Need for mega Islamic bank

GLOBAL Islamic finance has seen rapid growth and enormous deals since its inception 30 years ago, with assets worth some US$1.3 trillion (RM4.1 trillion) at last count, but it still has a long way to go before it can call itself a success story.

"The problem with the global Islamic finance industry is not a lack of interest, deals or funds but the lack of one mega bank in the vein of HSBC or Citibank," said Bahrain-based KPMG audit partner Jalil AlAali during an interview at the World Islamic Banking Conference (WIBC) here last week.

Jalil said although global Islamic banking has grown rapidly, it has yet to see the kind of deals done by its conventional counterparts.

"Right now, any major underwriting has to be done with the aid of several banks as any one existing Islamic bank is unable to undertake a huge deal on its own.
"None of these banks are capable of helping a customer in the likes of petroleum provider Saudi Aramco fund its business expansion on their own.

"However, an Islamic mega bank with assets worth billions of dollars will enable the industry to be more self-efficient and will be viewed as more stable. This will in turn inspire confidence," he said.

In order to be on par with conventional banking, an Islamic mega bank cannot grow organically on its own as that will take a long time. It will need the consolidation of several existing big Islamic banks.

"Saudi's Al Rajhi is capable of taking the first step in this, so can Kuwait Finance House and perhaps Maybank Islamic in the Southeast Asian region," he said.

Jalil said there has been talk of an Islamic mega bank for a long time, especially in the Gulf Co-operation Council, but legislation and regulations between borders have somewhat hindered the merger.

"That being said, I believe an Islamic mega bank will emerge soon as the industry has a need for it," he added.