OBG talks to Bassel Gamal, Group CEO, Qatar Islamic Bank (QIB)

Interview: Bassel Gamal

What is behind the high growth rates among Islamic financial institutions (IFIs) in Qatar?

BASSEL GAMAL: Qatar’s Islamic banking segment has recorded strong momentum over the last few years, not only in Qatar itself, but across the entire GCC. There are a number of contributing factors for this, not least of which is the strong economic growth that the country is enjoying. This growth is both supported and governed by the Qatar Central Bank, which regulates the banking sector. The continuing strength of the oil and natural gas industry – the profits of which are contributing to overall growth as the country implements Qatar National Vision 2030. The 2022 FIFA World Cup provided a major lift, adding further impetus to the country’s already strong momentum, resulting in many spin-off projects. QIB is supporting the business community and all individual clients by providing a wide range of products and services. The introduction of innovative sharia-compliant products across all segments, as well as our ability to provide competitively priced financial solutions compared to conventional banks, are contributing to the sector overall. Recent figures confirm that Islamic assets remain the fastest-growing banking segment. In December 2013 they stood at QR213.1bn ($58.4bn), compared to QR119bn ($32.6bn) in December 2010, for a growth rate of 78.6% over three years. QIB’s assets grew at an even faster rate. In comparison, Qatar’s conventional banking assets grew by 63.3% over that period. Likewise, the share of Islamic assets in Qatar’s banking sector grew from 20.9% in December 2010 to 23.3% in 2013, while Islamic deposits have reached 25%. Given the positive contributing factors mentioned, IFIs are expected to continue growing robustly for the foreseeable future as the industry becomes a mainstream business.

What target segments of the market do Islamic banks in Qatar concentrate on?

GAMAL: Islamic banks in Qatar are targeting all segments – wholesale, institutions and retail – just like conventional banks. Today, there are more than 300 IFIs in more than 55 countries with global Islamic banking assets totalling more than $1.6trn. Yet, overall sharia-compliant assets represent less than 1% of the global financial total. Islamic banks are, however, starting to expand regionally and internationally, and this spread will help in the establishment of standard practices. Islamic banks have managed to develop sharia-compliant products and services that enabled them to meet different segments’ needs as well as, or in some cases even better, than conventional banks. Islamic banks initially had limited offerings; however, in the last decade there have been massive improvements and investments in new products and services that are sharia-compliant and cover the needs of all our clients.

How can the development of Qatar’s sukuk, or Islamic bond, market best be encouraged?

GAMAL: The sukuk market has been underdeveloped due to high liquidity in the Qatari banking sector. Recently, the government and a number of Qatari institutions have moved towards the issuance of sukuk to benefit from the high demand for Islamic products after the 2008 financial downturn and debt crisis in Europe. Qatar was the source of 12% of global sukuk issuance in 2012, accounting for $5.45bn of the total $46.4bn. Locally, Qatari banks are diversifying their sources of funding by utilising capital markets. We anticipate Qatari companies will follow the lead of financial institutions and issue sukuks due to high demand for Qatari investment assets. There is a continuing growth in liquidity in the global Islamic finance market, with sukuks being one of the few avenues available for sharia-compliant investments. This high demand has allowed banks like QIB to issue sukuks at a competitive profit rate.

Furthermore, Qatari banks are now diversifying their sources of funding by using capital markets. We expect that other local companies will follow Qatari financial institutions’ example and issue their own sukuks due to the increased demand for Qatari investment assets.