Adnan Ahmed Yousif has been the President and Chief Executive of Al Baraka Banking Group since August 2004. He is the Chairman of Jordan Islamic Bank, Banque Al Baraka D'Algerie, Al Baraka Turk Participation Bank, Al Baraka Bank Ltd., South Africa,
Al Baraka Bank Egypt, Al Baraka Bank Lebanon, Al Baraka Bank Syria, Al Baraka Bank Sudan and Al Baraka Bank (Pakistan) Ltd., Vice Chairman of Al Baraka Islamic Bank, Bahrain and Director of Al Baraka Bank Tunisia and Itqan Capital, Saudi Arabia. Past Chairman of the Union of Arab Banks for two successive terms and twice recipient of the "Islamic Banker of the Year" Award at the World Islamic Banking Conference. Yousif has additionally been honoured with the King Hamad Prize (Competency, First Class) Medal and the Tatweej Award for excellence in leadership and institutional performance in the category "Wise Leadership in the Field of Arab Banking for 2012" and the 2012 "LARIBA Award for Excellence in Achievement" by LARIBA American Finance House. He has had over 40 years' experience in international banking. Yousif, a Bahraini national, holds a Master of Business Administration degree from University of Hull, UK.
Adnan Ahmed Yousif provides practical insights into the real world of Islamic financial transactions, and illustrates the complexities of this rapidly growing mode of modern finance.
BUSINESS LIFE has been given an awesome opportunity to interview the very talented and distinguished President and Chief Executive of Al Baraka Banking Group.
This exclusive interview with the leading free-market thinker, Adnan Ahmed Yousif covers core Islamic banking and finance topics including the challenges faced by Islamic banks, the current economic situation in the region, the future of Islamic banks and the International Monetary Fund (IMF) and the World Bank.
BL: How do you view the efforts and achievements of the International Monetary Fund and the World Bank especially that both are continuously evolving in response to new economic developments and challenges?
Adnan Ahmed Yousif: The International Monetary Fund and the World Bank were both created at an international conference convened in Bretton Woods in 1944. The joint goal of the two of them was to establish a framework for economic cooperation and development that would lead to a more stable and prosperous global economy. While this goal remains central to both institutions, their work is constantly evolving in response to new economic developments and challenges. The IMF’s mandate is to promote international monetary cooperation and provides policy advice and technical assistance to help countries build and maintain strong economies. While the World Bank’s mandate is to promote long-term economic development and poverty reduction by providing technical and financial support to help countries reform particular sectors or implement specific projects—such as, building schools and health centers, providing water and electricity, fighting disease, and protecting the environment. Thus, both the IMF and World Bank collaborate regularly and at many levels to assist member countries and work together on several initiatives such as reducing debt burdens, reducing poverty, setting the stage for the 2030 development agenda and assessing financial stability.
BL: What is your advice to financial institutions regarding the current financial and political imbalance prevailing in most of the globe and specifically in the GCC countries, the MENA countries and Europe?
Adnan Ahmed Yousif: Banks operating in the Gulf will see their performance weighed on by the slowdown economic environment this year and 2017. Asset growth started to moderate in 2015, reaching 7 percent for Islamic and 5.7 percent for conventional banks in the GCC in 2015, compared to 12.3 percent and 9.6 percent, respectively, in 2014. We forecast that growth will drop to around 5 percent for both types of banks in 2016 as governments strive to restore their fiscal sustainability through a mix of spending cuts and revenue-boosting initiatives. The continued drop of oil prices since June 2014 has brought the region’s governments under fiscal pressure and it reduced growth opportunities for their banking systems. However, both the conventional and Islamic banks have built sufficient buffers to navigate through the new environment. Moreover, they still have enough liquidity to finance the economic programs and public debt, but they will be more careful in financing some hot sectors such as real estate and personal financings.
BL: How Gulf Cooperation Council countries (GCC) dealt with the sharp decline in oil prices and how were the governments' efforts to support a sustainable economic growth?
Adnan Ahmed Yousif: The GCC took several measures and steps to deal with the current decline in oil prices such re-pricing of oil and gasoline in local markets as well as reconsidering the generalized subsidies and increase some feed and taxes. However, 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 was 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, including widening the role of private sector, applying the VAT and privatization programs.
BL: Adnan, do you agree that Islamic banking is moving from “a very esoteric asset class to one that’s more global”?
Adnan Ahmed Yousif: Much has been said about the phenomenal growth of the Islamic finance industry over the past two decades to become global phenomenon – and the growth rates have been outstandingly impressive. Industry supporters have also lauded how successfully Islamic banking has largely weathered the global economic crisis that engulfed the conventional banking industry. Islamic finance is undergoing various progressive stages as one of the fastest growing asset classes in the world. In spite of the continuing aftershock of the global financial crisis, the 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.
BL: What is the philosophy of Islamic banking and finance?
Adnan Ahmed 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 Islamically - 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. The main philosophy of Islamic banking 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: What is the future of Islamic banking?
Adnan Ahmed Yousif: There are several factors pointing to a better growth scenario for Islamic banking in the rest of the current decade despite the current slowdown and troubled operating environment. While the global economic outlook certainly influences growth in the Islamic banking sector, Asia’s economic expansion is an even more relevant factor in projecting the development of Islamic banking. There are indications that growth in Asia during the rest of the decade is likely to be higher than the growth in the “developed” world. The world’s Muslim population will also increase by (at least) two percent per annum, which will be reflected in the growth of Islamic banks’ potential clientele. The economic conditions of the world’s Muslim population are also improving. Another factor that needs to be kept in mind when assessing the future growth of Islamic banking is the unused Islamic banking potential in the countries with a large proportion of Muslims.
BL: How do Islamic banks reward their depositors since payment of interest is not allowed?
Adnan Ahmed 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 Shariah?
Adnan Ahmed Yousif: The primary sources of the Islamic Shariah are two things: the Qur'an and the sunnah. 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: How did Al Baraka Group evolve during the past 14 years?
Adnan Ahmed Yousif: Although the Al Baraka is relatively new, its antecedents go back almost 35 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: How successful has the industry been in establishing itself as an alternative to conventional banking models?
Adnan Ahmed Yousif: The key success of the Islamic banking industry lies in its overall strategic objectives, which are built around three key pillars: the business must be of a Halal nature, the mode of financing used must comply with Sharia requirements and ultimate end result must serve at least one or more social responsibilities: such as income increase, job creation, savings etc. The end result of the Islamic system is to build a “fully integrated socially responsible financial system” which over the past two decades, as the conventional system has been rocked by financial and economic crises, has benefited from a growing social profile as a safer and more ethical method of banking. The key advantage of Islamic banking is the maintenance of a strong sense of social responsibility. This perceived advantage has led to considerably increased interest in the sector from the international financial community, looking for a safe haven.
