|Business Home > Archive|
Islamic banking industry shows rich potential
5 November 2010
DUBAI — The Islamic banking industry in the GCC is expected, in general, to remain strong moving forward, growing by 15 to 20 percent year-on-year in 2010, according to a banking and finance expert.
Muhammad Said Abdul Wahab said that the existence of financial centres in Bahrain, Qatar and the UAE, as well as a number of Islamic finance organisations such as the Accounting and Auditing Organisation for Islamic Financial Institutions, Liquidity Management Centre, and the International Islamic Financial Market will continue to attract new players to the region and further propel the Islamic banking industry to greater heights.
Wahab is the Assistant General Manager and Chief Financial Officer of Kuwait Finance House, one of the largest financial institutions that operate under Islamic Shariah. He is also the Chairman of the Accounting and Auditing Standard Board of the Accounting and Auditing Organisation for Islamic Financial Institutions.
In his keynote address, “Is Islamic finance different enough from conventional finance to avoid its pitfalls”, at the Fourth Annual CFO Strategies Middle East Forum organised in Dubai by naseba, Wahab said that the growth will be underpinned by the robust supervisory and regulatory framework, and stable banking system with comparatively strong funding and capital positions.
In addition, he said the region’s high GDP (PPP) per capita at $27,937, coupled with its young population (30 per cent falls under 15 years and 66.7 per cent is between 15-64 years of age), will help to support consumer spending and investment which would in turn increase the demand for Islamic financial products and services moving forward.
Wahab said that the potential for Islamic finance far outstretches the global crisis and has vast opportunities to grow further due to strong demand for Shariah compliant products and investments for further growth of the industry.
Proactive measures have been taken by certain jurisdictions globally to promote the development of Islamic finance, he added.
He said that the development of Islamic finance centres and innovative technological development helps greater awareness in the global market to strengthen the growth of Islamic finance Industry, while government-linked/ top tier companies in the Middle East and emerging Asia (financial, real estate, oil and gas and transport sectors) are looking for funds on the back of massive infrastructure and construction projects in the regions.
Wahab said that most of Islamic financial institutions have seen their reputation benefit from the current financial crisis, reflecting their conservative approach to business, a proximity to their domestic and regional deposit franchises, balanced and ordered appetite for growth and focus of banking as opposed to innovation.
He said that UK has emerged as the epicenter for Shariah-compliant finance. When HSBC Holdings (HBC) offered Islamic equivalent mortgages in 2004, nearly half the customers were non-Muslims, attracted by the competitive pricing compared to conventional interest-based financing.
He said that the main driver of growth in Islamic financial institutions is the increasing number of them offering Sharia-complaint products and Services.
There is an emerging trend among existing conventional banks to convert their operation to become Islamic, in addition to global expansion of most of Islamic banks in the Middle East with major focus in Asia and Africa , he said.
Wahab said that main challenges faced by the Islamic financial institutions are product development and innovation, distribution, and operational excellence.
|comments powered by Disqus|