The Global Donors Forum in April 2012 was a congregation of altruistic Muslim decision makers. Bankers rubbed shoulders with politicians; philanthropists with businessmen. Mohammad Shaheed Khan spoke at the conference. During the event, he took time out to speak with us on his work and vision.
You have worked in Pakistan, Saudi Arabia, Malaysia and UAE before moving to Bahrain. Tell us what made you move to Bahrain, which has in the recent past almost lost its position as a regional leader in Islamic finance.
I do not think Bahrain has lost its position. Bahrain is still a hub for Islamic finance in the region and it has more of an established infrastructure in Islamic fi- nance than its neighbouring countries. There are 26 Islamic banks and 19 Islamic insurance companies operating in the Kingdom. Bahrain is home to AAOIFI, LMC, IIFM and the IIRA, Islamic financial bodies that are sustaining and promulgating the industry. The industry in Bahrain has remained resilient with its direct contribution to gross domestic product standing at 26%. The Islamic finance industry is strongly supported by the Central Bank, and regulations have been passed which are conducive to the growth and development of Islamic finance.
A central advantage of Bahrain is its location. It is close to Saudi Arabia, which is the Gulf’s largest economy. Saudi Arabia is also experiencing a significant boom right now, though this can also be said about Qatar, which is less than an hour’s flight away. In fact, I believe the Gulf region is going through a very exciting period. With Bahrain, the unrest had caused uncertainty in the financial markets but this appears to be subsiding. Anxiety remains but I think over the next few years there will be more stability, which will help propel Bahrain forward.
What in your opinion are the greatest challenges facing the global Islamic financial services industry?
Given the impressive growth of Islamic finance, it is easy to forget that the industry is still in its infancy and will take time to reach critical mass. The problem is that we are trying to compete and replicate everything conventional. We flatter their system by imitation. There needs to be a transition from “Shari’a Compliant” to “Shari’a Based”. This is changing but there remains a fair level of scepticism. It makes it difficult in terms of marketing to convince potential customers about the value proposition of Islamic finance. A lack of understanding about the products contributes further to this scepticism with many people making presuppositions be- fore actually investigating the nuances of Islamic finance. However, I think the industry shoulders the burden of responsibility to change people’s perceptions. At the heart of Islamic finance is a genuine philanthropic spirit which pervades all its business practices. Till the Islamic finance industry is able to meaningfully contribute towards its greater objectives of wealth creation, scepticism will remain. Islamic finance should focus on the dual purposes of personal social responsibility and corporate social responsibility.
Islamic banks need to ensure that not only are contracts for financing halal, but every facet of its business follows Shari’a principles and spirit. Unfortunately, we have seen several Islamic banks in the Middle East that have not lead by example. Practices in Western conventional banks are often much better. It is not enough for an Islamic bank to claim Shari’a compliance merely because it has a fatwa from a scholar on a product or service. To date, most institutions have placed additional layers of documentation without looking at maqasid al-Shari’a focusing on the “Form” mostly and ignoring “Substance”. I believe all areas of an Islamic bank should be Shari’a based; from its HR policies to remedial management. An Islamic bank should “managed by Islam”, following this concept in its entirety. More research is needed in this area linking modern management with Shari’a. We have much to learn about the leadership and management practises of the Holy Prophet (PBUH) and his Sahaba.
It is important to educate current customers and potential customers on Islamic finance. The next step is for Islamic banks to understand the needs of their customers; a proper customer segmentation exercise is needed for each jurisdiction it operates in. A “one size fits all” approach is no longer useful. Islamic banks have to deliver products and solutions which are cost-effective, creative and adhere strictly to Shari’a principles. Islamic banks are realising that by just pushing products and waiting for a deluge of new customers, it is not going to generate the numbers that will ensure that the industry flourishes. We have to provide solutions, not just simply push and promote products.
Other issues in the market include a lack of trained manpower. There are a number of qualifications and training courses out there that, in the long run, will create a talent pool from which the industry can benefit. It will take time but it is not an insuperable obstacle, and certainly not one that we should be too worried about given the growing interest and desire for Islamic finance. One issue that I do believe needs to be resolved urgently is the lack of uniformity of Shari’a standards. Differences can breed uncertainty and confusion. In the modern world, we pride ourselves in mitigating these factors and having clarity. A lack of uniformity perpetuates ambiguity.
In order to reach the next level, we have to attract non-Muslims. For this to occur, making inroads into the US market is imperative. Islamic finance has entered the US market but unfortunately, it is too small and there are far too many negative connotations associated with Islam and Islamic finance in the States. However, there is potential and Islamic financial institutions need to do more to change perceptions.
Why did you choose to do Islamic banking as a career? Do you not think that there still are greater opportunities for building a successful career in conventional banking?
I gave up a career in conventional treasury because I did not want to “wage war against Allah and his Prophet (PBUH)”. Since then, I have never looked back. Yes, there have been lucrative opportunities offered to me in the conventional space that I declined. For me, a career in banking has to be only Islamic, InshaAllah. A competent Islamic banker will always have job offers.
I am passionate about Islamic finance and promoting it. Islamic finance has brought a lot of “barakah” (blessings) into my life. When the source of one’s income is halal, supplications are answered. I have gained recognition in this industry, Alham- dulillah, from a very young age, I was given opportunities to share my perspective and convey the little that I know globally at various international forums and events. I have been invited to conduct workshops and have had opportunities to teach at universities. From a career perspective, Allah has blessed me with growth within the organisations I served and made my ventures successful. It all begins with having the right “niyah” (intentions) and hard work.
What are the benefits of having an Islamic window as part of a conventional bank, as compared to having a fully-fledged Islamic bank?
Both Islamic banks and conventional windows have their particular roles to play. There is still so much to learn from the conventional banking industry. While Islamic finance is diametrically opposed to the conventional system, we cannot ignore their best practices. Not everything in the conventional banking industry is haram and they have had many more years of experience to ensure best practices and good governance. Windows at conventional banks can leverage off the established brand and working practices and so add value to the Islamic finance industry. We have to concede that Islamic banks are still playing catch up to large sophisticated conventional institutions. Furthermore, within large conventional banks, generally, Islamic businesses contribute very little to the bottom line compared to the conventional business; hence it becomes a challenge at times to make its presence felt.
Who amongst the contemporary personalities has influenced or impressed you the most?
King Abdullah bin Abdulaziz, Mahathir Mohamad and Recep Tayyip Erdogan are extraordinary Muslim leaders, who have done much to for their respective countries and the Muslim ummah at large. One cannot underestimate the importance of a leader in making a country great. Plato spoke of the philosopher king as the desired ruler, one who understands the reality of his people but goes beyond the physical realm and ponders upon profound questions of life. I think these leaders have the right balance of profundity and practicality, making them such excellent leaders. We need these kinds of people for Muslim countries to shake off the negative viewpoints arising due to authoritarianism and poverty that prevails in most Muslim countries. In many respects, these leaders have paved a worthy path for Muslims leaders to follow.
What is it like living in Bahrain?
Bahrain is very different to places where I have lived in the past. Bahrain is a desert island, surrounded by a shallow, warm sea. Barring some recent unrest, life is very peaceful and serene. It is a close-knit community and a melting pot of different cultures. Bahrain is an open, tolerant and welcoming society; a place without prejudice. It is the most politically liberal country in the Gulf with long-standing social openness and tolerance and a lot of respect for diversity. Expats and Bahraini nationals are well-integrated in both professional and social circles. Bahrain has a very strong, rich heritage and culture in the GCC. Unlike some of its neighbours, Bahrain has retained its authenticity. Bahrain offers very good value for money with its low living costs.
The views expressed here are solely those of the interviewee and do not necessarily reflect the views of the Gulf International Bank.
