A recent Gallup survey reported that Islamic banking remains unpopular in Egypt, with only 3% of adults using Islamic banking services and only 49% who have heard of Islamic banking in the country.
The poll also found that 45% of all respondents preferred a more expensive loan from an Islamic bank to a cheaper loan from a conventional bank.
The report stated that male respondents were more likely than female respondents to choose the Islamic loan, with Egypt presenting the largest gender gap among other countries in this question.
Treasury Manager at the Industrial Development Bank Haytham Abdel Fatah stated that there are very few Islamic banks in Egypt, totaling a minimal market share of only 2-5%. “If there were stronger demand for these types of banks in Egypt, they would have expanded.”
He added that identifying the reasons for this lack of demand would require extensive research. However, he stated that there was no reason why Islamic banking could not increase in the future if its demand increased, indicating that the only barrier to its use was the lack of its popularity.
The survey was conducted in 2012 through face-to-face interviews with 1,000 adults aged above 15 years in Egypt, Tunisia, Algeria, Morocco, and Yemen.
Ninety-five percent of Egyptian respondents self-identified as Muslim, compared to 100% in the other countries, according to the report.
Overall, 48% of the poll’s respondents have heard of Islamic banks in their country but only 8% of those who have taken a loan in the past year from or have an account at a formal financial institution identified themselves as current users of Islamic banking services.
Islamic banking is different from conventional banking in that it does not use specific interest or fees for loans, or fixed or floating payments. The banks are governed by Sharia law, which is often considered to ban interest on money.
Instead, the interest rate is “presented in terms of the value of the monthly payment because explicit rates are not Sharia-compliant,” according to the Gallup report.
The report stated that Islamic banking is one of the largest growing financial sectors and accounts for 1% of global financial assets. It is currently led by Malaysia and Gulf Cooperation Council (GCC) states.
The report also predicted an increase in demand for both conventional and Islamic banking in the Middle East and North Africa, the region with the “largest share of unbanked adults worldwide.”
Former chairman of Misr Iran Development Bank Ismail Hassan recently stated that he expected the growth rate of the Islamic finance system in Egypt to come close to that of the traditional sector.
Hassan has also stressed that Islamic finance has existed in Egypt for a long time, with many existing banks based on interest-free banking such as the Faisal Islamic Bank of Egypt and Al Baraka Bank.