June 1 - 7, 2009

Syed Mujtaba Abbas started his banking career in the year 1992 after graduating from the Institute of Business Administration, Karachi. Mujtaba's highly impressive academic qualifications include Corporate Finance from the London School of Economics, Law graduation, Certification from Cambridge VISA Business School, Decision Sciences and Data Mining from MIT and Leadership training from Oxford.

He joined ANZ Grindlays Bank as a management trainee and after rotation in various departments was posted as account manager in the commercial banking unit of the bank. Because of his area of interest being Credit Analytics, he was recognized as a high potential officer of the bank and posted in the founding team of ANZ Grindlays Credit Card unit. ANZ Grindlays was one of the pioneering banks in Pakistan in the field of consumer financing and was the second bank to introduce the credit card to in Pakistan.

Mujtaba Abbas was part of the core team who spearheaded this initiative for the bank in his position of Head of Credit and Risk Management and was later elevated to the position of Head of Cards at ANZ. He also played an instrumental role in streamlining the consumer finance business during the amalgamation process of ANZ Grindlays and Standard Chartered, when the former was acquired by Standard Chartered. Later he was elevated to the position of Head of the Unsecured Consumer Finance business of Standard Chartered which included the bank's range of credit card and personal loan products. Under his supervision the Standard Chartered Unsecured Consumer Asset business achieved the position of market leader and introduced many innovative products including PIA co-branded credit card, Easy Credit, Aasan Installment, Treasures Reward Program and Mastercard.

In recognition of his outstanding achievements, Mujtaba was posted to the Regional office in Dubai and assigned the task of setting up the Decision Sciences and Strategy unit for Standard Chartered Middle East and South Asia (MESA) Region.

In his position of Head of Decision Sciences, Mujtaba was in charge of consumer business strategy for a cluster of countries including UAE, Pakistan, Qatar, Bahrain, Bangladesh, Lebanon and Sri Lanka. In 2006, Mujtaba managed the integration process of Union Bank Consumer Banking product portfolio with Standard Chartered as Project Director for Consumer Banking Integration & Risk Management. Mujtaba joined Dubai Islamic Bank Pakistan Ltd. in October 2007 and presently is heading the Consumer Banking Division. With his rich experience and in-depth knowledge of the Consumer Banking business in Pakistan and abroad, Mujtaba shared his views on the present scenario of the Consumer Banking business with PAGE in an exclusive interview.

PAGE: How would you measure the significance of consumer financing in the banking system and where do you place this in the range of other products of your bank?

SMA: Pakistan is a country with a young population of 160 million, which means that there is a huge market potential for all consumer related services. The banking industry is no exception to this, until and unless the common man is not provided banking facilities at an individual level, the growth of the banking industry cannot be sustained. There is a need to bring a greater percentage of the Pakistani population into the banking system and unless and until banks don't reach out to the masses this will not be possible. Consumer finance is one of the basic facilities that individuals look for in a bank, hence the importance of consumer finance cannot be denied. However, having said that, consumer finance is a much more resource intensive business than corporate finance and requires sound experience, coupled with high quality risk management and monitoring techniques and systems in order to be profitable for the banks. Entering into consumer banking business without proper risk management practices and adequate controls can be suicidal for banks. That's the reason why foreign banks have been more successful in this business since they bring with them a wealth of experience of various markets and have established scientific models to monitor and manage risk.

Dubai Islamic Bank Pakistan Limited (DIBPL) commenced operations in Pakistan in 2006, bringing a legacy of outstanding success, constant innovation and the expertise of a world renowned Shariah board. Within a short span of 3 years, DIBPL has established itself as a market leader on several fronts. Consumer banking has been one of the key focus areas of Dubai Islamic Bank Pakistan Ltd. since inception. Our key strength was our team of consumer banking professionals who had proven track record of setting up and managing consumer banking in various banks locally and abroad. This gave us a unique advantage as best practices were applied when the DIBPL consumer banking business was being set up.

We launched our consumer finance products in 2007 and made a conscious decision not to compromise on the quality of resources being invested during the set-up phase. That is the reason why the DIBPL consumer banking business is recognized by its customers for excellent customer service, quality staff, outstanding systems and procedures and a world class banking experience. Our Consumer Finance portfolio is the largest contributor to our balance sheet even surpassing our corporate financing portfolio.

PAGE: Do you think consumer finance at an affordable rate can ignite a spark and help getting the country out of the economic slowdown phase?

SMA: Consumer finance definitely plays a vital role in the growth of the economy, which is evident from developed economies where consumer finance has contributed in uplifting the socio-economic status of individuals. It fulfills basic requirements such as housing, automobile, home appliances and other lifestyle needs such as travel and education. It has the capability to act as a catalyst for the growth of domestic industries by creating demand at affordable terms.

However, consumer finance alone cannot be expected to kick start the economy. When the macroeconomic indicators move in a positive direction for the economy as a whole, the benefits trickle down to an individual level and that is when consumer finance can play its role effectively.

The rate cut announced by the SBP recently is very encouraging as this is a step in the right direction. When the macroeconomic scenario further improves in favour of making credit available at a reduced rate to the borrowers, consumer financing can definitely make a huge contribution to intensify this positive trend.

I would like to add here that macroeconomic policy measures are applied depending on the situation and the need of the economy. When the economy is in a developing stage, it is very important to take measures to promote "sustainable growth" rather than short term strategies. Macroeconomic policies designed to promote the domestic industries in the long run are best suited to developing economies otherwise there is a risk that affordable financing might become a vehicle for quick solicitation of imported luxury goods. The real estate sector is one such area if promoted by all stake holders, will impact the real economy with far reaching spill over effects towards all sectors of the economy.

PAGE: What in your opinion are the major areas where consumer financing plays an active role and gets a positive feedback?

SMA: In my opinion consumer finance in Pakistan is still in the developing phase and hence should focus on fulfilling the basic needs of individuals. As it is, we have a shortage of affordable residential units and hence there is a great demand for fulfillment of this need. However, to provide home finance to the masses in a viable manner, regulating the real estate business on the whole is a must. Most banks encounter hurdles when entering into new segments and geographies due to absence of a standard property management process and legal machinery to support a structured system with proper controls in place to facilitate the risk management of the bank.

PAGE: Generally speaking the role of consumer financing was limited in the banking sector following increasing infected portfolio, bad loans or non-performing loans, what is your experience in this regard?

SMA: The prudent business strategy adopted by DIBPL for consumer financing has yielded excellent results which is evident by the fact that DIBPL is still booking business when most of the banks have pulled out of the market due to heavy credit losses. DIBPL presently accounts for significant volumes of new business being booked in Auto and Home finance which is one of the highest amongst all Islamic and conventional banks.

We, at Dubai Islamic Bank introduced several initiatives for a robust risk management system and controls which safeguarded us to a great extent from credit related losses while creating opportunities to book good business.

As an Islamic bank DIBPL has to comply with Shariah requirements along with prudential regulations. Islamic banking promotes responsible investing hence financing is generally allowed where the end-use is defined. This ensures that the bank has a greater responsibility when extending financing facility and has to ascertain how the financing will be utilized by the consumer. The beauty of the Islamic finance model is such that it does not facilitate unproductive consumerism.

PAGE: Do you agree that behind increasing NPLs the major root cause is the high interest rate? Have you any benchmark in your mind for fixing or bracketing the interest rate which could help the consumer as well as the banking sector in the present scenario?

SMA: Islamic finance is based on the concept of partnership instead of a lender borrower relationship, where the bank and customer enter into a partnership (Musharaka cum Ijarah), both sharing ownership and risks of the transaction. DIBPL will then lease its share of the asset for a monthly rental. The monthly rental paid by the customer comprises a fixed and a variable component. The variable component is linked with KIBOR and consequently may increase or decrease with changes in KIBOR. Hence the customer installments increase as a result of the upward movement in KIBOR.

However it is pertinent to mention here that the intention behind earlier increase in rates by the SBP was to curb the inflationary pressure on the economy. Such a change, in the short term might increase the cost of financing however, at the same time it resulted in the availability of real estate assets at a much reduced price thus making acquisition of a long term asset more affordable. As the KIBOR rates are on a downward trend, the pressure on the customers will also begin to decrease.

We must appreciate the SBP role to safeguard banks by promoting sustainable growth in the economy with some important measures including, but not limited to:

Mandatory use of eCIB the data check service provided by SBP to advise banks about the total credit exposure on each customer

Debt burden ratios in conjunction with eCIB report- to ensure the debt burden of the borrower does not exceed 50% of his income

Managed disbursement protocol by banks to individuals and other prudential regulations to facilitate and guide banks on risk management processes.

PAGE: Would you like to share your bank's performance and the future programs and outlook? Are you introducing any innovative products in consumer financing sector?

SMA: Dubai Islamic Bank Pakistan Ltd. launched its consumer finance products like Home and Auto Finance in early 2007. In a short span of time we were able to achieve a market leadership position in terms of highest business acquisition volumes. This means we surpassed not only the Islamic banking players but also the more experienced conventional banks including foreign banks. But despite our aggressive sales efforts we did not compromise on the quality of the asset portfolio as a result of which we are very fortunate to have one of the lowest NCL's (net credit loss) in the industry. Our portfolio vintages have already matured and by the grace of Allah our risk management processes have yielded very promising results leading to sustainable growth for the bank.

Maintaining Dubai Islamic Bank's reputation of introducing innovative solutions to customers, the Dubai Islamic Auto Finance was the first product of its kind to offer free tracker for all vehicles, coupled with the lowest insurance rate. We have always focused on providing a premium quality product to our customers. The introductions dispel the general belief that opting for Islamic banking means that you have to compromise on service and product quality and I believe this has been the main reason behind our success.

We have recently introduced a Business Finance product which is the only Islamic product of its kind in the Pakistani market. The Dubai Islamic Business Finance is a term finance mortgage based product, with a tranche wise disbursement model. This product offers financing against residential property to fulfill cash flow requirements for business purposes. The facility can be utilized for various purposes including purchase of plant, machinery, inventory, office equipment, working capital needs etc. The Dubai Islamic Business Finance is the only Islamic product available in the market which is a hybrid of running finance and term finance. This new product will provide DIBPL an excellent opportunity to capture the segment which desires Shariah compliant business solutions.

Furthermore, our product development department under the close supervision of our Shariah Board is also involved in developing an Islamic model for personal finance which will cater to fulfilling the financing needs of education, travel, medical expenses etc for individuals. This will be followed by introducing a fully Shariah compliant credit card.


The total liquid foreign reserves held by the country stood at $ 11,193.5 million on 23rd May, 2009. The break-up of the foreign reserves position is as under:-

i) Foreign reserves held by the State Bank of Pakistan: $ 7,883.5 million
ii) Net foreign reserves held by banks (other than SBP): $ 3,310.0 million
iii) Total liquid foreign reserves: $ 11,193.5 million