Global Islamic banking assets with commercial banks are on course to exceed US$3.4 trillion by 2018, fueled by growing economic activity in core Islamic finance markets according to specialists at EY’s Global Islamic Banking Center. The Center has also announced the launch of its Mandarin and Turkish editions of its Islamic banking research today.
Across the six markets of Qatar, Indonesia, Saudi Arabia, Malaysia, UAE and Turkey (QISMUT), the combined profits of Islamic banks broke the US$10 billion mark for the first time at the end of 2013. If the current growth rate continues, the Islamic banking profit pool across QISMUT markets is set to exceed US$25 billion by 2018.
Ashar Nazim, Global Islamic Finance Leader at EY, says: “While the profit numbers for Islamic banks are impressive, they are still, on average, 15-19 percentage points lower than traditional banks in these markets. Regionalization and operational transformation, which are currently underway in several leading Islamic banks, will help to close this gap.”
There is significant growth potential for the industry. There are an estimated 38 million customers who bank with Islamic retail banks globally, but only a small number of these customers have fully transitioned from a traditional to an Islamic banking relationship. The average number of Islamic banking products per customer is just over two, whereas leading traditional banks have an average of five products per customer.
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“Building consumer confidence through service excellence, especially when it comes to customers opening accounts and cross-selling can increase the market share of Islamic banks by 40% from these customers,” comments Ashar.
Another major opportunity is for Islamic banks to assist the SME sector with their cross-border business growth.
“With increasing trade and capital flows between Turkey, Middle East and Asia Pacific, there is growing appetite to learn about Islamic financial solutions from clients and investors in these markets. Similarly, linking with world growth engines like China and India is becoming more important to help build business bridges between these high potential markets,” adds Gordon Bennie, EY’s MENA Head of Financial Services.