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The Islamic Financial Services (IFS) sector in Abu Dhabi is showing a bullish resilience to the world economic crisis as it increases market share while expanding its reach with new products, according to Michelle Solomon, Country Director for Oxford Business Group (OBG) in the Emirate.
Solomon said the global publishing, research and consultancy firm’s analysis also indicated that the industry was primed to play a key role in the financing of Abu Dhabi’s large-scale infrastructure projects thanks to its sizeable liquidity.
“Sharia-compliant financial services are expected to register growth on the back of anticipated global recovery as customers look for reliable alternatives to the conventional finance market,” she said. “We expect life insurance to be the next segment to emerge, while our research also indicates that sukuks are set to play an increasingly important role in the bond market.”
Solomon said that IFS institutions with retail operations registered the top performances in 2009, although all 20 of the largest sharia-compliant banks in the GCC increased their asset base and attracted new customers. “Further innovation and the proliferation of halal financial tools will increase market share for IFS institutions,” she said.
The key trends shaping Abu Dhabi’s IFS industry are mapped out in OBG’s 2010 report on the Emirate’s economy, which is widely recognised as breaking new ground with its in-depth coverage of sharia-compliant banking.
Solomon explained that topical issues, such as ethical aspects of Islamic Finance, are put under the spotlight in The Report: Abu Dhabi 2010. “OBG considered whether the principles imposed by Islamic law gave banks offering Islamic Financial Services an advantage over their conventional counterparts in averting a crisis,” she said. “Our coverage explored the moral authority which Islamic law has over the banking practices of Muslims and looked in detail at the rules governing sharia-compliant banking.”
OBG’s 2010 report also includes a wide-ranging interview with Tirad Mahmoud, the CEO of the Abu Dhabi Islamic Bank (ADIB), in which he dismissed concerns that the lack of standardisation within IFS products put the industry at a disadvantage. “In terms of variety of product-offering, Islamic finance could be viewed as still evolving,” he said. “A one-size-fits-all system may slow that down.”
The CEO also played down the need for regional consolidation within the IFS market, saying that although there was potential for some mergers, they should be driven by specific synergies rather than orchestrated on a macro level.
Solomon said she was delighted that the ADIB would be teaming up with OBG for a sixth year of collaboration as the groundwork gets underway for the Group’s 2011 report on Abu Dhabi’s economic activity.
“Oxford Business Group’s research team has benefited greatly from the high level of expertise that ADIB has built up in its pool of professionals, as our 2010 report shows,” she said. “I am grateful that we have had access to these resources and am also confident that The Report: Abu Dhabi 2011 will offer the Bank an ideal platform to illustrate its unrivalled understanding of the Islamic Financial Market within the capital.”
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