Islamic finance grows 50% faster than its peers

Confirming its position as the world’s largest and most influential annual gathering of international Islamic finance leaders, the 19th Annual World Islamic Banking Conference (WIBC 2012) witnessed a high profile opening at the Gulf Conventional Centre in the Kingdom of Bahrain. The three day event began yesterday with a series of technical pre-conference workshops and executive briefing sessions led by experienced and respected international industry standard-setting bodies and experts. The International Islamic Financial Markets (IIFM) led a workshop on Islamic capital markets, liquidity management and risk mitigation instruments. A ratings workshop on ‘Towards Greater Transparency and Capital Markets Development’ was also organized by the Islamic International Rating Agency (IIRA).

Convened under the patronage of HRH Prince Khalifa Bin Salman Al Khalifa, the Prime Minister of the Kingdom of Bahrain and held with the official support of the Central Bank of Bahrain, the event was attended by 1,227 industry leaders from 52 countries representing over 260 international and regional organizations. More than 90 international speakers and industry thought leaders discussed critical issues that the global Islamic finance industry is currently facing and how Islamic finance can adapt to the new dynamics of global finance.

The main WIBC conference was officially inaugurated today with an exclusive opening keynote address by H.E. Rasheed M. Al Maraj, Governor of the Central Bank of Bahrain. The inaugural address was immediately followed by a special keynote plenary session featuring Khaled Mohammed Al-Aboodi, Chief Executive Officer and General Manager of the Islamic Corporation for the Development of the Private Sector, the private sector arm of the Islamic Development Bank Group (IDB), Saudi Arabia. The session, focusing on capacity building to support the international development of Islamic finance, discussed key initiatives to enhance the supervisory architecture to facilitate the international development of Islamic finance, harmonize cross-border linkages and fast-track best practices to new emerging jurisdictions for Islamic finance.

David C. Chavern, Executive Vice President and Chief Operating Officer of the U.S. Chamber of Commerce also spoke at a special session that focused on how leading institutions are adapting to the new dynamics of international finance.

A key highlight of WIBC 2012 was the high-powered CEO and industry leaders’ power debate led by internationally respected CEOs and decision-makers from the key players in the industry. Led by Gordon Bennie, Partner, MENA Financial Services Industry Leader at Ernst and Young, the power debate session analyzed new growth strategies for Islamic finance and addressed the challenges of driving operational transformation to achieve sustainable profitable growth in the Islamic banking and finance industry. The Power Debate, featuring Adnan Ahmed Yousif, Board Member and President and Chief Executive of Al Baraka Banking Group; Toby O’Connor, Chief Executive Officer of the Islamic Bank of Asia; Suliman Azzabin, Chief Executive Officer of Al Rajhi Bank; Salah Jaidah, Chairman – Islamic Finance of Deutsche Bank AG; and Asad Aziz Ahmed, Managing Director of Gulf African Bank; also analyzed the critical success factors that will propel the Islamic finance industry to its next level of growth.

WIBC 2012 also featured for the first time a US Country Interface session which was inaugurated by His Excellency Thomas Krajeski, United States Ambassador to Bahrain and Houda Nonoo, Bahrain Ambassador to the United States. A special UK Country Interface session was also organized along the sidelines of the conference which discussed new initiatives driving Islamic finance in the UK. The session was inaugurated by HMA Iain Lindsay OBE, British Ambassador to Bahrain.

The eagerly awaited 2012/13 edition of the World Islamic Banking Competitiveness Report 2011/12 was also launched at a specially convened session at the conference. Developed in collaboration with Ernst & Young, the Report titled “Growing Beyond: DNA of a Successful Transformation”, was presented by Ashar Nazim, Partner, Head of Islamic Banking Excellence Center, Ernst and Young and Shoaib Qureshi, Senior Manager Islamic Financial Services MENA, Ernst and Young. The Report noted that “Islamic banking growth outlook continues to be positive, growing 50% faster than overall banking sector in several core markets with the Islamic banking assets with commercial banks globally grew to $1.3 trillion in 2011, suggesting an average annual growth of 19% over past four years. However it is a different story when it comes to profitability. The industry’s average ROE was 12% compared to 15% for conventional in 2011.”

The report also noted that “Islamic banks continue to grapple with multiple challenges relating to sub-scale operation, asset quality, negative operating income from core activities and a weak risk culture. The severity of performance challenge has prompted several institutions to initiate wide-ranging transformation programs which include regulatory transformation – involving compliance risk, capital optimization, integrated balance sheet management and liquidity management; risk transformation – around Shari’a governance, single data management framework, segment specific risk models and fund transfer pricing capabilities and retail banking transformation – strengthening a customer centric operating model, channel integration and technology enablement. Successful transformation around these three areas could potentially increase the profit pool of Islamic banks by 25% by 2015.”

Speaking to the media present at the event, David McLean, Chief Executive of the World Islamic Banking Conference, noted that “Islamic finance activities continue to venture beyond national boundaries and the industry’s international growth is now stronger than ever. The dynamic pace of innovation in the international Islamic finance industry has widened the range of financial products and services available to the global audience thereby significantly increasing its appeal. In the aftermath of the global financial crisis, the global economy is on its quest for a financial system that promotes sustainable growth. This highlights tremendous growth potential for Islamic finance given its inherent strengths of association with real economic activities. It is however essential that Islamic finance successfully adapts to the new dynamics of global finance in order to realize this vast potential. This requires further innovation as well as the global synchronization of product offerings, business models, risk management practices and the supporting regulatory and legal infrastructure.”

A similar view was earlier expressed by Mohamed Jamil Berro, Group Chief Executive Officer of Al Hilal Bank who said that “due to its substantial growth and reliability, Islamic finance has now become a global phenomenon with a number of non-Muslim countries also showing keen interest in this dynamic industry. While the conventional banking and finance industry recuperates from the effects of the global financial crisis, there is now an excellent opportunity for Islamic finance to prove its competitiveness and enhance its profile in the global financial landscape. This calls for a stronger industry architecture that would allow for the most efficient functioning of the industry not only within national economies but also across borders.”

“The World Islamic Banking Conference (WIBC) with its very high-profile international participation, sets the perfect stage for such discussions and we are delighted to be supporting this unique global gathering”, he added.

“The global Islamic banking and finance industry has been on a steady and consistent growth path and has made tremendous progress over the past decade, with recent reports indicating that its total asset base has now exceeded $1tr. However it is still less than one percent of global banking assets and this highlights the vast potential for further growth. The recent financial crisis has given Islamic finance the perfect opportunity to play a key part in building a sustainable economic structure and make significant contributions to economic growth not only in its key markets, but across the globe. For 19 years the World Islamic Banking Conference (WIBC) has been at the forefront of supporting the development of the global Islamic banking and finance industry. As a trusted leading Islamic financial institution offering a comprehensive range of financial solutions and contributing to social development, Ithmaar Bank is delighted to be supporting this important gathering of international industry leaders,” Chief Executive Officer and Member of the Board of Ithmaar Bank said that

The World Islamic Banking Exhibition which was held along the sidelines of the conference was inaugurated by Khalid Hamad Abdul Rahman Hamad, Executive Director – Banking Supervision, Central Bank of Bahrain and showcased latest products, services and innovations from over 60 exhibitors.

WIBC 2012 continues on the 11th of December and will feature a special guest address by Jaloul Ayed, Former Minister of Finance of the Republic of Tunisia who will discuss the potential of Islamic finance in Maghreb countries. There will also be an exclusive issuers and investors debate that will feature the launch of the Thomson Reuters Zawya ‘Global Sukuk Perception and Forecast 2013’.

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