The UAE needs larger Islamic banks to become more competitive against conventional banks, says Hussain al-Qemzi, global chief executive officer (GCEO) of Noor Investment Group and CEO of Noor Islamic Bank.

“In the UAE, we have eight Islamic banks, but we still need larger ones. It’s not about the quantity - depth, strength and size is what is required. For our market, I’d like to see larger Islamic banks size-wise, through mergers or collaboration on sizeable deals.

“I think it will happen naturally. There is probably nothing on the table now, but [in future] we could see a merger or the creation of a new bank with a sizeable impact that could become a major player.”

While Islamic banks have seen their business grow in recent years, they still need to become more competitive if they want to provide a more attractive alternative to conventional banks.

In addition, the sector is hindered by a lack of financial institutions, such as Takaful (Islamic insurance) and investment companies, as well as fragmentation on a global level. The planned introduction of a national sharia board, which will oversee the separate sharia boards of banks, is likely to help harmonise standards.

The Islamic finance sector grew 20.4 per cent to reach about $1.6 trillion in 2012, but that is “still trivial” compared with global financial assets, with some estimates a meagre 1 per cent, according to Mohammad al-Hashel, governor of the Central Bank of Kuwait.