Ahmed Saad Ibrahim

Globally, Islamic Banks controlled assets worth about $750 billion at the end of 2006. A figure which may rise to more than $1 trillion by 2010 as the industry sector expands according to the US management consultants McKinsey & Co. How do you assess the situation in Islamic banking in the UAE and globally?

Globally Islamic finance has been growing robustly for the last few years. In fact, in many parts of the world, the growth of Islamic finance has exceeded that of conventional finance simply because of the increasing demand for Shariah compliant products and services. The attraction of Islamic finance is that it is asset based finance, and that almost all transactions are secured on it, so the risk is minimized as far as creditors are concerned. Looking at the UAE in particular, we have observed that the potential for growth in Islamic finance looks very promising, and this is the reason why many new Islamic banks were started and new windows or subsidiaries were opened by local and international conventional banks. I believe that the growth of Islamic finance will continue well into the future not only here in the UAE, but also in many parts of the world.

Why have we witnessed such a huge interest in Islamic banking in Europe over the past few years?

It is all about being transparent about what you do and how you deal with your customers. One of the principal rules of Shariah is that you make everything clear when structuring contracts with your customers or counter-parts, so there is no important information hidden in small print or any other grey area at all. To answer your question, I believe the reason that Islamic finance has grown in Europe is to do with the fact that Islamic finance agrees to ethical finance and a lot of non-Muslims were attracted by this. Moreover, the structure of Islamic products is very clear and customers find them easier to understand, unlike some conventional products which are very complicated

Can you give us a brief overview of conventional and Islamic banking? What is the difference?

Both are banks, however, the major difference is that one provides Shariah compliant products and services while the other doesn’t. For example, Credit cards usually come with supplementary services like insurance, discounts and so many others additional services that ordinary people don’t usually use, and this confuses them. In contrast, the Shariah compliant credit card provides you with all the essential services that normal conventional credit cards would with a fixed fees, so, customers are aware exactly how much they have to pay whether they utilize half of the credit or not.

UAE banking sector posted nearly $6.8 billion in profits for 2007, an increase of 29%. With economic fundamentals remaining very strong, even the spread of the US subprime contagion may not make its way into the UAE banking sector. How confident are you that the UAE banking sector is immune to this recession and that growth will continue in the region?

The UAE economy has grown strongly over the last few years at the back of higher oil prices and strong non- hydrocarbon growth. A lot of projects have been launched in the country and I believe this is likely to continue. There has been an inflation issue which has affected many countries in the region including the UAE, but apart from that business was very good. The economic fundamentals of the country remain very strong and I believe the economy is going to grow stronger.

How would you describe the banking climate in the UAE? What is so special about it and what makes it different from other countries?

The UAE banking sector is very competitive as there are more than 50 banks operating in the country. However, because of the growing economy, banks have in recent years been reporting strong business growth and significant improvements in their financials. Therefore, I still believe that the potential for growth is huge, and that there is room for growth.

Where do you think the market will head in 5 years time- towards consolidation?

I anticipate consolidation to happen in long the term may be 5 years or more. I think it will be healthy for the industry. If you want to compete against bigger international banks, size will be an important factor. In addition, consolidation gives you the opportunity to grow customer base, improve operating efficiency and more importantly the ability to finance bigger-ticket projects. 

Net profits rose to 50.4 percent to Dhs 301.84 million, or Dhs 0.27 per share in 2007. Total Assets increased by 42% to reach Dhs 10.9 billion, Customer Finance receivables increased by 44% to reach 6.5 billion and Customer Deposits increased by 58% to reach Dhs 7.0 billion. These are incredible figures. What makes you perform better than last year and what are your key success factors?

Before the transformation our assets were 2 billion plus, in 2007, our assets were close to 11 billion, that gives you an indication of how much we have grown since. We have increased our equity to 2.2 billions in 2005 and again to 4 billion plus in 2008. We have seen huge demand in our recent right issue of shares which shows that our shareholders as well as our customers have a great confidence in our performance and the potential for growth in the future. I believe that the success of our human capital, and the support we received from our shareholders, board of directors as well as the government of Sharjah contributed to the growth and the expansion of Sharjah Islamic Bank 

How would you assess this performance? Could you give us some basic fundamental financial figures for the first half of 2008 and where would you like to finish at the end of the year?

Due to the rules and regulations of the Securities & Commodities Authority, we are not allowed to reveal some of this information at the moment. What I can reveal to you however, is that we expect our growth momentum on year-on-year financials to continue well into the coming years.

Let’s talk about diversification. What are some of the new developments and additions to your diversified portfolio? How would you describe your diversification strategy and on what areas are you focusing?

We have both medium and long term strategy as approved by our board of directors. We have diversified our business and income streams by creating valuable subsidiaries that will enhance our profitability and growth in the future years. One of the subsidiaries we created is Sharjah Islamic financial service(SIFS) which made a profit of nearly 17 million in 2007. We believe that profits made by SIFS will grow stronger in the coming years. In addition, we acquired Sharjah National Hotels which own three main hotels in Sharjah. We have development plans for these hotels which will increase their value. Furthermore, we plan to start Shariah compliant insurance in the near future. When all these factors are combined, I believe we will able to offer good value for all our stakeholders in the coming years. 

In terms of international expansions what particular geographical areas are you targeting?

GCC, North Africa, Turkey and the Indian subcontinent. So are you still staying in the region? More or less in the same region. We initially plan to invest in other GCC countries, but we might also go other countries if profitable opportunities arise.

How do you want to approach these expansions?

That will depend on the particular business opportunity we go for. If it is possible to go for a full fledged Islamic bank, we will go for it, if not, may be we will go in partnership with another institution or investor, it will all depend on the rules and regulations of the particular country we want to invest. 

You mentioned that had acquired Sharjah National Hotels Company. What do you expect from them in terms of investment towards the development of tourism in Sharjah?

First of all we are a private business and one normally tries to maximize profits and add value. We acquired this business because tourism is one of the fastest growing sectors in the UAE economy, and we saw it as a good investment in the long term.

His highness, Sheikh Sultan bin Mohamed bin sultan Al Qassimi, the crown prince of Sharjah has always emphasized that if Sharjah Islamic Bank contribute to the community and the economy then profits will come. How do you contribute to different sectors of society, economy and community?

We have contributed and took part in financing many government infrastructure projects. We have worked closely with government institutions and universities so as to play a part in the various initiatives geared to develop the economic, social, healthcare and educational aspects of the emirate. As part of our social responsibilities, we contribute and sponsor through our Donations & Zakat Committee, many valuable programs intended to enhance the community development in general.

How do you contribute to building Sharjah’s image as an international destination?

Since the creation of the bank in 1976, Sharjah Islamic Bank has been an important contributor to the success of the financial sector in the emirate’s economy. We have expanded our dealings in the international market through our international investment and correspondence banking. For instance, when we launched our Sukuk in 2006, we travelled to several countries for the road show of the Sukuk and I believe at the time, we managed to raise the profile of the bank as an import member in the financial sector of the emirate. Sharjah is a business friendly emirate and that is why a lot of international investment came to invest in the emirate. 

Are you planning to have another Sukuk in the future?

We have recently doubled our capital; therefore, we are not currently planning to have another Sukuk in the near future. However, in the long term, it will depend on the needs of the business, if the growth of the business requires one, we will go for it.

Do you have a message for Sharjah as an Emirate?

Sharjah is stable and business friendly emirate. It is the third largest contributor to the UAE economy. The laws and regulations of Emirate are very transparent, and this has been the reason why a lot of international investment has come to the emirate. The infrastructure of the emirate is currently being upgraded. I am confident that all these success factors mentioned above will continue into the future.