Islamic Banking in Egypt Hits EGP 701bn in March 2024

A recent report by the Egyptian Islamic Finance Association (EIFA) highlights the significant growth of Islamic banking within Egypt’s banking sector. By the end of March 2024, the turnover of Islamic banking reached an impressive EGP 701 billion, a substantial increase of EGP 157 billion from March 2023. This remarkable 28.8% year-on-year growth showcases the expanding presence and impact of Sharia-compliant finance in Egypt. With such robust growth, Islamic banking is becoming an integral part of the broader Egypt banking landscape, offering diverse and ethical financial solutions to a growing customer base.

Market Share and Expansion in Egypt Banking

Islamic banking now represents 5% of the overall Egyptian banking market, reflecting its growing popularity and trust among consumers. The Egyptian market includes 14 banks licensed by the Central Bank of Egypt (CBE) to offer Islamic financial products. Among these, three banks operate exclusively as Islamic banks: Faisal Islamic Bank of Egypt, Al Baraka Bank Egypt, and Abu Dhabi Islamic Bank Egypt. Additionally, 11 other banks have Islamic branches alongside their traditional operations, broadening access to Sharia-compliant services.

Branch Network and Customer Reach

The number of Islamic branches has grown to 264, with 10 new branches added since 2023. These branches serve approximately 4 million customers, indicating a significant customer base that prefers Islamic banking. Traditional banks like Nasser Social Bank also hold Islamic financing licenses, providing Sharia-compliant services across all their branches.

Leading Performers in Egypt Banking

Faisal Islamic Bank of Egypt leads the sector with a turnover of EGP 217 billion, capturing a 31% market share. Abu Dhabi Islamic Bank – Egypt follows closely with a turnover of EGP 190 billion (27.1% market share). Banque Misr’s Islamic branches contribute EGP 133 billion (19% market share), while Al Baraka Bank secures fourth place with a turnover of EGP 113 billion (16.1% market share). The United Bank rounds out the top five with a turnover of EGP 16 billion (2.2% market share).

Deposits and Financing Growth

Islamic deposits reached EGP 510.5 billion by the end of March 2024, reflecting a 23.5% growth compared to March 2023. These deposits make up approximately 6.5% of the total deposit volume in the Egyptian market. Financing compatible with Islamic Sharia principles stands at EGP 576 billion, marking a significant increase of EGP 145 billion, or 33.8% growth. This amount corresponds to 5.4% of the total loan portfolio across all banks in Egypt.

Microfinance Services and Sharia-Compliant Financing

Several companies have obtained licenses from the Financial Regulatory Authority (FRA) to provide Sharia-compliant microfinance services. ‘Maksab’ is the first company to receive such a license, and Abu Dhabi Islamic Bank has established a microfinance company adhering to Sharia controls. ‘Aman’ operates six branches dedicated to Sharia-compliant microfinance services. Companies like Bedayati and Irada, offering Sharia-compliant financing, are also exploring the issuance of sukuk (Islamic bonds) to fund their clients in accordance with Sharia principles.

Industry Challenges and Human Resources Development

A key challenge for the Islamic banking sector in Egypt is the development and qualification of capable human resources. The EIFA addresses this by offering professional master’s degrees in Islamic finance through the General Council for Islamic Banks and Financial Institutions (CIBAFI). Additionally, the association provides specialized professional certificates and programs to enhance employee skills and deepen their understanding of the Islamic banking industry.

Global Outlook on Islamic Banking

Globally, the Islamic banking industry’s assets reached approximately $4.5 trillion by December 2023. Projections indicate that by the end of 2027, the industry’s assets will grow to $6.6 trillion. Currently, there are 1,871 Islamic financial institutions worldwide contributing to this growth.

Mohamed El-Beltagy, president of the Egyptian Islamic Finance Association, highlights the evolving landscape of Islamic banking in Egypt. The market now offers approximately 65 products catering to various client needs, including savings vehicles, banking services, and financing and investment formulas. However, there is still room for innovation, particularly in developing products that align with Sharia guidelines across sectors like individuals, companies, public bodies, financing firms, and small and medium enterprises (SMEs).

The robust growth and increasing market share of Islamic banking in Egypt underscore its potential to further integrate into the mainstream banking sector, offering diverse and ethical financial solutions to a broadening customer base.