INTERVIEW: M A MANNAN CEO DUBAI ISLAMIC BANK PAKISTAN
FUNDAMENTALS HAVE STARTED MOVING IN THE RIGHT DIRECTION.

AMANULLAH BASHAR
Nov 16 - 22, 2009

M. A. Mannan is a dynamic professional who has been associated with leading banks in local and global markets. He was appointed as CEO of Dubai Islamic Bank Pakistan Ltd. (DIBPL) in 2007. Since then, he successfully managed to establish Dubai Islamic Bank Pakistan Ltd. as a world class Islamic bank excelling in consumer, corporate, and investment banking. 

Prior to joining DIBPL, Mannan was Deputy CEO & Head of Global Consumer and Commercial Bank of United Bank Ltd., one of Pakistan’s largest banks. He was instrumental in turning around UBL and launching the consumer banking business from the scratch.

Before UBL, Mannan was associated with Citibank where he was heading the Cross Sell business in USA and in Pakistan. He was part of the pioneering team which set up the consumer banking business.  Mannan is MBA from the Institute of Business Administration, Karachi.

PAGE: WOULD YOU DISCUSS THE CURRENT BANKING SCENARIO ESPECIALLY ISLAMIC BANKING AND ITS FUTURE OUTLOOK IN PAKISTAN?

MANNAN: The impact of the global economic slowdown has been felt all over the world and Pakistan is no exception. Since we are not operating in isolation from the rest of the world, the banking industry in Pakistan too saw a decline in earnings and slow down in business momentum.  However, we must note the fact that no bank in Pakistan collapsed or came close to collapse, like we witnessed many cases all over the world. This was due to the checks and balances built into our banking system and the close monitoring by the State Bank of Pakistan.

I believe the worst is over and things have started to improve, the fundamentals have started to move in the right direction and if the law and order and security situation is controlled, the future outlook is very positive.

As far as Islamic banking is concerned, its success has been recognized all over the world, and the fact that Islamic banking was least affected by the global financial crisis, has made it a major focus area of banks around the world. Many countries including the US are looking into the important features of Islamic banking that could help in tackling the current financial crisis and Islamic banking has become an important issue being discussed right now by experts both in the public and private sectors.

In Pakistan, Islamic banking has been growing at a very impressive rate. Although market share is just over 5%, the average per annum growth is in the range of 30 – 40%.  According to the recent SBP Islamic Banking Bulletin, Islamic banking witnessed a 12% growth for the quarter ending June 2009.

PAGE: TELL US ABOUT THE PERFORMANCE OF DIB, ITS ACHIEVEMENTS, PLANS FOR EXPANSION, AND ITS FINANCIAL RESULTS DURING LAST FINANCIAL YEAR AND PROJECTION FOR THE CURRENT FINANCIAL YEAR.

MANNAN: Alhamdolillah, Dubai Islamic Bank Pakistan Ltd. is probably the only bank in Pakistan which has shown a tremendous growth in performance during 2009 compared to the previous year. July-September 2009 is the fourth consecutive quarter in which DIBPL has posted profits. Profit before tax for the nine months of 2009 stands at Rs. 280 million, compared to a loss before tax of Rs. 301 million in the corresponding period last year.

2009 will be our first full year of profitable operations since commencement of business three years ago in 2006. Our credit rating has also been re-affirmed by JCR-VIS as ‘A’ for medium to long term with a stable outlook, and a short term rating of A-2 (A two).

Dubai Islamic Bank organized an Ijarah Sukuk in collaboration with Standard Chartered Bank (Saadiq) for Government of Pakistan’s three-year PKR6.525 billion (US$85 million) deal in September 2008 with Pakistan Domestic Sukuk Company. This Sukuk allows ongoing fund raising and establishes a Sukuk auction system akin to that for T-bills whilst allowing for various tenors.

DIBPL won two awards at the 4th Annual Islamic Finance News Awards, "Sovereign Deal of the Year" and "Pakistan deal of the Year" for this consortium-led deal.

Our future outlook is extremely positive. In 2010, we will be expanding our operations further. We opened 12 new branches this year, and next year we are looking at adding another 25 branches to our network. We will be introducing new initiatives such as branchless banking, SMS banking, and mobile banking. DIBPL aims to lead not just the Islamic banking market but become a role model for the banking industry hence delivering on its promise of providing ‘World Class Banking – The Islamic Way’.

PAGE: WOULD YOU DISCUSS THE IMPACT OF THE FINANCIAL SLOWDOWN ON THE ISLAMIC BANKING AND CREDIT DEMAND FROM THE PRIVATE SECTOR?

MANNAN: Due to the nature of Islamic banking, it has largely escaped the effects of the global financial crisis. The rules of Islamic banking do not allow many risky transactions e.g. derivatives, market speculation etc.  As per Shariah law, all transactions should be backed by real assets, and paper-based transactions are prohibited. Islamic banking is based on a risk-sharing model, so there is an increased responsibility and incentive for the banks to manage risks prudently. In addition to this, the operations of an Islamic bank are supervised by a team of Shariah scholars who evaluate every aspect of a product or service ensuring it does not violate any Shariah rules.

We can say that the slowdown affected Islamic banking in an indirect manner due to the overall crisis but credit demand from the private sector has started to pick up again and going forward we expect things to improve further both locally and globally.

PAGE: CONSUMER FINANCE WAS ONE OF THE LEADING SEGMENTS OF THE BANKING PRODUCTS TILL RECENTLY BUT NOW IT IS UP A STUMP WHAT ARE THE REASONS?

MANNAN: Whenever the market experiences an interest rate hike, consumer finance is the first to get hit simply because the monthly instalments increase to the extent of the interest rate hike and the borrower’s ability to repay is affected adversely. 

DIBPL is proud to have one of the best asset portfolios in the industry. Our book comprises 55% corporate and 45% consumer financing. Our prudent policies ensured minimal losses and due to this reason DIBPL did not have to pull back or stop financing even while most players in the industry had brought their consumer financing businesses to a complete halt.

PAGE: WHAT IS THE PERFORMANCE OF DIB IN DUBAI AND ITS CONTRIBUTION IN PAKISTAN’S FINANCIAL SECTOR AND THE ECONOMY?

MANNAN: DIB is amongst the top five banks in UAE, and the 3rd largest Islamic bank of the world.  It has been at the forefront of Islamic banking since its inception in 1975. Presently, it has over 60 branches operating in UAE, and also has operations in Turkey, Iran, and Jordan.

DIBPL is a 100% owned subsidiary of DIB, UAE and the group committed an investment of $100 million with the announcement of commencing Pakistan operations. The bank has already acted as a catalyst for the arrival of several foreign investors in Pakistan and has convinced world renowned giants from the GCC to this market. 

COMPANY PROFILE

History was created over three decades ago when Dubai Islamic Bank the world’s first Islamic Bank was formed. Since its formation in 1975 in UAE, Dubai Islamic Bank has been at the forefront of providing quality Shariah Compliant Services to its ever growing customer base. DIB is a public joint stock company and its share is quoted on the Dubai financial market.

In 2006, Dubai Islamic Bank Pakistan Limited (DIBPL) a 100% owned subsidiary of DIB UAE opened its doors in Pakistan bringing a legacy of outstanding success, constant innovation, and the expertise of a world renowned Shariah board.  Within a short span of over 3 years, DIBPL has established itself as a market leader on several fronts.   

DIBPL believes in providing its customers world class products and services which are designed the Islamic way. Hence the customer who comes to DIBPL does not have to compromise on any aspect of the overall banking experience just because he/she chooses to bank the Islamic way.

DIBPL offers a full suite of Shariah compliant corporate, investment banking and consumer banking products. The bank has an asset base of over Rs. 32 billion and deposits over Rs. 25 billion and has been running profitable operations since the beginning of 2009. Presently the branch network comprises 31 branches. This network is being enhanced to 37 covering 16 cities by the end of 2009.

DIB has won the respect and recognition of its peers and was awarded the "Pakistan deal of the Year" award at the 4th Annual Islamic Finance News Awards. The award category highlights Government of Pakistan’s three-year PKR6.525 billion (US$85 million) deal in September 2008 by Pakistan Domestic Sukuk Company led by Dubai Islamic Bank.

DIBPL has achieved a leadership position in consumer banking, whose growth rate in market share outperforms not only the Islamic banks but also conventional banks. The bank’s consumer banking business is characterized by excellent customer service, investment in quality manpower, branch premises and a robust technology base.  Best practices in terms of operating procedures and technology support ensured that seamless service was provided to customers from day one, hence avoiding the teething problems usually faced by most newly established setups. 

On the wealth management side, DIBPL has been playing an innovative role, being the first Islamic bank in Pakistan to introduce a VISA debit card and priority banking services and recently became the first Islamic bank to introduce Bancatakaful – providing its customers the facility of saving and protection through Takaful coverage, which is the Islamic alternative to conventional insurance.
Scholars of high repute with extensive experience in law, economics, and banking systems make up DIB’s Shariah Board. 

The Shariah Board is headed by the widely acclaimed Dr. Hussain Hamid Hassan, whereas Dr. Muhammad Qaseem heads the Shariah department for Dubai Islamic Bank in Pakistan. The Shariah Board supervises the development and creation of innovative Shariah-compliant products and services. Shariah auditors ensure that all the transactions are carried out in strict compliance to Islamic principles of banking. This framework along with a stringent compliance to rules has made DIB the pioneering organization to practice Islamic finance in true letter and spirit. The very name Dubai Islamic Bank has come to signify innovation, financial dynamism, leadership and above all a complete assurance that all the transactions are free from riba (interest).

Besides being a key player and improving the lifestyle of its 40,000+ customer base, DIBPL is committed to attract foreign investment in Pakistan.

With an outstanding legacy of success, visionary leadership and a strong team of qualified Islamic banking professionals at the helm, DIBPL is poised to emerge as one of the biggest banks in the country.

PAKISTAN'S LIQUID FOREIGN RESERVES POSITION

The total liquid foreign reserves held by the country stood at $ 14,272.0 million on 7th November, 2009. The break-up of the foreign reserves position is as under: -

i) Foreign reserves held by the State Bank of Pakistan: $ 10,700.9 million
ii) Net foreign reserves held by banks (other than SBP): $ 3,571.1 million
iii) Total liquid foreign reserves: $ 14,272.0 million