Islamic finance enjoys high popularity among non-Muslims of UAE: Report

By Rahul Vaimal, Associate Editor
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According to the Islamic Banking Index by Emirates Islamic, the uptake of Islamic finance products by non-Muslims soared in the UAE, with credit cards rising to 28 percent this year compared to 24 percent in 2019.

According to the index, the use of Sharia-compliant credit cards increased by 28 percent this year compared to 24 percent in 2019, while more non-Muslims have opened Islamic savings accounts, up from 28 percent in 2019 to 32 percent this year.

Overall, since 2015, the penetration of Islamic banking products in the UAE has risen from 47 percent to 58 percent, while traditional banking products have declined from 70 percent over the last five years to 64 percent.

“While the global economic downturn has impacted consumer’s banking habits, Islamic banking continues to be perceived as more supportive of the community and trustworthy as well as having better value to customers as compared with conventional banking,” Wasim Saifi, deputy chief executive of consumer banking and wealth management at Emirates Islamic, said.

The Islamic Banking Index is a benchmark survey that tracks the progress, penetration and perception of the Sharia-compliant banking sector and the future intentions of banking customers in the UAE.

The survey also noted that the economic consequences of the COVID-19 pandemic caused the penetration of both conventional and Islamic banking products to decline in 2020 in the UAE. Islamic banking product penetration fell to 58 percent, down from 60 percent in 2019, while traditional banking slipped from 65 percent in the previous year to 64 percent in 2020.

The State of the Global Islamic Economy reports that the overall value of Islamic finance assets worldwide rose by 13.9 percent to $2.88 trillion last year and expects a compound annual rise of 5 percent to $3.69 trillion by 2024.

According to the annual index launched in 2015, the overall perception of Islamic banks remained stable at 38 percent, but increased by 12 percentage points from 26 percent in 2015, surpassing traditional banking. Responses were gathered in the third quarter of 2020 from more than 900 respondents who have a bank account in the UAE and earn more than $1361 per month.

Islamic banks are considered to have lower fees compared to traditional banks and deliver higher financing and profit rates on savings. Muslim consumers have a better perception of Islamic banks on all parameters, except in terms of innovation, the survey said.

More than 70 percent of respondents have heard about at least one Islamic product this year, with takaful and murabahah being the most popular since 2015, while 27 percent are not aware of any Islamic banking products.

The percentage of customers likely to subscribe to Islamic products has dropped from 38 percent in 2019 to 33 percent in 2020, and conventional products dropped from 40 percent in 2019 to 35 percent in 2020.

Value for money in financial products has grown in importance, with 36 percent of respondents citing better rates and pricing as a factor influencing a potential shift to Islamic financial products, compared with 33 percent last year, ahead of better customer service, technology and product range.