Islamic banking assets in QISMUT top $801B out of $920B worldwide

Islamic banking assets in QISMUT top $801B out of $920B worldwide
2.5 5

Published December 2nd, 2015 - 14:30 GMT via SyndiGate.info

Rate Article:

 
PRINT Send Mail
comment (0)
Islamic Development Bank in KSA. (Shairco Interior Projects)
Islamic Development Bank in KSA. (Shairco Interior Projects)
Follow >
Click here to add Ashar Nazim as an alert
Ashar Nazim
,
Click here to add Gordon Bennie as an alert
Gordon Bennie
,
Click here to add Muzammil Kasbati as an alert
Muzammil Kasbati

Global Islamic banking assets with commercial banks are set to exceed $920 billion in 2015, a report said, noting that the sector continues to see strong growth with a compounded annual growth rate of about 16 per cent.

Meanwhile, Islamic banking assets of commercial banks based in Qatar, Indonesia, Saudi Arabia, Malaysia, the UAE and Turkey (denoted as QISMUT) are set to exceed $801 billion in 2015 and will represent 80 per cent of international Islamic banking assets, according to the World Islamic Banking Competitiveness Report 2016 from EY, a global leader in assurance, tax, transaction and advisory services.

Gordon Bennie, Mena Financial Services Leader, EY, said: “With the exception of Turkey and Indonesia, Islamic banking has gained market share in all markets, demonstrating the immense success and resilience of the industry.

“Twenty-two international Islamic banks now have US$1b or more in shareholder equity, making them better positioned to lead the future regionalization of the industry. In relative terms however, they are still only one third of the size of their largest traditional peers in home markets, and also lag in terms of return on equity.”

In 2014, the GCC countries added $91 billion in Shari’a compliant assets, representing a year-on-year growth of c. 18 per cent share, despite Turkey losing market share by 0.3 per cent nationally due to political pressure on one of the leading Islamic banking institutions in the country.

High-performing countries

Saudi Arabia continues to dominate the share of the global Islamic banking market at 33 per cent and is the highest contributor to total global Islamic banking assets, followed by Malaysia at 15.5 per cent and the UAE at 15.4 per cent. Islamic banks in Bahrain have also been steadily gaining market share over traditional banks.

Ashar Nazim, partner, Global Islamic Banking Center, EY, said: “Leading Islamic banks have done well to mainstream with a competitive, sizeable business in their home markets. The combined profit pool of Islamic banks across QISMUT was estimated at $10.8 billion in 2014, which is a notable milestone. However, the return on shareholder equity could be significantly enhanced, by at least 15 per cent–20 per cent, and this need becomes more pressing in the context of the prevailing macro-economic environment.”

Drivers of growth in Islamic banking

Two main areas are expected to drive future growth in Islamic banking; average growth in banking sector assets and increase in market share, the report said.

Muzammil Kasbati, director, Global Islamic Banking Center, EY, said: “The external operating environment is certainly getting tougher, given the prevailing oil price and the resulting impact on banking system liquidity and infrastructure spend.

“Islamic banks are in a better position to weather this storm due to the simpler nature of their balance sheets, basic products and localized operations. However, they do not appear to be ready for the digital changes that are impacting the way customers engage with banks. A fundamental review of their operating models at this stage will be critical to the success of Islamic banking across the Organization of Islamic Cooperation markets.”

Islamic banking in 2020

The total Islamic banking assets with commercial banks in QISMUT are expected to reach $1.6 trillion by 2020 and the total industry profit pool of QISMUT is expected to reach $27.8 billion.

In terms of banking market share, Saudi Arabia, Kuwait, Bahrain and Qatar are expected to be the major players by 2020.

“QISMUT will remain the key driving market with the GCC providing the additional acceleration for future growth of the industry, with Turkey expected to recover from the current temporary setback,” said Nazim.

“There is still a lot of opportunity; the industry today is yet to reach 100 million customers. The potential captive market is six times bigger but requires a different banking model. A digital-first strategy has to be the stimulus for Islamic banks to sign up the next 100 million customers over the next decade,” he concluded.

 

Copyright 2015 Al Hilal Publishing and Marketing Group

Add a new comment

 avatar