Islamic finance grows four times faster than traditional banking

Islamic banking assets grew by 29 per cent to $822 billion this year, more than four times faster than conventional banking assets according to The Banker’s Top 500 Islamic Financial Institutions Survey, published in association with HSBC Amanah.

Now in its third year, the report is the only annual benchmark of its kind, which ranks some 600 retail, commercial and investment banks, insurance companies and asset managers according to their Shariah-compliant assets.

Asset growth

Assets held by fully Shariah-compliant banks or Islamic banking windows of conventional banks, rose from $639 billion in 2008. This is in striking contrast to The Banker’s 2009 Top 1000 World Bank Rankings released in July, which showed annual asset growth of just seven per cent at conventional banks.

The Islamic finance industry continues to build a strong track record: the compound annual growth rate for 2006-2009 is 28 per cent, with assets forecast to hit $1 trillion in 2010.

Brian Caplen, editor of The Banker Magazine, said: ‘A conservative approach to risk and a close link between the financial sector and real assets has helped shield the sector from the worst of the credit crisis. But finding improved ways to manage liquidity at Islamic banks, as well as harmonising Shariah and prudential compliance between institutions and markets, remain significant hurdles.’

David Dew, Deputy CEO of HSBC Amanah, said: ‘It is important that the Islamic Finance industry continues to analyse its growth critically if it is to become a truly credible alternative to conventional banking in a significant number of markets.

‘Our support for this global benchmark reflects HSBC Amanah’s status as the premier cross-border provider of Shariah compliant financial services to retail, corporate and institutional clients.’

GCC dominant

The Gulf Cooperation Council remained the dominant segment of Islamic finance, with $353 billion or 43 per cent of the total global aggregate. Iran remains the largest single market for Shariah-compliant assets, accounting for 36 per cent of the global aggregate.

Outside the Middle East, Malaysia remains by far the largest player, accounting for 10 per cent of the global aggregate, but other markets are expanding rapidly. The UK now accounts for just under 2.5 per cent of global. Shariah-compliant assets, and the Syrian Islamic finance market expanded an eye-catching 500 per cent.