Success Factors of Islamic Banks: An Empirical Study3.3 Growth of Deposits in Islamic Banks
Customers’ deposits are the foundation of a bank’s activity and the
source of its profitability. Table 6 outlines the development and growth of
customers’ deposits in the 7 banks we are studying. We find that banks that
increased their assets by a high proportion are those that were able to
substantially raise customers’ deposits, as is the case with banks G and C.
Table 6: Percentage Growth in Customers’ Deposits
BANK 1998/99 1999/2000 2000/2001 1998/2001 Average
A 8.20 14.19 10.79 36.88 12.29
B -0.22 11.79 -1.69 9.66 3.22
C 20.83 28.12 34.28 107.89 35.96
D 36.13 -5.60 -14.00 10.52 3.51
E 4.33 0.92 10.19 16.02 5.34
F --- 6.33 -25.89 -21.20 -10.60
G 5.79 15.90 14.74 40.69 13.56
Average 12.51 10.24 4.06 28.64 9.04On the other hand, banks that are unable to realize high increases in their
deposits are those that remained at the lowest rank of growth in their assets,
as is the case with banks B, D, F and E. We should keep in mind, however,
that the other source to increase assets is an increase in equities through
bringing new funds from shareholders (bank B) or retaining large chunks of
realized profit as done by all other banks without exception.
In addition to retaining profits, bank A started with a modest deposit
growth average in 1999, but because it offered new financial instruments it
was able to attract new deposits in 2000 and 2001. This re-emphasizes, time
and again, the utmost importance of the efforts of the departments of
financial engineering and marketing in the success of the Islamic bank, as it is
these efforts that determine the bank’s ability to attract new customers and to
increase its transactions with the old ones.
Yet, Table 6 has some very important significance: the market for Islamic
financial services in the countries where these banks operate, particularly in
Kuwait, United Arab Emirate and in Bahrain to some extent, still have a
tremendous capacity to absorb more Islamic financial services offers. If one
bank is able to increase its deposits at a rate of more than 40 per cent or 170
per cent over three years, there must be a sort of market’s thirst for such
services and a high capacity to accommodate more Islamic financial services
institutions.