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Thursday, 5 December 2013

UAE, five other nations control 80% of Islamic banking assets

Global Islamic banking assets with commercial banks are expected to reach $1.72 trillion in 2013, according to EY’s latest World Islamic Banking Competitiveness Report 2013-14, launched on Wednesday at the World Islamic Banking Conference in Manama, Bahrain. 

In 2012, global Islamic banking assets with commercial banks reached $1.54 trillion. The report revealed that six rapid-growth markets including Qatar, Indonesia, Saudi Arabia, Malaysia, UAE and Turkey (QISMUT) represented 78 per cent of the international Islamic banking assets with commercial banks, excluding Iran.

This includes both pure-play Islamic banks and windows of conventional banks. There is also increased demand on established and new reference centres including Bahrain and Malaysia to provide leadership for the next phase of industry’s development.

Gordon Bennie, Partner and MENA Financial Services Leader at EY, said: “We believe that the future success of Islamic banks will be measured less by the growth of assets and more by the quality of this growth. Impact made through responsible banking, inclusive growth and alignment with the broader halal asset class will be the defining features. Also, trade patterns are shifting decisively in favour of rapid growth markets and QISMUT will be the major beneficiaries. Banks with strong connectivity across key markets and sectors are set to gain.”

QISMUT is home to 17 of the top 20 Islamic banks and the global Islamic banking standard setting bodies. QISMUT holds the largest pool of financial and intellectual capital of the industry that will drive the next wave of development across existing and new markets.

Ashar Nazim, Partner, Global Islamic Banking Centre at EY, said: “Bahrain and the six rapid-growth markets are systemically important to the future globalisation of the Islamic banking industry. We expect Islamic banking to grow at a CAGR of 19.7 per cent across QISMUT to reach $1.6 trillion by 2018 compared to $567 billion in 2012.”

According to the report, Islamic banks today serve approximately 38 million customers globally, two third of whom reside in QISMUT. However, few Islamic banks are able to fully apply customer insights to innovate.  Going forward, emphasis on customer excellence will be the key differentiator that will separate successful Islamic banks from others.

“Islamic finance markets are far from being homogenous as each market is at a different stage of maturity and profitability varies significantly compared to conventional banking. For 2012, the average ROE of the 20 leading Islamic banks was 12.6 per cent compared to 15 per cent for its conventional peers,” added Ashar.

The report reveals that many banks are currently in the process of replacing or upgrading their core banking system. Capital planning in view of Basel 3 and IFSB guidelines is already influencing the preferred business mix and more Islamic banks believe that the collaborations between mobile providers and banks will further accelerate the adoption of mobile banking beyond payments to more complex savings and financing products.

The biggest challenges for Islamic banks are how to become a mainstream form of banking in their home markets, diversification to build regional brands, and taking a more socially responsible approach to differentiate themselves from conventional banks. 

The growth of the industry is expected to remain moderate going into 2014, as several leading Islamic banks contemplate large scale operational transformation. 

“Driving such a broad change programme - combining cost improvement with revenue growth - requires exceptional leadership capabilities and significant management capacity. Moving forward, customer and technology will be among the top transformation themes for the global Islamic banking industry,” said Ashar.

(Emirates / 05 Dec 2013)
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Malaysia: Support for Hong Kong Islamic financial market

PETALING JAYA: More measures to encourgae the development of the Hong Kong’s Islamic financial market, particularly the sukuk and the Islamic fund management industry were discussed during the first meeting of the Joint Finance Forum which was held in the special administrative region.
The forum was held yesterday following an agreement between the Hong Kong Monetary Authority (HKMA) and Bank Negara in August to strengthen collaboration between Hong Kong and Malaysia in the area of Islamic finance.
The forum participants agreed to identify potential sukuk issuers and encourage cross-border sukuk issuances between Hong Kong and Malaysia.
In particular, corporations located in the region could be one of the key sources of potential sukuk issuers.
“Hong Kong market players supported that sukuk should be offered as one of the possible options or solutions to their clients who have funding needs, as sukuk can be a means for potential issuers to expand their investor base.
“Participants also welcomed the initiative of the Hong Kong government to consider issuing sukuk, which will showcase Hong Kong’s Islamic financial platform to local and international issuers and investors,” said HKMA and Bank Negara in a joint statement.
The participants also agreed to consider launching Islamic funds and make use of the established mutual recognition framework for Islamic funds between Hong Kong and Malaysia to facilitate cross-border Islamic financial activities.
This will encourage a wider range of syariah-compliant fund offerings in Hong Kong and Malaysia.
The meeting also agreed to enhance the strategic financial linkages between Hong Kong and Malaysia aimed at facilitating cross-border investment flows and creating greater opportunities for investors from the region and other parts of the world, the statement said.
HKMA and BNM acted as facilitators, while the Financial Services and the Treasury Bureau of the Hong Kong Government, the Securities and Futures Commission and the Hong Kong Exchanges and Clearing Ltd also participated in the meeting.
(The Star Online / 04 Dec 2013)
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