IFIs less affected by recession: MTI

Islamic Financial Institutions (IFIs) have been less affected by the global recession, according to a survey carried out by MTI Consulting. Around 62 percent of the survey respondents cited they had experienced little or no impact from the recent crisis which has ravaged banks and financial institutions worldwide.

The survey was conducted as MTI prepares to present at the 16th Annual World Islamic Banking Conference 2009-10 for the fourth consecutive year opens at Gulf Hotel in Manama this week.

Islamic finance makes up only small part of the world finance industry currently, and is estimated to be worth around $700 billion globally. However the industry has been growing at 20-30 percent annually since 2000 and is set for continued strong growth despite the global slowdown. Industry experts and financial institutions predict Islamic assets will reach a whopping $1.6 trillion by 2012.

The survey was conducted to augment MTI’s study for the World Islamic Banking Conference. The survey respondents included CEO’s and managing directors of Islamic finance institutions from various countries in the Middle East and South Asia.

Speaking on the survey results MTI Consulting CEO Hilmy Cader said unlike conventional banks, Islamic banks are not permitted to have any direct exposure to financial derivatives or conventional financial institutions’ securities — which were hit most during the global crisis. Hilmy Cader’s views were reflected in the survey as 72 percent of the respondents said less exposure to derivative products was one of factors driving the demand for Islamic finance during the crisis.

According to findings of the survey IFIs still lag far behind in marketing, which is the theme of this year’s conference. Companies in this category still struggle to compete with their conventional counterparts in product development. Around 55 percent of the respondents stated Islamic finance product development has not gone beyond Islamization of conventional products. What is more alarming is the fact 57 percent of the respondents agreed Islamic finance product development is not backed by any consumer research. Like most companies around the globe today, Islamic financial institutions have also had their marketing and advertising budgets trimmed. Forty eight percent of the respondents stated the advertising budgets of their companies have been decreased over the last twelve months. Looking forward 87 percent of the respondents feel their companies will maintain or increase their advertising budget in the next two hours.

On other areas, 96 percent stated risk and governance gained prominence in the last 12 months. As for overall strategic initiatives 12 percent have pursued mergers and acquisition, 40 percent have ventured into new markets, 64 percent went into cost cutting initiatives, while 34 percent have done product rationalizations.

Link: http://www.arabnews.com/?page=6&section=0&article=129198&d=7&m=12&y=2009