Demand for Islamic finance gaining ground in Mideast
Islamic finance is gaining popularity in key markets, including the personal loan sector, and there has been a marked increase in the amount of UAE residents choosing an Islamic finance loan over a conventional loan
Compareit4me group has noticed an increase of 53 per cent of consumers searching for Islamic finance products.
The increase in popularity is across the board and research by Morgan McKinley found a surge in the global value of Islamic banking assets is forecasted for the next few years. Figures are predicted to reach $6.5 trillion by 2020, a huge leap compared to of $150 billion in the mid-1990s.
In the UAE alone, total Islamic banking assets accrued in 2013 was $95 billion (compared to $83 billion in 2012), and it is showing no signs of slowing down, with the Dubai Chamber of Commerce and Industry predicting that the annual growth rate will reach 17 per cent until 2018.
The increase has been with all consumers, with a recent study from Bloomberg concluding that in the UAE, Islamic finance has also gained popularity among non-Muslim expats.
The sector is still growing at an incredible rate; in some markets it is growing up to 50 per cent faster than traditional banking and it looks to be a trend that's set to continue. This is predominantly thanks to an impressive increase in competition, product development and better customer value.
For a while Islamic banks slipped behind conventional banking in terms of educating customers about what they offer, how they are different and why they are an appealing alternative - but they have stepped up. Now the awareness is much greater, the products available are much wider and these efforts are paying off, as the spikes on compareit4me.com, a Middle East finance comparison website, indicate.
While UAE Islamic banks including ADIB, Emirates Islamic, Dubai Islamic and ADNIF are continuing to offer competitive products, with flat rates on loans as low as 2.36 per cent, non-Islamic banks are also increasingly offering attractive Shariah-compliant products. Commercial Bank of Dubai and Noor are offering flat rates as low as 2.75 per cent, in comparison to other banks that are offering up to seven percent.
The research by compareit4me.com found that 74 per cent of consumers are looking for personal loans and credit cards; nine per cent for home loans; five per cent for auto loans; and 12 per cent for other products, such as different types of bank accounts and business loans.
Jon Richards, chief executive officer of compareit4me.com, said: "Once they might not have been, but now Islamic finance products are most definitely viewed side by side with conventional bank products. Given the trends we've seen on the site, we've become aware that most users are blind to the fact a certain product is Islamic, they just simply want a good rate. Therefore, the main attraction for customers seeking new banking products is the transparent fees and rates which come with the Shariah offerings."