x Abu Dhabi, UAETuesday 25 July 2017

Islamic finance on a charm offensive

KPMG's global head of Islamic finance says the industry faces a major issue in communicating with the public, deterring many sceptics from participating within the industry.

Al Hilal Bank is in talks with the Abu Dhabi Education Council to develop Islamic finance courses as part of the curriculum.
Al Hilal Bank is in talks with the Abu Dhabi Education Council to develop Islamic finance courses as part of the curriculum.

The Islamic finance industry has begun a charm offensive to convince more governments, institutions and bank customers to adopt Sharia-compliant finance.

Neil Miller, the new global head of Islamic finance at KPMG, said sovereign wealth funds and governments in the region were prime candidates for greater use of sukuk and other Islamic instruments.

"That's a specific dialogue that we're just beginning," he said. "Personally, I think it would be interesting to see these institutions raise funding Islamically, and I've begun that dialogue with them."

In addition to approaching the wealthiest institutional clients, some lenders are also seeking to develop greater levels of awareness of Islamic finance for the UAE's youngest. Al Hilal Bank is in talks with the Abu Dhabi Education Council to develop Islamic finance courses as part of the curriculum, said Mohammad Zaqout, Al Hilal's head of retail banking.

"It's a challenge for Islamic finance," he said. "It's a fact that people are more aware of non-Islamic finance, [but] Islamic awareness is increasing.

But the $1 trillion (Dh3.67tn) industry must address a lack of understanding about Islamic finance, which deters many people who might otherwise make use of Sharia-compliant banks and services, Mr Miller said.

"The industry has to get better at explaining what it does," he said.

Explaining the many unfamiliar forms of Islamic finance was often a challenge when dealing with many potential customers, whose most important financial transaction is usually no more complex than a mortgage, Mr Miller said.

"It's not that the documents used are not clear and are not transparent. They are transparent, but it's how you communicate that's important," he said.

While there were many "purists" among Al Hilal' customers who took Islamic banks' services as inherently positive because of the faith-based aspects, the ethical principles behind Islamic banking provided a safeguard to consumers not offered by conventional lenders, Mr Zaqout said.

"There's Sharia board that acts on their interests, so there's a policeman within the bank," he said.

Revenue at the UAE's listed Islamic lenders grew by 7.3 per cent to Dh2.01bn during the first quarter of this year from a year earlier, according to financial statements.

 

ghunter@thenational.ae