Doha, Qatar: The Islamic banks experienced significant growth in financing in 2022 particularly in the real estate and services sectors, which saw a notable increase of 42.8 percent and 38.3 percent respectively, attributed to the impact of hosting the World Cup.
The financing of Islamic banks accounted for 30 percent of the total financing of the banking sector in the year 2022, and during the period (2018-2022) the compound annual growth rate of total financing in Islamic banks was 10 percent compared to 4.5 percent in conventional commercial banks according to the Islamic Finance in Qatar Report released by Bait Al-Mashura Finance Consultations.
The industry sector experienced growth, with financing increasing by 22 percent. However, the general trade and public sector financing experienced a decline of (14 percent) and (6.1 percent), respectively, it added.
The report noted, according to quarterly data issued by Qatar Central Bank, financing provided by Islamic banks in 2022 amounted to QR380.5bn recording an increase of 12.3 percent over 2021, while credit facilities to conventional commercial banks decreased marginally by (0.2 percent).
“As for the contribution of Islamic banks in financing various sectors in 2022, we find that the consumer sector represented the largest sector financed by Islamic banks, as it acquired 63 percent of the total financing of commercial banks (Islamic and conventional), followed by the real estate sector by 44 percent, the construction sector 42 percent, and the industry sector 39 percent.”
“Most of the financing of Islamic banks is directed towards the local market, at a rate of 96 percent of their total financing, compared to 95% of the financing of traditional commercial banks, directed towards the local market,” it added.
Comparing to the net financings of the four Islamic banks in the year 2022, and according to the financial statements of those banks, we find that with the exception of the marginal growth that occurred in Dukhan Bank financings by 0.6 percent, the rest of the banks decreased their financings in the year 2022, as Masraf Al Rayan financings decreased by (2.5 percent), and QIIB with (5.4 percent), and QIB with (7.1 percent).
During the five-year period (2018-2022), the compound annual growth rate of net financing in Islamic banks in Qatar during the period reached 8.6 percent. The highest compound growth rate was for Dukhan Bank at a rate of 22.1 percent, followed by Al-Rayan at a rate of 10.2 percent, QIIB at 4.6 percent, and QIB with a growth rate of 3.1 percent.
Considering the bodies financed by Islamic banks in 2022 we find that the most of this finance went to the government and semi-government sectors by 24.9 percent, followed by the real estate sector by 22.7 percent, and personal finance by 17.5 percent, the report said.
At the level of these banks, Qatar Islamic Bank focuses on personal finance by 25 percent and real estate by 26 percent, QIIB finance focuses on personal finance by 48 percent, and real estate by 21 percent. Masraf Al Rayan focuses its financing on the government sector for 45 percent, followed by real estate with 23 percent. Dukhan bank focuses its financing on the government sector by 27 percent and real estate by 23
percent.
The report further stated that debt-based finance still dominates most financing formulas, considering the used financing formulas in Islamic banks by more than 97 percent. It varied to 74.2 percent of the volume of Islamic bank finance in Murabaha and Musawamah, 22.8 percent in Ijarah and Ijarah MBT, and 0.3 percent in Istisna’a.
Participatory finance formulas constituted 1.5 percent, of which 1.3 percent were participatory finance, and 0.2 percent were Mudaraba. Masraf Al Rayan still has the highest percentage of participatory finance formulas, whereas Musharakah amounted to 4 percent of its finance. QIIB achieved the highest percentage of using the Mudaraba formula with 2.4 percent of its total financing in 2022.
