Credit rating agency Moody’s Investors Service has created a new dedicated group to meet a growing demand for credit ratings and research in Islamic financial markets.

Moody’s announced the creation of a new Islamic Finance Group (IFG) to provide independent analysis of Shari’ah-compliant products, financial institutions, and insurers “to support an improved understanding of the credit risks and market trends in this rapidly expanding sector”.

The firm notes that both Islamic capital markets and Islamic banking are enjoying double-digit growth rates. “The launch of Moody’s dedicated IFG recognizes the growing importance of Islamic finance in international capital markets, particularly in fast-growing economies in the Middle East and Asia,” it says.

Outside of the traditional Islamic markets, other countries, such as the United Kingdom and Luxembourg, and others across Europe and Africa, are also beginning to utilize Islamic finance “in order to both raise additional capital and claim a share of the related financial services growth,” said Khalid Howladar, global head of Islamic finance, who will chair the IFG.

In Asia, Malaysia continues to lead the sector, and Moody’s notes that the growth of Islamic finance has also been notable in Indonesia, Singapore and Brunei, although development in these markets remains at a nascent stage. It expects the growth of Islamic finance in Asia to remain strong, supported by the ongoing regulatory developments and the demand for infrastructure development in emerging Asia.

“The Islamic finance industry is relatively new, complex and evolving rapidly, which highlights the constructive role that Moody’s independent opinions and research on credit risk can play for global investors,” said Howladar. “Given the natural affinity of customers within the Gulf and Malaysia towards Islamic banking, growth of these banking assets in emerging markets is broadly twice that of conventional banks. Saudi Arabia’s domestic banking and sukuk markets are already strong, while newer markets, such as Turkey and Indonesia, also show very significant long-term growth potential.”