Sunday, February 13, 2011

Qatar Tells Conventional Lenders To Stop Islamic Ops

Qatar's central bank-Qatar's central bank has ordered conventional lenders operating in the gas-rich Gulf Arab state to shut down Islamic finance activities by the end of 2011, two bankers familiar with the situation said Sunday, in a move that could curb an important source of income for many banks, reports Zawya Dow Jones (Monday, Feb 07, 2011).The central bank earlier this month sent a memorandum to non-Islamic lenders operating in Qatar asking them to close their Islamic units without providing a reason for the decision, according to two senior banking officials, who reviewed the document. The move is seen to benefit the pure Islamic players such as Masraf Al RayanMasraf Al Rayan and Qatar Islamic Bank (QIB), whose shares rose 10% and 8.4% respectively, the report added.

"We expect banks to convert or restructure Islamic corporate loans into conventional loans, wind down or sell their Islamic loans," the report quoted Jaap Meijer, Dubai-based head of the banking team at AlembicHC research.
A Qatar central bankQatar central bank official, who declined to be named, confirmed that the memorandum was issued but declined to provide further details.

The report added:

Meijer said the biggest impact would be on Qatar National BankQatar National Bank, as 12% of its assets, 16% of its loans and 9% of its profits are derived from Islamic finance. QNBQNB's shares lost nearly 5%. Doha BankDoha Bank and Commercial Bank of Qatar would also be affected by the central bank move, he added.
"QIB could be key beneficiary as it currently has 50% market share in Islamic finance. If it captures just 50% of loans of the big three, this could boost loans by around 35%," Meijer said.
While analysts and bankers are assessing the impact of the central bank's decision, few can offer an explanation of the motive other than that the country's authorities want to separate the product offering of conventional banks and shariah-compliant lenders.
"We don't know the real reason, the picture is still unclear," one of the Qatar-based bankers said.