Retail demand for Islamic finance in the Kingdom of Saudi Arabia and the wider region keeps increasing. Growth areas include structured hedging and investment products, project and aviation finance, equity-linked and greenfield project sukuk.
Global Finance: What is propelling the growth in Islamic assets and liabilities at Samba?
Al-Saif: Retail demand for Islamic finance in the Kingdom of Saudi Arabia (KSA) and the wider region continues to increase. Retail assets at Samba Financial Group (SFG), which includes personal loans, credit cards and home finance, are 100% shariah-compliant, essentially due to strong underlying retail demand.
Public values is an increasingly important driver in the selection of a financing structure. In KSA, this is particularly true for large corporates in the public sector who have a strong preference for shariah-compliant financing solutions. Currently more than 50% of SFG’s corporate asset book consists of shariah-compliant financing.
Samba was the first bank to introduce Islamic credit cards in the kingdom, and we offer an array of both asset- and liability-based shariah-compliant retail and investment products. With respect to Islamic liability products, in addition to Islamic Al-Khair current account, Samba also focuses on corporate Islamic deposit products.
GF: Where do you see the best opportunity?
Al-Saif: Significant large-scale corporate financing, project finance and debt capital market deals continue to be structured in compliance with shariah to achieve the widest possible distribution in KSA and beyond. These are essentially the market segments which have the potential for highest growth, notwithstanding the current economic constraints in the region. Specific growth areas include: structured hedging and investment products (Islamic treasury solutions), project and aviation finance, equity-linked and greenfield project sukuk, alternative assets (e.g. REITs and private equity) and acquisition financing.
GF: What are Samba’s ultimate ambitions?
Al-Saif: SFG’s objective is to remain the premier provider of Islamic products and services in KSA and the wider GCC market.
GF: What are your biggest challenges?
Al-Saif: There is increasing competition from existing local and international players, including regional banks as well as Saudi joint venture banks and their investment banking arms. This is specifically relevant for debt capital markets and sukuk, corporate finance and advisory transactions.
GF: What products or services will you bringing on board this year or next?
Al-Saif: SFG continues to introduce new shariah-compliant products and services. We launched Islamic gold financing in late 2015, and in early 2016 launched an Islamic interbank placement product. Other developments include a shariah-compliant off-balance-sheet discounting product based on Hawala, an ijarah financing product for the corporate banking group, which is a new product based on lease financing for bilateral ijarah and syndicated regular and forward lease (ijarah mausufa) transactions, Islamic overdraft facilities and possibly a shariah-compliant finance and shipping guarantee.
GF: Do you expect more growth in Islamic assets than conventional banking assets?
Al-Saif: This has been the trend for some time now, and we expect this to continue for the foreseeable future. Key public sector corporates and real estate private developers have considerable appetite for Islamic financing, both at bank and capital market levels.
GF: Do you have regional and/or international expansion plans?
Al-Saif: We are already providing select shariah-compliant products via Samba Financial Group in the UAE and United Kingdom.
GF: Are margins better for Islamic offerings than conventional ones?
Al-Saif: The underlying economic considerations for Islamic products, especially on the asset side, must remain at par with conventional counterparts. Customers typically do not pay more to have an Islamic solution, hence the argument of better margins does not hold in a commercially driven industry. Regardless of this fact, Islamic finance capability is no longer a niche business and has become an industrywide phenomenon. clients expect financial institutions to offer