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Monday, 25 February 2008

QIB takes Islamic banking to great heights globally

The Islamic banking industry is relatively new compared to the conventional banking. Introduced 30 years ago, it was operating in a limited number of Muslim countries. Three decades ago, Islamic banking was targeting and planning to serve only Muslim clients keen to deal only on Shariah compliant base.

Since the beginning of the 21st century we witnessed a radical change and the number of Islamic banks significantly increased and their geographical spread grew exponentially to be present today in almost 76 countries covering all continents.

The potential and promising future of Islamic banking were probably the main reasons that pushed major international conventional banks to embrace the Islamic banking wave.
Most of them opened an Islamic window under their main platform with an objective to capture within the Islamic industry the lion share using their muscles. The paradox is that international conventional banks with their 400 years banking experience were newcomers next to their peers with 30 years of Islamic banking experience.

This is why today full fledge Islamic banks, mainly from the GCC, are leading the growing Islamic banking industry. Backed up by their countries’ booming economies and natural resources such as oil and gas, these banks are now going global offering Shariah compliant financing solution to clients in all continents where the demand for the product is expected to reach $4 trillion in five years period. Their strengths are a banking concept based on transparency, win-win relationship and ethical banking values and services.

One of the most active Islamic banks in GCC, eager to play a major role in the international finance arena is Qatar based, Qatar Islamic bank (QIB). With more than 25 years experience in Islamic banking, an outstanding financial performance record and the leading position in its own country in Islamic banking, QIB is leading the way in global expansion of Islamic banking. We have met with QIB Chairman, Sheikh Jassim bin Hamad bin Jabor Al Thani to talk to us about this success story and to tell us more about QIB’s future plans and strategy in the booming Islamic banking sector.

Qatar Islamic Bank (QIB) closed 2007 with not just a record profit year but the fourth consecutive year of outstanding financial performance, outperforming many in the banking industry. Would you please share with us some of the key figures and brief highlights of main reasons behind this performance?

The last four-years journey was a breakthrough in QIB history. In four years we have almost tripled our total assets that reached QR21.3bn in 2007 representing a year on year increase of 43 percent vs 2006, and 40 percent average increase for the last four years. During the same four years period we have more than doubled our deposits that reached QR12.2bn a 39 percent increase vs 2006 FY, and a 26 percent average increase for the four years. This is mainly due to our aggressive local expansion plan whereby we have now 22 branches in Qatar and our unique products range enabled us to consolidate our existing customers base and attract new ones despite the fact that all conventional banks during this period opened Islamic windows and new full fledge Islamic banks were established in Qatar.

Our financing and investments simply tripled in four years reaching QR15.9bn in 2007 representing a 57 percent increase vs 2006, and an average growth of 39 percent for the same four years. 2007 in particular was an exceptional year where we managed to convert some corporate financing traditionally with conventional to Islamic financing. We represented this in the aviation industry with Qatar Airways for an Airbus 340-600, with Al Waab city mega project financed on Shariah compliant base and Salam bounian who mandated us for a $150m sukuk issuance for the gate project. We also used our Shariah compliant scheme to finance partially other projects such as Qanat Quartier at the Pearl Island or a desalinisation plant for Qatar Electricity and Water. We consolidated and strengthen our leading position in real estate financing. We are the only Islamic bank with an in house real estate department that not only provides financing to customers but a total solution up to turnkey project. Our real estate investment funds outside Qatar continued being a success year on year, achieving an average revenue that exceeds its counterparts.

During this four-year period QIB net profit quadrupled to reach QR1.255bn in 2007 a 25 percent increase vs 2006, with an average profit increase of 74 percent for the last four years. Both the capital and the shareholders equity tripled in four years with an average growth of 82 percent and our return on asset is one of the best in the world as we were ranked 14th worldwide in 2006 and 2nd in profits growth among the Arab banks. Overall, our performance is by far above the industry average whether in comparison to the total banking industry or to Islamic banking.

What strategy did QIB put in place to achieve this outstanding performance?

QIB has developed a five-year strategic business plan that is on going up to 2012. The objectives of this plan are to consolidate and maintain our leading position in the Islamic banking in Qatar and to become a leading global provider of Islamic banking via an aggressive international expansion plan and the development of new financial instruments covering the increasing demand on the banking and financial services on the local and international market.

To put this into execution we have been through a total reengineering process of the bank. We have used external advisers and auditors to evaluate our position in several fields such as IT or HR and organization structure. The management team and the external advisers developed a strong and aggressive plan that we have successfully executed and is currently on going.

I would like to highlight the role undertaken by the Shariah Control Board presided over by Dr Youssef Al Kardawi, where the board has endeavoured, since the bank started in 1982, to find and develop legitimate solutions for the banking, financing and investing services. Hence, the committee's achievements and QIB experience in this field became an important reference for developing the Islamic banking services in Qatar and abroad.

The committee plays a role in enhancing the ambitions of the board of directors to expand the bank's activities internationally through developing the financing houses established abroad and opening new investment houses in promising markets such as in Asia, the Middle East, North Africa and Europe.

What about the organization structure and employees' contribution to this success?

We have put in place a new organization structure that addresses the bank requirements and challenges. We have attracted high caliber talents with expertise in their respective fields and strong determination to raise Islamic banking to new heights. We have created stand alone specialized structures dedicated to retail and consumer banking, corporate banking and private banking.

We have established an investment banking and business development structure to oversee the bank expansion and investment internationally and to develop Shariah compliant sophisticated financing structure to convert totally or partially mega project financing from conventional to Islamic banking. Our employees are one of our strongest assets. We do have today more than 600 employees in Qatar of which about 30 percent are Qatari talents and we also employ via our subsidiaries internationally around 150 employees.

On top of a strong performance, we have also witnessed a major change in the identity and overall communication activities. What were the reasons behind this change?

After 25 years in the market place we believed that this was the right time to revamp the entire image and identity of QIB. We are now competing at an international level and we need to build strong image and brand awareness not just in Qatar but globally. Our aim is international standards at all levels. To achieve this we have clear upgrade plans in place where required. For example we are upgrading our IT system to the latest technology available, we developed a new website and even our offices’ interior design was upgraded. All these among others are part of our plan to combine authenticity and modernity to reach global international standard while maintaining our Shariah compliant roots.

The success of our global strategy is already acknowledged. Fitch and Capital intelligence respectively upgraded our rating from BBB+ to A- and for our 2007 performance we have already received four awards among which are "Best Real Estate Finance House" and "Most Improved House" from Euromoney in addition to "Best Rebranding" and "Best Advertising Campaign" from the Business and Islamic Finance magazine.

What makes QIB keen on international expansion?

In our strategy we have included aggressive growth plan both locally and internationally. We believe in globalization and in exponential growth of the Islamic banking industry. With our 25 years experience in this field we see it normal at this stage to build a global network. Part of our mission is to serve and promote the Islamic banking industry. This will be achieved by transferring the know-how and expertise to our network in different continents.

Thanks to our investments houses, subsidiaries and affiliates, we are proud to say that we have already established the first Islamic banking global network under one roof and this is via the Arab Finance House in Lebanon, the Asian finance bank in Malaysia, the European finance House in UK and QInvest in Qatar, our investment arm in Qatar licensed by QFC and in operation since May 2007. QIB global network is able to offer cross continent Islamic financing solutions to any corporation worldwide in compliance with the Islamic Shariah.

How do you see competition within the Islamic banking industry?

We compete in the total banking industry and not just in Islamic banking and of course globally not just in Qatar. It is with such a wide competitive map in our strategic plan that fast growth in market share and performance can be achieved. We continue to lead the Islamic banking sector in Qatar with around 57 percent and we hold about 10 percent of the total banking industry. Our expertise and experience allows us to offer alternative solutions to convert clients or mega projects financing from conventional to Islamic financing and this is going to be a major source of growth.

What do you foresee for Islamic banking in general and what are QIB plans in particular?

QIB is strongly committed to Islamic banking and will continue playing a major role to raise the profile and the awareness of Islamic finance. We believe that in Qatar the Islamic banking will continue to grow faster than the conventional sector. At a global level we expect that by 2010 the Islamic banking will reach $1 trillion. We have strong plans to maintain our leading position in Qatar with a 25 percent growth rate. We are going to put state-of-the-art key performance indicators to measure our performance on 360 degree scale including for example earning /employee.

We will increase our branches network to achieve 35 within the next few years. We will expand our ATM network and launch e-banking. We will develop a unique incentive and concierge programme for our private banking customers. Moreover, we do expect a strong growth in projects and corporate financing via an alternative finance solution conversion programme targeting key companies in Qatar. We do have plans to reengineer our real estate development subsidiary Aqar and prepare it for further challenges.

We will continue with QInvest looking for major investment opportunities and turn them into reality as we have successfully done recently with the acquisition of 40 percent of the prestigious Shard of Glass in London.

We will also establish two new financial institutions, a private equity fund firm and a sukuk specialized institution. We plan to operate the two institutions from the QFC. In 2008 we will also build the foundation for a Takaful company.
We will continue our support to the Qatarisation programme and of course continue our corporate and social responsibility programme.

What is next in the agenda for the international expansion?

The expansion plan will continue. We are now licensed by the FSA in the UK to open the European Finance House (EFH) in UK. We will expand our European presence and prepare to open Finance Houses in France and Germany. We will also expand our Asian presence and on top of Malaysia the Asian finance bank we will open representing offices in Indonesia, Singapore and Brunei. In Lebanon we will continue our expansion and Arab Finance House will move from 4 to 7 branches. We are now in final stages of feasibility study to expand to Turkey and Egypt and we are seriously considering the other GCC countries. We do also have a strategy of acquisition as part of our growth plan and are evaluating few options. Moreover, we will continue looking for the right opportunities to consolidate our existing international funds portfolio. --(ThePeninsular)
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