High Potentials

There is a high potential for Islamic banking, Islamic financial services and Islamic wealth management in Australia due to a sizeable Muslim population (market) and Muslim businesses in various sectors of the economy.

According to 2011 Australian Census (as the Australian Bureau of Statistics has yet to release the outcome of its Census conducted in November 2016), there were 476,290 Muslims in Australia, of whom about 40% were Australian born. This is a conservative figure and some estimates point to a much higher level of Muslims in this country. About 46% of the Muslims live in NSW, 32% in Victoria and 7% in Queensland, indicating the major markets for an Islamic bank within Australia. The age group is of interest: 48% are in the age group of 25 to 54 years which is the prime age of employment and income generation. A survey conducted by the Islamic Financial Services Council of Australia (IFSCA) in 2016 found that the level of wealth and purchasing power are high for Australian Muslims.

As for Muslim businesses, Australian Muslims own businesses in various sectors of the economy. These businesses include retailing, butchery, accounting services, financial services including Islamic finance, manufacturing, real estate, taxis & transportation, home & gardening, furniture, automotive, Halal food & beverages, travel agency, clothing & accessories, computers & IT, jewellery & watches as well as books.

The Muslim market and Muslim businesses will create a sizeable demand in banking services for a commercially viable Islamic bank in Australia.


The challenges to establish an Islamic bank are Formidable. To date, no license for Authorised Deposit-taking Institution (ADI) was issued to conduct Islamic banking business in Australia. We have other providers of Islamic financial services in Australia, although they are not banks.

Requirements for Establishing an ADI

Under the Banking Act 1959, APRA issued relevant guidelines for prospective applicants seeking an authority to carry on banking business in Australia. Applicants Aust have “the capacity and commitment to conduct banking business with integrity, prudence and competence on a continuing basis.” Capital requirement is $50 million in Tier 1 capital which is equity capital and declared reserves or retained earnings. As for ownership structure, the Financial Sector (Shareholdings) Act 1998 limits shareholdings of an individual shareholder or a group of associated shareholders in an ADI to 15% of the voting shares, requiring at least 7 shareholders each contributing in excess of $7 million. Prudential Capital Ratio is 8% of the total assets of the ADI.

The governance processes are stringent. All Directors and key management position holders will have to be “fit and proper” as per APRA regulations. Adequate risk management and internal control systems including credit risk, market risk, liquidity risk and operational risk will have to be in place.

Foreign ADIs will not serve the banking purpose of the general consumers due to restrictions on them under the legislation. Foreign ADIs are not permitted to accept deposits from individuals and non-corporate institutions of less than $250,000. This will exclude banking for salary payments, rental payments and other payment services required by mum and dad customers.

Concluding Remarks

There are enormous potentials for Islamic banking in Australia which will create choices for consumers and diversify financial services for Muslims and non-Muslims alike. MCCA and others have been exploring this opportunity for years. If an Islamic bank is established, it will create jobs, generate incomes and economic growth for all Australians.