Islamic finance organisations must become more competitive to cope with increased demand globally, according to a recent PricewaterhouseCoopers report published in advance of the ninth World Islamic Economic Forum (WIEF) in London next month.
"Islamic finance institutions are relatively small and need to step up to the plate," Ashruff Jamall, the author of Islamic Finance - Creating Value and the global Islamic finance leader at PwC in Dubai, said at a media briefing previewing the forum.
The world's Islamic population is projected to grow by 35 per cent by 2030, fuelling demand for Islamic financial products, according to figures cited by PwC.
This market is expected to double to US$2.6 trillion by 2017.
While Islamic products hold appeal for Muslims and other ethical investors, their higher costs and lower returns dent this.
Islamic banks in the Arabian Gulf region provided a 7.1 per cent return on equity from 2006 to 2011, compared with the 14.6 per cent return provided by conventional banks.
Greater customer focus, better operational efficiency and improved governance structures - such as the independence of Sharia boards - are among the challenges that must be addressed, PwC said.
The ninth WIEF is to be held in a non-Muslim country for the first time.
London fought off competition from Russia and Canada to secure the event, according to the WIEF chairman Tun Musa Hitam.
London has the largest Islamic banking sector outside the Middle East and Asia, with 22 banks that are Sharia-compliant or offer Sharia products.
London's bid to host the event was backed by the UK prime minister David Cameron, who will attend the event along with other world leaders including the prime ministers of Malaysia, Pakistan and Morocco, the Crown Prince of Bahrain and the Sultan of Brunei.
"After eight years we can say we have arrived," Tun Musa said. "For the first time we are venturing outside the Muslim world."
A total of 1,500 delegates from business, government and academia are expected to attend the October 29-31 conference.
Harnessing the potential of women as drivers of growth, harmonising Islamic and western banking, and micro finance and start-ups are among the discussion topics.
Workshops, roundtables, panel sessions and networking events will be held at the UK government's British Business Pavilion to showcase the country's offering to the Islamic world.
