Islamic banks squeezed in the GCC by conventional multinational banks

"Challenges and opportunities in the world's hottest market", Financial Times (via Yahoo! News), October 24, 2006

Amid tremendous growth of project finance opportunities within the Gulf Cooperation Council (GCC) area, local banks (both conventional and Islamic) are being squeezed out of the market due to their relatively small size. In many of the largest deals, the multinational banks are able to offer lower financing rates than can any smaller local bank. In one sense, that is bad news for Islamic banks, but it will not spell disaster for the industry. Islamic banks have not grown enough (nor have convential banks based in the GCC region) to be able to offer financing to large projects on the scale as multinationals. What remains to be seen, however, is whether the local Islamic banks in the GCC can expand further or whether they will see markets dominated by Islamic windows of conventional multinational banks.