The fledgling Islamic mortgage market in the Arabian Gulf fell under the spotlight on the third and final day of the high profile 2005 International Islamic Finance Forum in Dubai, as expert speakers highlighted the need for greater market liquidity to meet demand and fend off competition from foreign banks.
Adel Al Shirawi, CEO of Tamweel Home Finance, in the UAE, said that as Dubai continues to expand, 300,000 to 500,000 units would be needed to meet projected housing demand. But he raised doubts the figure would be met. In 2004, only 10,000 units were delivered, he said.
“Even with double digit growth, we cannot meet finance demand for the next three to four years,” said Al Shirawi. “The market needs liquidity. The greatest concern we have, more than the Dubai ‘bubble’, is liquidity. The Dhs 10 billion currently available in the market is not enough. We need Dhs 90 billion.”
Al Shirawi identified the implementation of a regulatory framework and access to foreign capital as key means to enhancing liquidity. “A regulatory framework that enhances money supply needs to be activated as soon as possible,” he said.
Meanwhile, he said, “We are trying to tap the foreign market to bring some of the capital here, based on Sharia’h compliance and Sharia’h laws. If we don’t engage foreign banks, they will come and flood the market with cash. They will come here with debt instruments because we don’t have them and they will take the market from us.”
Mohammed Ali Al Hashimi, CEO, Amlak Finance, said, “One of the biggest challenges is keeping up with the growth of the demand.” Amlak currently has 3,000 customers and has committed in excess of Dhs 3 billion to the market, but the concept of home finance is still new. “The market is still in its infancy,” said Al Hashimi.
In a presentation on the theme of Consumer Finance, Al Hashimi outlined to the forum’s 400 participants from 50 countries why home finance, including Islamic home finance, is important to economies. “It creates long-term credit markets, strengthens the middle classes and increases demand for construction materials, home consumer items and so on,” he said. It also lifts up banking systems and strengthens capital markets, he added.
The three-day 2005 International Islamic Finance Forum was organised by IIR Middle East, in association with DowJones Indexes and Saudi Economic & Development Company (SEDCO), Saudi Arabia.