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Islamic banking flourishing
Muzaffar Rizvi / 11 October 2012
DUBAI — Islamic banking in the UAE is going from strength to strength and plays a key role in the economy by providing an alternative solution to conventional products and services, a top official of Mashreq Al Islami said.
“Our estimate is that Islamic banking has taken 20 per cent market share of overall banking in the UAE. This is a very positive sign and shows the continued growth in Islamic banking in the Emirates,” Moinuddin Malim, chief executive officer of Mashreq Al Islami, told Khaleej Times on the sidelines of World Islamic Retail Banking conference, which concluded here on Wednesday.
He said Islamic banks, Islamic windows of conventional banks and Islamic finance companies have been playing a major part in promoting the sector by providing an alternative solution to conventional products and services for those customers who prefer Islamic banking and finance.
He said Mashreq Al Islami offers all key products and services from its Shariah-compliant platform, which are offered across Mashreq branches in the UAE. “We are working to further strengthen the bank’s retail presence and will be shortly introducing the Islamic credit card and an alternative to retail overdraft facility. This will complete our product proposition for the retail segment,” he said.
Mashreq Al Islami is the Islamic banking arm of Mashreq Group. The bank aims at offering progressive Islamic banking for the modern world and it has been playing an active role in the growth of Islamic financial services within the UAE and beyond, in both business and personal banking.
“We already have all depository products including current account, mudaraba saving account and wakala fixed deposits. In terms of asset products, we have personal finance, home finance and retail SME finance. On the wholesale banking front, Mashreq Al Islami has every foreseeable Shariah-compliant range of products and services matching the product suit of Mashreq,” he said.
Banks perform well
Malim said the UAE banking sector will perform well in the second half of the year with some banks doing better than others mainly due to their low cost of borrowing. “The high liquidity levels at banks, which they will be looking to deploy will further create price tensions and put pressure on margins. The market forces will be at work and the true winner from this shift in price equilibrium will be the consumers,” he said. Elaborating, he said the banking sector has grown at a multiple of two times of the nominal gross domestic production, or GDP. The UAE’s nominal GDP is expected to range between 3.5 per cent and four per cent during 2013 to 2015. Accordingly, the banking sector on average is expected to grow between seven and eight per cent. However, there will be outliers who will grow faster than other.
“As GCC countries have gradually come out of restructuring, a rationalisation of projects has set in, including realignment of objectives. One would see a much focused approach to business and the banks will play a key part in this structured growth during next three years,” he said.
Investors’ confident in economy
Malim said the bank’s overall profit and revenues reflect investor confidence in the UAE economy, which is in a steady growth mode. Within the UAE, Abu Dhabi enjoys the harvest of the oil sector whereas Dubai has seen excellent growth in non-oil sector. Additionally, the credit default swaps have come down for Dubai while for Abu Dhabi it has remained almost at constant.
“This will help Dubai-based banks. However, the gap between the two key emirates has also reflected on how the banks based in these two emirates have been able to secure funding locally and internationally post crisis which has an effect on their performance.
“On the other hand, commercial banking and trade finance activities are more prevalent in Dubai, which has also made Abu Dhabi banks to set up shop here. This additional competition is well received, however, the ability to raise deposit at a lower cost is a substantial advantage for Abu Dhabi-based banks that will further test us in the coming days,” he said.
To a question about the bank’s business strategy, he said: “Our bank has very aggressive growth aspiration and this is all going to be organic growth through working to increase the asset book.”
“We believe that setting up segregated branches for the Islamic offering does not add any value to our customers who can access Islamic products and services thorough all Mashreq branches strategically located across the UAE,” he added.
To a question about expansion in GCC, he said Mashreq has a presence in Qatar, Bahrain, Kuwait and Egypt and it may consider other markets if any opportunity exists.
“As and when opportunities arise we will address them on case by case basis,” he said, adding that the new regime in Egypt presents an excellent opportunity for Islamic banking and finance.
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