MANAMA: While Islamic banking will keep on growing, it needs more concerted action at the inter-governmental and industry level, Standard Chartered Saadiq Malaysia chief executive and global head of consumer banking Wasim Saifi said.
Talking to the GDN on the sidelines of the WIBC 2013, which concluded at the Gulf Hotel’s Gulf Convention Centre yesterday, Mr Saifi said increased competition has resulted in a widening of the Islamic product offering, bringing it within the scope of larger numbers of Muslims.
“As the Islamic banking proposition became more attractive, Muslims converted from conventional banking at a rapid pace, spurring the industry to make products offered even more sophisticated,” he said.
“Whether in terms of access, technology, products or services, they expect nothing less than they have been getting from conventional banks, and Islamic banks are responding,” he added.
He said what helped the growth along was the fact that to bank in a Sharia-compliant way, Muslims no longer needed to sacrifice the convenience, products and services they had been used to.
The increasing regulatory support, with governments in many markets like Bahrain actively encouraging the development of a healthy Islamic banking ecosystem, also helped.
The next big step for the global Islamic banking industry will be to close the gap with conventional banking when it comes to the range of products and services on offer, he said.
“Islamic wealth management is clearly lagging behind, with Sharia-compliant funds comprising less than 0.25 per cent of total assets under management.
“It is a classic chicken-and-egg story,” Mr Saifi added.
“To attract wealthy Muslim clients, you need a competitive range of products and services, but to get this, you need scale.”
However, he feels, with the strong growth in Islamic assets, and Islamic banking providers putting increased pressure on fund managers to respond, there is a good chance Islamic wealth management will catch up within the next few years.
For all the industry’s recent growth, Islamic banking still represents a fraction of total banking assets globally, and the great majority of Muslims (roughly only one in every eight Muslims with a bank account, banks Islamic) still bank conventionally.
Penetration remains low in some of the world’s largest Muslim countries.
According to Mr Saifi, the most obvious reason for this is a simple lack of awareness of what Sharia banking has to offer.
“Regulatory barriers also persist in some countries,” he said.
“While different markets will develop at different speeds, support from governments and regulators will help keep up the pace of change.
“Opening markets to international Islamic banks will help, too,” he added.
International providers tend to accelerate development in individual markets with their ability to migrate best practice, product sophistication and banking expertise between geographies.
“At Standard Chartered, for example, we work with regulators in a number of countries to help develop their framework for Islamic banking, using our experience from other markets.
“StanChart Saadiq has ambitious long-term plans in the Islamic finance sector in Southeast Asia, Middle East, South Asia and Africa,” he said.
“We will continue to further drive business momentum across our footprint, working with existing and new markets to build and strengthen the bank’s Islamic banking services and products under the Saadiq franchise,” he added.