UAE Residents Are Less Interested In Islamic Banking Products This Year Than They Were Last Year
The number of UAE consumers applying for Islamic banking products has declined since last year, according to a new study from yallacompare, the Middle East’s leading comparison site. By analysing statistics from its financial comparison platform, yallacompare can reveal that, during the first half of 2017, 10.47% fewer people applied for Islamic banking products than in the first half of 2016. This is down to a significant lull in demand for both Islamic car finance and Islamic personal finance. In the first half of 2017, 34.6% fewer people applied for Islamic car finance, compared to the first half of 2016, while the number of applicants for Islamic personal finance dropped by 22.41% during the same period.
“Over the past year, conventional banks have taken a significant share of consumer attention for personal loans and car loans. While Islamic banks have seen fewer people applying for products in these categories, there was a 65.7% year-on-year increase in the number of people applying for conventional car loans in the first half of 2017, and a 35.15% increase in the number of people applying for conventional personal loans during the same period,” said Samer Chehab, COO of yallacompare.
“This is a relatively recent development. A previous yallacompare study found that, between 2015 and 2016, the number of users applying for Islamic car finance increased by 64.79% to the point that, by the end of 2016, 45% of all car loan applications were allocated to Islamic banks.”
However, it would appear that Islamic banks are beginning to steal some market share back during 2017, particularly in the car finance space. Between Q1 2017 and Q2 this year, the number of people applying for Islamic car finance products increased by over 145%, indicating that, as the UAE car market picks up, consumers are more inclined to shop around for suitable Islamic auto finance products.
And despite a lull in demand for Islamic personal finance and car finance, UAE consumers have begun gravitating towards credit cards from Islamic banks. During the first half of 2017, there was a 46.74% increase in the number of people applying for Islamic credit cards compared to the first half of 2016. That’s in contrast to the 8.05% decline in the number of people applying for conventional credit cards during the same period.
Indeed, the only truly sustaining lull in demand for Islamic finance products is in the personal loan segment. Between Q1 and Q2 this year, the number of people applying for Islamic personal finance products fell by 32.06%, indicating that, for the remainder of the year, consumer demand for Islamic personal finance will be significantly down on 2016’s numbers.
“This fits in with the strategies that many Islamic banks in the UAE laid out at the beginning of the year. To ride out the liquidity crunch caused by the drop in oil prices, many UAE banks pivoted their focus away from unsecured finance, and Islamic banks, bound by regulation to avoid risky investments, embraced this strategy wholeheartedly,” explained Chehab.
“As the UAE economy continues to successfully diversify away from oil, and as business confidence picks up ahead of Expo 2020, we expect Islamic banks to renew their focus on personal finance. We are already seeing the beginnings of these strategies in the growing popularity of Islamic credit cards, another form of unsecured finance.”
