Islamic Finance To Outpace Conventional Banking In The GCC, Moody's Forecasts
Moody's Ratings has projected that Islamic banks in Gulf Cooperation Council (GCC) nations will maintain robust profitability over the next 12 to 18 months. This forecast is based on strong commercial activity driven by government efforts to diversify economies across the GCC.
The report highlighted that Islamic financing is set to continue outperforming conventional banking, with a growing demand for Sharia-compliant products. Additionally, further growth is anticipated through mergers aimed at enhancing revenue and reducing costs.
Islamic banks in GCC countries are expected to maintain strong capital and liquidity levels. This financial strength will enable them to leverage the increasing demand for Sharia-compliant financial services in the region.
Non-oil economic growth in GCC countries is predicted to remain robust in 2025. This growth is attributed to ambitious government plans for economic diversification and strong business confidence.
Badis Shubailat, Assistant Vice President and Analyst at Moody's, stated, "Sustained economic growth, government commitment to bolstering the broader Islamic finance industry, and increasing demand for Sharia-compliant products in the GCC region will continue to drive Islamic finance growth, which will outpace its conventional peers."
The agency's report also noted that government initiatives are playing a crucial role in driving commercial activity. These initiatives are part of broader efforts to diversify economies across the GCC.
Overall, Moody's expects Islamic banks in the Gulf region to benefit from these favourable conditions. The strong profitability outlook is supported by both internal strengths and external economic factors.
The report underscores that Islamic banks' ability to maintain high capital and liquidity levels positions them well for future growth. This stability allows them to meet the rising demand for Sharia-compliant financial services effectively.
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