Q&A: Hussain Al-Qemzi, CEO, Noor Islamic Bank

23 March 2010

Growth potential for GCC Islamic banks as demand outpaces the competition

MEED: How well has NIB fared in the downturn?

Hussain Al-Qemzi: Last year was a difficult year for the financial industry globally. Relatively speaking, NIB has fared quite well. Our consumer business almost doubled its customer base over the year and the bank launched almost 20 new products or product variants over the year.

As a new organisation, we have, however, faced a number of challenges in this period. The rapid outflow of liquidity in the market made it difficult for even relatively risk-averse organisations to maintain a healthy liquidity base, and there was fierce market competition for deposits, which drove the average cost of funding up and consequently narrowed spreads across the industry. 

NIB had the advantage of being a relatively small bank, with a smaller asset book. Conversely, we also had the disadvantage of having a relatively smaller deposit base. NIB managed to maintain a comfortable financing loan-to-deposit ratio relative to the published industry average.

How are you generating your revenues today?

A highlight of 2008’s performance was our capital markets team, which has been acknowledged in the industry with the many accolades that the bank won over the year. We acknowledge that there is a slump in the market. However, there are always opportunities in a downturn. The bank has focused on helping its customers restructure their existing financing, building on supporting customers in their business transactional needs and the sovereign and sovereign-linked entities.

How strong is the competition among GCC Islamic banks today? Is there still space for new players in the market?

With the exception of Oman, competition has evolved significantly over the past five years in the GCC. However, the demand has outpaced the competition, which leads me to believe that there is still ample growth potential for existing players and new entrants.

You’ve said that sharia-compliant products have the capability of not only competing with more conventional products, but surpassing them in the post-crisis world, as customers seek more ethical and risk-adverse solutions to their financial needs.

Is there any tangible evidence that Islamic finance is now being favoured over conventional finance?

Because of limited disclosure in the key market where Islamic banking exists today, it is very difficult for me to present any empirical evidence of increased favour.

However, if you were to have Googled ‘Islamic banking’ five years ago and compared the results with those of today, there has been a significant increase in interest, which can easily be translated into increased knowledge about the industry as a whole. Furthermore, even within the UAE, the most recent three banks to open are all Islamic.

How is Noor Takaful performing today? Conventional insurance has experienced very limited growth in the region. Do you think that Islamic insurance has more growth potential?

Noor Takaful has come a long way since its inception in 2009. We currently have a humble share of about 1 per cent of the local market for insurance, a figure which is certainly impressive, given that the company was established during the financial crisis.

The takaful industry is growing faster than conventional insurance. Given the overall success and resilience of the Islamic banking and finance industry, increased level of consumer awareness, and a current low penetration of takaful products, we see a strong and growing demand. We expect annual takaful growth to be 10-15 per cent.

Muslim majority countries represent 23 per cent of  the emerging market growth, yet insurance or takaful penetration remains comparatively low. Insurance penetration in Muslim countries is 1.3 per cent, versus 2.8 per cent in emerging markets, well below the developed economies.

What is the bank’s strategy for 2010?

We believe we have built a solid infrastructure in the UAE; it is now time for us to increase our market share. We will do this by reaching clients through a wide array of channels. So we will do more of the same, prudently.

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