The offer of Sharia compliant services by non-Islamic banks has intensified pressure on Islamic banks as they try to compete in an increasingly regulated global environment. Islamic banking is like any other banking business and the same market forces apply. My experience of the market in South Africa confirmed my view that while Muslims are very keen to place their savings according to Islamic principles, they would rather save with major Western banks. A major UK bank or building society that provides such products would soon capture the lion's share of a grateful and loyal consumer base. Analysts therefore predict that over the next few years, mergers of Islamic banks will be a definite possibility as they consolidate their market share, improve efficiency and allow stricter regulation of their affairs.
Islamic banking is equally attractive to borrowers and depositors.
Interest-free loans based on the expectation of profit and the market cost of funds allow flexibility for the borrower. The careful allocation of loans to business has also encouraged the growth of a large client depositor base that is lured by the prospect of a share in bank profits. With a large client base, Islamic banks, according to an analyst, appear best prepared for growth in retail banking. We are depending on small savers. Our strength lies in doing business in accordance with the Islamic Sharia.