Banking Industry in Commercial Finance Sector

The Middle East has become one of the fastest growing markets in banking and finance industry.  In many GCC countries the banking sector is well developed while in many the banking sector is dominated by Public sector banks.  This commercial finance should be considered as banks have a lot of government intervention in credit allocation, interest rates and issues on loss and liquidity.  There has been a change in the requirement with the younger generation becoming more educated and more demanding.  There is a need for improvement in the services of financial institutions and better monitoring to develop secure financial systems.  The commercial banks in the coming years are likely to become more efficient.  Middle East banking sectors are on the path of recovery.  International financial experts have suggested improvements in five major sectors where it is needed.  They are:

(1) Improving bank services by reviewing branch models and existing networks and improving customer satisfaction.

(2) The processes followed in many banks are manual and introduction of automation can help improve services and increase efficiency.

(3) Improve savings and procurement.

(4) Outsourcing and offshore strategies have to be made to centralize business processes.

Komerční Banka. Commercial Banking arrives in Novy Jičin , March 1992 by sludgegulper, on Flickr.  This work is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.

The global recession in the world kept Middle East banking sectors unaffected. This was owing to the conservative investment strategies practiced there.  Many central banks are pumping money and maintaining liquidity through various measures.  This increased the confidence in the consumers.  Banking sector in UAE, Qatar and Turkey are expected to register fast growth along with other banks in this region. The prominent bankers in this industry include National Commercial Bank, International Bank, Jordan Ahli Bank, National Bank of UK, Qatar National Bank among others.  Although generally strong central bank control has helped in keeping the industry healthy some more reforms are required.  Consolidation is essential to meet foreign competitors.  The region has seen two big mergers in the past two years.  Gulf Internal Bank and Saudi International Bank has created a single identity in Bahrain and in Saudi Arabia, 30% Citibank owned Saudi American Bank merged with United Saudi Bank.  More mergers will help but banks in Arab world continue to remain family businesses.

Islamic Banking

The big factoring players banking industry is becoming more competitive.  The region is one of the largest Islamic banking markets in the world.  Islamic banking has become an important part of the banking industry.  There is a strong government involvement and entrance of many new people and also an increase in demand of Islamic products.  The significance of this development has given rise to many financial analysts offering detailed data and financial analysis on the country-wise banking sector.  The banking sector in the Middle East region has been found to be fundamentally strong according to “Middle East Banking Sector Forecasts 2013”.  Kuwait’s The International Investor is developing a regional sector in Islamic banking sectors.  It is trying to lend its expertise to conventional banks in the region by setting up Islamic banking windows.  There are also some Middle East governments which allow foreign investors to buy shares.  The interest rates can be determined by the banks but not above that of comparable domestic deposits.  They can be opened only by the NRI and not by anyone else through holder of Power of Attorney.  A joint account is possible only with a close relative (as legally defined) and will be in the Former or Survivor basis.  The resident close relative can operate the account through a Power of Attorney only during the life term of the NRI account holder.  The account is in Indian Rupees and overdraft up to 50,000 Rs is permitted on condition that the same is repaid within two weeks with interest due.  Credits, debits and loans are as per regulations.