In the wake of negative perceptions after the Muslim Brotherhood’s fall from power, industry insiders once again begin to cite promising signs for the future of Islamic finance in Egypt: including recent profit, increased demand from foreign outlets, a comparative lack of consumer confidence in conventional banking and the potential establishment of Sukuk.
On the 6th April this year Abu Dhabi Islamic Bank (ADIB)–Egypt reported gross revenues of EGP580 million (US$81.02 million) for 2013, representing a 48.7% increase over 2012 gross revenues. Furthermore, net income reached EGP103 million (US$14.39 million), which compares favorably to a loss of EGP855 million (US$119.44 million) in 2012. The positive net profit achieved in 2013 was the first profitable year for ADIB-Egypt since 2007. The results of the last year prompted ADIB-Egypt CEO Nevine Lotfy to remark that ADIB is prepared to embark on a new phase of growth and expansion within Egypt.
The bullish outlook extended to the chairman of centrally-owned United Bank, Mohamed Ashmawy, who expects Islamic banking in Egypt to grow by 50% in 2014. Ashmawy cited increased demand for Shariah compliant products, particularly from Saudi and other Gulf-based companies, as a primary reason for his optimistic forecast. Ashmawy also points to a recent major sugar production project receiving EGP1.5 billion (US$209.54 million) in Islamic financing. In addition to the sheer size of the project, Ashmawy was encouraged by the cooperative abilities exhibited by a large conglomerate of Islamic and conventional banks in consummating the deal.
Indeed, Ashar Nazim, the global Islamic finance leader at EY, cited a lack of sophisticated banks offering Shariah compliant services as a potential inhibitor of growth within the industry, so it is particularly encouraging that The United Bank (Egypt), Banque Misr, Bank Audi, Egypt and ADIB-Egypt, along with 10 more banks, participated in this major transaction.
Furthermore, according to an ADIB-commissioned survey of around 1,000 retail banking customers in the UAE, Egypt, Turkey, Indonesia, and the UK, Islamic banks were believed to be more transparent with customers and were more likely to treat customers as partners than their conventional counterparts. Additionally, the number of survey participants willing to partner with an Islamic bank increased by 30% when they were informed about the core tenets of Islamic finance. Tirad Al Mahmoud, CEO of ADIB, believes that this favorable perception, in conjunction with the demand for ethical banking, provides Islamic bankers with a clear opportunity to gain market share.
Islamic financiers may also be encouraged by the expected reconsideration of Sukuk in Egypt. Sherif Samy, the executive chairman of the Egyptian Financial Supervisory Authority (EFSA), intimated on the 6th May that the Sukuk initiative is of great importance, but had to be technically revised. Samy emphasized the need for cooperation between the EFSA and the Egyptian Exchange in order to establish Sukuk in Egypt.
Walid S Hegazy is the managing partner at Hegazy & Associates in association with Crowell & Moring. He can be contacted at
[email protected]
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