Qatar's Islamic finance sector set for growth
Business leaders in Qatar and around the globe say Islamic banking and finance is set for continued growth that may terminal until the terminate of the decade
The Sharia-compliant fiscal system is worth some $1.88 trillion, according to recent figures released in May past industry monitor, the Islamic Finance Services Board (IFSB). The organization was bullish in its growth estimates, stating that the number could increase to $iii.4 trillion by 2018.
Observers at the Earth Depository financial institution accept noted what they called the industry'south "rapid" growth. The group chalked Islamic finance'due south ascent upwards to a "heightened interest in fiscal instruments that emphasize risk sharing" in the wake of the well-nigh recent financial crisis.
Other reports show Islamic banking has also performed well in recent years, valuing the industry at $1.34 trillion in 2014 – a year in which the sector grew by 12%.
"Over the years nosotros have seen faster and consistent growth of Islamic finance assets as infrastructure development and the general economic system every bit a whole continues to grow together. In addition, the widening of our customer base as Islamic finance becomes more than understood and appreciated across the mainstream segment provides a major boost to support growth. We project that the need for Islamic finance will continue on a positive growth trajectory going forward into the next decade," says Adel Mustafawi, Group Master Executive Officeholder at Masraf Al Rayan, a Qatar-based Islamic bank.
"Islamic banks are at present targeting all segments by competing and acquiring not only sharia-compliant sensitive customers but also value-seeking customers who find the Islamic products pricing and offerings comparable to that of conventional banks"
Bassel Gamal, Group CEO, Qatar Islamic Bank
Manufacture insiders say Islamic finance enjoys crucial "advantages over conventional fiscal products." Mahmoud Mohieldin, a Senior Vice President at the World Banking concern and one-time Egypt investment minister, wrote in a contempo column that, "[Islamic finance]'southward prohibition of interest and requirement that investments be linked to the real economy, together with its arroyo to profit- and loss-sharing, add stability to the financial sector." Mr. Mohieldin added that Islamic finance can promote financial inclusion for those who, for cultural or religious reasons, are excluded from the traditional financial organisation.
"This is perhaps ane reason why Islamic finance has been expanding at 10-12% per twelvemonth over the last decade or and so," he wrote.
Although a study past the International Islamic Financial Market showed the issuances of Islamic bonds, known as sukuks, have dropped significantly since 2013, the mood around the industry remains positive.
"Islamic banks are at present targeting all segments by competing and acquiring not only Sharia-compliant sensitive customers but also value-seeking customers who notice the Islamic products pricing and offerings comparable to that of conventional banks," says Bassel Gamal, Grouping Chief Executive Officer at Qatar Islamic Bank (QIB).
Qatari banks observe Western Allies
Much of that value has been found in the ongoing internationalization of Islamic finance. The industry maintains increasingly strong ties to non merely globe centers of Islamic culture, merely also powerful fiscal hubs similar London or New York. Indeed, the United kingdom of great britain and northern ireland authorities issued a GBP £200 one thousand thousand sovereign sukuk in 2014—a relatively small corporeality, but notwithstanding one a BBC commentator claimed was "a signal of intent."
In Qatar, business concern leaders say the state'southward ties with the United States have likewise strengthened.
"The U.S.-Qatar bilateral human relationship is an important one. The U.Southward. plays a very important role in supporting the strategic mission of Qatar, in terms of trade, investments, banking and finance, in improver to defense, education, besides as political and social responsible executions," said Dr. Ragharan Seetharaman, CEO at Doha Depository financial institution in Qatar.
"The surge in merchandise and other bilateral relationships between Qatar and U.S. is going to improve synergies between them and thereby contribute to investment flows between them. Bilateral investments and merchandise tin become in the right management thereby banking can play a bigger role."
Other Qatar-based executives institute the tighter connections to the West to be a sit-in of the quickening evolution of Islamic finance.
"When nosotros first started to invest, it took a lot longer to practise any Islamic financing, be it sukuk or depository financial institution financing. Today it is much more accustomed and the documentation is more standardized," says Tamim Al-Kawari, Chief Executive Officer at QInvest, a Qatari investment business firm (QInvest's varied international dealings include a serviced apartment redevelopment project in the City of London).
"We do non really think of the Islamic finance market place beingness different from whatsoever other marketplace (…) The manner we look at things and the manner nosotros would hope other treasurers, companies and actually anybody looking for funding or majuscule, is to wait at Islamic finance as a different source of funding."
Qatar growing into an Islamic banking powerhouse
Currently, the top markets for Islamic banking and finance in the world are in Iraq, Kingdom of saudi arabia and Malaysia. Together they account for nearly $800 billion of the industry's total worth. Only every bit Islamic banking and finance'south global influence has spread, other nations are starting to benefit from its Sharia-compliant banking system.
That has led to increased calls for government reforms of Islamic financial instruments. The World Bank'due south Mr. Mohieldin wrote in his cavalcade that new sets of standards and regulations need to be implemented if countries within the Organization of Islamic Cooperation (OIC) want to use Islamic finance for economic diversification.
"Topping the list is the demand for stronger legal institutions that protect property rights and ensure that contracts are enforced. If people are to have full conviction in Islamic fiscal products, moreover, the industry will need to be standardized and regulated. National tax policies will also need to be tweaked, to prevent discrimination against Islamic fiscal instruments," Mr. Mohieldin wrote.
In Qatar, statistics show that Islamic banking has become i of the country's primary manners of handling finances. Islamic banking now makes upwards 26% of the nation's overall cyberbanking sector, according to the IFSB study.
"Islamic finance has gained pregnant ground in Qatar and the Gulf Cooperation Council (GCC). Islamic finance continues to play a major function in shaping the future of our economic system through advancing direct and indirect finance in support of infrastructure and projects; corporate and pocket-sized and medium-sized enterprises; retail and individual banking needs; and business development," says Mr. Mustafawi.
Some financial analysts in the country have said that much of the success of Islamic banking in Qatar tin be pinned to contempo reforms put in identify by regulators.
For instance, Qatari officials take established mediation centers to resolve problems with conflicts stemming from the perceived complexity of Islamic financial instruments. The IFSB written report noted that these types of measures accept led to the increased forcefulness of the sukuk in Qatar. The paper also stated that corporate sukuk issuance in the country had risen by $one.30 billion since 2014.
Additionally, the Qatar Stock Exchange has reportedly said that it will brand Islamic financing a central office of its recent plans to diversify its offerings.
This all comes equally Qatari officials are making a concerted effort to steer the state'southward economy toward new sectors.
"Qatar [is in the ongoing process of] economic diversification away from its traditional role every bit a hydrocarbon exporter. In recent year's growth has been mainly driven by the large-scale projects set past the regime as part of the Qatar National Vision 2030," says Mr. Gamal of QIB.
International recognition for Qatar banks
Banks in Qatar are now starting to proceeds international recognition for their business acumen. Doha-based Masraf Al Rayan was dubbed the world's virtually efficient Islamic bank on the 2015 World Islamic Banking concern Briefing cost-to-income ratio leader board, a global ranking of sharia-compliant financial institutions. Masraf Al Rayan's cost-to-income ratio was xx.vi%, a number that demonstrates how successfully the bank kept costs low while increasing income streams in 2015.
"Our vision is to build a bank that is strategically positioned and aligned to back up our clients and their businesses across the globe," adds Mr. Mustafawi.
"We exercise not actually call back of the Islamic finance market being dissimilar from whatever other market (…) The way we await at things and the manner we would hope other treasurers, companies and actually anybody looking for funding or capital, is to look at Islamic finance equally a unlike source of funding"
Tamim Al-Kawari, CEO, QInvest
Likewise coming in the height five of the rankings were the Qatar International Islamic Bank (QIIB) and the Qatar Islamic Bank (QIB), who garnered price-to-income ratios of 24.47% and 31.78%, respectively.
"QIB's strategy is to target all cyberbanking sectors roofing their fiscal needs in a comprehensive way. Both our corporate and personal portfolios take been posting good for you growth, while our local and international subsidiaries and associates contributed positively to QIB's Group results," says Mr. Gamal.
According to him, QIB controls more than 43.5% of the Islamic banking market place share in Qatar and xi.five% of the overall market, every bit per the latest figures published by the Qatar Central Bank.
Mr. Gamal is now starting to programme for a prosperous future not just for his banking concern, but for Qatar as a whole.
"We are continuously calculation economic value and trying to ameliorate the society as a whole also equally the lives of each individual living in Qatar," he says. "There is no doubt that the Qatari economy will continue on expanding and diversifying in line with the 'Qatar National Vision 2030' and our Bank is in a potent position to support and do good from the expected growth."
Source: https://www.theworldfolio.com/news/unprecedented-growth-of-islamic-banking-as-it-looks-to-enter-world-stage/4314/
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