KUALA LUMPUR: Islamic finance is evolving beyond its traditional role as a funding source into a key enabler of cross-border capital, trade and digital infrastructure as geopolitical shifts and supply chain diversification reshape global commerce, Standard Chartered said.
In a statement, the bank said the industry now manages about US$6 trillion in assets across nearly 100 jurisdictions, with growing opportunities to channel capital between liquidity-rich markets and fast-growing economies.
Its report, Islamic Banking for Financial Institutions: The Islamic Finance Connector Era, said shifting trade patterns and the push for more resilient supply chains are strengthening Islamic finance's role in connecting the GCC, Asean, South Asia, Africa and other emerging markets.
Despite significant infrastructure financing needs in South Asia and Africa, only 6% of global sukuk capital currently flows to these regions, highlighting scope to better connect capital-rich and capital-constrained markets.
The report also identified GCC-centred, China-centred and Middle East-Türkiye trade corridors as key growth channels for Islamic trade finance, investment and working capital.
Standard Chartered Group Islamic Banking chief executive officer Khurram Hilal said Islamic finance is becoming an increasingly important enabler of international trade and investment.
"Islamic finance is becoming a critical enabler of cross-border connectivity. As its role in facilitating trade, investment and capital flows continues to grow, financial institutions must place Islamic finance firmly on their strategic agenda," he said.
“As trade routes become increasingly interconnected, institutions need recognised financing structures and operational capabilities that enable Shariah-compliant capital to move seamlessly across borders.”
Beyond public capital markets, the report highlighted private credit as another avenue for funding infrastructure, trade-linked assets, receivables and mid-market businesses while adhering to Shariah principles.
It also said tokenisation and digital assets could improve cross-border investment efficiency as legal frameworks, interoperability and governance continue to develop.
The report was launched alongside Standard Chartered's Global Islamic Financial Institutions Forum in Kuala Lumpur, attended by more than 150 bankers, regulators and industry participants.
Standard Chartered Saadiq Malaysia chief executive officer Bilal Parvaiz said Malaysia's Islamic finance ecosystem provides a strong platform to support capital flows across Asean, the GCC and other high-growth markets.
Bank Negara Malaysia deputy governor Adnan Zaylani Mohamad Zahid said Malaysia's well-established Islamic finance ecosystem has positioned the country as "not only as a participant in global capital flows, but also as a trusted connector of capital and growth."
He added that Malaysia is well placed to facilitate cross-border linkages and connect investors with opportunities across Asean, the GCC, South Asia and Africa.
