Young Southeast Asians propel Islamic finance growth

By Francis Allan L. Angelo

New research spearheaded by Mambu, a prominent SaaS cloud banking platform, has shed light on the dynamic growth of Islamic banking, driven primarily by the millennial and Gen Z Muslim populations in Southeast Asia.

The findings, detailed in the report ‘Beliefs & Business: The Shape of Islamic Finance in 2024,’ underscore a significant cultural shift, with 77% of Malaysian and 65% of Indonesian young consumers incorporating Islamic banking into their financial practices, in stark contrast to a mere 31% of their global counterparts.

The study conducted by Mambu provides an in-depth look into the adoption rates of Islamic banking, revealing that Malaysia stands out with the highest percentage (42%) of consumers exclusively using Islamic banking services, more than a 16% lead over the global average. Moreover, the potential market expansion is considerable, evidenced by 85% of respondents across all surveyed regions expressing an interest in adopting Islamic banking, with this figure soaring to 92% among Indonesians.

In a press statement, Colin Kum, Market Sales Director at Mambu Asia Pacific, highlighted the significance of the findings.

“Asia Pacific represents around 25% of the global Islamic finance market, with Malaysia the clear frontrunner in the region. This research highlights the growing interest from consumers in Islamic banking, and makes clear the opportunity banks have to embrace Shariah-compliant products and services in order to serve new and existing markets. A continued focus on technology is also crucial for banks, with 92% of respondents calling out the importance of their Islamic finance provider offering online banking options.”

Mambu’s thorough research, which commenced in 2021 and repeated in 2024, spanned the UK, South Africa, the UAE, Saudi Arabia, Malaysia, and Indonesia, involving over 1,500 Muslim participants aged 16 to 40 years.

The study discovered a heightened awareness among Malaysian youth regarding Islamic banking services and a pronounced preference for banks that resonate with their religious values, with 91% of Malaysians deeming it important versus the global average of 83%.

In comparison, Indonesia, despite its predominantly Muslim demographic, displays a more modest engagement with Islamic banking.

Yet, it still surpasses the global average, pointing to a broader trend of increasing embracement of Islamic financial services. A significant hurdle identified in the Indonesian context is the skepticism regarding the adherence of banks to Shariah principles, with 43% of Indonesian respondents doubtful of banks’ full compliance.

The findings also reflect a broader interest in ethical investment, with 86% of millennial and Gen Z Muslims emphasizing its importance.

The report by Mambu underscores a vital growth opportunity for banks to tap into this market and cater to the burgeoning demand for Shariah-compliant and ethically-aligned investment options, particularly in the burgeoning Southeast Asian markets.

For full findings and to access the report, please visit Islamic Finance: Beliefs and Business.