Retail Finance Focus Helps Islamic Banks Battle Adverse Effects of COVID-19: Moody’s

On the 20th of September 2021, Moody’s Investors Service (Moody’s) stated in a report that Islamic banks in Gulf Cooperation Council (GCC) countries and South and Southeast Asia are concentrating on low-risk retail finance, which should help in protecting their asset quality amid a volatile economic recovery from the pandemic.

Why it Matters?

The deterioration of banks’ loan books has been masked through regulatory forbearance and this is anticipated to continue to impact profitability. Return on assets is expected to still be below pre-COVID-19 levels on average in 2021, owing to low interest rates, a still-subdued operating environment and high costs of provisioning. However, solid demand for Islamic finance, which is expanding fa...