Abdulrazzak M. Elkhraijy's extensive career took him to various positions and areas of responsibility within the NCB Group; working as deputy and branch manager in various locations in Jeddah from 1982 until 1985, and in 1985 he was promoted to the position of branch manager at Jeddah's main branch, one of the most important positions in the bank. Between 1987 and 1994, Elkhraijy was elevated to the position of acting and regional manager for the Western and Eastern Regions, and in 1994 he was made deputy head of the Islamic Banking Division (IBD). As deputy head of IBD, Elkhraijy was responsible for setting up its business strategy, new product and service development in addition to determining the suitability of investment opportunities for the assets that were under management and being the head of Islamic Credit Committee.
In 1998 he was made the head of IBD, a post he held until 2004. During his tenure, he managed and boosted IBD by converting individual and regional branches to Islamic banking, introducing first capital preserved funds, guidelines for Islamic equity investment and the launch of the first Islamic credit card. Moreover, he introduced a range of new innovative Islamic funds that helped propel NCB to become the leader in diversity and size of its portfolio of Islamic funds.
As a result of the merger of the retail division and the Islamic banking division, the Islamic Retail Banking Division was born and Elkhraijy was its head from 2004 until 2006. In December of 2006, he was made head of the Islamic Banking Development Group which was charged with overseeing all aspects related to Islamic banking at NCB divisions and some of its subsidiaries.
Yes, I do. The Islamic financial industry is certainly contributing to strengthen the global financial system. The industry has provided a viable alternative financial system with new rules and standards to ensure its sound governance. However, what is more important to understand is the very basics of Islamic banking which have the potential to contribute toward financial and economic stability of any economy. With close linkages between financial transactions and the real economic activities, Islamic finance is helping to bring back the much-needed resilience and stability of the global financial system. The value of Shariah-compliant assets globally has grown by more than 20 percent to reach an approximately $1.2 trillion industry. The sukuk market has surpassed $100 billion and is doing well in 2012 up till now, thus providing the much-needed succor to the global financial system. In general, Islamic banks have grown faster than their conventional counterparts. This has been possible due to the strong ethical foundations of the Islamic banking industry. As you are aware, Islamic banking follows certain strict ethical principles such as (i) avoidance of riba and prohibition of making money from money; (ii) avoidance of speculative and gambling based transactions (mayseer); (iii) avoidance of significant contractual uncertainty (gharar) in dealings; and lastly (iv) avoidance of Shariah-prohibited activities such as dealing in alcohol, drugs, armaments, etc. and "not to sell what you do not own." These noble ideals of Islamic banking have served to protect the customer, the bank, the economy and the society at large.They say that the Islamic financial industry lacks regulations. What is your take? Is there a need for a strong regulatory oversight for Islamic financial services industry and related capacity building?
You think new standards and guiding principles in Islamic finance will endeavor to strengthen the basis for market development and to spur the development of new Shariah-compliant instruments?Yes, to a large extent. It is not only important to develop new standards and guiding principles but also to adapt and implement it truly in letter and spirit. The combined effect of this will result in growing the industry further. In this context, I am looking forward to more research in Shariah and its application in modern banking so that the combined effect of this will see introduction of efficient products with greater conformity to Shariah in its essence and implementation.
It is indeed heartening to see greater interest and involvement of world bodies such as the World Bank and the International Monetary Fund (IMF) in collaborating with Islamic finance industry bodies and banks in general to establish various prudential standards and institutional framework to govern the industry. As you know, the World Bank has declared Islamic finance as a priority area since there is a need to strengthen the foundations of Islamic financial system both in terms of implementing Shariah standards as well as in terms of establishing prudential standards so as to prevent the occurrence of another financial crisis. I would like to mention the views of the World Bank as articulated in a recently-held conference at Harvard, the following essential foundational issues and challenges need to be addressed to facilitate the growth of Islamic banking. These challenges are: (i) improving the regulatory framework; (ii) the need to rebalance tax treatment for Islamic bank transactions; (iii) the need to improve exit rules in the event of insolvency and default; (iv) the need to ensure adequate liquidity; and (v) the need to establish sound risk management standards specific to the practice of Islamic banking.
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Is it possible to promote global financial and economic linkages through Islamic finance?
As the global economy creates new financial architecture, incorporating lessons from the global financial crisis, Islamic banking is slowly emerging as a role model because of its focus on ethical investments. The developmental contributions of the Islamic banking industry are not limited to the direct economic development, but transcends to embody the social and moral aspects of development as well; elements that are not currently included in the “Human Development Index” of the UN. Lastly, any discussions on the role of Islamic economy and Islamic finance would be incomplete without mentioning about the tools of zakat, waqf and takaful which are an integral part of Islamic economy. These are very important tools for ensuring social and distributive justice. Together, with an array of Islamic banking products and services, they offer a composite solution to the moral and economic woes of the global economy. I would like to mention that the Islamic banking model is for everyone regardless of their religious denominations since it is based on solid foundations of ethics and real economy which has proved its strength during the global financial crisis.
What are the major challenges for Islamic banking?
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