Kingdom gaining more clout in Islamic finance

As Islamic finance/banking industry is growing at a sky rocketing growth rate of 12 percent – 15 percent per annum, Kuala Lumpur, Dubai, Bahrain and London are chomping at the bit to become the center of the industry, which currently boasts some $1 trillion in assets.

For the moment, Dubai holds the title of Islamic banking hub – but it could soon lose ground, both to traditional competitors like Bahrain, Kuala Lumpur or London or newcomers on the scene like Singapore.

But the country that really laid the foundation and basic infrastructure of Islamic Finance and paid billions of dollars by establishing the prestigious institutes like IDB, ICD and ITFC etc. and spending billions of dollars over last several decades and deserves to be global hub of Islamic finance and banking is Saudi Arabia.

Saudi Arabia, the Gulf’s largest economy and a G20 country, is the strongest and well-deserved contender for the title and has an edge. Its financial clout and the development of the King Abdullah Economic City strengthens the case.

“The only impediment is that it may not be the easiest place to obtain banking licenses especially now, given the plight of the banking industry in Bahrain and Dubai, but Saudi Arabia has always been very cautious.

The Saudi Arabian Monetary Agency (SAMA) guides and supervises the financial sector – that already made Saudi Arabia the safest haven in the world amid the current debt storm.It would be a shame to lose this lifetime opportunity in the presence of prestigious institute like IDB, ICD and ITFC being ideally based and headquartered in Jeddah.

These institutes have already produced scores of talented bankers (in Islamic finance) that are spread now in the entire region and beyond and serving the Islamic finance and banking industry.But this achievement wouldn’t be easy without full government support. With a strike of a degree, this industry could create thousands of jobs for Saudi men and women.

Dubai, despite its liberal policy and religious tolerance, has benefited from government support in creating a regional Islamic finance hub due to a favorable regulatory environment and strong domestic ties to Islam and Shariah.

It has more listed sukuk, than anywhere else.What’s more, Dubai is cosmopolitan and business-friendly enough to lure talent from far a field.The industry is not just limited to providing jobs to bankers but a lot of other support industry also flourishes like law offices, Shariah-complaint insurance companies, leasing and mortgage companies etc.

In the absence of any competition from countries like Saudi Arabia, Dubai will continue to be a major driver for Islamic finance in the near term, as it attempts to recycle the region’s petroleum wealth into real estate, tourism, technology and other anchors of a truly diversified economy.

Dubai’s attractions are many. In addition to glitzy and modern shopping malls, it boasts numerous free zones that allows for 100 percent foreign ownership, 100 percent repatriation of capital and profits, exemption from corporate tax and no import duties.

But its central role in Islamic finance isn’t assured over the long haul.The recent financial crises have severely dented Dubai’s reputation and its financial soundness.

The Islamic finance market, that was once a local affair, deeply rooted in the Gulf region only, is now spread in Far East and Europe and somewhat in the US while Africa still remains a virgin market, offering enormous potential and unlimited opportunities.

Appreciating the potential of this $ 1 trillion and growing industry (expected to reach $2 trillion by 2013), the British government had voiced its determination to issue a sukuk and asked its Finance Ministry to start working on necessary regulatory changes by next year while it issues licenses to Islamic banks.

It has to be noted that sukuk is a $30 billion global industry.In recent years, Islamic finance has grown rapidly across the world, conservatively estimated at 12 percent a year.Malaysia has been strong in the Far Eastern market for the past decade. But now, Asian countries – with tiny Muslim populations – are also looking to join this process.

Japan wants to be the first nation in the G-7 to issue a sovereign sukuk bond – that is, if Britain doesn’t get there first.Among cities outside the Muslim world, London is the strongest Islamic finance center and it leads race to be Shariah capital.

London will give Malaysia and Dubai and the rest of the Islamic world a run for its money, as London has all the strengths of a traditional financial center, from a solid infrastructure to a qualified pool of prospective employees.Singapore, also seeking to attract Islamic capital, has the same lures but to a lesser degree.

London is already enjoying some success as a focal point for international Shariah-compliant investors, with both corporations and countries listing sukuk bonds in Britain.London is also benefiting from New York’s relative indifference to Islamic finance, which removes from the race a traditional long-standing rival for global capital because America’s financial capital or political leadership has a narrower appetite for Islamic assets than other centers.

So far New York investors have shown an interest in Shariah-compliant equities, but not in Islamic bonds or Takaful, (Islamic insurance).Saudi Arabia deserves all credit for its tireless persuasion to make Islamic banking industry in the world.

Saudi Arabia’s task to introduce Islamic banks into conventional banking systems was challenging and tough. Islamic banking is steadily moving into an increasing number of conventional financial systems.It is expanding not only in nations with majority Muslim populations, but also in other countries where Muslims are a minority, such as the United Kingdom or Japan.

Similarly, countries like India, the Kyrgyz Republic, and Syria have recently granted, or are considering granting, licenses for Islamic banking activities.In fact, there are currently more than 300 Islamic financial institutions spread over 51 countries, plus well over 250 mutual funds that comply with Islamic principles.

This industry is currently experiencing growth rates of 22 percent per annum despite a tough investment climate – and this growth trend is expected to continue.This golden opportunity shouldn’t be missed simply because of arrogance or ignorance and this country should get what it rightly deserves.

Sharjah Islamic Bank opens Priority Banking Centre in Abu Dhabi

HE Mohammed Abdullah, CEO of Sharjah Islamic Bank (SIB) has opened the bank’s Priority Banking Centre on Sheikh Zayed the First Street (Electra Road) in the downtown area of the UAE’s capital city of Abu Dhabi. The opening, which took place recently, brought the number of priority banking branches to three, with the other two being located in Shrajah – one at the bank’s headquarters and one at the Buhaira Corniche branch.

It was attended by SIB Head of Corporate Banking Group, Rahma Al Shamsi; Head of Retail Banking Group, Jassem Al Baloushi; Head of Wealth Management, Abdullah Al Owais; and Head of Priority Banking, Nidal Hamoud; as well as a number of directors and bank officials.

Operating under the umbrella of SIB’s Wealth Management Division, the new Priority Banking Centre aims to facilitate the provision of banking services and products to the bank’s VIP clients while offering them a range of flexible, value-added services and a host of facilities, discounts and promotions on various SIB banking products, as well as a number of privileges that are tailored to best serve the needs of this particular group of clients.

Speaking at the opening, Mr Abdullah said, “The ideal investment climate in Abu Dhabi, coupled with the UAE’s solid legal infrastructure for banking activities, prompted us to open SIB’s third Priority Banking Centre. This step is in line with our desire to provide more high-quality services to our VIP clientele in Abu Dhabi, and is consistent with our strategy of expanding the priority banking services to our various branches so as to increase the value we offer to VIP clients”.

“Islamic banking in the region is seeing noticeable demand-driven growth and increasing consumer confidence due to the high quality and flexibility of Shari’a-compliant banking products, which also help ensure safe asset- and wealth management. This demand is spurring major expansion in banking services and opening up new vistas for future banking projects,” he continued.

Following the opening of the Abu Dhabi Priority Banking Centre, the CEO made a tour of the bank’s offices and departments and listened to employees speak about the nature of their work and the quality of services rendered to VIP clients. He urged SIB employees to provide clients with the fastest and most accurate services possible in order to better the bank’s reputation and respond to the requirements of the overall growth in the country.

KFH Bahrain advising banks on mega merger

MANAMA: Kuwait Finance House – Bahrain (KFH-Bahrain) is advising three local Islamic investment banks that are looking to merge. Speaking at the opening of KFH-Bahrain’s ninth branch at Isa Town Mall yesterday, managing director and chief executive officer Abdulhakeem Alkhayyat said that when the three banks merged they would create a new entity with a capital of $400 million and assets of $500m which would give them a scale which would make them more competitive in the market.

He declined to name the banks but said an announcement about the merger would likely be made in the near future.

“Industry is recovering because the government is investing and spending money in the housing market and giving additional support to small and medium sized companies while helping the economy by increasing government salaries,” he said.

“That is helping the banking sector and other industries to achieve growth.”

The bank continued to broaden its presence in Bahrain’s competitive banking sector and strengthened its expansion plans with the official opening of its branch at Isa Town Mall.

Mr Alkhayyat along with senior bank officials and high-profile invited guests officially inaugurated the Isa Town branch.

“We are delighted with the opening of this branch as we will be able to provide our customers in Isa Town with an enhanced banking experience by offering them even greater convenience and flexibility at all times,” Mr Alkhayyat said.

Each of KFH-Bahrain’s nine branches utilise state-of-the-art technologies to serve their customers swiftly and efficiently with high-quality products and services that are Sharia-compliant.

“Thanks to a strategic initiative adopted to expand KFH-Bahrain’s presence in the local market, our customer base is growing at a rapid pace,” said executive manager and head of the banking group Khalid Rafea.

“We are also committed to ensuring that our customers are able to make better choices in how and where they conduct their banking activities.”