Emirates News Emirates News An increasing demand for Islamic finance in the UAE and the world The Emirates Source of the news – Emirates – Statement with details of the news An increasing demand for Islamic finance in the UAE and the world:
According to the data, the world is witnessing an increasing growth in the field of Islamic finance, in Malaysia, Islamic finance increased by 8% during 2020 compared to 1% for traditional banking, while in Pakistan, the assets of Islamic banking services increased by 30% in 2020, with a higher rate of services Conventional banking.
Ali Hammad, Head of Markets in the Middle East and North Africa, Private Banking Unit at Standard Chartered Bank emphasized that Islamic finance has become more prevalent, and that banking clients expect that this option will be available to them, and that banking relationship managers are fully aware of all the details of Islamic products. He explained that Islamic finance has the ability to take a larger share of the market, especially since wealthy clients usually like to invest in these products that offer better value for money, while religious customers prefer these products if their advantages are similar to traditional advantages and are compatible with Sharia at the same time. This, as they expect, is the absence of additional costs and other downsides for conventionally comparable products and services.
Funding for all
He explained that despite the name Islamic finance, it is not limited to Islamic countries only. However, raising awareness about Islamic finance has always been a major challenge facing the banking sector, as traditional banking services still prevail. Most of the time, Muslim clients know what Islamic finance is and what advantages it can add to their portfolios. Many Muslim customers also choose Islamic finance out of their main motive of adhering to Sharia law, without focusing on product performance. As for those who are less religious, they see Islamic products as related to more religious people. While non-Muslims feel that Islamic finance is not theirs due to the name, and therefore they do not try to know more about it. There is no doubt that the finance sector plays an important role in raising the awareness of non-Muslim clients, and herein lies the question related to diversification and investment opportunities within a growing financing sector.
Ali Hammad pointed out that there is a clear link between Islamic finance and environmental and social investments and corporate governance. As the demand for environmental and social investments and corporate governance increases, we are noticing the similarities between these investments and Islamic finance that has emerged based on high ethical standards and a belief that there should not be. Value for money in and of itself, as it is just a means of exchanging products and services. As for environmental and social and corporate governance standards, they are the essence of Islamic finance. For example, it is not possible to invest within Islamic financial services in things such as alcohol, tobacco and gambling, as they have a negative impact on society.
He said that while clients are aware of the link between the two, unfortunately, when a non-Muslim person wants to choose the ethical way to invest, that is, to make sustainable investments, he bases his choice most of the time based on the name. Consequently, the non-Muslim is more inclined towards environmental, social and corporate governance investments due to its name and its very popular popularity.
The head of markets in the Middle East and North Africa, the private banking unit at Standard Chartered, explained that the pandemic has not brought about many changes to the behavior of the Islamic finance customer. On the contrary, some clients have used “lockdown periods” to spend more time analyzing their portfolios, in order to invest in areas aimed at benefiting the public interest. But, at the same time, the same can be said for traditional customers. The two groups considered that the pandemic contributed to changing the rules of the game with regard to Islamic finance service providers, by providing them with the opportunity to present their products through digital platforms, thus enhancing technological progress in this sector.
Barriers to Progress
He explained that there are 3 challenges that impede the progress of the Islamic finance sector, which are the existence of fewer options for products within funds, bonds and ETFs in Islamic finance compared to conventional financing, the sector’s restriction of investment more than the traditional sector, and the presence of a limited number of issuers of sukuk. The third challenge is the perception that this funding option is beneficial or appropriate only for Muslims.
Ali Hammad added that Islamic finance continues to develop and revolutionize the banking sector, as its most prominent features include that it provides an alternative way of banking services, providing customers with more options for products that are in line with their beliefs and beliefs, which will contribute to achieving more financial inclusion. On the other hand, Islamic finance can be considered as a primary indicator of environmental, social and corporate governance, despite the ongoing debate about when to lose the religious aspect, so that Islamic finance works to satisfy a person’s awareness more than the individual’s Islamic aspect.
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