Asia-Pacific’s Islamic banking sector is poised for significant growth post-2025, with financing growth projected to accelerate towards 10% by 2028, according to a report by S&P Global Ratings. The report, titled “Asia-Pacific Islamic Banking Outlook 2026: Rebound Masks Regional Divergence,” highlights that whilst the sector’s assets are expected to climb to $550b, this growth conceals notable regional differences.
Credit analyst Nikita Anand from S&P Global Ratings noted, “We expect financing growth for Islamic banks in Asia-Pacific to edge up toward the higher end of our forecast range of 8%-10% over the next three years after a slowdown in 2025.” The total assets, currently around $430b as of the end of 2024, are anticipated to surpass $550b by the end of 2028, making up about 20% of the global Islamic banking market.
The growth is largely driven by domestic operations, although overseas business is gaining traction in some markets. In Malaysia, high competition is prompting major Islamic banks to explore growth opportunities in Southeast Asia, including Islamic wealth management. Meanwhile, Indonesia and Pakistan are expected to maintain higher growth rates than their peers, leveraging stronger margins and consolidation to enhance efficiency.
In contrast, Bangladesh faces challenges with asset quality, though growth may improve if political and external conditions stabilise in the coming year. The report also highlights the importance of digital innovation, diverse funding sources, and adequate capitalisation for banks to enhance their scale and competitiveness.
The findings underscore the dynamic nature of the Islamic banking sector in Asia-Pacific, with varying growth trajectories across different regions.
