Focus on retail finance to help GCC Islamic banks weather pandemic

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Dubai

Islamic banks in the Gulf Cooperation Council (GCC) region are weathering the coronavirus pandemic due to their focus on low-risk retail finance, Moody’s Investors Service said on Monday.

Banks across the region have had a chal-lenging period since the health outbreak began. Interests are low, while credit growth has slowed down and provisioning costs are high.

, Moody’s noted that there has been a strong demand for Islamic finance, which is growing faster than conventional bank-ing.

Such trend will offset the strains caused by subdued operating environment, low interest rates and high provisioning costs.

“Islamic banks are focusing on low-risk retail finance, which will help protect their asset quality amid an uneven economic recovery across these regions,” Moody’s said.

Overall, Islamic banks’ regulatory capital remains well above minimum requirements. Their liquidity is also strong, thanks to the growth in deposits as customers cut down on spending due to economic uncertainty.

The ratings agency, however, forecast that more Islamic banks are expected to pursue mergers. —Zawya News

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