Islamic banks aim for the mainstream
Euromoney Limited, Registered in England & Wales, Company number 15236090
4 Bouverie Street, London, EC4Y 8AX
Copyright © Euromoney Limited 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Islamic banks aim for the mainstream

Difficulties at one Middle East bank have focused attention on a fast-growing sector of the finance market. Islamic banks used to be simply places for those with strong religious convictions to deposit their money. Now, as Nigel Dudley reports, these institutions want to grow internationally, get into new business areas and compete for non-Moslem customers. International firms such as Citibank think the sector is attractive enough to set up their own specialist operations.

Ways to lend without interest

Key concepts in Islamic banking

The rapidly developing Islamic banking sector was stunned by the recent revelation that one of its oldest and most respected commercial institutions, Dubai Islamic Bank, had run into what was described officially as "financial difficulties". The bank only survived because of a capital injection by the central bank of the United Arab Emirates (UAE) and the emirate of Dubai.

The authorities are tight-lipped about the cause and scale of the bank's difficulties. But the Gulf was immediately awash with unconfirmed rumours of fraud, that the losses totalled more than $50 million and the problem had been caused by the actions of one or two figures in Dubai Islamic Bank. There was an immediate run on the bank as depositors started to withdraw deposits. A nervous 24 hours passed before calm returned and it became clear the bank would not fail.

The shock was all the greater because Dubai Islamic Bank, which was set up in 1975, was seen as one of the most conservatively run of the Islamic institutions. It was also regarded as being up to international accounting standards: Ernst & Young had signed off the 1997 accounts earlier this year.

Gift this article