Premium Essay

Islamic Bank

In: Business and Management

Submitted By girishghoorah
Words 572
Pages 3
Future of Islamic Banking
For the past years, most Islamic banks have double-digit growth rates, surpassing their conventional rivals. There is ample room for growth for the Islamic Banking as they form part of merely 30% of total market share, even in the countries like UAE, Saudi Arabia, Kuwait and Malaysia. However, there are still several potential markets with large Muslim populations that remained largely untapped, such as India or even China. Subsequent to rapid growth, Islamic banks are facing a comparatively slowing growth rates recently in most markets, even in countries like the Saudi Arabia and the UAE, and can soon meet the general market rate. Moreover, there are still some Islamic banks that are facing declining profit margins and many other challenges.

CHALLENGES IN ISLAMIC BANKING 1. Competition
Even if Islamic banks are growing in number, there are established conventional banks which continue to launch Islamic windows. This is considerably making the task hard for Islamic banks. 2. Standardization and regulation
Different interpretations of the acceptability of various products from Sharia compliant institutions make standardization difficult depending on one understanding of the Sharia principles. For e.g. one Islamic bank can reject the same Islamic financial instrument that another is willing to accept. 3. Size
Many Islamic banks are still comparatively small to domestic or even international conventional banks, hence losing considerable significance. 4. Cost structure
Islamic products are more complex than conventional products and there exist weaknesses such as risk management and operational effectiveness. 5. “Loyalist”
There are three categories of customers; “conventional bank loyalists”, “Islamic bank loyalists” and the floating mass (they are the ones who do not deal with only one type of banking).

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