The size of the Islamic finance industry in ASEAN is expected to cross US$1 trillion by end-2026, after reaching nearly US$950 billion at the end of the first half of this year (1H2025).

Credit ratings agency, Fitch Ratings (Fitch) said the industry’s growth will continue to be led by Malaysia, Indonesia and Brunei due to their large Muslim populations, supportive regulations, access to sukuk, and potentially improving ties with Gulf Cooperation Council countries. 

"Malaysia is ASEAN’s largest Islamic banking market, with about US$300 billion in assets, and Islamic financing representing 42 per cent of total system financing at end-1H2025,” the agency said in a statement.

It added that Malaysia led ASEAN’s Islamic funds segment, with assets under management (AUM) exceeding US$50 billion in the first four months of 2025 (4M2025), reflecting an established Islamic finance ecosystem, mature regulatory environment, strong demand and diverse Shariah-compliant products.

As for Indonesia, its Islamic banking assets stood at US$56 billion in 4M2025, accounting for seven per cent of the banking sector’s total.

Brunei’s Islamic banks held nearly US$10 billion in assets or 63 per cent of total banking assets at end-2024, while the Philippines' only Islamic bank’s assets stood at about US$20 million.

Indonesia's and Brunei’s Islamic fund markets are smaller, with AUM of US$3 billion and US$500 million, respectively.

Fitch Ratings also highlighted that Islamic finance demand in ASEAN is fragmented, with limited presence in Singapore, the Philippines and Thailand, and remains undeveloped in Vietnam, Laos, Cambodia and Myanmar due to their small Muslim populations and lack of regulatory frameworks.

"More interconnected ASEAN financial systems could support penetration,” it said.

The agency said that sukuk outstanding in ASEAN reached US$475 billion or 16 per cent of the debt capital market (DCM) at end-1H2025, with Malaysia and Indonesia contributing almost all issuance, accounting for 47 per cent of the global sukuk market.

Sukuk outstanding accounts for 59 per cent of Malaysia's DCM, and 18 per cent of Indonesia’s DCM, while environmental, social and governance (ESG) sukuk are also concentrated in these two countries.

It added that the Singapore Exchange is the sixth-largest dollar sukuk listing venue globally, and highlighted that the Philippines’ sukuk outstanding remained flat since its 2023 sovereign debut, while Brunei’s are mainly short-term and sovereign.

No sukuk has been issued in other ASEAN countries.

On takaful, Fitch Ratings said Malaysia, Indonesia and Brunei have the most established takaful markets in ASEAN.

General takaful represented 21 per cent of Malaysia’s general insurance market in the first quarter of 2025, while family takaful held a 39 per cent share at end-2024.

"Indonesia's takaful sector contributed 8.4 per cent of total insurance premiums in 4M2025, while Brunei’s share was 47.8 per cent at end-2024.

"Meanwhile, the Philippines’ Insurance Commission issued guidelines for takaful window operations in 2024 and on inclusive micro products, including micro takaful in 2025, and granted the first takaful operator licences to two insurers in 2024,” it added.

Islamic Treasury Sukuk auction for July 2025 attracts bids worth $1.42bln

The Ministry of Finance (MoF), in its capacity as the issuer and in collaboration with the Central Bank of the UAE (CBUAE) as the issuing and payment agent, announced the successful completion of the July 2025 auction of the UAE Dirham-denominated Islamic Treasury Sukuk (T-Sukuk) amounting to AED1.1 billion.

This issuance forms part of the T-Sukuk issuance programme for the year 2025, as published on the MoF’s official website.

The auction attracted robust demand from eight primary dealers across both tranches maturing in August 2028 and May 2030. The total bids received reached AED5.35 billion, reflecting an oversubscription of nearly five times and underscoring the strong confidence of investors in the UAE's creditworthiness and Islamic finance framework.

The auction results highlighted competitive, market-driven pricing with a Yield to Maturity (YTM) of 3.88% for the August 2028 tranche and 3.95% for the May 2030 tranche on par with comparable US Treasuries at the time of issuance.

The Islamic T-Sukuk programme plays a vital role in supporting the development of the UAE’s dirham-denominated yield curve, offering secure investment instruments for a wide range of investors.

Furthermore, it reinforces the local debt capital market, contributes to the development of the broader investment landscape, and supports the UAE’s long-term economic sustainability and growth objectives.