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GCC-based Islamic banks increased their balance sheets by an average of 15.2% between 2009 and 2014, while their conventional peers registered an 8.8% increase. Last year, Gulf-based Islamic banks grew at a rate of 12.6%, against 9.6% for conventional banks, shows the latest report by Standard & Poor’s (S&P).
Investor demand for Sharia-compliant products and supportive government actions will enable Islamic banks in the region to continue to grow and gradually increase their market share, it says.
The two most important factors influencing the Islamic banks’ faster growth are an increasing demand for both retail and corporate Sharia-compliant banking products and government initiatives designed to support Islamic finance, it added.
However, the ratings agency expects 2015–2016 to be relatively less benign for Gulf Islamic banks in general largely due to declining oil revenues.
“After several years of improving returns and strong growth we expect a gradual change in the operating conditions for Islamic banks in the Gulf in 2015–2016, largely as a result of the weakness in oil prices and its effects on regional economies,” said Standard & Poor’s credit analyst Timucin Engin.