Qatar's Islamic finance sector set for growth
Business leaders in Qatar and around the world say Islamic cyberbanking and finance is set for connected growth that may last until the cease of the decade
The Sharia-compliant fiscal system is worth some $1.88 trillion, co-ordinate to recent figures released in May by industry monitor, the Islamic Finance Services Lath (IFSB). The system was bullish in its growth estimates, stating that the number could increment to $iii.four trillion by 2018.
Observers at the World Bank have noted what they chosen the industry's "rapid" growth. The group chalked Islamic finance's rise upwardly to a "heightened involvement in financial instruments that emphasize risk sharing" in the wake of the well-nigh recent financial crisis.
Other reports prove Islamic cyberbanking has besides performed well in recent years, valuing the manufacture at $1.34 trillion in 2014 – a year in which the sector grew by 12%.
"Over the years we have seen faster and consistent growth of Islamic finance assets equally infrastructure evolution and the general economy every bit a whole continues to grow together. In improver, the widening of our customer base as Islamic finance becomes more understood and appreciated across the mainstream segment provides a major boost to support growth. We projection that the demand for Islamic finance will continue on a positive growth trajectory going forward into the next decade," says Adel Mustafawi, Grouping Master Executive Officer at Masraf Al Rayan, a Qatar-based Islamic banking company.
"Islamic banks are now 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, Grouping CEO, Qatar Islamic Bank
Industry insiders say Islamic finance enjoys crucial "advantages over conventional financial products." Mahmoud Mohieldin, a Senior Vice President at the World Banking concern and onetime Egypt investment minister, wrote in a recent column that, "[Islamic finance]'due south prohibition of involvement and requirement that investments be linked to the existent economy, together with its approach 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 system.
"This is perhaps one reason why Islamic finance has been expanding at x-12% per yr 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 manufacture remains positive.
"Islamic banks are now targeting all segments by competing and acquiring not only Sharia-compliant sensitive customers merely also value-seeking customers who detect the Islamic products pricing and offerings comparable to that of conventional banks," says Bassel Gamal, Group Chief Executive Officeholder at Qatar Islamic Bank (QIB).
Qatari banks notice Western Allies
Much of that value has been found in the ongoing internationalization of Islamic finance. The industry maintains increasingly strong ties to non just world centers of Islamic civilization, but likewise powerful financial hubs similar London or New York. Indeed, the UK regime issued a GBP £200 meg sovereign sukuk in 2014—a relatively small corporeality, but still 1 a BBC commentator claimed was "a betoken of intent."
In Qatar, business leaders say the country'due south ties with the Us have also strengthened.
"The U.S.-Qatar bilateral human relationship is an important i. The U.S. plays a very important function in supporting the strategic mission of Qatar, in terms of trade, investments, cyberbanking and finance, in addition to defense, teaching, likewise equally political and social responsible executions," said Dr. Ragharan Seetharaman, CEO at Doha Bank in Qatar.
"The surge in trade and other bilateral relationships betwixt Qatar and U.S. is going to better synergies betwixt them and thereby contribute to investment flows betwixt them. Bilateral investments and merchandise can go in the right direction thereby banking tin play a bigger function."
Other Qatar-based executives found the tighter connections to the Due west to be a demonstration of the quickening evolution of Islamic finance.
"When nosotros first started to invest, it took a lot longer to do any Islamic financing, be information technology sukuk or bank financing. Today it is much more accustomed and the documentation is more standardized," says Tamim Al-Kawari, Master Executive Officer at QInvest, a Qatari investment house (QInvest'due south varied international dealings include a serviced flat redevelopment project in the City of London).
"We exercise not really retrieve of the Islamic finance market being different from whatever other market place (…) The style we await at things and the way we would hope other treasurers, companies and actually everyone looking for funding or upper-case letter, is to await at Islamic finance every bit a dissimilar source of funding."
Qatar growing into an Islamic banking powerhouse
Currently, the tiptop markets for Islamic banking and finance in the world are in Iraq, Saudi arabia and Malaysia. Together they account for almost $800 billion of the manufacture'southward total worth. Only as Islamic banking and finance's 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 Earth Banking company'south Mr. Mohieldin wrote in his cavalcade that new sets of standards and regulations demand to be implemented if countries inside the Organization of Islamic Cooperation (OIC) want to utilize Islamic finance for economical diversification.
"Topping the list is the need for stronger legal institutions that protect holding rights and ensure that contracts are enforced. If people are to have total confidence in Islamic fiscal products, moreover, the manufacture will demand to be standardized and regulated. National taxation policies will as well need to exist tweaked, to prevent bigotry against Islamic financial instruments," Mr. Mohieldin wrote.
In Qatar, statistics evidence that Islamic cyberbanking has go ane of the state's primary manners of handling finances. Islamic banking at present makes up 26% of the nation'southward overall banking sector, according to the IFSB report.
"Islamic finance has gained meaning basis in Qatar and the Gulf Cooperation Council (GCC). Islamic finance continues to play a major part in shaping the future of our economic system through advancing direct and indirect finance in back up of infrastructure and projects; corporate and small-scale and medium-sized enterprises; retail and private banking needs; and business evolution," says Mr. Mustafawi.
Some fiscal analysts in the state accept said that much of the success of Islamic banking in Qatar can be pinned to recent reforms put in place by regulators.
For instance, Qatari officials have established arbitration centers to resolve bug with conflicts stemming from the perceived complexity of Islamic financial instruments. The IFSB study noted that these types of measures have led to the increased strength of the sukuk in Qatar. The newspaper also stated that corporate sukuk issuance in the land had risen by $1.30 billion since 2014.
Additionally, the Qatar Stock Exchange has reportedly said that it will make Islamic financing a primal role of its recent plans to diversify its offerings.
This all comes as Qatari officials are making a concerted endeavor to steer the country'south economic system toward new sectors.
"Qatar [is in the ongoing procedure of] economic diversification away from its traditional role as a hydrocarbon exporter. In recent year's growth has been mainly driven by the large-scale projects ready by the government equally part of the Qatar National Vision 2030," says Mr. Gamal of QIB.
International recognition for Qatar banks
Banks in Qatar are now starting to gain international recognition for their business acumen. Doha-based Masraf Al Rayan was dubbed the world'south virtually efficient Islamic banking company on the 2015 World Islamic Banking company Conference price-to-income ratio leader lath, a global ranking of sharia-compliant financial institutions. Masraf Al Rayan's cost-to-income ratio was xx.six%, a number that demonstrates how successfully the bank kept costs depression 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 earth," adds Mr. Mustafawi.
"We practice not really call back of the Islamic finance market being different from whatsoever other market place (…) The style we expect at things and the way we would hope other treasurers, companies and actually anybody looking for funding or capital letter, is to look at Islamic finance equally a different source of funding"
Tamim Al-Kawari, CEO, QInvest
Also coming in the tiptop 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 banking sectors roofing their financial needs in a comprehensive way. Both our corporate and personal portfolios take been posting healthy growth, while our local and international subsidiaries and assembly contributed positively to QIB's Group results," says Mr. Gamal.
According to him, QIB controls more than than 43.v% of the Islamic cyberbanking market share in Qatar and 11.five% of the overall market, as per the latest figures published by the Qatar Central Banking concern.
Mr. Gamal is at present starting to plan for a prosperous future non only for his bank, but for Qatar as a whole.
"We are continuously adding economic value and trying to improve the society as a whole too as the lives of each individual living in Qatar," he says. "There is no doubt that the Qatari economy will go along on expanding and diversifying in line with the 'Qatar National Vision 2030' and our Banking company is in a stiff position to support and benefit 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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