“We are for sure the fastest grow­ing Is­lamic bank in Pak­istan and we have dif­fer­ent thresh­olds to mea­sure and en­sure that we are not only keep­ing pace with the mar­ket but ex­ceed­ing it”.

An ex­clu­sive In­ter­view with Ahmed Khizer Khan, Pres­i­dent & CEO, Burj Bank Lim­ited

Enterprise - - News -

What is your view re­gard­ing the growth of Is­lamic Bank­ing glob­ally, and in Pak­istan?

The global economies, and the fi­nan­cial mar­kets, are at a turn­ing point. Fast growth economies in Asia, Mid­dle East, Africa, Latin Amer­ica and East­ern Europe now form al­most half of the global GDP and, in 2010; they contributed 70% to over­all global growth. Th­ese trends have ac­cel­er­ated in the last two years.

The Eu­ro­zone cri­sis and the protests against the global fi­nan­cial sys­tem, which we have seen across the world, present our in­dus­try with a golden op­por­tu­nity. It is now time to talk about how Is­lamic fi­nance can con­trib­ute to long-term in­clu­sive, eq­ui­table and sus­tain­able eco­nomic growth not just in the Mid­dle East, but in ev­ery coun­try across the globe. In­dus­try fore­casts sug­gest Is­lamic bank­ing as­sets with com­mer­cial banks glob­ally, will reach $1.1 tril­lion by the end of this year. Is­lamic fi­nance may have come a long way in the past decade but its to­tal as­set base of $1 tril­lion is still less than one per cent of global bank­ing as­sets. As for MENA, Is­lamic bank­ing as­sets in­creased to $416bn in 2010, rep­re­sent­ing a five year CAGR of 20% com­pared to less than 9% for lead­ing con­ven­tional banks. As new ge­ogra­phies open up to Is­lamic bank­ing, the MENA Is­lamic bank­ing in­dus­try is ex­pected to more than dou­ble to $990bn by 2015.

In Pak­istan, Is­lamic bank­ing pen­e­tra­tion stands at about 7.5%. Be­ing the 6th most pop­u­lous coun­try, Pak­istan is now the sec­ond largest Is­lamic na­tion in the world with over 180 mil­lion peo­ple, and con­tin­ues to grow rapidly. Till date the bank­ing sec­tor has only been able to tap roughly 20 mil­lion cus­tomers. Ac­cord­ing to our anal­y­sis, an un­tapped bank­ing mar­ket of over 40 mil­lion cus­tomers still ex­ists within the coun­try. Is­lam is the pre­dom­i­nant re­li­gion in Pak­istan and Shari’ah-com­pli­ant Bank­ing as of to­day has a very small mar­ket share, thus re­flect­ing huge po­ten­tial for growth in this sec­tor.

Though it is true that greater aware­ness of the in­built strengths of Is­lamic fi­nance has contributed to­wards in­creased in­ter­na­tional par­tic­i­pa­tion in Is­lamic fi­nan­cial mar­kets, aware­ness alone is not suf­fi­cient to en­sure sus­tain­able growth for our in­dus­try in Pak­istan and be­yond. To re­main com­pet­i­tive we have to con­tin­u­ally in­no­vate and adapt. If we are to chal­lenge the con­ven­tional banks’ en­trenched po­si­tion in in­ter­na­tional and lo­cal fi­nan­cial deals, we must de­velop the ca­pac­ity to struc­ture multi-cur­rency and cross-bor­der trans­ac­tions and build scale.

Is­lamic bank­ing and fi­nance in­dus­try has been on a steady and con­sis­tent growth path, with the Mid­dle East be­ing its nerve cen­ter. Though the in­dus­try has built a wealth of op­por­tu­ni­ties and op­tions for in­vestors over the last decade, a lot more still has to be done in or­der for the in­dus­try to suc­cess­fully com­pete with their con­ven­tional coun­ter­parts.

You have re­cently com­pleted your first year as the Pres­i­dent and CEO of Burj Bank. How has the jour­ney been so far?

My first year at Burj Bank has been an ab­so­lute roller coaster ride. I clearly re­mem­ber my first day, spend­ing the whole day pon­der­ing over how we can work as one team and turn this ship around to­wards be­com­ing the pin­na­cle of Is­lamic Bank­ing. To­day, I can proudly say that with the help of Almighty Al­lah, we have man­aged to get our­selves rec­og­nized as the fastest grow­ing fi­nan­cial in­sti­tu­tion in this coun­try. To­day our com­pany’s vi­sion of be­com­ing the Is­lamic Bank of Choice seems ap­proach­able. Our core brand val­ues of “Pu­rity”, “In­tegrity”, “Pas­sion” and “De­vo­tion” are be­ing lived out by the peo­ple run­ning the com­pany; demon­strat­ing in their per­sonal and busi­ness lives that they pas­sion­ately be­lieve in th­ese val­ues.

My ini­tial fo­cus was to­wards build­ing a solid foun­da­tion for the fu­ture growth of the Bank. I am pleased that our busi­ness model has pro­duced out­stand­ing fi­nan­cial re­sults in the first 3 quar­ters of 2012 and the bal­ance sheet has been strength­ened phe­nom­e­nally. We con­tinue to be prof­itable on a month-on-month ba­sis. Our de­posits have wit­nessed ex­cel­lent growth. The Bank is now fo­cus­ing on ra­tio­nal­iz­ing the de­posit mix to lower the cost of funds in or­der to ease pres­sure on spreads aris­ing from dis­count rate re­duc­tion. We have booked fresh

fi­nanc­ings dur­ing the pe­riod with­out com­pro­mis­ing port­fo­lio qual­ity and con­tinue to fo­cus on build­ing a high qual­ity and di­ver­si­fied fi­nanc­ing port­fo­lio. Our GMA (Global Mar­kets & Ad­vi­sory) busi­ness has out­per­formed the in­dus­try and de­liv­ered great re­sults for the Bank. I can proudly say that in the first nine months of this year we have posted a profit of PKR 194 mil­lion be­fore tax.

By the end of this year our foot­print in the coun­try would have in­creased to 75 branches. In­shal­lah, in the next 5 years, Burj Bank will have over 300 branches as well as an es­tab­lished non-brick and mor­tar bank­ing model in place. Over the next 5 years, Burj Bank will emerge as one of the most im­por­tant play­ers in the Pak­istani bank­ing sec­tor and can also be ex­pected to have a sig­nif­i­cant in­ter­na­tional pres­ence.

Give us a back­ground about your ma­jor share­hold­ers.

Burj Bank has a rich Mid­dle East­ern back­ground with the fi­nan­cial and tech­ni­cal sup­port of a great in­sti­tu­tion, ICD Jed­dah (Is­lamic Cor­po­ra­tion for Devel­op­ment of the Pri­vate Sec­tor) which is the pri­vate sec­tor arm of Is­lamic Devel­op­ment Bank, Jed­dah. ICD is work­ing for eco­nomic devel­op­ment and so­cial progress in var­i­ous Mus­lim coun­tries by in­vest­ing in the pri­vate sec­tor. Other ma­jor share­hold­ers in­clude Bank Al-Khair from Bahrain, Gar­gash En­ter­prises from the UAE and Al-Ro­maizan from Saudi Arabia. This strong back­ground gives Burj Bank ex­cep­tional fi­nan­cial strength and ab­so­lute cred­i­bil­ity.

How have chal­lenges like the re­ces­sion­ary econ­omy, the en­ergy cri­sis, poverty, low lit­er­acy lev­els and the frag­ile se­cu­rity sit­u­a­tion af­fected the Is­lamic bank­ing sec­tor?

Chal­lenges are ex­is­tent in ev­ery ven­ture and in­dus­try. The success of any in­di­vid­ual, or­ga­ni­za­tion or in­dus­try lies in the way we con­front those chal­lenges and con­vert them into op­por­tu­ni­ties. While all the men­tioned prob­lems are true, Pak­istan has time and again proved it­self as a re­silient econ­omy by out­per­form­ing ev­ery time. For the Is­lamic Bank­ing sec­tor, in par­tic­u­lar, some of th­ese chal­lenges have ac­tu­ally be­come op­por­tu­ni­ties for us. For in­stance, the re­ces­sion­ary econ­omy has di­verted many ad­vo­cates of the con­ven­tional bank­ing sys­tem to shift their fo­cus to­wards Is­lamic Bank­ing. Sim­i­larly, the en­ergy cri­sis has brought us to our draw­ing boards to come up with strate­gies of fi­nanc­ing var­i­ous en­ergy projects through Is­lamic modes of fi­nanc­ing. Low lit­er­acy lev­els have pushed us to come out of our shell and ed­u­cate the masses re­gard­ing Is­lamic Fi­nance, whereas the frag­ile se­cu­rity sit­u­a­tion has strength­ened our faith in our re­li­gion, con­se­quently pulling more and more peo­ple to­wards the Shari’ah-com­pli­ant fi­nan­cial sys­tem.

How fa­vor­able has the reg­u­la­tory frame­work gov­ern­ing Pak­istan’s bank­ing sec­tor been to­wards Is­lamic Bank­ing?

State Bank of Pak­istan has done an ex­cel­lent job in bring­ing the Bank­ing in­dus­try to its cur­rent level. Par­tic­u­larly in terms of Is­lamic Bank­ing, I would give spe­cial credit to SBP who learned from the ex­pe­ri­ence of Is­lamic Bank­ing dur­ing the 1980s and, based on those ex­pe­ri­ences, re-launched Is­lamic Bank­ing in 2001. Mea­sures taken by SBP have re­sulted in a coun­try­wide roll out of Is­lamic Bank­ing. Is­lamic Banks in Pak­istan are presently in their evo­lu­tion phase and still there is enor­mous po­ten­tial to grow this mar­ket. With the com­mit­ment of our reg­u­la­tors, I have no doubt that this will be made pos­si­ble in the times to come.

Based on your ex­pe­ri­ence in other mar­kets, how do you com­pare the Pak­istani Hu­man Cap­i­tal to oth­ers in the re­gion in all ar­eas?

Well, if we take a look at the his­tory of the coun­try, Pak­istan has faced a se­ries of tem­pes­tu­ous chal­lenges since its in­cep­tion and ev­ery time it over­pow­ered all the grave dilem­mas by dint of its re­silient, brave, and hard­work­ing peo­ple. Whether it was re­set­tle­ment of refugees in 1947, or war against In­dia in 1965 or de­struc­tion from earth­quake in 2005, the brave na­tion coun­tered the chal­lenges suc­cess­fully. Pak­istani courage is leg­endary. The way with which the peo­ple of the coun­try dealt with earth­quake dev­as­ta­tions and bat­tled against floods showed the world that the peo­ple of Pak­istan are blessed with ex­tra-or­di­nary po­ten­tial.

Around 68% of Pak­istan’s pop­u­la­tion is re­garded as youth (un­der 30 years). Many of them are now coming into the labour force, in­creas­ing the size of the work­force by over 3 per cent an­nu­ally. How­ever, the de­mand for skilled labour in the coun­try still ex­ceeds the sup­ply. The qual­ity of the skilled work­force of Pak­istan stands to be world renowned, and has suc­cess­fully made its mark in ev­ery field. In or­der to fur­ther in­crease this pool, key fo­cus is needed on two fronts. Fore­mostly, re­form­ing statu­tory reg­u­la­tions that en­cour­age job cre­ation within the for­mal econ­omy and si­mul­ta­ne­ously, cre­at­ing pro­grams that help in­for­mal work­ers ad­just to labour mar­ket shocks and build fu­ture earn­ings po­ten­tial.

The sup­ply of per­fectly skilled labour force to in­dus­tries can trig­ger the in­dus­trial growth rate. Pak­istan’s vocational train­ing in­sti­tutes need to ad­dress the skill devel­op­ment needs of work­ers and de­velop pro­grams for their skill en­hance­ment in line with

in­ter­na­tional stan­dards, be­cause the types of skills de­manded in the job mar­ket are chang­ing rapidly.

A lot of our skilled labour force to­day is be­ing poached by for­eign coun­tries of­fer­ing bet­ter wages, slowly de­vour­ing our labour force and leav­ing a big gap within the coun­try, af­fect­ing in­ter­nal pro­duc­tiv­ity. This is ob­vi­ously hav­ing a di­rect im­pact in our for­mal job mar­ket, as lot of peo­ple who are on con­tract tend to go for other jobs. We do be­lieve in pro­tect­ing jobs but the fo­cus should be to pro­tect work­ers. Our peo­ple un­doubt­edly pos­sess ex­tra­or­di­nary po­ten­tial, which has been rec­og­nized glob­ally and putting this po­ten­tial to pur­pose is what is re­quired.

What is Burj Bank do­ing on the Cor­po­rate So­cial Re­spon­si­bil­ity front?

Cor­po­rate So­cial Re­spon­si­bil­ity is at the heart of our busi­ness and we be­lieve that giv­ing back to the com­mu­nity and this coun­try is just as im­por­tant as our Core Brand Val­ues. We un­der­stand the re­spon­si­bil­i­ties of be­ing a cor­po­rate cit­i­zen and value the im­por­tance of the ac­tiv­i­ties done un­der CSR. Burj Bank Lim­ited has been able to seam­lessly in­te­grate the so­cial, eth­i­cal and en­vi­ron­men­tal con­cerns of the so­ci­ety in its busi­ness model. It has proac­tively par­tic­i­pated in com­mu­nity well-be­ing and growth ef­forts, with its em­ploy­ees con­tribut­ing to var­i­ous phil­an­thropic ini­tia­tives un­der the aegis of the Burj Char­ity com­mit­tee.

Rec­og­niz­ing ev­ery Burj Bank em­ployee as a pow­er­ful agent of pos­i­tive change, we re­cently launched an em­ployee driven CSR ini­tia­tive - “Giv­ing be­yond the Work­place Cam­paign”. Un­der this ini­tia­tive we car­ried out a num­ber of ac­tiv­i­ties that in­volved spend­ing qual­ity time and din­ing with the beau­ti­ful chil­dren at the Edhi or­phan­age and dis­tribut­ing clothes and house­hold items to the chil­dren at the SOS vil­lage. Re­cently we also hosted an event where we dis­trib­uted do­na­tions to the fam­i­lies of the vic­tims of the Bal­dia Town fire in­ci­dent.

What is your vi­sion for Burj Bank and what mes­sage would you like to give to your read­ers?

The FY 2011 – 2012 has seen the Bank grow from strength to strength with sig­nif­i­cant de­posit growth, in­creased cap­i­tal, en­hanced en­tity rat­ings, a re­ju­ve­nated man­age­ment team, a healthy bal­ance sheet and an ex­tremely suc­cess­ful re-brand­ing ef­fort. Our growth plans ahead are ag­gres­sive whereby we are open­ing 25 new branches this year and tar­get­ing a net­work of 300 plus branches in the next 5 years. So there is a lot of work that is hap­pen­ing and our cus­tomer growth is very rapid. We are for sure the fastest grow­ing Is­lamic bank in Pak­istan and we have dif­fer­ent thresh­olds to mea­sure and en­sure that we are not only keep­ing pace with the mar­ket but ex­ceed­ing it.

Our vi­sion is to make Burj Bank the Is­lamic Bank of Choice and I have faith in my team’s ca­pa­bil­ity to achieve this cus­tomer-cen­tric vi­sion. I can con­fi­dently say that In­shal­lah in the coming years, Burj Bank will be one of the great­est success sto­ries in the fi­nan­cial sec­tor of Pak­istan.

Ahmed Khizer Khan is the Pres­i­dent & CEO of Burj Bank Lim­ited. Prior to this po­si­tion, he served as Chief Op­er­at­ing Of­fi­cer of ICD. He was the Chief Ex­ec­u­tive of Bar­clays Global Re­tail and Com­mer­cial Bank­ing, UAE from 2006 to 2010 and was as­so­ci­ated with Cit­i­group from 1997 to 2006 in var­i­ous se­nior level as­sign­ments in­clud­ing Coun­try Busi­ness Man­ager, Pak­istan

and Man­ag­ing Di­rec­tor Op­er­a­tions and Tech­nol­ogy, Cen­tral Europe. He did his MBA from Rut­gers Univer­sity, Ne­wark, New Jersey and his Bach­e­lors in Eco­nom­ics from Buck­nell

Univer­sity, Lewis­burg, Penn­syl­va­nia, USA.

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