“SUKUK CAN HELP COMPLETION OF PROJECTS”
Qatar International Islamic Bank (QIIB) CEO Albdulbasit Ahmed Al Shaibei discusses the oil price slump and its impact on ongoing infrastructure projects, and the developments relating to Islamic banking in Qatar, among other things.
Qatar International Islamic Bank CEO Albdulbasit Ahmed Al Shaibei discusses oil price slump and its impact on ongoing infrastructure projects, and the developments relating to Islamic banking in Qatar.
While oil-producing countries are worried over the impact of the oil price crash, which fell by more than 60% between June 2014 and January 2015, experts have been suggesting that sukuk is the best option for the GCC nations to ensure continuity in the execution of ongoing infrastructure projects. In Qatar, the government is implementing several mega projects, estimated to be worth more than QR728 billion ($200 billion), to strengthen infrastructure facilities in the country.
According to reports, the global Islamic bond issuance is expected to touch QR637 billion ($175 billion) in 2015, up from QR400.4 billion ($110 billion) in 2014, and is expected to be around QR910 billion ($250 billion) by 2020. The total global outstanding sukuk, which is currently at QR877.24 billion ($241 billion), is also expected to grow to QR3.3 trillion ($907 billion) by 2020.
Sharing the views of the experts, Al Shaibei says that the oil price decline is unlikely to impact the ongoing multi-billion infrastructure projects in the country as the government always has an option in the form of sukuk.
“Sukuk funding has always played an integral role in the capital markets and will do so during the current oil price decline which the world is witnessing. Infrastructure projects may use this option regardless of the nature of the economic climate we are in,” he says.
He also says that interest in Sharia-compliant banking products has been growing considerably and Islamic banks are trying to take advantage of the same to expand their operations as well as their customer base.“Islamic banking has been growing exponentially, especially in the last decade. Consequently, various Sharia-compliant products have been introduced. Qatar International Islamic Bank has always been part of this development and we innovate and introduce products on an ongoing basis. We are fully committed to providing comparable financial offerings at competitive prices and using structures and terminology which respect Sharia directives,” he says.
To a question on the way forward for the Islamic products that were running their business in a very narrow segment, he says that Islamic banking, as a market segment, was narrowly defined at the time of its inception. “But of late, Islamic banking concepts and products, guided by Sharia principles, are attracting larger market segments. This is particularly relevant at a time of the economic crisis we are witnessing now. Hence we see a widening customer base for Sharia products and services and a rising demand for Islamic financing from customers who were used to conventional products,” he says.
High- Quality Liquid Assets
One of the major concerns of Islamic banks around the world is acquiring High- Quality Liquid Assets (HQLAs) to conform to the Basel III standards and offset any volatility in the system.
Since Islamic banks are not allowed to pay interest, as per Sharia principles, they are obtaining deposits mostly through profit-sharing investment accounts (PSIAs), which are said to be more volatile than conventional deposits.
To negate this development, Islamic banks are expected to increase the amount of HQLAs which they hold. Since these banks are much younger and less developed compared with conventional markets, they do not have HQLAs.
Admitting that there is a short supply of HQLAs as far as Islamic banks are concerned, Al Shaibei says the landscape is changing slowly. New issues are also entering the market on a very regular basis, helping the banks to overcome the hurdle. “These are not purely rollovers but new capital requirements. Moreover, most Islamic banks hold high-quality assets until maturity, which creates less liquidity for them,” Al Shaibei points out.
Explaining the strategy behind the bank's development since it started operations in 1991, Shaibei says that the bank has been maintaining its growth along with improving customer experience. The bank has capitalised on new opportunities with aggressive sales and marketing activities and successfully acquired new customers.
“Our strategy includes different phases: providing a consistent experience across channels, enhancing the front-end and back-end operations and achieving a higher degree of integration between our lines of business.
The bank believes that it should shift its operating paradigm from a functional orientation to customer orientation,” he says and adds that QIIB's focus since inception has always been to support and contribute to Qatar's economy, and with prudent management it has been contributing to the success of the country.
As far as use of technology to improve retail banking is concerned, he says that a significant shift in the business environment, economic volatility, changing customer and staff expectations and the adoption of new technology make it increasingly challenging for banks to navigate through an alternative technological strategy and prioritise technology investments.
“We have always been strongly focused on developing and improving technologies to ensure customers' experiences are enhanced much beyond their expectations,” he says.
He says QIIB operates in three segments – Retail Banking, Corporate Banking and Treasury and Investments. While the retail banking segment accepts various deposits and offers consumers, different financing facilities (including trade finance facilities to small and medium businesses and individual customers), the corporate banking segment provides deposit products, financing and other credit facilities to corporate and institutional customers, and the treasury and investments segment provides treasury services and investment banking activities.
“Our approach is to build a very different bank; QIIB is well known for its performance with consistency. We see it as our responsibility and obligation,” he says.
“We will continue to seek promising opportunities and this fits well into our strategy. We assess opportunities carefully and with due diligence. We will continue to examine regional developments and in other areas areas where we operate. For example, trade finance-directed transactions may form part of the desire to enter those markets, either by joining forces with partners or by establishing a representative office,” Al Shaibei adds
“Our strategy includes different phases: providing
a consistent experience across channels, enhancing
the front-end and back-end operations and achieving a higher degree
of integration between our lines of business. We believe that it should shift its operating paradigm from a functional orientation to customer orientation.”
ALBDULBASIT AHMED AL SHAIBEI
Chief Executive Officer Qatar International Islamic Bank