Thursday, Jun 30, 2022
Finance | Asia-Pacific | Malaysia

Banking in Malaysia

An award winning Islamic banking institution

7 years ago

Syed Abdull Aziz Jailani bin Syed Kechik, CEO of OCBC Al-Amin
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Syed Abdull Aziz Jailani bin Syed Kechik

CEO of OCBC Al-Amin

World Report spoke to Syed Abdull Aziz Jailani bin Syed Kechik, CEO of OCBC Al-Amin, to discuss the current standing of Islamic banking in Malaysia and the rapid growth of Al-Amin.

With the liquidity crisis in Europe and the United States we have seen that central banks are becoming more aware or more in favor of stricter regulation. We have seen Basel III come in as the new norm. What impact would something like Basel III and its stipulations have on the Islamic banking sector?

I think that the impact on Islamic banks, as far as Basel III is concerned, will not be any different from the impact on conventional banking. If you look at the liquidity position of banks in Malaysia, I think it is still very healthy. In my opinion, it would be a big challenge for Malaysian banks to comply with Basel III.

Also, another landmark event will be the beginnings of financial sector integration in the ASEAN block. How do you see that impacting the Malaysian banking sector and what opportunities do you see that creating for Malaysian banks in the wider ASEAN region?

In my personal opinion, banks will probably be one of the enablers of ASEAN integration. 

As regards Islamic finance, Malaysia is taken as a model to follow in regulation. How do you see Islamic finance growing, and, especially, how do you see it coexisting with conventional finance in the Malaysian model?

There has been Islamic finance in Malaysia for close to 40 years now, and it has been progressing quite well, especially in the last 15-20 years. It has gone through several stages. In this current phase, there is full support and integration of various components to assist Islamic banks. In any financial system you need to have four main pillars: capital market, banking market, money market and insurance. These four pillars make up the whole financial system. I think we are probably one of the few countries that have all these four pillars. This is very important because only with this you can really grow and expand. I think Malaysia will go on having the dual system, the two financial systems. Islamic banking will continue growing in terms of its market share in this country. I think the aim of the government is to have a good fair share of the Malaysian banking asset in the Islamic finance.

Do you think that impetus to push and grow the Islamic financing is due to the overall impact that it has in the financial sustainability or the stability of the financial market? How do you take something like Islamic finance, where governance is so important, and apply it, or how do you get the global standards to converge? Is that a challenge that you face?

I am only making reference to the Islamic banks in Malaysia. Any governance perspectives that we have for conventional banking are applicable for Islamic banking as well. So we have to follow all the perspectives, all the standards imposed on us by the central banks are the same they impose on conventional banks.

When the banks are going to access GCC country’s capital and trying to break into those countries, there are maybe differences in regulations, standards? How is that impacting accessing those markets?

Yes, there are differences, especially on the Sharia standards – Sharia is the Islamic law. This is a difference between this region and the Middle East. Fortunately or unfortunately, OCBC Al-Amin does not have a presence in the Middle East, we do not have a presence in parts of the world that practice different standards as far as Sharia law is concerned. We work in Malaysia, Indonesia, Singapore.

Over time, there has been a lot of harmonization in the interpretation of the law between the East and the West, between the Middle East and here. There have been discussions among scholars and the differences have been narrowed down. Differences still exist, but they are very small.

The challenge in the cross-border business I think is still there because of these differences. When you go cross-border to risk funds you are talking to investors not just from your country, but also from other countries, which have different standards altogether. So, we and also most of the local Islamic banks do not really go out. We manage the business in the country, where we do not face that problem. But if you go out, then these are the challenges. 

Let’s talk a little bit about OCBC Al-Amin here in Malaysia. Although you have been here just for six years, you have received many awards. Could you tell us a little bit about the performance over those six years? What do you look back and say “this was a really, really big achievement”? Could you also inform us a little bit about your plans for the future and where you want to take the operation?

OCBC is not new to the Islamic banking business in Malaysia. In fact, we have been in the business for more than 15 years and we have grown the business, which used to sit under the conventional bank as a “window”. In December 2008 we incorporated OCBC Al-Amin. In that first phase we grew our capacity, our business. The second phase was when we started expanding our network, building more branches. Now we have 10 branches altogether. We started acquiring customers, we expanded our size and our business. We have been doing really well. We have increased our market share by increasing our ranking in the industry. When we started we were number five, among the foreign Islamic banking players, as far as financing assets are concerned. Today, as from last year, we are number two. So, we have done well over the last six years, we have built our capacity, we have increased our skills. Our aim is to move up the ranking. We are now number two. Of course going forward it is not going to stop there. We will always want to go on improving and growing. We want to focus on the areas in which we do not have a presence yet. There are still a lot more opportunities in Malaysia, even though there are so many banks in this country. The population here is still young and it is growing, the saving rate is relatively high, so a lot more people would like to have financial services. The demand for financial services is going to increase further. We want to increase our footprint and expand our branches.

Would you say that it is because you are so young in terms of branches, and the penetration rate here is so low, that this is something that it is still very focal to you?

Yes. Penetration, I must say, is not yet 100% complete in Malaysia, but it is very good. As the young population is growing in this country, the wealth is getting bigger, the affluent segment is getting bigger, unemployment is still very low, so the need for financial products is going to get bigger, too. We are very excited about that because the young population can give you a lot of opportunities, not just on the financing side, but also on the wealth side. The wealth management business, to me, with the expanding saving they have, will expand, too.

If you think about that idea of bricks and mortar and you look at someone like HSBC, you see they are making new branches but very high tech places where, maybe, personnel costs are actually reduced, combined with self-service terminals. For me, one of the more interesting areas is how banks use technology now to try and access their market, to try and draw in customers, while obviously keeping their cost low. Is technology something that you have been exploring at Al Amin? You have been in finance for a long time. How have you managed to keep up with the trends?

Yes, we look at it in two aspects. The first is if we still have room to expand to a higher level, which we do now. We still want to increase our branches. And at the same time, the second aspect is, yes, I think using technology is the way to go. But you must remember not everybody wants to do everything online, especially in the wealth management business, when they need a lot of advice. We are trying to balance brick and mortar and technology and we want to go on expanding. We have done many things in connection with technology, like launching the app for online banking, which is very user-friendly.

How do you perceive the brand of Islamic finance and what is it that you are trying to create in your brand to make it attractive?

We have always believed in the name of the bank. Most banks here are called some name, plus “Islamic”, so we decided to do something different for branding. And we chose “Al-Amin”, which does not have the word “Islamic”, but is a brand that extols a key virtue of Islam, which is trustworthiness. People do not refer to us simply as OCBC anymore, they call us OCBC Al-Amin. That is very important to me because it differentiates us, people recognize both the mother brand and the fact that the “Al-Amin” part of it is a premier Islamic bank in Malaysia in its own right as well. Also, when we expand in terms of branches we want to locate OCBC Al-Amin in the areas where we do not have a presence yet, to increase our branding in other locations as well. Also, this will allow more people to get our products and services.

How would you tell or get across the advantages of Islamic finance to somebody who, maybe, does not understand it?

Well, that is not easy; I think that is a challenge. When you offer these banking products and services you are not just targeting the Muslims, you are targeting the non-Muslims as well. We want to offer our products to everybody in this country. I think that, in this country, for the non-Muslims, it makes no difference whether banking products are Islamic or conventional, as long as people get value. So we are competing to have value that is superior to conventional banks. Muslims, under the same conditions, would take Islamic products because of religious beliefs. I think we are still at the stage in which we need help from the government to really push this forward. They have helped us in connection with taxes, for example, so that our customers can realize savings in terms of tax treatment of our financial products.

What is your opinion on the human capital and talent that exists to service the Islamic finance sector? Is it sufficient? What more is needed?

In Islamic banks we do not just limit to hiring staff that have got specific knowledge in Islamic finance. We still get people from the conventional business to come in and join the Islamic finance. It is good to have people with knowledge about both types of financing. It is positive, too, that now the students who study Islamic finance also get some practice before graduating. Now they have not only the Sharia (religious) knowledge, but also they know more about business.

What convinced you to come across from conventional to Islamic finance? And what is your big objective? What do you want to achieve between now and the next two or three years with Al-Amin?

I spent about 15 years in conventional banking. I worked with foreign banks in Malaysia. At that time, Islamic banking in Malaysia was just about to take off because of the changes in the regulatory and legal fronts. So I decided to try out in the Islamic banks and I moved on and joined one of the local Islamic banks at the time. We grew the business at the same time we learnt more about the business. What triggered me was the opportunity and the religious belief, as I am a Muslim. I was curious to see how Islamic banking was different from conventional banking. In fact, before moving, I bought books and studied on my own, I met a lot of people who were already in the Islamic banking business and asked a lot of questions. My interest in Islamic finance grew and grew. Then, there was an opportunity for me to join one of the local Islamic banks and I took it. I was in that bank for six years, and then there was another opportunity here, so I came here. I have been here for more than six years – from day one of the establishment of OCBC Al-Amin – so I have been in Islamic finance for 12 years altogether. I found out that all the theory in books did not help much. You really know about the Islamic business, about how this whole thing works, when you are inside. 

To really take OCBC Al-Amin to the next level. I am really excited about this because I think we have achieved a lot and we have support and commitment from everybody, from the staff, from the board of directors, and also from the shareholders, who really want to see OCBC Al-Amin go to the next level because OCBC bank group as a whole has trusted OCBC Al-Amin. So, we are starting with Malaysia, because obviously this is the market to learn and establish, and then from here we will see where else we can go. I am proud of everybody in this organization. We have a proper strategic objective to make OCBC Al-Amin one of the best, not just in Malaysia, but also in the region.




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