The Abu Dhabi-based lender FGB says its Islamic trade finance businessis booming as the government shrugs off the drop in oil price and continues spending on infrastructure.
That has kept imports for materials flowing into the country and created work for banks keen to get other sources of income apart from their traditional mainstay of vanilla-flavoured loans and deposits.
“Trade finance is very much a growing segment for banks in the UAE, whether conventional or Islamic, but Islamic trade finance is becomingmore and more popular with clients in the UAE,” said Shamzani Hussain, the global head of Islamic banking at FGB’s wholesale banking group.
“Most of these companies are companies that import materials from outside, companies that have clients outside the UAE.”
Mr Hussain declined to give specific figures for the size of FGB’s Islamic banking assets or the size of its business in trade finance but said that its Sharia-compliant assets had grown more than 80 per cent since 2013 as clients warmed to doing business the Islamic way.
Almost a quarter of all banking assets in the UAE do not bear interest, which is proscribed under Islam, but instead come with a pre-agreed profit rate, compared to about 11 per cent in 2006, he noted.
“There are clients that are interested in Islamic banking but do not have enough information,” he said. “They are not well educated as yet. This is an interesting group because what we are doing today is going out and educating our potential clients that would like to know more about Islamic banking.”
Like most banks in the UAE, FGB realises that it cannot survive on loans alone and has consequently beefed up its fee income business from underwriting bonds and securities, displacing HSBC to become the nation’s top arranger of syndicated loans. It has also expanded its footprint abroad in recent years, and since 2013 has grown its Islamic banking footprint. That helped make the bank the most profitable in the UAE last year.
“One of our key strategies apart from focusing on the UAE as our main market is to market our Islamic banking products across our seven international offices,” said Mr Hussain. “This is part of our strategy to diversify our revenue stream and be where are clients are.”
FGB has representative offices in London, Seoul and Hong Kong, and branches in Singapore and Qatar. Its representative office in India is being upgraded to a branch, and it is planning to operate a representative office in China by the end of the year.
(The National Business / 11 June 2015)
---Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com
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