Globally, Islamic banking assets are said to be growing twice as fast as conventional banking assets and expected to reach $1.1 trillion (Dh4.04 trillion) in 2012, up 33 per cent from 2010, according to a Ernst & Young study.
“The Muslim world has a number of large economies; immediately Egypt comes to mind for the reason it is a large economy,” he said,
Experts say that the sector’s potential is affected by several challenges. Niraj Vyas, financial planning director for Guardian Wealth Management, based in the Middle East and Europe, lists, “Staff training, qualifications, attitude shift from products to clients, planning rather than selling, transparency in terms of fees, technology support (for example, offering clients platforms), and complete solutions rather than products alone.”
One of the latest entrants in the market is Standard Chartered Private Bank (the Private Bank), which launched Islamic financial solutions for its clients late last month, in response to a latent demand for Islamic banking products among its existing and prospective client base.
“We are seeing a lot of demand for Islamic finance windows in conventional banks,” says Mohammad Harb, business development manager for Islamic products at Misys, a British banking solutions company, based in the UAE.
Harb says that their Islamic solutions market is growing at 10 per cent every year, with new demand coming from the Arab Spring countries.
This is the case not just in banking but in insurance as well. “We are seeing a lot of growth in the conventional sector. Most reinsurance companies now have retakaful windows,” said, Gassan Marrouche, CEO of Takaful Emarat, a Islamic insurance company.
Companies have long cited backend costs as the reason behind high fees charged from customers. “Retakful is costlier than reinsurance,” Marrouche said.
With software integration becoming cheaper, all this should change. “Now the system is built in at little cost and effort. Our software solution now runs on the same core system. Analysts say competition will also ensure that products are reasonably priced.
Takaful in vogue
In its most basic, unorganised format, Takaful or Islamic insurance has been practised by groups of expat truck drivers in the UAE who would each look out for the other, without any institutional support. If one of them met unexpected expenses such as heavy fines, the group would pool money to pay them off.
“The idea of Takaful is 1,400 years old. It came with people pooling money in and using it for emergencies. Enough with this innovation, you have to provide what the client needs,” says Marrouche, explaining how Takaful Emarat expanded into micro-Takaful products, one launched two months ago.
“We have a corporate product for blue collar workers with salaries up to Dh4,000. We are not depriving them from being attended by a licensed physician from the UAE. We are not putting them in five-star hospitals but having something is better than nothing. In the first two months we have exceeded almost 40,000 workers.”
Islamic finance products are increasingly focusing more on creating products to compete with conventional products on an equal footing.
Marrouche says: “We are, of course, Sharia-compliant but we need to focus on Takaful, on our product and make it work for everyone.”
source: Gulf News