Islamic banks in the GCC should offer products and instruments that are more involved with their countries’ real economies, banking chiefs said at the third annual Middle East Islamic Finance and Investment Conference, held on 17 April.

They said Islamic banks’ inability to link the needs of shareholders with Islamic principles and the absence of a more comprehensive Islamic framework are the main reasons Islamic banks tend to overlook micro-level needs.

In the GCC, the Islamic banking sector accounts for more than 80 per cent of the money in the Islamic finance industry.

“Islamic banking has become much more aggressive in some regions, but what have we become?” said Moinudddin Malim, chief executive officer at Mashreq al-Islami.

“We’re copy cats, copying conventional products and instruments into Islamic banking. We’re doing transactions that are pseudo-Islamic. We should look to countries such as Malaysia and Nigeria, where a lot is funded by awqafs [authorities in charge of religious endowments] where people are not looking at credit terms but at how we can support the economy and uplift the social fabric,” he said.

Amr al-Menhali, head of Islamic banking at ADCB Islamic Banking, agreed, pointing out more should be done when it comes to contributing to countries’ infrastructure and social responsibility through government-initiated projects. However, he said that “we are considered to be [a] new [industry] and in the meantime I think we have proven to be successful”.

Anouar Adham, head of asset management at Qatar Islamic Bank, UK, agreed that the link to the real economy should be stronger but found the critcism “a little harsh”.

“We need to differentiate ourseves from conventional banks, which are making money over money until there are no assets beneath that. In Egypt there are examples of crowdfunding where Islamic banks are directly linking money to entrepreneurs,” Adham said.

“It’s true Islamic banks have a lot of similarities to conventional banks, but we’re trying to play football on a rugby field. We need to change the field. The starting point is looking at how we are part of an ecosystem with a regulator and agencies.

“The vehicles we have right now to do that are not the right ones, we need to create a different one that can add value on a micro-level,” he added.