Srilanka, Oct. 5 -- Fitch Ratings expects Sri Lanka's Islamic finance industry to grow over the medium term, supported by regulatory progress, rising political will, and expanding conventional-bank participation through Islamic windows. Sri Lanka's Islamic finance industry exceeded USD1 billion at end-1H26. Sri Lanka has one of the highest Islamic finance penetration rates among countries with Muslim-minority populations. However, the industry will likely remain niche due to the population mix, persistent demand-supply gaps, and a weak operating environment.
Muslims are a minority at around 10% of the population, which could constrain mainstream relevance. Limited distribution channels, product gaps compared to conventional banks, and a st...