Islamic banking refers to a system of banking or banking activity that is consistent with the principles of the Shari'ah (Islamic rulings) and its practical application and guided by Islamic economics. And when you refer to Islamic banking, Al Baraka Banking Group shines as the leader in this buoyant industry.
In this challenging domain, Dr. Adnan Ahmed Yousif, Member of the Board of Directors and President & Chief Executive of ABG excelled and challenged the obstacles hindering the development and progress of Islamic banking regionally and internationally. Dr. Yousif devoted his career to push forward this important industry where he has also taken on key roles.
In recognition of his long service of Islamic economics and the dissemination of Islamic banking culture, Jinan University of Lebanon (JUL) awarded honorary doctorate to Adnan Ahmed Yousif, President and Chief Executive of Al Baraka Banking Group and former Chairman of the Union of Arab Banks.
Dr. Yousif was the Chairman of the Union of Arab Banks, Lebanon for two terms (from the year 2007-2013). Besides having received many international awards including twice the Islamic Banker of the Year award (2004 and 2009), he is the recipient of the Medal of Efficiency, a unique honor conferred by His Majesty King Hamad Bin Isa Al Khalifa, the King of the Kingdom of Bahrain during the year 2011.
Furthermore, Dr. Adnan Ahmed Yousif was honored with the Tatweej Award for his Excellence in leadership and institutional performance in the category Wise Leadership in the field of Arab banking for 2012 granted by the Arab Administrative Development Organization - an organization affiliated to the Arab League - in cooperation with the Tatweej Academy. In addition, he was awarded by LARIBA American Finance House the 2012 LARIBA Award for Excellence in Achievement, in recognition of his leadership role in consolidating and operating the largest diversified Islamic Banking Group in the world.
Dr. Adnan Ahmed Yusif served as a General Manager of Albaraka Banking Group (ABG) since March 2000. Dr. Yousif commenced his banking career in 1973 at Habib Bank, working as Assistant Manager of credit transactions at American Express Bank from 1975 to 1980. He had been with Arab Banking Corporation (ABC) since 1980 where he held various positions includes Manager of main branch, Deputy General Manager and vice-chairman, Director of Global Marketing & Financial Institutions Division, Head of Arab World division, Vice-Manager of subsidiaries and investments. He served as the Chief Executive Officer of Bahrain Islamic Bank from 2002 to 2004. He served as the Chief Executive Officer of the ABG since August 2004. He serves as the Chairman of Islamic Investment Bank of Europe. He has been the Chairman of Albaraka Turk Katilim Bankasi A.S. since April 8, 2005 and serves as its Director. Since 1998, he served as the Chairman of ABC Islamic Bank (EC). He served as Director of the ABG since August 2004. He is a Vice-President of Arab Banks' Union (Lebanon). Dr. Adnan Ahmed Yusif holds MBA at Hull University (England) where he completed his post-graduate study.
BL: Dr. Adnan Ahmed Yousif is a renowned banker regionally and globally, what dream you did not fulfill until now?
Dr. Adnan Yousif: Well I think that to running subsidiaries in fifteen countries is a challenge for any chief executive. Bringing subsidiaries in 15 countries to work together in one strategy that is mainly focusing on providing real services and products to the societies of these countries and in a way that contributing to their development and at the same time adhering to the Sharia will remain a main challenge and at the same time a dream to achieve.
BL: What are the implications of the oil’s tumbling prices on the GCC region?
Dr. Adnan Yousif: Over the short term, the GCC have enough financial resources and surpluses to face the declining in oil prices. This will be supported by these countries success in diversifying their economies, especially services and industries. Going back to 2008 crisis, the Gulf countries were able to overcome the implications of this crisis by keeping the expenditure at high level, which in turn, pushed the economic growth toward good levels. Nevertheless, on longer term, the GCC need to put more efforts and plans to proceed with their economic diversification and integration programs.
BL: Dr. Adnan Ahmed Yousif is a renowned banker regionally and globally, what dream you did not fulfill until now?
Dr. Adnan Yousif: Well I think that to running subsidiaries in fifteen countries is a challenge for any chief executive. Bringing subsidiaries in 15 countries to work together in one strategy that is mainly focusing on providing real services and products to the societies of these countries and in a way that contributing to their development and at the same time adhering to the Sharia will remain a main challenge and at the same time a dream to achieve.
BL: What are the implications of the oil’s tumbling prices on the GCC region?
Dr. Adnan Yousif: Over the short term, the GCC have enough financial resources and surpluses to face the declining in oil prices. This will be supported by these countries success in diversifying their economies, especially services and industries. Going back to 2008 crisis, the Gulf countries were able to overcome the implications of this crisis by keeping the expenditure at high level, which in turn, pushed the economic growth toward good levels. Nevertheless, on longer term, the GCC need to put more efforts and plans to proceed with their economic diversification and integration programs.
BL: How do Islamic banks reward their depositors since payment of interest is not allowed?
Dr. Adnan Yousif: The prohibition on paying or receiving fixed interest is based on the Islamic tenet that money is only a medium of exchange, a way of defining the value of a thing; it has no value in itself, and therefore should not be allowed to give rise to more money, via fixed interest payments, simply by being put in a bank or lent to someone else. The human effort, initiative, and risk involved in a productive venture are more important than the money used to finance it. Islamic banking is based on profit sharing. Islamic banks focus on generating returns on investments through investment tools that are Shari’a compliant.
BL: What are the sources of Islamic Sharia?
Dr. Adnan Yousif: The primary sources of the Islamic Sharia are two things: the Qur’an and the Sunnah of the Prophet Mohammed. The Qur’an is the holy scripture of Islam, believed by Muslims to be the direct and unaltered word of God. By the Sunnah, we mean the sayings, actions and silent approval of the Prophet Mohammed.
BL: What are the major modes of Islamic banking and finance?
Dr. Adnan Yousif: The following are the main modes of Islamic banking and finance:
• Murabaha: Literally it means a sale on mutually agreed profit. Technically, it is a contract of sale in which the seller declares his cost and profit. Islamic banks have adopted this as a mode of financing.
• Ijarah: It is a contract of a known and proposed usufruct against a specified and lawful return or consideration for the service or return for the benefit proposed to be taken, or for the effort or work proposed to be expended.
• Ijarah-Wal-Iqtina: A contract under which an Islamic bank provides equipment, building or other assets to the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee.
• Musawamah: Musawamah is a general and regular kind of sale in which price of the commodity to be traded is bargained between seller and the buyer without any reference to the price paid or cost incurred by the former. Thus, it is different from Murabaha in respect of pricing formula.
• Istisna: It is a contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment and future delivery. Istisna’a can be used for providing the facility of financing the manufacture or construction of houses, plants, projects and building of bridges, roads and highways.
• Bai Miajjal: Literally it means a credit sale. Technically, it is a financing technique adopted by Islamic banks that takes the form of Murabaha Muajjal.
• Mudarabah: A form of partnership where one party provides the funds while the other provides expertise and management. The latter is referred to as the Mudarib. Any profits accrued are shared between the two parties on a pre-agreed basis, while loss is borne only by the provider of the capital.
• Musharakah: Musharakah means a relationship established under a contract by the mutual consent of the parties for sharing of profits and losses in the joint business. It is an agreement under which the Islamic bank provides funds, which are mixed with the funds of the business enterprise and others.
• Bai Salam: Salam means a contract in which advance payment is made for goods to be delivered later on. The seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advance price fully paid at the time of contract.
BL: How did Al Baraka Banking Group evolve during the past 10 years?
Dr. Adnan Yousif: Although the Al Baraka is relatively new, its antecedents go back almost 30 years. The Group has come about as a result of a consolidation of various interests of Shaikh Saleh Abdullah Kamel in 10 Islamic banks, with the object of adding strength and purpose to his vision of creating a global Islamic banking group. The Group has thus progressed from stride to stride, carrying our core values forward for the benefit of our shareholders and the society at large. Al Baraka’s strategy after formation was fourfold: to achieve a successful consolidation of the subsidiaries into the Group structure; to establish control over the members of the Group via head office departments established by the Group’s executive management team; to achieve a successful share flotation; and to commence the Group’s expansion, both organically through expansion of its existing subsidiaries and by the establishment or acquisition of new subsidiaries in new countries.
BL: What is the added value for acquiring Itqan Capital?
Dr. Adnan Yousif: The acquiring of Itqan Capital is an excellent move that reflects our Group’s strategy to enter key regional markets, for Saudi Arabia is the largest Arab economy with strong fundamentals and a stable financial and investment environment, which presents us with significant business and investment opportunities. We look to this step as a strategically vital initiative for the Group. Our founding shareholders have a strong base in the Saudi market so the launch of the Company will strengthen that presence. The Saudi market represents a key entre-point for us to access the extensive base of investors and provide them with a wide range of Sharia compliant products that have been developed by the Company and the Group for the past many years. The ABG Group has the unique advantage of a large and geographically diverse network in many countries, whose experience and track record we will draw upon to strengthen our business presence in the Saudi market.
BL: What is the main purpose of Islamic banking and what is the main purpose of ABG?
Dr. Adnan Yousif: There is no standard way of defining what an Islamic bank is, but broadly speaking an “Islamic bank is an institution that mobilizes financial resources and invests them in an attempt to achieve predetermined Islamic-acceptable social and financial objectives. Both mobilization and investment of funds should be conducted in accordance with the principles of Islamic Shari’a: prohibition of interest or usury, ethical standards, moral and social values and liability and business risk. Our main purpose is to serve society and engage in business in a socially responsible manner that serves the needs of the community at large while at the same time adhering to the ethical principles of the Sharia.
BL: Did Al Baraka Banking Group Strategy meetings meet your goals? How was this year’s meeting?
Dr. Adnan Yousif: The Group’s strategy meetings discuss normally a number of highly important topics including business strategies of the Group’s banks in the coming stage and how to coordinate among them, as well as other strategic issues such as strategic management tools and product development strategies. This year strategy meeting discussed the presentations provided by the GM of ABG units regarding the progress of implementing the year’s business plans as well as other main strategic topics such as FATCA and IT developments.
BL: What are your plans for the year 2015? What is the financial statement of ABG?
Dr. Adnan Yousif: We will continue during 2015 to implement the planned initiatives in launching new innovative products and services in the markets as well as enhancing the standing of ABG in the international markets. All of these plans will be implemented, God willing, successfully considering that we are the only Islamic banking group that has such diversity of geographical presence and excellent knowledge of the markets, and we are optimistic that we will end this year, God willing, with better results than the previous year. The net income amounted to US$ 207 in first nine months of 2014 compared to US$ 197 million in first nine months of 2013, which reflects an increase of 5%. The total assets of the Group amounted to US$ 22.5 billion as at the end of September 2014, an increase of 8% over the comparative figure as at the end of 2013. Financing and investments amounted to US$ 16.4 billion as at the end of September 2014, representing an increase of 7% compared to the end of December 2013 as a result of expansion in businesses. Customer accounts have also witnessed a good increase of 8% from US$ 17.7 billion at the end of December 2013 to US$ 19.2 billion at the end of September 2014, which indicates continued customer confidence and loyalty to the Group. Total equity at the end of September 2014 amounted to US$ 2 billion, strengthening by 2%.
BL: What are the main challenges facing Islamic banking and what are the solutions?
Dr. Adnan Yousif: In spite of the continuing aftershock of the global financial crisis, the Islamic industry is expanding in many emerging markets and introducing new standards that should help develop products and attract investors. The industry’s ability to absorb the shocks of financial crises better than conventional institutions has attracted remarkable attention, including from non-core markets of Europe, Asia and North America. Therefore, we can say the most notable achievement made in the global Islamic banking and finance industry over the last 2 decades that the industry is truly globalizing, that is, spreading as a universal alternative to conventional finance and banking worldwide. One of the challenges the Islamic banking faces is creating enough awareness amongst Muslim and non-Muslim customers, potential customers and bank staff. There i`s still a fair level of skepticism towards Islamic banking and we find there`s still a high level of not fully understanding the products. Educating customers about Islamic finance, understanding their needs and delivering products and solutions that are creative, yet adhere strictly to Sharia principles and are cost effective, is part of a concerted strategy that retail banks are now undertaking upon in order to develop the sector fully and enlarge their share of the Islamic retail business. Key concerns holding back the development of Islamic retail banking, particularly in newer markets, have also included limited liquidity management instruments and lack of lender of last resort facilities. As a result of extensive efforts made both at industry and the central bank level, Islamic commercial banks are putting more efforts to develop a comprehensive liquidity management solution that would include for example development of Islamic interbank money market. Steps such as these offer strong support to the development of Islamic retail banking in new countries, and offer the prospect of real competition to the dominance of established Islamic retail banks. Moreover, in order to keep up with globalization and to serve the growing wealth of the rapidly increasing global Muslim population, the industry needs to invest in research and development to create new and innovative Sharia compliant products and services that go beyond simply matching those offered by conventional banks. Moreover, while few would disagree that the sector`s growth potential is enormous, there is a need for a regulatory, supervisory and Sharia frameworks to be put in place across all markets in order for the sector to realize its fullest potential. Stronger standards for corporate governance, transparency, disclosure, accountability, market discipline, risk management and customer protection are crucial to increase market confidence and penetration.
