Islamic finance to see rapid growth in Jordan (page 2 of 2)

Is the industry growing fast in Jordan? If so, what is causing the growth?

Islamic banks have been around in Jordan for the past twenty years or so, but they are yet to provide Islamic investment vehicle funds, or Islamic funds for that matter.

The perception in Jordan is that Islamic banks are equipped to handle financing, but investment is still a virgin field, so to speak.

Murabaha, Mudaraba, and Islamic leasing are all financing options that merit a good deal of attention. Also, a number of Islamic insurance (Takaful) companies have been on the rise recently. The growth in both cases is clearly attributed to customers with Islamic orientation, who would solely seek financing from Islamic institutions.

Having said that, we have been able to identify a growing interest in Shariah-compliant funds, hence the decision to create a Shariah compliant mutual fund, registered in Bahrain, a vibrant off-shore centre for Islamic investments.

More importantly, the fund targets the widest base of clients in Jordan, including retail, and experienced investors, in line with the CBB's terminology. In other words, it is offered to both individuals and businesses alike, and we strongly believe that other players in the market should follow suit.

Do you have any dollar estimates of the size of the industry in Jordan and the Middle East?

As regards the size of the local market, Jordan has been taking serious steps towards integrating itself with other regional markets, be it the stock market, the banking sector, or the financial sector .

Islamic investments are no exception. Among other Middle Eastern markets, Jordan has been a major pioneer in Islamic finance, and it still remains as the principal provider of these products in the Middle East.

It is difficult to attach a number to the size of the industry locally, but I would like to mention some figures to illustrate the growing importance of the Islamic banking sector in Jordan since the endorsement of Law 13 to provide for the establishment of Islamic banking institutions in 1978.

The sector currently comprises the Jordan Islamic Bank (founded in 1978) and the Islamic International Arab Bank (founded in 1998), while the Industrial Development Bank has completed all necessary procedures to convert into an Islamic bank in 2008.

The former two banks collectively accounted for JD208m ($293m) in 2007 in shareholder equity, while their combined assets stood at JD2.2bn ($3.1bn). The Jordan Islamic bank, in particular, has witnessed almost 10% growth in its customer base (as gauged from the change in its deposits), compared to 12% for the whole banking sector.

The growth of the industry, from the investment vehicles' side, especially funds, remains to be seen, given the very recent arrival of Islamic funds, whose sizes are estimated to be in the area of $150m - $200m in the near future.


See also:
Sharaih-compliant trading gathers pace in Dubai
Islamic finance faces obstacles despite growth