Saudi Arabia tops in Islamic loans volume

Islamic loan volume exceeded $5.66 billion (Dh20.78bn) in Saudi Arabia during the May 2009 to May 2010 period, according to different research data.

The loan volume in Qatar was the next highest at $2.75bn, followed by the UAE at $900 million, Bahrain at $540m, Turkey at $306m and Kuwait at $293m.

The Islamic finance industry would touch the $2 trillion mark in three to five years, said Rushdi Siddiqui, Global head of Islamic Finance, Thomson Reuters.

"Given that it took the industry almost 40 years to get to the $1trn mark, it is a pretty impressive growth pattern but only as long as it is based on a solid foundation, is asset backed and is linked to real, economy assets," Siddiqui told Emirates Business.

"It will take the industry three to five years to reach the $2trn mark," he said. According to data by Thomson Reuters Lipper, LPC and Tokio Marine Middle East, assets under Islamic finance continued to grow and were at $950bn in 2009. While global takaful premiums reached $5.6bn, including $157m in the UAE and $2.4bn in Saudi Arabia, money raised via Islamic loans amounted to $85bn across 255 deals globally.

The sukuk volume, according to research, was more than $45bn between May 2009 and May 2010 with Malaysia leading at $30bn, Indonesia at $5.6bn and the total outstanding value of sukuk at $130.7bn.

A recent report by Moody's said Islamic finance assets grew to $950bn in 2009 inspite of the economic crisis. Moody's estimates that the Islamic finance industry's potential is worth at least $5trn.

According to industry experts, growth opportunities lie for Islamic finance in various areas including SME financing and also by tapping into the wealth of high net worth individuals which is estimated to increase at 8.1 per cent on an average from 2009-2013, with Asia-Pacific and Middle East seeing the maximum increase in wealth.

"Medium to long-term prospects are quite strong for Islamic finance," Baljeet Kaur Grewal, Managing Director and Vice-Chairman, Kuwait Finance House, said recently.

"With increase in Muslim population and non-Islamic countries also warming up to the concept of Islamic banking, the value of assets managed by Islamic banks is expected to grow to $4trn by 2020," she said.

On the way to its growth, the industry needs to pay attention to several issues like using technology for better presentation and information and bringing its stakeholders on a single platform, said Siddiqui.

In conventional space you have news, data, analysis. In Islamic finance we are way behind, he said. He said Islamic finance today is where FX was in 1971. Technology is the next stage, he said.

The Islamic finance industry needs to be flexible, constructive and innovative, said Mutlaq H Al Morished, Executive Vice-President, Corporate Finance, Saudi Arabian Basic Industries. "It has to be competitive to position itself as a viable alternative. Its growth prospects are promising." Regarding defaults and restructurings, Siddiqui said: "These are part of any embryonic industry, it goes through growing pain."

Follow Emirates 24|7 on Google News.