Sami Al Afghani, CEO of Jordan Dubai Islamic Bank talks to Banker Middle East about the growing interest towards Islamic banking products and practices within Jordan's banking and finance sector.
How do you see the growth in Islamic banking in Jordan?
Islamic banking is an increasingly growing sector in Jordan and is in a position to fulfill all the financial needs and requirements of customers in all categories. There is a growing trend in Jordan whereby a large number of customers are shifting their business to Islamic banks. This trend is made rather clear from the increasing market share for Islamic banks, due mainly to a host of new competitive Islamic products.
At Jordan Dubai Islamic Bank , we are placing all our focus on the local market for the time being to ensure our position in the market as the leading providers of Islamic banking products in Jordan.
There is room for Islamic banking to grow in Jordan and the opportunity for it is rather great due to an ever increasing Muslim community, interested only in dealing with Islamic financial products especially where there are clear guidelines and structures. Islamic banking is not only a matter of providing the service but more importantly, it is about the quality of this service which is highly affected by Shari'ah Islamic laws.
I believe that the entrance of new players into the Islamic banking market is beneficial for all, as it will help in allowing for more regulations for this sector and will highlight Shari'ah- compliant products making them more familiar to the public, as new comers will enhance the experience and culture in this sector in the same way that Jordan Dubai Islamic Bank has.
What is your view of the Sukuk market growth in Jordan, regionally and globally?
The Sukuk market is growing rapidly both regionally and globally. This growth rate reflects the economic development of the Middle East region, the financial appetite of countries such as those in the GCC, as well as the growing appetite for Shari'ah-compliant instruments.
Last year in October 2012, the Sukuk law was approved in Jordan. Now there is a committee consisting of the Central Bank of Jordan, Jordan Securities Commission, Ministry of Finance and Dar Al Efta', to place detailed instructions and mechanisms to issue sovereign Islamic Sukuk, which will be the benchmark for the private sector to issue Sukuk, and we expect this to be finalised within the second half of this year. Sukuk issuance will help Jordanian Islamic banks invest their liquidity surplus, which means managing the funds more efficiently which will in turn be reflected in depositors and shareholders' profitability.
The increased conservatism of the Arab banking sector in its lending policies resulted in a noticeable surplus of funds amongst some of them. How can these banks invest their surplus and what is the impact of its accumulation on the Bank's profitability?
I think that the tightening in Arab banking lending/financing policies is a normal reaction to the various financial challenges and its negative impact on the world's economy. This negative impact and slowdown is affecting every sector and therefore banks have to be more cautious and do have to analyse every aspect, which is already in the core structure of banking business. However, during financial slowdowns similar to the one we are going through, banks increase their terms and level of analysis in order to protect their depositors and shareholders.
How has the Bank performed at end of 2012? And what are your plans for the future?
Jordan Dubai Islamic Bank started operations in 2010. By the end of its third year of operating as an Islamic Bank, working under the Central Bank of Jordan's regulations, the Bank's total assets exceeded $670 million and its shareholder's equity exceeded $179 million. Our results for fiscal year 2012 were much better than original expectations as we have adopted flexible plans taking into consideration regional developments and their impact on the Jordanian economy. Despite the difficulties that have faced Jordan Dubai Islamic Bank in 2012, we were successful in building a high-quality financing portfolio that generated operating profit and at the same time we have been able to distribute competitive profit rates to our depositors.
Mr. Sami Al Afghani, CEO of Jordan Dubai Islamic Bank since its establishment in January 2010 has 26 years of experience in banking, holding different positions in several banks across the region such as the Abu Dhabi Islamic Bank, Arab National Bank and Arab Bank.