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Monday, 24 September 2007

ISLAMIC FINANCE - The New Face of Gulf Banking

THE GLITTERING CITYSCAPE OF DUBAI STANDS as a bold declaration of the emirate's seemingly boundless ambition. The Burj Dubai, a planned office, hotel and residential high-rise, towers over a sea of skyscrapers and developers' cranes downtown; standing 116 stories high in late March and climbing by three stories a week, it is on its way to becoming the world's tallest building. International City, a residential district for 60,000 people that draws on architectural styles from nine countries, sprouts in the desert on the edge of the city. The World, a collection of luxury residences and resorts on 300 man-made islands, is rapidly taking shape just off the coast in the Gulf. Amid this feverish development, Dubai Islamic Bank is easy to miss. Headquartered in a modest low-rise building on the road to Dubai International Airport, the bank sits next to an auto dealership and a kitchenware shop. Unprepossessing appearances aside, it is shaking up the local banking industry by offering a broad range of financial services that comply with shari'a, or Islamic law, the region's hottest financial sector. Its ambitions are as grand as anything on the skyline. "We have the intention to be the leading Islamic commercial bank in the world," says Sohail Zubairi, vice president and head of the bank's Shari'a Coordination Unit. "There is a huge political resolve on behalf of the government of Dubai to support Islamic finance. DIB is in an enviable position." DIB has financed some of the emirate's most audacious megadeals with multibillion-dollar issues of sukuks, or Islamic bonds, attracting Western investors as well as locals. Last year the bank co-led a $3.5 billion sukuk to help finance Dubai Ports World's $6.8 billion acquisition of the U.K.'s Peninsular and Oriental Steam Navigation Co., as well as a $3.5 billion offering by Nakheel Group, the construction company that is building many of Dubai's development projects. The bank's retail arm, meanwhile, is also grabbing market share, with an array of new shari'a-compliant products, such as fee-based credit cards and mortgages structured as sale-leaseback arrangements. "DIB has been very innovative in introducing new products into the market," says Khalid Yousaf, managing director of Islamic finance at International Holdings Group, a Dubai-based private equity and investment advisory firm. "They are pioneers in retail and investment banking." The results are impressive. DIB, which was founded in 1975 and is the world's oldest Islamic bank, operated largely in obscurity for its first 20 years before nearly collapsing because of an embezzlement scandal in the late 1990s. Today it is Dubai's fastest-growing bank. Net income rose 47 percent in 2006, to 1.56 billion dirhams. - (II)

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