Dr. Ezzedine Khoja, Chief Executive Officer of Zitouna Bank is a recognized leader in Islamic Finance whereby he spoke passionately to BUSINESS LIFE about the development of Islamic Finance in Tunisia with particular importance to the internationalization of Islamic Finance and stating that the Islamic Finance industry growth will go on double digit in 2014.
He has a long regional and European experience and a rich Arabic and European education.
Dr. Khoja officially joined Zitouna Bank in June 2012 after working as Secretary at the General Council for Islamic Banks and Financial Institutions (CIBAFI) where he left his fingerprints in its foundation, performance and achievements. As a pioneering leader at prominent institution, Dr. Khoja helped to assess the proper foundations for research on Islamic Finance and training.
He has over thirty years’ experience of leading local and international research teams for the progress of local and global Islamic Finance. During this time, he has pioneered large-scale research on Islamic Banking that has provided the foundation for a new generation of thinking. His roles have included managing and publishing regulations and guidelines for Islamic Banks which changed the outlook of Islamic Finance. He published his famous first encyclopedia in the Islamic Finance. Dr. Ezzedine Khoja’s ambition is to see Zitouna Bank available worldwide through branches and offices in the near future.
He agrees that Tunisia’s fledgling Islamic Finance Industry could take a 25% to 40% share of the country’s financial sector assets in five years’ time if adequate regulations, consumer awareness and private investment plans materialize as Thomson Reuters study found.
BL: Zitouna Bank has a special stance in the Tunisian economy and you are trying your utmost best to place it among the successful Tunisian banks that were established prior to its inception. Though Zitouna Bank is still in its infancy stage, it’s well positioned in the Tunisian banking sector in addition to its contribution to the Islamic banking industry in Tunisia and abroad. What are the challenges you faced since you took the charge as the Chief Executive Officer of Zitouna Bank in 2012?
Dr. Khoja: Actually, since I took the charge of the bank, the biggest challenge was to address the issue related to its former ownership with the risk of image for Zitouna Bank as an Islamic bank offering new original and innovative sharia compliant products & services. The focus was on how I can regain the trust of the Tunisians in Zitouna Bank? Presently, I confidently confirm that this target has been fully achieved as today everyone who mentions Zitouna Bank, refers to Islamic Banking and this was done through an enormous effort; we almost explored the whole state from north to south raising awareness campaigns and introducing Islamic finance. First, we tried to expand rapidly our branch network. After I joined the bank, we started having an annual target, to establish 18 new branches annually. End of 2013, we reached 50 branches and hopefully in 2014 we will have 18 additional branches. Whenever, we establish a new branch, we launch an awareness campaign inside the city it is located in, inviting influent people and potential customers, holding seminars for businessmen to expose the bank’s specificities and appeal. All of that led to an important result which is the big trust between the Tunisian citizen and Zitouna Bank, this is the first important element. The second one, is that the bank today is not only providing Islamic banking services, it also has other activities and ambitions that it is seeking to achieve. We prepared a five year business plan in which we determined the new fields that we will work in; we started with Takaful insurance, but now we are working on microfinance business and hopefully by the end of 2014, this new company will be established. Other projects and areas are planned, but in order to achieve this expansion plan, a prerequisite is needed. Indeed, the bank’s resources have become limited with presently a 70 Million Tunisian Dinar share capital that needs to be boosted in support to this expansion plan.
We have been able to successfully address this issue by bringing a huge strategic partner to the Bank, as the Islamic Development Bank will own a 21% stake in Zitouna Bank, through a capital increase.
BL: How do you see the growth in Islamic banking in Tunisia and abroad ?
Dr. Khoja: Zitouna Bank believes in the integrated and geographical dimension between the Maghreb and the African countries. As a member of the Islamic Development Bank Group, we took an unprecedented initiative to establish partnerships with the African Islamic banks in which the Islamic Development Bank has stakes; bilateral and group agreements were signed on April 7th within Zitouna Bank Headquarters. This event was enhanced by the presence of His Excellency Dr. Ahmad Mohamad Ali, Sheikh Saleh Kamel and a number of government representatives and officials.
This is giving Zitouna Bank an African dimension. African countries today have important growth rates compared to any country in the world, standing for a promising future, and importance of doing business with them. Zitouna Bank took this initiative to encourage investors, businessmen and exporters and else in accompanying them in their import and export process, investments and other business related matters.
Today, Zitouna Bank is focusing on a worldwide dimension after its local success and proven existence as a strong, unique and modern company, providing state-of-the-art technological services. In fact, Zitouna Bank was the first financial institution offering online banking services including money transfer through mobile channel. We are an Islamic Bank and at the same time completely modern and relying on high technology.
Those are the most important aspects. The Islamic Development Bank entry in Zitouna Bank’s capital has been a prelude for a partnership agreement to cooperate and participate in many fields including the African dimension with other banks and the microfinance company to be called Zitouna Microfinance.
BL: How has Zitouna Bank performed at end of 2013? What are your views for the future?
Dr. Khoja: Zitouna Bank achieved positive results by its third year of activity We witnessed very important results, high volume of deposits, where we exceeded one thousand million Tunisian Dinar ranking us, although newcomers, as 5th institution in terms of deposit growth in 2013 amongst 25 banks. Volume of financing was also exceptional providing the bank with a big leap sparking the bank’s performance. This proves that there is a huge interest from the market when dealing with Islamic Finance which will hopefully contribute in dealing with many challenges witnessed by Tunisia, mostly the expansion challenge in business and regional development. Our interest in promoting microfinance is a clear response to this commitment. However, I believe that the journey has only started for the bank; the most important thing is that we build other achievements upon present success.
BL: Dr. Ezzedine Khoja, you led the bank in Tunisia’s most difficult phase and now I’m hearing about these huge deposits and impressive achievements; what system did you follow to make Zitouna Bank succeed in Tunisia especially amidst the political events that were of high tension?
Dr. Khoja: When the revolution took place, the bank was owned by a member of the former ruling family, so there was a negative image of the bank and even before the revolution a lot of Tunisians were avoiding doing business with this bank for this specific purpose. Following revolution, the bank got confiscated and a temporary legal and governmental official was appointed to take over this transitional period. Tunisians did not have trust in the Institution. The situation was critical and continuity of business jeopardized. Through my rewarding experiences within Al Baraka and the General Council for Islamic Banks and Financial Institutions (CIBAFI), I felt up to this great challenge. The question was: How can this institution continue and strive to become a leading force in the Islamic Finance Industry? It simply needed someone who believes in Islamic Finance, not only as an institution to manage, but as someone to explain the concepts of Islamic Finance, a new and distinguished product. What I have done is to translate my former experience to Tunisia by introducing Islamic Finance internally and externally; I exposed a lot of concepts, new to the Tunisian market, all of that contributed to multiple interaction through regional seminars in which many prominent participants attended from the Gulf, Africa, Tunisia and other parts of the world. All that impacted positively on the image of the bank.
The bank not only was able to retain its customer-base which was at risk but was able to attract new clients and the bank’s financial figures are a testimony to its success.
We as Zitouna Bank, took the initiative to establish Zitouna Takaful, the first sharia compliant insurance company in Tunisia. Today, two additional companies were established.
BL: How do you assess Zitouna Bank?
Dr. Khoja: When I came to Zitouna Bank, I found highly competent staff, I did not make a miracle; this institution’s chosen staff competency, when it was launched made it an extraordinary institution. Zitouna Bank staff was perfectly selected with the highest expertise. We benefited from their expertise within the banking sector, we provided them with guidance on the Islamic Banking side and they were able to accomplish this achievement. This success was not achieved by one single person, it is the success of all the staff
I was one of the people who contributed to building it, as prior to being its Chief Executive Officer, when this bank was established, I was a member of its Sharia Committee. I trained the employees before the revolution and before becoming Zitouna Bank’s CEO. Through my position in CIBAFI, I trained around 80 - 90 people providing them with CIBAFI Certificates, as an objective to upgrade Islamic Banking knowledge in Zitouna Bank. With God’s blessings, I joined the bank later on and became one of its team.
BL: What is the number of employees at Zitouna Bank?
Dr. Khoja: Zitouna Bank now has 540 employees and hopefully we will reach more than 1000 employees within the upcoming 4 years especially since we are in the process of fast expansion and we hope with our perseverance and persistence to reach more than 1000 employees.
Our most important challenge in reaching this target and developing Islamic Financial industry is to provide the proper human skills in Islamic Finance. Thank God, Tunisia following the Revolution stood out by witnessing a very active academic sector which focused on creating adequate curriculums to teach Islamic Finance and Islamic Banking. This was not limited to Master Degrees but to bachelor degrees. I had the chance to provide courses within Zitouna University’s Master Degree on Islamic Finance as I also provided the opening course for the Islamic Finance Bachelor Degree at the Sfax Management University.
All this relates to the actual situation internationally, as universities worldwide are competing in order to attract students in the Islamic Finance & Banking fields. Today, we can count over 100 degrees in this specific field.
BL: What are the amendments that were made to Islamic Finance and what are the remaining improvements that need to be done now and in the future?
Dr. Khoja: Some of the corrections that should be made are simple, but have a big impact. I will give you a small example: when I came to Zitouna Bank, we had late penalty fees, when someone was late in settling his payment he was penalized. Although late penalty fees is Riba (interest) and as such forbidden, several Fatwas allowed banks to apply them, but not to account them as revenues or as potential profits but to isolate them in an independent account to be spent for charity and public benefit. When I joined the bank, I raised a big campaign about the identity of the bank and therefore, I put a stop to late penalty fees collection even though spent for charity. I put an end to the criticism of a wide range of people who have religious knowledge. Consequently, by correcting this image, it made us attract new clients and at the same time gave us more credibility on the Islamic Finance side. This does not mean that I am 100% satisfied about the bank’s products; there are mechanisms that need amendments. I launched a 6 months mission with an international expert in Islamic Finance Audit who meets periodically with a dedicated working team to check the process of correcting the product mechanism. Put quite simply, corrections need to be done. Thus, our job is to constantly correct our path and do the same for our image. There are simple corrections, but there are also more complicated ones that require new solutions. Today, throughout its financing and investment activity, Zitouna Bank like any other bank is required to commit to standards and instructions of the Tunisian Central Bank which are not properly taking into account our specificity as an Islamic Bank. Therefore, even if the Bank is offering Islamic Products & Services, it should act within the frame of the banking regulation that was set for traditional banks, while awaiting the setup of adequate regulations for Islamic Finance.
BL: What did attract your attention at Al Baraka 35th Symposium on the Islamic Economics?
Dr. Khoja: I have participated in all the precedent editions of Al Baraka Bank starting from the second edition in Tunisia in 1984 discussing various issues related to Islamic finance and Islamic banking and all novelties in this field. As such, several very important fatwas were issued which have become essential references for all actors and participants in the Islamic financial industry. This year’s symposium marks a turning point in its content and ideological approach as it started to cover issues related to a global economic standpoint and not only the financial sphere in an objective to ensure economic viability and sustainability.
For this reason, this edition discussed the State’s role and responsibility in business activities based on Islamic economic principles and the role of endowment in the development and fight against poverty and unemployment. Other subjects related to Zakat & Waqf were discussed.
This, I believe is a marking point and I consider this ideological change as extremely positive and a good initiative to be further expanded in the upcoming years.
BL: In your speech Dr. Ezzedine Khoja, during the first day of the symposium, can you recap what was the focus on and what message did you want to transmit to the attendances?
Dr. Khoja: Today, I am very happy that Al Baraka Group has suggested one of the most sensitive topics which is positive banking as a new model of Islamic Finance since we need to look for new ideas.
In the infancy stage of Islamic Finance, it was difficult to think about mechanisms which are very different from the conventional ones, as all people thought, there is no development without economy, no economy without banks and no banks without interest. That allowed us to build an alternative banking model as a first step for the launch of Islamic Finance, with some limitations and weaknesses.
Today, we need a new vision, we have to think out of the box to propose an original concept, able to sustain a viable economic and social development while respecting the ethical dimension. The paper on “Positive Banking” presented in Al Baraka Symposium, is an initial attempt to expose new ideas and concepts, especially in the aftermath of the financial crisis, which forced number of developed countries (USA, UK, …) to look for a new banking system.
