Islamic banking assets continued double-digit growth this year, even as conventional bank growth stagnated, 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 over 600 retail, commercial and investment banks, insurance companies and asset managers according to their Shariah-compliant assets.
Assets held by fully Shariah-compliant banks or Islamic banking windows of conventional banks, rose by 28.6%, to $822bn from $639bn 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 6.8% at conventional banks.
The Islamic finance industry continues to build a solid track record: the compound annual growth rate for 2006-2009 is 27.86%, with assets forecast to hit $1033bn in 2010.
Mr 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. It also illustrates our commitment to continue to meet customer needs, which we believe will enable the industry to achieve meaningful scale and mainstream relevance in a growing number of international markets."
The Gulf Cooperation Council (GCC) states remained the dominant segment of Islamic finance, with $353.2bn or 42.9% of the total global aggregate. Iran remains the largest single market for Shariah-compliant assets, accounting for 35.6% of the global aggregate.
Outside the Middle East, Malaysia remains by far the largest player, accounting for 10.5% of the global aggregate, but other markets are expanding rapidly. The UK now accounts for just under 2.5% of global Shariah-compliant assets, and the Syrian Islamic finance market expanded an eye-catching 500%.
Mr Caplen added: “An extra 30 or so banks reported up-to-date data for this year, but transparency and financial reporting remain challenges for the Islamic banking industry if it is to continue its impressive growth rate.”