The Sri Lankan economy is considered as one of the emerging economies in Asia with GDP growth exceeding 8% in 2011 and per capita incomes doubling from US$1,062 in 2004 to over US$2,800 in 2011. The positive economic outlook has created opportunities in varied sectors and has resulted in an influx of foreign direct investment to the country. Sri Lanka’s predominant services sector, which accounted for 59% of the GDP in 2009, was one of the key contributors to the economy as companies recorded strong financial performance in the recent financial year and the negative effects of the global recession subsided.
The history of Islamic finance in Sri Lanka can be traced to 1997 when Amana Investments was established. Much water has flowed under the bridge since then. The high watermark of the evolution of the industry came when Banking Act No. 30 of 1988 was amended in 2005 to permit licensed commercial banks and licensed specialised banks to offer selected Islamic financial instruments. Today a state bank and a two licensed commercial banks operate Islamic windows and the indications are that many banks are on the verge of venturing into the arena.
There are many other institutions including Islamic micro-financiers offering murabahah, mudarabah, ijarah, wakalah, musharakah, diminishing musharakah, takaful, etc. Whilst this augurs well for the development of the industry, the central bank has permitted the opening of a fully-fledged Islamic bank; creating a new chapter in the development of the Shariah compliant banking in the country.