well established. Meanwhile, regions like North America and Europe are gradually recognizing the potential of Islamic finance, leading to increased interest and investment in Islamic banking software solutions.

Component Analysis

The Islamic Banking Software Market, segment

The Malaysia and Indonesia takaful market size reached USD 1,400 Million in 2024. Looking forward, IMARC Group expects the market to reach USD 5,400 Million by 2033, exhibiting a growth rate (CAGR) of 14.2% during 2025-2033. The market is driven by the increasing demand for Shariah-compliant financial products and proactive government support, including regulatory initiatives and incentives promoting Islamic finance, attracting both local and foreign investments.

IMARC Group provides an analysis of the key trends in each sub-segment of the Malaysia and Indonesia takaful market report, along with forecasts at the country and state levels from 2025-2033. Our report has categorized the market based on insurance type and distribution channel.

In 2023, the household sector had the largest amount of financing from Islamic banks in Malaysia, with a total of approximately 560 billion Malaysian ringgit. The second-largest sector that had financing from Islamic banks was finance, insurance, real estate and business sector, with more than 100 billion Malaysian ringgit.

Malaysia Loans: IB: Islamic Bank: Finance, Insurance, Real Estate & Buss (FI) data was reported at 118,563.465 MYR mn in Mar 2025. This records an increase from the previous number of 117,636.965 MYR mn for Feb 2025. Malaysia Loans: IB: Islamic Bank: Finance, Insurance, Real Estate & Buss (FI) data is updated monthly, averaging 77,013.886 MYR mn from Jul 2021 (Median) to Mar 2025, with 45 observations. The data reached an all-time high of 118,563.465 MYR mn in Mar 2025 and a record low of 67,354.468 MYR mn in Sep 2021. Malaysia Loans: IB: Islamic Bank: Finance, Insurance, Real Estate & Buss (FI) data remains active status in CEIC and is reported by Bank Negara Malaysia. The data is categorized under Global Database’s Malaysia – Table MY.KB017: Loans: Outstanding: By Sector and Purpose: Islamic Banking System.