Curious about ethical investment options in Kuwait? Halal stocks provide Muslim investors with the opportunity to grow their wealth while staying true to Islamic principles.
In this guide, we’ll explore the landscape of Sharia-compliant investments in Kuwait, highlighting both the potential rewards and considerations unique to this market. Whether you’re a seasoned investor or just starting out, this article offers essential insights on achieving financial growth in line with your values.
List of 10 Halal Stocks in Kuwait by Market Cap
Key Financial Trends for Kuwaiti Islamic Banks
Kuwaiti Islamic banks demonstrated resilience in the first half of 2023, benefiting from a stable operating environment. The merger of Kuwait Finance House (KFH) and Ahli United Bank significantly boosted Islamic banking assets, now representing 50% of the sector’s total.
Asset quality saw a slight increase in impaired financing, reaching 2%, with Fitch Ratings predicting stability through 2023–2024. While financing impairment charges rose, they remain below pandemic levels, with concentration risks still prevalent.
Profitability improved, with the operating profit-to-risk-weighted assets ratio rising to 3.2%, driven by higher profit rates and business volumes. However, regulatory provisioning, competitive pressure, and investments in digital channels may weigh on future profits.
Capital ratios declined slightly, with the average common equity Tier 1 capital ratio at 12.4%. Islamic banks’ tangible leverage remains lower than that of conventional banks, mainly due to the 50% alpha factor, which reduces risk weights.
Source: Kuwaiti Islamic Banks Dashboard: 2023
Growth and Success of Islamic Banking in Kuwait
Islamic finance in Kuwait boasts a penetration rate of 42%, making it one of the highest globally. The sector’s financing assets reached $85 billion in September 2021, up from $79 billion in December 2020, reflecting rising demand for Sharia-compliant financial products.
Kuwaiti Islamic banks have outperformed in growth and profitability, supported by low-cost deposits and a higher net financing income margin. As a result, these banks earn slightly higher returns on assets compared to conventional banks.
The industry is regulated by the Central Bank of Kuwait, adhering to both AAOIFI and Basel III standards. Unlike some markets, Kuwait prohibits conventional banks from offering Islamic windows, ensuring Islamic banks operate as separate entities.
Boubyan Bank is a testament to the sector’s success, growing into Kuwait’s third-largest lender. Its focus on digital innovation and Sharia-compliant services has fueled its expansion, both locally and internationally, including through its UK-based subsidiary, Nomo Bank.
Source: Kuwait showcases the growth of Islamic finance across the Middle East
Summary
Sharia-compliant investments in Kuwait highlight key trends in Islamic banking and a list of 10 Halal stocks by market cap. Kuwaiti Islamic banks maintained stable performance in the first half of 2023, with asset growth supported by the merger of Kuwait Finance House and Ahli United Bank.
Islamic banking assets reached $85 billion in 2021, with regulations ensuring that Islamic banks operate independently from conventional ones. Boubyan Bank has grown into Kuwait’s third-largest lender, focusing on digital innovation and expanding both locally and internationally.
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