Islamic Banking vs Conventional Banking
The American University of Sharjah
Fall
11
08
Fall
Ghada AL Ghazali
ID: 37506, Professor: George Naufal The Main concept of Islamic banking vs. conventional banking systems
Introduction
Islamic finance is one of the fastest growing sectors of the global financial industry. It has become essential in some countries and very relevant in others. Many factors have influenced to the rapid growth of Islamic finance, including: (i) high demand in many Islamic countries; (ii) growing demand of foreign investors to invest in Islamic banks, along with introducing it to their own countries; (iii) consistent progression in the strengthening of their legal framework to a more reliable and strong one; (iv)
It is estimated that the size of the Islamic banking systems in terms of the global market was approximately around US$820 billion, at the end of 2008. (IFSB et al, 2010). Moreover, countries of the GCC are known to have the largest amount of Islamic banks (IBs). “The market share of Islamic finance in the banking systems of the GCC countries at end-2008 was in the range of 11−35 percent, compared with5−24 percent in 2004”. (Maher Hasan & Jemma Dridi, 2010) The following data shows the actual growth in asset of Islamic banks compared to conventional banks within the MENA region. | Market share in 2008 | Growth rate of assets (Islamic banks) | Growth rate assets (banking system) | Period | Saudi Arabia | 35.0 | 33.4 | 19.0 | 2003-08 | Bahrain | 29.9 | 37.6 | 9.60 | 2000-08 | Kuwait | 29.0 | 23.2 | 14.3 | 2002-08 | UAE | 13.5 | 59.8 | 38.1 | 2001-08 | Qatar | 11.5 | 65.8 | 31.9 | 2002-08 | GCC average | 23.8 | 44.0 | 22.6 | | Jordan | 10.3 | 20.6 | 11.2 | 2001-08 | Yemen | 30.2 | 26.5 | 22.7 | 2004-08 |
Source: Central banks and Islamic banks annual reports. 1. Including Islamic banks 2. Including Islamic windows 3. Growth rate in calculated for the total of wholesale and retail while market share for retail only.
Fall
11
08
Fall
Ghada AL Ghazali
ID: 37506, Professor: George Naufal The Main concept of Islamic banking vs. conventional banking systems
Introduction
Islamic finance is one of the fastest growing sectors of the global financial industry. It has become essential in some countries and very relevant in others. Many factors have influenced to the rapid growth of Islamic finance, including: (i) high demand in many Islamic countries; (ii) growing demand of foreign investors to invest in Islamic banks, along with introducing it to their own countries; (iii) consistent progression in the strengthening of their legal framework to a more reliable and strong one; (iv)
It is estimated that the size of the Islamic banking systems in terms of the global market was approximately around US$820 billion, at the end of 2008. (IFSB et al, 2010). Moreover, countries of the GCC are known to have the largest amount of Islamic banks (IBs). “The market share of Islamic finance in the banking systems of the GCC countries at end-2008 was in the range of 11−35 percent, compared with5−24 percent in 2004”. (Maher Hasan & Jemma Dridi, 2010) The following data shows the actual growth in asset of Islamic banks compared to conventional banks within the MENA region. | Market share in 2008 | Growth rate of assets (Islamic banks) | Growth rate assets (banking system) | Period | Saudi Arabia | 35.0 | 33.4 | 19.0 | 2003-08 | Bahrain | 29.9 | 37.6 | 9.60 | 2000-08 | Kuwait | 29.0 | 23.2 | 14.3 | 2002-08 | UAE | 13.5 | 59.8 | 38.1 | 2001-08 | Qatar | 11.5 | 65.8 | 31.9 | 2002-08 | GCC average | 23.8 | 44.0 | 22.6 | | Jordan | 10.3 | 20.6 | 11.2 | 2001-08 | Yemen | 30.2 | 26.5 | 22.7 | 2004-08 |
Source: Central banks and Islamic banks annual reports. 1. Including Islamic banks 2. Including Islamic windows 3. Growth rate in calculated for the total of wholesale and retail while market share for retail only.
References: Alkassim F. (2005). The Profitability of Islamic and Conventional Banking in the GCC Countries: A Comparative Study. Bahari, Z.B., (2009) Cihak M. & Hesse H., (2010). IMF Working Paper: Islamic banks and financial stability: An empirical analysis. Dridi J Gafoor. A.L.M. (1995). Interest-free Commercial Banking. Groningen: Apptec. The Netherlands Gafoor Saddy, F. (2009). Risky business: Islamic banking & finance. (3 ed., Vol. 7, pp. 20-25). Subbarao, D., 2009, ―Ethics and the world of finance‖ Keynote address at the Conference on "Ethics and the World of Finance," organized by Sri Sathya Sai University, Prasanthi Nilayam, Andhra Pradesh, 28 August 2009.