THE ASEAN Islamic finance industry surpassed the $1-trillion mark in the first quarter of 2026, underscoring its growing importance in regional and global markets, Fitch Ratings said.
Malaysia, Indonesia and Brunei led the region’s Islamic finance sector. Large Muslim populations, government commitments, supportive regulations, expanding halal economies and digitalization efforts drove the growth.
“Development across ASEAN remains uneven, although enhanced links with GCC countries and within ASEAN could boost industry penetration, attract investments and support financial inclusion,” Fitch said.
Sukuk, or Islamic bonds, accounted for nearly half of the region’s Islamic finance industry. Islamic banking assets followed at 41 percent, Islamic funds’ assets under management at 8 percent and takaful assets at 2 percent.
ASEAN accounted for almost half of global sukuk outstanding, with Malaysia ranking first and Indonesia ranking third worldwide. All Fitch-rated dollar ASEAN sukuk hold investment-grade “BBB” category ratings as of end-April 2026, with no defaults in the past 4 years, according to the credit rating agency.
However, Fitch noted that 63 percent of ASEAN sukuk issuers carry Negative Outlooks. The agency recently revised its outlook on Indonesia and the Philippines due to the varying impact of the Iran conflict on regional sovereigns and sukuk issuers.
“These depend on factors including higher energy prices and subsidy burdens, risk sentiment, wider credit risk premia, weaker currencies and tighter external funding conditions,” Fitch said.
In the Philippines, local regulators are developing a nascent Islamic finance ecosystem through new sukuk guidelines. A recent agreement with the United Arab Emirates seeks to deepen cooperation in Islamic finance. The UAE has signed similar agreements with Indonesia and Malaysia.
The Philippines issued its first sovereign sukuk in 2023 and now has five licensed takaful operators. Overall, the country’s Islamic banking assets reached about P2.5 billion ($44 million) as of end-2025.
