Islamic Finance: Opportunities for Growth and Innovation
Furqan Ahmad, Head of Product Development and Segmentation
ADCB Meethaq-Islamic Banking (Abu Dhabi)
The recent global financial crisis has shown us the critical importance of having equity participation, risk sharing and fair dealings in all banking and financial services. Internationally, trillions of dollars in wealth was wiped out in the crisis.
Since the commotion in 2008, customers are increasingly looking at alternative ways of banking. Islamic banking institutions are well placed to cater to the needs of such clients, especially those who want to avoid risks which have been rampant in the international conventional financial sector revolving around sub-prime lending, the American market meltdown, toxic assets, mismanagement of leveraged products, speculation, hedge funds, interest rate options, unethical practices, federal bailouts, short selling, mortgaged debts and derivatives.
High-Net-Worth Individual Market Opportunity
The total wealth of high-net-worth (HNW) individuals in the GCC has suffered in the recent crisis with a decrease of 14% to US$900 billion in investible assets, according to market surveys conducted in 2009 and 2010. On the other hand, Islamic HNW wealth is estimated to be approximately 10% to 15% of total assets, between US$90 billion and US$135 billion. Nevertheless, the opportunity for Islamic wealth management is at hand.
Market studies have shown that there is a definite opportunity in the UAE market for launching Islamic banking HNW propositions by Islamic banks and Islamic windows of conventional banks.
In this article, we will be looking at opportunities for growth, primarily for Islamic banks and secondarily for the Islamic banking windows of conventional banks, with particular focus on the UAE market.