Islamic banking has great potential

Experts see bright future, say industry needs to be innovative and competitive to reap benefits 

Islamic banking is one of the fastest-growing segments in the world, but it needs to be innovative and competitive to realise the true growth potential in years to come, experts say. 

Addressing the fifth World Islamic Retail Banking Conference here on Tuesday, top executives of leading Islamic banks underlined the need to address the challenges being faced by the industry to increase its share in global banking industry.

“There is urgent need to develop Shariah regulatory framework to realise the true potential of Islamic retail banking,” said Adnan Yousif, president and chief executive of the Al Baraka Banking Group.

He delivered the keynote speech entitled “The Changing Retail Banking Landscape” and said the lack of awareness about Islamic banking products is one of the main challenges, which needs to be settled to promote the industry.

“The media can play an important role to develop awareness about Islamic banking industry,” he said, adding that Bahrain has already launched good initiatives including Islamic finance as a subject at the secondary level, colleges and universities.

Yousif also hailed Dubai’s recent initiatives to become a capital of Islamic economy and said local banks — Dubai Islamic Bank, Noor Islamic Bank, Mashreq and Al Hilal Bank, among others — are doing good to promote Islamic retail banking.

Criticising conventional banking, he said it is just compiling “toxic loans” or “bad debt”, which is not beneficiating the economy.

“I wish we could have a huge Islamic bank in the Arab world that could help develop big industries,” he said.

Asad Batla, head of the consumer banking division of Bank Nizwa and who was chairman for the first day of the conference, said Islamic banking industry is relatively new and “we need to give our best to promote this segment”. 

Abdulrahman Turki, general manager of retail banking at Bahrain Islamic Bank, said Islamic banking is doing good compared to conventional modes of business. However, he stressed the need to create awareness about Islamic banking through various channels to increase its share in the industry.

“We are one of the top Islamic banks operating in Bahrain with 14 branches and have launched couple of good initiatives to promote Islamic banking in the country through conferences and meetings,” he said.

The annual CEO roundtable, entitled “Developing Islamic Retail Banking, reaching to the retail target segments: Back to Basics”, highlighted the basic practices and the potential of immense opportunities that Islamic banking offers to the global retail banking sector.

Jordan Islamic Bank’s vice-chairman and CEO Musa A. Shihadeh explained the reasons why Islamic banks failed to build up the assets and said industry need to bring down the cost of funding to competitive levels.

Dr Jamil El Jaroudi, CEO of Bank Nizwa, said the industry is doing well and not piling up “toxic loans” like conventional banks.

Irfan Siddiqui, president and CEO of Meezan Bank, shared the success story of the bank and said about 70 per cent of customers are still untapped and there is huge potential to promote Islamic banking across the globe.

Wasim Saifi, CEO of Standard Chartered Saadiq Berhad and global head of Islamic Consumer Banking of Standard Chartered Bank, said Islamic banking should be high on bankers’ agenda to gain more share of the banking industry.

“Substantial opportunities exist in East and West Africa and the next decade is very important for the industry. Major Muslim countries need to realise the true potential of Islamic banking,” he said.

Sultan Choudhury, executive board director and managing director of the Islamic Bank of Britain, said the UK is a very integrated market for the banking industry and the bank more dependent on technology and Internet banking. He said non-Muslims are also strong customers for Islamic banking products.

Moinuddin Malim, CEO of Mashreq Al Islami, said Islamic banking has done a good job compared to conventional units, however the quality of service, education and innovasion are keys to promote the industry.

In his presentation John Chang, head of consumer banking at Noor Islamic Bank, enlightened the audience on how to achieve total organisational alignment. Renowned Shariah scholar Shaikh Nizam Yaquby acknowledged the queries of the participants during the annual open fatwa session, which was moderated by Professor Humayun Dar, chairman of Edbiz Corporation.

The other participating Shariah scholars and experts were Dr Muhammad Al Bashir Muhammad Al Amine, group head of Shariah at Bank Alkhair; Shaykh Haytham Tamim and Momin Hyat, Shariah scholar and manager of Shariah Governance and Compliance at Mashreq Al Islami.

R. Lakshmanan, chief executive of Sakana Holistic Housing Solutions, focused on the different models used to understand housing finance such as Ijara, Musharaka and Murabaha.

Tamas Erni, managing partner at Loxon Solutions, addressed the issues pertaining to credit risk origination through IT platforms in his presentation.

Imran Samee, head of the Consumer Banking Division at Bank Islam Brunei Darussalam, presented the Case Study Brunei on Islamic retail banking, emphasising on reposition, distribution and risk management issues.

The first day of the conference marked its closure with the networking reception, which also paved the way for the inauguration of the Global Islamic Finance Awards, which was hosted by WIRBC and organised by Edbiz Consultancy late on Tuesday.

(Khaleej Times / 27 Nov 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com