Driving a more resilient growth

Dear Readers, As we embark into another year, I am filled with a sense of quiet confidence. Why am I so buoyed? The answer can be found in how our banks continue to help the UAE develop into a strong, resilient nation — financing not just wealth by creating trade and investments, but also providing homes, education, health care and jobs. The banking industry’s 70-year legacy of success is a testament to the resilience of the sector and, in the last 45 years, the policy and regulatory leadership of the UAE’s Central Bank. I would like to indulge myself by reminding us of our rich heritage: How from the very beginning, our banks became the lifeblood of our nation; providing the finance that has built infrastructure, businesses and industries — and sometimes, by reflecting on our past, we can better map our future.

Overall outlook: A and pivot of stability: The ethical window of opportunity: development

We feel great pride in being part of the journey of modern banking which began in 1946. It is the banking sector’s efforts and collaboration which has led to the creation of next-generation eco-systems like the Dubai Internet City Innovation Hub and low-carbon cities, like Masdar, as well as the continual improvement in our lives through investments in high quality infrastructure and services.

From the very beginning, the philosophy of banks has been to adopt greater socioeconomic responsibilities. Once partners in creating petro-wealth, banks are now equally keen to drive the diversification mission. Much in the tradition of early bankers, who advised rulers on setting up hospitals and electricity companies, banks are now at the forefront of innovation, bringing all of its activities to your fingertips.

Despite some waves of unpredictability, the UAE remains strong by virtue of its diversification efforts, led by the people — and enabled by government laws and banks. This people-oriented legacy has helped us withstand uncertain and volatile times, triggered by international political and economic events.

Be it the 2008 financial crisis, the roller-coaster oil prices or the challenges the sector faced last year from a large number of SMEs defaulting, the regulatory authorities have reacted quickly to contain a potential crisis at each stage. The World Bank for example, mentioned that the Mena region saw the most reforms implemented in the past year, since 2009 — with the UAE and Bahrain being noted among the world’s top 10 improvers.

It is this willingness to enact reforms, pass necessary laws and build strong institutions, which continues to give me the confidence that we can effectively protect our customers’ wealth.

Over the next few years, much growth will occur in “new economy” sectors and banks will need to develop multiple ways to engage with customers comfortable with operating in a virtual environment. New-Age banks anticipating the future needs of customers will open up new and big business opportunities. With constant upgrades, we expect consumers and businesses to shift to smart platforms and save on time and costs.

However, modern banking is not only about examining opportunities and competition, and making investments in technology of the future. Despite advancements, the issue of ethical banking remains.

After the great recession of 2008-10, the need for alternate banking was acutely felt. This gap is being filled by the growing popularity of Islamic finance, which has values of community welfare and giving embedded in the DNA of Sharia compliant banks. As we celebrate our ninth anniversary at Noor Bank this month, we are proud to be a part of this new world order.

Yet, across the world there are still millions of Muslims who choose not to use the Islamic banking system. Out of $11.5 trillion (Dh42.2 trillion), which represents the wealth of Muslims worldwide, $9.5 trillion remains outside the global Islamic financial services industry according to a report by Edbiz Corporation. My hope is that, in 2017, the Islamic finance industry will put aside competition and come together to convince Muslims, and non-Muslims, that Islamic finance provides an ethical alternative to the abuses of the conventional banking system.

Even though the IMF predicts that UAE’s GDP will grow slightly from 2.3 per cent in 2016 to 2.5 per cent in 2017, I believe there are many reasons to be positive about the future of the UAE economy. A greater level of commercial activity is predicted until 2020, with the World Expo and continued operations in our free trade zones.

However, we mustn’t throw caution to the winds. Unpredictable external developments will continue to cast a shadow in some sectors more than others, and jobs in some of those sectors may come under strain. Only by exercising financial due diligence and focusing on stability can we stay ahead in the race. I am confident that as in the past, the UAE’s banks will continue to respond to challenges and opportunities that any unforeseen global, regional and local events will pose.

I wish you all a happy and prosperous 2017.