Why UAE residents are opting for personal finance from Islamic banks

The UAE residents' preference for Islamic banks products such as personal and auto finance is growing over the conventional banks, thanks to better interest rates and lower late payment charges imposed by Shariah-compliant lenders on the customers, according to a new study released on Monday.
Wasim Saifi, Deputy CEO for Consumer Banking and Wealth Management at Emirates Islamic bank, said penetration level of Islamic banking products has increased from 52 per cent last year to 55 per cent in 2018 while conventional bank's score has come down from 69 per cent to 63 per cent.
"It is getting to the stage where Islamic banking is catching up very closely with conventional banking system. We have seen that more Muslims now have an Islamic banking products than conventional banks as penetration grew from 61 to 65 per cent while penetration level for conventional bank went down from 65 to 58 per cent. Non-Muslims gap is there but that's narrowing also. Last year, we had 38 per cent of non-Muslim respondents had Islamic product this year that has gone to 40 per cent. And conventional bank's share has come down from 75 per cent to 71 per cent," Saifi told Khaleej Times during an interview on Monday.
He pointed out that Islamic banks were aggressive and had high level of penetration in financing segment. For example, auto financing, which has always been an Islamic dominant product, saw further increase in market share from 57 to 59 per cent for Islamic banks and conventional has fallen from 45 to 38 per cent. Around 70 per cent of Muslims take auto finance from Islamic banks.
"For personal finance, the ratio has gone up from 46 per cent to 49 per cent while for conventional it has fallen. The rise has been rise from Muslims customers because now bulk of Muslims customers tend to take personal finance from Islamic banks," he added.
Saifi said more people are opting for personal finance from Islamic banks due to better interest rates (or profit rates as termed by Islamic banks) lower charges for delayed payments. "Islamic banks are offering better profit rates and overall proposition is better because the fees that Islamic levy for any delayed payments are much lower and considerate than the conventional banks. If you are not able to pay on time, for instance, the conventional banking will instantly bring in punitive interest rates." - waheedabbas@khaleejtimes.com