Potential abound

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Dr. Rak Vorrakitpokatorn
Dr. Rak Vorrakitpokatorn, Senior Executive Vice President of Islamic Bank of Thailand

The Islamic Bank of Thailand was founded in 2002 as the first bank in Thailand based on the Islamic principles of Shariah. Inside Investor talked to Senior Executive Vice President Dr. Rak Vorrakitpokatorn about business prospects in the predominantly Buddhist nation.

Q: What are the growth prospects beyond the more than 100 branches branches currently in existence, seeing that the bank faces no domestic competition?

A:  Islamic Bank of Thailand, or IBT, now has 101 branches operating throughout Thailand, evidence of our rapid growth. There are 8 million Muslims in Thailand who are attracted to the financial products we offer and currently have little other access to except for a few Shariah-compliant microfinance windows operated by the Government Savings Bank in the south. In addition, 40 per cent of our customers are non-Muslim and show interest in the alternative we offer to conventional banking.

Q: The IBT had a massive campaign in Bangkok this summer, painting the BTS Skytrain in their corporate colours. What was the outcome?

A: The campaign was untaken to create more brand awareness in non-Muslim customers to the alternative that Islamic banking offers. The joint venture concept of Islamic banking has been received well by major players in Thailand already. Among our list of customers are Thai Airways, PTT, Isara Group and Saha Farm, a large poultry producer.

Q: The Islamic Bank of Thailand was one of the seven state enterprises in the country shuffling senior management in 2012 . How will this affect direction of the company going forward? 

A: Our new president, which took office on November 16, 2012, has a background in retail banking. Being that the IBT is looking to expand its retail banking division, which currently contributes to 22 per cent of our operations, his experience will match wonderfully.

Q: What kinds of volumes in growth is the IBT looking at this year? 

A: The IBT enjoyed a 30 per cent growth rate in financial assets in the fiscal year 2010 to 2011. This then slowed down to 10 to 15 per cent this year, which is an expected slowdown. As noted, we have grown from 26 to 101 branches quickly. In fact, we expanded so fast that we need to restructure and restrategise our standard operation procedures and core banking system. This will come in two facets. The first is in organisation, namely of human capital and resources. The second is with IT, services and capital structure.

Q: Islamic banking is known for having a limited amount of products. How does IBT attract customers, especially the non-Muslim majority of Thailand?

A: We try to cook our food to our customers’ tastes. We play to the needs of our customers, such as SMEs, which benefit from our project-financing products, created through Musharakah, or profit- and loss-sharing. We also offer Shariah-compliant overdraft and factoring services. We aim to make our offerings mixed by conducting market comparisons.

Q: Why, in general, should a 96 per cent Buddhist nation actually embrace aspects of Shariah banking? Wouldn’t it make more sense to launch a bank based on Buddhist ethical principles?

A: The government is currently in the initial stages of drafting a Buddhist bank, but this is only at the feasibility stage. There are issues with corruption that have to be considered. However, there is a market for such a bank being that some of the larger Buddhist temples in Thailand sit on savings worth up to 10 billion baht. With regards to Shariah-compliant banking, Buddhists are very open-minded. Regardless of their origin, the joint venture concept of Islamic finance is already familiar to many Buddhists who find mutual funds quite appealing. Moreover, Islamic finance is a clear-cut service. If you want to buy a house, we buy it for you and sell it back to you at a fixed price, for example. There are no fluctuations in the market that you have to worry about, as seen in conventional banking.

Q: What happened to the plans to issue the first baht-dominated sukuk earlier this year?

A: There were legal issues and we are waiting for it to be endorsed by parliament. However, we are expecting to issue Thailand’s first sukuk during the second quarter of 2013, which will be worth $5 billion baht. The IBT currently has an AA rating with Fitch and an AA rating with Thai Rating and Information Services, or TRIS.

Q: The globalisation of Islamic banks is fundamental to establishing standardisation. How is the IBT planning integration into the world Islamic finance market?

A: We are looking towards the formation of the ASEAN Economic Community. Fifty per cent of ASEAN’s 600-million-person population is Muslim. This will provide a large customer base for us to access once the community comes into existence. For standardisation, we use a combination of concepts from Malaysia and Pakistan.

Q: Concerning globalisation once again, what has growth in financing been like between Thailand and the GCC in Islamic finance?

A: There has been none of yet. Our first sukuk is being aimed at the domestic market, but may attract up to 10 to 20 per cent foreign direct investment. We plan to reshuffle our product for the second issuance.

Q: Finally, in your opinion, is Islamic finance a viable alternative to conventional banking?

A: It would make a good supplement. Islamic banking can go hand-in-hand with conventional standards. The concept of profit-sharing is attractive to many people, no matter their background. We act as a sure-thing port of service. There are no uncertainties or dramatic fluctuations in Islamic finance.

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Reading Time: 4 minutes

Dr. Rak Vorrakitpokatorn, Senior Executive Vice President of Islamic Bank of Thailand

The Islamic Bank of Thailand was founded in 2002 as the first bank in Thailand based on the Islamic principles of Shariah. Inside Investor talked to Senior Executive Vice President Dr. Rak Vorrakitpokatorn about business prospects in the predominantly Buddhist nation.

Reading Time: 4 minutes

Dr. Rak Vorrakitpokatorn
Dr. Rak Vorrakitpokatorn, Senior Executive Vice President of Islamic Bank of Thailand

The Islamic Bank of Thailand was founded in 2002 as the first bank in Thailand based on the Islamic principles of Shariah. Inside Investor talked to Senior Executive Vice President Dr. Rak Vorrakitpokatorn about business prospects in the predominantly Buddhist nation.

Q: What are the growth prospects beyond the more than 100 branches branches currently in existence, seeing that the bank faces no domestic competition?

A:  Islamic Bank of Thailand, or IBT, now has 101 branches operating throughout Thailand, evidence of our rapid growth. There are 8 million Muslims in Thailand who are attracted to the financial products we offer and currently have little other access to except for a few Shariah-compliant microfinance windows operated by the Government Savings Bank in the south. In addition, 40 per cent of our customers are non-Muslim and show interest in the alternative we offer to conventional banking.

Q: The IBT had a massive campaign in Bangkok this summer, painting the BTS Skytrain in their corporate colours. What was the outcome?

A: The campaign was untaken to create more brand awareness in non-Muslim customers to the alternative that Islamic banking offers. The joint venture concept of Islamic banking has been received well by major players in Thailand already. Among our list of customers are Thai Airways, PTT, Isara Group and Saha Farm, a large poultry producer.

Q: The Islamic Bank of Thailand was one of the seven state enterprises in the country shuffling senior management in 2012 . How will this affect direction of the company going forward? 

A: Our new president, which took office on November 16, 2012, has a background in retail banking. Being that the IBT is looking to expand its retail banking division, which currently contributes to 22 per cent of our operations, his experience will match wonderfully.

Q: What kinds of volumes in growth is the IBT looking at this year? 

A: The IBT enjoyed a 30 per cent growth rate in financial assets in the fiscal year 2010 to 2011. This then slowed down to 10 to 15 per cent this year, which is an expected slowdown. As noted, we have grown from 26 to 101 branches quickly. In fact, we expanded so fast that we need to restructure and restrategise our standard operation procedures and core banking system. This will come in two facets. The first is in organisation, namely of human capital and resources. The second is with IT, services and capital structure.

Q: Islamic banking is known for having a limited amount of products. How does IBT attract customers, especially the non-Muslim majority of Thailand?

A: We try to cook our food to our customers’ tastes. We play to the needs of our customers, such as SMEs, which benefit from our project-financing products, created through Musharakah, or profit- and loss-sharing. We also offer Shariah-compliant overdraft and factoring services. We aim to make our offerings mixed by conducting market comparisons.

Q: Why, in general, should a 96 per cent Buddhist nation actually embrace aspects of Shariah banking? Wouldn’t it make more sense to launch a bank based on Buddhist ethical principles?

A: The government is currently in the initial stages of drafting a Buddhist bank, but this is only at the feasibility stage. There are issues with corruption that have to be considered. However, there is a market for such a bank being that some of the larger Buddhist temples in Thailand sit on savings worth up to 10 billion baht. With regards to Shariah-compliant banking, Buddhists are very open-minded. Regardless of their origin, the joint venture concept of Islamic finance is already familiar to many Buddhists who find mutual funds quite appealing. Moreover, Islamic finance is a clear-cut service. If you want to buy a house, we buy it for you and sell it back to you at a fixed price, for example. There are no fluctuations in the market that you have to worry about, as seen in conventional banking.

Q: What happened to the plans to issue the first baht-dominated sukuk earlier this year?

A: There were legal issues and we are waiting for it to be endorsed by parliament. However, we are expecting to issue Thailand’s first sukuk during the second quarter of 2013, which will be worth $5 billion baht. The IBT currently has an AA rating with Fitch and an AA rating with Thai Rating and Information Services, or TRIS.

Q: The globalisation of Islamic banks is fundamental to establishing standardisation. How is the IBT planning integration into the world Islamic finance market?

A: We are looking towards the formation of the ASEAN Economic Community. Fifty per cent of ASEAN’s 600-million-person population is Muslim. This will provide a large customer base for us to access once the community comes into existence. For standardisation, we use a combination of concepts from Malaysia and Pakistan.

Q: Concerning globalisation once again, what has growth in financing been like between Thailand and the GCC in Islamic finance?

A: There has been none of yet. Our first sukuk is being aimed at the domestic market, but may attract up to 10 to 20 per cent foreign direct investment. We plan to reshuffle our product for the second issuance.

Q: Finally, in your opinion, is Islamic finance a viable alternative to conventional banking?

A: It would make a good supplement. Islamic banking can go hand-in-hand with conventional standards. The concept of profit-sharing is attractive to many people, no matter their background. We act as a sure-thing port of service. There are no uncertainties or dramatic fluctuations in Islamic finance.

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