The Eurozone crisis and widespread protests against the global financial system present the $1 trillion Islamic the finance industry with a big opportunity to accelerate growth, Hussain Al Qemzi, chief executive of Noor Islamic Bank said.
Speaking at the 2nd Annual Middle East Islamic Finance and Investment Conference on Wednesday, Al Qemzi said greater cooperation, rather than competition, between the Middle East’s Islamic financial institutions is necessary if the industry is to provide a real alternative to the conventional international banks operating in the region.
“We need to build bigger banks, bigger capital and to cooperate,” Al Qemzi said.
He said regional Islamic banks do not have the financial punch to challenge their larger competitors from the US, Europe and the Far East. He said the global Islamic finance industry could grow to around $4 trillion from $1 trillion at present within five years as untapped markets such as China open up and new products drive demand.
Al Qemzi called for the Islamic banking industry to build scale through consolidation, but said his own bank is currently not considering any mergers and acquisitions activity.
“It is now time to talk about how Islamic finance can contribute to long-term inclusive, equitable and sustainable economic growth not just here, in the Middle East, but in every country across the globe,” he said.
“Though it is true that greater awareness of the inbuilt strengths of Islamic finance has contributed towards increased international participation in Islamic financial markets, awareness alone is not sufficient to ensure sustainable growth for our industry. To remain competitive we have to continually innovate and adapt. If we are to challenge the conventional banks’ entrenched position in international financial deals, we must develop the capacity to structure multi-currency and cross border transactions and build scale,” Al Qemzi said.
Moinuddin Malim, Mashreq Al Islami CEO, said global Islamic banking and finance industry has been on a steady and consistent growth path with the Middle East being its nerve centre. Though the industry has built a wealth of opportunities and options for investors over the last decade, a lot more still has to be done in order for the industry to successfully compete with their conventional counterparts.
He said the Islamic finance industry in the Middle East is at a crucial evolutionary phase. “Regardless of the current socio-political concerns facing some markets in the Middle East, there is large untapped liquidity available at the disposal of investors in the region and it is critical that the Islamic finance industry realises this potential and utilises the opportunity to ensure stronger growth for the industry in the region.”
Conference organiser David McLean noted ‘though Islamic banking assets have grown significantly over the past few years, they still only represent less than one per cent of total global banking assets – with more than 50 per cent concentration in the Middle East region and this represents a unique growth opportunity. Islamic finance represents one of the fastest growing segments in the global finance industry and the Middle East region has been at the forefront of the dramatic and exponential growth.
“Being a significant source of capital, Islamic financial institutions in the Middle East are significantly contributing towards the global development of Islamic finance with an increasing number of Middle East based Islamic financial institutions now taking a more global perspective. With the growing global demand for Islamic finance, the Middle East region is well positioned to be the global hub of Islamic finance linking key markets of Asia, Europe and Africa,” said Mclean.
Dr. Jarmo Kotilaine, chief economist of the National Commercial Bank, said while Islamic banking assets have grown significantly in the past decade, their share of total global banking assets remains marginal. Absence of long-term financing tools and a growing importance of long-term capital projects launched in the region has significantly increased the attractiveness of Islamic finance, he pointed out.More than 250 leaders of the international and regional Islamic banking and finance took part in the conference.
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