Simon Hughes of International Banker interviews Dr. Khalid Abdulla, General Manager of Eskan Bank on the highly influential role of the bank in the housing market in Bahrain
Congratulations to Eskan Bank on the award for Best Customer Service Provider of the Year, Middle East. Many congratulations.
Thank you very much, Simon. I accept this with, of course, honor, and I would like to dedicate this to … this was because of the hard work of all the employees of the bank. And because of the inspirational guidance that we see from our chairman, the Minister of Housing. And also I’d like to acknowledge our executive team members for their dedication and hard work. I’m very happy to receive this, and I’d like to dedicate it to all the employees of the bank for their perseverance. Together we are achieving so much. Thank you very much.
Let’s start with your working relationship, I suppose, with the Bahrain government. Are there any instances when your objectives are not completely aligned with that of the government, and if so, how do you handle that?
Luckily today we are very much in sync with the government’s overall objectives, and we are doing that through maintaining a very close relationship with the Ministry of Housing, whom we consider as our senior partner. And a full, close relationship we maintain with synergies in terms of what we do. And that is why our work becomes more complementary rather than competitive or redundant sometime. At some point in time Eskan Bank had activities that we can label as commercial. Over the last few years we have refocused the core business toward the social agenda, which is set by the government and manifested by the objectives of the Ministry of Housing. So today we are working very closely and complementing. We are acting as the flexible financial arm to the government when it comes to the social-housing agenda.
And the other side of that is obviously the private sector and getting them involved. So what methods does Eskan Bank use to get the private sector involvement in social housing?
I think the word respect maybe sums up our approach. Initially I come from a private sector so we know what is the private sector’s objectives. We approach these objectives with utmost sensitivity, and we do dialogue and work out, and sometimes we go out of our way to secure what they are looking for as objectives. And frankly they do appreciate sometimes even the effort, even if they have to compromise a little bit on the rate of return, for example. We … one thing we ask them direct, “What sort of rate will you be looking for?” And then we work together. Sometimes it will be a little bit slower, but they know, because we have mitigated the risk, it is more secure. So we speak their language. And we do engage in a partnership spirit whereby it is a win-win kind of, we secure a win-win relationship rather than turning it into a battlefield, where somebody tries to overpower the others. Actually we inject a lot of this comrade spirit without losing sight of the overall objective, that is return and profitability. That’s why I think we’ve been quite successful to attract a lot of private sectors. And for our future endeavors, we started tapping into the international financial sector, and we are very pleased with that kind of response we are getting.
Now you used the word relationship there, and if we think about kind of customer service, your customers include the public, the private sector and the government. How difficult is it to design comprehensive customer-based solutions when you’ve got so many different customer bases, in a way, so many different strands, which have little in common with each other?
It appears that they have very little in common compared to each other, but when, actually when we do conduct our business, we find that there is a lot of commonality. For example, the government’s objective is to see every Bahrain citizen staying in the comfort of a good housing unit, and they would like to see good access to financing programs. So we consider private financial institutions, private developers as our partners. So in attaining that objective, working out solutions together, we are making the government happy to achieve its objectives. And the private sector invested with its financial developers are happy. And the customer at the end of the day who is enjoying this service is also happy. We do adopt a 360-degree view when approaching our clients, whether that is individual or supplier or the government for that matter. Because inject certain level of lending ourselves to the cause and to the service. And up to now it has been successful. It is not entirely compatible. There sometimes appears conflict in terms of maybe they like to cut corners and trim their quality. But overall it’s complementary. And once you manage to lead people to see the bigger picture, negativity and the small skirmishes subside.
Now talking about kind of quality, one of the aims of the Tomooh program has been to encourage apartment-style living amongst first-time homebuyers. Now why do you think the population traditionally has been so averse to that type of housing, and have you seen more of a kind of uptake since you launched that program?
We have the traditional line of thinking of inheriting to your children whatever land has been prevailing. And actually this is a cause of a lot of problems that we’ve seen, whereby different children have entitlement to small plot and the house. And this causes a lot of feuds, sometimes, between families. We are trying to alleviate this thinking into the more rational thinking of tying affordability and requirements to make them work more hand in hand. And we want to inject more rationality into the financial planning in terms of attaining a house. We are in opposition to denying people the dream of having a house. And actually we want to promote that. But we want them to approach it in a sensible manner that doesn’t put them under immense financial pressure that might affect even the quality of the life that they’ll be living. So our slogan for Tomooh is that apartment is your best route toward having a house or a villa. And that is because in the initial stages, people’s requirements are very limited. Especially when we are talking about the young families. And they need, rather than overburden themselves, they can spend this money much more wisely on their child’s education. Whereby if they go to a good school, to a good university, they will be the person to acquire the three units rather than the unit that was uninhabited. And luckily we found quite an amazing positive response among the younger generation of Bahrainis. And we are trying to develop the pull factor. There is a big push factor, and that is to have to wait for so many years to get a house, to have access to a house. And we are trying to, we succeeded in developing the pull factors, whereby our new developments …. We are not in the business of developing pigeonholes, similar pigeonholes. We are in the business of building communities with all the amenities and facilities that are positively energized, and whereby we approach building issues as we are building for our children. So we approach it with utmost respect toward their aspirations. We’ve seen quite a remarkable uptake amongst this target group. Our latest development, which is 164 apartments—it was picked up in less than a month’s time. And another development whereby we have 84 units, we have pending applications fourfold the development. So it shows that people are becoming more rational in their approach.
And it’s almost like they are adopting that “first step on the property ladder” approach.
Exactly. And we want to introduce a concept that is very much prevailing, which is that first-time buyer and engaging in upgrades throughout his career.
Now I know that you are also facing an interesting challenge which is the launch of the real estate investment trust. What opportunities do you see opening up for Eskan and Bahraini citizens from the launch of this trust?
This will be the first time that an Islamic REIT is launched in Bahrain. And it would be liquid, as it will be listed on the stock exchange from day one. And I have to acknowledge the support that we will receive from the central bank in this respect. And we’re aiming at launching in the coming couple of weeks. I think for Eskan Bank, it’s provided a fantastic opportunity to afford the non-core properties. Our focus is on residential real estate, but as part of developing such communities, we have to develop mixtures, so we have commercial buildings, we have shops, we have even malls coming up. And the REIT will provide us with a nice exit route too, through which we will get refunded, and we can use the cash liquidity again in social housing. But also it offers a fantastic opportunity to the people, to our citizens to acquire these units of REIT, whereby you have kind of secured returns, and we are able at the retail, so we have reduced the minimum to 500 BHD, which is almost 1,000 pounds. So that the retail sector has access to this good a quality asset, and we are promising a return, an annual return, that is of course to 7, which is in today’s low interest environment considered a very generous return. Again we see in it as a win-win. The rate will be open even for third parties to afford their properties. Of course, subject to very stringent due diligence and fair pricing.
Now, I mean listening to you, it’s very clear that Eskan Bank shifted its focus away from retail banking during the last few years with a really sharp focus on affordable housing. How much has that shift changed the way banking is conducted on a day-to-day basis?
I think to a large part we remain a retail bank in terms of serving I would say a special purpose. A retail bank whereby our focus is social mortgages. But we’ve seen the growth in investment banking as we engage more and more private sectors, so our activity and structuring and financial innovation has been increasing tremendously. Today we are engaging the private sector on a daily basis for projects. Social housing, affordable housing projects. And so there is kind of a change in the focus of our activities. I think our people in retail banking are doing a fantastic job. The approval rate that I see is fantastic. We have more than 95 approval rate of the level of customer service that people are getting. But we are focusing and extending our customer service beyond that meet and greet into developing solutions whereby we are engaging more in financial structuring so that the investment banking side is a growing one.
Now we talked about that kind of behavior change in terms of that first step on the property ladder. Does the same kind of change take place in terms of perception within Bahrain about affordable housing? Do you think there’s been a shift in the way people view affordable housing?
Actually we’ve seen that. Affordable housing, like, for example, the perception of council houses in Britain, usually they will approach somehow with a certain negativity. And probably this wasn’t the case, but today we are seeing that the Ministry of Housing taking the lead in developing units, very spacious apartments, 200-metre apartments, with all the amenities. The design of the houses—much thought has been given in terms of how to create a very welcoming for the family atmosphere. And in the same way we at Eskan Bank in approaching our developments programs, whether they are vertical or horizontal developments, we are trying to create this positive feeling of spacious, of having all the amenities whereby you have a very healthy community in a place. So we are seeing now a class people, segments of people that I would call a permitted class, adopting these units, which is a great sign to see.
Now the other question we always ask in these interviews is about technology. Banking technology. How do you ensure that Eskan Bank remains at the forefront of banking technology?
I’m not sure about the forefront. But definitely when it comes to serving our customers, I have always seen technology as a great enabler. And our focus is on how to generate value out of technology. So that’s why we are amending toward the end of finalizing instituting our new core banking system, which would turn our system to more agile, given that we have a specific requirement that some time vary from the standard commercial bank requirement due to the various programs of social housing administered by the government in Bahrain. So we do see technology as an enabler toward a more agile organization in terms of responding to changes. We are also in the end stages, I would say, of developing Eskan Bank’s app whereby our customer base would be able to interact with various services. Also we would like to make use of it as a marketing tool, especially that will be going into thousands of units from the hundreds that everybody is used to. We are also revamping our site toward more dynamic. Today customers are exposed, and they have developed huge expectations in terms of how IT serves them, and we are trying to fulfill such expectations.
And behind all of these developments is the kind of culture of the bank itself. How would you describe that culture? And how does it determine how things get done within Eskan Bank?
I think a lot of the culture, so to speak, stems from the vision and mission of the bank. And also from the core values that we agreed in a participatory manner, where all the employees were involved. And we did identify four important core values that have influenced the shape of the bank and that prevailing culture. And we have as our top priority integrity, whereby we are instituting “100 person”. We think that “99 person” community doesn’t belong to Eskan Bank. And then the culture of ownership whereby people assume ownership for their task. And ownership here doesn’t stop at sending the email or doing the follow-up call. It is actually seeing the task through. We adopted the notion that “99 person” completion is not completion. It has to be “100 person” completion. So we’ve seen the level of people assuming ownership, which translated itself into results achieved. We also adopted respect as a huge value that’s impacting the bank today. We approach customer service with a profound respect of the aspiration of our customer. Hence we go beyond, we go to the root causes, try to come up with a solution. So respect also when approaching the customer on every matter. And innovation. And we are seeing quite a bit of that. It varies. Sometimes it is in a small thing that has to do with how you reuse the papers to innovation in financial structuring that would serve that social housing agenda in Bahrain.
You mentioned the importance of your partnership with the people in the Ministry of Housing, the Ministry of Finance. How has working with them benefitted Eskan Bank?
I think it’s benefitting us tremendously. Mainly in terms of showing us, providing us with the guidelines of … so we make sure that our compass is right. Our continuous and close work with the Ministry of Housing ensures that all our efforts are dedicated toward the main agenda, the government of Bahrain, and that is to see the waiting list shrink and provide all the solutions to people that enable them to access their houses. And the Minister of Finance as the overall supervisor of that government financial affair also receives guidelines in terms of what is possible and not possible, which helps us in putting together our financial structures. For example, today we are seeing a lot of people interested in engaging and developing social housing. I’m talking here about foreign direct investment. Without a sovereign guarantee or a buyback guarantee from the government. And I think this is due to Bahrain’s long stance as very secure. We haven’t had any incident of default; there was no delay in meeting all of our commitments. This soundness of how to manage public funds has enabled us to engage the foreign direct investment without these sweeteners, and they’ve accepted it because they believe in our agenda, in our rationale. So through this close relationship, we are managing to structure a program with least cost to everybody.
And when you’re talking about foreign investment, do you see foreign investment becoming a significant factor in terms of the development of affordable housing?
Actually our future focus is on foreign direct investment. Currently we have five major initiatives by Bahraini standards in terms of social-housing projects. And we are structuring all of them through partnerships with foreign direct investment. We’ve been particularly pleased when we have issued a teaser into the market, about the first of these projects, and we had results that were really pleasantly surprising in terms of peoples’ interest in working in Bahrain and with Eskan Bank and social housing. So, yes, our focus is … we already are seeing a lot of foreign direct investment in smaller projects of 500 and 1,000 units, but when we launched a project of 4,200 units, we had a fantastic response, which would be reinforcing our effort in this regard. So, yes, I think we’ll see a lot of foreign direct investment to the social housing sector in Bahrain.
Now we always like to explore our guests’ CSR credentials, and I know, for example, some of the developments—your solar power, use of LED lighting, which is a way of reducing costs ongoing, the running costs of things. Are there any recent successful CSR projects that you’d like to highlight?
I would consider that our core engagement is of CSR nature. I don’t see anything more CSR than providing housing to the needy, to people. I don’t see anything more CSR than coming up with a program that secures access to finances to people who are less privileged and enable them to access their units. So we are fortunate to engage in CSR as a core business. But beyond that we also do engage in many CSR, and I would like to engage in initiatives where we generate value out of it. I think of Eskan Bank’s award for innovative engineering, now running into its fourth year. Very successful program whereby we are targeting young engineers, trying to equip them with the right skills and vision and approach. And we are seeing a lot of promising young Bahraini engineers adopting these values, and we like to spread them throughout the sector. Also we have donated a 3D printer to the university to make the lives of these students much easier. And we are seeing a lot of models developed by these students. One way we approach CSR, we would like to see a value generated, a social value generated. Of course, the employees of the bank engage in so many activities of raising funds for the needs of different needy groups.
And finally I’m thinking about the next three-year period. What are the major objectives you hope Eskan Bank will achieve?
We would like to see ourselves play a more active role and contributing to the government’s objective and fulfilling its promises of delivering the housing unit and program to the citizens of Bahrain. I see ourselves working even closer with the Ministry of Housing, where we get our inspiration from his excellency the Minister of Housing, who’s the chairman of our board. We see ourselves moving in terms of development to areas that are not very close to social housing but a lot of meaning behind development, of developmental nature. I see us playing a role in that respect. I see us benchmarking for the new developments in Bahrain in terms of the green aspect of sustainability. I see ourselves to be an established regional name when it comes to social housing, whether in terms of financial structuring of the program or the actual development of the units.
A lot to look forward to, and thank you very much for your time today.
Thank you very much.