Title (Arial bold 30 point) - Accounting and Auditing Organization for ...

0 downloads 128 Views 822KB Size Report
footprint… c. USD 300 trillion. Global Financial Assets. USD 45 trillion. Assets – Principles of Responsible. Invest
Transforming Islamic finance from niche to mainstream industry

Noor ur Rahman Abid

AAOIFI International Conference Al-Madinah Al-Munawwarah, May 2016

Perspective

1 The situation today 2 Why is going mainstream so critical? 3 Key recommendations

4 Future ambition - the 2021 view

There is tremendous potential for Islamic finance to build its global footprint…

40 years contemporary history 4 countries with more than 30% share of banking system market Includes documented and semi documented sectors

c. USD 300 trillion USD 45 trillion

Global Financial Assets

Assets – Principles of Responsible Investing (UN)

USD 3 trillion

Global Islamic Financial Assets

Retail/commercial banking is the biggest segment within Islamic finance… others like Awqaf, pensions, and HNW wealth are less documented

Source: Thomson Reuters

There is significant concentration of Islamic assets in three markets: Malaysia, Saudi Arabia and Iran constitute 65% of global Islamic assets

Source: ICD Thomson Reuters Islamic Finance Indicator 2015

Achieving our true growth potential requires clarity in terms of purpose… with a view to meet the critical needs of the market

Financial Inclusion

2.5 billion people globally currently do not have bank accounts (Indonesia 64% population without bank account; Egypt 85%; Pakistan 87%)

Sustainable Economic Growth

40% of population across OIC markets below poverty line Globally, Socially Responsible Investments (SRI) growing fast… targeting sustainable, long term, premium shareholder returns

Jobs & Entrepreneurship

1 billion youths across OIC markets alone 200 million micro, small and medium size businesses globally have unmet financing needs

A candid view of where we are today…

What’s gone well…

…and what still needs to happen

1

Formation of financial capital and knowledge communities

1

Clarity on purpose of existence and impact being made

2

Driven by grass-root demand

2

Innovation - future banking model (specially for emerging markets)

3

Reasonably good level of international acceptability

3

Transitioning from start-up to a growth play (institution building)

4

Regulatory basics in place

4

Replicating success of core markets across OIC and globally

Nine core markets are the international growth engine of Islamic banking industry… with some 40 retail banks considered systemically important Share of Retail/Commercial Banking Market KSA

51%

Malaysia

21%

UAE

22%

Kuwait

45%

Qatar Turkey Indonesia

26% 6% 4%

Bahrain Pakistan

29% 10%

Quality of growth requires serious attention. An estimated USD 500 billion of Shari’a compliant funds are brokered to conventional system through interbank and money market transactions

In 2015, combined profits of Islamic banks in core markets crossed USD 13 billion… and is well positioned to triple by 2021

Islamic banks have the financial strength to drive the future regionalization of the industry

USD 13b 2015

USD 38b 2021

22 Islamic Banks

USD 1b+ Equity

But ‘market share growth’ in many of the core markets appear to be slowing down and is a concern…

This is because while Islamic retail & commercial banks have made good progress, the journey on remaining (8) segments is still just beginning… TRADE

BANKING

9

INFRASTRUCTURE

1

TAKAFUL

8

7 AWQAF

2

Completing the finance circle needs to be a priority 6 5

PENSIONS

3

CAPITAL MKT

4 SMALL FINANCE & SAVINGS

WEALTH MGMT

Looking forward… (3) supply side recommendations

Seed, incubate and build out the remaining eight segments as priority. This requires national champions Complete the financial financial circle

Create (10) super super regional retail retail banks

Today, the industry has less than 100 million customers. Think Big. Of the 22 large Islamic banks, at least 10 should build multi-market franchises to facilitate cross border flow of financial and intellectual capital

Establish fintech

To stay relevant, embrace and build Sharia-friendly fintech ecosystem Supply Side

Looking forward… (3) demand side recommendations

Re-branding & communication

Invest preferentially in digital channels and collaborative organization models

Build focus on principles underlying Islamic finance (and its alignment with Principles of Responsible Investing)

Innovative outreach

Youths & SMEs segments

Demand Side

Build best-in-class leadership position in start-up and SME segments

(3) Infrastructure strengthening recommendations

KSA, Indonesia and Turkey to develop joint strategy to lobby Islamic finance on G20 forum

Build influential access to international forums like AIIB, World Bank, IMF, Basel, WEF, etc. G-20 & international forums

Fundamentally re-position the critical standard setting bodies to meet future of finance…

Challenge and re-configure board and C-suite leadership for the next era

Strengthening infrastructure institutions

New generation leadership

Infrastructure

“Three By Three Strategy” to transition Islamic finance to mainstream industry over next five years

Complete the financial circle

Create (10) super regional retail banks

Establish fintech accelerators

Supply Side

Re-branding & communication

Innovative outreach

Youths & SMEs segments

Demand Side

G-20 & international forums

Strengthening infrastructure institutions

New generation leadership

Infrastructure

Our ability to innovate will determine our continued relevance to global financial system…

Apple

Sharia’ and Business Model Innovation is a must to stay relevant

Google

Alibaba

7 Yrs

18 mth

7 mth

800 million customer billingrelationship

erased 85pc market cap of GPS companies

became China’s largest money market fund

Implementing “Three By Three Strategy” could easily lead to a 250m customer industry, with more than 50% share of banking system assets across 20 key markets and an asset base of USD 9 trillion

2021

2021

20 mkts with 50%+ mkt share

250 million customers

USD 9 trillion assets

4 markets with 30% plus mkt share

Less than 100 mil customers

USD 3 trillion assets

2015

2015

2021

2015

Transforming Islamic finance from niche to mainstream industry

Noor ur Rahman Abid

AAOIFI International Conference Al-Madinah Al-Munawwarah, May 2016