A.T. Kearney report reveals Islamic finance doubled in the past year

While shaira-compliant banking has traditionally focused on the GCC and Malaysia, there has recently been a dramatic increase in the number of Islamic banks outside the core markets: most remarkably in the UK, where the number of Islamic banks has more than doubled over the past 12 months. At the same time, they're products remain popular in their core markets, where Islamic banks consistently outgrow their conventional competitors.

Assets in the Islamic banking sector grew to over $250bn globally in 2006, according to the UK Treasury. In the GCC, this segment expanded to 15% of the total system and is expected to reach 50% within the next few years.

The success at home enables these banks to export their business abroad, as Islamic banks from the GCC are the major shareholders behind all of the newly set-up Islamic banks in the UK. However, the strategic approach they take on differs between there and their home countries.

"While Islamic banks in their core markets take a universal banking approach, with retail, corporate and investment banking business lines, they focus on wholesale banking in the UK," said Dr. Alexander von Pock, Manager of Financial Services, A.T Kearney Middle East.

The study reveals that these wholesale banks target a broad set of corporate, institutional and high net worth clients, both Muslims and non-Muslims.

"Islamic investments have often been outperforming conventional investments, hence why even Western, non-Muslim, investors are becoming more interested in Islamic finance. They account for up to 40% of buyers for some recent sharia-compliant offerings in London,"

said Maktoum Al Maktoum, Associate Director, A.T. Kearney Dubai.

Interest in the sector has exploded; many Western banks are joining the Sharia bandwagon and also new regional players are established, such as recently Ajman Bank in the UAE.