What is the relationship that exists between Asian Finance Bank (AFB) and Qatar Islamic Bank (QIB)?
KAMIL: The synergy that we have with Qatar Islamic Bank is that we work very well with them in the sense that they are the majority shareholder of our bank and have been very supportive in all our corporate funding. Our relationship is very important because, being a very small bank with a small balance sheet, we need to leverage Qatar Islamic Bank. Together, we have an investment bank, QInvest, and this link is very important because with the balance sheet that we have within the group, it allows us the opportunity to assist a lot of government-linked companies and public-listed companies that are moving into the Middle East to expand, or looking at tapping the liquidity of the Middle East. Our group companies, such as QIB and QInvest, have been providing the leverage and also guidance to AFB in order to move this forward and make it happen.
What regions of the world is Asian Finance Bank currently focused on? What areas are you keen to develop in the medium-term?
KAMIL: The focus for the bank, in terms of geography, will still be on Malaysia because we see that there is a lot of potential, particularly when taking into account the Economic Transformation Programme and the GDP programs that have been launched by the government of Malaysia. We see that there is a lot of synergy in terms of the operations in Doha and Qatar, particularly in the oil and gas sector, which we are going to focus on in Malaysia, and also in the area of development. This is in line with the World Cup 2022 in Doha. We have a lot of Malaysian companies that are very interested. They have the development expertise, and experience in the business of development in the areas of property and infrastructure, to provide guidance as well as to have joint venture partners in Qatar. So the market will still be in Malaysia, but we must not forget Indonesia, where the Muslim population is almost 280m. This is where we are looking at tapping the liquidity as well as the opportunity to provide funded asset growth in Indonesia. We are already working the deals in Indonesia because we already have a representative office there. We are just scouting the deals in the market, and once the deal comes through, we always tap the liquidity of QIB because the funding requirement in Indonesia has always been dollar funding. So this is where we again tap the liquidity from Qatar Islamic Bank to assist. The other area of new geography that we are looking at is the Philippines. As you know, the Philippines is also a growing Muslim market and there is a lot of potential for Islamic finance to grow. Malaysia has been the champion in Islamic finance. We have both the legal and the technical infrastructure so that we can come together with the Philippine government to provide the infrastructure and the platform to develop Islamic finance in the Philippines. This is an area that we are looking at quite seriously, so the three areas where we will focus will be, still Malaysia, Indonesia, and the Philippines.
How does AFB remain competitive in a market full of larger, better capitalized, banks?
KAMIL: For AFB, the magic model is to be able to attract customers that do not want money, but that want relationships.That is going to be the niche that we are going to possess because it is very important for us to create that impression, whereby we are just not providing monetary gains to develop the business, we are providing a higher level of service with relationships. With relationships, everything will be very successful. At the end of the day, what is important is that we need to create a very strong relationship between the Middle East and the world. As you know, the liquidity is now in the Middle East, Europe and America are going through their own progress, in terms of adjusting and restructuring their own economies, so we must give them time. At the end of the day, business has to go on. Now that we have the liquidity in the Middle East, we would like to target customers who are looking into the possibility. We want to tap the liquidity of the Middle East. We are looking at sovereign wealth funds from the Middle East to participate in equity of public listed companies within our own jurisdiction, because with this we are talking about long-term and medium-term investment and we do not want to focus on a project, or specific project, per se. Most of the development in Malaysia, if you look at investment from the Middle East, has always been property-centric. It has been on a certain development, and after three to four years when the development is completed, the relationship is over. We would like to have more equity participation by sovereign wealth funds for publicly listed companies in Asia where they can see long-term growth. They too can play a role in the development of these economies in Asia, and they too can contribute in terms of establishing strategic collaboration between the Qatari companies and the global companies that Qatar has investments in, and Asia. This is the story that we are preaching, that we are able to attract these global players in the market that would like to go to the Middle East, not only to tap the liquidity but also to look at all the investment opportunities available. This is where we are going to target, and we have been quite successful in targeting these customers because these customers that do not require money, as they have all the global bankers to provide them with that type of funding. Once the corporate advisory position is strengthened, then the corporate funding will automatically spill in. It is a question of timing, only.
What are the biggest challenges facing new entrants into Malaysia’s banking sector?
KAMIL: The challenges particular to Islamic banking are there because of the existence of very established banks in Malaysia, banks which have been in business for the last fifty to sixty years. They have been doing very well because they have a comprehensive suite of professional investment banking services as well as retail banking services. So for new banks like AFB to penetrate the market, it has been very challenging unless we are able to identify a niche where we can provide our professional services to our clients. If we are able to do so, then these challenges can become less daunting. Moving forward, the challenges can be reduced in the sense that once we get the support from our parent bank, Qatar Islamic Bank, it helps a great deal because we have the balance sheet and the liquidity from Qatar. So the challenges are still there, but if we are able to identify the niche and the services that we want to provide, Insha'Allah, we’ll be able to develop the market very well. Once we are a niche player, we are talking about providing corporate services in the area of possible identification of joint ventures and partnerships from Qatar, in addition to possible equity participation by sovereign wealth funds from Doha into Malaysian public-listed companies. We also want to look at strategic collaboration that we can develop between Malaysian companies and Doha. In Qatar, we have global investments, all over the world, in the area of property development, infrastructure, services, and finance. So we are able to tap into those resources and be able to develop a strategic collaboration between the government linked companies and public listed companies in Malaysia. This is the way to move forward in order for us to penetrate the market more visibly.
What role has Malaysia played in the development of Islamic finance?
KAMIL: We are very fortunate in Malaysia because we have been the champion of Islamic finance since 1983 when we set up the Islamic Banking Act. During that progress, we have grown and matured in the sense that we understand Islamic finance from its infancy up until its current state. Now moving forward, what is important is that we need to develop the skill set as well as the expertise in the global market and be able to influence the industry and the society to accept Islamic finance as an alternative to conventional banking. We have been doing this very successfully here in Malaysia. If you look, we have the infrastructure, not only in terms of legal but also in terms of the education process. We are very fortunate because even the Central Bank and the government of Malaysia have been giving special privileges to Islamic banking instruments. We have tax exemptions, stamp duty exemptions, even legal fees exemptions. So these are all the incentives that are being offered by the Malaysian government and also by the Central Bank to develop Islamic finance in a very big way. Also, if you look at the population of Malaysia, we are talking about 28 million, and out of that the majority, 60-70%, is Muslim. So Malaysia is a big market on its own. However, developing Malaysia alone is not sufficient; we are also looking at Indonesia as a serious market. Malaysia will always be the best and provides a good benchmark that we can emulate and develop in most other countries that are aiming to develop Islamic finance. We are also very fortunate that we have been accepted universally. Of course, there have always been challenges in Islamic finance, particularly when you talk about the development of the Sharia scholars, where there could be some conflicting views on certain parameters. What is important to note, however, is that now, most of the Sharia scholars have agreed on certain basic legal fundamentals on the acceptance of Islamic finance, and that is good moving forward. Conflicting views are always welcome because those are the checks and balances to develop Islamic finance, but not to forget, we are also new in industry. This is going to be our 30th or 35th year of Islamic finance, and we have not gone through the cycle of finance like the conventional banks have gone through. They have gone through their own pitfalls and their own successes. We must always be weary of this and not be overzealous in developing Islamic finance on an overnight basis. We need to do it slowly, steadily, and more importantly, we need to be able to convince the population of the morality of Islamic finance. We cannot only talk about the fundamentals. When we talk about Islamic finance, the next level is to talk about the morality of Islamic finance, which is very important to carry the industry forward.
Most of the development in Malaysia, if you look at investment from the Middle East, has always been property-centric. It has been on a certain development, and after three to four years when the development is completed, the relationship is over. We would like to have more equity participation by sovereign wealth funds for publicly listed companies in Asia where they can see long-term growth.
What areas or sectors currently offer the best investment opportunities for investors from the Middle East?
KAMIL: So far the involvement of Middle East equity has always been property-centric. It has always been on a project-to-project basis on any development. What we are saying is that in order to have long to medium-term investment, if you want to play a critical role in the growth of the economies of the region that you are participating in, you should be looking into the possibility of investing into and having equity participation in this public listed company. You can then be able to contribute, not only in terms of money, but the technology and expertise that you have in your own region, to be shared among all the ASEAN countries. This is good because you are not only investing in the dollar; you are also going to invest in the local currency as well. Therefore, if you are able to invest in Sime Darby, or DRB HICOM Group, or UMW within the PNB Group, you are going to be involved in Ringgit. With this involvement, you are able to strengthen the Ringgit with better value, in terms of appreciation. More importantly, you will be able to develop on the Kuala Lumpur stock exchange, and maybe the Bursa can have a dual currency exchange in a trading platform. So if this opportunity is given to the foreigners from the Middle East to come into Malaysia, the development of the capital market will grow tremendously. There will be a platform for trading in dual currency, Ringgit or Dollar, where you have the liquidity already from the Middle East. This is good for the region because we need to develop currencies which are strong in order to develop the economy of Asia, and the Middle East can play a very critical role in this area.