The Islamic banking sector in Egypt has shown remarkable growth, with its turnover reaching EGP 701 billion by the end of March 2024. This represents a substantial increase of EGP 157 billion compared to the same period in 2023, marking a 28.8% year-on-year expansion. The robust performance of Islamic banking highlights its growing significance in the Egyptian financial landscape. With 14 banks licensed to offer Islamic financial products, including three exclusively Islamic banks, the sector now constitutes 5% of the overall Egyptian banking market.
The Islamic banking sector in Egypt has experienced significant growth over the past year. By the end of March 2024, the turnover reached EGP 701 billion, a notable increase from EGP 544 billion in March 2023. This growth is attributed to the rising demand for Sharia-compliant financial products and services. The sector now holds a 5% share of the total banking market in Egypt, reflecting its expanding influence.
Faisal Islamic Bank of Egypt leads the market 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, representing a 27.1% market share. Banque Misr’s Islamic branches rank third, contributing EGP 133 billion to the sector, while Al Baraka Bank and The United Bank round out the top five with turnovers of EGP 113 billion and EGP 16 billion, respectively.
The number of Islamic banking branches has also increased, reaching 264 by March 2024, up from 254 in the previous year. These branches serve approximately 4 million customers, indicating a growing acceptance and preference for Islamic banking services among Egyptians.
Deposits and Financing
Islamic deposits in Egypt have seen substantial growth, reaching EGP 510.5 billion by the end of March 2024. This represents a 23.5% increase compared to March 2023, highlighting the trust and confidence that customers have in Islamic banking institutions. These deposits now constitute approximately 6.5% of the total deposit volume in the Egyptian banking market.
Financing compatible with Islamic Sharia principles has also expanded significantly. By March 2024, Sharia-compliant financing stood at EGP 576 billion, marking a 33.8% growth from the previous year. This amount corresponds to 5.4% of the total loan portfolio across all banks in Egypt. The increase in Sharia-compliant financing reflects the sector’s ability to meet the diverse financial needs of its customers while adhering to Islamic principles.
Several companies have obtained licenses from the Financial Regulatory Authority (FRA) to provide microfinance services in accordance with Sharia. Notable examples include ‘Maksab’ and Abu Dhabi Islamic Bank’s microfinance company. These entities are playing a crucial role in extending financial services to underserved segments of the population, thereby promoting financial inclusion.
Future Prospects and Challenges
The future of Islamic banking in Egypt looks promising, with continued growth expected in the coming years. The sector’s expansion is driven by increasing consumer demand for ethical and Sharia-compliant financial products. Additionally, the government’s support for Islamic finance and the regulatory framework provided by the Central Bank of Egypt (CBE) are crucial factors contributing to the sector’s development.
However, the sector also faces several challenges. One of the primary challenges is the need for continuous innovation to develop new products and services that meet the evolving needs of customers. Additionally, Islamic banks must invest in technology to enhance their operational efficiency and customer experience. The competition from conventional banks, which are also offering Islamic financial products, adds another layer of complexity to the market dynamics.
Despite these challenges, the Islamic banking sector in Egypt is well-positioned for sustained growth. The increasing awareness and acceptance of Islamic finance principles among the population, coupled with the sector’s robust performance, indicate a bright future. As the sector continues to evolve, it will play a vital role in promoting financial inclusion and contributing to the overall economic development of Egypt.
