Noor Islamic Bank (NIB) aspires to be a global Islamic bank with a footprint across three continents: Africa, Asia and Europe. Hussain Al Qemzi, group chief executive of the bank, speaks to MONEYworks.
Although NIB is only in its ninth month of operations, the bank has already amassed assets of AED18 billion. Total assets in excess of AED50 billion during the next five years seems to be an achievable goal, considering the rate at which Islamic banking is growing in this part of the world.
"It has been possible because we have had very good business since it started. As of now, everything is looking very promising and we are getting an overwhelming response for some of our products," says Hussain Al Qemzi, group chief executive of the bank. "However, how much of it is the result of the boom in the UAE market and how much is the result of our own effort is difficult to differentiate."
Launched in December 2006, NIB started operations in February 2008 with an initial capital of US$1.1 billion (AED3.7 billion). Although cashing in on the rapid growth of Islamic finance and the increasing popularity of Shari'ah-compliant products are the main reasons for many more players entering the Islamic banking arena, Qemzi makes it clear that NIB will not just be the seventh addition (with the entry of Al Hilal Bank after NIB, there are eight Islamic banks in the UAE at present) to Islamic banking in the country.
"NIB has its own road map of growth not only within the country, but also in the greater Middle East and globally. We are more interested in being recognised as an Islamic bank with global orientation," he says.
NIB has opened its first overseas office in Tunisia, from which the bank will cater to other North African markets. The bank has also established a presence in the Maldives.
Qemzi notes that entry into the other GCC countries is difficult due to political reasons and limited licensing facilities. However, he adds, the markets that NIB is targeting not only offer tremendous opportunity, but also easier entry.
The next five years will be a hectic period for NIB. Apart from Africa, the bank has Asia and Europe in its radar screen for expansion. In Asia, the bank will target Indonesia, Malaysia, India, China and Pakistan, while in Europe, the wish list includes the UK, France, Germany and Belgium.
"Though there are Islamic banks in the UK and banks like Lloyd TSB and others are offering Islamic products, the quality of the products and delivery is not that good. That is why we believe in investing in the training of the people and delivery of products. Also, services have to be much more competitive," Qemzi points out.
The group chief executive feels that Europe in particular has a lot of potential. "We consider ourselves as providers of finance beyond being just an Islamic bank. Our target audience is much wider, all customers whether Muslim or non-Muslim," he says.
Apart from setting up its own units, NIB is also interested in strategic acquisition. Qemzi, however, does not go into detail regarding whether there is any such deal on the drawing board.
"We are actively negotiating with various banks in the UK, France, Turkey and Indonesia. There are not enough targets, though, as there are very few Islamic banks to acquire," he says.
Qemzi adds: "Moreover, it is not easy to acquire conventional banks because of the complexities of accounting. Acquisition might not be profitable enough, at least during the period when one is going through the conversion of wealth. You have to be careful about your target so that it complements your strategy."
In the domestic market, despite being a newcomer, NIB seems to be comfortable and confident about facing competition from the established players. The NIB chief executive knows that NIB has to compete not only with other Islamic banks, but also with conventional banks. He is also aware that customers are no longer satisfied with whatever they are getting from a particular bank, as today they have a number of choices.
"Technology and products can be replicated easily within the banking industry, but where we can make a difference is the culture and service quality," says Qemzi. "We have new technology, good products and are ensuring good services, which will fulfil customer requirements. In Dubai and in other places where the culture is cosmopolitan, our brand will go beyond the religious paradigm."
Qemzi does not seem to see being relatively new to the UAE's Islamic banking field as a disadvantage. With the right technological set-up, trained staff, good product spread and good service orientation, newcomers can take a major share in the market.
"Even if you look at the conventional banks, there are very few as the dominant players. We are really aiming to be one of the largest players in terms of our presence, assets and our books in the Islamic banking field," Qemzi explains.
In the UAE, NIB has a comfortable mixed customer base of around 7,000. As far as assets are concerned, 60 to 70 per cent of the balance sheet accounts for the corporate banking division. The remaining percentage comes from consumer and retail banking.
Qemzi realises the importance of consumer business, as it is the source of liquidity. Over a period of time, NIB plans to roll out more products for the consumer sector. Eventually, the ratio of consumer to corporate banking will move towards an equal balance, says Qemzi.
At present, NIB has 10 branches and a staff of 700. The bank has licences for another 10 branches, which are likely to open by the middle of next year.
Other businesses
Along with regular banking, NIB has also entered into the insurance business. The life side subsidiary, where the bank and Noor Investment Group have 90 and 10 per cent stakes respectively, will be officially launched soon, even though it has been in operation for some time. The bank has also received a licence from the government for the non-life business. According to Qemzi, there is a lot of room to create an insurance culture in the UAE, as insurance has low penetration.
"The scope of growth is so much for this sector that sometimes I think insurance should grow at a faster pace than banks," he says.
Qemzi is concerned about certain challenges Islamic banking is facing globally. According to him, Islamic banking started in order to address the emotional banking needs of people. It now needs to come off the emotive agenda and create value proposition to become a global industry. It also needs to standardise its products and services.
Qemzi says the Islamic banking industry did not innovate initially, as it never faced competition in the face of overwhelming demand. But with the supply side becoming stronger, the issue of standarisation has become very important today.
The other big challenge is to adhere to the basic principles of Islamic banking, adds Qemzi. The form of Islamic banking when it started around 1974-75 was quite different from its form now. Initially, Shari'ah-compliant finance was created to help people who were typically shy about taking finance. Now, with the immense growth potential that Islamic finance promises, the current form and concept of Islamic finance and banking have undergone significant evolution and are more oriented in commercial aspects, according to Qemzi.
"Very few Islamic finance institutions follow the principles of Ibadat (worship) and Muamulad (treatment), the two basic principles of Shari'ah," he says.
The present day concept of Islamic finance is borne out of the Islamic academia. As the demand for Shari'ah-compliant finance increases, organisations are jumping into providing such finance. As such, there is a dearth of people having knowledge of Shari'ah principles, finance and legalities, says Qemzi. This situation, he adds, definitely needs to be improved.
© MONEYworks 2008
