New report by HBMSU’s Dubai Center for Islamic Banking and Finance reveals world’s most efficient Islamic bank
· Several GCC countries, including UAE, make it to top 20 most efficient Islamic banks
· Kuwait & Saudi Arabia banks lead 131 global institutions
· Malaysia the only country outside GCC to make it to top 20
UAE, October 12, 2016 –
Consistent with its central role of producing groundbreaking and
game-changing research works, The Dubai Center for Islamic Banking and
Finance (DCIBF), a joint initiative of Hamdan Bin Mohammed Smart
University (HBMSU) and the ‘Dubai Islamic Economy Development Centre’,
has formally released its second annual report on Islamic economy today
(Wednesday October 12, 2016) during the third Global Islamic Economy
Summit in Dubai, the region’s premier forum on the Islamic economy,
which ran from October 11 to 12, 2016 at Madinat Jumeirah in Dubai.
The
latest statistics-backed comprehensive report titled ‘Islamic Banking:
Growth, Efficiency and Stability’ focuses on the efficiency performance
of 131 Islamic banks operating globally and other various key facets of
Islamic banking. Out of the total Islamic institutions studied, DCIBF’s
report reveals that an Islamic bank from Kuwait emerged as the world’s
most efficient.
The
Kuwait Finance House (KFH) received the highest efficiency score among
all banks mentioned in the report, followed by Al Inma Bank from Saudi
Arabia, which obtained the top score in terms of the most cost-efficient
Islamic bank in the world. The top 20 most efficient Islamic banks come
from seven countries, including the UAE, Qatar, Malaysia, and Bahrain
in addition to Kuwait and Saudi Arabia. Outside the GCC region, it is
only Malaysia that made it to the top 20 list.
The
Dubai Center for Islamic Banking and Finance (DCIBF) plays a pivotal
role in the preparation and development of in-depth studies covering
developed global Islamic banking sector efficiency—used as a reference
and base for the Islamic Retail Banking Awards, which held its inaugural
edition in 2015. The extensive research conducted by the Center has
also led the DCIBF to being awarded with the Islamic Banking R & D
Award in 2015, which was given in recognition of the efforts made to
assess the performance of Islamic retail banks.
In
business, efficiency refers to how much needs to be spent in order to
maximize output. According to the report, as financial markets become
more integrated and decentralized, it has become imperative to measure
the efficiency of banking institutions.
More
than 400 Islamic banks and financial institutions are now operating in
over 60 countries from different regions, including Europe, Americas,
South Asia, Far East, Africa, and Australia. The report points out that
the growth and competitiveness of Islamic banking are being driven by
numerous factors such as size, brand, ability to enter new markets,
microfinance, combating poverty, strategic alliances, and the
development of Islamic finance as an integral part of the global halal
economy.
Besides
the global ranking, the report, which comprises four chapters, also
studied the current state of the global Islamic financial services
industry valued at USD 2 trillion at the start of 2015. Although it is
expected that Islamic banking will continue to grow globally, the report
warns that it may face challenges especially in countries that heavily
rely on oil and other commodity prices. In this regard, diversification
of the industry and further expansion is essential for its sustainable
growth, the report states.
Dr.
Mansoor Al Awar, HBMSU Chancellor, said: “The efficiency analysis of
Islamic banks used in this report is the first of its kind in that it is
specifically designed for Islamic banks and that it has direct
relevance to the global Islamic financial services industry. The
innovative, pragmatic methodology utilized for the report combines the
best academic methods with some basic tools that other practitioners can
benefit from. The report is full of substantial statistics and reliable
references to back its findings and recommendations. We are confident
that the results will positively impact the entire global Islamic
economy in such a way that more essential reforms will be implemented to
further improve their competitiveness in the global stage.”
Dr.
Al Awar, added: “The report forms part of DCIBF’s commitment to the
initiative launched by H.H. Sheikh Mohammed bin Rashid Al Maktoum, UAE
Vice President and Prime Minister and Ruler of Dubai, to make Dubai the
capital of Islamic economy. It also represents another significant
contribution to the realization of Dubai Strategic Plan’s goal of
promoting knowledge-driven and sustainable economic development in the
emirate by providing rigorous scientific research that addresses key
issues in Islamic economy and finance. Rest assured that as it gleans
more experience and has more resources to capitalize on, the Center will
continue to conduct and facilitate research, and will advance the
concepts and the applications of research in Islamic banking and
finance.”
Furthermore,
the report tackles the basic performance indicators of Islamic banks.
It suggests that while the industry remains on a growth trajectory,
concentration of Islamic banking assets in few markets, mainly the GCC
and the wider MENA region, may pose a threat to the stability of Islamic
banking. A detailed literature review on Islamic banks was also done to
look into Islamic banks’ developments as well as their profitability
over the past few decades.
The
study addresses pressing challenges facing the Islamic banking and
finance sector at a time when many factors have tremendous impact on the
industry such as oil price fluctuations.
The
research team was led by Project Director Prof. Nabil Baydoun, with
Prof. Humayon Dar and Rizwan Malik serving as Chief Editor and Research
Assistant, respectively. The members of the Steering Committee comprised
Prof. Rodney Wilson, Prof. Fahim Khan, Dr. Syed Othman Al Habshi, Neil
D. Miller, Dr. Yusuf Talal DeLorenzo, and Dr. Khaled Fakih.
Islamic
banking and finance have been gaining momentum on a global scale, and
have been offering profitable opportunities for institutions and
individual investors of all sizes. They now represent an important
system offering viable innovative alternative models for investment and
growth to the conventional financial system, which is under significant
strain owing to the recent financial crisis.
Dubai
is well placed to promote rigorous research in Islamic banking and
finance. The Dubai Government has seen a real potential for expanding
its economic base and wants Islamic economics to play a significant part
in the wider economic system.