Qatar's move to stop Sharia-compliant lending by conventional banks could trigger similar moves across the region as Gulf states jostle for position in a market estimated to be worth US$800 billion (Dh2.93 trillion).
Qatar's central bank this week ordered conventional banks to shut down their Islamic operations by the end of the year amid worries about an overlap between the two forms of banking.
Industry experts say this action will prompt other Gulf countries to follow suit. Separating Islamic and conventional banking is "almost an infectious thing", said Ghanem Nuseibeh, a partner at Cornerstone Global Associates. "Now Qatar has done it, others in the Gulf might have to do it."
Malaysia's central bank, responding to the Qatar ruling, yesterday said Malaysian Islamic banking institutions, operating as subsidiaries or windows, must have a separation of funds to ensure Sharia compliance.
Profits at conventional banks are expected to be hit hard unless the lenders diversify, market commentators said. "I think all the big commercial banks, the usual suspects that do not have separate [Islamic] banking licences, would do this," said Khaled Masri, the head of brokerage at Rasmala Investment Bank. "The grey area between conventional and Islamic banking would be removed and those that tend to bank in an Islamic fashion will find it clearer."
HSBC's Islamic unit said it was seeking "clarification" on the central bank's order.
Publicly listed Qatari banks made $2.6bn in profits for the nine months ending last September, up from $2.1bn in the same period a year earlier, according to data from the International Bank of Qatar.
Qatar Islamic Bank (QIB), the nation's largest Sharia-compliant bank, has become the latest lender to express interest in the assets of conventional lenders in Qatar. Ahmed Mashari, QIB's acting chief executive, said the bank wanted "maybe 100,000 clients" of conventional banks.
Qatar National Bank (QNB) has the nation's biggest market share in Islamic banking with 27 per cent, despite being a conventional bank. Shares in QNB closed 3.4 per cent higher at 141 Qatari rials (Dh142.21), the most in a month, on news that QIB may buy assets in the bank.
kbrass@thenational.ae
