On the search for a low-risk, non-interest and ethical way of investing, investors might regard Islamic finance, which is expected to reach $1 trillion globally in 2010, as a trustworthy alternative way of sheltering their savings from the rumbles of any financial crisis.
Islamic retail banks promise their clients all sorts of financing with Allah's blessing.
However, in the Gulf, where two thirds of the roughly 40 million inhabitants are younger than 25, a new generation is entering the scene seeking not only adherence to religious principles but also to the modern tools needed for e-banking.
Among the lenders making innovations to accommodate the new generation is Noor Islamic Bank, which recently introduced the UAE's first Arabic-enabled mobile Internet banking service, combining faith and modern finance in a country where most citizens have two mobile phones. In the UAE, 16% of all banking assets are Islamic, according to The World Islamic Banking Competitiveness Report 2009-2010, issued by Mega Events and McKinsey & Company.
Meanwhile, Dubai Islamic Bank, founded in 1975 and the oldest regulated Islamic bank, offers online-recharge of Salik accounts for car drivers (Salik is the highway toll system for Dubai's main traffic way Sheikh Zayed Road). Shariah-compliant Dubai Bank attracts many non-Muslims with its Covered Visa Card product with which clients can accumulate points and redeem them at dozens of retail shops throughout the UAE.
Islamic bank branches have become a common sight in Dubai. Noor Islamic Bank's blue logo has gained prominence on Sheikh Zayed Road where the bank runs the first 24/7 retail branch in the Middle East.
Other local players such as Abu Dhabi Islamic Bank lure new clients at stands in shopping centres like the Mall of the Emirates to open a Ghina account. With Ghina, any account holder with a minimum of Dhs20,000 can win Dhs2m in a raffle happening every four months.
The "invest-and-win" scheme has become a popular tool to tap citizens' savings among IFIs, albeit lucky games are considered as haram. National Bonds, which is licensed and regulated by the UAE Central Bank, is a Shariah compliant saving scheme open to UAE nationals, UAE residents and non-residents over the age of 16. Bondholders are automatically entered into a monthly draw to win Dhs1m in addition to having the opportunity to win 22,250 prizes every month.
The savings are invested under a Mudaraba scheme into projects in the UAE, meaning the holder will earn a profit rate according to the project's return.
Shariah-compliant Dubai Bank's Kunooz Value Plus account scheme rewards Dhs30,000 to three customers in a daily raffle and Dhs1m every month. Since all the aforementioned schemes are a product of a Shariah-compliant investment scheme and not a casino product per se, they are considered as halal.
While project finance with Sukuk focuses on quality projects such as airports with a promising passenger frequentation and superior rate of return, the retail banking business model is a numbers game. X number of clients means x number of basic fees.