The Next Chapter in Islamic Finance: Higher Risks but Higher Rewards
Abstract
REPORT PREVIOUSLY PUBLISHED BY OLIVER WYMAN
Islamic finance represents 1% of global assets. Surveys suggest that half of the 1.4 billion Muslims worldwide would opt for Islamic finance if given a competitive alternative to conventional services. The market has been growing at over 30% annually since 2000 and is set for continued strong growth.
In The Next Chapter in Islamic Finance: Higher Rewards but Higher Risks, Oliver Wyman conducts a review of the global Islamic financial services market across segments and geographies, with a focus on retail and wholesale banking, and provides insights on emerging trends and success factors within each segment.
Despite tremendous interest and phenomenal growth rates, most institutions are far from taking full advantage of that growth. Success will distinguish the acquirers from the acquisition targets in the medium-term consolidation of the sector.
Wholesale banks have a large focus on real estate and vanilla lending and offer simple products that use mostly Murabaha and Ijara structures. Retail banks are very profitable, but most banks have an undifferentiated product offering, poor client servicing, and sales efficiency problems.