The Iranian Association of Islamic Finance held an international webinar on Analysis of Islamic Finance Indicator on 19 December, 2022 at 2:00 PM Tehran time.

The invited speakers were as follows:

Dr. Eskandar Shah, Assoc. Prof. at Hamad Bin Khalifa University, Qatar
Dr. Taslima Julia, Visiting Researcher at The Research Center for Islamic Economics, Turkey

Dr. Eskandar Shah, Assoc. Prof. Hamad Bin Khalifa University
He said the Islamic Finance Development Indicator (IFDI) is a composite weighted index that measures the overall development of the Islamic finance industry with data on over 1,600 Islamic financial institutions, information on 136 countries and measured across more than 10 key metrics, including Knowledge, Governance, Sustainability and Awareness.

Indicators
Financial Performance: weighted index of Islamic capital markets and Islamic financial institutions (IFIs), per country, that generate Islamic financial services

Governance: weighted index of standards of good practice with regard to regulations, corporate governance and Shariah governance.
Sustainability: weighted index of CSR activities and ESG practices for all Islamic finance sectors and asset classes.
Knowledge: weighted index of education and research which are the main building blocks for any knowledge based industry.
Awareness: weighted index of Islamic finance market awareness that assess two components: events and news.

Financial Performance - Growth Cross All Sectors

Islamic banking:

• Key growth drivers: 1. banks benefited from extended government support to sectors that were pandemic-hit; 2. small number gained operational efficiencies i.e. branchless banking, partnering with FinTechs; 3. continued .high demand for Islamic banking

Islamic funds
• Total of 6%, grew by 34% to US$238 billion -Iran, Saudi Arabia and Malaysia
• Money market and equity, exchange traded funds (ETFs)
Lack of Standardization:
Lack of Growth: Lack of standardization can stunt the growth of the industry.
Sharia Arbitrage can lead to institutions 'fatwa shopping'.
Reporting: A lack of standardization can lead to a lack of transparency and consistency in reporting.
Form Market Failure to Market Shaping:
Market-shaping,, mission-oriented approaches to policy provide the possibility to justify ambitious policies that aim to transport landscape
Challenges: How to nurture organizational structures that can manage such policies & how to appraise and evaluate market-shaping effect of the policies.
Need to focus on dynamic efficiency and creation of collective public value:
• Potential to create spillover effect across sectors
• Alter level of investment & broader trajectory of growth
Governments need to embrace new instruments & techniques that focus on
• User experience and co-creation practice
• Shifting & shaping technology & innovation
• Managing complex system under uncertainty

Dr. Taslima Julia, Visiting Researcher, The Researcher Center for Islamic Economics (IKAM)

Islamic Finance Development Indicator (IFDI) provides an exclusive Islamic finance database.

• It includes data on over 1,600 Islamic financial institutions through its leading Refinitiv Eikon platform. • The database provides Islamic Finance markets stakeholders with
How does IFDI Measures Performances?
Global Islamic Finance Development Indicator
Measures Performance of 136 Countries
1. Financial Performance
2. Governance
3. Sustainability
4. Knowledge
5. Awareness

What is new in the IFDI 2022?
They brought three significant changes to the Islamic Finance Development Indicator (IFDI) model:
1. First, added new metrics related to ESG and Islamic FinTech;
2. Second, re-arrangement of some of the previous metrics to form new subindicators;
3. Third, a change in the weightage of the five main indicators by stressing more on the financial components (40% from 20%) and governance (25% from 20%). The methodology has been changed and the indicators are rearranged, therefore, we cannot compare the year-to-year data of IFDI.
Analysis of the Financial Performance
The Financial Performance indicator is a weighted index of Islamic capital markets and Islamic financial institutions (IFIs), per country, that generate Islamic financial services. Islamic capital market represents • Islamic banking
• Sukuk
• Islamic Funds
• Other Islamic Financial Institute (OIFIs)
• Takaful

Analysis of the Governance Indicator
The Governance indicator is a weighted index of standards of good practice with regard to regulations, corporate governance, and Shariah governance.
Regulations are the backbone of Islamic finance Governance and the reason why so many countries scored better on the indicator compared to the others that make up the IFDI. A new metric is added to the Regulations sub-indicator this year, the FinTech Sandbox, to better reflect the development of the overall industry.

Shariah Governance is the second strongest sub-indicator. Several countries have centralized Shariah boards and most nations have Shariah scholars who represent Islamic financial institutions.
Corporate Governance is the weakest among the sub-indicators as many financial institutions, either full-fledged Islamic or windows returned weak reporting scores.

Analysis of the Sustainability Indicator
The Sustainability indicator is a weighted index of CSR activities and ESG practices for all Islamic finance sectors and asset classes.
For CSR measures metrics used are funds disbursed to charity, zakat, qard-al-hasan, and disclosed CSR index score. For ESG measures metrics used are the Number and value of ESG Sukuk outstanding, ESG Islamic funds outstanding, presence of sustainability guidelines, ESG reporting index score.

Analysis of the Knowledge Indicator
The Knowledge indicator is a weighted index of education and research which are the main building blocks for any knowledgebased industry.
For education measures, metrics used are the number of Islamic finance courses and degree providers. For research measures metrics used are the number of research papers produced and the number of Islamic finance journals.

Analysis of the Awareness Indicator
The Awareness Indicator is a weighted index of Islamic finance market awareness that assess two Awareness Indicator components: events and news.
Event measuring metrics are the number of seminars, conferences, and online events. Awareness is also measured based on the number of exclusive and regional news.
The Position of Iran and Turkey
• Iran is in the top position in terms of Islamic Finance assets.
• The country alone possesses 1235 (US$ Billion) Islamic finance assets. Islamic banking and Islamic funds are performing great here
• The country is not positioned in the highest rankings for IFDI overall due to lower scores across the indicators.
• Since the start of 2022 as well, the Islamic finance industry was hit by the depreciation of the currencies of some large Islamic finance markets such as Iran, Pakistan, Sudan and Turkey.
Turkey is in the eighth position in terms of Islamic Finance assets. The current government is sincere to flourish the Islamic financial and Economic system.
The country is playing a strategically great role in Russia and Ukraine Wars which may have a positive impact on the economy soon.