Banking on a unique Islamic selling proposition

Reading Time: 4 minutes
Azrulnizam Abd Aziz, Chief Executive Officer of Al Rajhi Banking & Investment Corporation (Malaysia) Bhd

Al Rajhi Bank is the largest Islamic bank in the world, headquartered in Saudi Arabia. The group ventured into the international market by setting up its first overseas branches in Malaysia, where it today operates 23 branches nationwide. Inside Investor sat down with Azrulnizam Abd Aziz, Chief Executive Officer of Al Rajhi Banking & Investment Corporation (Malaysia) Bhd, to discuss the company’s success and its aspirations.

Q: How would you position Al Rajhi Bank among its competitors in Malaysia?

A: The bank is still young here, we started operations only six years ago. We grew very rapidly, and we aspire to be in the top ten in terms of assets in the next 18 to 24 months in Malaysia. We want to create values for the people in Malaysia. Especially the Muslim people here are associated with Al Rajhi Bank because of its strong Islamic background. We have a very good brand name and the number of customers is increasing on a daily basis. As of now, we have 160,000 customers and 23 branches in Malaysia. Our business model is to be a universal Islamic bank. In Saudi, the bank is predominantly in retail banking. But in Malaysia, as it is a very sophisticated market, we cover retail, small and medium businesses, commercial, and corporate banking segment as well as treasury, wealth management, sukuk, and so on. We have a full suite of products, but due to our stringent Shariah standards, we are somehow limited compared to others, because we only offer products which we are comfortable with and that are acceptable both in Malaysia and the GCC. This includes fundraising on the capital markets.

Q: What is the ratio between retail and corporate banking at Al Rajhi in Malaysia?

A: It’s about 50:50. We have to have both engines running in Malaysia, retail and corporate. If you break down the 50 per cent on the corporate side, then we do about 60 per cent normal corporate financing. The balance is treasury and capital market operations.

Q: Do you issue any sukuks?

A: We have recently established an investment banking team to build a sukuk business. We are very pleased with our early wins with two sovereign entities. Still we have a long way to go as the Malaysian debt capital market is dominated by large local banks. We are trying to create our own space by leveraging our parent’s balance sheet.

Q: What are the new areas that you might be looking at?

A: We are talking to most of our clients about new sukuk structures, which we are coming up with, and the appetite is very big, particularly from the market in Saudi Arabia. But we also see demand from Korea and Japan, and recently from African markets like Ghana where they are looking at sukuks as an alternative instrument to raise financing.

Q: You mentioned earlier that you want to grow with Al Rajhi among the top ten in Malaysia. Did you mean the Islamic banking market?

A: Our aspiration is very simple. We want to be the preferred Islamic solutions provider in Malaysia. There are probably 20 Islamic banks in Malaysia, and we want to be in the top ten in terms of assets, which is viable as we continuously, expand our customer base and increase our deposits.

Q: How important is the Malaysian market for Al Rajhi?

A: Absolutely important. If we would look at regional growth in Southeast Asia, Malaysia would be the hub. Actually, we will continue to expand in the region, but I cannot go into details now. In terms of international relations, there is an exchange between Saudi Arabia and Malaysia, and our role is to open the gates.

Q: However, Al Rajhi has been a little quiet lately here. Will this change?

A: Yes, but my plan is now to increase the visibility of the bank and the awareness for its brand name on the Malaysian market. A lot of customers want to be associated with Al Rajhi, so the opportunity is huge. We want to grow the business in this country as much as we can. Currently, we have RM6.4 billion in assets, and 15 to 20 per cent growth would be an acceptable level and a benchmark for us. We have the momentum for that.

Q: Al Rajhi is a little more Islamic than others. Is this a challenge for the market here?

A: We see it as an advantage. People know that our Shariah standards are the highest in the market, and we use that as our unique selling proposition. We are very fortunate to have our Shariah board shaping our business and communicate this to our customers.

Q: What is your stance on standardisation of Islamic banking products?

A: I’ve been in the Islamic banking industry for the past 12 years and have been asked this particular question many times. My view on that is quite simple: Yes, standardisation is necessary. If you look at conventional banking, there is much less confusion than in Islamic banking. Islamic banking is in evolution, and it is important to move towards standardisation as much as possible to ensure that customers are not confused, for example in the case of housing loans, that come in different forms and products in Islamic banking. I think by 80 to 85 per cent we are close to standardisation, and the more we reach the goal, the more it makes life for our customers and ourselves easier.

Q: In Malaysia, the Islamic banking market is much more transparent and liberalised than in other markets. Is this the reason for the tremendous growth of the sector?

A: It’s an obvious answer. Malaysia has been very dynamic to promote Islamic banking in the past, for example by simply calling it interest-free banking. Tax issues and classification are clear, the framework is robust, and people understand the system. So the answer to your question is yes. We have all the ingredients to be a global hub for Islamic banking in Malaysia.

Q: How will Al Rajhi be part of this?

A: When we were developing our strategy, we were looking at what the Malaysian government and the Malaysia International Islamic Financial Center wanted to do with the sector. Our strategy will cover and engage in what Malaysia wants to achieve. This is a perfect aspiration for us.

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Reading Time: 4 minutes

Azrulnizam Abd Aziz, Chief Executive Officer of Al Rajhi Banking & Investment Corporation (Malaysia) Bhd

Al Rajhi Bank is the largest Islamic bank in the world, headquartered in Saudi Arabia. The group ventured into the international market by setting up its first overseas branches in Malaysia, where it today operates 23 branches nationwide. Inside Investor sat down with Azrulnizam Abd Aziz, Chief Executive Officer of Al Rajhi Banking & Investment Corporation (Malaysia) Bhd, to discuss the company’s success and its aspirations.

Reading Time: 4 minutes

Azrulnizam Abd Aziz, Chief Executive Officer of Al Rajhi Banking & Investment Corporation (Malaysia) Bhd

Al Rajhi Bank is the largest Islamic bank in the world, headquartered in Saudi Arabia. The group ventured into the international market by setting up its first overseas branches in Malaysia, where it today operates 23 branches nationwide. Inside Investor sat down with Azrulnizam Abd Aziz, Chief Executive Officer of Al Rajhi Banking & Investment Corporation (Malaysia) Bhd, to discuss the company’s success and its aspirations.

Q: How would you position Al Rajhi Bank among its competitors in Malaysia?

A: The bank is still young here, we started operations only six years ago. We grew very rapidly, and we aspire to be in the top ten in terms of assets in the next 18 to 24 months in Malaysia. We want to create values for the people in Malaysia. Especially the Muslim people here are associated with Al Rajhi Bank because of its strong Islamic background. We have a very good brand name and the number of customers is increasing on a daily basis. As of now, we have 160,000 customers and 23 branches in Malaysia. Our business model is to be a universal Islamic bank. In Saudi, the bank is predominantly in retail banking. But in Malaysia, as it is a very sophisticated market, we cover retail, small and medium businesses, commercial, and corporate banking segment as well as treasury, wealth management, sukuk, and so on. We have a full suite of products, but due to our stringent Shariah standards, we are somehow limited compared to others, because we only offer products which we are comfortable with and that are acceptable both in Malaysia and the GCC. This includes fundraising on the capital markets.

Q: What is the ratio between retail and corporate banking at Al Rajhi in Malaysia?

A: It’s about 50:50. We have to have both engines running in Malaysia, retail and corporate. If you break down the 50 per cent on the corporate side, then we do about 60 per cent normal corporate financing. The balance is treasury and capital market operations.

Q: Do you issue any sukuks?

A: We have recently established an investment banking team to build a sukuk business. We are very pleased with our early wins with two sovereign entities. Still we have a long way to go as the Malaysian debt capital market is dominated by large local banks. We are trying to create our own space by leveraging our parent’s balance sheet.

Q: What are the new areas that you might be looking at?

A: We are talking to most of our clients about new sukuk structures, which we are coming up with, and the appetite is very big, particularly from the market in Saudi Arabia. But we also see demand from Korea and Japan, and recently from African markets like Ghana where they are looking at sukuks as an alternative instrument to raise financing.

Q: You mentioned earlier that you want to grow with Al Rajhi among the top ten in Malaysia. Did you mean the Islamic banking market?

A: Our aspiration is very simple. We want to be the preferred Islamic solutions provider in Malaysia. There are probably 20 Islamic banks in Malaysia, and we want to be in the top ten in terms of assets, which is viable as we continuously, expand our customer base and increase our deposits.

Q: How important is the Malaysian market for Al Rajhi?

A: Absolutely important. If we would look at regional growth in Southeast Asia, Malaysia would be the hub. Actually, we will continue to expand in the region, but I cannot go into details now. In terms of international relations, there is an exchange between Saudi Arabia and Malaysia, and our role is to open the gates.

Q: However, Al Rajhi has been a little quiet lately here. Will this change?

A: Yes, but my plan is now to increase the visibility of the bank and the awareness for its brand name on the Malaysian market. A lot of customers want to be associated with Al Rajhi, so the opportunity is huge. We want to grow the business in this country as much as we can. Currently, we have RM6.4 billion in assets, and 15 to 20 per cent growth would be an acceptable level and a benchmark for us. We have the momentum for that.

Q: Al Rajhi is a little more Islamic than others. Is this a challenge for the market here?

A: We see it as an advantage. People know that our Shariah standards are the highest in the market, and we use that as our unique selling proposition. We are very fortunate to have our Shariah board shaping our business and communicate this to our customers.

Q: What is your stance on standardisation of Islamic banking products?

A: I’ve been in the Islamic banking industry for the past 12 years and have been asked this particular question many times. My view on that is quite simple: Yes, standardisation is necessary. If you look at conventional banking, there is much less confusion than in Islamic banking. Islamic banking is in evolution, and it is important to move towards standardisation as much as possible to ensure that customers are not confused, for example in the case of housing loans, that come in different forms and products in Islamic banking. I think by 80 to 85 per cent we are close to standardisation, and the more we reach the goal, the more it makes life for our customers and ourselves easier.

Q: In Malaysia, the Islamic banking market is much more transparent and liberalised than in other markets. Is this the reason for the tremendous growth of the sector?

A: It’s an obvious answer. Malaysia has been very dynamic to promote Islamic banking in the past, for example by simply calling it interest-free banking. Tax issues and classification are clear, the framework is robust, and people understand the system. So the answer to your question is yes. We have all the ingredients to be a global hub for Islamic banking in Malaysia.

Q: How will Al Rajhi be part of this?

A: When we were developing our strategy, we were looking at what the Malaysian government and the Malaysia International Islamic Financial Center wanted to do with the sector. Our strategy will cover and engage in what Malaysia wants to achieve. This is a perfect aspiration for us.

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