Bahrain, January 10, 2011
With over 20 percent of sustained annual growth and having achieved the critical volume estimated at $1 trillion in Islamic assets by 2010, the Islamic financial institutions are at crossroads entering 2011, according to Ernst & Young.
"The industry is expected to continue to show resilience in the face of a challenging economic scenario. This is despite the fact that growth levels of the Islamic finance industry, at more than 20 percent per annum for the past several years, came under tremendous pressure in 2010," said E&Y in a report. "Having achieved the critical volume estimated at $1 trillion in Islamic assets, the question reverberating across board rooms and among users of Islamic financial services is about differentiation, or the lack thereof, that Islamic financial institutions have on offer. Effectiveness of the existing Shariah governance framework, as well as synthetic product structures commonly in use are especially under discussion," said Ashar Nazim, executive director and MENA head of Islamic Financial Services Group at Ernst & Young.
"Scarcity of data and under-investment in analytical tools means that Islamic banks' focus remains limited to a handful of asset classes while their operating costs are, in many cases, higher than their conventional peers. Future opportunities may no longer come from traditional captive clientele. Instead, Islamic financial institutions urgently need to upgrade their business models to tap mainstream segments," said E&Y in a report.
Ernst & Young was voted the Best Islamic Advisory Firm and also won the award for Best Islamic Research at the 2010 Islamic Business and Finance Awards organized by CPI Financial. Ernst & Young's Islamic financial services team was acknowledged for its original thought leadership to help steer the industry through the difficult business environment.
Ernst & Young also recently joined hands with Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the leading standard-setting body for Islamic finance industry, to provide product and contract certification that would strengthen universal acceptability of Shariah-compliant products offered by Islamic financial institutions.
Ernst & Young's World Takaful Report highlighted the fluid nature of the Takaful industry, as well as tremendous growth potential. The industry is expected to grow three-fold from an estimated $9 billion in 2009 to $25 billion by 2015.
"The biggest challenge for the Takaful operators is to bring out the differentiation, its unique Islamic proposition, for its stakeholders. This was the key message for the industry during 2010," said Nazim.
-Arab News-
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