UBS enters Islamic finance with Noriba

Noriba Bank BSC, a financial services institution wholly owned by the UBS Group, has set up shop in the Kingdom of Bahrain. Its CEO, Mohamad Toufic Kanafani spoke to Arabian Business about the bank's strategy and role in the US $250 billion Islamic finance industry.

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By  Massoud Derhally Published  October 6, 2002

|~||~||~|AB: What attracted Noriba to Bahrain?

MTK: Bahrain is a growing center for Islamic banking and its increasingly gaining a reputation and rightfully so for being a major Islamic banking hub not only regionally but worldwide. The Kingdom has solid commercial laws, and the regulatory environment provided by the Bahrain Monetary Agency is on par with the highest international standards. Bahrain is the first of Noriba’s geographical locations. We envisage the establishment of a Noriba network in various countries throughout the world as the business grows.

AB: Is this the first time that UBS ventures into Islamic finance and Islamic banking and is this the first time you have a physical presence in the Middle East and in the Islamic finance industry?

MTK: This is the first presence of UBS in the Middle East as a Sharia-compliant bank. UBS offered limited Islamic products and services prior to Noriba out of London and Switzerland; a few Sharia-compliant funds, trade investments and deal structuring. However, this is an underserved market and there is a tremendous need for developing Sharia-compliant products and services in order to provide the market with competent and innovative investment opportunities.

AB: A number of Islamic bankers talk about the industry not having enough products and they speak in general terms. What, if any, new products will you bring to the table?

TK: Well the reason why they don’t tell you is because they want to keep it confidential until they launch it. I really can’t tell you right now all the specific products that we intend to launch in this industry. I will tell you one thing though; they are not typical traditional Islamic products you currently see in the market. This sector needs more global participants in order to make it a market. The more participants you have, the better. Islamic investors were limited previously, as they had only a few investment options available to them. If you complete the spectrum of products that have to be in place to provide the Islamic investor with choice and diversity, then he can benefit from a proper and complete portfolio consistent with his risk appetite.

AB: Is this going to be retail, what are we talking about here, consumer credit cards?

TK: Noriba is not a retail bank. We are targeting global investors who wish to invest in Sharia-compliant products and services, and these investors are either institutions or high net worth individuals.

AB: The Islamic banking industry has come under the microscope since Sept. 11. Does that affect how you look at the playing field?

TK: Not at all. I have been asked this question before and I don’t see how people link Sept. 11 to the hamour fishing industry in the Gulf or selling umbrellas in China. I don’t see the link between Sept. 11 and a bank providing products and services that happen to be Sharia-compliant. Could someone explain this to me? Sept. 11 has no relation to the Sharia-compliant banking industry because this industry is independent of political events. If I develop a Sharia-compliant product, its because there is demand for such a product and no other reason. We conduct our business in accordance with the stringent rules and regulations of the BMA.

AB: How big do you size the Islamic finance industry? There are figures out there that estimate it between US $150-250 billion.

TK: There has been no credible research about how big this market is. But people talk about anywhere between US $180-270 billion.

AB: What do you think is an underdeveloped area in Islamic finance?

TK: Without going into specifics, there are two major areas that deserve serious attention: Islamic bonds (Sukuk) and alternative investments.

AB: In what way will the International Islamic Financial Market (IIFM) affect your business?

TK: The more Sharia-compliant product providers there are in the market, the better it is for investors and market growth. Any global participant who actually contributes to this market is likely to have a positive impact on the industry as a whole.

AB: What size of operation will you have and what are your medium term plans?

TK: We will start with 20-25 people and we intend to grow as the business grows. Noriba Bahrain is the beginning of Noriba and as the business grows we will expand.||**||

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