Size matters for Shariah investments

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CIMB Islamic, headquartered in Kuala Lumpur, is the global Islamic banking and finance arm of CIMB Group, a leading universal banking franchise in the ASEAN region. The bank is present in eight out of ten ASEAN member countries, which makes it an interesting institution and financing partner to look at for investors eyeing the region.

Interviewee: Badlisyah Abdul Ghani, CEO CIMB Islamic Bank

Q: Could you please give an overview on the history and present state of your company and the role the bank plays in South East Asia?

A: CIMB Islamic is a universal bank doing banking across South East Asia. We started in Malaysia in 2002 as an Islamic investment banking franchise that was purely focused on sukuk arrangement and advisory, and from there we have expanded with consumer banking activities, both in retail and commercial, as well as with other corporate deals. We have about 320 branches in Malaysia. In Indonesia, we operate through a sub-brand called CIMB Niaga Syariah, which is an Islamic finance window under CIMB Niaga. We have more than 600 branches there, in which we serve our customers with universal banking services, investment banking, consumer banking, as well as corporate banking. In Singapore, we operate two branches as a window under our CIMB bank brand. At the moment, our offerings there are focused on wholesale banking, but we will launch consumer banking offerings next year. In Thailand, we are very much involved in wholesale banking, and there is a lot of advisory work to do. Consumer banking will not be among our offerings in Thailand for the time being as the market is not ready for it. So, actually, CIMB Islamic is the largest Islamic bank in the whole of Southeast Asia, if not the world, by number of branches. Our focus is to provide our 14 million customers with the best choice in the market. We offer the choice of doing Islamic financing and ensure that our customers who want an Islamic value proposition get it. Our balance sheet business started in 2006, at the same time when we started with consumer banking. We grew from RM15 million worth of financing to roughly about RM27 billion in five years, a growth rate that even our biggest rival is unable to match.

Q: What are your business relations to the Gulf Cooperation Council (GCC) countries?

A: We set up business in Bahrain in 2006, just before the financial crisis. Then the property bubble burst in Dubai, and the European sovereign crisis came, so we faced troubling circumstances across the board. When we established ourselves in the GCC, we started out by establishing relationships and doing strategic deals with our clients first, which eventually gave us the ability to enter closer into the market. We have a long-term view on the GCC in terms of our participation there, and we are committed to these countries. At this point of time, our activity in the GCC is purely wholesale banking and advisory. Having that said, we would support GCC corporates and investors who are looking at investing in Southeast Asia. Nobody knows the ASEAN region better than us because we are ASEAN’s leading investment bank. Therefore, if anyone wants to invest in ASEAN, I would encourage them to come to us.

Q: What are the prospects for investors in the ASEAN region in your view?

A: ASEAN as a whole has the fourth largest GDP in the world. This is reason enough for people to look at ASEAN. Since the ASEAN century is approaching, it is the right time for ASEAN to be seen as the next place to invest in, aside from China and India. And ASEAN is a more liberalised market among the majority of Asian countries. Just look at Malaysia, Indonesia, Singapore, and Thailand – these countries are very liberalised, and the investment climate in these countries is very sound. There are a lot of incentives and a lot of protection for investors in the market. Definitely these are the places for any company to come and look for opportunities. And CIMB will always want to play a role to facilitate deals for anyone from the GCC in any way we can. Some of the GCC banks have established a presence in both Malaysia and Singapore for that matter. We have three GCC banks in Malaysia, Kuwait Finance Bank, Al Rajhi, and Asian Finance Bank, who are looking to establish and raise sukuks in this market. Malaysia is the largest, deepest, and broadest sukuk market in the world. It’s only the right thing for anyone who wants to raise sukuks to come to this market.

Q: What is your advice for GCC companies and banks wanting set up business in ASEAN?

A: Naturally, if I want to go to the Middle East and raise funds, the best partner I would choose is a local bank, as they have a deeper penetration in the market. So, naturally, GCC corporates and banks looking at tapping the ASEAN market should look at the more established ASEAN institutions, institutions like CIMB, who know the market and have a wide network and distribution.

Q: How is your bank perceived in the GCC?

A: Some GCC banks seem to have the impression that banks like CIMB are very domestic. We are not. In fact, the bulk of the book-building processes we exercise comes from clients when we do deals with international banks. Therefore, we are working on getting their support to invest in ASEAN. Of course, we are not aggressively marketing ourselves as the lead arranger in the GCC because we are more focused on supporting them to invest in ASEAN rather than supporting them to raise funds for investments in the GCC. Since we are not aggressive in marketing ourselves, they do not come to us.

Q: In how far would you want to change this perception?

A: It is the right time for us to market ourselves as the sukuk arranger for anyone who wants to tap the ASEAN market as well as Asia in general. The only difference is that in the past, we have not supported this from a balance sheet perspective. Many of the corporates from the GCC seem to have this policy whereby they will only give mandates to people who have supported them before. If they want the best, CIMB Islamic is ready to talk. However, at this point of time, we don’t have a balance sheet business for the GCC because we don’t have a local bank there that has the power to support a deal. But if corporates want to come to this part of the world to invest, we will support them. If they want to raise funds for investments in the GCC or in the Middle East, I am more than willing and more than ready to facilitate this deal.

 

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Reading Time: 4 minutes

CIMB Islamic, headquartered in Kuala Lumpur, is the global Islamic banking and finance arm of CIMB Group, a leading universal banking franchise in the ASEAN region. The bank is present in eight out of ten ASEAN member countries, which makes it an interesting institution and financing partner to look at for investors eyeing the region.

Reading Time: 4 minutes

CIMB Islamic, headquartered in Kuala Lumpur, is the global Islamic banking and finance arm of CIMB Group, a leading universal banking franchise in the ASEAN region. The bank is present in eight out of ten ASEAN member countries, which makes it an interesting institution and financing partner to look at for investors eyeing the region.

Interviewee: Badlisyah Abdul Ghani, CEO CIMB Islamic Bank

Q: Could you please give an overview on the history and present state of your company and the role the bank plays in South East Asia?

A: CIMB Islamic is a universal bank doing banking across South East Asia. We started in Malaysia in 2002 as an Islamic investment banking franchise that was purely focused on sukuk arrangement and advisory, and from there we have expanded with consumer banking activities, both in retail and commercial, as well as with other corporate deals. We have about 320 branches in Malaysia. In Indonesia, we operate through a sub-brand called CIMB Niaga Syariah, which is an Islamic finance window under CIMB Niaga. We have more than 600 branches there, in which we serve our customers with universal banking services, investment banking, consumer banking, as well as corporate banking. In Singapore, we operate two branches as a window under our CIMB bank brand. At the moment, our offerings there are focused on wholesale banking, but we will launch consumer banking offerings next year. In Thailand, we are very much involved in wholesale banking, and there is a lot of advisory work to do. Consumer banking will not be among our offerings in Thailand for the time being as the market is not ready for it. So, actually, CIMB Islamic is the largest Islamic bank in the whole of Southeast Asia, if not the world, by number of branches. Our focus is to provide our 14 million customers with the best choice in the market. We offer the choice of doing Islamic financing and ensure that our customers who want an Islamic value proposition get it. Our balance sheet business started in 2006, at the same time when we started with consumer banking. We grew from RM15 million worth of financing to roughly about RM27 billion in five years, a growth rate that even our biggest rival is unable to match.

Q: What are your business relations to the Gulf Cooperation Council (GCC) countries?

A: We set up business in Bahrain in 2006, just before the financial crisis. Then the property bubble burst in Dubai, and the European sovereign crisis came, so we faced troubling circumstances across the board. When we established ourselves in the GCC, we started out by establishing relationships and doing strategic deals with our clients first, which eventually gave us the ability to enter closer into the market. We have a long-term view on the GCC in terms of our participation there, and we are committed to these countries. At this point of time, our activity in the GCC is purely wholesale banking and advisory. Having that said, we would support GCC corporates and investors who are looking at investing in Southeast Asia. Nobody knows the ASEAN region better than us because we are ASEAN’s leading investment bank. Therefore, if anyone wants to invest in ASEAN, I would encourage them to come to us.

Q: What are the prospects for investors in the ASEAN region in your view?

A: ASEAN as a whole has the fourth largest GDP in the world. This is reason enough for people to look at ASEAN. Since the ASEAN century is approaching, it is the right time for ASEAN to be seen as the next place to invest in, aside from China and India. And ASEAN is a more liberalised market among the majority of Asian countries. Just look at Malaysia, Indonesia, Singapore, and Thailand – these countries are very liberalised, and the investment climate in these countries is very sound. There are a lot of incentives and a lot of protection for investors in the market. Definitely these are the places for any company to come and look for opportunities. And CIMB will always want to play a role to facilitate deals for anyone from the GCC in any way we can. Some of the GCC banks have established a presence in both Malaysia and Singapore for that matter. We have three GCC banks in Malaysia, Kuwait Finance Bank, Al Rajhi, and Asian Finance Bank, who are looking to establish and raise sukuks in this market. Malaysia is the largest, deepest, and broadest sukuk market in the world. It’s only the right thing for anyone who wants to raise sukuks to come to this market.

Q: What is your advice for GCC companies and banks wanting set up business in ASEAN?

A: Naturally, if I want to go to the Middle East and raise funds, the best partner I would choose is a local bank, as they have a deeper penetration in the market. So, naturally, GCC corporates and banks looking at tapping the ASEAN market should look at the more established ASEAN institutions, institutions like CIMB, who know the market and have a wide network and distribution.

Q: How is your bank perceived in the GCC?

A: Some GCC banks seem to have the impression that banks like CIMB are very domestic. We are not. In fact, the bulk of the book-building processes we exercise comes from clients when we do deals with international banks. Therefore, we are working on getting their support to invest in ASEAN. Of course, we are not aggressively marketing ourselves as the lead arranger in the GCC because we are more focused on supporting them to invest in ASEAN rather than supporting them to raise funds for investments in the GCC. Since we are not aggressive in marketing ourselves, they do not come to us.

Q: In how far would you want to change this perception?

A: It is the right time for us to market ourselves as the sukuk arranger for anyone who wants to tap the ASEAN market as well as Asia in general. The only difference is that in the past, we have not supported this from a balance sheet perspective. Many of the corporates from the GCC seem to have this policy whereby they will only give mandates to people who have supported them before. If they want the best, CIMB Islamic is ready to talk. However, at this point of time, we don’t have a balance sheet business for the GCC because we don’t have a local bank there that has the power to support a deal. But if corporates want to come to this part of the world to invest, we will support them. If they want to raise funds for investments in the GCC or in the Middle East, I am more than willing and more than ready to facilitate this deal.

 

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