Scope Of Sharia Banking

More than 400 banks today operate on the principles of Sharia Banking; these windows are opening

up in conventional countries like Pakistan, Malaysia and Singapore. Currently Sharia Banks have an

average growth rate of 15%-20% annually with an asset under management in excess of US $1 trillion,

according to Standard & Poor's Ratings Services the potential market is $4 trillion worldwide,

therefore Sharia Banking can be a tool for enhancing economic development in many underdeveloped

and developing countries.

Sharia Banks are hungry to grow their loan books while small- and medium-sized enterprises (SMEs) in

the Middle East and North Africa, on the other hand, are still finding it hard to obtain funding, in many

aspects it could be estimated that they could be a perfect match for each other. According to the

International Finance Corporation thousands of SMEs across the region are left in the cold because

there are not enough sharia-compliant banking services available across the world.

On an average, around 35% of SMEs in Iraq, Pakistan, Yemen, Saudi Arabia, Jordan, Tunisia, Morocco,

Lebanon and Egypt, are not borrowing money despite the significant demand due to the lack of Sharia

finance offerings.

Many financial experts believe that Sharia banks have not adopted ways which can help their markets

to grow. They lack innovation and that is the main obstacle they are facing as they do not have any

strategic outlook.

Where does Sharia Banking stand currently and in the forthcoming years?

In contrast to the above belief, Sharia Banks have steadily expanded their footprints throughout the

world. The international field of Sharia finance has been growing at an estimated rate of 15% a year.

This growth is occurring not only in the Middle East but also in the Western world and in the

developing nations of South Asia and Africa. There are now several Sharia financial institutions

operating in the UK, Europe, and the USA. Sharia-compliant assets reached about $400 billion

throughout the world in 2009, according to Standard & Poor's Ratings Services; the potential market

for Sharia Banks is $4 trillion. Iran, Saudi Arabia and Malaysia have the biggest sharia-compliant

assets. Sharia Banking is not restricted to Sharia institutions purely, following a precedent of Citicorp

which set up CitiIslamic Investment Bank in Bahrain in 1996, financial institutions like ABN Amro,

HSBC, American Express, ANZ Grindlays Bank, Chase Manhattan, Deutsche Bank, Nomura Securities

and Union Bank of Switzerland all have in-house “Sharia” units. Sharia Banking operations now exist

in about 100 countries and as new geographies open up to this concept; this industry is expected to

more than double to $990 billion by 2015.