The overall market penetration of Islamic banking in the UAE has fallen from 60% in 2019 to 58% in 2020, but there has been a 4% increase in the uptake of Islamic financial products among non-Muslims while public perception for the sector has improved, a survey has found.
The figures are from Emirates Islamic’s 2020 Islamic Banking Index, a consumer survey that tracks sentiment toward Islamic banking in the UAE, particularly as the year 2020, riddled with challenges resulting from the coronavirus pandemic, draws to a close.
The survey, first launched in 2015, gathered data from over 900 respondents and is benchmarked against the key indicators of penetration, perception, knowledge and intention.
Notable is the overall perception of Islamic banks remaining stable at 38% in 2020, but increasing by 12 percentage points from the 26% recorded in 2015. The numbers indicate a significant improvement in areas related to service and technology, as Shariah banks in the UAE have responded to the rapid changes in the market with strong digitization and digitalization strategies to serve customers.
“No industry has been untouched by COVID-19, as consumers have changed the way they live, preferring reduced face-to-face contact, more time spent in the home and financially conservative behavior in a climate of economic uncertainty,” Wasim Saifi, deputy CEO of consumer banking and wealth management at Emirates Islamic, said.
“It is clear that the shift to digital services has accelerated during 2020, and the real test for banks going forward, including Emirates Islamic, is to continue to innovate and strengthen their digital ecosystems … It is more important now than ever that Islamic banks focus on growing and maintaining a digital market share.”
The UAE is a key market in the global Islamic economy, ranked the fourth-largest in terms of Islamic banking assets; over 20% of the country’s banking assets are Islamic.
In the GCC, Islamic banks’ overall performance have weakened due to a decline in business and the economy, but they have all maintained investment-grade issuer default ratings with stable outlooks, driven by strong sovereign backing, Fitch Ratings said in a report.