Noor Islamic Bank said that its office in Tunisia provides it with an opportunity to promote our brand awareness locally as well as across North Africa. In an interview with African Manager, Hussain Al Qemzi, Group CEO, Noor Islamic Bank pointed out that Tunisia’s strategic geographic location between Europe and Africa is ideal for introducing Islamic banking into the extended region, while taking advantage of its strong ties to the thriving gulf region; Interview:
You said, in a Press Release, that “Our representative office in Tunis is operational and we continue to explore market opportunities in North Africa”. What is your assessment of the opportunities that Tunisia provides to Noor Islamic Bank in terms of bank performance?
The Tunisian economy has been progressing at a steady average rate of 5 percent per annum, for the last 2 decades,. We appreciate that Tunisia enjoys stable economic fundamentals that lend themselves well to the growth of Islamic finance: consumer and investor confidence remains on a firm footing in spite of the global financial crisis, per capita income is on the rise, the vast majority of the citizens are middle class, whose financial needs would be ideally met by Shari’ah compliant banking. We see promising opportunities for our wide range of unique Shari’ah compliant products and services, in such untapped emerging markets. Tunisia’s strategic geographic location between Europe and Africa is ideal for introducing Islamic banking into the extended region, while taking advantage of its strong ties to the thriving gulf region
Our office in Tunisia provides us with an opportunity to promote our brand awareness locally as well as across North Africa. It supplements and supports our marketing efforts which aim at developing relationships with financial Institutions, government organizations and blue chip companies in the region.
Are you planning to change the status of your presence in Tunisia so that your representative office will be converted into a subsidiary?
North Africa has always been a strategic market for the Middle East. We are and will continue to evaluate all opportunities available to us, and will assess the merits of those opportunities in line with our strategic plans and the value they bring to our shareholders. There are many factors to be considered before contemplating conversion strategies of the representative office into a subsidiary or an overseas branch, the most important being the current global macroeconomic conditions. Once we have assessed that the time is right and the opportunity for sustained growth in the region is quantified, we would consider enhancing our business model to maximize opportunities available to us.
What is the situation of Islamic finance in the context of the current international crisis and how it is expected to manage and do once the economic recovery is back?
The ethical guidelines governing Shari’ah finance disallow certain risky and complicated practices, for example synthetic derivatives and credit default swaps – which alone have resulted in losses worth tens of trillions of dollars. Regulators are still trying to unravel the complexities of the structures. Having said that, it must be pointed out that Islamic finance is not a stand-alone financial system, but a fully integrated player in the world economy. This means that Shari’ah compliant players have also been affected by the crisis.
Islamic Finance has grown at an annual rate of 15 to 20 percent over the past 10 years, but with the current situation; we expect these growth rates to become more moderate and expect 2009 and at least the 1st half of 2010 to be a period of prudent growth.
Can Islamic finance compete with conventional finance in terms of economies of scale?
It would be unrealistic to expect it to do so. For one, conventional banking has been around for much longer. . Conventional banking has had a substantial head start over Islamic banking which has enabled it to take root, grow, consolidate and spread to all corners of the world. This is opposed to the 35-year modern history that Islamic banking has had. Even if we were to zoom in on its progress in the Muslim world, we would note that Islamic banking has a long way to go before it approaches levels anywhere near to its conventional counterpart.
Rather than competing merely on terms of scale, there are other parameters which suggest that Islamic banking is a serious contender in the global financial system. The Shari’ah compliant financial sector is growing at a commendable rate of 15 to 20 percent per year, and its model is subscribed to by people across the world, including non-Muslims. Even mainstream commercial banks find it prudent to offer Shari’ah compliant services. Islamic banking has positioned itself as a serious alternative to conventional banking, and I believe it will only grow from this position of strength.
Your bank was launched to become a global Islamic bank. Is this a realistic ambition?
There is no Islamic bank with a truly international presence today. Noor Islamic Bank has set this vision in front of itself: to aspire to become the world’s most respected international Islamic bank.
True, due to current economic conditions worldwide, practically every organization has had to rethink its international expansion and M&A plans. Noor Islamic Bank has been using this time to review, re-think and consolidate its way forward whilst at the same time committing its resources to work for the economy locally in the UAE.
Noor Islamic Bank has potential, drive and the resources to forge ahead. For example, we are on our way towards achieving the retail distribution target we had set for ourselves – to have twenty locations in operation across the UAE by the end of 2009. We are also well capitalized to fund our growth. However, current market conditions tell us that it is better to be prudent and optimize our balance sheet for value and consolidate the rapid growth we have experienced in the past year. There are good valuations in certain markets, but these can be better and more competitive going forward.
Please comment/update on the developments around the world in terms of expansion of Islamic banking products and services…
The development of the industry over the past three decades has clearly been able to demonstrate as well as gain respect and trust as an alternative and parallel system to the traditional interest based system of banking. This in itself is a significant achievement in such a relatively short duration.
To grow further, Islamic finance needs to invest more in research and development, establishment of robust equity and secondary markets, development and attraction of human talent, strong governance and risk management practices. These need to be aligned towards recognizing and managing the specific risks inherent within Islamic products, transactions and structures alongside of investing in technology to meet the needs and demands of the new economic and financial order that will emerge to deal with the challenges of the first decade of this century.