Interview: Bassel Gamal
What options are available to Islamic banks in Qatar that want to finance large projects?
BASSEL GAMAL: There are several options available to Islamic banks to finance large projects, particularly infrastructure projects, depending on the type and size of the financing. For both local and regional projects, syndication is the most common option used for big transactions, where a larger number of banks participate to finance the project. For smaller efforts involving fewer banks, club deals are commonly used. For large, long-term projects the option of issuing corporate sukuk on debt capital markets has gained traction in recent years. Finally, if the deal involves international contractors, the options of involving export credit agencies or the International Finance Corporation are available.
With increasing competition regionally, how can Qatar improve its position in Islamic finance?
GAMAL: The growth of Islamic banking in Qatar has been strong and going forward the prospects for the sector are healthy. According to the latest available figures, Islamic assets account for more than 25% of the Qatari banking sector’s total assets. We are experiencing growing demand for Islamic finance throughout the region. The regulatory authorities in Qatar are keen to provide a stable and clear business environment, and the country is well positioned in terms of expertise in sharia-compliant products and risk management structures, so it can play a key role in the future of Islamic finance. Through significant investment in education, as part of the Qatar National Vision 2030, the country’s universities and faculties are building the next generation of leaders and managers, who will have deep knowledge and specialisation in Islamic finance. As Qatari investors, institutions and banks continue to strengthen capital and trade flows with international counterparties, the role of the country as a key centre for Islamic finance will continue to grow.
How are asset-backed Islamic financial institutions (IFIs) diversifying away from real estate?
GAMAL: Islamic banks have already begun to diversify away from real estate and into the growing areas of infrastructure projects, services and consumer financing. Other sectors that have also been growing strongly include contracting and industry, where IFIs continue to gain additional market share.
Given the lack of developed money markets for IFIs, to what extent is liquidity management an issue for sharia-compliant banks in Qatar?
GAMAL: In general, there is ample liquidity in GCC markets and Qatar is not an exception. Sukuk issuances are more frequent, boosting liquidity and helping to build a curve that will support a future secondary market pricing and trading. The central bank has been issuing Islamic treasury bills to support liquidity and actions are under way to allow the trading of Islamic treasury bills at the Qatar Stock Exchange. We also believe the introduction of sharia-compliant repos and reversal repos is another instrument to further support liquidity in the future.
What progress has been made in developing new products to help local Islamic banks better compete with their conventional counterparts?
GAMAL: The introduction and the adoption of sharia-compliant International Swaps and Derivatives Association documentation has been a great success for local IFIs. Islamic banks can now engage rate swaps, commodity hedging and many other new sharia-compliant products. The banks have also introduced customer segmentation and are targeting segmented customers with sharia-compliant value propositions and product suites. In this context, Islamic banks are competing for and acquiring not only sharia-compliance-sensitive customers. They compete on equal basis for customers seeking value-added services by offering competitive products.
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