Islamic certificates of deposit issued by the UAE Central Bank have run up a balance of Dh12 billion, equivalent to $3.27 billion, Central Bank Governor Sultan Bin Nasser Al Suwaidi said in Abu Dhabi yesterday.

In his welcoming speech to delegates at a seminar titled ‘Islamic finance in a global perspective’, Al Suwaidi said: “During the fourth quarter of 2010, the Central Bank of the UAE was able to create an Islamic CD [certificate of deposit], which has been very successful since inception in November 2010.”

Figures of Islamic banks are impressive, but there are some challenges, Al Suwaidi said. The first such challenge is the short-term liquidity management at Islamic banks and other Islamic financial institutions, he added.

“Another challenge for Islamic finance is the distinction between profit to shareholders and profit to investors/depositors, which is not a clear-cut issue at the moment. We need a standard formula to calculate profit in an equitable and fair way at all Islamic banks,” he added.

The third challenge, Al Suwaidi said, is represented by rulings by the various Sharia boards of Islamic banks, which needed to be better coordinated and harmonised.

“This will satisfy an important requirement, i.e. setting of credible standards for Islamic banks,” he added.

Encouraging growth

Al Suwaidi said that at the end of last year, deposits at the country’s Islamic banks stood at Dh198 billion, accounting for 18.7 per cent of the total deposits in the banking system. Total assets of Islamic banks at the end of last year stood at Dh269 billion, or 17 per cent of total assets of the banking system in the UAE, he added.

Al Suwaidi said the growth of assets of Islamic banks in the UAE on year was 10.9 per cent in 2010, while deposits grew 7.6 per cent and loans and advances rose 5.6 per cent.

He said the number of Islamic banks in the country now stands at eight with 260 branches.

According to banking industry estimates, Islamic banking is growing at a fast clip and its size globally is expected to reach $2.7 trillion (Dh9.91 trillion) by 2015 from an estimated $1 trillion, at present. Islamic banking, on a global scale, has seen a ten-fold increase over a ten-year period.

Source : gulfnews.com