Islamic banks profitability up 58% in Q1FY12

KARACHI: The profit of Islamic banking industry (IBI) reached Rs 8 billion by end of the first quarter of 2011-12, showing growth of over 58 percent, as earning’s growth rate of conventional banks having Islamic banking branches is significantly higher than the growth rate of full-fledged Islamic banks.

The study ‘Islamic Banking Bulletin July-September 2011’ released by the State Bank of Pakistan (SBP) revealed that the share of full-fledged banks in overall profit of IBI though declined marginally over this quarter still constitutes major share (55 percent share) of overall profit of the industry.

The growth in profit during the said quarter is relatively lower than the growth rate of the last quarter (100 percent). However, the significantly higher growth rate of the last quarter can be associated to the base effect.

IBI continued its positive trend of earning as indicated by the rising trend in return on assets (RoA) and return on equity (RoE), both these ratios though didn’t show any significant change over the quarter under review for the overall banking industry.

It is also worth noticing that for IBI ‘net mark-up or profit income to gross income’ indicated a decline while ‘non-mark-up or profit income to gross income’ showed an upward trend, which is in contrast to overall banking industry norms.

As of end September 2011, the total assets of the IBI stood at Rs 568 billion, constituting 7.3 percent share of overall banking industry.The deposits of IBI reached Rs 463 billion during the quarter under review and its share increased to 8 percent of the overall banking industry from 7.6 percent in the last quarter (April-June 2011); the yearly basis growth of the deposits was almost 37 percent.

However, investments growth decelerated while financing witnessed retrenchment compared to the previous quarter. The deceleration in growth of investment can be explained by the non-issuance of any new Sukuk during the quarter while the retrenchment in financing is due to the business cycle of most corporate clients as well as the overall economic conditions of the country.

The industry witnessed rising non-performing financing (NPF) during the period under discussion reaching Rs 15.7 billion from Rs 14.8 billion during the last quarter, even so the IBI continued to achieve higher profit and increase in earnings.

The Islamic banking branches’ network increased to 841 branches from 799 as at the close of the last quarter. By opening 42 branches during the quarter the industry also achieved 62 percent of its planned annual branch expansion plan for 2011.

In line with the past trend these additional branches are more concentrated in Punjab (23) and Sindh, which constitute 78 percent share of overall network of the industry. Among banks, Meezan Bank Limited has remained prominent in expansion of its network with an increase of 20 branches during the said period.

However, the industry still seems reluctant in expanding to second and third-tier cities.The assets of IBI reached Rs 568 billion as compared to Rs 560 billion in the last quarter, registering a growth of 2 percent during the quarter under study; the growth is significantly lower than that of the last quarter, SBP report said.

It is important to note that assets of full-fledged Islamic banks witnessed a decline in growth rate from 10 percent in the last quarter to 3 percent in the quarter ended September 2011, while Islamic banking divisions (IBDs) of conventional banks contracted by 1 percent over the period under study in contrast to 17 percent growth in the last quarter mainly attributable to the category of other assets.

The financing of IBIs retrenched by almost 6 percent as it dropped to Rs 177 billion by end of the quarter under study from Rs 188 billion in the last quarter. This fall in financing is in line with the trend of overall banking industry and also with the usual trend of IBIs.

In general the business cycle of most industries including textile (the major shareholder of financing of IBIs) enable industries to retire major portion of their financing in third quarter (from July to September).

This can also be seen by looking at the sector-wise financing of IBI, as the corporate sector that comprises more than 70 percent of the financing recorded negative growth of more than 5 percent. The decline in financing share of industries like textile, sugar, shoes and leather garments etc also support the premise of drop in financing due to nature of their business cycle.

IBI’s investment reached Rs 236 billion in the quarter ending September 2011 from Rs 231 billion in June 2011, registering a growth of only 2.2 percent in contrast to the growth of 19 percent during the last quarter. The lower growth of investment during the quarter is primarily attributable to non-issuance of government of Pakistan’s Sukuk.

However, the available government’s Sukuk in the market remained the major investment avenue for Islamic banking institutions particularly for IBDs. The asset quality of the industry deteriorated marginally with non-performing financing (NPF) increasing from Rs 14.9 billion to Rs 15.8 billion during the quarter under study. The industry witnessed Rs 0.8 billion increase in the category of substandard while Rs 0.2 billion in category of doubtful.

However, this quarterly rise in NPFs is in line with the quarterly growth of NPLs of the overall banking industry. The yearly basis growth rate of 16.8 percent in NPF is lower than that of last quarter, however, the quarterly growth rate (6 percent) is higher than that of the previous quarter indicated by the rising trend of NPFs to financing as well as the net infection ratio.

However, both mentioned ratios are still below than the overall industry average (almost half) hinting at the cautious approach of Islamic banks.Deposits of the industry reached Rs 463 billion by end of the third quarter (September 2011), increasing from Rs 452 billion by end of the last quarter (June 2011).

However, the growth rate witnessed a decline – both annually and quarterly. It is interesting to note that despite the fall in overall growth rate of deposits the category of fixed deposits of customers witnessed a significant rise in its annual and quarterly growth rates from 31.8 percent to 36.5 percent and from 6.3 percent to 7.5 percent, respectively.

Islamic finance unpacked

THE National Treasury is considering issuing Islamic bonds and has asked interested banks to submit bids. Some local banks and the JSE already offer sharia-compliant financial instruments. These include the JSE Shariah All Share [JSE:J203] index and the JSE Shariah Top 40 – (Tradeable) [JSE:J200].

Other instruments include Mudarabah, a form of investment partnership between banks and businesses that shares the risk and losses. There is also Murabah, a transaction in which the bank buys the asset then immediately sells it to the customer at a pre-agreed higher price payable by instalments.

Kokkie Kooyman, head of Sanlam Investment Management: Global, said the Treasury’s Islamic bond issue would be part of a bid to “tap into” the unds from the Muslim countries that are shariah-compliant.

“I am sure this was at the request of those Middle Eastern countries because SA has a small Muslim population,” Kooyman told Fin24, adding the shariah products and funding are made attractive by the fact that they are not interest rate sensitive.

FNB Islamic finance offers shariah-approved banking options that are not limited to Muslims. They help FNB clients manage their day-to-day finances, whether they need an account for personal use or a number of products for their business.

Standard Bank Group [JSE:SBK], Africa’s biggest bank by assets, does not offer Islamic banking services in South Africa yet, according to Erik Larsen, the head of media relations at the bank.

In 2010 the bank launched its first Islamic savings and current account in Tanzania. In July last year Stanbic, a unit of Standard Bank, won approval from Nigeria’s central bank to provide Islamic banking services there.

Nedbank Group [JSE:NED], South Africa’s fourth-biggest bank, does not offer any Islamic banking products in South Africa. Absa Islamic finance offers businesses current and retail accounts. Its offerings range from savings, investments, term deposits and commercial asset finance.

Kooyman said the sharia-compliant offerings are worth pursuing because the end result or return is the same as that of conventional banks. “The returns are also not much different for ordinary investors,” he said. Pros and cons But Islamic banking, like conventional banking, has its advantages and disadvantages.

In terms of banking charges, clients of Absa Islamic banking and FNB Islamic finance pay the same fees as Absa and FNB clients banking conventionally; both banks are well known for charging high fees. In Islamic financing, loans for a house or a car offer fixed repayments, which are an advantage to many. This is not the case with conventional banks.

Banking experts said the introduction of more Islamic finance products into South Africa would improve the size of the economy. They added this would also help diversify the banking sector’s funding and investor base.

Steve Meintjes, a senior banking analyst at Imara SP Reid, told Fin24: “If people that have been using Islamic banking have been happy all the time, let us have (more) of it.”

Meintjes said: “The SA economy needs more finance. Islamic banking will enhance the productive capacity of this economy.” He warned, however, that investors who are interested would have to do a bit of homework to understand the products on offer.

Tom Winterboer, a banking analyst at PwC, said Islamic finance products can be accessible to investors beyond the Muslim population. Only 2% of South Africa’s population is Muslim but the demand is coming from non-Muslims, according to Absa.

“It must be a good thing to happen to South African investors. It is a different principle from the domestic finance we have come to know,” Winterboer said, adding however that it needed a different expertise. “But South African banks have this expertise.”

The government is also keen on opening the doors to Islamic finance banking in South Africa. It has proposed a tax amendment in a bid to put Islamic banks in South Africa on an equal footing with conventional banks.

Top Oman Islamic banks to float shares

Oman’s two Islamic banks will float 40 per cent of their shares by June, the Sultanate’s central bank executive president Hamood Sangour al-Zadjali said on Monday.

Both banks, which are currently under formation, were awarded sharia-compliant banking licences last year – Bank Nizwa in May and Al Izz in August – after the Sultanate reversed its position as the only Gulf state which did not allow banks to specifically offer products and services complying with Islamic law.

‘Bank Nizwa will issue an initial public offering of 40 per cent of its capital of RO150 million ($389.61 million), while Al Izz International Bank will issue 40 per cent of its RO100 million capital by June this year,’ Zadjali told reporters on the sidelines of an Islamic finance conference.

Bank Nizwa has picked Oman Arab Bank as the issue manager for its IPO, an Omani banking source said, speaking on condition of anonymity because the information is not public.Al Izz has not mandated anyone to lead its offering, the source added.

Conventional lenders are also allowed to establish Islamic banking windows in the non-Opec oil producer.Both Bank Muscat and National Bank of Oman have said they would do so, while Standard Chartered is considering whether to offer sharia-compliant services.

UAE: Abu Dhabi Commercial Bank’s Financial Strength Rating Affirmed – Foreign Currency Rating Downgraded

Global Arab Network  – Capital Intelligence has announced that it has affirmed Abu Dhabi Commercial Bank’s (ADCB) Financial Strength Rating at A- with the Bank’s large domestic franchise,

Improved operating profitability and capital adequacy being major factors supporting the rating, Global Arab Network reports according to a press statement.  Despite the Support rating of ‘1’, which reflects the extremely high likelihood of official support from the government of Abu Dhabi in case of need, the Bank’s Foreign Currency (FC)?

Long-term rating is adjusted downwards to ‘A+’ from ‘AA-‘ (a two-notch difference between FSR and FC as per CI methodology) to reflect continuing high credit risks in the UAE and their likely impact on the Bank’s weak asset quality and tight liquidity.  The FC Short-term rating is maintained at ‘A1’.  A ‘Stable Outlook has been assigned to all the ratings on the assumption that the remainder of 2011 and H1 2012 will see improvements in both asset quality and liquidity.

ADCB is a major retail and corporate bank in the UAE with strong customer franchises and a comprehensive range of products and services that generate multiple revenue streams.  The Bank’s earnings have been impacted by high impairment provision charges in recent years; however, operating profitability remained reasonably high, buoyed by good net interest and non-interest income.

The 2010 impairment provision charge included provisions on the Bank’s sizeable exposure to a Dubai government-related entity, which was classified as impaired and was subsequently restructured.

The Bank’s return on average assets (ROAA) strengthened in the first nine months of 2011 owing to lower impairment charges compared to the corresponding period of the previous year as well as extraordinary income arising from the sale of shares in an overseas associate.  The operating profitability ratio also improved on the back of higher net interest.

The Bank’s capital adequacy ratio (CAR) strengthened in 2011.  This was partly due to the sale of the Bank’s stake in an overseas associate, which led to substantially lower deductions from regulatory capital for the purposes of calculating the CAR.  The Bank has received substantial increases in capital from the government of Abu Dhabi and the federal government in recent years.

Despite improvements, ADCB’s liquidity remains tight. While the Bank’s access to Abu Dhabi government funds is a mitigating factor here, given the uncertain global economic outlook, a higher level of liquid assets would provide more comfort.

The ratio of loans to customer deposits remains high, although the customer deposit base has grown substantially in recent years primarily due to the aggressive marketing of Islamic savings products.  The Bank also regularly raises medium/long-term resources from regional and international markets, but any dependence on such funding could be a point of vulnerability in current market conditions.

ADCB was created in 1985 by the government of Abu Dhabi through the merger of three distressed retail commercial banks.  The government, through the Abu Dhabi Investment Council, owns 58% of the Bank.  ADCB is the third largest bank in the country with total assets of AED169 billion at end 2010.

The Bank has a moderately large network of branches spread across the emirates.  ADCB offers a comprehensive range of retail and corporate banking products and services and overseas operations are limited to two branches in India.

ITS ETHIX – Financial Solutions Awarded 'Best Technology Provider of the Year' by Islamic Business and Finance Award

Dubai – The International Turnkey Systems Group (ITS) has realized a new regional achievement by obtaining the “Best Technology Provider of the Year” award at the Islamic Business and Finance Awards ceremony.

This award was presented in recognition of ITS for providing the latest technological solutions and services that would meet banks present and future needs. ITS solutions also enabled Islamic banks to face growing challenges of competition in the local and regional financial markets.

ITS has provided banks with a number of ETHIX main banking services and solutions, including Islamic banking, automation of branches management, online banking services, and technological services related to treasury and management of Islamic in-vestments and documentary credits.

Khaled Jasim Al Amiri, Assistant General Manager of ITS, received the award at a prestigious ceremony at Emirates Towers Hotel, Dubai.

Al-Amiri commented on being selected for this award: “Once again, ITS confirms its superiority by the testimony of others through obtaining one of the top regional awards and is highly recognized by companies and institutions in various sectors.”

He added: “For more than 30 years (the lifetime of the company), our human resources have played a prominent and important role in realizing these achievements. They have helped position the company to enable it to compete strongly within the market and most importantly, to distinguish itself through groups of solutions, products and services, which have ultimately become the hallmark of ITS.”

Subsequently, ITS also has been awarded “Systems Integrator of the Year” at the Ara-bian Business awards which is considered among the most notable and important awards presented to the business sector in the region.

Banking and Investment Sector

The ITS ETHIX financial solution is a recognized solution in meeting the requirements of Islamic and traditional banking and Islamic finance. ETHIX has assisted many banks and financial institutions to minimize their operational costs in responding to the increased demand of customers for both traditional and Islamic products and services.

In addition, through the use of the most advanced and developed technological solutions in the world, ETHIX Financial solutions is ranked globally as the premier total banking solution, fully compliant with Islamic Shari’a catering to Tier1 banks.

The successful strategy of the ITS Group has enabled the company to double the ceiling of its returns and achieve significant company growth. By increasing total returns and the company’s equivalent in profits, ITS have been able to make both regional and strategic expansions, highlighting the role of HR in ITS.

Bangladesh banks have weak cushion against risks

Bangladeshi banks’ strength in terms of capital to losses is the lowest among the major South Asian countries, according to the first-ever Financial Stability Report (FSR) released yesterday.

The capital adequacy ratio (CAR), which sets the minimum cushion of capital a bank must keep to absorb losses and promote stability, was 9.3 percent in Bangladesh at the end of 2010. The CAR of Indian banking industry was 14.6 percent as of end-March 2010, 14 percent in Pakistan and 14.9 percent in Sri Lanka.

“Banks’ CAR must increase from the present level,” SK Sur Chowdhury, executive director of Bangladesh Bank, told reporters at the launch of the report.

The CAR has to go up to 14 percent under Basel-II requirements. The major three South Asian countries have more capacity than the regulatory need under the Basel-II.

The BB released the FSR 2010 yesterday at its office. The FSR has checked the health of the Bangladesh financial system and accordingly, advised the banks and non-banks to enhance capacity to absorb shocks.

The report was based on the data of 2010, but it used stress-tests of 2011 to assess the resilience of the financial system to adverse domestic and global macroeconomic developments.

The FSR observed that the domestic financial system remained stable in 2010 despite an adverse international backdrop. Market participants and stakeholders reposed their confidence in the stability of the domestic financial system and stress testing. The FSR, however, pointed out some weaknesses that need to be addressed.

Though the report found a resilient local financial system supported by congenial macroeconomic environment in 2010, it identified a risk arising from the global economic vulnerabilities and its spillover impacts on the economy.

“The financial sector has to make buffer in the wake of a deteriorating global financial condition. The banks should have a liquidity contingent plan,” Chowdhury said.

He cited an example of cash withdrawal during the Eid festivals. “Can a bank remain liquid if it faces 2 percent more withdrawal than that of normal transactions?” he questioned.

He also asked the banks to be more vigilant on the asset-liability mismatch.

The report found banking sector’s balance sheet recorded a sizeable growth in 2010. Assets and loans were not concentrated among a small number of banks. The provision shortfall was also reduced significantly, it said.

Banking industry’s operating and net profit increased by about 47 percent and 54 percent respectively in 2010 than 2009. The return on assets and equity also increased in line with net profit.

Though the non-performing loan ratio has been on a downward trend, the banks have to pay due attention to bring down the ratio to the minimum level, said the report.

The FSR found no big risk in the equity and currency markets during the period under review. However, the local currency was devalued by nearly 15 percent in 2010.

Islamic banks showed a remarkable growth in 2010. Its asset base grew by 27.35 percent, deposits by 25.69 percent and investments by nearly 30 percent in 2010 than 2009. The CAR of five Islamic banks out of seven was higher than the regulatory requirement of 9 percent.

Non-bank financial institutions have also been growing. The total assets of the NBFIs increased by 30 percent in 2010 compared to 2009. The volume of term financing by the NBFIs rose by more than 61 percent in 2010 than the previous year.

However, the non-performing assets (NPA) of the NBFIs increased by over 8 percent in 2010. But provisions maintained against the NPA showed a surplus over required provisions, said the FSR.

The payment and settlement systems in Bangladesh remained resilient and continued to operate smoothly throughout 2010. There was a remarkable shift from paper-based payments to the electronic form, but cash and cheques remain popular, said the report.

On the capital market, the report blamed lower pace of investment activities, reduced interest rates on deposits and savings certificates and over-crowding for the huge flow of capital in the stockmarket in 2010.

Islamic banking faces liquidity risk: Expert

Doha: Islamic banking sector is increasingly facing liquidity risk across all geographical regions. The situation is more challenging in the GCC region, said an expert.

He called for the industry leaders and the regulators to create new instruments and develop fresh policy tools for  the liquidity risk management in the Islamic industry sector.

Dr Salman Syed Ali of Islamic Research and Training Institute, Saudi Arabia, cautioned that the Islamic banking sector might also go the way of conventional banks, unless effective tools are not in place immediately.

Dr Salman, who was in Doha to attend the International Conference on Islamic Economics and Finance, told The Peninsula: “The structure of liquidity of Islamic banks have changed significantly over the years.  From an era of liquidity surplus in the beginning of the decade Islamic banks are now in the era of liquidity shortages. In general, the banks have moved from a position of positive gap to a negative one or from a negative gap to a more negative one.”

The level of liquidity in Islamic banking has been decreasing while liquidity risk has been increasing in all geographical regions over the past decade. The risk has further increased after the global financial crisis.

Contrary to the general perception, the liquidity of Islamic banking industry in the GCC is lowest with highest liquidity risk when measured by liquidity ratio and financing to deposit ratio.

There has been a major structural change in the maturity profile of assets and liabilities of Islamic banks between the years 2000 and 2009 from a position of positive short-term maturity gap to a negative gap.  This, according to Dr Salman, is a strong indication of a liquidity risk.

In comparison with the conventional banks, the Islamic banks, despite downward trend in their liquidity ratio, are holding much higher proportion of liquid assets.  Even during the financial crisis the liquidity in Islamic banks was more than twice the liquidity of conventional banks. This, among other factors, may have helped Islamic banks to ride out of the crisis.  But things are changing in the industry.

For want of updated Islamic instruments for liquidity management, the fully fledged Islamic banks face more difficulties compared to the conventional banks and the Islamic banking windows of conventional banks. A comprehensive review liquidity management practices and policies of Islamic industry is an urgent need.

“Out of the box thinking is needed to come up with solutions.  Researchers and policy makers need not confine their thinking within the present model of commercial banking and the set-up of the existing financial sector”, he said.

Among the GCC countries, Kuwait had consistently low liquidity ratio over the period. UAE is the country where liquidity ratio dropped most and remained lowest during the global crisis.  Among other countries, Jordan has the highest liquidity ratio consistently since 2004 followed by Malaysia.  The liquidity ratio in Sudan has been consistently showing a downward trend since 2004.

An important measure of liquidity risk is the Financing to Deposit Ratio – a situation that captures the relationship between changing nature of demand for financing and deposit gathering ability of banks to fund that demand.  This ratio is quite high in the GCC and Mena when compared to other regions,  Dr Salman said.

Benchmark a major step for Islamic finance

Last month, the world’s first Islamic interbank benchmark rate (IIBR) was launched. It was the result of a collaborative approach taken by many Islamic financial institutions, industry associations and Sharia scholars over the course of 24 months to address a decades-old industry challenge:

how to decouple Islamic finance from a conventional western pricing benchmark (Libor) when an “Islamic” alternative was not available. The objective was to support and preserve Islamic finance authenticity.

The IIBR is an interbank benchmark that offers a reliable and realistic standard to better measure the cost of funding for Islamic financial institutions. As contributed pricing for Sharia-compliant funding, it represents the DNA of an Islamic banking industry that is today focused on commercial banking over investment banking.

IIBR brought together more than 20 Islamic finance institutions to create a proprietary Islamic pricing benchmark. It is a major indication to the world that Islamic finance has come of age and can be seen as a sustainable and rapidly developing feature of global financial markets.

The benchmark is designed to be used to price a number of Islamic instruments including common overnight to short-term treasury investment and financing instruments such as murabaha, wakala and mudaraba, retail financing instruments such as property and car finance, and sukuk and other Sharia-compliant fixed-income instruments. It can also be used for the pricing and benchmarking of corporate finance and investment assets.

We expect the benchmark to grow organically as industry use and acceptance increase. As the industry gets used to the idea of its own proprietary benchmark and its scope becomes more global, we expect to see banks use the rate to price their interbank liquidity placements.

As that gains traction, banks will start to use it for their corporate and retail banking facilities. The rate has reached its full potential when we see investment banks providing syndicated Islamic financing (loans) and debt (sukuk) issuance using the rate.

Since the launch of IIBR, it has received much attention around the world for the positive step that it is.

Understandably though, the significance of IIBR and what it means for the Islamic finance industry, indeed the very position of Sharia-finance in Islam and the wider world, means that it provokes strong opinion and debate.

And we must address the critics if we are to achieve the full potential of this initiative. After all, these commentators are important additional stakeholders.

All collaborations start with open minds and transparent dialogue, and so here I hope to address some of the key points raised.

What is the difference between IIBR and Libor – the London interbank offered rate? Put simply, IIBR measures expected profit while conventional benchmarks such as Libor measure interest rates.

The IIBR question for contributors explicitly refers to the cost of raising Sharia-compliant funding and is therefore based on returns generated by Islamic assets.

The IIBR rates represent the aggregate risk profile of Islamic financial institutions, by way of their assets on the balance sheet, and the geographies in which they operate. This is important for two reasons.


On an economic level, now more than ever, conditions in Europe or the US do not necessarily reflect the conditions in the Middle East funding market, although there will inevitably be a connection as global financial markets are always intertwined.

How is IIBR representative and reflective of global Islamic finance treasury funding costs?

This is only a beginning. At present, we have a strong base in GCC countries, we have three major Malaysian banks and are in conversations with others, and we have started conversations with banks in Turkey, Pakistan and other jurisdictions.

How will IIBR address cross-border funding costs?

The precondition for cross-border funding is establishing local rates, and we are starting a dialogue with more countries with established Islamic banking industries. The more important point is that a transparent process or methodology is in place for price contributions, and its integrity is overseen by our benchmark committee with rules that will punish banks, including expulsion, that violate the agreement they have signed.

Why are only murabaha contribution rates used?

Murabaha is the predominant form of funding for Islamic banks. However, the IIBR is instrument-neutral as decided by the Islamic benchmark committee, and in the future, when other instruments such as wakala or mudaraba become more widespread, a higher proportion of contributions could be derived from other rates.

Is IIBR only for Islamic financial institutions?

IIBR, like Islamic finance, is for all people and institutions for all times. As an accurate and transparent measure of market activity, it is suitable for a variety of uses in the modern financial markets of the world. With IIBR, conventional banks will now have more confidence in their counterparty Islamic banks because their rates will be benchmarked and publicly available.

Islamic windows of conventional banks to go QCB

Doha: Qatar Central Bank (QCB) will go ahead with its decision to close down the Islamic windows of conventional banks in the country by this year-end. The segregation of the Islamic and conventional banking operations would be done by strictly adhering to the country’s fiscal and monetary policies, said Qatar Central Bank Governor H E Sheikh Abdullah bin Saud Al Thani.

QCB has recently issued specific directives to each of the conventional banks that have Islamic branches, directing them to stop opening new Islamic branches, accepting Islamic deposits and dispensing new Islamic finance operations.

As for the Islamic branches’ current assets and liabilities including deposits and finance operations the QCB has given a time frame up to December 31, 2011 to manage these by collecting the balances.

Delivering the key note address on the opening day of International Conference on Islamic Economics and Finance yesterday, he said the overlapping nature of non-Islamic activities of conventional banks were making it difficult and complex for the QCB to prepare accurate financial reports.

It is impacting negatively on the proper preparation of the reports at the expected quality standards of Qatar’s financial system. The overlapping of the two banking models could undermine the free and transparent competition between banks, he said.

The local Islamic banks in Qatar is posting sound growth rate that is being reflected on the robust Qatari economy.

He said he was confident that the Islamic banks in Qatar are capable of facing current economic slowdown and any possible impact of the crisis in the developed economy. However, he called on the banks to come out with fresh products that suits the changing demands of the consumers.

The Islamic banking model has been on a growth trajectory over the years. So, they must develop their own mechanisms to tackle the emerging challenges faced by the global economy in these changing times

Islamic banks are mainly facing two challenges. It needs to develop a solid legal infrastructure for their transactions that matches to the global quality standards.

Second, it must come out with less complicated financial products. These two challenges being faced by the local Islamic banks are being studied by international organisations, Sheikh Abdullah said.

He added that Islamic banks grabbed a lot of international attention in the past few years, due to their success in Islamic finance.

Dr Ahmad Mohamed Ali Al Madani, President, Islamic Develoopment Bank; Dr Hatem El-Karanshawy, dean, Faculty of Islamic Studies (QFIS); Qatar Foundation; Dr Mabid Al Jarhi, President, International Association for Islamic Economics (IAIE) and DR Nabil Dabour, Head of Research, OIC Ankara Center (SESRIC) were among other who addressed the opening session.

Oman Islamic Economic Forum

Muscat, Dec 16 (ONA) – Sayyid Shihab bin Tariq al-Said, will sponsor tomorrow  (Saturday) at al Bustan Palace Hotel the Oman Islamic Economic Forum (OIEF) organized by Amjad Company and lasts for two days.

The OIEF seeks to highlight the steps needed by the Sultanate to develop its Islamic finance sector and Takaful, the elements related to social responsibility in the elements of the Islamic economy.

It also seeks to provide proposals to form a regulatory framework for the Islamic finance sector which in turn will contribute to boosting the growth of the economy in the Sultanate.

The forum will cover a number of themes on the models for regularizing the Islamic banking sector, selecting the best right Islamic banking model for the Sultanate, Islamic banking as practiced by the Islamic banks,

structuring of the Islamic banking products, Sharia issues in banks and Islamic financial, horizons of (Takaful) at the AGCC countries, Arab Islamic market, the role of Zakat, Awqaf and alms in building an alternative Islamic  economic system and the Islamic banks as a mean for Economic reform.

The OIEF will bring together a number of stakeholders – financial practitioners, academicians, business leaders and key decision makers- from within and outside the Sultanate.

The Forum is an ideal opportunity to have an idea about some major personalities and institutions in the Sultanate and establish fruitful long term business relations.