Arab Banking: Introduction – Part I
Arab countries are the domicile of about 430 banking institutions. The industry’s consolidated assets reached US$2.6 trillion by the end of 2012 and grew at a faster rate than the region’s gross domestic product (GDP) that year. These assets represent more than 100 percent of the Arab countries’ aggregate GDP.[1]
At first glance, Arab countries look well banked, with a fairly developed banking system, and numerous banks and branches (table 1). Financial depth is significant in terms of both shares of banking assets and deposits in GDP. Deposits and assets of deposit banks in most Arab countries rank higher than the average for middle-income countries (MICs) or the world. The number of branches and their density relative to the population are higher than MIC and world averages, apart from Algeria, the Arab Republic of Egypt, and Saudi Arabia. At the same time, concentration of banking assets is high. The share of assets within the three- and five-largest banks is mostly higher than the MIC and world averages.
Table 1: Structure of Banking in Selected Arab Countries
|
Depth |
Density |
Concentration |
National/Foreign |
||||
|
Country |
Bank Deposits to GDP (%) |
Deposit Money Bank Assets to GDP (%) |
Bank Branches per 100,000 Adults |
3-Bank Asset Concen-tration (%) |
5-Bank Asset Concen-tration (%) |
Foreign Bank Assets among Total Bank Assets (%) |
Foreign Banks among Total Banks (%) |
|
Algeria |
42.4 |
35.0 |
5.3 |
75.5 |
91.2 |
14.0 |
64.0 |
|
Egypt, Arab Rep. |
62.3 |
64.6 |
4.6 |
60.7 |
71.1 |
23.0 |
52.0 |
|
Jordan |
95.6 |
101.4 |
21.1 |
88.2 |
97.9 |
23.0 |
40.0 |
|
Lebanon |
199.7 |
134.2 |
31.5 |
51.3 |
77.6 |
36.0 |
39.0 |
|
Morocco |
87.5 |
86.5 |
22.3 |
71.2 |
87.9 |
34.0 |
50.0 |
|
Tunisia |
53.5 |
72.4 |
17.2 |
41.1 |
62.2 |
50.0 |
|
|
Bahrain |
86.3 |
94.5 |
89.1 |
95.6 |
55.0 |
56.0 |
|
|
Kuwait |
52.7 |
55.6 |
19.4 |
88.9 |
100.0 |
8.0 |
11.0 |
|
Oman |
30.6 |
42.5 |
23.6 |
72.9 |
100.0 |
n.a. |
n.a. |
|
Qatar |
44.6 |
66.8 |
17.8 |
86.9 |
96.3 |
n.a. |
n.a. |
|
Saudi Arabia |
27.0 |
47.5 |
8.7 |
55.3 |
78.2 |
||
|
United Arab Emirates |
57.8 |
77.8 |
14.5 |
60.9 |
81.1 |
2.0 |
21.0 |
|
Malaysia |
120.9 |
120.1 |
10.5 |
52.7 |
67.8 |
18.0 |
33.0 |
|
Turkey |
46.7 |
64.6 |
18.3 |
46.2 |
70.1 |
14.0 |
43.0 |
|
Middle Income Countries |
38.6 |
41.0 |
13.9 |
64.4 |
76.0 |
35.0 |
48.0 |
|
World |
44.1 |
47.4 |
16.6 |
71.2 |
81.1 |
34.0 |
45.0 |
Source: World Bank Global Development Finance Database;
While the Arab world looks well banked on the surface, striking diversity among Arab banking systems masks hidden challenges and room for development. This seven-part series looks to examine various aspects of the Arab banking sector from ownership structures, to micro- and macro-prudential regulation through to financial and economic performance. Over the course of the following six blogs, we will explore issues pertinent to the development of Arab banking structures and challenges Arab banks face in improved performance.
Read Part II, Part III, Part IV, Part V, Part VI, Part VII
[1] Union of Arab Banks: http://www.uabonline.org/en/home/articlesissuedbybodandsgofuab/diversifyingthegulfsfinancialsectorbywis/0.
Wafik Grais is an International Senior Adviser specializing in Islamic finance, financial regulation, investment financing, private equity management, and corporate governance with expertise in SMEs and green growth financing. He was co-founder and chairman of Viveris Mashrek, a Cairo-based, financial advisory services company specialized in private equity investments in SMEs, licensed by Egypt's Financial Supervisory Authority. He spent 28 years in international finance notably with the World Bank in Washington DC where he held several senior positions both in operations and at corporate levels. He holds a Ph.D. in Economics.
