Islamic finance ready to move into fast lane
Ethical banks could grab half of regional market within years
Islamic banks are set to have the same share of the Middle East’s banking industry as their conventional rivals by the end of the decade, a major international lender has said.
Leading executives at global institution Standard Chartered say Sharia-compliant banks are on track to boast around half of the region’s banking assets by 2020 - on the back of surging growth which has seen the industry expand by 30 per cent in the region in just two years. Standard Chartered say Islamic banking now accounts for 25 per cent of the UAE banking industry.
“It’s not niche any more - it’s becoming part of regular banking,” Khalid Elgibaly, head of consumer banking in the region at Standard Chartered, told 7DAYS yesterday.
Elgibaly admitted the potential revenues from Islamic banking are “absolutely huge”, but added: “It’s not just about that, it’s about values, trust, honesty. Is that not what you want from a banker?”
It is these factors that are making Sharia-compliant finance appealing to non-Muslims too, he said.
The bank’s global head of private banking, Stephen Evans, added: “Ethical investment has become a big driver for investment choices.”
According to Elgibaly, the reason that Muslims in the region have often used conventional banks, as opposed to Islamic institutions,
“They’ve never had access to the same global investment opportunities - it’s always been local or regional banks at best,” he said.
Many Islamic scholars have expressed concerns about Muslims building large personal fortunes through conventional finance. But Evans insisted: “Making money is fine in Islam, trade is something that is absolutely fine in Islam - it’s the way you trade.
“Islamic banking is very respected in worldwide investment circles. We have the Muslim world to thank for the words ‘bank’ and ‘cheque’.”
According to Standard Chartered though, just 14 per cent of the world’s 1.6 billion Muslims have a bank account. And the bank spies a big opportunity for its Islamic division, despite the company’s own roots in conventional finance.
Evans said: “The biggest provider of halal products in the world is [Swiss conglomerate] Nestle. We’d like to be the Nestle of the banking world.”