“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.

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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.

Growth strat­egy

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.

Fu­ture plans

“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

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