Over 400 Islamic financial institutions operate in 60 countries

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Global ranking of Islamic banking industry

Amanullah Khan

Karachi—More than 400 Islamic banks and financial institutions are now operating in over 60 countries from different regions, including Europe, Americas, Pakistan Far East, Africa, and Australia.
The growth and competitiveness of Islamic banking are being driven by numerous factors such as size, brand, ability to enter new markets, microfinance, combating poverty, strategic alliances, and the development of Islamic finance as an integral part of the global Halal economy. The Dubai Center for Islamic Banking and Finance (DCIBF), a joint initiative of Hamdan Bin Mohammed Smart University (HBMSU) and the ‘Dubai Islamic Economy Development Centre’, has formally released its second annual report on Islamic economy during the third Global Islamic Economy Summit in Dubai.
The latest report focuses on the efficiency performance of 131 Islamic banks operating globally and other various key facets of Islamic banking. Out of the total Islamic institutions studied, DCIBF’s report reveals that an Islamic bank from Kuwait emerged as the world’s most efficient. The Kuwait Finance House (KFH) received the highest efficiency score among all banks mentioned in the report, followed by Al Inma Bank from Saudi Arabia, which obtained the top score in terms of the most cost-efficient Islamic Bank in the world.
The top 20 most efficient Islamic banks come from seven countries, including the UAE, Qatar, Malaysia, and Bahrain in addition to Kuwait and Saudi Arabia. Outside the GCC region, it is only Malaysia that made it to the top 20 list. In business, efficiency refers to how much needs to be spent in order to maximise output. According to the report, as financial markets become more integrated and decentralised, it has become imperative to measure the efficiency of banking institutions. Besides the global ranking, the report, which comprises four chapters, also studied the current state of the global Islamic financial services industry valued at $2 trillion at the start of 2015.
Although it is expected that Islamic banking will continue to grow globally, the report warns that it may face challenges especially in countries that heavily rely on oil and other commodity prices. In this regard, diversification of the industry and further expansion is essential for its sustainable growth, the report states.