The government devised a strategy, Vision 2030, whereby it invited the private sector to play a bigger role in the economy, creating vast initiatives to actively engage in the diversification of various services and products and Eskan Bank is a reflection of that.
How are banks such Eskan leading the way in financing the country’s large megaprojects, such as social housing?
First to understand the role of Eskan Bank today, is important to look at our environment and our socio-economic history. The global financial climate has affected many neighboring countries, and I think Bahrain was amongst the first few countries to redefine its strategy, acting quickly and in an efficient manner. The government devised a strategy, Vision 2030, whereby it invited the private sector to play a bigger role in the economy, creating vast initiatives to actively engage in the diversification of various services and products and Eskan Bank is a reflection of that.
Now, what is happening in the social housing arena is unique. We, as the retail-banking, mortgage-financing arm of the Ministry of Housing (MOH), are responsible for the allocation of social-housing financing to citizens. This way we support the MOH’s efforts to reduce the waiting list for social-housing services. The bank has been instrumental in developing and shaping the evolving Bahraini mortgage market over the past five decades. Eskan Bank’s top priority is to help deliver homes to Bahraini citizens that are enjoyable to live in, economically maintained and attractively priced. Previously people had to wait fifteen to twenty years until they could get a house, while today someone can apply and with our help secure; access to finance and an eligibility certificate, together these can guarantee that they will get a loan. Within this framework, they will only pay 25% of their income over 25 years, and the government will give a subsidy. So we overcome the bureaucracy and we are acting as a catalyst for the private sector to become an active player in the provision of social housing. In short, in order to assist the government of Bahrain in achieving its housing-sector goals, Eskan has managed to develop key partnerships with the private sector that have allowed funding for social-housing beneficiaries to be raised. We have been very effective. That is why Eskan Bank has a long and prestigious history with regards to Bahrain’s real estate market. Having been established in 1979, its main mission was to provide mortgages for Bahrain’s low-to-medium-income citizens, and to engage in community-related property-development activities. Now we are Bahrain’s unequivocal leader in residential-mortgage provision and one of the biggest banks in the property-development market.
How has Eskan Bank evolved over the years, and what does it stand for today?
We initially started as an administrator of social loans that were given through commercial banks. We also managed the housing units that were given by the Ministry of housing; we overlooked the whole process with the follow up and collection. Since then, we have always been proactively growing. Our aim has been to add value and fill the needs of the market; hence how we have become a flexible financial arm to the government. That is how we act today as a catalyst for the private sector, we have many programs whereby we partnership with the private sector and our main goal is to mobilize resources. In fact, we can anticipate that to facilitate the mission of the Ministry of Housing we will have to play a key role in mobilizing international funds to the social housing sector in Bahrain. That is why we are also involved in the development of the financial restructuring and the management of social housing units.
Today, Eskan offers investment banking, retail banking, Sharia-compliant financing, and treasury and capital-management services, in addition to property development. One could describe Eskan Bank’s approach to customer service as holistic. Although its primary responsibility remains the private Bahraini citizen, its close working associations with the government and private sectors mean that the bank’s very definition of what customer service constitutes is broader than that of other regional banks. In addition, Eskan Bank also invests generously in new technology, primarily to allow the bank to handle more customers. Also, we are now embarking on a PPP initiative through which we are trying to mobilize international funds to the social housing sector in Bahrain.
There is a strong demand for social housing all over the world, however in many cases the quality and standards are compromised in order to bring construction and end product cost down.;
How are you going to prevent this from happening in Bahrain and how can you make sure that in Bahrain the quality is maintained?
We are developing housing units of 170 square meters; these are 3 bedroom units with all of the required services. They also have two parking spaces assigned, all at very affordable price. We have had international visitors and they have valued those apartments at a million mark. So, the quality is there for anyone to see, we don’t compromise on that.
We have always had our mission and vision very clear. Our core values are; integrity, respect, ownership and innovation, and lastly always regulating our line of work. We approach the social housing project with outmost respect, so when we build a unit we do it as if it was for our children. That is why our standards are so high, we insist in sustainability and providing all the services, amenities and green areas that can make a housing unit a home. On the technical side, we ensure our developments have parks; we introduced solar panels, recycling facilities and everything we can include to make it as sustainable as possible. Finally, we could not have done it without the fantastic employees of the bank who assume responsibility and ownership of their job. We all appreciate the value of being in a position where we serve the people of the country. Our teams have some of the most qualified financial professionals and Islamic bankers; everyone has helped the bank to achieve our goals.
Bahrain’s Eskan Bank has enjoyed a very fruitful 2015, particularly in terms of the performance of its core business—housing. Total net income grew by a healthy 8 percent during the year, while the bank’s capital-adequacy ratio continued to improve to 151.72 percent. Indeed, housing, particularly within a social context, has become the heart of Eskan Bank’s existence and success.
Now that you have identified a niche sector that works, which is your 2017 -2018 strategy to stay ahead of the Real Estate business?
We initially started as an administrator of social loans that were given through commercial banks. We also managed the housing units that were given to us by the Ministry of Housing; we overlooked the whole process with the follow up and collection. Since then, we have always been proactively growing. Our aim has been to add value and fill the need in the market; hence we have become a flexible financial arm to the government. That is how we act today as a catalyst for the private sector, we have many programs whereby we partner with the private sector and our main goal is to mobilize resources. In fact, we facilitate the mission of the Ministry of Housing by playing a key role in mobilizing international funds to the social housing sector in Bahrain. That is why we are also involved in the development of the financial restructuring and the management of social housing units.
While we grow and progress, we always look for creative solutions, like the real estate investment trust (REIT) that was launched in November 2016. The REIT basically consists of us providing the land and the private sector participating in the funding. We developed this strategy, as it is transparent structure investors where we can offer an attractive return on investment providing that our requirements are met. The REIT is a financial instrument serving the real estate sector but more importantly it provides means for enhancing the citizens’ participation. We want the wider population to have access to purchasing a home as there is a sector of society that doesn’t necessarily have the means to directly buy a home. Everyone can participate in this very new initiative; the interest has been so strong that we have had oversubscription. Finally, on the investors’ side, our expected return is very attractive positioning ourselves over 2% above the interests offered in Europe or USA.
This year marks the 200th year anniversary of friendship between UK and Bahrain. How important is it to strengthen Bahrain – UK relations, when it comes to the financial sector?
I think London is one of the most important and significant financial centers in the world and many Bahrainis institutions have maintained the presence there and now we have both learned from each other; a great example is how both nations share a strong links in the growth of the Islamic Finance segment. Europe has realized the benefits of using Islamic instruments and Bahrain is a great force when it comes to Islamic banking. We have many banks with international reach, I think this is an area where we can come together even further; on one hand we can always rely on the expertise that London can provide, while Bahrain can offer insight for institutions in the UK. When we have, international relations based on mutual respect, cooperation and dialogue to resolve international issues; developing solutions is natural. And this is the base of our relationship with the UK, hence why it works for both nations. This constructive approach has been one of the characteristics between Bahrain and UK. Today I see more and more space for both parties to come together, and of course it is key that we further the relationships that can develop not only in trading but also in manufacturing and finance. One must remember we have very attractive opportunities with minimal taxes as well as cost of labor, energy and living expense. So, we are a very attractive destination and we are ready to keep working together.