A continued boom in bank products compliant with Islam has spurred plans to set up a new financial institution in Switzerland based on the tenets of the faith.National Bank of Kuwait, one of the Middle East’s largest banks, is planning an Islamic private bank in Switzerland in partnership with a Saudi Arabian institution.The move comes as Islamic banking continues to see strong growth, in defiance of the credit crunch. Industry assets have grown by about 20 percent to $500bn (€316bn) since last summer, according to Moody’s, the ratings agency.NBK, the third-largest bank in the Arab world in terms of assets, had already applied for regulatory approval, Ibrahim Dabdoub, chief executive officer said.He declined to name the Saudi bank and said the deal would require approval from Swiss, Kuwaiti and Saudi authorities.The Islamic institution would target high-net worth individuals from the Persian Gulf region, which is currently awash with liquidity as it enjoys an unprecedented oil-fuelled boom.
“There is demand, (and) Switzerland is still a haven for people who want to keep money outside,” Dabdoub said.
In recent years, Islamic finance – based on an interpretation of the holy Quran that bans the use of interest in transactions – has witnessed a huge expansion with products that are compliant with Islamic law, or sharia.
It is becoming one of the fastest-growth areas of banking in the Arab world.
The booming oil price has driven the expansion of Islamic banking as Middle Eastern companies and consumers grow increasingly wealthy, providing profits and business for the world’s biggest Islamic banks.
The Persian Gulf economies – which comprise Bahrain, Kuwait, Oman, Saudi Arabia, Qatar and the UAE- have more than doubled in size since 2002 as oil prices have risen from $30 a barrel to more than $100.
Anouar Hassoune, credit analyst at Moody’s, said: “Oil is creating liquidity and wealth through profits for companies and salaries for individuals.”
“This finds its way through to the banks, whether it is in sharia-compliant personal loans, or from investors wanting to buy sukuk bonds,” he added.
Dabdoub said he was hopeful the Islamic bank could move forward before the end of year.