Today we are joined by Khairul Kamarudin, the new CEO of Bank Islam. Mr. Kamarudin takes over from Mr. Zukri Samat, who retired as Bank Islam’s managing director in June.
We will be discussing Mr. Kamarudin’s new role, as well as the bank’s aspirations concerning digitalisation and the community initiatives with which it is involved.
Mr. Khairul Kamarudin, CEO of Bank Islam Malaysia Berhad
Mr. Kamarudin, welcome, and congratulations on your new appointment. Would you say your style of leadership is significantly different from that of your predecessor, Mr. Zukri Samat?
Thank you. Mr. Zukri Samat was my mentor, and I had the privilege to be part of his team. The bank’s success stems from a deliberate turnaround strategy that dates back to 2006. I feel like an equal partner of what this bank is today, and hence, I don’t feel compelled to change. Yes, I am sure there will be distinctions in the way we run the organisation, as no two individuals are the same. But in essence, and perhaps more importantly, is the foundation that he had laid down—cultural strength that is based on ethics and integrity will remain.
What is the one objective you are hoping to achieve above all others during your time in charge?
Without a doubt, the environment we are in now is a lot different than the one we had several years ago. My objective for the bank focuses more on the long haul—more holistic and sustainable in nature in line with our Islamic finance values. For a start, we will be embarking on playing an important role of a value-based intermediary (VBI) as advocated by the Central Bank of Malaysia. This means that the bank will carry out an intermediation function that is driven by practices and conduct that aim to generate positive and sustainable impacts to the economy, community and environment (beyond mere financial return to shareholders). The concept is similar in intended outcome to environmental, social and governance (ESG) and sustainable, responsible and impact (SRI) investing but is very much tied to Shariah purposes. As a true-blue Islamic bank driven by established Shariah principles, we are the embodiment of that. Bank Islam has always placed economic progress and community wellbeing as priorities, alongside its financial performance. So to me it is about projecting ourselves as a VBI more strongly in the future.
Another area of focus will be digitalisation. Our strategy includes aiming at innovation that benefits customers coming from fintechs. For example, recently we collaborated with the US-based Cognizant to lay the foundation of a digital-banking platform across the bank’s entire network. We hope to develop fintech solutions that optimise resources, improve efficiency and enhance customer experience.
Bank Islam Headquarters in Kuala Lumpur, Malaysia
Do you expect to be taking Bank Islam in any major new directions, for example, in terms of new product offerings or growing the bank’s presence in new business areas?
Like I said earlier, our focus is VBI. Bank Islam comes from a deeper sense of purpose, and that is that we are here to serve the broader society and the common good. We are driven by something more than just our financial bottom line. We will start with the Value Based Proposition, which focuses on the triple bottom line approach—social, environmental and financial as well as operating within Maqasid (objectives of) Shariah; e.g., the bank’s role as a caliph (Islamic leader) is to preserve stakeholder’s value and wealth, to prevent harm and corruption, to ensure our product offerings and services are designed and offered to meet the needs of people and community in which we operate and to safeguard the environment.
Basically the core of our business model embraces the concept of shared prosperity with regard to generation, accumulation, preservation as well as distribution of wealth in a just and fair manner. To do so, we plan to:
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Gradually change our asset profile towards those that place importance on environmental, societal and governance matters.
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Continue our efforts in serving the real economic sector. For instance, greater participation in the SME (small and medium-sized enterprise) sector that could potentially create greater multiplier effects to the economy through increased productivity and formation of sustainable business chains.
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Focus on enhancing our customers’ experiences through our digitalisation plan. It is imperative that we continue our efforts, enhanced by digitalisation, in establishing strong relationships with our clients by understanding their business environments and supply chains.
You mentioned digitalisation just there. Indeed, it seems that technology and innovation are some of the watchwords for banks at present. What has been the most innovative development undergone by Bank Islam in 2017?
I am very proud of our track record in innovation at Bank Islam. It can be better, of course, but we are on the right track. We constantly try to look at how we can do things better, add value to the stakeholders and give back to society. One initiative is promoting charity and donations using technology. Bank Islam realised that many people are prepared to donate to charity to help those in need, but often remain unaware of the channels through which they can give. Hence, there is constantly a need to find new ways of facilitating donations to society’s most needy. Premised on this, Bank Islam in 2016 launched an innovative product and the first in the country, the ‘e-Donation’ Terminal using Visa PayWave, a platform where donations can be made through the contactless electronic method using any debit/credit card with the payWave feature. Several e-Donation terminals have been installed at mosques throughout Malaysia, which can be fully utilised by the mosques’ congregations as their donations can be made easily and quickly.
It is also worth mentioning that Bank Islam through its 100-percent subsidiary BIMB Invest has been partnering with its strategic partner UK-based Arabesque Asset Management Ltd in introducing Malaysia’s first multi-currency Shariah- and ESG-compliant global equity fund. The fund uses a quantitative-method system: a systematic, disciplined and rules-based investment process of stock selection driven by artificial-intelligence technology to identify value stocks around the globe through data analysis.
That sounds like an exciting partnership. It seems banks are also increasingly partnering with fintechs. How thriving is the fintech scene in Malaysia, and do you anticipate opportunities to collaborate with fintechs to develop cutting-edge products?
Currently, the Malaysian fintech industry has some interesting companies focusing on areas including billing and payment solutions to SMEs, mobile top-ups, money transfer, crowd-funding and currency exchange. Their target customer base are mostly Millennials, the expat population in Malaysia and SMEs. Though this covers some important functions in banking and addresses some imminent problems faced by customers, some other critical functions are not featured in the current scene, such as micro-financing, e.g. to students, Millennials, credit scores, insurance guidance, trading and personal-finance management. Fintechs in the United States, Singapore and India are actively pursuing these areas. We could learn from them.
That said, Malaysian startups have a distinct advantage of understanding their local customers and demographics. The focus on expats hints towards a customer segment that might be left out by the mainstream banks. So collaborating with the startups on this front will be an opportunity. Another area to tap is perhaps fintech companies that provide solutions to SMEs in the billing and payment function.
For Bank Islam, we have taken a step towards accepting fintechs with the recent strategic collaboration with Cognizant, allowing us to embark more on innovative digital Islamic banking in the near future. Cognizant, a leading global business and technology consulting firm, is ranked fourth on the Forbes Fintech list.
Are there any innovative banking products that Bank Islam has introduced recently that you would like to take this opportunity to highlight?
In October 2015, Bank Islam was one of the four founding Islamic banks to form a consortium that launched the Investment Account Platform (IAP). Similar to fintech platforms such as crowd-funding and peer-to-peer lending platforms, IAP facilitates direct investment by investors into viable ventures of their choice; however, a key differentiating factor of IAP are the roles undertaken by the Islamic financial institutions (IFIs). Before supporting a venture, the sponsoring IFI will perform due diligence and ensure that only those projects that comply with minimum disclosure standards are selected. Through IAP, it will provide investors with direct access to a broad range of investment opportunities, and businesses as well as Islamic banks with a new source of funding. Through IAP, Bank Islam recently became the sponsor bank to facilitate part-financing of a local company, CMC Group Sdn Bhd’s RM23 million telecommunication integration project for the Ho Chi Minh City Urban Railway System (Metro Line Project) in Vietnam.
Turning now towards Bank Islam itself, the bank’s mission statement includes the goal “to be a responsible and prudent corporate citizen”. Do you have one or two examples of how you put this into practice?
I have always believed that the bank’s mission must be ingrained in us. It becomes part of our life. It also means striking the right balance between pursuing growth and preventing over-leveraging among customers. We have tight standards, putting in place stringent underwriting criteria to rein in over-borrowing by customers. For example, the “net take home pay” requirement ensures customers have sufficient funds to spare for basic needs after deducting all of their financial obligations. This protects the trust placed in us by the stakeholders, such as depositors, investment account-holders and shareholders, in ensuring that the bank’s asset quality continues to be healthy and resilient.
We also maintain a high degree of transparency and inclusiveness in governance, corporate disclosure and reporting. By inclusiveness we mean maintaining active, open and mutual relationships with all of our stakeholders (regulators, customers, business partners, co-workers, etc.) not just limited to shareholders or management.
We ensure that our product offerings, business conduct, operations and eco-system comply strictly with Shariah requirements. As part of the governance process, the bank provides assurance of its Shariah-compliance activities and affairs in its annual report under “Report of the Shariah Supervisory Council” and “Statement of Corporate Governance”. In addition, one of the steps taken to uphold Shariah principles in the bank is our zero tolerance of Shariah non-compliance. Under this policy, Shariah non-compliant income derived from Shariah non-compliant events are not recognised as Bank Islam’s income and are subsequently channelled to charity upon approval by the Shariah Supervisory Council.
Your mention of charity just then brings us nicely onto Bank Islam’s waqf projects. Firstly, could you kindly explain the concept of waqf, and then outline some of the exciting new projects that Bank Islam is developing in this sector?
Waqf, an Islamic avenue, is the donation of land, buildings or money as an endowment, the profits from which are given away as charity. In Malaysia, Bank Islam is also the leading advocate for waqf, in which public-donated funds are channelled towards commercially viable projects that benefit society. Some examples of waqf projects are:
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Bank Islam’s own Waqf project: Our very own office building, now known as Bank Islam Headquarters, provides prayer and congregational talk facilities to more than 3,000 people per week. The construction of the 34-storey building at a cost of RM151 million (£27 million) was on an area of 1.2 acres of waqf land and undertaken in 2009 in partnership with two other organisations, Federal Territory Religious Council and TH Properties. Upon completion in 2010, Bank Islam had then leased the office building (under a 25-year lease). Currently, the prayer assembly area or better known as “Surau” located in the basement of the building has become the congregation centre within the Kuala Lumpur city’s Golden Triangle for prayers and talks. Since its inception, the surau has been organising various talks and activities for social and educational benefits. Reaping its benefits as a strategic location for numbers of office workers and the public to congregate, the surau has been able to act as a charitable organisation, where it has raised quite a fair amount of contributions from these visitors to be donated for good causes. In 2016, the surau held more than 300 talks aimed at elevating and enhancing various topics of spiritual and religious knowledge among its visitors. The venue is capable of accommodating about 5,000 visitors for Friday prayers at any one time, and throughout the year 2016 it managed to raise more than RM170,000 (approximately £31,000) for various charitable purposes.
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Affordable development in Selangor: In July 2016, in partnership with a property developer in the state of Selangor, Malaysia, Bank Islam agreed to provide project financing and end-financing for this project totalling RM15.5 million (approx. £3 million). Phase One will provide 164 apartment units, 25 shop lots and 34 bazaars in several areas in Selangor.
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School-construction financing: In August 2015, Bank Islam and Yayasan Islam Perlis announced a project to make Sekolah Menengah Agama (Perempuan) Al Madrasah Al Alawiyah Ad Diniah Yayasan Islam Perlis, a girls’ religious school in the state of Perlis, a reality after the project faced years of delay due to the inability to secure financing. This school will provide education to more than 300 girls. Bank Islam played a key role in promoting and collecting contributions from our customers, corporations, government agencies and the general public to make this project happen. Banking fees for tuition payment into the Waqf account are also sponsored by Bank Islam. Currently at the fund-raising stage, Phase One of the project is focused on building an academic block, a hostel, a lunch hall, warden’s quarters and an assembly hall. The entire project is anticipated to total RM22 million (£4 million approximately), with Phase One requiring around RM7 million.
Well, it sounds as though you are managing to generate much success through these well-intentioned projects. The bank seems to be on the cusp of a sizeable transformation, and you appear to have many exciting projects in the pipeline. Mr. Kamarudin, thank you for your time, and we wish you all the best in your new role.