Islamic Wealth Management: niche or new wave? (page 2 of 2)

The GCC's largest bank Emirates NBD has its own Sharia-arm Emirates Islamic Bank.

According to Swiss Bank Sarasin-Alpen in Dubai, some 52% of the Saudi Arabian bank assets and a quarter of bank assets in the UAE are invested in line with Sharia. Key drivers are the overall market growth and conversion of conventional banks in KSA and the expansion of Islamic banks in the UAE. Their advantage: lower costs. A Swiss banker who does not want to be identified told AMEinfo.com: "We are aware that our fees are higher than those at Emirati banks, but Swiss service has its price."

Increased competition

Tax avoidance is not a primary reason for a GCC customer, whose primary concern is diversification. Geneva remains a popular hub for Arab capital in Europe. These steps provide a good mix in order to drag Islamic Wealth Management out of its niche.

Competition will intensify. Sarasin and Clariden-Leu expanded their operations from Dubai to Abu Dhabi, where both banks almost simultaneously opened representative offices last December. While Sarasin runs an Islamic wealth management section, Clariden-Leu only customizes wealth solutions in line with Sharia on demand. "I never understood the demand-driven model, which comes only into play when an Arab HNWI asks for Islamic finance", says John Sandwick, an independent wealth manager in Geneva. "Of course you can create demand by offering ex ante Islamic wealth management. That Muslims in the Gulf region in particular pray five times a day and observe the Holy Month of Ramadan is a fact, and practicing the religion of Islam does not stop at a bank counter", he adds.

For Californian-born Sandwick, it was not surprising that Deutsche Bank and Swiss private bank Pictet closed down most of their Islamic funds in the vague of the financial crisis. "Islamic wealth management cannot succeed by offering a fund", Sandwick says, "but rather it must be based on the Islamic idea of Tauhid or unity. Only a full-fledged capital management which covers trust solutions, equity and Sukuk investments, real estate management and succession planning can survive the struggle to put faith into finance for wealthy clients."