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Wednesday, 20 February 2008

GCC Islamic banks assets cross $300b

(MENAFN - Bahrain Tribune) The Gulf Cooperation Council's 22 Islamic banks have in excess of $300 billion of Sharia-compliant assets and were poised for double digit growth sustainable over the next decade, leading global financial services firm, Morgan Stanley, revealed yesterday.It predicted continued strong growth for the Islamic banking sector driven by a robust outlook for the region and an increasing share of system assets. Morgan Stanley yesterday initiated coverage on Dubai Islamic Bank (DIB) and Kuwait Finance House (KFH) in a report that forecasts that Islamic assets in the GCC would grow to 18 per cent of system assets by 2012 from its current 13 per cent. "A buoyant macro-economic backdrop, increased infrastructure spending and continued diversification from oil economies are driving the banking sector generally," said Marwa A. Elsheikh, an analyst at Morgan Stanley, in the firm's report 'Middle East and North Africa Islamic Banks - Structural Growth Story'. "In terms of factors behind the growth in Islamic finance, a greater focus on Islamic identity, Government backing for the development and promotion of Islamic banking, low penetration and competition among conventional banks make Islamic banking more attractive and more favourable industry dynamics are all likely to fuel the growth."The report suggests that, while the outlook for the sector remains strong, there are a number of potential hurdles to growth. Most Islamic banks lacked scale, the products were complex and there was no single regulatory body. "Further, there are operational limitations, such as not being allowed to hedge, and there is often less transparency and financial disclosure than conventional banks," she pointed out. "However, despite these potential setbacks, the underlying growth drivers will more than offset these structural impediments," said Ms. Elsheikh.

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