Year upon year, the Islamic finance industry posts stellar growth figures. However, as large Western lenders withdraw from the sector, is Islamic finance in as healthy a shape as the figures suggest? The Banker asks a number of experts in the field what the future holds for sharia-compliant banking.
Islamic finance is increasingly being viewed as a credible alternative to conventional finance, but Hussain Al-Qemzi, group chief executive of Dubai-based Noor Investment Group and chief executive of Noor Islamic Bank, recognises that Islamic institutions must work together if they are to compete with conventional banks.
The steady growth of sharia-compliant assets suggests banks believe in the future of the sector, but the dismantling of the largest cross-border Islamic window raises questions about whether global banking groups can make a success of the business.
Arab banks offset the turmoil of the Arab Spring and offered a robust performance in 2011 with impressive growth across the key financial indicators. And with minimal exposure to the eurozone crisis, the region's banks are expected to continue their recovery from the global financial crisis.
Local banks in the Middle East have continued to perform strongly despite the global financial downturn. The strategies of three such institutions – state-owned National Bank of Abu Dhabi, local-owned Qatar National Bank and retail franchise Emirates NBD – help to explain such a strong performance.
The events triggered by the 2008 global financial crisis have ushered in a new wave of banking regulation in the United Arab Emirates and led to a greater focus on risk management. While UAE banks now boast some of the highest capitalisation levels in the world, the biggest challenge facing the sector as a whole is that of tightening liquidity.
Dubai’s banking sector has suffered a series of setbacks in the past few years. But with a series of new bond issuance from state-owned companies being met with high demand, and banks rolling out new mortgage products, 2011 has seen an upturn in the fortunes of the emirate.
With unrest spreading through many Middle Eastern and north African countries, the stability of the United Arab Emirates is making the country a haven for investors in the region, with Abu Dhabi's development and investment company Mubadala a leading light when it comes to utilising the bond markets.