QCB Governor Hails Islamic Finance Development in Qatar

HE Governor Of Qatar Central Bank (QCB) Sheikh Abdulla bin Saoud Al-Thani praised the performance of Islamic finance in the State of Qatar, stressing that it is witnessing continuous development through updated policies and regulations to ensure its continued competitiveness at the regional and international levels.

In his introductory remarks in Bait Al-Mashura Finance Consultations' report on Islamic finance in Qatar, His Excellency said that the assets of Islamic finance in Qatar amounted to QR528 billion (USD144 billion), of which the assets of Islamic banks constituted 86 percent.

"Upon successfully completing the Dukhan Bank merger, Masraf Al Rayan recently sought another merger with Khaleeji Commercial Bank to boost the strength of Qatari Islamic banks worldwide. Such a new banking entity is expected to be the fifth-largest Islamic bank in the world with assets amounting to USD47 billion," HE the QCB Governor said.

He added, "In 2020, the global economy, as well as the financial and banking sector, have gone through an unprecedented crisis due to COVID-19 implications and repercussions. These events posed a new challenge to the financial and banking system in Qatar.

"Thanks to the measures that focused on ensuring business continuity, supporting liquidity, and providing support to affected sectors, we managed to mitigate the implications of this shock, maintain credit flow to economic sectors, and achieve financial and banking stability in the country."

"During this crisis, banks witnessed pressures on their systems and budgets through the required harmonization between continued credit granting, asset reclassification, and provisions for credit losses. Banks in Qatar continued to apply the accounting standard for calculating provision for expected credit losses and to update the structures of scenarios used to determine credit losses in a more conservative view. Nevertheless, the results of banking sector came good, as banks maintained their asset quality standards and credit grew at 8.6 percent."

HE the QCB Governor said, "Financial technology is no longer an option, but an urgent necessity the adoption of which applications should be accelerated. This crisis also revealed to us the Qatari banking sector's ability to quickly adapt to these changes by adopting technological solutions according to the best technical standards and protectionist and supervisory controls. Banks and other financial institutions managed to smoothly and safely provide their services through their applications."

"During this year, we launched many central financial technology systems, including the Qatar Mobile Payment System (QMP), to continue developing the financial and banking environment in Qatar in order to achieve the National Vision 2030."

The report issued by Bait Al-Mashura Finance Consultations discussed the results of the work of Islamic financial institutions in the State of Qatar in 2020. It provided a clear picture of the performance of Islamic financial institutions and the financial and economic sector in the State of Qatar, with the aim of providing a knowledge base for institutions, researchers and those interested in the local Islamic finance sector.

Vice-chairman of Board of Directors, Bait Al-Mashura Finance Consultations, Dr. Khaled bin Ibrahim Al Sulaiti said, "Islamic finance sector has shown flexibility and solidity in facing COVID-19 repercussions in light of the sector's great digital transformation, which provides new opportunities for growth."

"The report on Islamic finance in Qatar for 2020 issued by Bait Al-Mashura Finance Consultations reviews the performance of Islamic finance institutions in Qatar, including Islamic banks, Takaful insurance companies, and Islamic finance and investment companies. It also reviews Islamic financial products, including investment funds, Sukuk and movement of Islamic financial market.

"We have taken upon ourselves at Bait Al-Mashura to strive to continuously improve and develop our products, in order to provide the best and highest quality service to the Islamic financial industry and the community inside and outside Qatar. As we present this effort, we invite researchers, specialists and pioneers of Islamic finance to intensify efforts to upgrade the Islamic finance industry through their research efforts and creative ideas that believe in the authenticity of Islamic economy and its role in leading the financial industry and overcoming crises", he continued.

The report indicated that the total assets of Islamic finance in Qatar in 2020 amounted to about QR528 billion with the assets of Islamic banks represent 86 percent, the existing sukuk amounted to 12 percent, and the assets of Takaful insurance companies accounted for approximately 1 percent, while the assets of investment funds and other Islamic financial institutions constituted around 1 percent.

According to the report, assets of Qatar's Islamic banks grew in by 8.4 percent, and deposits grew by 8.7 percent in 2020, with the private sector's deposits accounting for 56 percent.

Non-resident deposits returned and exceeded pre-crisis rates of 2017. Financing grew by 7.9 percent, concentrated in government, semi-government, real estate and personal finance sectors. Although revenues grew by 3.4 percent, profits decreased 2.6 percent, affected by the increased provisions for expected credit losses. Such profits amounted to QR6.7bn in 2020 compared to QR6.9bn in 2019.

In the Takaful insurance sector, the assets of insurance policyholders amounted to QR2.2 billion, and insurance subscriptions reached QR1.3 billion. Due to the decrease in insurance claims due to the lockdown, closure and general movement restrictions, the insurance surpluses in these companies rose to reach QR149 million.

The report indicated that the assets of Islamic finance companies amounted to QR2.6 billion, while the revenues recorded QR242 million, of which the revenues of financing activities constituted 96 percent.

In the Islamic investment companies sector, the performance of the two investment companies varied between growth and decline, achieving profits and recording losses. The decline in the performance of the First Investor company affected the sector, as the assets of the two companies amounted to approximately QR540 million, down by 6.2%, and revenues decreased by 38%, where one company made a profit and the other recorded a loss.

In the field of Islamic Sukuk, no government Sukuk was issued in 2020. Islamic banks issued Sukuk amounting to nearly QR8 billion. In Islamic investment funds, the total assets of these funds amounted to about QR895 million, and the performance of all these funds was positive during 2020.

In the Qatar Stock Exchange Al Rayan Islamic Index, and despite the decline of the index at the beginning of 2020 due to the COVID-19 repercussions and thanks to the economic stimuli that were taken, the index rebounded to close with an increase of 8.06 percent in 2020 compared to 2019.

The report said that the Islamic financial sector in the State of Qatar diversifies to include four main sectors: Islamic banks, Takaful insurance companies, Islamic finance companies, and Islamic investment companies, in addition to Islamic financing products represented by Sukuk, investment funds, and Islamic indices. These institutions operating in these financial sectors are subject to the direct supervision of the QCB, in addition to the presence of some financial institutions that practice Islamic finance activities within the framework of the Qatar Financial Centre (QFC).

The report noted that the banking sector in the State of Qatar includes four Islamic banks out of a total of 17 banks, including five traditional local commercial banks, a specialized bank (Qatar Development Bank), and seven branches of conventional foreign banks, in addition to the presence of a representative office for a foreign bank. The Islamic banks in Qatar operate through a network of internal and external branches that amounted to more than 70 branches and offices.

The report indicated that the QCB includes under its supervision a number of insurance companies, including five independent takaful insurance companies: the Qatar Islamic Insurance Company, the Gulf Takaful Insurance Company, the Damaan Islamic Insurance Company (Beema), the General Takaful Company of the Qatar General Insurance and Reinsurance Company, and Doha Takaful company, a subsidiary of Doha Insurance Group. Five national conventional insurance companies, and four branches of foreign conventional insurance companies, in addition to representatives of four conventional insurance companies, also operate in this sector.

Also, three Islamic finance companies operate under the QCB umbrella, along with two investment companies and five Islamic investment funds, which are: Al Beit Al Mali Fund, Al Rayan Fund for GCC (Q), Al Rayan Fund for GCC (A), the First Investor GCC Equity Opportunities Fund (Q), and Al Rayan Qatar ETF. These funds operate inside and outside the State of Qatar in addition to the Qatar Stock Exchange Al Rayan Islamic Index, which is one of the indicators of the total return as it reflects the price-performance as well as the revenues obtained from reinvesting the dividends of listed companies. (QNA)

Source: QNA

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