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

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

Islamic Finance in Gulf

Rehan PathanHead of International Sales, NCB Capital

10 December 2011

Page 2: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

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 oil1974: Islamic Development Bank (IDB) and the Fiqh Academy1975: Dubai Islamic Bank 1976: First International Conference on Islamic Economics1979: Pakistan ‘islamicises’ economy ; Iranian Revolution

Page 3: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

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

Page 4: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

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 20105.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

0

200

400

600

800

1,000

1,200

2002 2003 2004 2005 2006 2007 2008 2009 2010

Total Assets (USD bn) Assets growth-RHS

CAGR – 28%

Page 5: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

Sharia Compliant assets compared to total assets

Page 6: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

Islamic finance assets in GCC:

 Total Banking Assets

$bnTotal Islamic banking

asset $bnPercentage share of the

total assets KSA 377 131.95 35%

Kuwait 155 48.05 31%Bahrain 46 12.42 27%Qatar 156 34.32 22%UAE 438 74.46 17%Oman 41 0 0%Total 1213 301.2  

Page 7: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

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

Page 8: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

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

Page 9: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

The biggest business risks faced by Islamic banks

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

Future growth & direction

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

Page 11: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

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.

Page 12: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

Islamic Asset Management – room to grow

Page 13: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

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 thenext 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

Page 14: Islamic Finance in Gulf Rehan Pathan Head of International Sales, NCB Capital 10 December 2011.

Thank you


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