Shariah-compliant banks lead in personal finance products due to several factors, mainly for transparency and trust.
Islamic banks in the UAE continue to lead their conventional peers for personal finance products such as loan, auto and mortgage products despite a dip in all over penetration rate due to the ongoing economic situation caused by the coronavirus pandemic.
Wasim Saifi, Deputy CEO-Consumer Banking and Wealth Management at Emirates Islamic, said Islamic banks lead in three personal finance products due to several factors, mainly for transparency and trust.
“There is a feeling among Muslim and non-Muslims that Shariah-compliant banks are more transparent when it comes to delays in payments and overdue charges. Also, they are not as much prohibitive. Even in the perception index, it is felt that Islamic banks are more trust worth as far as pricing is concerned,” Saifi said during a virtual press briefing, launched to share insight into its latest edition of Islamic Banking Index, a benchmark survey revealing the progress, penetration and perception of the Shariah-compliant banking sector in the UAE.
“Respondents, both Muslim and non-Muslim, cite better rates and pricing as a factor influencing a potential shift to Islamic financial products, ahead of better customer service, better technology and better product range, reflecting the high priority consumers are placing on value,” Emirates Islamic Bank said in the report.
The index revealed that overall penetration of both conventional and Islamic banking in 2020 has seen a small reduction, falling 60 per cent to 58 per cent for Islamic banking products and from 65 per cent to 64 per cent for conventional banking as compared to 2019.
In the long run, the penetration of Islamic banking products has increased gradually from 47 per cent to 58 per cent since 2015, while conventional banking products have seen a reduction from 70 per cent to 64 per cent over the years.
The overall penetration of Islamic finance products among Muslim respondents was consistent, 70 per cent in 2019 and 69 per cent in 2020. Among non-Muslims, there was an increase in uptake in Islamic credit cards – 24 per cent in 2019 to 28 per cent in 2020, and Islamic savings accounts – 28 per cent to 32 per cent.
“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 behaviour in a climate of economic uncertainty. However, while the global economic downturn has impacted consumer’s banking habits, we are pleased to see that Islamic banking continues to be perceived as more supportive of the community and trustworthy as well as having better value to customers as compared to conventional banking,” said Saifi.