Ernst &Young: Global Islamic assets expected to reach US$1.8 trillion

By Rob Starr, Content Manager, Big4.com

Global Islamic banking assets held by commercial banks are set to cross US$1.8t in 2013, up from the US$1.3t of assets held in 2011, according to Ernst & Young’s World Islamic Banking Competitiveness Report 2013.The forecast is significantly higher than some of the earlier industry estimates. Globally, the Islamic banking industry continues to record robust growth, with the top 20 Islamic banks registering a growth of 16% in the last three years and Saudi Arabia emerging as the largest market for Islamic assets.

Egypt has been actively investigating issuing sovereign Sukuks as well as the development of a new regulatory framework for Islamic banks, as several banks in Egypt are expected to launch Shari’a compliant products.

Iraq is contemplating Islamic banking legislation while Libya prepares to implement its Islamic banking framework.A number of banks, both established and new, are considering introducing Islamic banking operations in these markets – highlighting the continued growth and development of Islamic banking throughout the Middle East and North Africa (MENA) region.

Despite the projected asset growth and the introduction of new Islamic initiatives in a number of countries, the profitability of Islamic banking continues to lag behind that of conventional banking in the same markets. Over the period 2008-2011, the leading Return on Equity (ROE) for Islamic banking was only 11.6%, against 15.3% for conventional banking. Islamic banks continue to face a number of issues affecting the profitability of the industry.