Islamic banks account for 20% of UAE banking sector’s total assets

ABU DHABI / WAM

The UAE is home to eight Islamic Banks, accounting for approximately 20 percent of total assets in the banking sector, which comprises 23 percent of total domestic credit as of the end of August 2017, Mubarak Rashed Al Mansouri, Governor of the UAE Central Bank, said.
“The growth of Islamic banking has been supported by robust growth of deposits that has hit 24 percent of total deposits by the end of August,” Al Mansouri stated at the opening of the International Financial Services Board Summit, which started here on Monday.
“The Central Bank, in turn, has extended its support to
the sector by issuing Islamic
Certificates of Deposits and availing the Collateralised Murabaha Facility — a marginal lending facility or discount window — to increase the capacity of Islamic banks to manage their liquidity in compliance with Islamic principles.”
The CB governor added that the credit of Islamic banks is mainly benefiting the private sector, particularly real estate activities, trade, financial activities and insurance, as well as small and medium enterprises.
“The Islamic banking system is sound. The capital adequacy ratio hovers over 17 percent. And the Liquid Assets Ratio of 17 percent is well above the mandatory ratio of 10 percent. Therefore, Islamic banks constitute to some
extent a pillar of financial
stability in the UAE.”
He underlined the importance of the recent findings of notable studies, including that by IMF, purporting the asset-based nature of Islamic financing helps to curb excessive leverage and investments in highly leveraged assets and short selling, suggesting that this model is likely to foster financial stability and render the global financial system less prone to financial distress.
“Among the potential beneficiaries of growth of Islamic financing, we can emphasise infrastructure projects and SMEs for which Islamic
Finance seems to be well-suited,” the governor said.