Why does SCB want to focus on Islamic banking in Bangladesh?
Islamic financing is growing alongside conventional banking. The growth has been quite encouraging in almost all key markets, which are in Asia Pacific and the Middle East. We are always encouraged by how the government and regulators are supporting the promotion of Islamic banking globally.
Why the focus on Islamic banking?
Because of the need. There are 1.8 billion Muslims around the world. The core markets we operate in are mostly Muslim-majority countries. So we realize that these markets are looking for Islamic financing opportunities and alternate products, rather than the conventional products.
We started the business because our customers in the core markets needed these products. Taking on that from the UAE, Dubai, Malaysia, Pakistan, and Bangladesh, we have seen that the demands for such products are increasing and the growth of these products all across these four markets has increased.
Similarly, a customer who walks into a branch feels that the bank is offering Islamic banking products which are on par with conventions but also satisfy their personal beliefs. So that is driving the Islamic banking.
The market also expanded from basic products on the retail side to sophisticated products in commercial and corporate banking and the financial market side.
Bangladesh is one of the key markets where the growth will continue to happen as banks like us and others are expanding in this area.
What are the challenges for Islamic banking in Bangladesh as well as in the global markets?
Bangladesh is no exception to the challenges we have globally. Human capital is one of the biggest challenges because the market is expanding in a way that not enough Islamic bankers are available. We are encouraged by fact that the universities have programmes and certification for Islamic experts.
The second challenge is standardization in terms of accounting standards and shariah standards, because there are different scholars working in different markets. They could be diverse in opinion.
As the industry is evolving, transactions are getting done, and products are being made, standardization is a very important aspect that needs to be addressed.
The third one I would say is liquidity. Liquidity management is an important aspect globally. It is important how Islamic liquidity gets attractive, how we invest it, and what the regulatory framework is. Another is awareness about the Islamic financing system.
Why would Bangladeshis choose Standard Chartered Bank over local banks?
We bring lots of commitment and credibility to our customers. The SCB is providing international standard products and services. In ensuring quality services, control and governance are very important. We are regulated by the global key entities around the world. It is very important how we conduct our business in the country. As an international bank, we have lots of experience.
Is Islamic banking only for Muslims?
Our products are for everybody. A customer has multiple needs and is not restricted by religious beliefs or ethnicity. It is open for everybody. A customer who wants to have Islamic facilities could come from any background.
I know someone who carries both a conventional credit card as well as our Saadiq credit card. He is a non-Muslim and he uses it as he feels it is much more convenient.
What is key to the success in Islamic banking?
One of the fundamental principles of Islamic banking is that it is not in any kind of speculation business. We do not do things that are speculative in nature. That is why uncertainty is not a part of our DNA for Islamic finance. The structure is less prone to adverse market conditions. Islamic banking typically on the corporate side is based on mostly assets based structure. So, you are financing the real economy.
Is SCB Shariah compliant?
The SCB has a global shariah board and we have three levels of boards. Experts of these shariah boards actually formulate policies and procedures for our products. All the products and services have to be compliant with these boards.
When it comes to Bangladesh, the regulator is still evolving its policies and procedures and also learning from other markets.
We work with the regulator and share our experience with them. Already, the regulator has done a fantastic job, that is why we are seeing lots of Islamic banks flourish.
What is your forecast about Islamic banking in Bangladesh?
I am encouraged by the commitment and how the market has evolved here. But future growth will depend on how the local banking sector and the economy channels this into more productive uses, as well as the level of support from the regulator.
The market is evolving and there is no reason why Islamic banking cannot be one of the shining stars.
Do you think people are choosing Islamic banking only due to religious beliefs?
Religious belief is an important part. But over the years the system and the products have become on par with conventional offerings, so now it is an alternate way of doing business or making profits.
There is Islamic liquidity out there. So lots of entities look for diversifying their borrowings and their banking needs. In this way the Islamic liquidity is coming into the system.
Since there is shortage of human resources in Islamic financing, do you have plans to train people here?
There is a natural training process happening in retailing. We do not sell products without educating our people adequately. They are fully trained in Islamic banking procedures.
But as a community responsibility, we go to schools and colleges to give orientations on Islamic banking not to professionals but to students.
What is the current market size of Islamic banking and the growth rate in Bangladesh?
Islamic banking has expanded three times from 2007 to 2017 in Bangladesh, with a Compound Annual Growth Rate (CAGR) of 11.6%. The Takaful sector has grown five times with a CAGR of 19.34% during this period.
Less than two to three percent of total banking is Islamic banking. The global market size is about $2 trillion and projected to grow to $3 trillion by 2020.
What about major Islamic investment in Bangladesh?
SCB has arranged a $32 million Diminishing Musharakah Facility for Noman Terry Towel Mills and Ismail Spinning Mills, two concerns of Noman Group.
This is the first Islamic syndication arranged by SCB Bangladesh. The facility will finance the company’s capital expenditures and support its export growth.
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