Abstract
Islamic finance is based on Shari'ah, or Islamic law, which prohibits the receipt and payment of “riba” (normally translated as interest), “gharar” (excessive uncertainty), “maysir” (gambling), and short sales or financing activities that it considers harmful to society. Rather, it involves risk and reward sharing, transactions with real economic purposes, and fair actions of the participants. Consequently, innovative arrangements such as contractual profit-and-loss sharing and leasing arrangements are common. However, macroeconomic statistics, such as the System of National Accounts (SNA) and the Balance of Payments Manual (BPM) have traditionally focused on the coherent treatment of conventional finance rather than Islamic finance. Thus, comprehensive and coherent internationally-endorsed recommendations to account for Islamic finance in both the national accounts and external sector statistics frameworks were absent. These gaps might have impacted the quality and comparability of economic statistics in countries with prominent Islamic financial activities. They have been addressed by the recently-concluded global efforts to update the System of National Accounts, 2008 (2008 SNA) and the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). These have resulted in recommendations on Islamic finance in the System of National Accounts, 2025 (2025 SNA) and the seventh edition of the Balance of Payments Manual (BPM7) from which Islamic finance statistics can be compiled to better inform policy makers and other stakeholders.
Introduction
Background
Islamic finance has grown rapidly in the past decade. According to data from the Islamic Finance Development Report 2025, 1 global Islamic finance assets increased from US$2.51 trillion in 2018 to nearly US$6.0 trillion in 2024, implying an average annual growth rate of around 15.6 percent and are expected to grow to US$9.72 trillion by 2029. In 2024, the largest shares of these assets were located in the member economies of the Gulf Cooperation Council (GCC) comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (US$2.33 trillion, or 39.0 per cent), Middle East and North Africa (excluding GCC) (US$2.33 trillion, or 39.0 per cent) and Southeast Asia (US$0.96 trillion, or 16.0 per cent). In addition, by segment, Islamic banking had assets amounting to US$4.32 trillion (72.1 per cent), Islamic capital markets (comprising Sukuk, other Islamic financial institutions and Islamic funds) had assets worth US$1.53 trillion (25.6 per cent), while the Islamic insurance sector had assets (as measured by gross contributions) worth US$0.14 trillion (2.3 per cent).
Islamic financial standard setting bodies, including the Accounting and Auditing Organization for Islamic Financial Institutions and Islamic Financial Services Board (IFSB), have developed Islamic finance standards on accounting, auditing, governance, capital adequacy and regulatory and risk management frameworks. These efforts aim to harmonize practices and principles of operation and recording within the Islamic financial system and ensure effective integration into the international financial system.
The international statistical community has addressed the treatment of selected aspects of Islamic finance in a number of manuals, compilation guides and research work. Annex 4.3 of the Monetary and Financial Statistics Manual and Compilation Guide 2 describes Islamic financial instruments and how to classify them within the framework of the 2008 SNA. 3 Annex 3 of the Handbook on Securities Statistics 4 addresses the treatment of Islamic securities including the classification of Islamic debt securities in existing international statistical standards such as the 2008 SNA. Annex 7.4 of the 2019 edition of the Financial Soundness Indicators Compilation Guide 5 provides guidance to map the source data of Islamic deposit takers to the necessary balance sheet and income statement templates used to compile financial soundness indicators for systems with Islamic banking. The Compilation Guide on Prudential and Structural Islamic Financial Indicators, 2019 6 by the IFSB provides guidance on the collection, compilation and dissemination of prudential and structural Islamic financial indicators (PSIFIs) for banking, capital markets and takaful institutions offering Islamic financial services. In addition, in response to requests at national accounts meetings, an Islamic finance task force was formed in 2017 under the auspices of the Intersecretariat Working Group on National Accounts and subsequently developed initial recommendations on the classification of Islamic financial instruments and corresponding property income and sectorization of Islamic financial corporations and methods to calculate their output from the perspective of national accounts. These recommendations were presented at the 13th meeting 7 of the Advisory Expert Group on National Accounts (AEG). Also, in 2018, as part of its contribution to the work of the IFTF, the Bank for International Settlements published a report on the reporting practices of Islamic banks it conducted in six economies. 8
However, until recently, comprehensive and coherent internationally-endorsed recommendations to account for Islamic finance in both the national accounts and external sector statistics frameworks were absent. These gaps meant that it was not possible to compile internationally-comparable macroeconomic statistics on the output, financial and non-financial transactions and balance sheets of Islamic financial corporations, the investment income associated with Islamic financial instruments and cross-border activities of Islamic financial institutions under these frameworks. Such standardized statistics would help policy makers to assess the performance of Islamic financial activities and financial stability or formulate policies to promote the growth of Islamic finance. Given that most Islamic financial assets are concentrated in the Middle East and North Africa, these gaps were likely to affect the countries in these regions significantly.
Objective and organization of the paper
This paper outlines the initiative to develop recommendations to account for Islamic finance in the national accounts and external sector statistics as part of the recently concluded global initiatives to update the 2008 SNA and BPM6. 9 Section 2 describes the work to develop these recommendations and outlines the endorsed recommendations. Section 3 describes the possible policy uses of the data that are compiled from these recommendations, while section 4 concludes.
Developing the endorsed recommendations
An Islamic finance task team (IFTT) was formed in 2020 to develop consistent guidance on the treatment of Islamic finance in the national and external sector accounts under the umbrella of the global initiatives to update the 2008 SNA and BPM6. The IFTT was co-chaired by Morocco and the State of Palestine and comprised 53 members from national statistical offices, central banks, international and regional organizations, Islamic financial standard setting bodies and independent experts. Six IFTT sub-task teams were formed to develop recommendations for the following topics: Terminology for the investment income for Islamic deposits, loans and debt securities Sectorization and output of Islamic financial entities Economic ownership of non-financial assets related to sales, lease, and equity financing which are legally owned by Islamic financial corporations Classification of Islamic financial instruments and corresponding investment income Reference rates and terminology to calculate the Islamic implicit financial services on loans and deposits Islamic insurance (takaful and retakaful)
The recommendations were consolidated in a guidance note 10 which was circulated to the national accounts and balance of payments communities for global consultation between December 2021 and January 2022. The guidance note was also translated into Arabic to ensure wider accessibility. In addition, the United Nations Economic and Social Commission for Western Asia, in coordination with the IFTT and United Nations Statistics Division, organized a webinar on 16 December 2021 to promote the guidance note.
In total, 36 respondents from 29 economies and regional/international organizations responded to the global consultation. The outcome of the global consultation revealed that most of the respondents indicated that the topic was of high or medium relevance to their economy. More importantly, there was solid support for almost all the recommendations in the guidance note. This broad endorsement underscored the consensus within the statistical community regarding the need for greater flexibility in current macroeconomic statistical standards to accurately account for Islamic finance activities. Respondents specifically agreed with the key recommendations, such as broadening the terminology for the investment income on Islamic financial instruments which are considered deposits, loans or debt securities; the sectorization and output calculation methods for Islamic financial entities; applying the concept of economic ownership to non-financial assets underlying various Islamic financing arrangements; classifying Islamic financial instruments while maintaining the universality of international statistical standards; and the sectorization and output calculation for Islamic insurance entities (takaful and retakaful).
However, the global consultation showed that while the SNA formula to calculate the implicit financial services on loans and deposits (i.e., the financial intermediation services which are implicitly charged in the form of either the difference between a reference rate and the return actually paid to depositors, or the difference between the return charged to borrowers and a reference rate) was preferred for measuring Islamic financial intermediation services, there were diverging views on the reference rate to be used, with a slight majority in favour of one reference rate for both conventional and Islamic implicit financial services on loans and deposits in the same currency. The outcome 11 of the global consultation was presented at the joint meeting of the AEG and the Balance of Payments Committee (BOPCOM) in March 2022. The meeting endorsed the outcome of the global consultation and supported all the IFTT recommendations except for the issue of reference rates for conventional and Islamic implicit financial services on loans and deposits which are denominated in the same currency. To resolve this outstanding issue, the AEG and BOPCOM meeting agreed that the IFTT should conduct an experimentation and testing exercise to determine the reference rates for conventional and Islamic implicit financial services on loans and deposits. Five economies subsequently participated in the exercise. The results recommended one reference rate for both conventional and Islamic implicit financial services on loans and deposits in the same currency, unless there is evidence that a different reference rate should be used.
The endorsed recommendations, most of which are incorporated or elaborated in the chapter 26 of 2025 SNA 12 and chapter 17 of the BPM7, 13 are outlined below.
Terminology for the investment income for Islamic deposits, loans and debt securities
Islamic finance is participatory in nature and the returns on Islamic financial instruments such as deposits, loans and debt securities while functionally parallel to interest can represent a broader concept that may include features of equity, rental or sales. Thus, a more nuanced terminology was needed to accommodate these returns under Shari'ah principles.
Accordingly, the sub-task team developed the following endorsed recommendations. The first concerns broadening the term “interest” to “interest and similar returns”. The word “interest” ensures continuity with the existing terminology in the SNA and BPM for conventional financial instruments. The addition of “similar returns” helps to describe the broader, interest-like returns specific to Islamic deposits, loans, and debt securities. This approach allows for the better integration of these Islamic financial instruments and their corresponding returns into the SNA and BOP frameworks, thus eliminating the need for developing alternative classification systems. At the same time, the term “similar returns” also complies with Shari'ah principles against riba (interest).
The second involves maintaining the current investment income classification in the SNA and BPM but renaming the term “interest (D411)” to “interest and similar returns (D411)” to align with the above recommendation. At the same time, countries with significant Islamic financial activities are given the option to create a sub-category within D411 to show the returns for Islamic deposits, loans and debt securities. Doing this will make these returns more statistically visible in the accounts of the SNA and BPM and allow users to gauge the share of this investment income in total investment income.
The third endorsed recommendation involves reflecting the term “interest and similar returns” in the relevant paragraphs of the 2025 SNA and BPM7, including the following key paragraphs: 2025 SNA 8.119 “ 2025 SNA 8.120 “ BPM7 12.61 “
Sectorization and output of Islamic financial entities
The sub-task team on sectorization and output confirmed the existing classifications of Islamic financial entities and the methods to calculate their output that were proposed by the IFTF. It also developed endorsed recommendations for four specific Islamic entities which were not fully addressed previously (see Table 1).
Summary of endorsed recommendations for classifying, sectorizing and calculating output of Islamic financial entities.
Summary of endorsed recommendations for classifying, sectorizing and calculating output of Islamic financial entities.
The four specific entities in Table 1 could all be considered institutional units if they meet specific criteria, especially the maintenance of a complete and separate set of accounts.
Off-balance sheet restricted investment accounts (which are accounts where investors impose specific conditions on how their funds are invested, and the Islamic banks hold these funds separately from their own assets) are sectorized into the non-MMF investment funds subsector (S1224). This is because clients’ money is held in segregated investment funds which are managed independently from the Islamic banks, through which these funds are channelled, and clients bear the risk and losses (except if these are due to breach of trust or misconduct by the units managing the funds) and receive profits in proportion to their investment. This arrangement is similar to conventional investment funds. Islamic windows (which are units or divisions within conventional banks that offer Islamic financial products compliant with Shari'ah) are classified under the deposit-taking corporations except the central bank subsector (S1222) because the funds obtained by them have the characteristics of deposits which are then used to provide financing to borrowers using various Islamic financial instruments. Waqf funds (which are religious/charitable endowments, with the donated assets held by charitable trusts) are placed in the captive financial institutions and money lenders subsector (S1227) since the beneficiary is the sole client, making them similar to endowment funds. The financial claim of the beneficiary is classified as ‘other equity’. Hajj funds (which are enterprises that undertake, as a significant part of their activities, the management of long-term savings open to individuals intending to undertake the Hajj pilgrimage in compliance with Shari’ah principles) are classified in the non-MMF investment funds subsector (S1224) as they align with their long-term saving nature where investors bear the risks and rewards of investment performance.
The output for these entities includes a combination of fees, implicit financial services on loans and deposits and sum of costs, depending on the nature of their activities. For instance, the management fees paid by a Waqf fund to the fund manager are considered the costs and output of the Waqf fund. They are payable by the beneficiary to the fund as they are paid out of profits which are recorded as property income to the beneficiary.
Islamic financing arrangements (such as Murabaha, Ijarah, Mudaraba, etc.) often generate income through the sale or leasing of underlying non-financial assets. Islamic finance accounting standards often record the legal ownership of these assets on the balance sheets of Islamic financial corporations (IFCs). The statistical challenge was to determine how to record the ownership of these assets since the SNA and BPM use the concept of economic ownership to determine the recording of assets on balance sheets. Economic ownership refers to the right to claim the benefits associated with the use of an asset in economic activities by bearing the associated risks and responsibilities of ownership, even if the legal ownership is held by another party. This ensures that the flows and stocks in macroeconomic accounts reflect real economic activity and not just legal or financial arrangements.
Taking the above into consideration, the sub-task team developed the following endorsed recommendations. For statistical purposes, IFCs should generally not be classified as the economic owners of the underlying non-financial assets. Rather, it is possible for IFCs to establish separate institutional units (which could be non-financial units), often in partnership with other institutional units, which will then be the legal and economic owners of the underlying assets. Further, IFCs can act as facilitators by transferring the economic ownership of the non-financial assets from the seller to the client which intends to make use of these assets. This approach better articulates the IFCs’ role as providers of financial services. The brief ownership of assets by an IFC can be considered a form of constructive (qabd hukmi) or physical possession (qabd fe'eli), but not economic ownership. The ultimate purchasers of these assets are considered the economic owners because they are the ones entitled to claim the benefits or assume the risks associated with the use of the assets. To align with the recommendations in the SNA and BPM, the acquisition of the asset should be recorded at the moment the economic ownership changes hands. Another endorsed recommendation relates to the treatment of assets in financing arrangements when a client defaults on a payment for the asset. In such situations, the client will still be considered the economic owner. The default is treated as a default on a financial payment, although the IFC may be able to confiscate the assets if feasible.
Classifying Islamic financial instruments and corresponding investment income
The sub-task team recommended to classify Islamic financial instruments and their corresponding investment income by mapping their economic characteristics to conventional financial instruments with similar economic characteristics in the SNA and BPM. This approach, thus, avoided the need for a new conceptual framework to classify these instruments. Since a perfect one-to-one relationship between a specific Islamic financial instrument and an existing classification is rare, several factors were also used. These included the institutional unit form of the recipient of the finance (equity classification is only possible for a corporation); whether the financial instrument is designed to provide a profit that has a comparatively high reliability relative to its magnitude; whether the financial instrument is recorded on the IFC's balance sheet; whether the account holder has an investment claim on the venture or fund offered by the issuing institution; whether the account holder has a claim on the residual value of the issuing institution; whether the lender is the supplier of goods and services being financed; the presence of negotiable securities; and whether equity holdings, in the case of foreign investment, exceed the 10 per cent threshold for foreign direct investment.
As an example, consider a consumer looking for financing to buy a car. In conventional finance, banks use interest-based loans. The consumer would apply to a bank for a loan to buy the car. When the bank approves the application, it finances the car purchase. The consumer agrees to repay the loan amount and interest, which can be fixed or variable, over a set period. The interest is the bank's profit. The car loan is classified as a loan in the SNA. In contrast, in Islamic finance the consumer can use, say, a Murabaha arrangement with an Islamic bank. Under this arrangement, the Islamic bank buys the car and then sells the car to the consumer at a profit margin that the consumer and the Islamic bank agree on in advance. The consumer can make the payment in instalments. However, the total cost stays fixed, thus removing the uncertainty of interest rates. This arrangement, which is recorded on the balance sheet of the Islamic bank as an asset, resembles a collateralized loan within conventional finance, in which the underlying goods (in this case, a car) are registered under the consumer's name and are used as collateral. On this basis, the Murabaha arrangement is classified as a loan within the SNA since it has characteristics which are similar to conventional loans.
Reference rates and terminology to calculate Islamic implicit financial services on loans and deposits
Like their conventional counterparts, the explicit fees charged by Islamic deposit-taking corporations may not reflect the full value of their services. There is also the need to account for their services in intermediating funds between parties with surplus funds and those that require funding. These services are known as the implicit financial services on loans and deposits. They are the difference between the return rate paid to the Islamic banks by borrowers and a reference (service-free) rate plus the difference between the reference rate and the return rate paid to depositors. The sub-task team developed the following endorsed recommendations to address the various issues related to measuring the implicit financial services on loans and deposits provided by Islamic deposit-taking corporations given the prohibition of interest (riba). One, the implicit financial services on loans and deposits formula in the SNA should be used to calculate the financial intermediation services provided by Islamic deposit-taking corporations. This is consistent with their classification in the deposit-taking corporations except central bank subsector in the SNA. Two, all Islamic deposits and loans should be included in the calculation of implicit financial services on loans and deposits. These include Qard, Wadiah, Amanah, and Qard-hasan deposits and financing, even if they pay no investment income or small returns on the basis of gifting (hibah) because Islamic financial corporations are still providing a service, such as safekeeping and record maintenance, that should be accounted for. Related to this, the use of total deposits and total loans to calculate implicit financial services on Islamic deposits and loans is preferred to the more complex instrument-by-instrument approach. Three, to calculate the cross-border implicit financial services on Islamic deposits and loans, separate reference rates for each currency involved should be used, with each reference rate taken from the financial markets of the home market of that currency. Fourth, in the implicit financial services on loans and deposits formula, the same terminology for income flows as recommended by the terminology sub-task team (“interest and similar returns”) should be used. Fifth, as confirmed after the experimentation exercise, a single reference rate should be used to calculate the implicit financial services on conventional and Islamic loans and deposits which are denominated in the same currency, unless there is evidence that a different reference rate should be used.
Islamic insurance
The fulfilment of Shari’ah principles results in three groups of units (i.e., takaful participants, takaful funds and takaful operators) in the various takaful/retakaful business arrangements. In order to conform to Islamic finance accounting standards, takaful funds and takaful operators are required to compile complete and separate set of accounts, including balance sheets. The sub-task team developed the following endorsed recommendations after a thorough assessment of these arrangements. One, takaful operators and takaful funds (including retakaful or Islamic reinsurance operators and funds) are considered as separate institutional units on the basis that they have the features of institutional units, including complete and separate sets of accounts. On the other hand, less complex takaful arrangements (known as light takaful), which do not segregate funds and operators, are to be treated as a single institutional unit, similar to conventional insurance. Also, takaful/retakaful windows (which are dedicated units within conventional insurers providing Islamic insurance/reinsurance services) are also considered as institutional units due to their separately-identified assets, liabilities, and accounts. Two, takaful/retakaful funds (and windows) are sectorized into the insurance corporations subsector (S1228). This is because the funds behave like insurance corporations by collecting contributions (which are equivalent to premiums in conventional insurance) and maintaining reserves which belong to the policy holders. Takaful operators are sectorized into the financial auxiliaries subsector (S1226) on the basis that they do not take economic ownership of the assets and liabilities of the takaful funds. Light takaful arrangements are sectorized into the insurance corporations subsector (S1228). Three, the output of takaful/retakaful operators is calculated as the wakalah fees they charge and/or the share of profits earned from investing the takaful/retakaful funds. The output of takaful/retakaful funds (and windows) is calculated as the sum of costs, which includes the fees (wakalah) and/or profit share paid to the operator plus any other intermediate consumption. The output of light takaful is calculated using the methods used for conventional insurance output in the 2025 SNA.
Policy uses and applications
The recommendations in chapter 26 of the 2025 SNA and chapter 17 of the BPM7 mean it is possible to compile comparable Islamic finance statistics across space and time which are consistent with the integrated sequence of economic accounts and external sector accounts. These statistics are, however, largely grouped within existing macroeconomic aggregates, so compiling agencies can enhance their analytical usefulness by presenting them through supplementary breakdowns or a thematic account on Islamic finance. Such presentations will consolidate scattered information, facilitate a more granular decomposition of Islamic finance statistics, enhance statistical visibility, and allow alternative aggregations that remain fully consistent with the SNA framework.
The detailed data on Islamic finance can offer significant potential for informing evidence-based policy decisions and policy applications as described below.
Better assessment of contribution to economic growth
A systematic literature review of 68 studies by Farah et al. 14 reveals a strong positive link between Islamic banking and economic growth, emphasizing its role in promoting inclusive development, reducing economic instability, and enhancing financial stability, particularly during crisis. Standardized statistics on Islamic finance will be useful in formulating and assessing the outcomes of sectoral policies to promote the growth of Islamic finance. For instance, better and more reliable estimates of financial intermediation services (including services provided to non-residents) provided by Islamic financial institutions such as Islamic deposit-takers can be compiled. This is particularly facilitated by the recommendation to use a single reference rate to compile the implicit services on both Islamic and conventional deposits and loans. As a result, a more accurate measure of the contribution of the Islamic banking sector to economic growth can be derived. This is particularly important to economies in the GCC, other Middle East and North Africa and Southeast Asia, which according to the ICD – LSEG Islamic Finance Development Report 2025, 1 had a combined share of 95.8 per cent of global Islamic banking assets in 2024. Further, various important macroeconomic indicators such as the share of the value added of Islamic financial institutions in national and financial sector value added, the share of Islamic deposits and loans in national deposits and loans and growth of Islamic financial activities can be readily derived. These indicators can allow for a more accurate assessment of the size and growth of Islamic finance. In addition, they can facilitate a direct comparison of Islamic finance with conventional finance for policy purposes and assessments of the diversification within the financial system through alternative financing channels and the capacity of the financial system to absorb shocks during economic crisis.
Better assessment of contribution to capital markets
By leveraging the recommendations in the 2025 SNA and BPM7, countries can compile standardized statistics on domestic and international transactions in Shari’ah-compliant financial instruments for various policy purposes. For example, according to Bennett and Coyle, 15 the largest jurisdictions for the issuance of Sukuk (Islamic bonds) during 2024 were Malaysia, Saudi Arabia, and Indonesia. These countries can now compile internationally-comparable separate time series statistics on outstanding Sukuk (both domestic and international issuances), Sukuk turnover in secondary markets, and holdings of Sukuk by sector (households, non-financial corporations, financial corporations, non-residents, etc.). Consequently, it is possible to derive internationally-comparable capital-market indicators such as “Sukuk outstanding as a percentage of GDP”, and “Sukuk outstanding as percentage of total bond market holdings” to show the true systemic importance of Sukuk markets. In addition, cross-border issuances and holdings of Sukuk and other Shari’ah-compliant securities in the international investment position (IIP) and financial account will facilitate the calculation of internationally-comparable indicators such as the “share of non-resident investors in domestic Sukuk markets” as a proxy for the extent of global investor confidence in Shari’ah-compliant financial assets. These statistics will allow these countries to identify trends, such as the increasing preference for Sukuk over conventional bonds due to Shari’ah compliance and the extent of international demand for their Sukuk. As a result, evidence-based policies can be formulated to mobilize investment in Sukuk for purposes such as the development of infrastructure, deepening liquidity, widening the investor base, improving secondary-market infrastructure so that Islamic capital markets can be positioned as a credible alternative (or complement) to conventional ones. This will contribute to more resilient and inclusive capital markets and financial systems.
Contribution to financial stability analysis
The rapid growth of Islamic finance, its increasing systemic significance in many domestic markets, the steps taken by the IMF to formally monitor Islamic finance in terms of surveillance and the application of core principles in banking supervision of Islamic banks suggest it is important to identify and address macroprudential issues and systemic risk, monitor the development of indicative factors, and assess the impact of the implementation of regulatory standards related to Islamic finance. 6
To address this, the IFSB, through its Compilation Guide on Prudential and Structural Islamic Financial Indicators, 2019, 6 is leading efforts to compile PSIFIs and their corresponding metadata to facilitate macroprudential analysis and assessment of the structure and state of development of the Islamic financial services industry (IFSI). The PSIFIs, in addition to providing insight into important determinants of the macroeconomic and prudential soundness of the IFSI, also support the concurrent analysis of the structure and development of the IFSI to help gauge its contribution to economic growth and the overall development of the Islamic financial sector. In particular, the prudential, structural and financial strength indicators aim to (a) facilitate the monitoring and analysis of the soundness and stability of the IFSI as well as by fostering cooperation among central banks/monetary authorities and other relevant supervisory authorities; (b) support and help coordinate the formulation, development, and enhancement of appropriate international prudential standards by the IFSB; (c) help promote the development of the IFSI as a vehicle for stimulating economic development and reducing disparities in economic progress between nations; (d) help strengthen transparency and international comparability of domestic IFSI in order to facilitate their integration into the international financial system through public accessibility to the PSIFIs and other published cross-country industry data in IFSB research reports; and (e) help ascertain the market shares of Sharī’ah-compliant financial transactions, products, and services as a percentage of the entire financial system, at both the national and global levels, so as to gauge the performance of the IFSI at any given time. 6
Many PSIFIs are calculated using detailed underlying data on Islamic financial assets and liabilities and their corresponding returns and fees and takaful/retakaful and their fees. Thus, the availability of statistics for these assets which are compiled under the 2025 SNA and BPM7 frameworks will help to improve the international comparability of these indicators and enhance the macroprudential analysis and assessment of the structure and state of development of the IFSI. They will also enhance the quality of the metadata underlying these indicators so that users will have a better understanding of the data sources and methodologies that are used to produce these indicators.
Supporting financial inclusion
Kammer et al., 16 citing research done by others, has noted that financial inclusion has proven to be linked to desirable economic outcomes. The positive association between financial depth and long-term economic growth is consistently stronger in countries that tend to perform better on financial inclusion. Thus, there may be a cost in foregone economic growth when financial services in a country do not reach a sufficiently large share of the population. In addition, Barajas et al. 17 has found that Muslim countries (defined as members of the Organization for Islamic Cooperation) are still less financially inclusive overall compared to non-Muslim countries, partly because some people avoid conventional banks for religious reasons. Countries with Islamic banking seemed slightly more inclusive, suggesting Islamic banking might help reduce this religious self-exclusion. More recent studies such as those by Hassan, 18 Hassan, 19 Khan et al., 20 and Novreska and Arundina 21 have also noted the potential for using Islamic finance to foster financial inclusion to address various economic and social challenges such as promoting inclusive economic growth, alleviating poverty, and supporting community and human development.
Given this, governments in Muslim countries or countries where Islamic finance is prominent would need to design policies to increase financial inclusion based on Sha’riah principles in order to promote sustainable economic growth. Examples of policy options include improving the operating model of Islamic banks so as to attract depositors and serve businesses such as small and medium-sized enterprises; launching private and public sector initiatives to enlarge the role of Islamic finance in improving financial access through tools such as Islamic microfinance; and implementing reforms of financial infrastructure and regulation. 17 With digitalization becoming prominent in many countries, another option is to improve the innovation/digitalization of financial products and services that are attractive, useful, and easily accessible to all levels of society, especially the poor or low-income people. 21 Also, tailored educational programs for small business owners and practical financial management programmes for individuals could improve their financial skills and make it easier for them to access suitable financial products. 19
The availability of standardized Islamic finance statistics under the 2025 SNA framework will help to facilitate the design of these policies. At the same time, these statistics will help policy makers assess the success or otherwise of these policies by highlighting the accessibility and usage of Shari’ah-compliant financial products through indicators such as the growth in the issuance and holdings of these products.
Conclusion
The integration of Islamic finance within the frameworks of 2025 SNA and BPM7 is an important step in addressing the treatment of Islamic financial activities in international statistical standards. It also ensures that international statistical standards are inclusive and representative of diverse financial systems. Specifically, the recommendations on Islamic finance in chapter 26 of the 2025 SNA and chapter 17 of the BPM7 provide clear guidance on key issues such as the terminology for the returns on Islamic debt instruments, sectorization and output of Islamic financial entities, classification of Islamic financial instruments and corresponding returns, measurement of implicit financial services associated with Islamic deposits and loans, and treatment of economic ownership and Islamic insurance. While these recommendations appropriately reflect the distinctive features of Islamic finance, they, nevertheless, mostly preserve the universality and internal consistency of these standards. By applying these recommendations, compiling agencies, especially those in countries and territories where Islamic financial activities are prominent, will be able to compile and publish reliable and comparable statistics on Islamic finance in their national and external sector accounts. This will enhance the role of their accounts in providing a comprehensive picture of Islamic financial activities.
Also, the availability of standardized Islamic finance statistics will enhance policy applications. In particular, they will enable a better assessment of the contribution of Islamic finance to economic growth and capital markets, support financial stability analysis by improving the quality of macroprudential indicators, and promote financial inclusion which will address economic and social challenges such as promoting inclusive economic growth, alleviating poverty, and supporting community and human development. These outcomes will reinforce the relevance of Islamic finance statistics for evidence-based policymaking and sustainable economic development.
Disclaimer
The views expressed in this publication do not necessarily reflect the views of the United Nations Secretariat and are those of the author.
Footnotes
Acknowledgments
The author would like to thank three reviewers for their helpful comments on an earlier draft of the paper.
Funding
The author received no financial support for the research, authorship, and/or publication of this article.
Declaration of conflicting interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.