Islamic Finance center to be established in Jordan
08 Dec 2012 08:24 GMT
 
Amman: A regional center for Islamic Finance is soon to be established in Jordan as the Jordanian government is working aggressively to foster Islamic Finance industry in the country and feels the need of a leading Islamic finance center to achieve its goals. By Farhan Iqbal

Amman: A regional center for Islamic Finance is soon to be established in Jordan as the Jordanian government is working aggressively to foster Islamic Finance industry in the country and feels the need of a leading Islamic finance center to achieve its goals.

According to a report by KFH-Research, the Jordanian government has taken this decision in the wake of rapid growth of Islamic banking in the country, due to laws that organize the work of takaful insurance and sukuk.

The assets of the four Islamic banks operating in Jordan are $4.6 billion and form 5 percent of total banking assets. They achieve annual growth of 13 percent and are better than traditional banks in growth of deposits and financing. This reflects high demand for transactions; especially that they offer various unique services and products.

In addition, the report mentioned that Islamic insurance companies are still performing poorly, but after receiving a nod from the government regarding takaful insurance, the performance is expected to get better.

The Jordanian government plans to issue sukuk to face the deficit in budget, after a legislation that organizes that matter received a nod. The legislation allows the trading of sukuk in Amman bourse.

Islamic finance in Jordan is still at a very early stage of development. The Islamic finance started in the country when the Banking Law 13 was endorsed in 1978 which has allowed the establishment of an Islamic bank. Since then, the first Jordanian Islamic bank, the Jordan Islamic Bank for Finance and Investment (JIB) was set up.

Even though it was established as a member of the Saudi-based Dallah Al Baraka network of Islamic banks, 90 percent of its capital was owned by the Jordanian citizens. By 1986, it had become the sixth largest Jordanian bank in terms of total assets and had financed numerous projects.

This indicates that Islamic banking was welcomed by the Jordanian citizen which subsequently led to the introduction of the second Islamic bank, the Islamic International Arab Bank, in 1998.

As at end-2011, the total assets of Jordan’s Islamic banks stood at JOD3.25 billion ($4.58 billion) with 13.13 percent y-o-y growth (2010: JOD2.87 billion).

Currently, there are four Islamic banks operating in the country. In addition to the Islamic banks mentioned above, two other Islamic banks operating in Jordan are Jordan Dubai Islamic Bank which was established in 2010 and Al Rajhi Bank which set up its branch in 2011.

Presently, Jordanian Islamic banks hold approximately 4.85 percent of the country’s banking sector total assets.

Based on a compound annual growth rate (CAGR) of 18.3 percent between 2009 and 2011, Islamic banking assets in Jordan are expected to grow from JOD3.25 billion as at end-2011 to approximately JOD3.84 billion by the end-2012, accounting for more than 5.4 percent of the country’s banking sector total assets.

In terms of products and services, Jordan Islamic Bank offers a wide range of financial products and services to both individuals and corporations.

The services include Murabahah and Ijarah Muntahia Bithamleek as well as some investment products such as Musharakah and Mudarabah.



-- Al Arabiya Digital


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