Vince Cook, CEO, National Bank of Fujairah sheds light on the setting up of NBF Islamic and his views of Islamic finance in the UAE

NBF Islamic was a natural--and timely--response to a growing number of requests we were receiving for Shari'ah-compliant banking services, especially from customers in our home emirate of Fujairah. As we reviewed the potential for this offering, we also saw an opportunity to provide Islamic banking services that complement our existing propositions in our core Corporate & Institutional Banking (C&IB) business.

When we launched NBF Islamic at the end of 2014, our first offering was our Shari'ah-compliant suite of retail banking services in Fujairah. The reason for this limited approach was to allow us to test the waters and determine the appetite for our offering, as well as our ability to provide a service that could compete with some of the larger Islamic financiers. We were also very concerned that the integrity of our compliance with the principles of Shari'ah based financing should be of the highest order. Following its launch and the initial encouraging observations of our Shari'ah board, we were pleasantly surprised with the customer response and it's safe to say that the business has surpassed our initial expectations. 

In turn, we launched Shari'ah-compliant corporate banking services last year and have seen huge demand in the market from companies looking to do business with us. Moving ahead, once we have grown our core business and our market share, we may look to expand into areas such as capital markets.  Central to these developments will be our focus on ensuring that our Islamic capabilities reflect our organisational strength in fulfilling customer needs quickly and effectively. This includes implementing systems and building processes to support our infrastructure; as well as investing in the ongoing development of our staff and bringing more industry experts on board.

Pipeline

Since it launched, it has been extremely encouraging to see the strong response we have had for our NBF Islamic offering. We were able to break even within the first year of operation, and will most likely have doubled our initial deposit base sometime this year. Similarly, we were able to grow our Islamic balance sheet in quick order to reach AED 1 billion of financing. In fact, if you look at the bank's first half results, you will see that our operating income growth has primarily been driven by our Islamic banking business.

We have a full suite of Shari'ah-compliant treasury products now and we continue to grow our retail product base. On a bank-wide level, investment in technology is a priority, and we continue to enhance our digital channels to improve our clients' banking experience. We have just launched a mobile banking app and are currently upgrading our online banking service for our corporate and business banking customers. This will see the introduction of new features such as corporate cheque printing. All such developments are now accommodating both Shari'ah and conventional customer needs.

At the same time, continuing to improve our customer service levels will be a priority, as it will enable us to develop long-term relationships with clients that will in turn drive our long-term growth. Over time, we would like to see our Shari'ah-compliant business grow and eventually reflect the local banking sector as a whole, with a 75:25 split between conventional and Islamic banking.

Outlook

It is widely known that the UAE's retail banking landscape is saturated, and even in terms of Shari'ah-compliant financiers, there are a number of well-established banks in this space. With this in mind, competition will be one of the biggest challenges we face, although we believe that we can differentiate our offering sufficiently to make good headway. In the short term, the current market environment is also likely to impact our growth aspirations, but we see this as a temporary phenomenon. Nevertheless our expectations of annual growth for NBF Islamic are still around 20 per cent and we believe we will soon be able to capture a two per cent share of the market.

I think that within the UAE, the demand for Islamic banking has been growing for quite some time as more and more customers in the retail and commercial banking segments--many of them non-Muslims--begin to appreciate its viability as an alternative to conventional banking. As a result, we see that there is demand for the transparency and asset-backed financing that Islamic banking provides, along with the tailored service and innovative products that conventional banks are more recognised for today.

We are well positioned to meet both these needs, as we are able to combine our renowned corporate and commercial banking expertise with our Shari'ah-compliant facilities.
In particular, we are able to bring our segmented financing approach that has seen us become the 'Bank for Business' in the UAE, through which we look to create bespoke financing solutions for clients by combining our expertise across areas like trade finance and treasury. Additionally, the Dubai government's efforts to become the capital of the global Islamic economy will certainly fuel the demand for Shari'ah-compliant financing services, which is where we believe we can add value.

© Banker Middle East 2016