GCC witness Islamic banks surpass conventional banks’ growth in region
31 Mar 2013 07:07 GMT
 
Dubai: Gulf countries are witnessing continuous outstanding performance of Islamic banks and they have surpassed the growth of conventional banks, especially Qatar has posted the strongest Islamic Finance signals in the gulf region, estimates released by consultancy Ernst & Young showed.

Dubai: Gulf countries are witnessing continuous outstanding performance of Islamic banks and they have surpassed the growth of conventional banks, especially Qatar has posted the strongest Islamic Finance signals in the gulf region, estimates released by consultancy Ernst & Young showed.

Shariah-compliant assets at commercial banks in the six countries of the Gulf Cooperation Council (GCC) climbed 14.1 percent from a year earlier to $445 billion at the end of 2012, said Ashar Nazim, Islamic financial services leader at the firm.

This was faster than the growth of conventional bank assets in the region, which rose 8.1 percent, Ernst & Young said without giving a figure for the size of those assets. Previously, it has estimated Islamic institutions accounted for about a quarter of the entire banking industry in the GCC.

“We expect a relatively positive outlook for the Islamic banking industry in the GCC,” the consultancy said. Qatar’s Islamic banking assets were estimated to have grown more than 23 percent in 2012.

“Globally, the Islamic banking sector has posted a five-year average annual growth rate of 19 percent across the 22 major Islamic finance markets which Ernst & Young monitors. New entrants into the industry have boosted assets from a low base,” Nazim said.

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.

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.”

Analysts said that many Islamic institutions in the Gulf have grown by expanding their staff numbers and facilities rather than by boosting efficiency, so profit growth has in some cases been weak.

Nazim said that some Islamic banks need to make significant investments to upgrade their back-office information systems and become more efficient.

He said, “Islamic banks remain technologically disadvantaged as software systems are primarily designed for financial institutions based on conventional banking frameworks.”

“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,” Nazim concluded.



-- Al Arabiya Digital


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