JEDDAH, 1 April 2006 — There are 270 Islamic banks with combined assets of $265 billion, according to a report of Dubai Islamic Bank (DIB).
“Deposits at Islamic banks are now estimated at $202 billion and are growing at the rate of 20 percent annually,” said the report carried by Al-Eqtisadiah business daily.
Islamic banks have now become a world force, DIB said. However, the report pointed out that the industry was still facing a lot of challenges, especially in matters related to setting out standards for the globalization of the fast growing sector.
Despite the presence of 270 Islamic banks, they account for only one percent of global banking assets.
The report called for further developing Islamic banking services and tools such as bonds, investment banking, asset management, private banking, risk management, project financing, Islamic accounting, Islamic life insurance, and bank guarantee to take the industry to greater heights.
DIB expected launch of more Islamic banks in the region in the coming years. In Dubai, authorities have approved the formation of an Islamic finance company with a capital of 1.5 billion dirhams. The company has received approval from the UAE Central Bank to carry out all financial operations.
The new company is expected to offer financial services and investment products in real estate, industry and trade in the United Arab Emirates and other Gulf countries.
It will also provide innovative investment tools required by the market.
Qatar International Islamic Bank, meanwhile, announced that it would start operations in Syria in July when its subsidiary Syrian Islamic Bank opens in Damascus with a capital of $100 million. Albaraka Banking Group and Islamic Development Bank are waiting for license to operate in Syria. Syrian Parliament has already approved establishment of Islamic banks.
Albaraka Banking Group (ABG) intends to increase the number of its branches to 250 within the next five years. At present the group has nearly 200 branches in 10 countries, including Egypt, Jordan, Lebanon, Algeria, South Africa, Turkey and Pakistan.
In a related development, several Kuwaiti financial companies intend to make their operations comply with Shariah principles, the business daily said.
Rifaat Ahmed Abdel Karim, secretary general of the Islamic Financial Services Board, or IFSB, has called for big-sized Islamic banks to meet growing financial requirements in the Middle East and other parts of the world.
“There is a need for big-sized Islamic banks. We don’t have the likes of HSBC, Citibank or Standard Chartered,” Abdel Karim said.
The Kuala Lumpur-based IFSB sets self-regulatory standards for Islamic banking based upon Shariah laws, which ban investments that pay interest or that derive profit from alcohol, tobacco, pork, gambling or weapons.
Islamic banking is largely concentrated in the Middle East and Southeast Asia but it is making inroads into Europe and the US, Abdel Karim said.
With Muslims accounting for 1.6 billion, or 25 percent, of world population, demand for Islamic finance is booming, he said.
But only one Islamic bank in the world — Al-Rajhi Bank — has capital exceeding $500 million, and 10 others with more than $200 million. “Islamic banks must realize that remaining small will not help. They need to grow to be competitive in the market, for better economies of scale and to be able to take on big projects,” he said.
Abdel Karim welcomed a proposal by the General Council for Islamic Banks and Financial Institutions to set up a $1 billion Islamic mega bank, saying it will help boost the industry’s market share in the global financial system. The council has said it hoped to launch the bank next year and is looking at Bahrain, Qatar, Dubai and Malaysia as possible host country.