People of the Islamic faith across the globe are currently observing Ramadan, the ninth month of the Islamic calendar – a month of fasting, prayer, reflection, and community.
The rating agency predicted that the industry is positioning itself for sustainable growth by looking at increased standardisation and integration, the development of dedicated social Islamic finance instruments and green sukuk , higher levels of digitalisation and fintech collaboration. The important statistic, however, is the rate of growth between 2019 and 2021, two years where economic activity was marred by the pandemic. Traditional banking deposits grew at a rate of 15.16% while Islamic deposits increased by 41.51%.
“It also gives you, as a bank, a competitive edge. If you don’t offer it, and another bank does, you will lose those clients,” Suliman says.Islamic banking is a banking system based on Islamic financial principles promoting risk-sharing, transparency, and social responsibility. Interest is forbidden, but trade is allowed.
Suliman explains the difference of a vehicle financing arrangement: “If you require vehicle financing from us, we enter into a lessor/lessee arrangement where we lease the car to you for some time and at the end of the term sell the car to you at a nominal value,” he says. “When you place a deposit with us, we use the funding in a profit-generating activity such as purchasing cars for lease purposes. The profit we generate from these activities is then shared with you as a depositor.
“The products are available to anyone who chooses this alternative form of banking,” he says. He references some geographies in Africa where the products have been marketed as “no-interest” solutions, which then immediately markets them to a larger part of the population.While there are no specific obligations that require Islamic banking during Ramadan, Absa does offer support to its customers who may have an increased need for banking solutions at this time.
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