Dr Ahmed Aljanahi has been hailed as the right fit for the job of a deputy chief executive at Noor Islamic Bank (NIB). NIB, with ambitions to embark on all areas of financial services in the region and outside, will find in Dr Aljanahi an ideal professional who has exposure to areas ranging from real estate, airlines, telecom and banking to insurance in different markets the world over. Prior to joining NIB, Aljanahi was chief executive and board member of Investors Bank, chairman and managing director of Takaful International and member of the board of directors and the executive committee of the Bahrain Islamic Bank (BIB). He has more than 23 years experience in senior and executive positions with commercial and investment banks in Bahrain and Kuwait, of which 15 years was spent in Islamic investment banking.
Currently, deputy group CEO of Noor Islamic Bank and Noor Investment Group, Dr Janahi has a clear picture of what NIB can do in the Islamic space in the region and overseas. During a recent interview with The Business Weekly's CL Jose, he discussed the group's growth plans and the challenges that Islamic banking is facing currently. Noor Islamic Bank has a different mandate from other Islamic banks, according to Dr Aljanahi. This includes making a mark in the overseas market.
Islamic banks in the UAE seem to be looking towards Bahrain for leaders. The newly established Ajman Islamic Bank's chief executive is from Bahrain, and now you are the deputy CEO of NIB. Is there a shortage of Islamic finance professionals in the UAE?
Bahrain, of course, is an established Islamic financial centre and it is quite natural that the GCC's Islamic institutions have many Bahrainis take up senior posts. But in NIB, we have about 650 employees from 42 countries and out of this, 27 per cent is from the UAE alone. Mostly, NIB employees are from the GCC.
How long has NIB been in operation and what are its achievements so far?
We are now four months old and our asset book has grown to more than Dh9 billion by the end of the first three months. We are strong in corporate and retail, including mortgage.
Growth during the first three months has been quite fast, hasn't it?
Yes, we want to be not only the largest Islamic bank in the world, but the fastest growing Islamic institution.
Though we were given the mandate to set up the bank in 12 months, we were able to achieve this within nine months. We have six branches operational now.
What is the target for the branch network?
We would grow to 10 within four months from now.
How do you propose to grow outside the UAE?
We have ambitious plans to grow outside the UAE and we will not confine ourselves to organic growth alone. We are open to acquisition outside the UAE be it the Middle East, Europe, North Africa or Far East.
So when will you foray into the overseas market?
By the end of next year (2009), we will have at least two international branches.
Are you already in talks with any banks overseas?
Yes, we are in talks with banks in three other countries. And this could include conventional banks too. If we end up acquiring conventional banks, we can convert them into Islamic. We are looking at small to medium-sized banks for acquisition.
Do you think you have enough funds for acquisition?
We have enough funds at our disposal because we are already well capitalised at Dh3.67 billion ($1 billion).
How is your mortgage finance faring?
It is doing well and we are doing very good business in mortgage at a time when the property market is booming.
Don't you think there is a lack of clarity in calculating the equated monthly instalment (EMI) for mortgage finance by Islamic banks?
It is very clear with us and we are ready to explain it to our customers.
There is no need for any confusion with regard to EMI.
There is another complaint that Islamic banks are following the interest rate of conventional banks and just call it 'profit rate'. How do you address this?
I know this is a persistent complaint against Islamic banking.
The economy generated by conventional banking is much bigger than that of Islamic banking, whereas the latter is still present in only small pockets. And for this reason, we cannot detach ourselves from the attributes of conventional finance, at least for the time being. Whatever we do, we have to benchmark now against the general economic trends.
What sort of a market share do you have now?
I do not know what market share we have as of now. But our target is to get between one and one-and a half per cent of the total market in the UAE before long.
We have Dubai Bank with almost the same owners of NIB. What was the compulsion to set up NIB? Or could you not have acquired Dubai Bank?
We believe competition is always good. Having said this, it is the shareholders' call whether to set up a new bank or acquire an existing one. As far as we are concerned, our mandate is not to make just another bank with a well-defined target. We are creating a financial 'icon' for Dubai to represent Dubai in all its essence and spirit.
What are NIB's new initiatives?
We have many. For example, we have embarked on the new outfit with Emirates Post which has been set up as a joint venture. This will give us the strength of a 100-branch network and this will help us set up the largest networked bank in the UAE. Together, NIB and Emirates Post Holding Group will launch a sharia'a-compliant company that will target people earning about $250 a month. The yet to be named company will have a capital of Dh500 million and will focus on launching debit cards, Islamic insurance, credit cards, micro-financing, salary payments, remittances and currency exchange. The joint venture will leverage NIB's expertise in the sharia'a-compliant financial services arena and Emirates Post's countrywide reach to offer a comprehensive basket of financial services.
What are your other initiatives?
Under Noor Investment Group, we have plans to enter the new areas of insurance, trade finance, capital markets operations, postal bank etc.
We heard that your back office has been outsourced to India. Can you shed more light on that?We have outsourced our back office job to a BPO company in India - Adventity, which has about 1,400 people. In fact, we own 50 per cent of the Middle East operations of that company. This has been created through a joint venture with Adventity and NIB's work is outsourced to this joint venture company.
Any IPO plans?
Not for the time being as we have to build up a strong asset base before we could think of such things.
Do you have a separate Sharia'a Board?
We have a full-fledged Sharia'a Board which functions exclusively for us.
What unique products and services do you have to offer to UAE clients?
We have a long list of products and services which no other banks will have. The list has 144 products and sub-products and this could be larger than the product list of any other Islamic banks.
A core banking IT solution still remains a dream for Islamic banks. How do you address this challenge?
I have to admit that this is a challenge like many other challenges that Islamic banking faces currently. But fortunately for us, there is a very strong operations team in place. Most of the members of this team are from an Islamic banking background.
There were reports quoting the chairman of the Accounting and Auditing Organisation for Islamic Financial Institutions Sheikh Muhammad Taqi Usman that 85 per cent of the sukuks are not sharia'a-compliant. Any comments?
I am yet to study that fully before I could make any comment.
We hear that some banks offer personal loans using a different platform called Tawarruq which is a reverse Murabaha structure. It is allowed in Malaysia. How do you view this?
This is approved here as well and we at NIB are offering this product. In Islamic banking, trading augurs well for the system as booking assets in our book is crucial for Islamic banking.
In mortgage, what sort of a share do the Islamic institutions have in the UAE?
I think, all put together, the share of Islamic institutions in Islamic mortgage finance would be not less than 50 per cent.
Is it true that Islamic finance has different schools of thought?
It is true that institutions from the Middle East and those from Malaysia were following slightly different forms of Islamic finance with Malaysia said to be relatively liberal. But the gap between these two is narrowing, and I am sure, sooner than later, all differences on this will be done away with.
So is Malaysia coming around to your terms or is it the other way round?
Somewhere in between.
Uniformity is still absent, to a good extent, among products from different institutions from the same region. Why is this so?
This is true and the beneficiary is the customer at the end of the day. We, as an industry, do not want to impose any product on any customer. He always gets a chance to choose from products designed by different institutions headed by different Sharia'a Boards.
Is it not cumbersome for the Sharia'a Board to see each and every product?
The board meets quite frequently. The industry is in its evolutionary phase and these pains are inevitable and good for a growing industry like Islamic finance.
Do you foresee more conventional banks converting themselves into Islamic in the future?
I won't be surprised to see more conventional banks going for conversion in the coming years. This is set to happen not only in the UAE but in all GCC countries.
How do you face competition from Islamic windows of conventional banks?
Islamic banks cannot represent the whole market and this is good for the industry.
© Emirates Business 24/7 2008
