Islamic Banking Opportunity in Canada

The core of the preliminary discussions was that Canada has 1 million Muslims, which is estimated to grow to 2.7 million by 2030 according to Pew Research Centre1. Currently overlooked by major Islamic banks of Malaysia and Gulf countries due to its relative small size, Canada market is a significant growth opportunity for a small bank like Bank Islam Brunei Darussalam (BIBD) that currently serves a population of approximately 400,000. With the current market size of 1M, BIBD can potentially grow twice its current customer base over a period of 2-3 years of operations.

First mover’s advantage is available for BIBD to capture this market, and build brand loyalty among the Canadian Muslims.

On the pull factor, a survey conducted by Abrahamic Finance, shows that there is a significant market appetite for Islamic Finance. The survey focuses on the retail banking aspect. Home, car and Islamic investments have been identified as the top three products that Canadian Muslim consumers are interested in. A Thomson Reuters 2016 publication moreover has underlined a USD$2 billion in Shariah-compliant home loans in the first year, that potentially could grow to USD$17.7 billion by 20202.

There are demands in the areas of Takaful and Sukuk products as well. The sukuk market could be used to fund the CAD172 billion infrastructure projects, 9% of Canada’s GDP. This is a market opportunity for Tabung Amanah Pekerja (TAP) funds, which experienced a 1% growth this year.

On the push factor, BIBD is interested to set a global presence. In June 2015, BIBD established a Singapore base to promote BIBD products and services in the Asia Pacific region. The 2016 corporate report also states that BIBD is planning to have presence in the Middle East (Pg. 27). Government’s financial policy includes expanding Brunei’s takaful industry into the international market (pg. 66, Financial Sector Blueprint). Establishing Brunei linked securities in Canada has the potential of channeling Canadian pension funds into Brunei infrastructure projects; a challenge for many small economies.

The report aims to highlight the opportunity in a market space that is overlooked by existing conventional banks of Canada and under the radar of International Islamic Banks due to its relatively small size.