There is a lot of wealth parked in the conventional space, especially in the GCC and banks must adopt innovative steps to wean customers away from the conventional banking towards Islamic finance, said a report.

Wealth management will be the next area of development for Islamic finance, but the availability of products and services for Muslim high net worth individuals is still limited, said a report in the Gulf Daily News, our sister publication.

"There is a lot of wealth parked in the conventional space, especially in the GCC," Standard Chartered Saadiq consumer banking global head Wasim Saifi said.

"This wealth could easily move into the Islamic space if customers can find a Sharia-compliant option that can provide them with a diversity of risk and manage it properly."

Banks would need to innovate to wean customers away from conventional banking towards Islamic finance.

"Islamic banking institutions haven't made much progress in tapping the unbanked sectors, so the challenge is converting conventional customers to the Islamic alternative," he said on the sidelines of the World Islamic Banking Conference 2012 at the Gulf Hotel.

Product innovation will also be along the lines of technology and channel reach to attract younger customers, who use such platforms for their banking and consumer needs.

"A young client will look at the social media and the challenge for Islamic finance is to use such platforms to promote the industry," said Mr Saifi.

Microfinance, which has been increasingly used in countries with large Muslim populations such as Bangladesh, has yet to take off.

"Microfinance is not an area that has been tapped by Islamic finance yet," he said.

"Bangladesh, where microfinance is very common through the initiatives of Professor Muhammad Yunus, is still interest-based and has not adopted the Islamic financial model.

"There haven't been enough efforts and microfinance institutions are still going after catching the low-hanging fruit rather than provide full Islamic financial services," he said.

Bahrain, which was one of the earliest countries to adopt Islamic finance, is well on the path of becoming a regional hub.

Customer needs in the Middle East and inclination to adopt Islamic finance are some of the factors that will determine its success.

"Bahrain has a good start especially through its sukuk issuances.

"The penetration of Islamic banking still remains relatively low compared with Kuwait, Qatar and the UAE," he added.-TradeArabia News Service