Dubai: Islamic banking assets with commercial banks in international markets are set to exceed a whopping USD 778 billion in 2014, according to a new report.
Global Islamic banking assets witnessed a compound annual growth rate (CAGR) of around 17 percent from 2009 to 2013, according to Ernst and Young's World Islamic Banking Competitiveness Report 2014-15.
Approximately, 95 percent of international Islamic banking assets of commercial banks are based out of nine core markets, five of which are in the GCC (Saudi Arabia, UAE, Qatar, Kuwait and Bahrain).
The market share of Islamic banking assets in Saudi Arabia, UAE, Qatar, Kuwait, Bahrain and Malaysia is now between 20 per cent and 49 percent.
The analysis excludes Iran.
Islamic banks in Saudi Arabia, Kuwait and Bahrain represent more than 48.9 percent, 44.6 percent and 27.7 percent market share respectively.
Positive progress has been has made in Indonesia, Pakistan and Turkey, with 43.5 percent, 22 percent and 18.7 percent CAGR respectively from 2009 to 2013.
Gordon Bennie, MENA Financial Services Leader at EY, said that the six rapid-growth markets (RGMs) - Qatar, Indonesia, Saudi Arabia, Malaysia, UAE and Turkey (QISMUT) - commanded 80 per cent of the international Islamic banking assets at USD 625 billion in 2013.
"QISMUT Islamic banking assets are expected to continue to grow at a five-year CAGR of 19 percent to reach USD 1.8 trillion by 2019," Bennie said.
"The Islamic banking industry has gone mainstream in several core markets. This presents new opportunities as well as new challenges, and demands a fundamentally different approach to profitable growth. Customers have mixed emotions about their experiences of dealing with Islamic banks," Ashar Nazim, Global Islamic Finance Leader at EY, said.
According to Nazim, in the future, growth will be most significant for the banks that are able to strengthen customer experience through the use of digital technology.
"Banks that do not keep pace with technological advances are expected to face serious pushback from mainstream customers who will gravitate toward the larger conventional players who can deliver on digital," he said.
