Global demand for Sharia-compliant pension funds could reach $190bn, according to the Global Islamic Banking Centre at Ernst and Young (EY).
Ashar Nazim, partner at Global Islamic Banking, EY, speaking to Gulf News, said that emerging markets such as Saudi Arabia, the UAE and Malaysia are seeing increased demand for retirement plans that are Sharia compliant.
The maturity of the sukuk market and Sharia-compliant equity indexes mean that there are sufficient assets available for many pension funds to begin their Sharia-compliant proposals, he added.
Within the GCC member states, the mainstreaming of Islamic finance means that there will be a boost to demand for pension funds to be inclusive and offer Sharia-compliant retirement alternatives.
Nazim said: “This is, however, the beginning of a long journey. It begs the question whether we have the criteria in place, and the structures and tools to enable the effective management of this emerging asset class. We believe there will be a gradual evolution over the next 18 to 36 months.”
According to Nazim, the challenges facing the shift towards Islamic pension funds include, operational changes, legal and regulatory issues and customer focus.