TBY talks to Hussain Al Qemzi, Group CEO of Noor Islamic Bank, on Dubai as a financial hub, the bank’s international vision, and the Islamic banking model.
THE BUSINESS YEAR Does Dubai have the capacity to be a first-class global financial hub?
HUSSAIN AL QEMZI Dubai is already a logistical international hub with a huge port facility. This is a city that can clear 1,200 containers per hour. We supply and re-export to many nations around us, from companies on our border to East Africa. For example, Somalia has been relying on Dubai for years, and all of its shipments and goods have been coming from Dubai. We also reach Turkmenistan, the Kurdistan region of northern Iraq, and North Africa. This is an international hub that seeks to consolidate its services. The vision we have is to create a financial presence outside of the Emirate, but that is yet to happen. However, we have done a lot of business in Turkey. Although Noor Islamic Bank is predominantly a corporate, wholesale bank, our activities are determined by our banking partners. We work very closely with Turkish bankers and our relationship allows us to operate together. We have now completed transactions totaling over $2 billion in 18 months; we are raising funds for Turkish financial institutions, and we have many possibilities in the pipeline. This is what we have envisioned, and we aim to duplicate this activity in Southeast Asia or North Africa. This is where we see a lot of interest and potential to grow.
Is it your vision for Noor Islamic Bank to be global?
Noor Islamic Bank’s history began when His Highness Sheikh Mohammed sought to establish a bank with a vision to improve the Islamic banking sector. Before spreading to the rest of the world, Islamic banking actually began in Dubai. Initially the process was slow, cumbersome, and traditional, and His Highness aimed to establish a new bank that was mobile, progressive, and tolerant, with Islamic values. When the company opened in 2008, the crisis forced us to look inward. As a CEO, my only aim was to protect the newly born innovation; I did not want to deviate from our goal. However, we redirected the strategy to focus on preservation and containing our capital. Now we are absolutely unleveraged and do not take or borrow money from any source. Thanks to our capital deposits, we also have zero debt. I believe that we became survivalists; we never forgot our vision despite tough circumstances and a trying environment. We are focused on the short term, and the bank now understands the risks; our appetite and ability to manage is evolving. We are an almost 55% state-owned bank, and this gives us an advantage in terms of decision-making. We would love to be the global brand for Islamic banks. In our experience, the industry is still small, and if you cannot consolidate the only option is to cooperate. If we hadn’t cooperated with Turkey, we would not have been able to finance $2 billion. If we want to be global, we must pool together to become sizable and compete with international banks. I believe that cooperation is a very good approach toward becoming competitive. We do not yet have a concrete plan for consolidation. I believe that cooperation has been the best starting point for Noor Islamic Bank.
Is there a misconception that Islamic banks are heavily exposed to real estate investments and not as reliable as their conventional counterparts?
I do think these misconceptions exist to a certain degree. Historically, Islamic banks have always looked at asset-based finance, and this is how the model started in the beginning. However, the model of Islamic banks has devolved significantly, and today there are many products that meet almost every need. There is plenty of room for creativity, and the consumer side has already established clear products. The wholesale side of banking still needs improvement, and every transaction involves innovation. Some of our experiences deal with a number of large companies. We sought opportunities to prove that we do not simply want to manage property finances, and we have been able to create a very good structure.
Is further regulation the solution?
People say that Islamic banks need more regulation in order to grow, but I say our industry grows without regulation. We create the industry first, and then regulation follows. If we had to stop to wait for the regulator to come, the sector could not evolve. The authorities can analyze our models and then regulate.
How significant is the retail banking division for Noor Islamic Bank?
Retail banking is important for Islamic banks. We are a fully licensed bank that engages in every type of business activity. Typically, retail has been a source of income that takes longer to build—it is a volume-based business that has been growing slowly. We have been carefully following digital media solutions, and we are aware that the next generation of customers do not typically come to the branch anymore. We have to promote and implement innovative products. For example, we were the first bank to introduce internet and phone banking in Arabic that could be used on any mobile unit. We were even approached by Google to devise ways to write from right to left. Noor Islamic Bank also introduced online account opening technology, because the upcoming generation seeks new types of relations. These are some of our interests that we are trying to demonstrate on the consumer side. There are many players in the consumer business market, and my hope is to see the business split 50:50 between wholesale and consumer banking.
Does the bank have a significant non-Muslim customer base?
In a place like Dubai, even the non-Muslim customers understand the Islamic banking system, unlike a non-Muslim brand in a Muslim market. I would say that the non-Muslim segment makes up almost 44% of our customer base. We never use Islamic banking jargon, because our non-Muslim customers require the same products. We are a bank that can compete with all the others.
Have you witnessed increased demand in terms of project financing?
Actually, demand has slowed down compared to 2011, but we expect it to increase again. For our economy in this challenging period, we think it is important to continue spending on infrastructure, which can help save the economy from the effects of the ongoing crisis around the globe. I’m aware that there are many projects in the pipeline, but it’s difficult to be involved in project finance without issuance.
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© The Business Year - May 2012