UAE:
Mainly driven by higher retail focus, a research conducted by the Dubai
Chamber of Commerce and Industry projected that the global Islamic
banking profit pool is expected to reach US$30.5 billion by the year
2018. The Dubai Chamber report which was based on a recent study by EY
revealed that global Islamic banking assets have registered cumulative
annual growth rate of about 16% from 2008 to 2012, suggesting that
there is a radical shift from conventional financial system in favor of
Islamic finance.
According
to the report, there are approximately 38 million Islamic banking
customers around the world with two thirds of them in Qatar, Indonesia,
Saudi Arabia, Malaysia, UAE and Turkey. The Islamic banking profit pool
in these countries is expected to reach US$26.4 billion by 2018. Among
these countries Saudi Arabia remain as the biggest market in terms of
Islamic banking assets with an estimated value of US$285 billion in
2013, compared to US$245 billion in 2012, representing about 43% of the
total Islamic banking assets in all the six countries. Additionally,
the research note indicated the UAE as another serious player in this
sector with total Islamic banking assets growing to about US$95 billion
in 2013 compared to US$83 billion in 2012.
On
the flipside, Dubai Chamber also pointed out that many Islamic retail
banks suffer from lower profitability than the conventional banks, due
to higher expenses attributed to complex products, lengthy process
steps and more interfaces. It is estimated that on average, leading
Islamic banks posted 19% lower return on equity (ROE) than comparable
conventional peers. The average ROE for the top 20 leading Islamic
banks is about 12.6% compared to an average of 15% of comparable
conventional banks.
Nonetheless,
Islamic finance is seen to gain traction in MENA region as it is
expected to remain as the focal market in the industry with US$599.4
billion in total assets, followed by GCC with US$536.9 billion assets,
according to Kuwait Finance House’s estimations. The industry is also
starting to flourish in North America and Europe with banking assets
worth US$59.8 billion and total assets reaching US$71.6 billion in
2013, reflecting success in increasing market share in new areas.
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