UAE Islamic banking to hit $263b by 2019

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UAE Islamic banking to hit $263b by 2019

Sector outpaces growth of conventional banking

By Isaac John (associate Business Editor)

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Published: Mon 30 Mar 2015, 10:40 PM

Last updated: Thu 25 Jun 2015, 7:24 PM

Dubai — The UAE Islamic banking sector is on track to achieve $263 billion of Shariah-compliant assets by 2019, according to EY’s World Islamic Banking Competitiveness (WIBC) report released on Sunday.

The projected size of the Islamic banking sector in the UAE is expected to account for almost 15 per cent of the world’s six core Islamic markets estimated to hit $1.8 trillion by 2019.UAE Islamic banking to hit $263b by 2019

Global Islamic banking assets witnessed a compound annual growth rate (CAGR) of around 17 per cent from 2009 to 2013.

According to the EY report, Islamic banking assets with commercial banks in international markets were set to exceed $778 billion in 2014. The UAE Islamic financial sector, estimated to be worth $127 billion in 2014, is the third largest Islamic banking market by value, after the Saudi Arabian and Malaysian markets.

Ashar Nazim, global Islamic finance leader at EY, said that Islamic banks in the UAE, also known as participation banks, are eyeing revenue growth through experience-led transformation of their domestic business.

“Stronger capital position is also driving their international expansion. Initiatives in mobile payments are likely to cause positive disruption to banks’ traditional operating models. Looking at the positive performance of Islamic banks in the UAE, the country is expected to be one of the main markets that drive the future internationalisation of the Islamic banking industry,” said Nazim.

Shariah-compliant assets in the UAE crossed the $100 billion milestone for the first time. Islamic banking penetration in the UAE currently stands at 21.4 per cent and represents a 14.6 per cent share of the global market. The industry in the UAE is growing at more than twice the rate of conventional banking. Due to high demand, there is increased pressure on efficiency as more Islamic banks attempt to go mainstream, said EY’s report based on a study.

In the study, EY monitored 55,884 Islamic banking customer sentiments in the UAE on social media as part of a wider study, which looked at 2.2 million customer sentiments dispersed across various online sources in nine key markets (Saudi Arabia, Bahrain, Kuwait, the UAE, Malaysia, Indonesia, Turkey, Qatar and Oman). Banking clients were most satisfied with customer service, where positive comments on social media outnumbered negative comments by more than five per cent. Half of all the positive sentiments monitored were around customer service levels and complaint handling.

“The call to action for Islamic banks in the UAE is to build rich insights into customers’ delight and pain points, and break operational silos. The time is right for analytics; banks need to challenge their channel capabilities and push for more customised products and services. Regulatory intervention on product design can help to both attract and protect consumers. The reputations of Islamic banks today will depend on the way banks engage with their customers,” said Nazim.

Approximately 95 per cent of international Islamic banking assets of commercial banks are based out of nine core markets, five of which are in the GCC — Saudi Arabia, the UAE, Qatar, Kuwait and Bahrain. Excluding Iran, the market share of Islamic banking assets in Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain and Malaysia is now between 20 per cent and 49 per cent.


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