Magazine article The Middle East

Syria Moves to Accelerate Pace of Islamic Banking: John Dagge Reports from Damascus on the New Drive to Stimulate Syria's Islamic Banking Sector, Which Opened Locally Back in 2005 but Has, So Far, Failed to Establish a Credible Niche

Magazine article The Middle East

Syria Moves to Accelerate Pace of Islamic Banking: John Dagge Reports from Damascus on the New Drive to Stimulate Syria's Islamic Banking Sector, Which Opened Locally Back in 2005 but Has, So Far, Failed to Establish a Credible Niche

Article excerpt

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A NEW BREED OF financial institution is emerging in Syria; one that complies with Islamic law. In the past six months the country's first two Islamic banks opened for business, while another six have received licences and are in the process of setting up shop. The first Shari'ah-compliant insurance firm is expected to open within the next few months, rounding out the country's embryonic Islamic financial services sector. All are hoping to tap into the finances of a population increasingly keen to express its Muslim identity, in the last country in the Middle East-North Africa (MENA) region to liberalise its banking sector.

Early indicators suggest they will find a receptive public, with the latest entrants to Syria's rapidly expanding private banking sector taking around $260m in deposits since August last year. Indeed, the initial success of the country's first Shari'ah-compliant banks highlights the two dominant trends moulding contemporary Syria: a growing conservatism among its population and a new embrace of capitalism by its leadership.

Syria's banking sector was opened to Islamic firms in 2005, one year after the country's first private commercial banks commenced operations. Syria's first Islamic venture, Cham Bank, a joint $100m venture between Syrian, Kuwaiti and Saudi investors, opened to the pubic in August last year and has since registered 8,200 new accounts and taken close to $100m in deposits. During 2008, the bank plans to open eight additional branches throughout the country, introduce a Shari'ah-compliant credit card, extend its lines of corporate finance and increase total assets by $150m. While it is still early days, the bank predicts Islamic firms could eventually account for up to 40% of the banking market. "The general public is hungry for banking and other financial services that are halal, not haram," Chain Bank's general manager Mohammad Salman said.

The Syrian International Islamic Bank, a $100m venture between Syrian and Qatari investors, opened to the public in mid-September and claims to have taken around $160m in deposits through its two branches in Damascus and Aleppo. "Business to date has been excellent, exceeding our expectations," Syrian International Islamic Bank public relations director Mohammed Abu Zaid said. Throughout 2008 the bank plans to open a further seven branches in the country's major metropolitan centres, roll-out Internet, SMS and phone-banking services and extend the lines of private and commercial credit. "Syria is rich with potential and there is a large need for Islamic banking services in the country," Zaid said. "The public in Syria is looking to deal with Islamic banks."

A further six Islamic banks received licences from the Central Bank of Syria and are in the process of establishing their businesses. Most are joint ventures between Syrian and Gulf investors, although firms from Pakistan and Yemen are the driving forces behind two of the projects. The Bank of Baraka-Syria, a $100m venture by Bahrain's Al Baraka Banking Group, is expected to open to the public by the end of the year, while Bahrain's Global House Group recently outlined plans to launch a $500m Syrian affiliate in partnership with a number of large financial institutions from the Gulf and several Syrian businessmen. The country's first Islamic insurance firm, Al Aqeelah Insurance, is expected to open to the public within the next few months.

The emergence of Islamic institutions in Syria follows a massive surge in Shari'ah-compliant financial products globally. Around 300 Islamic banks operate in 25 countries and a growing number of the world's leading financial institutions are rapidly rolling out services aimed at capturing the wealth of the world's 1.6bn Muslims. Driven by a glut of money from the petro-economies of the Gulf, Shari'ah-compliant assets have more than doubled from $200bn to $500.5bn over the past two years, according to business consultants Maris Strategies. …

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