Recent trend of deposits in Islamic banks

  • Davidia Zucchelli Intesasanpaolo
Keywords: Bank deposit, Islamic finance, Islamic banks


Bank deposits increased sharply in 2020, continuing in 2021, in countries with advanced economies and emerging countries alike. The pandemic caused savings to increase for precautionary reasons. At the same time, the lockdown compressed spending, but deposits are now a financial resource that could be used to boost the recovery of consumption and investments. There was an increase in deposits in Islamic countries, but this was less marked. The fall in GDP in 2020 in all of the Islamic countries considered, with the sole exception of Bangladesh (+5%), was met with an increase in deposits, but not such as to be thought of exceptional magnitude. An acceleration was recorded in Indonesia, Bangladesh and Saudi Arabia, with increases only moderately higher than in the previous year. Several drivers can explain this trend, some of which are attributable to Islamic principles. In assessing the role of Islamic finance and bank deposits, financial inclusion is also critical. Despite gradually increasing, the level of financial inclusion, which is high in countries with the highest income (the Gulf countries), shows a large margin for potential growth. Especially in the less rich Islamic countries, there exists a problem of mobilising resources and providing a custody function for the financial resources of households and businesses. The proliferation of fintech channels, primarily through mobile phones, can contribute significantly to financial inclusion, particularly among young people. Prospects are positive thanks to the confluence of some factors (such as the strong demand for both Sharia-compliant and ESG products).


IMF, Global Financial Stability Outlook, April, 2021.

CIA website, available at

Islamic Financial Services Board, “Islamic Financial Services Industry Stability Report 2020”, 2020.

As is known, Islam is undergoing a constructive analysis of its own identity, deeply discussed among others in P. Nicelli, “Islam e modernità nel pensiero riformista islamico” [Islam and modernity in Islamic reformist thought], SanPaolo, 2009; and “Syed Muhammad Naquib Al-Attas and the Islamic Philosophy of Education”, Encounter”, Vol. 41/2, 2016).

HRH Prince M. Al-Faisal Al-Saud, "A State of Trusteeship", in Institute of Islamic Banking and Insurance, Anthology of Islamic Banking, 2000.

M. Fahim Khan, M. Porzio, "Islamic Banking and Finance in the European Union, A Challenge", Edward Elgar, 2010.

P. Biancone, "Scritti in onore di Pellegrino Capaldo” [Writings in honour of Pellegrino Capaldo], 2014. Based on the example of the IAS/IFRS for conventional banks, the standards issued by the AAOIFI provide the guidelines and criteria to be used in order to correctly and reliably represent the assets and income accrued during the year. However, this standardisation process requires numerous interventions by states with an Islamic majority, which must adhere to the principles issued by international Islamic institutions.

Z.Ahmad Khan, "Islamic Banking and its operations", Institute of Islamic Banking and Insurance, 2000.

G.M. Piccinelli, "The provision and management of savings: the client-partner model", in Khan and Porzio (2010), 2010.

I. Warde, "Islamic Finance in the Global Economy", Edinburgh University Press, 2000.

S. Cevik and J. Charap, The Behavior of Conventional and Islamic Bank Deposit Returns in Malaysia and Turkey, IMF, WP/11/156. In 2010, a preliminary investigation showed furthermore that, three decades after its introduction, there remained substantial divergences between Islamic Banking and Finance’s ideals and its practices, and much of Islamic Banking and Finance still remained functionally indistinguishable from conventional banking. See F. Khan, How ‘Islamic’ is Islamic Banking?, Journal of Economic Behavior & Organization, 76 (2010).

B. Akhtar, W. Akhter, and M. Shahbaz, (2017), "Determinants of deposits in conventional and Islamic banking: a case of an emerging economy", International Journal of Emerging Markets, Vol. 12 No. 2, pp. 296-309.

E. Smolo, M. Šeho and M. Kabir Hassan, "Development of Islamic Finance in Bosnia and Herzegovina", Journal of Economic Cooperation and Development, 41, 2020.

I. Moise, “Cash-rich banks seek to cut deposits, JPMorgan and Citi take step to avoid additional capital requirements", Financial Times, 5 May, 2021.

K.B. Jedidia and F. Boubakri, “Islamic Banking and the Perspectives of Savings Mobilization in Tunisia”, Journal of Islamic Financial Studies, December, 2018.

This provision is much more all encompassing than the anti-money laundering legislation envisaged in Western countries, as a higher number of banned activities are envisaged. In the latter, if the sums derive from illegal activities, in accordance with anti-money laundering provisions, the bank shall block the account and report them to the competent authorities. As part of the beneficial owner audit information activity, the opening of ongoing relationships or the execution of occasional transactions is prohibited if: i) the customer refuses to provide information regarding the existence or not of beneficial owner; ii) the customer is unable to provide the information relating to the beneficial owner or cannot update such information and the information is not available from different and reliable sources; iii) the statement made by the customer and the evidence collected by the Bank (including as part of the credit process, in case of borrower) do not match and the customer confirms the indications provided without adequately showing the reasons why there are no beneficial owners or different persons than those declared to be beneficial owners are found to exist. In these cases, an assessment must be made regarding whether to initiate the suspicious activity report procedure in accordance with the criteria defined in the anti-money laundering legislation in force.

World Bank and Islamic Development Bank Group, "Mobilizing Islamic Finance for Infrastructure Public-Private Parnerships", 2018.

R. Hamaui, M. Mauri, "Economia e finanza islamica" [Islamic economy and finance], Il Mulino, 2009.

Institute of Islamic Banking and Insurance (IIBI), "Islamic Banking and its problems", 1993, London.

S.B. Naceur, A. Barajas, and A. Massara, "Can Islamic Banking Increase Financial Inclusion?", IMF, WP/15/31, 2015.

World Bank, Global Financial Inclusion database (Global Findex), available at

A. Demirguc-Kunt, K. Leora, R. Douglas, "Islamic finance and financial inclusion: measuring use of and demand for formal financial services among Muslim adults", World Bank, Policy Research Working Paper 6642/2013.

World Bank, "Global Financial Development Report 2014: Financial Inclusion", 2014.

World Bank, "Leveraging Islamic Fintech to improve financial inclusion", October 2020.

World Bank, "Islamic Finance. A catalyst for shared prosperity?", Global Report on Islamic Finance, 2016.

Moody's, "Growth prospects remain strong despite challenges from pandemic", February, 2021.

A. Hauser, "Why Islamic finance has an important role to play in supporting the recovery from COVID - and how the Bank of England's new Alternative Liquidity Facility can help", UK Islamic Finance Week 2020, December, 2020.

K. Long, "Islamic banking ripe for ESG rebrand", interview with Noripah Kamso, former chairwoman of Bank Rakyat in Malaysia, The Banker, 2020.

How to Cite
Zucchelli, D. (2022). Recent trend of deposits in Islamic banks. European Journal of Islamic Finance, 9(1), 56-64.