GCC’s Islamic Banking Assets’ Growth Slows To 14%

Growth in 2012 was up on 2011, far outperforming conventional banking assets’ growth of 8.1 per cent.



Growth in Islamic banking assets in the GCC slowed down last year but still grew by 14 per cent when compared to 2011, a new study has shown.

According to a report by Ernst & Young’s Global Islamic Banking Centre, Islamic banking assets with commercial banks in the region hit $45 billion at the end of 2012.

This compared to $390 billion at the end of 2011. The 14 per cent growth however was less than the previous five-year average of 19 per cent, although it was still far greater than conventional banking assets’ growth of 8.1 per cent.

The report said the outlook for the industry in 2013 remains relatively positive.

Ashar Nazim, partner at Ernst & Young’s Global Islamic Banking Center, 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.”

Qatar was the fastest growing market in the region with its Islamic banking assets expected to have grown by more than 23 per cent in 2012.

Global Islamic banking assets with commercial banks held $1.55 trilion at the end of last year with growth in the next two years expected to push that figure to in excess of $2 trillion by 2015.

Compared to conventional banking assets, Islamic banks are at a disadvantage as the majority of technology and software systems are designed for conventional banking frameworks.

Oman recently launched its Islamic Banking Regulatory Framework, requiring Islamic banking institutions to ensure that all core banking systems are certified as Shari’a compliant.

“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,” said Nazim.

“Where such information is available, the analysis remains very rudimentary and has not really translated to a true competitive advantage.”