Sunday 17, September 2017 by Georgina Enzer

Dubai Islamic Bank: Shari'ah-compliant DNA

As part of our recently launched Profiles in Leadership series, CPI Financial CEO Robin Amlôt interviewed Dr. Adnan Chilwan, GCEO of Dubai Islamic Bank - for an in-depth review of the bank’s domestic and international operations together with thoughts about its plans for the future, watch the full video here

Dubai Islamic Bank is the longest-established modern Islamic bank. It is also one of the leading financial institutions in the Middle East. Robin Amlôt spoke with Group CEO Dr. Adnan Chilwan about the bank’s growth strategy

Dubai Islamic Bank (DIB) is one of the top five banks in the Middle East region on the BME 100 performance metrics and it has been for the past three years. In addition to impressive growth in its domestic market in UAE, the bank is working to establish its crescent of operations under its control that spans from East Africa to Southeast Asia.

Dubai Islamic Bank celebrated its 40th anniversary in 2015. It is not only the world’s first modern Shari’ah-compliant player but also the largest Islamic bank in UAE with group assets of more than $50 billion, a market capitalization of nearly $8 billion, and workforce of more than 8000 employees across a network of branches and entities in all emirates as well as growing international operations in Asia, the Middle East and Africa. DIB has operated a wholly-owned subsidiary, Dubai Islamic Bank Pakistan, which has been in operation since March 2006.

In 2015, the bank joined the ‘Billion Dollar Club’, a membership it retained in 2016 with DIB showing profits of more than a billion dollars each year.

DIB is one of the small number of ‘international’ institutions in the region’s financial sector. Is the bank able to leverage economies of scale as a result?

If you actually look at when we started expanding internationally, it has been a decade but in the last three years we have really gained traction. We now operate in seven countries. We were latecomers in this, given that we were one of the fastest-growing franchises in the region but we had to focus on our base at home. Having captured everything that we could in the UAE it was time for us to venture out. We started to look at operations outside our traditional borders. We now operate within Far East Asia in Indonesia, we have presence on the ground in Pakistan, South East Asia and we recently started to venture into East Africa. We definitely see economies of scale but for us it is a different strategy.

There are three distinct ingredients that we look for when we look at international expansion: firstly, we want to make sure that we take our brand name along with us, so Dubai Islamic Bank wherever we operate you will see there is consistency in the way people would see us; secondly, we need to have management control – we do not believe in passive investments, we want to make sure we drive the strategy of the organisation in line with the overall group strategy set within the UAE; thirdly, we want to make sure that Islamic finance and the norm of Islamic finance penetrates into new markets.

If these three pillars of our strategy are met vis-a-vis international expansion, that is where you will see us operating. While economies of scale are very important, we want to be different from what others have done and that needs to come out of the very niche that Islamic finance has been in.  Islamic finance has always been a very niche kind of discipline, we are trying to position ourselves differently. Whilst we are a Shari’ah-compliant bank, we want to make sure that we position ourselves as a bank for all. That has been one of our strategies that has worked for us both locally and internationally.

Looking to your international activities, in January 2017 DIB exited its investment in Jordan Dubai Islamic Bank. What was behind the decision to withdraw?

When we got into Jordan in 2008 we came with a clear mandate to set up a global institution that could implement best practices that we had established within the UAE. Having set up Jordan Dubai Islamic Bank (JDIB) we were quite passive in managing the institution. With a 20 per cent stake you are neither here nor there. With a very limited contribution to the future of JDIB we realised that it was an opportune time for us to exit our investment having been in the country for about 10 years.

Capital is finite. You have to make sure that you reinvest capital for the benefit of the shareholders in countries where ROEs are maximised. It was not a decision we took overnight. It was always part of our plans when we entered Jordan, we wanted to make sure that we enhanced the profitability of the Jordanian venture and, having achieved that within a decade, it was the right time for us to leave it in the capable hands of the existing shareholders and look at expanding elsewhere.

[Jordan Dubai Islamic Bank was the legal successor of The Industrial Development Bank which had originally been established in Jordan as a conventional bank in 1972. Following DIB’s withdrawal, the bank has been rebranded as Safwa Islamic Bank.]

In March 2017 Indonesia’s Bank Panin Syariah rebranded to Panin Dubai Syariah Bank (PDSB). DIB holds a 40 per cent interest here. What growth do you expect in Indonesia?

Indonesia is a very exciting market. It is the largest, most densely populated Muslim market, with around 250 million Muslims. When we entered into Indonesia, I was told that it is a market where Islamic banks are quite small, where Islamic banking is underpenetrated – so why go in to Indonesia? These are exactly the right reasons. The Indonesian market has tremendous potential. It is a market which has something in it for everyone. Given that you have the right positioning you cannot go into Indonesia and be just another player. You have got to bank on all the experience that you have gathered over the four decades that we have been in existence. Technology also plays a very large part. Last but not least, the regulator in Indonesia is quite supportive of Islamic finance. It is on the national agenda. If you look at the current five per cent penetration of Islamic finance, it is just the tip of the iceberg.

Organisations in the past that have tried to venture into Shari’ah compliant banking in Indonesia were not as successful as they wanted to be because of their positioning. Given the size and potential of the Indonesian market,  you cannot just do faith-based banking in Indonesia. There has to be a value proposition that makes sense to everybody. I am not saying that we would ever compromise on Shari’ah compliance, that’s within our DNA but you do not need to keep nailing the point that we are an Islamic bank, so you are a Muslim and you should bank with us.

The success of DIB within the UAE has been for that right reason, because we have changed our positioning. That’s the reason why after being in existence for four decades you have actually only taken notice of the bank in the last three or four years, because we have changed our positioning. We have not compromised Shari’ah, we have not compromised Islamic banking jurisprudence but what we have done is we have understood what the customer wants. We are now fighting tooth and nail to make sure we compete with the largest players within every region we are operate in and try to bank everyone. If that’s the positioning we follow in every geography we enter into, including Indonesia, I think the sky is going to be the limit.

The bank has very recently moved into a new geography; in May 2017 DIB was granted a banking licence by the Central Bank of Kenya to operate a subsidiary, DIB Kenya Ltd. What’s the next step and what opportunities do you see?

From where we sit within UAE, if you visualise it geographically, we have always had ambitions to connect the dots. We always wanted to make sure we ventured into Far East Asia and East Africa. It is an ambition that Dubai itself has in order to make sure it captures the trade flows between these two continents. Being a bank in the UAE, we subscribe to that natural ambition and we want to make sure we can play a part in enhancing and capturing these trade flows.

Within the UAE we have gained momentum, as everyone has witnessed, we had already ventured into Far East Asia, East Africa was the next logical point. When you look at Africa as a continent, everyone talks about ‘the promise’ and ‘Africa rising’, you have to choose between West and East. From where we are geographically located, East Africa makes more sense. Now, when you look at the countries in the East Africa belt; Kenya, Tanzania, Rwanda, Burundi, Malawi; Kenya stands out. It is a country that stands out in its regulatory framework, the stability in the country and also the welcome that the Kenyan regulator has for an institution coming out of the Middle East

We worked alongside the regulator and now have a licence to operate, the bank is up and running, it is already open and we have ambitious plans for East Africa. Kenya is just the start, we are also looking at the East African belt, but we have to walk before we can run, so we are taking it at the right pace and making sure that the organisation actually comes out of this gestation period. Kenya is going to be a country we will be focussing on in years to come. 

Dubai Islamic Bank is the largest Islamic bank in the domestic market in UAE. Have you reached the limits of growth in local terms?

Not really. I have immense belief in the leadership of the UAE. If you look at the last four to five years, the world has gone through all sorts of global financial crisis, we’ve had economic slowdowns in many countries within the world. Within the UAE itself we have not been insulated from the global economy, we have seen commodity prices falling and oil volatility, we have seen the impact of that on liquidity and asset quality. Despite all of this, if you look at every financial institution within the UAE, it has become stronger and it gained momentum and gone a step further.

DIB embarked on a growth strategy in 2014, that was the peak of this ‘mini crisis’, what did we do, we put a step forward and we started growing. Any analyst or any consultant coming to you would have advised that this is not the time, you have to consolidate and take a step back. We did quite the opposite. Why? Because we believe in this country, we believe in the leadership and we knew that the reliance on oil was not the only thing that the country ever did, it diversified. If you look at global macroeconomics of the UAE you will see it has diversified its reliance on oil into other sectors. That is exactly what the bank did, we started looking at other sectors and not put all our eggs in one basket. I always say, if you want to have something you never had, you have to do something that you never have. In 2014, 2015 and 2016 we grew. I feel that if we did that in the most tumultuous times then 2017, 2018 and 2019 are going to be relatively easier. I see that there is domestic growth on the agenda not just for DIB but for every institution that has got this right.

As part of our recently launched Profiles in Leadership series, CPI Financial CEO Robin Amlôt interviewed Dr. Adnan Chilwan, GCEO of Dubai Islamic Bank - for an in-depth review of the bank’s domestic and international operations together with thoughts about its plans for the future, watch the full video here


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