The meteoric rise of the Islamic finance industry in recent years has slowed of late, but taken as a whole its growth still outscores that of its conventional counterpart. The Banker recognises the leading Islamic institutions of the past 12 months, each of which has shown innovation and growth in a maturing market. 

The Banker’s Islamic Bank of the Year Awards for 2017 portray an industry that is experiencing a stable, if no longer meteoric, rise on a global level. Though many of this year’s entrants have still posted growth numbers that exceed their conventional counterparts, their performances are, for the most part, beginning to moderate in line with wider market norms. This partly reflects the natural maturation of the Islamic finance market in more established jurisdictions. But it also accentuates the material impact that lower commodity prices have had on some of the industry’s headline economies. 

Although this year’s winners exhibit the usual mix of innovation and growth that is required to scoop an award, the judges took note of a number of other promising trends. For one, Islamic banks are playing a more prominent role in facilitating the development of secondary sukuk market liquidity. With ever-greater global reach, many banks are now trading and issue sukuk across multiple jurisdictions, helping to advance the internationalisation of this aspect of sharia-compliant finance. 

Beyond this, efforts to mobilise deposits have seen a profound acceleration in the interaction between technology and sharia scholarship. In the fight to attract new customers, banks are pushing the envelope of mobile and digital technology to bring in new demographic segments, including young people and students, and to provide much-needed customer-centric products and services. As a result, there is greater convergence and co-operation between Islamic scholars, banks and telecommunications companies. Arguably, this is an aspect of the industry’s development that has been lacking in previous years. 

But looking ahead, Islamic lenders will need to do much more to ensure that their industry continues to grow at pace. It will be incumbent on many of the Islamic finance market’s biggest players, including banks, other financial institutions and multilateral organisations, to solve the problem of industry fragmentation. This will require a market consensus on business and sharia norms, from sukuk instruments to banking products, in order to internationalise capital flows in a way that will take the industry to the next stage of its development. 

For now, however, the achievements of the 2017 winners are a step in the right direction. 

Global, Middle East, Kuwait

Winner: Kuwait Finance House 

The winner of the 2017 Global Islamic Bank of the Year award, Kuwait Finance House (KFH), is the first Middle Eastern bank to scoop the highest honour in the past four years. The judges were impressed by the bank’s stellar performance in 2016, as well as its contributions to the development of the Islamic finance industry across the region and the rest of the world. 

These achievements have gone hand in hand with the bank’s continued commitment to customer service and innovation. KFH’s recent success also reflects its multi-year drive to restructure its global business with a focus on core banking and associated activities. To meet this objective, the bank continues to exit non-banking related investments while integrating other investments and business lines under the umbrella of KFH Capital.

Notably, these achievements have come as Kuwait and many of its regional peers in the Gulf Co-operation Council (GCC) have faced a host of challenges linked to the fall in oil prices. This has led to a fall in government spending and foreign investment, and delayed development plans across the region. For banks in the GCC, liquidity shortages have emerged intermittently, putting pressure on their cost of funds. Nevertheless, these pressures have not been equal for all lenders.

For those, including KFH, that have streamlined their operations by cutting costs and integrating business lines since the financial crisis, these challenges have been weathered more easily. Indeed, as KFH has noted in the past, Kuwait’s Islamic lenders have still performed relatively well, with the overwhelming majority of sharia-compliant banks posting growth in net income in 2016.

For KFH, the outcome can be seen in its 2016 annual results as the bank enjoyed success according to most key performance indicators. Net profits reached Kd165.2m ($544.5m), up from Kd145.8m in 2015, representing growth of 13.3%. Financing revenues reached Kd717.9m in 2016, growing by 13.5% over 2015’s figures, while net operating revenues hit Kd364.7m, representing year-on-year growth of 8.2%. Meanwhile, KFH’s cost-to-income ratio has declined considerably in recent years, reaching 44% in 2016, down from 51% in 2014. Among other things, this reduction points to the success of the bank’s restructuring efforts. The bank’s return on equity climbed to 9.2% in 2016, up from 7.4% in 2014.

On a global level, KFH has emerged as a genuine market maker in the sukuk market. In 2016, the bank traded $11.4bn in sukuk. Since its nomination as a ‘primary dealer’ in these instruments by the International Islamic Liquidity Management Corporation, KFH has contributed significantly to the secondary market in short-term sukuk. Given its reach across multiple markets in Asia, the Middle East and beyond, this trading has had a meaningful impact on secondary market liquidity.

Over the past 14 months, the bank’s global units have issued a number of high-profile capital-boosting sukuk. KFH Turkey issued a five-year $500m sukuk in late 2016 with a yield of 5.14% and listed on the Irish Stock Exchange. Total demand reached $1.9bn. This followed the February issue of a $350m Tier 2 Basel III-compliant sukuk by the same unit. 

KFH’s involvement in a number of headline deals also caught the attention of the judges. This includes the first tranche financing of Kuwait National Petroleum Company for its Clean Fuels Project. The tranche has a duration of 10 years and was provided by local banks, led by KFH and the National Bank of Kuwait, with a value of $3.9bn. In addition, KFH Bahrain is financing the development of 3100 residential units as part of the ‘Deerat Al Oyoun’ community over an area of 1.2 million square metres. The funding is being provided as part of a syndicated murabaha contract, to the tune of $366m, with other local banks. 

In terms of its innovations, in recent times KFH has launched a number of successful new products and services for its customers. The Al Rabeh Account offers periodic prize draws to customers who can quality for this feature if they deposit their salary into the account. The Al Nuwair Deposit is an investment deposit scheme that offers attractive returns to depositors who are also permitted to withdraw cash from the principal amount of the deposit within the investment period. Up to 30% of the principal amount can be withdrawn as long as the minimum deposit amount remains intact. 

For these reasons, and others, KFH has emerged as The Banker’s winner of the Global Islamic Bank of the Year award. Looking ahead, the bank plans to continue with its restructuring efforts, optimise its assets and improve asset quality across its global business. It will also look to achieve growth and improvements in terms of its footprint, earnings and customer service. 

Asia-Pacific, Malaysia

Winner: Maybank Islamic

In 2016, Maybank Islamic continued to lead Malaysia’s Islamic finance market. By total assets, total financing and total funding, including deposits and investment accounts, the bank claimed top position among sharia-compliant lenders in the country. This dominance translated into a strong set of results, with net profits rising by 10% to reach $322.7m for the year. Tier 1 capital and total sharia-compliant assets also enjoyed notable growth, climbing by 12% and 16%, respectively. Maybank Islamic’s return on equity for the year was 15.4%, while its cost-to-income ratio was a respectable 36% and non-performing loans were just 0.8%. 

But this set of impressive performance indicators were not the only reason for Maybank Islamic victory in the Asia-Pacific and country award categories. For one, the lender’s regional growth story continues at pace. In Singapore, Maybank Islamic has enjoyed a 73% growth in total sharia assets between 2010 and 2016, while total financing in the country grew by 61% year on year in 2016 alone. The lender’s Indonesian unit recorded financing and deposit growth of 61% and 71%, respectively, in 2016 as profit before tax jumped by 62% over the same period. Though the collective contributions of these two markets to Maybank Islamic’s total assets is still small, at just 6.4%, their growth trajectory remains overwhelmingly positive. 

In terms of innovations, Maybank Islamic has led the domestic and regional markets with a number of new products and services. In February 2016, the lender launched the first bank intermediated fintech platform that provides new financing options to entrepreneurs while offering the private sector and retail investors to invest in and support these businesses. According to Maybank Islamic, the ‘Investment Account Platform’ operates in a similar fashion to crowd funding or peer-to-peer lending. 

In the global sukuk market, the bank is playing a notable role in facilitating a number of issuances. The Bloomberg sukuk league table indicates that Maybank Islamic captured a 13% market share for global sukuk issuances in 2016, amounting to about 100 transactions. 

Sharia-compliant window

Winner: NBF Islamic

Established in 2014, United Arab Emirates-based NBF Islamic has grown at a considerable rate in its short lifetime. Its total asset base hit Dh3bn ($817m) in 2016 while its operating income reached Dh60.4m. 

This performance was mirrored by the increase in its financing and receivables, at Dh1.63bn, and customer deposits of Dh2.93bn. This performance has meant that NBF Islamic now accounts for about 8.4% of the total asset base of the National Bank of Fujairah, its parent bank. This saw NBF Islamic post striking growth figures for 2016, despite it starting from a relatively low base.

But it was NBF Islamic’s ability to innovate its products and services in a meaningful way, at a very early point in its evolution, that captured the attention of this year’s judging panel. In an effort to mobilise sharia-compliant deposits from within the UAE and further afield, the bank developed a reverse murabaha (deferred payment) structure to offer its customers assured returns on their deposits. According to NBF Islamic, the success of this product has been instrumental to its early success.

The launch of the NBF Islamic Visa infinite credit card in late 2016 has been another attraction for new and existing customers alike. The card’s easy payment plan permits customers to convert all of their transactions into easy instalments commencing at 0% for a period of up to 12 months. In the case of any payment default, NBF Islamic charges customers a percentage of the outstanding amount as opposed to a fixed fee, as is the case with other lenders. Such features have seen the card enjoy revenue growth of 25% since its launch. 

NBF Islamic is working on a fresh customer proposition for students and new graduates called ‘Ajyal’. This will include auto-finance options, tailored credit cards and flexible savings accounts to meet the demands of this customer segment. In addition, social media outreach initiatives are being pursued to better engage with younger generations and to tap into a market that NBF Islamic believes is underserved within the UAE. 


Winner: Bank Pasargad

Iran’s Bank Pasargad has again scooped the Islamic Bank of the Year country award based on its relatively strong financial performance, under challenging circumstances, and its commitment to product and service innovation. In 2016, total sharia assets climbed by 10.6% in US dollar terms, while the bank’s Tier 1 capital grew by the same number. Though net profits dipped by about 8% over the period, mirroring some of the challenges experienced in Iran, Bank Pasargad nevertheless impressed the judges with its steady year-on-year non-performing loan ratio of 5% and a solid return on equity of 16%. 

Beyond the numbers, the bank has introduced a number of new sharia-compliant products and services to the Iranian market. The launch of deferred payment letters of credit in Iranian rials has been a particular success, while the roll out of murabaha credit cards with credit limits of between IR100m to IR500m on a revolving credit basis is a market first. These developments have been accompanied by the introduction of special six- and 12-month sharia deposit accounts for both Iranian nationals and foreigners with Iranian residency. 

Over the coming year, Bank Pasargad plans to launch a number of other new products. For instance, the ‘Sukuk Al Ijara’ will be an Islamic bond based on ijara lease agreements, helping companies to secure financing for their projects while offering investors regular returns on their investments. In addition, the development of electronic wallets and payments through near-field communication will help to facilitate bill payments and public transportation expenses. 

Bank Pasargad’s commitment to research and development, both in terms of its sharia scholarship and its technological innovation, are helped by its ownership of Khatam University. Scholars and scientists work hand in hand to envision the kind of products and services needed to meet the demands of the economy of the future. In addition, the bank’s information and communication technology holding company, known as Fanap, is helping it to develop a mobile virtual network operator to augment its offerings in the mobile banking space.


Winner: Jordan Islamic Bank

Jordan Islamic Bank’s (JIB’s) continued success in The Banker’s Islamic Bank of the Year Awards is well deserved. In 2016, JIB recorded one of the highest return on equity ratios in the country at 16.52%. This was underscored by a notable decline in its cost-to-income ratio, which fell from 39.1% to 37.9%, and a marginal decrease in its non-performing loans over the period. 

Encouragingly, these results were obtained off the back of strong net profit growth of close to 11% in US dollar terms, while total sharia assets and Tier 1 capital climbed by 7% and 11%, respectively.

These positive growth metrics have been supported by JIB’s expansion of its branch network and digital channels. As of 2016, the bank had 97 branches and 190 ATMs across Jordan, up from 84 and 153, respectively, in 2014. In 2017 the bank intends to add one more branch to its network and increase its number of ATMs to 220. JIB’s I-banking platform, which includes internet banking and SMS services, registered 21% growth in 2015 and 57% growth in 2016 in terms of users. 

The judges were impressed by JIB’s efforts to support the green economy as well as projects focused on social development in the country. This includes the launch of its ‘Shifa’ product to help finance the cost of medical treatment, and a product to support the purchase of hybrid cars. 

JIB has also prioritised lending to small and medium-sized enterprises, including the provision of murabaha financing for the acquisition of raw materials, goods and equipment, as well as leasing mechanisms to finance the purchase of real estate. 

To improve its outreach in the wider economy and to raise the profile of Islamic finance more generally, JIB has developed a marketing programme to liaise with the heads of 17 chambers of industry throughout Jordan. As part of this effort, the bank now explains new financing services, including those in co-operation with the Central Bank of Jordan, and provides the details of relevant JIB branch managers.

Looking to the future, JIB plans to grow its total customer accounts by 10% over the next 12 months, in order to reach its target of 1 million accounts.


Winner: Meezan Bank

Pakistan’s Meezan Bank has gone from strength to strength in recent years. With a return on equity that has remained above 20% since 2014, the lender has reaped the benefits of a strategy that has focused on financial inclusion, effective cost management and product and service innovation. 

Meezan’s net profits increased by 11% in 2016 in US dollar terms, while total sharia assets grew by an impressive 24% for the year. Tier 1 capital, meanwhile, climbed by 11% over the same period. The bank’s cost-to-income ratio climbed slightly to 64% in 2016, from 60% in the previous year, though non-performing loans have remained low at just 2%. 

In line with the government of Pakistan’s financial inclusion agenda, Meezan Bank has developed the ‘Asaan Account’. This account is targeted at customers who have limited proof of source of income and requires a minimum deposit of only
Rs100 (about $1). The success of this product is demonstrated by its growth numbers. In 2015 Asaan accounts had Rs538m in deposits but by the end of 2016 this
figure had grown to Rs3.99bn. One
objective behind this account is to accelerate the formalisation of the Pakistani economy, a factor that impressed this year’s judging panel.

Meanwhile, Meezan Bank has participated in a number of syndicated lending deals that have raised the profile of Islamic finance in Pakistan over the past 18 months. This includes the development of a Rs34.7bn Swat motorway for the government of Khyber Pakhtunkhwa, as well as the development of an ijarah-based structure to help finance a Rs54.7bn liquefied natural gas pipeline near Lahore. 

Pakistan’s capital markets have also benefited from Meezan Bank’s expertise in sharia-compliant finance. The bank provides recomposition services for the Pakistan Stock Exchange’s two Islamic indices – the All Share Islamic Index and Karachi Meezan Islamic 30 Index – on a semi-annual basis by screening about 500 companies. The indices were launched with the assistance of Meezan Bank and it is the only lender to provide recomposition services.


Winner: Qatar Islamic Bank

In a competitive banking market, and one that has faced a number of challenges linked to lower commodity prices, Qatar Islamic Bank (QIB) has again scooped the country award for 2017. 

The judging panel took note of the bank’s stellar performance in 2016, which included a 10% rise in net profits in US dollar terms. This was achieved as QIB grew its total sharia assets by the same margin, while Tier 1 capital jumped by 19%. More impressively, the lender has managed to grow its return on equity in recent years, from just over 13% in 2014 to 15% by the year end of 2016. 

During the course of 2016, QIB issued a QR2bn ($549m) Basel III and Islamic Financial Services Board-compliant additional Tier 1 perpetual sukuk. The transaction achieved impressively low pricing, at 5.25% a year, reflecting the bank’s strong performance in recent years, and its stature in the Qatari banking system. The deal helped to maintain QIB’s strong capital adequacy ratio and to secure low-cost funds to support further growth.

In keeping with its long-term commitment to product and service innovation, QIB introduced its ‘Ladies Banking’ proposition to specifically cater to the needs of women and their role in the Qatari economy. This includes dedicated products, channels and the provision of well-trained female staff to assist clients. Meanwhile, QIB has introduced a new product for its private banking clients which enables the financing and purchase of buy-to-live property in London through branches in Qatar. 

Both domestically and regionally, QIB has been involved in a number of high-profile sharia-compliant syndicated financing deals. These include a QR2.67bn commodity murabaha to Al Faisal Holding and a QR1bn financing deal with Daewoo Engineering and Construction to support the upgrade of Qatar’s E-Ring road. In addition, the bank was involved in a $570m multi-bank murabaha facility to finance an arm of Bahrain’s National Oil and Gas Authority. 

To capitalise on its recent success, QIB plans to launch a number of new offerings in 2017. This will include the second series of the bank’s certificates of deposit scheme, for both retail and corporate customers. 

Saudi Arabia

Winner: Alinma Bank

In a competitive country category, Alinma Bank’s strong performance over a number of years, coupled with the standout role that bank has played in various headline Saudi deals, ensured that it scooped the 2017 country award. The lender’s total sharia assets grew by 18% in 2016, in US dollar terms, while its Tier 1 capital increased by 4.5%. But in a sign of a more difficult domestic economic climate, Alinma Bank’s net profits grew by 2% over the period, down from 16% in 2015 and 26% in 2014. 

“Alinma Bank had a strong year in 2016. Over the past four to five years we have been the fastest growing bank in the region,” says Abdulmohsen Al-Fares, chief executive of Alinma Bank. 

The bank’s return on equity has remained steady in recent years, at about 8%, while its cost-to-income ratio stood at 45% in 2016. Non-performing loans remained negligible at just 0.77%. Beyond Alinma Bank’s strong performance metrics, the lender is playing an increasing role in supporting the growth of Saudi Arabia’s small and medium-sized enterprises (SMEs). The creation of its proprietary ‘Business Billing’ service, which enables payment requests to be sent and settled through Alinma’s corporate online banking website, is a case in point.

“SMEs represent a big percentage of the economy. But as much as they need financing, they are even more in need of other professional financial services,” says Mr Al-Fares.

Alinma Bank’s participation in some of the country’s headline deals also points to the lender’s ability to lead and execute complex, landmark transactions. The SR8.4bn ($2.24bn) Jeddah Economic City fund provided by the bank will create further opportunities for economic growth and diversification for the country. In addition, the bank also participated in the SR3.2bn refinancing of the Rabigh 1 Independent Power Plant Project and the SR6.9bn refinancing of the National Titanium Dioxide Company. 

“I am very optimistic about 2017 and even more optimistic about future years to come. We expect to continue to achieve double-digit growth in the coming year,” says Mr Al-Fares. 

Sri Lanka

Winner: Amãna Bank

Sri Lanka’s Amãna Bank celebrated the fifth year of its founding in August 2016. That it has once again scooped the country award in The Banker’s Islamic Bank of the Year Awards in 2017 is testament to the solid progress it has made in this short period. 

But this journey has not been without growing pains and 2016 was no exception. A 68% fall in net profits – after posting a 280% increase in 2015 – is a case in point. Much of this drop is attributable to a loss on an impairment linked to the lender’s non-core banking activities. 

Nevertheless, the bigger picture remains positive. Financing income from Amãna Bank’s core banking activities grew by 40% in 2016 to reach $26.9m. Meanwhile, total sharia assets grew by 10% over the period in US dollar terms. The lender’s cost-to-income ratio – though high – continues to fall, reaching 79% in 2016, while its ratio of non-performing loans remained very healthy at just 0.89%. 

The judges were impressed by the bank’s ability to innovate its product and services and in turn advance the market for sharia-compliant finance in Sri Lanka. Education finance, flexi-term investments, savings plans and products tailored to corporates and small and medium-sized enterprises all stood out. 

Amãna Bank’s gold financing facility – which acts as an alternative to the conventional pawning of jewellery – disbursed more than $7.4m in financing in 2016, constituting a 250% rise in year-on-year growth. 

After successfully launching internet banking in 2015, Amãna Bank launched its first mobile application at the end of 2016. The app is available on both the Google Play and Apple Stores and has, to date, attracted 2500 downloads. 

Meanwhile, the bank’s physical footprint continues to grow with the roll out of a further four branches in 2016, bringing its total to 28 across the country. The bank now has five off-site ATMs, including the first drive-through ATM in Sri Lanka’s eastern province. Membership of the LankaPay ATM network also provides customers with access to 3700 machines island-wide. 

United Arab Emirates

Winner: Abu Dhabi Islamic Bank

Recent years have been challenging for the economy of the United Arab Emirates. Economic growth hit about 2.3% in 2016, according to the World Bank, representing a notable decline from previous years. In this environment, pressing liquidity challenges have emerged for the country’s banks even though the worst of these troubles now seem to have passed. Such difficulties are reflected in the performance of the UAE’s banking sector, which has posted weaker, if still respectable, growth figures of late. 

The winner of this year’s Islamic finance country award, Abu Dhabi Islamic Bank (ADIB), saw its net profits climb by 1% in 2016 in US dollar terms, down from 10% in 2015. Similarly, total sharia assets rose by 3% over the period, down from close to 6% in the previous year. Nevertheless, the bank’s return on equity remained strong at 17% while its cost-to-income ratio was a respectable 45%. The ratio of non-performing loans remained relatively steady at 4.5%. 

Though these growth numbers mirror the more challenging domestic environment, ADIB scooped this year’s country award based on the roll out of a number of eye-catching innovations. The introduction of sharia-compliant letters of credit in 2016 is a case in point. Designed to support the UAE’s businesses, and exporters in particular, the product allows customers to improve the management of their working capital by offering a simple and secure framework to manage their cashflow and finance. 

Meanwhile, ADIB’s mobile banking application continues to go from strength to strength. More than 200,000 customers, or about 25% of the bank’s total customer base, now use the app and each month more than 1 million transactions are executed through customers’ smartphones. 

In terms of deals, Abu Dhabi Islamic Bank has been involved in arranging billions of dollars-worth of sukuk transactions, syndicated lending arrangements and structured finance deals for government-related entities, corporates and financial institutions. In 2016, the bank concluded a $1.6bn syndicated finance transaction as mandated lead arranger and bookrunner, cementing its status as a leading player in the syndicated finance league tables. 


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