HE the Governor of Qatar Central Bank (QCB) Sheikh Abdulla bin Saoud al-Thani said Islamic finance plays a vital role within the financial and banking sector in the State of Qatar.
The QCB has been interested in Islamic finance since its inception, issuing circulars and providing the appropriate regulatory environment that considers its privacy until the Islamic finance market in Qatar is ranked the first among the best countries having strong laws and regulations.
This came in the statement of HE the QCB Governor in the '2018 Report on Islamic finance in the State of Qatar' issued on Saturday by Bait Al-Mashura Finance Consultation.
The report treatises the outcome of business by Islamic finance institutions in the State of Qatar to avail a knowledge base for the institutions, researchers and those who are interested in Islamic finance sector of Qatar.
HE the QCB Governor said: "The previous year has been a positive turning point to fostering the strength and power of the banking system in the country by taking advantage of the siege on Qatar and the sudden economic measures by the countries of the blockade.
"The QCB has adopted a proactive approach to address local and regional challenges to avoid any sudden shocks; it also ensured the strengthening of financial positions of banks and reduce their exposure to unconscionable risk," he said. His Excellency pointed that in this context, the QCB called on Islamic banks to apply early the Financial Accounting Standard No (30) for Islamic Financial Institutions, which is in compliance with International Accounting Standard No (9) regarding the calculation of the expected credit loss provision.
With the application of these standards and requirements, Islamic banks have achieved positive results and their profits have increased by 8.5% compared to 2017.
The capital adequacy and asset quality levels indicate that the banking sector in Qatar is able to withstand extreme stress scenarios.
He said: "The promotion of Islamic finance knowledge awareness is a joint task of financial, research and academic institutions. The public needs to know the operational nature of these institutions, financing and investment instruments and nature and feature of their operations. In this context, the promotion of financial education is one of our strategic objectives at QCB that we are seeking to achieve".
The Islamic Finance Report in Qatar 2018 showed the success of the urgent measures taken by the Government of the State of Qatar to address the crisis that was imposed on June 05, 2017 through the policies and structural reforms that were strengthened, which contributed to the management of the consequences of the crisis with unprecedented efficiency.
In the financial sector, non-resident deposits were disrupted, while strong and conservative asset assessment policies were applied to address the expected shocks.
The impact of this success embodied in changing the future perspective of Qatar by the international credit rating institutions to a stable outlook.
For Islamic Finance Sector, 2018 was more powerful in enhancing the quality of its assets, and continue to achieve positive results.
Within the Islamic Banking Sector, the banks made a profit of more than QR6.5bn at a high growth rate of 8.5% for 2017 driven by revenue amounted 10.4%.
Islamic banks' assets were declined with a simple rate of 0.6%, deposits by 1.1% and the net financing was declined by 3.3%.
Islamic banks' financing was focused on the private sector and individuals and moved towards the consumer, industrial and real estate sectors.
Deputy Chairman of Bait Al-Mashura Finance Consultations Dr Khalid bin Ibrahim al-Sulaiti said that the results of 2018 showed more stability and strength for the Islamic finance sector, overcoming the effects of the siege imposed on the State of Qatar and its economic consequences.
This sector continues to impose its competitiveness on the world in terms of size and performance, and the legislative and regulatory environment in which it operates.
The experience of the Islamic finance institutions during this period represents an important field for researchers and scholars regarding the management of emergent financial and economic crises.
"These achievements would not be possible without the Grace of Allah and the guidance of the His Highness the Amir Sheikh Tamim bin Hamad al-Thani; may Allah protect him, the patron of our renaissance, the good government for their tireless efforts and its various institutions, and the great role played by QCB in the regulation and modernisation of the banking sector," Dr al-Sulaiti added.
On Takaful Insurance Sector, the report said that the assets of the policyholders in Takaful insurance companies increased by 14%, while the Takaful insurance subscriptions increased by (2.3%). Additionally, these companies have achieved insurance surplus of QR46mn.
As regard to the Islamic Finance Companies, the assets declined slightly by a rate of (0.6%) with variation in growth and decline among these companies.
Despite the decrease in the revenues of the financing activities of these companies by (3%), it achieved profits of QR105.6mn with a growth rate of 4.2% over 2017.
As per the report, Sukuk issuance by Islamic banks increased with a rate of 27%, while the Islamic banks issued Sukuk with a total value of QR12.6bn.
In Islamic Investment Funds, all such funds performed positively with an average of 6%, the NAV of the unit holders of these finances was QR365mn.
As for the QE Al Rayan Islamic Index, it recorded an increase with a rate of (13.54%). The report showed that the assets of Islamic banks in December 2018 amounted to 350bn Qatari Riyals, and that over the last five years, the deposits of Islamic banks, as per the financial statements issued by them, grew at a compound annual growth rate of 4.3%.
The report stated that the contribution of Islamic banks to finance the consumer sector was greater than that of other sectors, as its contribution ratio in financing this sector was 45.4% of entire commercial banks (conventional banks) related to this sector.
It is noted that the finances granted to the industry sector are increased compared to previous years, which indicates the effectiveness of this sector and the role of Islamic banks in finance.
The contribution of such banks to finance the said sector represented 36.7% of the total finance, followed by the real estate sector with 36.2%.
Meanwhile, the finance of Islamic banks focused on the private sector and to individual finance, compared to conventional banks, which were mostly focused on the government sector.
The proportion of Islamic bank finance directed towards the local sector is higher than its traditional counterparts.
During the five-year period, the compound annual growth rate of finances in Islamic banks in the State of Qatar was 5.7%.
In view of the areas of finance for Islamic banks, compared to 2017, finances directed to the real estate sector accounted for 26%, exceeding the finances granted to governmental and semi-governmental entities, which amounted to 22% of the total finance of Islamic banks.
It is also noted that the finances directed to the industrial sector increased by 39% compared to 2017 to reach 4% of the total finance of Islamic banks.
The report also state that the Islamic banks in Qatar continue to achieve positive results and high growth rates.
In 2018, revenues amounted to 16.2bn Qatari riyals, with an increase of 10.4% over 2017.
The revenues from finance and investment activities represented 89.4% of the total revenues of these banks.
All Islamic banks generated profits with positive growth rates.
The profits of Islamic banks in Qatar exceeded 6.5bn Qatari riyals, with an increase of 8.5% over 2017.
In return, the compound annual growth rate for Islamic banks over the last five years was 4.9%.
Bait Al-Mashura is a specialised centre for consultations related to finance, investment, management, Shariah audit, and professional training.
It was established in 2007 and obtained the licence from Qatar Central Bank for offering financial and investment consultations, thereby it has become the first Qatari firm to obtain such a licence in the State of Qatar.