BAHRAIN: The Islamic finance industry has thus far neglected retail banking which could provide it with a more stable funding base than its main wholesale and investment business, said Ernst & Young’s head of Islamic finance Sameer Abdi.

He attributed this to the fact that most Islamic retail banks are unable to cater to this large segment, despite analysts saying that few retail customers would switch from conventional to Islamic banks for religious or economic reasons.

In view of this, he stressed that Islamic retail banks need to brush up on their “look, feel and service culture” in order to be consistent for the retail customer.

Kuwait Finance House and Bahrain’s Al Baraka Banking Group are among the few Islamic retail banks that have a presence in more than one country.

Big plans for SMEs

MALAYSIA: Standard Chartered Saadiq (StanChart Saadiq) aims to maintain a double digit compounded annual growth rate for its small- and medium-sized enterprise (SME) business over the next couple of years.

To fuel the growth of the SME business, StanChart Saadiq CEO Azrulnizam Abdul Aziz said the bank seeks to promote alternative solutions based on Shariah principles. He said the bank plans to introduce three SME products by the first quarter of this year which cover trade working capital, foreign exchange contract and investment to its existing six SME products.

Azrulnizam also said that StanChart Saadiq plans to open more branches this year to strengthen its foothold in the SME market.

Tables turn

MALAYSIA: EON Bank Group plans to adopt a new model this year for its Islamic banking subsidiary, EONCap Islamic Bank, by focusing on personal financing and Islamic cooperative loans, said EON Bank CEO Michael Lor.

EON Bank said it seeks to arrest the inefficiency of its Islamic operation in terms of cost, risk and growth, which had occurred as it had been left to its own devices. Lor said the new plan would enable EON Bank to achieve economies of scale and reduce costs.

He said under the new business plan, EONCap Islamic will have its own infrastructure to enable it to venture into and focus on its specialized areas, while being hubbed to its parent bank as well as delegating the backroom operations to its conventional banking arm.

Licensed to operate

MALAYSIA: Bank Negara has issued an Islamic banking license to German-based Deutsche Bank, according to a report.

The license, the third such to be awarded by the Malaysia Islamic Finance Centre, will provide a platform for the bank to offer Islamic commercial and investment banking services to institutional clients in Asia.

The license is part of the government’s effort to encourage more foreign investment in the country. It will also award two new Islamic banking licenses to foreign firms to set up banks with a paid-up capital of US$1 billion each in the coming months.

To date, only four banks have obtained Islamic banking licenses — Unicorn International Islamic Bank Malaysia, Bank Syariah Muamalat Indonesia, Al Rajhi Bank Malaysia and Deutsche Bank.