A positive outcome for Islamic banks in a ‘new normal’ of low oil prices is that they enter with low rates of non-performing loans, high liquidity, high capital levels and simple balance sheets with mostly Tier 1 capital overall, a report said.

Middle East Global Advisors, the convener of the upcoming World Islamic Banking Conference (WIBC) in Bahrain, is set to reveal cutting-edge insights on the outlook of the global Islamic financial industry in its inaugural “Finance Forward Islamic Finance Outlook Report 2016” this December.

Speaking ahead of the presentation of the report to be launched at WIBC, Dr Sayd Farook, vice chairman and CEO of Middle East Global Advisors, said: “The Outlook Report is expected to serve as a compass for Islamic Finance leaders who are undertaking key decisions that will fundamentally shape their business strategies for 2016.”

The uniqueness of the report, he continued, is that it combines meaningful insights from Islamic finance leaders - gathered from an extensive survey of practitioners’ sentiment  - with robust analysis of the performance of Islamic financial institutions.

According to the report, three major global macro developments of 2015 will shape the outlook of the industry: commodity prices (particularly oil), development in global interest rate policy, and a slowdown of the Chinese economy. Low commodity prices do not bode well for either the Gulf Cooperation Council or Southeast Asian economies, home to most of the world’s Islamic banks.

While the outlook for Islamic banks is likely to be muted going forward, many leading Islamic banks have built up their resilience in the face of tightening liquidity, slowing loan growth and worsening credit risks.

Survey results of the Outlook Report highlighted two key trends: the development of ethical business models and that of Digital Banking.

Blake Goud, chief research officer at Middle East Global Advisors said: “Shariah compliance is necessary but not sufficient for consumers demanding ethical financial services. This implies that corporate social responsibility is not enough - consumers want their financial institutions to integrate an ethical approach into their core business mode.”

On technology, he noted: “Bankers told us that internet and mobile banking (40 per cent and 38 per cent respectively) were the priorities in reaching their customer, higher than the share who said they used branches (25 per cent) and ATMs (15 per cent).”

The “Finance Forward Islamic Finance Outlook Report 2016” will be launched at WIBC on December 2. 2015.

WIBC 2015 is a three-day gathering of the industry's leaders taking place from December 1 to 3 at the Gulf Hotel in Manama, Bahrain. – TradeArabia News Service