Introduction 25
the growth rate was high during the 2006–2007 and 2007–2008 period
but there were signs of a slowdown after that. This can be attributed to
economic slowdown after the fi nancial crisis.
In general, the trend is that competition is increasing for Islamic banks,
as conventional banks are also pursuing this business aggressively. Several
Islamic banks that once enjoyed a virtual monopoly in the market are now
threatened by conventional banks that may have better marketing networks,
name recognition, and economies of scale. For example, according to some
estimates, Islamic banks accounted for 71 percent of Islamic assets in 2008
as compared with the almost-100 percent share recorded in 2003.^22
During the subprime fi nancial crisis, Islamic banks were largely immune
because they did not have any investments in toxic debt-based assets.
However, Islamic banks were not insulated from the regional economic
slowdown arising from the global economic recession. It was observed that,
during the fi rst half of 2009, banking assets in the GCC countries declined
by 1.1 percent, while assets of the fi ve largest Islamic banks increased by 1.3
percent. This compares with a rise of 17 percent and 21.5 percent, respec-
tively, in 2008.^23
With the economic recession, concerns have grown with respect to the
quality of assets of Islamic fi nancial institutions for several reasons. First,
TABLE 1.4 Growth rates of assets and deposits across countries
Country
Banks in
Sample Assets Customer DepositsGrowth Rate (%) Growth Rate (%)2006–07 2007–08 2006–07 2007–08
Bahrain 12 48.54 39.00 58.33 32.07
Egypt 2 21.27 10.53 22.89 9.54
Jordan 2 (9.30) 25.86 (8.59) 16.34
Kuwait 2 47.04 19.33 51.05 24.94
Lebanon 1 362.09 145.54 (3.02) 21.43
Qatar 2 34.64 47.94 26.63 31.98
Saudi Arabia 3 23.16 27.94 28.65 22.32
UAE 5 40.28 17.07 46.16 19.56
Yemen 1 7.29 20.08 6.13 18.73
MENA Region 30 34.50 24.50 37.47 22.28
Source: Ali, Syed Salman (2011), Islamic Banking in the MENA Region, Washington,
DC, USA. http://siteresources.worldbank.org/INTMNAREGTOPPOVRED/
Resources/MENAFlagshipIslamicFinance2_24_11.pdf