Al Baraka symposium is regularly held each Ramadan where renowned and famous Shari’a scholars, bankers and experts discuss some modern banking transactions and issue some Shari’a opinions (fatwas) and recommendations for the enhancement of Islamic banking and solving its problems. The forum had been held since its first inception in Medinah 1981 and up to-date in different cities, including Al-Madinah Al-Munawarah, Makkah Al-Mukarramah, and Jeddah in addition to Damascus, Cairo, Kuala Lumpur, Beirut, Istanbul, Tunis, Algeria and Jordan.
It is worth highlighting the career of the famed Arab Islamic banker Adnan Ahmed Yousif, Board Member and President and Chief Executive of Al Baraka Banking Group. Yousif entry into working life was in the form of an executive trainee with Habib Bank in 1973-74 where he was exposed to many aspects of banking operations. In recognition of his initiative and potential he was appointed in 1975 by American Express as Assistant Manager - Operations in Bahrain, where he served until 1980. In addition to the knowledge of banking operations that this experience provided, he gained exposure to credit analysis and marketing – later to form the platform for much of his banking knowledge. Later on, he joined Arab Banking Corporation and ABC Islamic Bank. Adnan left ABC in the first quarter of 2000, after an illustrious career to date spanning two decades. For the next 4 years he served as Chief Executive Officer at Bahrain Islamic Bank, one of the premier Islamic banks in Bahrain. At the same time as holding down this important role, Adnan also devoted time to developing the concept of Al Baraka Banking Group (ABG), having been chosen for this purpose by the pioneer of Islamic banking, Shaikh Saleh Abdullah Kamel, one of the most successful self-made businessmen in the Kingdom of Saudi Arabia. Adnan was entrusted with the formidable task of welding together the several individual and separate Islamic financial institutions, spread across 10 different countries, which formed the banking empire of Shaikh Saleh into a single banking group - ABG.
Under his stewardship, Al Baraka Banking Group has flourished and grown many fold and is accredited with many successes, the recent ones being the 2007 Initial Public Offering of the shares of Al Baraka Turk Participation Bank, oversubscribed 32 times and the 2009 Al Baraka Bank Syria Initial Public Offering that was 4.4 times oversubscribed.
His vision for Al Baraka Banking Group is simple, yet far-reaching in terms of business goals, Islamic ideals and social philanthropy: to create a society that would comprise of a fair and equitable financial system- one that rewards effort and contributes to the development of the community.
In 2008, Yousif was appointed Chairman of the Union of Arab Banks. Since his appointment he has served as ambassador for the Arab world, establishing the profile of Arab banking and of all Arab banks everywhere.
BL: At Al Baraka Symposium the 34th, you provided valuable information on Islamic banks. Presently, how much is the balance sheets of Islamic banks?
Yousif: Currently, Islamic banks’ balance sheets globally grew to $1.5 trillion.
BL: Certain rumors state that there are some Islamic banks showing losses that are not declared publicly, so is it true?
Yousif: Banks under the supervision of any central bank whether in Bahrain or outside, publish their accounts openly because by law banks have to publish their accounts and show their profit or loss. Financial institutions (traditional banks or Islamic banks) should not shy away from correcting their mistakes. We thought that the mega European and American banks are always safe institutions, but we learned the lesson in 2008, 2009 and 2012 that these institutions also suffer a lot and many of these institutions suffer more than the middle or small sized banks. Therefore, the international governments and their central banks took the action and corrected their banks and put them in the right direction. I think that Islamic banks and traditional banks in the Arab World should not shy away from correcting their mistakes and there is nothing wrong in incurring loss in business, we are taking risk and this is part of the game. In both trade and banking, you enjoy profit and also you suffer losses.
BL: How to calculate Zakat?
Yousif: Since four years and under the direction of Sheikh Saleh Kamel, we put this subject of Zakat and its calculation as part of the symposiums panel discussion. We discovered that because of the changes in the structure of companies in the Islamic countries, the calculation of Zakat has to be also updated or upgraded because in the old days companies were restricted to partnerships or maybe those companies were small and also most of their goods are coming within one year and most of their debts is also matured in one year, that was a very simple structure at that time, but now we have too many things happening in this period. Banks or companies are created, there are parents companies or parent financial institutions which own subsidiaries, and there are debts on these companies that are either in short term, medium term or long term. Furthermore, there ate profits which are located in certain countries which have not been transferred to the parent company, all these aspects complicate the issue of Zakat, it is not straight forward like in the old days. Consequently, we felt that this is a very important subject which has not been given the chance to be discussed. At this last symposium, it has been proposed that certain action has to be taken for the Zakat whereby new Zakat standards to be issued.
BL: What is Riba that Dr. Yehya Abdul Rahman gave a presentation on this topic?
Yousif: Dr. Yehya Abdul Rahman is one of the scholars in the Islamic banking; he has introduced the Islamic banking in the United States through his small bank. He has some ideas on how Islamic banking can work within different environments. Last year, during the inauguration of his bank “LARIBA Bank” in Dallas, USA I received an award. I believe that he did a very good job for Islamic banking in America and he is a well-known and respected person in our area.
Riba has been prohibited in all religions (Islam, Judaism and Christianity) and that is why some times Sheikh Saleh uses the phrase “Abrahamic banking” not Islamic banking because it is relating to our Prophet Ibrahim since all the three religions have prohibited interest (Riba). Hence, these banks should be named Abrahamic banks since these three religions are affiliated to Abraham [Ibrahim], the father of prophets (peace be upon him). People sometimes take it easy and they say well there is no difference between traditional banks and Islamic banks because everybody calculates the same percentage, but we reject this concept because people don’t understand what it means Islamic banking, there is a philosophy behind it. When I provide a financing to somebody I have to make sure that this money has gone in that project. Furthermore, I take more risk than the traditional banks; traditional banks sometimes provide you with their facilities, but those banks have no intention to go through the process where you spend that money. We always say that Islamic banking is going through the real economy, not outside the economy. Thus, what we pay goes to the direct economy. Anything which you add on the principle and you link it with the period this is the interest, whether it is high or low and that’s why Europeans and Americans suffered a lot because banks have lent people who don’t have the capability to repay the loan and that’s why the mortgage loan crunch happened in America, Europeans were stuck with it and they also have what we call the derivatives. Sometimes also they say that why Islamic banks have not been involved in the mortgage loan crisis which happened in America, because we don’t buy debts, debts do not add anything to the economy. I buy debt from X bank and I sell it to B bank, what is the benefit for the economy? There is no benefit. Furthermore, Islamic banks have not been involved in the financial crisis derivatives because in Islam, you cannot sell something you don’t own. That’s why when the Europeans discovered the derivatives and the trading, the first thing they did is they stopped the margin accounts where anybody can do it with no limitations.
Riba destroyed the economy, Riba also destroyed families, and Riba destroyed the economic structure. Sometimes people say: “well, interest is very low and it is controlled by the central bank.” In my opinion, this is not right.
BL: What’s the difference between “Murabaha” and “Mudaraba”?
Yousif: “Murabaha” is a financing; “Mudaraba” is when you appoint somebody to do things on your behalf with a certain return. “Mudaraba” is almost like brokerage. “Al Mudareb” has the knowledge, he will take an investor’s money and he will try his best to invest it in the right way according to the agreed terms and as per Sharia principles.
BL: Adnan, will you provide me with the main points of your speech?
Yousif: My speech was focusing on three parts: the first part focuses on what happened in the past few years, the crisis; the second part I mentioned that we should encourage Islamic banks to improve and work more on “Mudaraba” and “Musharaka” rather than just only on “Murabaha” as a product. Then the last part of my speech was about the financial result of Al Baraka from 2003 to 2013.
Additionally, I believe that in the 34th Symposium, we gained a lot of knowledge and experience and I think that we should now improve it. Attempts should be made to modify the existing structure to provide better products and quality service within the ambit of Islamic laws.
BL: What are ABG recent financial results?
Yousif: Al Baraka Banking Group net income increased by 16% in the first half of 2013 compared to the same period of 2012 to reach US$ 140 million. Similarly, statement of financial positions witnessed moderate increases. Total assets increased by 2%, total financing and investments by 3% and deposits including equity of investment accountholders by 2% as at the end of June 2013 as compared with the end of December 2012. These figures confirmed the Group's continuation to achieve the distinguished results in accordance with successful strategies business programs applied relating to new products and services and expansion of customer base through increasing the number of branches.
The financial results achieved by the Group during the first half of 2013 can be considered as excellent by all standards if we take into account the difficult economic and financial conditions that prevailed in the region and the world as a whole. Such results were not possible to achieve were it not for the flexible and ambitious strategies of the group, which were based on a number of objectives, programs and initiatives that aimed to achieve strong growth in earnings and operations. These strategies, at the same time, dealt with the repercussions of the global crisis with prudence and realism. We also note with satisfaction that, in spite of moderate growth in the size of assets, the rate of profit growth was much larger, which is a clear indication of improved productivity of the Group's operating assets.
The first half of 2013 witnessed many outstanding achievements and initiatives that translated these strategies to real successes on the ground in reaffirmation of our determination to continue with our expansion and modernization plans. This once more proves the ability of Al Baraka Banking Group to overcome the effects of such adverse developments and achieve good positive results.
With regard to the Group's plans to expand its branch network, the subsidiary units of the Group in Turkey and Egypt continued opening new branches, with total branches reaching 427 branches at present, and we expect to add 14 new branches this year.
Al Baraka Bank Turkey succeeded in obtaining joint Murabaha financing facilities worth US$ 250 million, which was structured as Sharia-compliant multi-currencies Murabaha financing. The facilities will be used in support of financing activities of Al Baraka Turkey. With access to these facilities, Al Baraka Bank Turkey seeks to strengthen and diversify its funding base and to expand its customer base.
In terms of the development of the operating environment of the Group and its banking units, Al Baraka Bank Pakistan has recently celebrated the opening of its headquarters in the heart of the Pakistani capital, Karachi, reflecting the Group's confidence in the country's recovery from the current crisis, and to generate huge business opportunities for Islamic banks.
We also continued during the first half of 2013 modernizing the institutional, human and technical infrastructure of the Group through developing the regulations, applications and practices of corporate governance, risk management social responsibility, governance, compliance, AML, training, risk management regulations and FATCA compliance regulations in according with latest international standards.
The month of June of this year witnessed Al Baraka Banking Group holding its 15th strategy meeting in Turkey with the participation of chief executives and general managers of the units of the Group from all around the world. The meeting addressed important topics notably the business strategies of the Group’s units during the next phase and coordination among them, in addition to evaluation of impacts of international economic developments on the Group’s businesses and drawing the guidelines for the Group’s activities, annual business plans and strategies during the next phase based on that evaluation.
