Involved in all sectors of the economy, leading financial services provider Masraf Al Rayan is perfectly positioned to play a major role in Qatar’s economic development and expand its own customer base, particularly as Islamic finance becomes more understood and appreciated across the mainstream segment. CEO Adel Mustafawi highlights the opportunities in Qatari finance and his company’s plans to venture further afield into the GCC, North Africa and Southeast Asia.
What are the opportunities within Islamic finance in Qatar?
Qatar’s financial system is solid and resilient with very strong fundamentals. There is no doubt that Islamic finance has gained significant ground in Qatar and GCC. Islamic finance continues to play a major role in shaping the future of our economy through advancing direct and indirect finance in support of infrastructure and projects; corporate, SME, retail and private banking needs; and business development.
Over the years we have seen a faster and consistent growth of Islamic finance assets as infrastructure development and the general economy as a whole continues to grow together. In addition, the widening of our customer base as Islamic finance becomes more understood and appreciated across the mainstream segment provides a major boost to support growth. We project that the demand for Islamic finance will continue on a positive growth trajectory going forward into the next decade.
How do these developments impact Masraf Al Rayan’s activities and what is the role the QE Al Rayan Islamic Index, established in January 2013, is to play?
Masraf Al Rayan is perfectly positioned to play a major role in the development of our economy as the government diversification strategy and initiatives are in full swing and continue to be successful across all sectors of the economy.
Islamic finance has proven to be resilient during challenging economic cycles and has demonstrated strong support for the economy and its customers during challenging phases.
Furthermore, one of the main and unique features of Islamic finance is the ability and need of Islamic finance to connect with the real economy in a manner that is prudent, conservative, economical and at the same time ethical. This strong connection with the real economy means Islamic finance does not open itself to creation of asset bubbles and speculation that could potentially be a source of toxic assets.
On the QE Al Rayan Islamic Index: Masraf Al Rayan, through its wholly owned subsidiary Al Rayan Investment, played a leading role in the establishment of the QE Al Rayan Islamic Index. This Islamic Index is a total return index reflecting both price performance and dividend income of Shari’a-compliant stocks listed on the Qatar Exchange and was established to create Qatar’s first Shari’a-compliant benchmark to advance the Islamic asset management industry.
Using the index as a building block, we are now supporting the creation of a Shari’a-compliant exchange traded fund (ETF). The Al Rayan Qatar ETF will track the Al Rayan Islamic Index. The ETF will be listed on the Qatar Stock Exchange and is currently awaiting regulatory approval. When launched, we hope this will be the largest Shari’a-compliant ETF in the world.
In which activities is this bank currently engaged and what is meant to be the impact of projects such as the Al Wakrah logistic zone for the future development of the country?
Masraf Al Rayan is involved with and supports all sectors of the economy in line with our governance and risk management frameworks. We are conservative overall but aggressive in certain sectors of the economy, especially where the public sector and semi-government institutions are active. Our business model continues to be focused on effective diversification, efficient asset liability management, operational efficiencies, first-class customer service and effective cost management to ensure that we achieve a balanced risk and return combination.
Masraf Al Rayan is a leading financial services provider (directly and indirectly) in support of the development of new logistics and industrial zones. We offer clients a wider choice of products and services to address their needs leveraging our strong knowledge and relationships in the local and regional economies.
What role is Masraf Al Rayan playing in fostering of SMEs through programs such as Al Dhameen?
Masraf Al Rayan has built a very strong SME business group dedicated to support our clients in the different SME segments, enabling them to achieve sustainable and healthy growth. We understand their needs and local business culture; a valuable experience enabling us to offer general and tailor made solutions. We also have unique offerings for our existing and new clients in these segments from working capital and term finance to trade finance and cash management.
A core element of our customer relationship model is the support we provide to our clients using our own internal expertise and resources (subject matter experts) specialized in real estate, engineering, hospitality, trade and contracting. It is this level of true partnership that enables us to go the extra mile and build close business ties with our clients for mutual benefit.
How is Masraf Al Rayan working to accomplish the goals stated at the National Vision 2030 for human and social development, beyond economic growth?
In and outside Masraf Al Rayan we are playing a major role of human and social development. We strongly believe in investing in human capital and expanding the training programs we offer through a combination of in-house, on-the-job and external training to support Qatar’s Vision 2030. We have also expanded the graduate development and leadership programs for Qatari nationals including career and individual personal development plans.
In 2015 Masraf Al Rayan offered more than 11,222 training hours, an increase of 42% on 2014. Recently we partnered with a local specialized organization to train our staff in sign language skills to be able to support all our customers.
Masraf Al Rayan is a leading sponsor of a number of sports, cultural, social and educational initiatives across the country.
How will the new set of regulations in process of implementation throughout this year by the Central Bank and the regulatory authorities impact in your operations?
In 2016 we have seen emphasis on Basel III compliance, the Internal Capital Adequacy Assessment Process (ICAAP), Cyber Security Assessments, preparation for IFRS 9 (Collective Impairment) implementation, Governance and Risk Management reviews, etc. We are always at the forefront of ensuring full compliance with applicable laws and regulations in all the markets we do business. We pro-actively invest in people, processes and IT systems to ensure effective compliance with laws and regulations and efficient management of operations. In general, we prioritize compliance over profitability.
Which are going to be the main drivers of growth for the bank in the mid-term?
We continue to invest heavily in understanding the needs of our customers, developing new products and services, enhancing our risk management and asset liability management systems, and improving our customers experience, including investing in the latest technology for online and mobile banking,
Supporting the development of infrastructure projects in Qatar and the government’s efforts to diversify further the Qatar economy are the building blocks of our future growth. At the same time we are growing our SME and retail franchise in Qatar and UK. Today our UK franchise has assets in excess of $1.45 billion. In Qatar we command more than 30% market share in Islamic assets and nearly 10% of total local banking assets.
Our franchise in Qatar is very well established, in less than 10 years of operations since the bank was established. A strong franchise combined with a solid capital position, funding profile, strong profitability, and conservative risk profile is an opportunity for us
Islamic finance assets globally are estimated at about $2 trillion and expected to reach $3 trillion in the next decade as reported by the Standard and Poor’s.
How can Qatar become a bridge between West and the Middle East?
Qatar has already established this bridge on several fronts from investments, sports and culture, to education, health care, travel and tourism.
What are the main advantages of Islamic banking services and products when compared to conventional banks?
Islamic finance assets are mostly based on real assets supported with risk and profit sharing fundamentals. The principle of connecting Islamic finance assets to real economy and real assets creates a natural hedge and better control over the financial system compared to convention banking assets that could outstrip real assets by many multiples especially when derivatives are taken into account.
Furthermore, under the principles of Islamic finance, short selling is totally not permitted. The ethical principles in ensuring fair treatment and dealings with customers at all times and more during financial difficulties underpin the unique partnership we share with our customers.
What are your future plans for expansion at Masraf Al Rayan?
To continue building a strong franchise servicing both Islamic and conventional customers, first in the GCC and then beyond into Europe, North Africa and Asia.
We are always looking for opportunities to grow organically and through acquisitions. Since the acquisition of the Al Rayan Bank Plc in UK we have been exploring other opportunities in the GCC, North Africa and Southeast Asia. We are also seriously considering expansion into Europe through Al Rayan Bank Plc. Our vision is to build a bank that is strategically positioned and aligned to support our clients and their businesses across the globe.
What opportunities do you see for further engagement in the US market?
As more investors from the region explore investment opportunities in the United States and a growing international trade between the United States and our region, Masraf Al Rayan is well positioned to take advantage of these opportunities. We always believe that trade finance business is a key opportunity area for us to grow our share of the business.
The success of Islamic finance in the United States will largely depend on a number of factors including the availability and adoption of Islamic finance laws and regulations and political support in the United States.