What challenges did RAKBANK face during the pandemic?
The initial part of the pandemic was uncharted territory for everyone. As in any crisis, the best approach is to focus on a few key things. Number one was the health and safety of our employees, customers, and stakeholders. Number two was about keeping the ship afloat, namely keeping our doors, phones, and systems open and seeking ways to run the organization in a way it has never been run before. Number three was liquidity, and number four was doing whatever it took to help our customers through the crisis. I told my team that if something is not within one of these four pillars, we do not need to do it. Once we agreed on those four priorities, we ran RAKBANK until August 2020 without planning much for the future or carrying out grand projects. This was our short-term resilience, and it got us through the worst of the crisis. There was not a single day where our customers could not get something they wanted. The immediate crisis subsided for us in June-July 2020, and in August we began thinking about restarting growth and regaining our former traction. We swung from that mode to gradually reopening and talking to clients about borrowing more money or helping them with expansion plans.
How was RAKBANK able to achieve 70% YoY growth as compared to 4Q2020?
We got there with a combination of things, though the main one is that our bad debt situation is significantly better than it was back then. In 4Q2020, it was different because there were a number of other factors coming into play that meant we could have upside going into 2021. The way forward now is about growing income more actively and strongly. The provisions or bad debt levels will be okay. The mission now is all about getting back to growing business. The UAE has handled the crisis remarkably well, and we will benefit from that. It is just a case of how long it takes for consumer confidence, particularly SME confidence, to come back strongly.
What is your insight on the potential for RAKBANK's partnership with US fintech Miza?
Miza is one of several companies we have worked with. We are one of the first banks in the UAE to work with fintechs. In our case, we worked actively with a fintech company called Invoice Bazaar, which has a similar but different business model to Miza. We work with a company called Versify Tech Solutions, a cloud-based accounting package provider. We offer accounting solutions to our clients through our SME digital banking offering. We are also working with BitNudge, which provides us with CRM solutions. For us, it is about finding partnerships that add value, rather than hanging something on the wall that suggests we are into fintech. Miza is interesting since its initial focus is the healthcare sector. In the UAE, the space around supply chain financing and invoice financing has been fraught with challenges in the past. The whole idea of fintech, whether its automation or technology, or being able to help banks understand that what they are financing is genuine, is a huge opportunity for banks, suppliers, and buyers. We were also one of the early adopters of blockchain and were one of the first banks to partner with Ripple. We can do instant, online, real-time transfers to about 25 markets. We use SWIFT, host-to-host connections, or Ripple for our connections to India, Pakistan, Sri Lanka, Nepal, Bangladesh, Europe and, more recently, the Philippines. We can do it without blockchain technology, but because it is in place in some banks elsewhere it makes it easier for us to connect.
In what ways does RAKBANK offer concrete support and foster the creation of SMEs?
Our approach is heavily SME-centric, and we do everything we can to support UAE's economy. We have been a relatively large player in the SME sector for the past 12 years. The UAE went through a difficult period in 2014-2015, which I call the SME Crisis. I suggested it was a golden opportunity to cement our place as the number-one Small Business Bank in the UAE, and that is what we did. We decided that no matter how bad it got, we would put even more energy and effort into supporting our SME clients. RAKBANK put in great effort into becoming the number-one player. Our balance sheet in that space is not huge, but our deposit and lending activities to SMEs for companies with turnover of less than AED100 million per year makes us far and away the number-one Bank—we have a 40-50% market share in that segment. COVID-19 was also a great opportunity to stand by our SME clients. We provided debt relief for up to 50% of our SME borrowers during that period, and 90% of those clients are still in business. The importance to us strategically is the most important aspect, and this differentiates us from everyone else.
What are your goals for the rest of 2021 and beyond?
For us, it is about continuing with the rebuilding post the peak of COVID. We are seeing bright signs in the UAE economy. The UAE and Ras Al Khaimah have done a great job in finding the best possible balance between health and safety and keeping the economy open, and we are seeing increased confidence. The government has great work in fine-tuning the visa program, 100% foreign ownership for companies, and other incentives to encourage expats to settle. For us, it is not just about capitalizing on that opportunity, but understanding there is a significant opportunity there and finding the best way for RAKBANK to carefully grow back into those segments. Looking further ahead, RAKBANK used to be a more product-centric organization; however, when I came along, I suggested diversifying our balance sheet. The SME segment is how we differentiate ourselves in the market. Compared to six years ago, RAKBANK has plenty of capital and liquidity, and there is nothing to stop us from broadening our horizons. We lend money to banks in Bangladesh, Sri Lanka, Nigeria, and other African countries. Today our balance sheet in that space is AED7.5 billion, and is very profitable and low risk. Overall, we believe we are well placed to actively support the UAE economy, and especially assist in driving the growth and development of Ras Al Khaimah.