Monday 25 June 2018

GCC Islamic bank assets surge 14pc to $445bn

Dubai, March 20, 2013

The Sharia-compliant assets at commercial banks in the GCC region climbed 14.1 per cent from a year earlier to $445 billion at the end of 2012, according to a report.

While Islamic banking assets posted solid growth the conventional banking assets grew by only 8.1 per cent - indicating the relative resilience and potential of the industry, said the report by the E&Y 'Global Islamic Banking Center.

Qatar was the fastest growing market where Islamic banking assets seemed to have grown by more than 23 per cent during 2012, the report added.

Ashar Nazim, the partner at E&Y Global Islamic Banking Center said he expected a relatively positive outlook for the Islamic banking industry in the GCC.

"Quality of growth remains under pressure and we expect more Islamic banks initiating an honest introspection of their operating model, especially with regards to the weak data management infrastructure," he noted.

Previously, the consultancy had estimated the Islamic institutions accounted for about a quarter of the entire banking industry in the GCC.

"Inability of most Islamic banks to generate accurate data and on time remains a serious concern for the management, the board as well as the regulators.  Where such information is available, the analysis remains very rudimentary and has not really translated to a true competitive advantage," remarked Nazim.

Globally, the Islamic banking sector has posted a five-year average annual growth rate of 19 per cent across the 22 major Islamic finance markets which E&Y monitors.

The new entrants into the industry have boosted assets from a low base, he added.

Islamic banking assets at commercial banks reached $1.55 trillion worldwide at the end of 2012, and are projected to exceed $2 trillion by 2015, the Ernst & Young report said.

Globally, the Islamic banking assets grew 50 per cent faster than the growth rate of the overall banking sector, said the E&Y report.

However, it also said of the Gulf's Islamic banks: "Quality of growth remains under pressure and we expect more Islamic banks initiating an honest introspection of their operating model."

In comparison to their conventional banking peers, Islamic banks remain technologically disadvantaged as software systems are primarily designed for financial institutions based on conventional banking frameworks, said the expert.

"While the industry regulators are looking to tackle this issue, it remains a concern for the industry leading to significantly higher operational and commercial risk, stated Nazim.

"In Oman for example, the Islamic Banking Regulatory Framework has recently been introduced, requiring Islamic banking institutions to ensure that all core banking systems are certified as Shari’a compliant," he noted.

According to Nazim, major investments in transforming the operating model are underway. 

"Discussions with management reveal that a common theme across most banks is ‘to get to know their customers,” he added.-Reuters and TradeArabia News Service

Tags: Qatar | Gulf | Islamic bank | asset | E&Y |

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