GCC Islamic banking assets booming
Islamic banking assets with commercial banks in the GCC reached $445 billion at the end of 2012, a 14 per cent increase on the previous year.
According to estimates by Ernst & Young’s Global Islamic Banking Center, Islamic banking assets with commercial banks in the GCC reached $445 billion at the end of 2012, up from $390 billion in 2011, with the outlook for the industry remaining relatively positive in 2013. This represents a 14 per cent year-on-year growth, which is considerably lower than the five year average of 19 per cent.
Qatar was the fastest growing market where Islamic banking assets are expected to have grown by more than 23 per cent during 2012. While Islamic banking assets with commercial banks in the GCC grew by 14 per cent in 2012, conventional banking assets grew by only 8.1 per cent - indicating the relative resilience and potential of the industry.
Ashar Nazim, Partner, Global Islamic Banking Center, Ernst & Young said, “We expect 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."
"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."
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. 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. 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.
“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’,” said Nazim.
Global Islamic banking assets with commercial banks are now at $1.55 trillion at end of 2012 and projected to exceed $2 trillion by 2015. Ernst & Young’s Islamic Banking Universe in its estimates represents banks across 22 major Islamic finance markets.
- Yemen Central Bank headquarters to relocate from Sanaa to Aden
- Show me the money: Lebanon addresses bank transfer delay problems
- Swiss Leaks revisited: Strong Egyptian presence in banking scandal
- Saudi market plans IPO in 2018
- Understanding the ripple effect: 8 reasons the US economy has slowed down in Q1 of 2015