Dubai: Islamic banking is gaining traction in the UAE in terms of progress, penetration, and perception according to the latest Islamic Banking Index from Emirates Islamic.

“Despite the current pandemic situation that has affected Islamic and conventional finance markets in the short-term, we expect strong growth in the Islamic finance market to continue to increase,” said Wasim Saifi, Deputy CEO-Consumer Banking and Wealth Management at Emirates Islamic.

The share of Islamic banks’ assets to total assets in the UAE has increased from 17.3 percent in 2013 to 18.8 percent as of June.

Popularity

As a fallout of 2020’s global economic downturn due to the pandemic, this year’s edition of the Index demonstrates a small reduction in the overall penetration of both conventional and Islamic products compared with 2019. The overall penetration of conventional and Islamic banking dropped from 60 percent last year to 58 percent for Islamic banking products and from 65 percent to 64 percent for conventional banking.

The penetration of Islamic banking products has increased gradually from 47 percent to 58 percent since 2015, while conventional banking products have seen a reduction from 70 percent to 64 percent. The overall penetration of Islamic finance products among Muslim respondents was consistent – at 70 percent in 2019 and 69 percent in 2020.

Three out of five respondents in the UAE now have at least one Sharia-compliant product – 60 percent – up from 55 percent in 2018. Post-pandemic market recovery and the growth in sectors such as halal food, halal treatments and cosmetics, and modest fashion should continue to create demand.

UAE’s Support

The UAE is working on initiatives to support the growth of Islamic finance. The UAE Ministry of Finance announced plans to create a “unified global legal and legislative framework” for the sector.

DIFC has been investing heavily in fintech to spur the growth of the Islamic finance industry. The FinTech Hive accelerator partners with specialist organizations that include the Dubai Islamic Economy Development Centre (DIEDC) and various Islamic banks.

DIEDC collaborated with DIFC, Dubai Financial Market, and Climate Bonds Initiative to grow the ‘green Sukuk’ market. The agreement aims to promote the issuance of green sukuks, in addition to developing the standards for their certification along the lines of Climate Bonds’ Standard and Certification Scheme.

Investor Confidence

Investor interest in Islamic investment opportunities are on the rise and is demonstrated by the successful sukuks from Emirates Islamic and Dubai Islamic Bank and the oversubscriptions they generated.

“With the economy opening up and lockdown measures lifted, we continue to witness increased uptake on Islamic finance products, particularly on the retail segment,” said Saifi.

“As an Islamic financial institution, it is now up to us to champion this new way of life, by embracing digital solutions and creating customer-centric ecosystems,” said Farad Al Mullah, Deputy Head of Consumer Banking and Wealth Management at Emirates Islamic.

Originally published on www.gulfnews.com