MANAGING RISKS

Oman 2020 | FINANCE | INTERVIEW

Bank Nizwa's goal is take the whole Islamic finance industry to a higher level by consistently growing its bottom line and market share.

Khalid Al Kayed
BIOGRAPHY

Khalid Al Kayed is the CEO of Bank Nizwa. A financial industry veteran with over 25 years of experience under his belt, Al Kayed served the bank initially as CFO before taking on the responsibility of CEO. Prior to joining bank Nizwa, Al Kayed worked for numerous well-respected financial institutions, as deputy CEO and CFO at Jordan Dubai Islamic Bank, CFO at Standard Chartered Bank Jordan, and financial controller of the offshore banking unit of Jordan National Bank Cyprus. He holds a master's degree in international accounting and finance from Liverpool University. He is also a certified management accountant and certified financial manager.

How will the COVID-19 pandemic impact Oman's economy in general and the Islamic banking sector in specific?
The pandemic is not only an immense health crisis, but also an imminent restructuring of the global economic order. Despite efforts to contain it, the outbreak has had far-reaching consequences. Public health measures to slow the spread of the contagion, such as social distancing, have turned to be effective, but at the same time such measures have blocked the flow of goods and hindered the economy. As a result, economic contagion is spreading as fast as the disease itself. Oman's government took prompt actions, which is why the numbers in Oman are well under control compared to other regional countries. The central bank made the necessary adjustments to provide much-needed support to banks. Moving forward, Oman's diversification plans will provide much-needed stimulus to the economy in 2020 and beyond.

Oman is set to enter a new economic cycle characterized by the financing of long-term infrastructure projects, privatization, PPPs, and SMEs. What opportunities will this economic environment generate for the Islamic banking sector?
Oman is maintaining sustainable growth, following the new reforms and governmental initiatives to diversify sources of revenue while increasing spending in key sectors. In the face of unprecedented global challenges, the country has remained steady and resilient in creating new opportunities in a wide variety of sectors. Infrastructure projects, traditionally financed by the government because of their huge investments, need to find funds from alternative sources to fill in the financing gaps brought by budget deficits and increasing public debt. Our solution to this funding gap is represented by sukuks (sharia-compliant bonds), so that investors in infrastructure projects have the option of either directly investing in a project or buying project sukuk. Aside from sukuks, the Islamic banking sector can assist investors with a range of different solutions, such as advisory in structuring the deal and financing through appropriate trade financing facilities. The central bank has already identified Islamic interest, which is an advantage coming into the market. Oman is a relatively smaller market, and liquidity is a concern, but fluctuation in the Oman market is less than others, which entails less risk.

Which commercial sectors are you looking at for medium-term credit growth?
There are numerous sectors expecting growth, such as manufacturing, tourism, logistics, mining, fisheries, infrastructure, and trade. The banking sector will thus seek to capitalize on its resilience to sustain the economic backdrop, together with the support of the authorities committed to implementing a series of new initiatives to ensure a gradual fiscal consolidation. In this sense, a bank's risk-management strategies play a crucial role. Bank Nizwa's approach, for example, is focused on the selection of clients and being specific on its project's cash assignments. Our strategy is to go into more secured credit and sacrifice the profitability. Moreover, the government is bringing some companies under one public umbrella. In 2021 and 2022, this will be our area of focus, along with increasing the limit of credit line from USD35 million to USD100 million.

Where do you see avenues for growth in the medium term, and what factors will drive them?
Our goal is to take Bank Nizwa and the whole Islamic finance industry to a higher level. To do so, we are consistently growing our bottom line and market share and setting strategic priorities on asset quality, liquidity, profitability, and efficiency. Our total assets grew by 19% in 2019, reaching OMR1.03 billion from OMR872 million in 2018, while our total customer deposit portfolio reached OMR797 million, achieving a growth of 11% YoY. We also had to increase our efficiency through re-engineering and revisiting processes. As a result, we have a plan for digitalization, which will include upgrading our core banking system and bringing more enhancements to the way customers can reach the bank. Looking at the longer term, we are planning on increasing the number of customers outside Oman's borders, both high-net-worth-individuals and institutional players.