SHARIAH-COMPLIANT PRODUCTS MAKING STEADY GROWTH ON FINANCIAL LANDSCAPE WORLDWIDE

INTERVIEW: MOHAMMED QASIM AL-ALI, CEO NATIONAL BONDS CORPORATION

AMANULLAH BASHAR
(feedback@pgeconomist.com)

Dec 19 - 25, 20
11

Mohammed Qasim Al-Ali has been discharging his responsibilities as the chief executive officer of National Bonds Corporation PJSC since 2008. Being the man on top, he is spearheading the management of the company's growing portfolio of enterprises and development of new and innovative savings initiatives.

Mohammed Qasim carries an extensive exposure and experience spanning over two decades in management in the aviation industry to his professional credit.

He held many senior management positions at the commercial divisions within the Emirates Group. He was earlier the General Manager for UK and Ireland at Emirates Airlines and the Vice President of Customer Services and Operations at Dnata, the ground handling company at Dubai International airport. He commenced his career with Emirates in 1989 as Overseas Area Manager.

Al Ali holds a graduate degree in Aviation Management from Florida Institute of Technology (FIT) and an IATA Diploma in airline Management.

Following are the excerpts of an interview Page conducted with him.

PAGE: CAN YOU GIVE US A BRIEF ON NATIONAL BONDS CORPORATION AND WHY IT HAS SELECTED SUBCONTINENT REGION SPECIFICALLY PAKISTAN TO EXPAND ITS MARKET REACH?

AL-ALI: National Bonds Corporations PJSC is a private joint stock shareholding company, established in March 2006 with a paid-up capital of AED150 million. It is 100 per cent owned by The Investment Corporation of Dubai, the investment arm of Dubai government. It is licensed and regulated by the UAE Central Bank, and audited by Dubai Government Audit Department, Shariah Supervisory Board as well as reputable international external auditors.

National Bonds is the first Shariah Compliant savings scheme of its kind in the UAE and the region that issues "Retail Mudaraba Sukuk". We offer competitive annual returns in comparison with most savings schemes. The cumulative returns since inception reached 26.45 per cent on the Mudaraba fund.

Customers have the opportunity to win 22,250 prizes every month, in addition to the grand monthly AED one million monthly prizes. The bonds are also highly liquid as it can be redeemed after a lock period of 30 days only.

We have 648,000 customers from over 200 nationalities and almost 50 per cent of them originate from the Indian subcontinent, so we know for sure that there is a huge potential for a country like Pakistan.

PAGE: WHAT KIND OF FINANCIAL PRODUCTS DOES NBC OFFER TO INVESTORS RESIDING OUTSIDE UAE?

AL-ALI: At the moment, the bonds are our primary financial product for investors outside the UAE. They can be subscribed through a Swift bank transaction and the bondholders qualify for all the same benefits and prizes as bondholders in the UAE.

We also offer USD Dirham-linked Sukuk bonds, which allow the bondholder to buy his bonds in US Dollars rather than Dirhams, thereby allowing people who have their savings in US Dollars the opportunity to buy bonds without having to exchange their funds into Dirhams. They will also enjoy the healthy returns equivalent to the Dirham based bonds.

PAGE: PLEASE ENLIGHTEN US ABOUT THE STRONG PERFORMANCE OF NBC OVER THE LAST FIVE YEARS AND HOW SHARIAH COMPLIANCE HELPED IN AVERTING ONE OF THE WORST FINANCIAL CRISES OF THIS CENTURY?

AL-ALI: As mentioned before, our returns have always been higher than the market average for similar schemes, but more importantly, the high liquidity of our bonds gives our customers peace of mind during any economic downturn because they know that they have easy access to their funds when needed.

In addition, national bonds' investment arm applies a model of a highly-diversified portfolio of low and low-to-medium risk Sharia'a compliant investments and this flexible portfolio allowed us to adapt to quickly during any shift in market conditions.

PAGE: AS AN EXPERT, WHAT IS YOUR VIEW ABOUT THE GROWTH OF ISLAMIC FINANCIAL ASSET MANAGEMENT AND THE RESPONSE OF THE CORPORATE SECTOR AS WELL AS INDIVIDUALS TO SHARIAH COMPLIANT PRODUCTS?

AL-ALI: The success of any product, both financial and non-financial, is linked to demand for it. We have seen steady growth across the world for Shariah-compliant financial asset management among both Muslims and non-Muslims because of the obvious benefits that come with it such as safety and flexibility, in addition to the importance of it to Muslims as their preferred type of banking and asset management.

The success of national bonds shows how Islamic finance can be applied even to a retail bond so we expect further growth and a wider range of financial products to enter the Islamic finance market in the near future.

PAGE: HOW IS NBC DIFFERENT FROM OTHER ASSET MANAGEMENT COMPANIES OPERATING IN THE REGION AND WHY SHOULD SOMEONE OPT TO INVEST HIS/HER SAVINGS WITH NBC?

AL-ALI: National Bonds is a unique savings and investments scheme because it removes all hidden costs such as account-opening, holding, and closing fees and charges no fees for redemption or purchase.

Furthermore, we offer the best returns in the market, the chance to win weekly and monthly prizes, Individual Takaful Coverage, and a Shariah-compliant savings.

PAGE: A LARGE NUMBER OF MODARABA COMPANIES HAVE BEEN OPERATING IN PAKISTAN FOR QUITE A LONG TIME. WHY HAS THIS SECTOR NOT SUCCEEDED IN MAKING ITS PRESENCE FELT IN THE FINANCIAL MARKET AND WHAT KIND OF ASSISTANCE THIS INDUSTRY WOULD REQUIRE TO GROW AND TO BECOME COMPETITIVE FINANCIAL SERVICE?

AL-ALI: Most of the Modarabas were set up in late 80's and early 90's. As the banking sector was de-nationalized, lower capital requirements fuelled the establishment of the Modarabas in addition to the low regulatory constraints. In the recent times, the commercial banking sector when allowed to undertake leasing and SME financing, led to the decline of the Modaraba mainstream business fuelled along with weak financial lending practices resulted in heavy losses for the sector.

In order for Modaraba to regain competitiveness both in conventional financial and Shariah compliant sector, a lot of concrete steps and regulations have to be chalked out both by the regulator and the private sector jointly.

PAGE: PAKISTANI CURRENCY HAS DEPRECIATED AGAINST MAJOR CURRENCIES BY OVER 40 PER CENT OVER THE LAST THREE YEARS, WHICH HAVE ERODED THE REAL VALUE OF SAVINGS. CAN YOU GIVE YOUR EXPERT OPINION AS TO HOW PAKISTANI INVESTORS CAN PRESERVE THE VALUE OF THEIR INVESTMENTS IN ADDITION TO EARNING STABLE RETURNS?

AL-ALI: Savers and investors alike have always to protect their saving from two factors: the currency depreciation and the inflation (the reduction in purchasing power). That can be achieved in two directions: diversification in the currencies as keeping some of their savings in major currencies such as USD and Euro or selecting from the currencies, which have high stability or growth potentials.

Currently, many economists are in favor of emerging markets currencies. While the gold can be an option for currency hedging and value protection, a saver should avoid the concentration risk of any currency for the long term.

For the second issue, keeping the funds without earnings will mean that the funds are subject to inflation and their value will decrease for almost similar amount of the inflation ratio and currently in Pakistan, it is almost 14 per cent as per SBP. So the funds need to be invested for covering these inflation rates, and because it is life saving, the investment should be in a very low risk investment with preferably a capital protection.

A scheme like national bonds is covering the two risk areas highlighted above as it is dominated in USD or AED currency, which can be used as a currency diversification mechanism in addition to the sustainable earnings to cover the inflation ratios, in addition to the other advantages linked to the ultimate objective of saving and future protection such as the impeded life Takaful and chances of prizes winnings.

PAGE: WOULD YOU LIKE TO COMMENT ON THE PERCEPTION OF THE PEOPLE ABOUT SHARIAH COMPLIANT FINANCIAL SERVICES ESPECIALLY THE YOUNGER GENERATION?

AL-ALI: We have seen a huge increase in the number of minors becoming savers with national bonds and many of our AED one million winners have been minors. At the moment, our aim is to continue encouraging people to get into the habit of regular savings, both young and old and we have begun road shows to raise awareness about this need to develop regular saving habits.

PAGE: HOW DO YOU SEE PAKISTAN AS AN INVESTMENT AVENUE AND WHAT ARE YOUR FUTURE INVESTMENT PLANS IN FAST GROWING SECTORS SUCH AS EDUCATION, HEALTH, AND INFRASTRUCTURE?

AL-ALI: National Bonds has received significant interest from consumers in Pakistan, many of whom have heard of national bonds from relatives, friends in the UAE and our website. They see the value of our unmatched product offering. Our research results show strong preference in the Middle East region for Shariah-compliant products offering attractive returns and with a credible reputation such as national bonds. This opens up many more opportunities for us in the near future to fill a gap in the market, which we intend to capitalize on. We are currently exploring opportunities to offer added-value to our customers in the fields of education and health and will announce these plans when they are at a more advanced stage.