Central bank data indicated that Islamic banks reduced the granting of funds in the local market during the past year to 366.4 billion dirhams at the end of 2019, compared to 373.4 billion dirhams at the end of 2018, a decrease of seven billion dirhams, a decline of 1.9%.
For their part, bankers attributed this decrease in Islamic bank financing to several factors, most notably the strict policy of some banks and mergers between Islamic banks, and the relatively low demand for loans during the past year.
Islamic banks
In detail, data released yesterday by the Central Bank revealed that Islamic banks reduced the granting of funds in the local market during the past year, as the total credit granted by them decreased to 366.4 billion dirhams at the end of 2019, compared with 373.4 billion dirhams at the end of the same period in 2018, a decrease of Seven billion dirhams, a decline of 1.9%.
Statistics showed that the decline was evident in private sector financing, and what falls under it from the financing of individuals and the industrial and commercial sectors, as well as individuals.
Funding grants
For his part, the banking expert, Amjad Nasr, said that "Islamic banks are very conservative in granting funds, if the customer's creditworthiness is low, so we find that there is a great commitment and strong internal standards to the reports issued by the credit information company," noting that during the year Also in the past, the demand for loans decreased relatively due to the uncertainty in the employment status of some sectors, and the lack of entry of new jobs in high proportions, all of which influenced the reduction of financing, though not by a large percentage.
Nasr added, there is another important factor, which is the mergers that took place between Islamic banks, and this led to the suspension of granting funds for several months, especially for individuals, industry and trade, so the total of funds came low.
And that the banks usually in the last quarter, trying to maintain high deposit rates to improve their budgets, and not to show the superiority of loans on deposits, contrary to the instructions of the Central Bank, stressing that these factors in their entirety contributed to the lack of growth in funds.
Special criteria
In a related context, the banking expert, Sheikha Al-Suwaidi, said that “some Islamic banks set their own standards, which are more stringent even than what appears in the report of the Union Credit Information Company, and stipulates that the customer who stumbled nearly a year in order to be able to obtain financing from them, in order to make sure Of his ability to pay. ”
She explained that this strict policy has two effects, one of which is: positive, which is the reduction of doubtful debts or troubles that cost the bank part of its profits, while the second effect appears in the decline in the growth of its funds or sometimes their retreat, stressing that the internal control committees in banks Islam requires stricter standards to be implemented, and administrations abide by them, so growth is almost stable and sometimes tends to retreat.
For its part, the banking expert, Awatef Al-Harmoudi, said that, “Previously, the segments of clients of Islamic banks were Muslims and non-Muslims, due to the clarity of fees, commissions, and all the fees imposed, but after the central bank unified the fees, whether for Islamic banks or their traditional counterpart, it became There is a transition for non-Muslims towards the latter, because of its strong offers and transparency in fees that characterized Islamic banks. ”
Al-Harmoodi added that the difference is now in the service of dealers, and what is in line with the Sharia, and these matters do not matter much to the non-Muslims segment, so we find the trend now for traditional banks in relation to this segment.
The total credit granted by banks reached 366.4 billion dirhams at the end of last year.