No Islamic bank needed to be bailed out during the credit crisis and no tax-payer cash was needed to prop up feckless and reckless lending. Many banks, like the Jordan Islamic Bank (JIB) actually increased deposits and upped market share.
In fact, H.E. Mr Mohammed Abu Hamour, the Minister of Finance, turned to JIB itself for a loan recently, so impressed was he with Islamic banking's success during the credit crisis.
No wonder, then, that some Islamic banks rapidly became safe havens for investors disillusioned with the western banking model. And while western banks slowly recover from the carnage, the Jordan Islamic Bank is an example of a bank consolidating commitment to shareholders, investors and employees, and at some speed.
Sharia law, based on sound conservative, classical banking principles, is also fast turning into one of the most fast-growing banking models. You can't grow your business in the 21st century without the latest cutting edge technology – or genuinely innovative products.
“It's about commitment in applying the latest innovative products in the banking industry and technology,” says Jordan Islamic Bank Vice Chairman, CEO and general manager Mr Musa Shihadeh, “as well as looking forward to gaining the trust of all people in our distinguished services in line with recent variables and changes within the framework of compliance with our Islamic sharia.”
Mr Musa Shihadeh says that one major priority is to continue the process of developing and updating JIB's communication systems, networks and lines as well as equipment, including the application of the new banking system (ICBS) and the introduction of new techniques to the banking business. Bonds will take a key role here, as we shall now examine.
Emphasis on bonds
Mr Musa Shihadeh knows huge opportunities exist for the development of Islamic bonds by JIB. Islamic bonds remain fundamentally different to conventional bonds (the issuance of Muqarada bonds, for example are issued enabling specific projects to be run within a company).
Huge financial centres like London are increasingly looking to issue shariah-compliant bonds to ensure they retain their financial clout. (Britain, for example, has adjusted its tax regulations to enable Islamic bonds − or Sukuk − to be held and traded.)
Islamic bonds in brief
Islamic finance is interest-free. However Islamic bonds, sometimes known as Sukuk, take an investment return from assets used to support them.
This approach is substantially from a typical corporate bond which pays a fixed rate of interest to investors.
Generally this means Islamic bonds tend to have a bias towards real estate and commodities – tangible, substantial assets. Islamic bonds are also based on the basis of risk and reward, within certain parameters.
But the success of any financial market place, be it Islamic or not, depends on the trust its shareholders, customers and employees places in it. What is the quality of its products? How transparent are its processes? How well does it perform in the market place compared to its rivals?
Mr Shihadeh says that JIB is proud of the trust placed in it since the bank's establishment, and this is reflected in its impressive credit rating, not to mention the rash of awards it can point to: JIB recieved World Finance's Best Islamic Retail Bank in the World for 2009 and 2010. The bank has an ‘AA' sharia rating (SQR), international scale foreign currency is rated BBB- long term and A-3 short-term. Fitch Ratings have awarded JIB an ‘BB-' grade for the long term and a ‘B' grade for the short term, foreign currency and a ‘Stable' outlook.
Technology to the fore
What is less known about Islamic banking players is the high level of technology innovation offered clients. Here, says Mr Musa Shihadeh, JIB are well ahead of the competition. “We provide a full SMS service through mobile networks to inform clients data about their accounts such as returned checks, withdrawals and balances as well as salary crediting.”
Additionally, SMS services to the holders of visa cards are also offered − clients can receive a message within seconds to confirm the acceptance or the refusal of a transaction. Video cameras operate in all branches and Smart Visa Electron Cards (VSDC) using Chip Technology provide superior security and protection to card holders.
“It is worth mentioning that JIB was the first local bank that offered such cards in-house,” says Mr Shihadeh. “We have also implemented the Electronic Clearing System to JIB's branch network, together with all local banks.”
JIB's e-banking service
This enables retail clients to easily check:
» Balance of their account
» Request statements from their account
» Order a cheque book
» Stop payment of any cheque
» Transfers between customer accounts
» Transition from the current Money Gram system to a Western union system via the internet to introduce a swift money transfer service
» Implementing the Verified by Visa (VBV) service which enable Gold and Silver Visa card holders to shop via the internet securely
A growth-based future
A priority for Musa Shihadeh is exceeding expectations by bringing new ideas and solutions to customers. It's a strategy of widening the customer base and increasing market share.
But it's also about how a company behaves to the wider community that is also important to JIB says Shihadeh. “We undertake to coutinue to be a pioneer in Islamic banking services according to the glorious sharia principle, to be sincere and faithful to our shareholders and customers by bringing new ideas and plans.”
Certainly Mudaraba-based tools and investments – Mudaraba offers specialist investment services in which the bank and customer can share any profits − is a tool actively promoted by Mr Musa Shihadeh and JIB to the benefit of all parties.
Mudaraba also provides an interest-free mechanism to support skills and mobilise resources. It's an especially useful tool for SMEs and small traders he says, helping to reduce long-term and short-term unemployment in the community.
“We are continuing to finance many projects and the requirements of a broad range of craftsmen and craftswomen,” confirms Mr Shihadeh. “The idea of this program is to support young craftsmen and women to build their future and to have their own projects, although they have no ability to finance their projects. But our bank is ready to finance them in order to help reduce poverty and solve the problem of unemployment.”
The on-the-ground facts of this kind of support are deeply impressive: the JIB's Financing Craftsmen (Personal Retail Social Service) has now financed more than $2.466m for small businesses.
JIB also continues to donate funds to many social and cultural events, from the Jordanian Hashemite Fund for Human Development to various charity commissions and collective wedding parties. In fact, JIB donated more than $380,000 last year to such services.
This socially responsible attitude is also underlined by several core JIB beliefs, namely:
» JIB's customers are its guests
» The bank is the family bank
» JIB is an experienced partner
» Increasing share in the local market
» Increasing profits
» Supporting the national economy
» Playing a key role in developing society
Truth is in the numbers
The last financial year proved another successful period for JIB with shareholder value rising 10 percent. But more impressive than that was a 21 percent rise in deposits (to $2.722bn) and an 18 percent rise in assets ($3.079bn). That's a stunning achievement in a very difficult year. “That's also down to the fact that there is more demand from our citizens to deal with an Islamic bank,” says Mr Musa Shidaheh. “But it's also about being satisified with our customer services and ensuring that they are compliant with sharia prnciples.”