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Private Banks fail to match rapid growth of Islamic financial institutions

Published: 15/08/2012 12:59:00 PM GMT
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Singapore: The retail banks are introducing a range of Shariah-compliant products including simple checking accounts, mortgage and car financing in order to match the rapid growth of Islamic finance sector but they are still far behind Islamic financial institutions success.

By Farhan Iqbal


Singapore: The retail banks are introducing a range of Shariah-compliant products including simple checking accounts, mortgage and car financing in order to match the rapid growth of Islamic finance sector but they are still far behind Islamic financial institutions success.

The demand for Islamic shariah-complaint financial products and services has tremendously grown in recent years and continually growing. But private banks are substantially behind in offering in terms of wealth management for Islamic customers, who want products and services that respect Islamic laws prohibiting trading in debt and collecting interest, among other rules.

According to the World Wealth Report 2012, released by Capgemini and RBC Wealth Management, the Middle East is the only region where wealth increased among individuals of high net worth, who are often defined as those with $1 million in investable assets.

The private bankers said that most of their clients are not trying yet to bank according to Shariah law and the market will evolve.

A portfolio manager at Citi Private Bank, Sameer Khale, stated, “These clients are very global in their outlook, they are aware of all the various investment opportunities, changing market conditions, and not all of these investment opportunities are yet Shariah-compliant.”

“Only a subset of our clientele will really insist on Shariah- compliant products and be willing to forgo some of the other investment vehicles that are out there,” he added.

But he believes that from a product point of view, there are now much more sophisticated products available that can meet the need for compliance with Islamic law.

Khale said, “For example, there is now a multitude of Shariah-compliant equity indexes that look at different geographies and sectors, and that itself is one of the indications of how the market is growing.”

The Managing Director of NQ International, a Singapore firm that provides advice to wealthy family businesses in Asia and the Middle East, Noor Quek, said that private banks do not have enough to meet the growing demand from their clients.

“Demand is definitely increasing for tailor-made Shariah-compliant products for ultrahigh net worth clients,” she said while citing succession planning, financing, discretionary and non-discretionary portfolio management, equities and structured products as examples.

She noted, “But few banks understand the needs of the Islamic ultrahigh net worth individual or take a holistic view of wealth management services.”

The Global Head of Islamic banking at Standard Chartered, Wasim Akhtar Saifi, said, “The gap between conventional and Islamic banking solutions has narrowed substantially.”

“Muslim high net worth individuals are increasingly expecting Shariah compliance in managing their wealth. However, in most cases, their existing private banks, even if they are able to offer Shariah compliance, are able to do so only for a specific product or a specific structure,” he added.

“We have looked at it from a much wider perspective. The idea is not to structure customized solutions for a one-off client, but to offer a more systematic wealth management approach,” Saifi concluded.



Wasim Akhtar Saifi, Global Head of Islamic banking at Standard Chartered

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