Digitalisation and consolidation helps Sharjah’s financial sector grow

The size of Sharjah’s financial services sector has grown steadily over the years, due in part to its quick response to changes that includes the rapid adoption of international best practices for banking. More recently, the banking industry has expanded its offering of digital services, particularly in response to the economic disruption caused by the Covid-19 pandemic, putting it in a good position for future growth as the world transitions to a digital economy. Meanwhile, the government of Sharjah’s acquisition of a majority stake in a local bank in 2019 could set the stage for additional strategic investments to further strengthen the financial services sector. While Sharjah does not have its own capital market, the emirate-level government and many local institutions have become regular issuers of debt and sukuk (Islamic bonds), with a number of sukuk sold in 2020 to raise financial support for the pandemic response.


The financial services sector’s contribution to Sharjah’s GDP has grown steadily. It generated an estimated Dh10.1bn ($2.75bn) in current prices in 2019, according to the most recent data from the Department of Statistics and Community Development (DSCD), up from Dh9.8bn ($2.67bn) in 2018 and Dh9.5bn ($2.59bn) in 2017. This put its share of GDP at 8.1%, in line with the 8% contributed in 2018 and 8.3% in 2017. In terms of non-oil GDP, the sector represented 8.5% in 2019, and 8.3% in 2018 and 2017.

As of 2019 there were a total of 33 banks in Sharjah, operating a combined 111 branches. Of the banks, four were headquartered in Sharjah, 15 in other emirates of the UAE and 14 were international institutions. The local banking sector is led by Islamic banks in terms of number of branches. Sharjah Islamic Bank (SIB) has the largest network, with 21 branches; followed by Dubai Islamic Bank, with 12; and Emirates Islamic Bank, with 10.

Gross loans and advances to Sharjah residents from all banks in the emirate amounted to Dh106.4bn ($29bn) in 2019, made up of Dh53.7bn ($14.6bn) to the private corporate sector, Dh31.1bn ($8.5bn) for individuals, and Dh21.6bn ($5.9bn) to the government and the public sector. Resident bank deposits stood at Dh98.1bn ($26.7bn), Dh82.2bn ($22.4bn) of which came from the private sector; Dh8.3bn ($2.3bn) from the government; Dh6.2bn ($1.7bn) from government-related enterprises (GREs), which are defined as companies in which the government holds a stake of 50% or more; and Dh1.4bn ($381.1m) from non-bank financial institutions.

Local Institutions

The emirate is home to four locally incorporated banks, each of which is listed on the Abu Dhabi Securities Exchange (ADX). The largest of the four, both in terms of assets and number of branches, is SIB. The bank was incorporated in 1975 as National Bank of Sharjah and changed its name when it converted to a sharia-compliant institution in 2002, marking the world’s first conversion of a conventional bank into an Islamic one. According to its 2020 annual report, SIB’s total assets increased by 15.5%, or Dh7.2bn ($2bn), to reach Dh53.6bn ($14.6bn) that year. Total shareholder equity represented 14.3% of the bank’s total assets, or Dh7.6bn ($2.1bn), with a strong capital adequacy ratio of 21.5%, per Basel III requirements. Among its asset classes, investment in Islamic financing accounted for the largest share, at roughly 55%, and grew by 16.4% from Dh25.1m ($6.8m) to Dh29.3m ($8m) over the 12 months. The bank’s net profits, however, fell by 25.6%, from Dh545.5m ($148.5m) to Dh405.8m ($110.5m). This was due to SIB’s prudent approach of hedging against potential risks during the unprecedented global economic headwinds of 2020: the bank made a provision on its financial assets equal to Dh255.8m ($69.6m), compared to Dh96.8m ($26.3m) the previous year. Despite the decline in net profits, the bank announced in early 2021 that it would distribute 8% in cash dividends to its shareholders on the back of its strong overall performance over the course of the previous year.

SIB is particularly active in the corporate and government segment, from which 52.9% of its 2020 total operating income was derived; followed by retail, with 28.2%; investment and Treasury, at 13.8%; and hospitality, brokerage and real estate, with 5.1%. The government of Sharjah is the largest shareholder in SIB, primarily through its investment arm Sharjah Asset Management, which holds a 28% stake in the bank. Kuwait Finance House Capital Investment Company is the second-largest shareholder, with an 18% stake, followed by Sharjah Social Security Fund, which owns around 9%. SIB owns three non-banking subsidiaries, namely ASAS Real Estate; Sharjah Financial Islamic Services, which is a trading, investment and wealth-management firm; and Sharjah National Hotels, which operates three hotels in the emirate.

Oldest Bank

The oldest local bank is Bank of Sharjah, which was incorporated in 1973 and began operations the following year when it teamed up with France’s Banque Paribas to become the first consortium bank in the GCC. Similar to SIB, the government of Sharjah is a major shareholder in the bank, with Sharjah Asset Management holding 17.2% of total shares. Other shareholders include United Alsaqer Group (12.7%) and Ahmed Abdalla Al Norman (6.2%).

While the bank had yet to release its 2020 financial report as of early May 2021, its latest unaudited financial statement showed that total assets reached Dh34.8bn ($9.5bn) at the end of the third quarter, up from Dh31.7bn ($8.6bn) at the close of 2019. When comparing the first nine months of 2019 to the corresponding period in 2020, net profits decreased by 25.3%, from Dh172m ($46.8m) to Dh128.4m ($35m). However, when comparing the July-to-September period of 2019 to that of 2020, there was a more than five-fold increase, from Dh20.1m ($5.5m) to Dh110.2m ($30m), signalling the bank’s recovery from the effects of the pandemic. According to Bank of Sharjah’s 2019 annual report, claims on corporates and GREs accounted for 44.2% of total claims, demonstrating its heavy presence in those areas, followed by claims on sovereigns at 16.7%.

Private Bank

The government does not hold a major stake in the third local bank, United Arab Bank, which was founded in 1975 as a joint venture between diverse UAE investors and Société Générale, a French international financial conglomerate. The bank operates 11 branches throughout the UAE, offering financial services in corporate banking, retail banking, trade finance, small and medium-sized enterprise (SME) banking and Treasury services.

According to the latest financial statements from United Arab Bank, its total assets amounted to Dh18bn ($4.9bn) as of September 2020, down from Dh19bn ($5.2bn) one year earlier. The bank’s major shareholders include Commercial Bank, which had a 40% ownership share; Sheikh Faisal bin Sultan Al Qasimi, who held 11.13%; Al Majed Investment Company, which held 5.47%; Jumaa Al Majed Abdullah Muhairi, with 5.31%; and Sheikh Sultan bin Saqr Al Qasimi, who had a share of 5.2%.

Investment & Consolidation

The most recent strategic investment in the banking sector took place in April 2019, when the government of Sharjah acquired a majority stake of 50.07% in Invest Bank, the fourth-largest bank headquartered in the emirate, for $300m. Invest Bank had assets of Dh11bn ($3bn) as of end-March 2020, per the latest available data. This was a slight decrease from the Dh11.7bn ($3.2bn) recorded at the end of 2019. The bank registered a net loss of Dh99.5m ($27.1m) in the first quarter of 2020, compared to Dh105.9m ($28.8m) in the same period of the previous year.

At present there is active study and discussion around next steps related to consolidation for the emirate’s banking sector. However, greater consolidation between banks both in Sharjah and the wider region may still be a few years away, due in part to the ownership structure of lending institutions. Royal family members and government entities typically own majority shares in banks, and most mergers and acquisitions (M&A) recorded in recent times have had the same shareholders on both sides of the transaction. “These transactions are rather akin to shareholders reorganising their assets, rather than pure M&A operations,” Mohamed Damak, senior director of financial services at Standard & Poor’s (S&P) Global Ratings, told international media in February 2020. “We are not questioning the economic added value of such transactions, though, which has proved to be significant in some cases.”

Nevertheless, remaining banks do not have strong common ownership and could thus make upcoming M&A deals difficult to close. “There could be a couple of other operations [that merge],” Damak added. “A second wave of [M&A, which] would be primarily driven by the economic added value, is yet to start – and might not see the light in the next one to two years,” he concluded. However, other banking industry observers, such as credit ratings agency Fitch Ratings, suggested in March 2020 that a wave of M&A could be on the horizon for the UAE as a whole, particularly among banks with weaker capital buffers. Asset quality in the banking sector weakened due to the pandemic’s impact on many industries that are critical to the UAE’s economy, such as tourism and hospitality, retail and wholesale trade, and real estate and construction – which accounted for 29% of total bank lending in the country as of end-2019.

Debt Issuance

To boost liquidity in the banking system, and with an eye to providing additional financial assistance to businesses that were affected by the pandemic, the Sharjah Finance Department (SFD) launched a Dh4bn ($1.1bn) initiative in May 2020. The first tranche of the Sharjah Liquidity Support Mechanism sukuk was issued as a 12-month, dirham-denominated paper valued at Dh2bn ($544.4m) and managed by the Bank of Sharjah. It received a short-term investment grade of “A-2” by S&P.

The following month the emirate sold a $1bn seven-year sukuk to bolster finances and offset the effect of falling global oil prices. The final spread for the sukuk was set at 245 basis points (bps) over mid-swaps, which was tightened by 30 bps from its initial price guidance earlier in the day.

On the private sector end, in September 2020 SIB’s $500m, five-year sukuk, with a profit rate of 1.85% per year, was named the Sukuk Deal of the Year 2020 at the 10th Global Islamic Finance Awards. The deal was closed in June 2020 and was 7.2 times oversubscribed, raising $3.6bn.

In October 2020 the emirate sold $250m in a re-opening of an existing sukuk issued the previous year. The final yield was set at 2.75%, tightening from an initial price guidance of about 2.9%. It received over $600m in orders for the tap of the $750m, 3.234% sukuk due in October 2029. That month S&P Global Ratings downgraded the emirate’s long-term credit rating to “BBB-” after it affirmed the emirate’s “BBB” rating at the start of the pandemic in April.

Digital Banking & Payment Systems

In response to falling customer foot traffic over the years, many banks have closed their brick-and-mortar branches. In August 2020 the National Bank of Ras Al Khaimah (RAK Bank) reported that it would be shuttering nine branches, or 25% of its network in the UAE, starting from the following month as a result of growing demand for digital banking. This includes the closure of one branch in Sharjah City, in addition to one each in Khorfakkan and Abu Dhabi, and six in Dubai. The total number of branches in Sharjah dropped from 125 in 2016 to 111 in 2019.

Recent moves by banks to increase their presence in the digital space were accelerated by the pandemic as people stayed home and observed social-distancing measures. SIB recorded a 55% increase in users of its digital channels and smart services in mid-2020, compared to a 35% increase at the same time one year earlier. Since the introduction of digital platforms, the bank has seen a 100% rise in the usage of some of its services, such as the Tayseer-Salary Advance, which enables users to instantly access their credit, Walid Alamoudi, head of digital banking at SIB, told local media in late June 2020.

Government entities have also expanded digital payment options in the emirate, advancing Sharjah and the UAE’s transition towards a cashless society. In July 2020 the Sharjah Municipality announced plans to enable the payment of fees and fines via e-wallet platforms operated by Apple, Google and Samsung, in addition to the existing cashless payment methods: Tasheel card, credit and debit cards either at point-of-sale or online, Emirates ID card or direct debit from bank accounts. In October 2020 the SFD launched the first phase of a programme to link its services to Digital Identity, a national online platform that allows users to access and make payments to local and federal government agencies, and other institutions. Government entities are also teaming up with the private sector to launch digital products that will boost SMEs’ access to finance. While banks in the emirate have historically supported the government and large businesses, in June 2020 Sharjah Media City, known as Shams, and Mashreq Bank, a leading financial institution in the UAE, announced a strategic partnership to assist SMEs. Per the memorandum of understanding, the bank will address a major hurdle facing SMEs and budding entrepreneurs in Sharjah: opening a business account. A NEOB iz digital bank account will be offered to entrepreneurs based in Shams, who will receive advice on how to grow and sustain their businesses. Mashreq also announced a relief package for SME customers, including its Shams clients, that includes low-balance basic accounts with no fall-below fee until June 2021.


The insurance sector, for its part, is expanding, both in terms of job creation and economic contribution. In 2019 it employed 619 people across the emirate and recorded Dh1.6bn ($435.5m) in direct premium, up 1.5% and 8%, respectively, compared to 2018. The number of insurance companies and branches in the emirate has also risen over the years, from 32 in 2015 to 47 in 2019. Of the total in 2019, 35 were from the UAE, while four insurance companies and branches were Arab-owned, and eight were foreign-owned.

There are two local insurance companies headquartered in Sharjah, and similar to the emirate’s four local banks, they are also listed on the ADX. Sharjah Insurance Company was founded in 1970, making it the first insurance firm established in the UAE. According to its most recent financial statements, the company’s total written premium was Dh44m ($12m) in 2019, down from Dh53m ($14.4m) in 2018. Its net retained premium was also down, from Dh30m ($8.2m) to Dh26m ($7.1m), as was its net operational profit, from Dh11m ($3m) to Dh5m ($1.4m). In terms of assets, Sharjah Insurance Company recorded a total of Dh294.9m ($80.3m) in 2019, down from Dh326.2m ($88.8m) the previous year. Meanwhile, 2019 financial results for the second-largest Sharjah-headquartered insurance company, Al Buhaira National Insurance Company, showed an improvement in total asset value, from Dh1.7bn ($462.7m) to Dh2bn ($544.4m). Total profit, however, fell from Dh35.5m ($9.7m) to Dh22.1m ($6m).

Business Lines

According to DSCD data, 343,967 insurance policies were registered in 2019, with car insurance accounting for the largest share, at 69.04% of the total, or 237,485 policies; followed by health, with 15.55% of the total, or 53,495 policies. In terms of direct premium, however, the order of the top-two segments was reversed. Health came in first position, with direct premium valued at Dh863.2m ($235m) in 2019, equivalent to 53.5% of total direct premium in the market and up from Dh656.2m ($178.6m) in 2018. The segment’s gross written premium stood at Dh799.2m ($217.5m) in 2019, an increase on the Dh667m ($181.6m) recorded in the previous year. Meanwhile, direct premium of Dh334.9m ($91.1m) from motor insurance, accounting for 20.8% of the total and down from Dh427.8m ($116.4m) in 2018, saw the segment come in second place. Gross written premium for motor also fell, from Dh433.6m ($118m) to Dh403.2m ($109.8m) over the same period.


While two of the emirate’s four locally incorporated banks saw their financial positions erode in 2020, the losses were moderate in relation to the scale of the pandemic. The banks have demonstrated robust capital buffers and liquidity in the face of lower oil income and slower demand for credit. This is reflected in international credit ratings agencies’ favourable outlook for the UAE as a whole. In December 2020 Moody’s gave the UAE government an “Aa2” rating – the highest sovereign rating in the region – and a stable outlook. Ongoing support from the national level is expected to support Sharjah’s financial services sector as it navigates the pandemic recovery phase. In November 2020 the Central Bank of the UAE announced it would extend the Dh100bn ($27.2bn) Targeted Economic Support Scheme by six months to June 2021. This will enable banks in Sharjah, as well as those in other emirates, to provide temporary relief to private sector and retail customers. Meanwhile, any decision to extend the nationwide trend of compulsory health coverage to Sharjah could significantly boost insurance uptake.

Although Islamic banks were relatively unaffected by the 2008 global financial crisis, Covid-19 is having a more significant impact. Nevertheless, the disruption could provide opportunities to diversify and accelerate expansion as the pandemic subsides. S&P believes that Covid-19 could unlock the sector’s longterm potential, noting that the pandemic provides “an opportunity for more integrated and transformative growth with a higher degree of standardisation, stronger focus on the industry’s social role and meaningful adoption of financial technology”.

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