Sharia'a board being set up
The Commercial Bank of Dubai (CBD) will be opening dedicated Islamic branches once it establishes the Islamic window to offer sharia'a-compliant banking services, according to the bank's chief.
This will be the first conventional bank to open such branch operations in the country. Talking to The Business Weekly, Peter PM Baltussen, chief executive of the bank, said CBD is not planning to set up an Islamic subsidiary and hence it has not applied for the same. The bank is also in the process of setting up an Islamic sharia'a board as part of its preparations to open an Islamic window for its customers.
Islamic finance is growing at the rate of 15 to 20 per cent in the UAE which is fast becoming the world's sukuk hub. A big chunk of the retail business, especially mortgage finance and auto finance, has been grabbed by the Islamic finance institution during the last two to three years, according to banking industry sources.
That is the reason why many of the UAE-based banks are seriously thinking of floating Islamic subsidiaries to take care of the sharia'a-compliant business. Already, banks such as Mashreq, Union National Bank (UNB) and Rak Bank have got a licence to establish Islamic finance companies as the bank's subsidiary.
Many others are in the process of applying for a licence. In the last five to six years, the UAE has seen three banks getting converted into Islamic entities. While the National Bank of Sharjah became the first conventional bank in the world to get converted into an Islamic institution, with the new name of Sharjah Islamic Bank (SIB), it was followed by Emirates Islamic Bank and Dubai Bank both converted from conventional to Islamic to join the team led by Dubai Islamic Bank (DIB) and Abu Dhabi Islamic Bank (ADIB).
Dubai Holding is in the process of setting up the Noor Islamic Bank, which will be operational by next year. With the GCC becoming the biggest market for project financing, more and more long-term funding requirements are emerging, and to a good extent, this appetite is being met by sukuk issues, the amount raised by which crossed $20 billion last year.
According to estimates, about 20 per cent of the funding requirements in project financing in the region will be met through the Islamic finance route in the coming years.By Amit Chettupuzha
© The Business Weekly 2007
