Islamic finance
is set to outpace conventional banking growth across the Gulf Cooperation
Council (GCC) region, driven by sustained economic expansion and rising demand
for Shariah-compliant products, according to a report from Moody’s Ratings.
Saudi Arabia
leads the region with an 85 per cent market penetration in Islamic banking,
while the UAE, Oman, Kuwait and Qatar also show strong potential for growth.
The report
highlights Saudi Arabia as a major beneficiary, with Islamic financing
supporting the kingdom’s Vision 2030 programme. Moody’s forecasts that Islamic
banks in the GCC will maintain strong profitability over the next 12 to 18
months, buoyed by government efforts to diversify economies and increase
commercial activity.
“Islamic banks
across most of the region have ample liquidity to support their expansion,
thanks to strong deposit inflows. However, Islamic banks will continue to hold
relatively lower levels of liquid assets than their conventional peers,
reflecting a lack of liquid Shariah-compliant financial instruments for
liquidity management,” said Moody’s.
Badis
Shubailat, Assistant Vice President and Analyst at Moody’s, was quoted as
saying, “Sustained economic growth, government commitment to bolstering the
broader Islamic finance industry, and increasing demand for Shariah-compliant
products in the GCC region will continue to drive Islamic finance growth,
outpacing its conventional peers.”
In GCC member
state Oman, for example, the combined assets of Islamic banks and windows grew
by 18.1 per cent to approximately $20.2 billion in 2023, representing 11.4 per
cent of the sultanate’s total banking assets. Total financing increased by 10.4
per cent to $16.6bn, while deposits in Islamic institutions rose 14.7 per cent
to nearly $15.5bn by June.