The Islamic conversion is most evident in the retail banking sector, reflecting both the popular appeal of banking backed by Islamic principles and the slow pace of conventional product innovation that has yet to realise its full impact on corporate and investment banking. 'Retail banks are the face of banks to the customers,' says Myers. As a result, they are frequently the first area of the bank to take the Islamic plunge. In NCB's case, nearly all of its 300 or so branches throughout the kingdom are now sharia-compliant, although its corporate and investment banking businesses remain conventional.

'The pressure to convert is coming from the customers,' says Yahya al-Sulaiman, operations head at Saudi Investment Bank (SIB), which is expanding its retail operations. 'It's more profitable to do business the Islamic way. There's a financial benefit.' The bank offers two types of loan and only 5 per cent of customers opt for the non-Islamic option.

SIB's loan experience is certainly not unique. 'Around 75-80 per cent of customers go for Islamic services if they are equivalent to conventional ones,' says Omar Kamal, a partner at Ernst & Young Islamic Financial Services, who advises banks on Islamic conversion. 'And now Islamic banks are beginning to offer the same quality services [as conventional banks].'

Faced with Islamic banks' double-digit growth, expanding market share and maturing track records, many conventional banks are understandably looking to tap the market by adopting sharia-compliant profiles. 'We can expect more conversions thanks to the high oil price and high liquidity. You would be shocked if I told you how many new Islamic banks will be established in Bahrain and how many were about to convert in the GCC,' says Kamal. In the main, Middle East banks that have chosen to convert are Gulf-based and have done so in the past five years.

Banks keen to offer sharia-compliant services typically offer a limited menu of Islamic products, such as mortgages and car loans, open a separate window within branches or establish a stand-alone Islamic unit. This can be in the form of a new venture, a subsidiary or a full conversion of the existing institution. Banks that have taken the full conversion route include Sharjah Islamic Bank (previously National Bank of Sharjah), Kuwait Real Estate Bank and Emirates Islamic Bank (formerly ME Bank, part of Emirates International Bank). Ras al-Khaimah's Commercial Bank International has also been granted a licence to convert.

The task may seem daunting, but according to Kamal, the conversion process takes only nine months to a year. Before a bank can overhaul its charter in line with Islamic fundamentals, the institution needs to obtain approval from shareholders and regulatory authorities. In the case of Kuwait, the government has recently issued three banking licences, which were exclusively reserved for sharia-compliant financial institutions. And this is at a time when licences in general are in short supply. The next step is to formulate a conversion strategy and appoint a committee to oversee the process. After that, it becomes less straightforward.

A bank must pick what products it wants to offer its retail customers and decide how to develop them in line with Islamic prohibitions on interest, trading in financial risk and investing in forbidden or haram enterprises, such as pork