The financial services sectors like banking and insurance have a pivotal role to play in the GCC countries quest to diversify their economies. While the banking sector in GCC countries is dominated by commercial banks offering conventional banking services, the non-bank financial institutions including capital markets and insurance are quite under developed. This post presents an overview of the banking sector in various countries of the Middle East.
Banking Sector in Middle East
The growth in the banking sector has started affecting the changing economies of the Middle East. According to reports issued by prominent consulting firms like KPMG and Ernst and Young (E&Y), it was discovered that domestic banks dominated the financial segment of the Middle East till 2008. It was also found that the Islamic banks, like Bank Muscat, (Oman), Gulf Bank (Qatar) Emirates NBD (UAE), Abu Dhabi Commercial Bank (UAE), are the dominant players. The banking sector has been largely responsible for contributing towards the GDP of the region. Observe the table below:
Table 1: Banking Sector Assets of the Middle East, 2004-2008 (in percent of GDP)
An Overview of the Banking Sector in Various GCC Countries Bahrain – Bahrain possesses the largest retail banking sector in the entire region with assets of about 260% of GDP at the end of the 2008. Three largest retail banks which constitute about 41% of the total assets of the banking sector include Ahli United Bank, National Bank of Bahrain and Bank of Bahrain & Kuwait. There is a vibrant wholesale banking sector in the nation as well that provides investment banking, offshore banking and project finance services to the region. The financial baking sector employs around 3% of the total workforce of the country.
Kuwait – The banking sector of Kuwait is majorly dominated by Kuwait Financial House and National Bank of Kuwait accounting for about 50% of total assets of the bank. Apart from banks, there are about 95 investment countries in the country with total assets of about 102% of the entire GDP.
Oman – Oman possesses the smallest banking system in the entire region with only a share of 66% of GDP. There are two major banks which are dominating the entire banking scenario in the country including National Bank of Oman and Bank Muscat. Qatar – Qatar has the third largest banking sector after Bahrain and UAE. There are three local banks which dominate this financial scenario and account for about 70% of total assets. These include Commercial Bank of Qatar, Qatar National Bank and Doha Bank. The entry of foreign banks under the supervision of Qatar Financial sector has augmented the competition, but local banks still possess well established franchises in the prime locations of the country.
UAE – UAE accounts for the second largest banking sector in the entire GCC region with total assets of about 140% of GDP. It is the least concentrated banking sector and apart from the three largest banks there are several other financial organizations as well. The three major banks include, Emirates Bank International, Abu Dhabi Commercial Bank and National Bank of Abu Dhabi. Though, the bank ownership is still held pre-dominantly by the government, but there are many private sector companies and many upcoming organizations seeking to offer banking services to the nationals of the country.
Growth and Future Outlook
UAE, in the current day and age, is looking at diversifying its economy by relying on some of the robust and promising business ventures that can help the country to grow and boom, even in the absence of oil & gas. Banking is one of the emerging and promising sectors which is well embraced by several countries like Bahrain. UAE has the second largest banking sector and it is looking forward to expand this sector by introducing more and more financial services for individuals & businesses. With a rapid globalization taking place, the banking sector of the Middle East is all geared up to implement new changes. Needless to say that the banking sector generates multiple employment opportunities in the Middle East; expats and nationals alike can find jobs in the banking sector of GCC. In a report published by Accenture, it was concluded that Middle Eastern banks antedate a more competitive market and pledges to implement strict regulations. Banks are shifting towards a more service-oriented model and a strict approach towards customer satisfaction. A major initiative has been taken over by banks to reach out to new-age customers. Experts are of the opinion that with so much happening in the banking segment—there’s immense scope of growth in the coming years.