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Islamic Banks’ Asset Growth Set to Slow in 2009

Issac John / 9 December 2008

DUBAI - Aggregate asset growth of global Islamic banking is poised to slow from 10 to 15 per cent in 2009, signaling a tough year ahead for the sector, Moody’s Investor Services said.

Combined assets of global Islamic financial institutions (IFIs), which are expected to post a growth of 20 to 30 per cent this year, have already shown signs of deceleration.

“However, IFIs benefit from a number of buffers (including ample capital and strong retail platforms) that will enable them to continue growing, albeit at a slower pace, before resuming more rapid growth, most probably within an 18-month timeframe,” a report by Moody’s said.

In times of crisis, clients may find it more comfortable doing business with an Islamic bank as such institutions are perceived as focusing on the basics of financial intermediation and depositors may therefore view them as safer havens less prone to excessive financial innovation, the report noted.

In the GCC, IFIs, despite their higher direct and indirect exposures to the property market compared to conventional peers, have displayed strong resilience amid the current global financial debacle, the report said.                                             




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