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Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

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Presentation on theme: "Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011."— Presentation transcript:

1 Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011

2 Growth of Islamic finance since the 50s  The Experiments (50s and 60s) 1956 : Tabung Hajji (Malaysia) 1963 – 1967 : Mit Ghamr (Egypt) 1970: Organisation of Islamic Countries (OIC) 1973: Oil shocks and the increased price of oil 1974: Islamic Development Bank (IDB) and the Fiqh Academy 1975: Dubai Islamic Bank 1976: First International Conference on Islamic Economics 1979: Pakistan ‘islamicises’ economy ; Iranian Revolution

3 Growth of Islamic finance since the 50s  Changes in Global finance (80s) - Washington Consensus and the deregulation of the markets. - Significant changes in the financial markets - Islamic banks and products enter international markets - Corporate scandals (BCCI)  The Growth (90s – Present Day) - Fall of communism and greater Western influence in MENA - Recognition of Islamic finance by the West (Eddie George) - The success of Malaysia - The economic growth of the Middle East - The problem of terrorism

4 Recent growth of the Industry Strong growth in Islamic banking continues Global Islamic banking assets  The interest for Islamic finance continues to grow even in non-Islamic countries as reflected from the fact that there are over 300 Islamic financial institutions worldwide across 75 countries  Share of GCC: Shari’a compliant assets represent 26% of the total size of global Islamic financial assets  While Islamic banking assets have grown significantly in the past decade, their share of total global banking assets remains marginal  Sukuk Issuance: 17bn of the total issuance in first 9 months, 38% of the total issuance in the year. Corporate Sukuk accounted for 87% of the total issuance ($14.6bn) compared to 77% (44.6bn) in 2010. Source: CIBAFI, Central Bank of Iran, Central Bank of Sudan  Global Islamic banks assets have grown considerably from USD145 bn in 2002 to USD1,033bn in 2010  The global economic crisis negatively impacted the Islamic banking sector  After growing at double-digit pace for number of years, growth in Islamic banking assets slowed down to 9.8% in 2009 before accelerating again to 26% in 2010 CAGR – 28%

5 Sharia Compliant assets compared to total assets

6 Islamic finance assets in GCC: Total Banking Assets $bn Total Islamic banking asset $bn Percentage share of the total assets KSA377131.9535% Kuwait15548.0531% Bahrain4612.4227% Qatar15634.3222% UAE43874.4617% Oman4100% Total1213301.2

7 GCC Profitability; Decrease in Return on Equity & Return on Assets Higher provisions and operating costs have contributed to the steep decline in profitability of Islamic banks

8 Situation is not that bad: Islamic banks are able to generate higher financing margin because of their stronger retail focus Islamic banks in GCC continue to grow their deposit base

9 The biggest business risks faced by Islamic banks

10 Future growth & direction Islamic banking and finance industry is projected to be worth $658bn by 2015 compared to the current that is worth $301bn.

11 Islamic Asset Management – a compelling opportunity Value of GCC funds: $28.5bn, 110 fund management companies and manage 337 funds. The six biggest banks constitute about $10bn of these GCC funds.

12 Islamic Asset Management – room to grow

13 Final thoughts - Key messages for Turkey Today, participation banking assets account for 4% -5% of the total banking assets in Turkey Participation banking is expected to more than double its market share to 10% in the next decade. The Turkish National Assembly in February passed tax and other measures to facilitate the introduction of sukuk in Turkey The core Shari’a sensitive segment constitutes approximately 20% of the bankable Market

14 Thank you

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