Bayt Al Mal Investment’s banking philosophy is one of complete openness and full Sharia compliance
Taking its name from an Arabic term translated as ‘house of money’ or ‘house of wealth’, privately-held Bayt Al Mal Investment was historically a financial institution responsible for the administration of taxes in Islamic states, particularly in the early Islamic Caliphate.
It served as a royal treasury for the caliphs and sultans, managing personal finances and government expenditures, and was the department that dealt with the revenues and all other economical matters of the state.
Today, this practice is still going strong. As well as fulfilling the requirements of its clients – institutions and providers of Islamic products that need distinguished investment – Bayt Al Mal Investment also provides business opportunities for major national and international companies looking to secure funding from the Islamic market. “We invest where the opportunity lies,” says Al Qimlas. “Wherever it is – we will look for it.”
Thanks to this philosophy, the investment bank has been something of a success story in recent years. In 2008, it led an investment consortium to bring a major motor sport, entertainment and commercial complex to the Niagara region of Ontario in Canada, and with it, additional foreign direct investment and tourists from across the border.
Bayt Al Mal Investment’s smart investments have given it a significant market-leading edge. It is already looking to become a MENA region specialist.
“We do provide a fully fledged range of services – including advising on M&A, fund management, portfolio management, buying and selling mandates, restructuring, helping foreign entities. We do it all – you name it, we do it,” says Al Qimlas. “Restructuring is always in demand; currently there is more of an appetite for real estate and equity so we aim to be flexible in the way we do business.”
Staying flexible seems to be something of a mantra for Bayt Al Mal Investment. A more recent major success story at the bank is the The Investor for Securities (TIS) subsidiary, which required adapting to a new set of regulations in response to a flourishing and niche market. “The subsidiary has set up a good number of funds in response to high demand, especially in the Saudi Arabian market,” says Al Qimlas. “We set up funds for developers to do a number of things in the marketplace – particularly in real estate. It’s the proper way to do things – to help society along and provide people with housing – all part and parcel of the makeup of Sharia law.”
The practice of societal responsibility has been a core principle of the Islamic faith as far back as the seventh century, and concepts of welfare and pensions were introduced in early Islamic law as one of the Five Pillars of Islam, part of the foundation of the religion.
Taxes, namely Zakat (charity), collected in the treasury were used to provide for the needy and a similar ethical strategy is still in play at the bank’s headquarters in Kuwait. Islamic trust and integrity principles ascertain that all transactions and deals are conducted in agreement with the provisions of Islamic law.
“The human element in the way we do business remains our utmost priority,” says Al Qimlas. “Sharia compliance is much like the software within the hardware. All our transactions and dealings must be monitored internally, and then renewed externally by a board. Our clients demand this of us – and we carry out our day-to-day business in a Sharia compliant way – an ethical way. As well as social responsibility, we provide confidence. I don’t withhold information from clients, and I don’t cheat them – which certainly aids reassurance in the way the bank does business.”
Awaqf, the Arabic equivalent of endowment, has become an important part of the economic sector of Sharia law. “This asset, be it in real estate, inheritance, or savings in benefits, is something that will help someone in society,” says Al Qimlas. “Awaqf must be cared for and protected to ensure it is enhanced, rather than diminished. This is a sector of the industry the bank is especially careful with when it comes to its dealings with investors.”
There are potentially trillions of dollars of Awaqf wealth in the Gulf region’s private and public sectors; it simply needs management. Studies indicate that Awaqf wealth in Muslim countries could amount to double that of the world’s trust funds. Bayt Al Mal Investment believes that the Islamic banking sector needs rehabilitation in order to compete with the western banks, who are more advanced in dealing with endowment issues.
The company endeavours to maintain its leading position in the fast-growing Islamic markets and to identify and avail itself of the favourable investment opportunities therein. Competition in the industry is currently very healthy – Al Qimlas maintains that a company without competition is a dead one, and it presents an opportunity for the bank to motivate itself to remain one of the top providers in the country. “We are well established in Kuwait and Saudi Arabia but we’re always looking to expand,” says Al Qimlas. “It’s all about that right moment, with the right partners. That’s what certainly makes the difference with investment.”
He believes the recent Kuwait Capital Market Authority (CMA) laws and regulations, which came into effect last year, have given Bayt Al Mal cause for celebration rather than concern. “The investment banking sector has always been resistant to change, but the enactment of these new regulations recognises a change to the way in which the capital markets do business,” says Al Qimlas. “Despite a small level of concern, particularly regarding investments (due to the possibility of excessive regulation, higher work loads and more compliance), I don’t necessarily see the new regulations as a bad thing. We are yet to see the changes, but if they provide more security, well, that can only be a positive change in my opinion. We’ve passed that stage of resistance now, and I think that as long as the new regulations have the capacity for a bit of longevity, they will become more and more accepted. The CMA will ensure the events of 2007-2009 will never happen again. There is now an eye on the marketplace, and it will ensure people comply properly. We will learn from past mistakes.”
Al Qimlas also plans to keep recommending Kuwaiti Dinar Short-Term funds for its clients – “There’s no idle Dinar at our bank!” he jokes. “Many people are looking for better returns for short term loans, which is ultimately better for the client and for us. Our interests are concentrated on the activities that enable us to generate an added value to the company, and which utilise our distinctive specialities.”
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Looking to the future, Bayt Al Mal plans to introduce a hi-tech electronic stock trading system. The system will use the latest security techniques and will be user-friendly, efficient, and will support Arabic and English languages to enable the company to offer better and more effective service to its customers, particularly when compared to market competitors.
“We are always aiming to be more flexible in the services we provide and we want to reach our clients on a multi-channelled basis,” says Al Qimlas. “Websites, smartphones, and tablets can enable us to provide a better service. The electronic stock trading system will allow for the clearing and settling of traded deals on time, which in turn will allow stocks or funds to be deposited in the customer’s brokerage account upon finalisation, giving greater choice for clients. We are setting it up in Kuwait and Saudi Arabia, and there is some integration to provide access to both markets.”
With the bank maintaining its strong position as a leader in Islamic finance, Bayt Al Mal Investment still believes there is room for growth in the future. “Islamic finance should not be looked at as a competitor for traditional finance, but rather as a complimentary service,” says Al Qimlas. “In Islamic countries, people are more comfortable with Islamic banking. We are aiming to expand on a more regional scale initially, rather than globally. There will certainly be more news coming from us over the next few years.
(World Finance / 25 June 2012)
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