Survey of Global Islamic Finance

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					Survey of Global Islamic Finance
Although the Shariah-compliant retail financial services industry is still in the early stages of
development in many markets, there are some lessons and best practice issues emerging in the
industry. This report looks at the likely trends within this market and assesses the future potential
for growth in mortgage finance, credit cards and wealth management.

Executive summary

Islamic banking has witnessed significant growth since it was formally launched and has since
been boosted by the repatriation of Middle Eastern funds and economic development in that
region. Given the favourable demographic trends within core markets, growth is set to continue.
In addition, major international financial services firms have launched Shariah-compliant
businesses; The UK, US and Singapore all witnessed the establishment of independent Shariah-
compliant financial institutions; and regulators of major Islamic banking markets agreed on
regulatory standards governing Islamic banking activities. As the re-structuring of global
financial services continues, and previously well established financial players attempt to re-
position themselves with core audiences, many are arguing that Islamic banking practices have
shielded institutions and their customers from the consequences of the credit crunch. As a result,
shariah models have gained favour with non Muslim customers looking for an alternative
financial model with a prominent moral foundation. At the same time industry observers feel that
the continued expansion of product lines has the potential to blur the lines between Islamic and
other ‘more mainstream’ types of finance.


       This report provides an extensive analysis of the global Islamic finance market
       It details historical values for the Islamic finance market
       The report provides a detailed analysis on key trends and drivers, marketing strategies,
        and challenges in the global Islamic finance market
       It details the marketing strategies adopted by various banks
       It profiles the major banks operating in the Islamic finance sector

Key highlights

       Islamic finance Assets-Under-Management (AUM) grew at 18.8% per annum during the
        period 2006-2011.
       Iran alone accounts for around a 37% share of Islamic finance assets.
       Unlike conventional products in mature markets, where there is a lot of competition,
        Shariah-compliant products have a ready market due to significant customer demand.
       Customers of Shariah-compliant products tend to have a more favourable risk profile
        compared to customers of conventional consumer finance products.
      Although Shariah-compliant vehicle financing is structured differently by institution and
       country, one of the major issues being faced by financial institutions is the lack of
       customer understanding of the unique features of these Shariah-compliant products.

Reasons to buy

      Understand Islamic finance
      Gain insight on the principles governing financial and business activities in Islam
      Identify the growth drivers in the Islamic consumer finance and retail banking industry
      Assess the competitive dynamics of the Islamic finance industry

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Report Details:
Published: July 2012
No. of Pages: 74
Price : Single User License: US$ 3800          Price : Corporate User License: US$ 11400

Table of contents

1 Executive Summary

2 Introduction to Islamic Retail Banking and Consumer Finance
2.1 What is Islamic finance?
2.1.1 Islamic Shariah and its sources
2.1.2 Principles governing financial and business activities in Islam
2.2 Developing Shariah-compliant products
2.3 Techniques used in Islamic banking and finance
2.4 The Shariah approval process
2.5 Dedicated board of Shariah scholars
2.5.1 Board of Shariah scholars at government level
2.5.2 External Shariah audit or certification
2.6 Approaches towards Shariah compliance in the Middle East
2.6.1 The Middle East
2.7 Growth drivers in the Islamic consumer finance and retail banking industry
2.8 Marketing potential
2.8.1 Shariah-compliant products as a customer acquisition tool
2.8.2 Opportunities to open up new market segments
2.8.3 Greater profitability of Islamic consumer finance customers

2.8.4 Low product penetration
2.8.5 Favourable cost structures
2.8.6 Low customer acquisition costs
2.8.7 Low development costs
2.8.8 Profitability of Islamic products
2.8.9 Greater prominence of the industry
2.8.10 Acceptance by conservative customers
2.8.11 Greater transparency and customer advocacy
2.8.12 The adapting role of Islamic financial institutions
2.8.13 Sizing up the Islamic finance market

3 Shariah-compliant retail finance products
3.1 Islamic mortgages
3.1.1 Overview
3.1.2 Murabahah-based products
3.1.3 Ijarah (leasing) plus diminishing equity based contracts
3.1.4 Musharakah-based contracts
3.2 Risk management issues
3.2.1 Default risk
3.2.2 Insurance risk
3.2.3 Image risk

4 Islamic motor financing
4.1 Overview
4.2 Major requirements for Shariah compliance
4.3 Various models of financing
4.3.1 Ijarah-based financing
4.3.2 Murabahah-based financing
4.3.3 Bai Bithaman Ajil-based model
4.3.4 Diminishing Musharakah-based model
4.4 The competitive landscape
4.5 Key growth drivers
4.6 Challenges facing Shariah-compliant vehicle financing
4.7 Market dynamics
4.7.1 The Middle East
4.7.2 Bahrain
4.7.3 Kuwait
4.7.4 UAE
4.7.5 Qatar
4.8 Southeast Asia
4.8.1 Malaysia
4.9 Bank Muamalat Malaysia
4.9.1 Products and services
4.9.2 Indonesia
4.1 South Asia
4.10.1 Pakistan
4.11 Islamic personal loans

4.11.1 Overview
4.11.2 Tawarruq-based model
4.11.3 Leasing-based model
4.11.4 Murabahah-based model
4.11.5 BBA-based model
4.12 Key growth drivers
4.13 Challenges
4.14 Market dynamics
4.14.1 The Middle East
4.14.2 Bahrain
4.14.3 Qatar
4.15 Southeast Asia
4.15.1 Malaysia
4.16 Case study
4.17 Bank Rakyat Malaysia
4.17.1 Product features
4.18 Personal financing products
4.18.1 Financial performance

5 Islamic Credit Cards
5.1 Overview
5.2 Types of Islamic credit cards
5.2.1 Fixed fee on card subscription
5.2.2 Fixed fee on revolving facility
5.2.3 Fixed mark-up on credit limit
5.2.4 Variable mark-up on revolving balance
5.2.5 Fixed mark-up on point-of-sale transactions
5.3 Key growth drivers
5.4 Challenges
5.5 Case study
5.6 Bank Islam Card-i - Bank Islam Malaysia
5.6.1 Fees and charges applicable on Bank Islam Card-i
5.7 Malaysia
5.8 An overview of the Malaysian cards and payment market
5.8.1 Islamic financial services
5.8.2 Malaysia - drivers of growth
5.9 Prepaid initiatives
5.9.1 Islamic cards
5.9.2 Younger cardholders
5.1 Challenges - merchant acceptance
5.10.1 Card fraud
5.10.2 Payments regulation
5.11 Indonesia
5.11.1 Overview of the Indonesian cards and payment market
5.11.2 Mobile banking opportunities in Indonesia

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