The uptake of Islamic finance products by non-Muslims rose in the UAE, with credit cards rising to 28 per cent this year compared with 24 per cent in 2019, according to the Islamic Banking Index by Emirates Islamic.
The usage of Sharia-compliant credit cards rose 28 per cent this year compared with 24 per cent in 2019 while more non-Muslims also opened Islamic savings accounts, up from 28 per cent in 2019 to 32 per cent this year.
Overall, penetration of Islamic banking products in the UAE has grown from 47 per cent to 58 per cent since 2015, while conventional banking products dropped to 64 per cent from 70 per cent over the past five years.
“While the global economic downturn has impacted consumer’s banking habits, Islamic banking continues to be perceived as more supportive of the community and trustworthy as well as having better value to customers as compared with conventional banking,” Wasim Saifi, deputy chief executive of consumer banking and wealth management at Emirates Islamic, said on Wednesday.
The Islamic Banking Index is a benchmark survey that tracks the progress, penetration and perception of the Sharia-compliant banking sector in the UAE, as well as the future intentions of banking customers
The survey also noted that the economic fallout from the Covid-19 pandemic caused a dip in the penetration of both conventional and Islamic banking products in the UAE in 2020. The penetration of Islamic banking products dropped to 58 per cent, down from 60 per cent in 2019, while conventional banking slipped to 64 per cent from 65 per cent in the previous corresponding year.
The State of the Global Islamic Economy report estimates that the total value of Islamic finance assets globally grew by 13.9 per cent last year to $2.88 trillion and forecasts a compound annual growth of 5 per cent to $3.69tn by 2024.
The overall perception of Islamic banks remained stable at 38 per cent, but has improved by 12 percentage points from 26 per cent in 2015, surpassing conventional banking, according to the annual index, which was launched in 2015. Responses were gathered in the third quarter of 2020 from more than 900 respondents who have a bank account in the UAE and earn more than Dh5,000 per month.
Compared with conventional banks, Islamic banks are perceived to have lower fees and offer better finance and profit rates on savings. Muslim consumers have a better perception of Islamic banks on all parameters, except in terms of innovation, the survey said.
More than 70 per cent of respondents have heard about at least one Islamic product this year, with takaful and murabahah being the most popular since 2015, while 27 per cent are not aware of any Islamic banking products.
The percentage of customers likely to subscribe to Islamic products has dropped from 38 per cent in 2019 to 33 per cent in 2020, and conventional products dropped from 40 per cent in 2019 to 35 per cent in 2020.
Value for money in financial products has grown in importance, with 36 per cent of respondents citing better rates and pricing as a factor influencing a potential shift to Islamic financial products, compared with 33 per cent last year, ahead of better customer service, technology and product range.