We are joined by the CEO of Ithmaar Bank, Mr Ahmed Abdul Rahim. With more than 30 years in the banking industry, Mr Abdul Rahim is one of the most experienced banking leaders in the Gulf region. Today, he provides us with his views on Ithmaar Bank’s recent performance, the global Islamic banking industry and the increasing use of technology in banking.
Mr Abdul Rahim, welcome.
I’d like to begin by discussing some of Ithmaar Bank’s recent financial results. Last year, in particular, seems to have been a stellar one for the bank, in which it returned to profit after posting losses in 2015. How well-positioned do you consider Ithmaar Bank to be in being able to continue generating sustained profits over the next few years?
Ithmaar Bank is well positioned to take full advantage of new growth opportunities and to help generate greater value to shareholders following the successful completion of the reorganization at the beginning of the year and the formal commencement of the new group structure resulting in three entities being established, namely Ithmaar Holding Company B.S.C. at a parent level and listed on Bahrain Bourse and Boursa Kuwait as the holding company of Ithmaar Bank B.S.C. (c), which is a retail-banking entity focused on retail banking, and IB Capital B.S.C. (c), which is focused on investment banking. All three entities are licensed by the Central Bank of Bahrain.
Ithmaar Bank B.S.C (c) is now entirely focused on retail banking, wherein lies a great potential for growth and sustainability as the bank has been in the Bahrain market for several years and is considered one of the biggest Islamic retail banks, and this growth story continues. One of the critical factors for the bank to have sustained profit levels is to continue to grow its quality assets within its overall risk appetite, and retain and nurture its valuable human resources; the bank is proud to have one of the best human-talent pools available in the country. The Strategic Business Plan of the bank is reviewed to ensure that business levels are commensurate with the business plan; and the same is revised to complement the prevailing and envisaged economic conditions, and the related KPIs (key performance indicators) are stringently monitored. With these processes in place, the bank is confident it will have sustained growth and profitability levels in the years to come.
You mentioned the importance of human capital just there. One of your brand values, which presumably requires the bank to have exceptional human talent, is Responsive Action. According to the bank’s website, Responsive Action means that “we go about our business every day with an ongoing sense of urgency, always aiming to ensure that our actions and responses meet or exceed customer expectations”. Are you able to provide an example or two of how this responsiveness works in practice?
The business model of the bank is customer-centric, and it is an ongoing objective of the bank to exceed customers’ expectations, be it with new, innovative banking products or the speed of delivery. Ongoing enhancement of processes and technology is undertaken to ensure that the waiting period at the branches is reduced and the customer is provided various delivery channels for services like an efficient 24 X 7 X 365 call center, Internet banking, convenient payments solutions such as EasyPay and mobile banking. The turnaround time for approval of financing requests is ensured to be the shortest, albeit with comprehensive underwriting of the risks. While addressing the customer’s expectations, the bank is also conscious of its responsibilities towards the customer to maintain confidentiality of his or her information; in the current market, there is the constant cyberattack threat—towards this, the bank has implemented state of art information-security systems, which are compliant with international standards, namely ISO 270011. The bank is currently in the final stages of completing the requirements for getting the PCI DSS (Payment Card Industry Data Security Standard) certification.
Your highlighting of Internet banking and mobile banking just then suggests you place a particularly high value on technology. Given the fintech revolution taking place in the world today, what are some of the main ways in which the bank is incorporating fintech solutions into its banking business model?
The bank is going through major upgrades for the core banking systems, ebanking and other critical systems, which is a step towards having in place state-of-art technology, protecting the interests of customers and initiating digital-banking initiatives. The bank recently launched EasyPay, the first-of-its-kind mobile-payment service in Bahrain. The new service uses secure near-field communication (NFC) tags to eliminate the need for cash or cards by allowing customers to shop simply by tapping their mobile phones at the checkout counters of participating merchants.
Earlier the bank was the first in Bahrain to launch its award-winning MobiCash (the first card-less cash withdrawal) service that is currently offered on all of the banks’ ATMs. The bank is a strong supporter of the recent e-organizer-wallet developed by Benefit Company.
It certainly seems that you are leading the way on the technology front. But one tech-related issue that seems to be a growing problem in the global banking industry is cybercrime. Has Ithmaar Bank taken specific measures to prevent cyberattacks from taking place in the future?
Towards this end, the bank has initiated several measures, including but not limited to ISO 27001 certification, obtaining PCI DSS certification, cybersecurity risk assessments, social-engineering testing and, last but not the least, business-continuity management governed by an active Crises Management Team chaired by the CEO.
Clearly, you appear to be doing much to counter this potential threat. However, political risk is another issue that could potentially affect Ithmaar Bank, particularly in the case of one of the bank’s operating subsidiaries—Faysal Bank (FBL)—which is located in Pakistan. Does the heightened political risk faced by this country concern you?
The Pakistan economy continues to improve, and increased financial stability has been achieved through enhanced structural reforms and a government which has made reasonable progress over the past two years or so. Under CPEC (China–Pakistan Economic Corridor), part of China’s efforts to expand trade and transport linkages across Central and South Asia, about USD 46 billion is expected to be invested in transport infrastructure and energy-related projects, including roads, railways, pipelines and power plants in Pakistan over the next 15 to 20 years. CPEC has the potential to improve Pakistan’s business environment by improving infrastructure, and thus to stimulate domestic and foreign investment over the longer term.
In the year 2016, FBL’s primary focus was on the expansion of its footprint. It accomplished its goal of opening 75 Islamic branches in 2016. This led to increasing its branches to more than 350 and increasing its presence in more than 100 cities throughout Pakistan. During the course of the year, along with the expansion, another key initiative was to introduce new, innovative products and to tap unserved customer segments and penetrate the market effectively. A coherent effort was made to offer bundled products in order to diversify the bank’s portfolio offerings and create better customer experience. The bank initiated the groundwork to move towards a digitally savvy organization, which will translate into a straight-through process for customer facilitation on the back of technological advancement. The initiatives of 2016 have not only impacted the business volumes and profitability but also set a strong foundation to offer increased value for the bank’s customers in the ensuing challenging macroeconomic environment, which is bound to extend into 2017.
You mentioned just then the “opening of 75 Islamic branches in 2016” by FBL. Does Ithmaar Bank exclusively cater to the Islamic world, or are its products and services also available to non-Muslim customers?
Ithmaar Bank offers its products and services to all customers, both natural persons and corporates including financial institutions, regardless of their religion—provided they meet all applicable regulatory requirements and satisfy the bank’s own know-your-customer (KYC) requirements. The bank has customers across all religions, faiths and nationalities as Islamic banking in today’s world also appeals to what is known as ethical banking
As a pioneering Islamic retail bank, Ithmaar is absolutely committed to ensuring that all its products and services are compliant with Islamic Sharia rules and that it conducts its business accordingly. Ithmaar Bank’s Sharia Supervisory Board actively participates in providing the guidance and supervision on all products, services and business activities and is responsible for certifying every product and service to ensure strict adherence to the principles of Sharia.
And as for yourself, Mr Abdul Rahim, you have now been CEO of Ithmaar Bank since January 2014. In the three or so years since then, have there been any significant improvements to the bank that you have inspired?
Post assuming the duties of the CEO, the first thing that I initiated was the reorganization of the bank, focusing on improvement in customer services, enhancing the quality of the delivery channels, investing in technology to ensure that the customers of the bank have access to the latest technology in terms of services provided to them, developing the bank to be one of the most favored employers and adopting the international best practices in the field of technology, risk management, compliance and accounting. The adoption of the latest technology is to enhance the customer’s experience and also protect his or her interests in view of the increasing levels of cybercrimes and attacks, especially on financial institutions. The value of human resources has been of paramount importance to me, and towards this end the management at the bank is focused on nurturing the skillset of the employees by ensuring ongoing training, onboarding of Bahraini youth and developing them to be promising bankers of the future. The rewards policy for performing employees is under constant review to ensure that the bank is the most favored employer. Systems and processes are in place enabling the bank to be compliant with the international best practices in the field of technology, risk management and accounting.
Well, evidence of adoption of the latest technology is certainly there for all to see. I suspect that this embrace of technology will put Ithmaar Bank in good stead for the future, both in terms of improving the overall customer experience and the bank’s financial performance.
Mr Abdul Rahim, we wish you and Ithmaar Bank the best for the coming years. Thank you for your time today.