Haitham Abdou is a busy man. Playing such a central role at Information Turnkey Solutions (ITS), the pioneering integrated systems and service provider, Mr Abdou is at the forefront of innovative developments in Islamic finance, thereby ensuring his time is taken up with paving the way forward in this nascent industry. Fortunately for us, he kindly took the time out to discuss ITS, Islamic banking and why he believes Islamic banking is becoming a viable alternative model.
What is the focus of ITS?
Our focus is primarily on the Islamic banking sector, from core banking to all the delivery channels both retail and corporate. We have launched a number of products this quarter and are hoping to launch a new suite of products in the next quarter. This will include new Islamic investments and Islamic treasury solutions. It will complement our existing product offerings, bringing a suite of products together which falls under our product brand, Ethix Financial Solution.
What is your assessment of the market for ITS Islamic banking systems?
Currently, the largest markets for ITS are the GCC and the Middle East at large. Many of our customers are from Kuwait, Bahrain and UAE. While the area has been our prime focus over the last few years, we have started to expand into different geographies and currently conducting research and analysis of other global markets. One thing to note is that the outreach of ITS parallels that of the growth of Islamic banking in general. Thankfully, when it comes to Islamic banking, we are
seeing interest everywhere. For the Islamic banking industry, it is about maturity rather than lack of interest. Many countries, for example in Europe, are expressing interest and are studying it but are still not at the stage of adoption. In Europe and probably North America, the Islamic banking seeds are there but just need time to grow.
Which markets do you wish to tap into?
We are starting to tap into the African and Western European markets. We are already working in Africa. In North Africa, ITS covers countries such as Egypt, Tunisia and Libya. We have customers in Zambia, Namibia and Nigeria. In fact, one of the largest banks in Nigeria, Zenith Bank, runs our solutions. From these locations, we are planning to expand into neighbouring countries.
What we are especially looking into within these regions is the Islamic window concept. We feel that there is more scope for coexistence with conventional banking systems. Additionally, we are starting to adopt a new type of focus and model based on the different financial sectors in the different African countries. For some territories, we have partners on the ground that
offer our solutions. Overall this means for some countries, ITS is going to directly offer its solutions, and for others, we will be using partners. Specifically, in central and southern Africa we are looking at the partnership model and alliances with other system integrators who would be willing to offer our Ethix Financial Solutions.
Describe the ETHIX Finance Solution.
The Ethix Financial Solution is two different products: one is for conventional banking and one is for Islamic. For Islamic banking, the product was designed from the ground up paying close attention to the needs of Islamic banks. We did not amend and adapt conventional banking systems in order to make it work with Islamic banking systems. This we feel is typical of our competitors and we end up seeing the limitations they have with their customers. It takes a long time for a conventional system to be customised to fit the needs of Islamic banking, tested and then delivered to the customers for it to be deployed. What we did was to look at the business elements of the Islamic banking industry and build a product that caters specifically to the bank’s needs. We feel that that is our major distinction from our competitors.
What are the key differences between ETHIX and its conventional counterpart?
In terms of differences between the conventional and the Islamic system, it boils down to the mindset of the product and the design of the product. That is why if a product is not designed for Islamic banking from the beginning, it is very diffi- cult for the product to keep up with the continuous growth of the industry.
One of the main differences is that in the Islamic banking industry, there are many different viewpoints as to what is considered Shari’a compliant for products. It could differ between banks in the same country and also between different countries. The way Shari’a compliance is looked at in the GCC is different to the way it is looked at in the Asia Pacific areas. These differences I feel will continue because of the simple fact that Shari’a compliance is dictated by the Shari’a board of individual banks. They decide what is a Shari’a-compliant product, how to structure it, how it is defined, etc. They also define how the contract between the bank and the customer is drafted. They define the accounting policies for every step of the transaction. Therefore, it is very difficult for a software vendor to pre-empt the mind of every single Shari’a board.
Leading on from this, please describe the ITS product offering to Islamic banks in greater detail.
What we have done in ITS is come up with a suite of what we call Islamic Banking Engines. There are four: Islamic Definition Engine, Islamic Product Engine, Islamic Workflow Engine, and the Islamic Accounts Generation Engine. These four engines allow a bank to define from the ground up the Shari’a compliance rules and regulations dictated by the Shari’a board. It allows banks to design accordingly as the borders of Shari’a compliance become a definition within the hands of the banks. That is the only way we can guarantee our product is Shari’a compliant as we allow the customer to define their own Shari’a compliance rather than try to dictate to them. They can tailor-make their products. It is truly the only product which allows independent customisation. The product is flexible for the Shari’a boards to dictate the Islamic banking products they want to launch and how to structure them, from a workflow point of view, from a contracts management point of view and from an accounting point of view. It is a suite of products that when put together, will create their own Shari’a compliance. They don’t have to come back to the vendor for customisation.
We are proud that Tier one banks such as Kuwait Finance House, Bahrain Islamic Bank, Arab Finance House and Abu Dhabi Islamic Bank are users. These are banks that are at the forefront of innovation in the Islamic banking industry around the world. And that’s what differentiates us from our competitors as these banks are operating our systems because they realise the benefits of such flexibility.
Is it only the product that differentiates you from your competitors?
Aside from our product, we are also a service and systems integrator. We offer end-to-end solutions that our competitors cannot offer. We can offer our customers a full service including the hardware platform, the services they need, the network security, storage as well as 24/7 support. So on top of being a product vendor – which is where our competitors stop – ITS offers an entire range of IT solutions that complement the software. Our customers do not need to be with multiple vendors. We offer them a single point which is a valuable and convenient proposition for our client. At the same time, we don’t force them to take all services from ITS. But most of our clients have found it beneficial to use ITS as a product vendor and total IT system and service integrator.
ITS is what we call as pure play. We are the largest company in the world that spends research money and development only on Islamic banking. Other competitors in the conventional banking space are larger than ITS but do not spend much on Islamic banking. I believe we are the only company in the world that can cater to all the models of Islamic banking, from those that are at a conceptualisation stage all the way up to large, multi-service banks. We can offer our solutions for start-up Islamic banks where we can assist in the establishment of an Islamic bank in two months. We have done this on a number of occasions. We are the only company that is able to convert conventional banks into fully fledged Islamic banks, not only from an IT point of view but also from a business consultancy perspective. We also have solutions that cater for Islamic windows and I believe we are the first vendor to implement an Islamic window in the GCC- the Commercial Bank of Dubai. Moreover, we cater for smaller entities and for Investment houses in Islamic finance. So we serve all the variations of organisations in the Islamic financial industry.
What are your plans for ITS in the short, medium and long term?
Short term: We are launching a re-vamped product line to complement our Islamic full offering. The suite will cover direct portfolio management, fund management, sukuk, and direct investments and serve front, middle and back office.
Medium-term: We are implementing a roadmap, a new concept of business process management that will be incorporated within our total banking solutions and transition into a complete service-orientated architecture. We are looking at expanding into Europe and North America in the medium to long term.
Long-term: We wish to expand globally. While we have a
presence on most continents, the growth of Islamic banking will help induce our growth further. In the long term, we hope to make a significant impact in Africa,Asia Pacific, Europe and North America.
What are the IT-related challenges faced by the Islamic financial services industry?
Islamic banks are similar to conventional banks in what they need from IT. They are banks like any other bank. The difference is Shari’a compliance. This raises difficulties due to differences of opinion when it comes to Shari’a compliance. The challenge is to create the right software solution. Hardware and networking are the same as conventional but it is in software where Shari’a compliance presents issues. Furthermore, the lack of a global standard for Shari’a compliance compounds the challenge further. That being said, I personally do not believe that we will see, any time soon at least, a global standard for Shari’a compliance that will govern Islamic banks. We see organisations like AAOIFI – which ITS is a member of and has been certified but there are other standards agencies such as IFSB and I expect more to follow, adding further layers to the diversity of opinions in Islamic finance. Ultimately, however, the end decision for Shari’a compliance really lies with the Shari’a board and that is why there will always be differences in the interpretation of Shari’a compliance. Subsequently, software needs to be tailored keeping that challenge in mind. ITS is the only company that has looked at developing systems from this angle and has created a suite of Islamic software engines that allows that challenge to be mitigated.
Have you been affected by the Arab Spring?
We have been affected by the Arab Spring but in a very positive way. Certainly, in the short term, it has been negative. Following the financial crisis, and then the Arab Spring, spending, in general, went down because there was uncertainty. However, in the long term, what has resulted from the Arab Spring is the rise of political parties that are more inclined to an Islamic-based society in general, and utilise Islamic banking as the main banking model. The events in Tunisia, Egypt, and Libya appear to be heading towards that direction. Therefore, we see a huge potential for the growth of Islamic banking and Islamic windows in these countries. The result is a growth of Islamic banking in the medium and long term after the resultant slowdown due to political instability. So there is a growth opportunity for Islamic banking and the development of a strong IT infrastructure.
Would you be able to highlight the performance of ITS over the last few years?
What I can tell you is what has already been publicised by objective entities in the world. We have been ranked by Gartner in a report published in 2011, as a tier-one global organisation when it comes to Islamic banking. We are one of the top two or three companies when it comes to market share, size and research and development and having a tier-one customer base. We have been ranked by the IBS sales league last year, as the number one company in terms of sales for Islamic banking. We are also very honoured to win a GIFA award for “Best Islamic Finance Product”. Last year we received from the CPI, the Best Technology Provider for 2011. So overall I think we can consider ourselves as one of the top Islamic banking vendors in the world but we do not rest on our laurels and constantly looking for new opportunities.
What is your focus in the Far East?
Islamic banking is relatively mature in the Asia Pacific area, especially Malaysia. Other countries like Hong Kong, Singapore, South Korea and China have all expressed interest in Islamic finance. In the case of Singapore, they have done much to kick-start the industry within the nation. Indonesia has a lot of potential to grow since it has the largest Muslim population in the world. I believe that the Asia Pacific region will be ranked second after the Middle East in Islamic banking. We have a customer base in Malaysia and the Philippines and we are looking to partner with companies in that area and expand in the region.
Tell us about a typical working day of Haitham Abdou.
The only thing that I can tell about my work routine is that there is very little routine in the ICT industry! My multiple roles within ITS ensure
that I am constantly on my toes. I am the Group Director of Marketing for ITS, which involves looking into many industries such as banking, education, enterprise solutions, etc. I am also the Director for the Banking Business Solutions department which is heading the project management development of our Ethix Financial Solutions as well as the implementation, the presales and the support. Additionally, I am responsible for the Global Operations unit, which looks into the expansion of our product industry to other parts of the world through channels where we do not have direct sales office. As you can imagine, these three things keep me extremely busy. But all with the same strategic intent which is to position ITS as a regional leader, a service integrator and anIT systems integrator for tier-one organisations in general thus making ITS a global leader when it comes to Islamic banking solutions on a global scale.
What is your educational and professional background?
I graduated as a software engineer from California State University, USA. I started my career as a software developer and then worked my way up in the banking industry, working in a number of roles including system analyst, designer, architect, project manager and then heading ITS development. This was followed by entry to marketing the products and then into high-level, executive positions in the company. I have been at ITS for 16 years though prior to that I worked in other companies.
What impresses you about Islamic banking?
Islamic banking is good for society. It is based, in principle, on the merits of buying and selling and trading of goods where money is not considered as a commodity or a good to be traded and so inhibiting the opportunity for interest or riba. That principle to me has many meanings. When you trade, that means a good has to be produced meaning there is a factory which produces the good, which means the factory has employees. Once the good is produced it has to be shipped, which means retail shops and this, in totality, makes the economy of the society work. The core principle of Islamic banking makes it less risky as it is not based on compounded interest or virtual money. I believe that is why Western societies are gradually finding Islamic banking more attractive.
What are your opinions on the current state of Islamic finance?
Awareness of Islamic banking is growing year by year at a global scale. Islamic banking is experiencing double-digit growth year after year which is a phenomenon. What is especially interesting is that Islamic banking has gradually shifted from its original religious conceptualisation to a more business and economic paradigm. This is allowing it to grow at a faster pace. Non- Muslims are now partaking in the benefits suggesting that Islamic banking is breaking the barrier of religious misunderstanding and suspicion. It is now seen as an alternative business model that allows coexistence. The choice, however, remains with the consumer as to which model they wish to choose. This goes a long way in driving the expansion of Islamic banking and finance.
Another paradigmatic shift over the last year or two has been branding. Attending conferences and speaking regularly to industry practitioners, the ideology of Islamic banking is leaning towards ethical banking. That is why we called the product ‘Ethix’ to keep in line with that trend.
The industry as a whole is maturing; expertise on a global scale is gradually being built. Systems are there to support the business and not visa versa. Software and IT systems is a necessity nowadays as it supports the growth of the business. If you cannot translate business needs into an IT system that is when you find limitations on your business.
What are the challenges which face this industry?
A key challenge for the industry is appeasing the regulatory system of different countries. Regulation of Islamic banking and finance is much easier in the Middle Eastern countries and that is why it has been adopted much faster. In Western countries, it is much slower though certain countries like the UK have amended and added to present regulations to accommodate Islamic finance.
More obstacles have to be overcome especially in the context of taxation. This is something that is often spoken about in conferences and events I have attended on Islamic finance. Corporate governance is another aspect that needs to be considered. These hurdles are gradually being resolved. That is why we see double-digit growth year in year out, worldwide. In general, if it keeps on growing, I see the hurdles disappearing. I feel optimistic that the growth will continue and actually even expand into different countries.
