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Dubai Bank’s Makkawi is still undecided on whether to adopt a dual or wholly Shari’a banking system. As with everything in the UAE’s burgeoning business world, Dubai Bank started very quickly. It launched in September 2002 as a retail and corporate banking entity, but the man at the helm, Ziad Makkawi is now looking to lead the company into unchartered territory — into the foreign world of Islamic banking.
“Maybe more time should have been spent on thinking about the bank’s strategy than was initially done [at the time of the launch], but I think speed to market has always been a Dubai trait,” Makkawi says candidly, admitting he is uncertain in which direction to take the bank. He could choose to adopt a dual system where Islamic and conventional banking methods operate in parallel, or take on a single banking system that fully accords to Shari’a injunctions — the Lebanese Dubai Bank CEO is still deciding.
“How we tackle the market — whether we fully convert to an Islamic banking institution or set up individual companies to deal with the opportunities available is something that has been studied and the board of directors and shareholders are currently deliberating it. No final decision has been taken on that but this (Islamic banking) is definitely one area we want to be very active in,” he explains, suggesting that a clearer plan for the future should have been put in place before he joined the bank 18 months ago.
“One of the things that I was commissioned to do when I joined the bank in February 2004 was to review the bank’s strategy and answer some of those questions [regarding conversion] but some of these questions could have been asked earlier,” he admits. “Actually I think initially, even at the very inception of Dubai Bank, there was talk about defining the strategy and whether it should be Islamic or not, retail focused or corporate focused and so on and so forth,” he adds.
Islamic banking is more or less the same as conventional banking except that it operates in accordance with the Islamic rules on transactions. Its basic principle is the sharing of profit and loss and the prohibition of interest. Among the common Islamic concepts used in this form of banking are profit sharing, safekeeping, joint venture, cost plus and leasing.
With a vibrant Islamic banking industry already present in the emirate, Dubai Bank’s conversion could play a meaningful role in the emirate’s future economic and social development. But the UAE’s Central Bank will be keen to see Dubai Bank build competent institutions and develop its supporting infrastructure before it gives Makkawi the green light to make any changes.
“Conversion to Islamic banking is probably the easiest option and once we have decided on what strategy we want to pursue we will engage the Central Bank in discussions,” he explains. “We have already started talking to them about the different scenarios but where it becomes complicated here in the UAE is if you start to require additional licenses — they require Central Bank license approvals and they can sometimes delay you,” he adds.
With Islamic finance having gained wide acceptance as a form of financial intermediation in the Middle East it has also taken on a new dimension to meet the changing requirements of consumers and businesses. As such, Makkawi and Dubai Bank are keen to alter their respective strategies in a bid to tap into this market.
“I’ve spent quite a bit of time looking at a move into Islamic banking and we’ve looked at the various businesses — retail, corporate and investment and asset management — and tried to identify the opportunities available on the Islamic banking side. We are convinced that there are tremendous business opportunities in most if not all of these areas,” he says.
“Most institutional investors and corporate banking clients tend not to be religiously motivated and are more interested in the services and the pricing they get. But in the retail space you do have a sector of the client base that is religiously or ideologically motivated,” he adds.
As the Islamic banks get more and more competitive, the world’s 1.2 billion Muslims will naturally shift towards Shari’a compliant lenders — a move that could spell disaster for conventional institutions. Proof of this is the fact that many western banks have started offering Islamic services.
Muslims now make up one fifth of the world’s population, but Islamic financial institutions have failed to adequately tap into this potential market, which has traditionally been serviced by conventional financial institutions. Furthermore, with the global financial system now operating in an era of transformation, even non-Muslim nations are expected to test different financial systems such as Islamic banking in the future.
“There are Muslims that live all over the world — 6 million in France alone, so clearly that’s an untapped market. But this year we’ve also seen the establishment of the first Islamic bank in Britain, which has received FSA approval, there’s another one — the European Islamic Investment Bank — which will see the light of day in the next few months,” explains Makkawi. “Islamic banking is a high-growth industry, it’s here to stay and it’s not limited geographically. I’m speaking about places of course like Malaysia, Indonesia, India, Singapore, Pakistan, Iran — very untapped markets,” he adds.
Despite the competitive nature of the UAE’s banking sector — there are 48 banks currently in the country with more set to follow — Dubai Bank’s financial results for 2004 showed an earlier than expected break even. Last year’s strong growth placed it well ahead of initial plans to break even by 2006.
“Our operational revenues reached US$30.2 million, an increase of 156% compared to last year. The bank also generated a profit of US$1.1 million compared to a loss of US$9.8 million last year,” Makawi says, glowing with pride.
“We have attained break even within a short period of two years, and the excellent results speak for themselves. To achieve this milestone, we faced different challenges and increasing competition within Dubai. As the city grows into a global player, Dubai Bank will continue its ongoing success through increasing competency levels and providing services at par with international standards,” he adds.
Makkawi puts the bank’s impressive growth down to the good choices made in terms of the businesses it started off with as well as its popular credit cards. He also claims that the bank’s cautious yet uncompromising tactics have paid dividends.
“On the retail side, the credit card business really took off — we have 50,000 cards issued and on the gold card we are the fastest growing. On the corporate banking side, we started developing our business in a prudent yet aggressive manner so we built up quite a nice portfolio of corporate banking business, which is interest rate based or fee based. We were able to grow with the market and achieve better market penetration than was originally anticipated,” he says.
In terms of Makkawi’s vision for the future, he wants to promote the emirate as the region’s number one financial centre by making Dubai Bank a monetary behemoth. But to do that Makkawi realises that first of all he must find a gap in the Islamic financial market and cement the bank’s position there.
“I want us to carve out a niche for ourselves ... occupy a hill and be able to defend it,” he proclaims. “Then our aim is to become a financial powerhouse that champions Dubai’s role as a financial centre. I see our mission as one to grow the bank to a size and importance that will put Dubai on the map as far as financial services are concerned,” he adds.
This may seem like an enormous mountain to climb for a bank which was set up just three short years ago. However, with backers like real estate giant Emaar Properties and the bank’s high-profile chairman (Sheikh Hamdan Bin Mohammed Al Maktoum — the son of Dubai’s crown prince Sheikh Mohammed Bin Rashid Al Maktoum) such ambitions do not seem beyond reach.
“It’s a tall order. We’re one of the smallest banks, we’re definitely the youngest bank and we’re dealing with a highly competitive market. Because of who owns us — today Emaar, tomorrow it may be Emaar and others, and who our chairman is, we have to carry the flag and we have to make sure what we do reflects Dubai and what Dubai stands for,” states Makkawi. “I would say that whether it’s Emaar, Dubai Bank, Emirates Airline, all of them have a brand vocation to make sure Dubai is successful at what it does and positions itself as a global leader. Emirates Airline is a great example and we want to be that successful on the financial side,” he adds.
In order to emulate the achievements of the likes of Emirates and fund his grand expansion plans, Makkawi claims Dubai Bank is seriously considering floating on the emirate’s financial market. The move is expected to be approved by the bank’s shareholders later this year.
“[Going public] is definitely something we are contemplating,” he says. “It obviously has to go back to the shareholders and the Board of Directors in terms of what is the best timing. There’s no doubt that somewhere down the road, and probably not too far down the road, Dubai will ... end up opening up its shareholding to a broader public audience,” he adds.
Rumours have been rife that Dubai Holding, the emirate’s government owned investment vehicle would buy part or all of Dubai Bank. However, Makkawi is quick to quash those stories.
“The media has repeatedly reported interest by Dubai Holding in the bank. I think the story behind all of this is that Dubai Bank was established to be an important bank in the UAE,” Makkawi explains. “Within that context, various scenarios were floated around — IPOs, Islamic conversion, and Dubai Holding. Rather than commenting on a specific transaction, Dubai Bank must become one of the leading banks in the UAE because of what the bank stands for,” he adds.
The fact that the bank is fully owned by Emaar Properties, which is in turn partially owned by the Dubai government, any sale would have to be approved by the state.
“This is absolutely a private company, although being 100% owned by Emaar and Emaar itself having a 30% ownership by the government, one could argue, that’s where you get some blurred lines,” affirms Makkawi. “But this is absolutely a private entity and our flotation is a private one. Ultimately the one theme is that Dubai Bank needs to grow to become one of leading banks in Dubai and the UAE and needs to carry Dubai’s name to the region and maybe the larger region,” he adds.
Makkawi certainly has the credentials to spearhead the bank and the emirate’s financial growth. He started his career on Wall Street with JP Morgan. But after a spell at Elf Aquitaine structuring energy related products, he moved back to Beirut in the mid-1990s. It was here that he helped to established two banks; Lebanon Invest and Middle East Capital Group.
Before joining Dubai Bank as CEO in February 2004, he acted as executive managing director of Shuaa Capital, where he helped build up their financial services business. With all of this experience, the importance of Makkawi’s role is not lost on him.
“A bank is a very powerful piece of equipment. It gives you antennae into really very deep roots in the economy and community, and it gives you visibility into what’s growing and what’s not,” he says. “It’s a very exciting time to be a banker in this part of the world, which is seeing truly historical change in terms of the scale of the growth and also qualitative transformation — I’m having a good time,” he adds.
How long the good times will last is another question entirely. Makkawi admits that perhaps the markets in Dubai “are getting ahead of themselves”, but believes that there is still plenty of room for additional growth within the market.
“I’ve witnessed big market crashes but I don’t expect this to happen here because of the liquidity we see here in the market and there is growth left in the companies,” he explains.
“Some of the smaller retail clients may not know what they are getting into and that’s an area of concern but in general if you look at the size of the credit on a per capita basis relative to some of the other GCC countries and some more developed markets there is still room for growth. I’m not concerned about it in this type of high-growth market.”
Despite the fact that Dubai is no longer an oil economy, Makkawi believes that the petro-dollars are still having an influence, especially since oil prices are still sky-high. At the time Arabian Business went to press oil prices were hovering around the US$60 per barrel mark.
“As long as you have high oil prices that will underpin the whole economy,” predicts Makkawi. “Over the next five years, GCC economies are worth somewhere in the region of US$1.5 trillion. That’s a liquidity tsunami and will not be easily absorbed by the GCC economies.
“The question is how long this boom will last — that’s the US$64,000 question,” he adds.
Posted by Informed Realist, Dubai, UAE on 27 July 2009 at 19:11 UAE time
I don't think I have ever heard Al Fahim described as a role model for the world. You might want to educate yourself a little!
Posted by temur, birmingham, United Kingdom on 17 June 2009 at 15:12 UAE time
dr sulaiyman is a role model for all the world not only muslims his vision will go far, lets just hope we get some more new big signings.
Posted by sherry, shenzhen, China on 16 May 2009 at 20:20 UAE time
Best of luck for everything!
Posted by Kawthar Saeed, Dubai, UAE on 5 January 2009 at 15:47 UAE time
Abdullatif Al Mulla is indeed a great and superb leader! I have worked with him closely in TECOM and learnt from him many good skills of leadership which I am using them in my current role. I wish him all the best in his career and may God grant him success all the time. Abdullatif, as always, you are a great leader for us!
Posted by Layla Al-Ansari, London, UK on 27 October 2008 at 16:50 UAE time
The top 100 CEO's list is highly impressive covering the biggest names from all over the gulf. However, whoever has compiled the list has definitly forgotten some notable movers and shakers in the past decade.
Dr. Abdallah AlDabbagh the CEO of Ma'aden the Saudi Arabian Minning Company has spearheaded the establishment of an entire new industry sector in Saudi Arabia. Not only is this sector viable with it's ambitious projects such as gold, alumina and phosphate projects, it is more importantly sustainable.
I am sure Dr Al-Dabbagh was not the only CEO overlooked in your report. In your next top 100 CEO's report, I suggest you undergo in-depth analysis of the gulf market and the massive changes that REALLY taking place and changing the future.
Posted by Steven on 18 September 2008 at 00:46 UAE time
Mr Al Hashimi is a fine role model for all young people in the world today, I hope that someone of his calibre and experience could help football teams like newcastle united to reach their full potential, the fans from the north-east are the kindest and best supporters in the Uk, and I imagine the people of newcastle would welcome him
Posted by Mohamade Iqbal Oojageer, Port-Louis, Mauritius on 3 September 2008 at 14:14 UAE time
Dr Sulaiman
Congratulations to you as the new big boss of Manchester City. With your massive investments, you will prove to the world, Insha Allah, your vision is gold and City can become the biggest club in the world and new English reference for quality football. I am a seasoned Sports Journalist and I can foresee success and positive revolution in British sports, especially soccer.
Posted by Biniraj, Sharjah, UAE on 29 July 2008 at 12:27 UAE time
It was indeed right decision launching of Air Arabia. I described Air Arabia as REAL AIRLINE. .. i noticed one thing that, they are on time, they are on line, they are on right price, that is what we need.
I am proud to say as a Air Arabian traveller, and I salue Mr. Adel Ali for his visions.
Posted by Ataur Rahman ,Business Development Manager, Dubai, UAE on 10 July 2008 at 20:39 UAE time
An analysis of the the top 100 in GCC reveals a shocking statistic too..63% of them are from UAE, 14% Saudi, 13%Kuwait, 6% Qatar, 4% Bahrain.
More shocking to me is that in Energy sector only there are 4%..in construction 4% Media & Marketing, 4% Politics & Economic 4% Banking & Finance 20% Real estate 23%
Why inspite of all the boom in petrol price there are just 4% of them belongs to this sector. I demand an explanation.
Posted by john, New York, US on 25 May 2008 at 16:48 UAE time
Dubai's real estate watchdog on Sunday launched its own magazine in an effort to address investor concerns over a lack of transparency in the market.
Posted by Mr George Osei, accra, Ghana on 11 May 2008 at 17:29 UAE time
Dear Friend,
My name is Mr. George Osei,I work with a Bank as a manager, in one of the commercial banks in Accra-Ghana west Africa. I have packaged a transaction that will be of mutual benefit to us. As the branch manager of the Bank Ghana, it is my duty to send a financial report to my head office in the capital city, Accra, at the end of each financial year.Following the release of the second quarter financial report, ending June 2007, I discovered that my branch made a substantial profit which accrued from the account of the Inland Revenue Service (IRS).
This was not detected by the internal auditors from my head office. I have diverted the funds into what the bank call Escrow Call Account with no beneficiary. Meanwhile as you know I can not be directly connected to this money for obvious reasons. So my contacting you is for you to assist me receive this fund in your country which I know is possible if you liaise properly with me and get a consideration share of the total funds as your benefit.
The transfer would be a Bank-to-Bank transaction. All I need from you is to stand claim as the original depositor of this fund. I will compute your particulars as the person who made the deposit in my branch into our computer data base, so that my head office will immediately order the transfer to your designated bank Account. Thanks for your understanding and co-operation. Please you can indicate your interest by sending me a return mail. While I implore you to maintain the absolute secrecy and confidentiality required in this transaction I am waiting for your positive response.
Yours truly,
Mr.George Osei
Show all comments
Posted by stuart mayhead, Abu Dhabi, UAE on 21 April 2008 at 09:21 UAE time
Hi Len if you visit www.artinthecity.com you will find and Art Map of Abu Dhabi, Dubai and Sharjah which shows all the local galleries and has a calendar of events noting all the exhibitions. If you sign up for them you will receive fortnightly reminders.
Posted by len on 20 April 2008 at 14:15 UAE time
I'm looking for modern art galleries in your country. Can you help me with a list?
Editor's Reply Kindly visit www.timeoutdubai.com for a full list of art galleries in Dubai, or www.timeoutabudhabi.com for a full list in the capital.
Posted by Nabil Alwakidi, jeddah, KSA on 13 April 2008 at 10:24 UAE time
Dear Abdulkareem,
Perfect person on the right place, very difficult to find some one like you. this comment will show you how much we like your job.
Best of luck for everything!
Cheers,
Nabil Alwakidi
Posted by shahla naim, AbuDhabi, U.A.E on 19 March 2008 at 11:18 UAE time
Success, from my point of view is 10%luck, 40%study, 50% hard work. Upon reading this article, I think am still at the first 10%.
Posted by Nasrin Quraishi, Chennai, India on 5 March 2008 at 15:03 UAE time
Good Evening,
I am very happy and proud that I am living in this world where HRH Mr.Abdullah Al Awadi is living. I pray Almighty God to work under him atleast for a year.
Thank you
Posted by Safwat Faroun, Ramallah, Palestine on 13 February 2008 at 19:20 UAE time
I am currently residing in the west bank, and I am looking for jobs. Your Arabbusiness could be of indispensable value to me. Keep up the good work!
Posted by Jehad M. Shaban, Kuwait, Kuwait on 9 December 2007 at 15:57 UAE time
As per your Arabic article of the top 100's CEO's in the GCC, would you kindly correct Mr.Abdullah Al Awadi's name in Arabic to: عبد الله العوضي and the company name to: Al-Ahlia Holding Company. Thank you.
Posted by Nand, Riyadh, Saudi Arabia on 9 December 2007 at 11:41 UAE time
Wonder what standing Saudi ARAMCO has? Is it not among the most admired companies in the GCC?
Posted by Prabal Rai, kathmandu, nepal on 6 December 2007 at 12:07 UAE time
Dear Sir,
How possibly I can contact direct to Amir Alwalid Bin Talal for my own personal plea concerning my occupational hazzards in compny own by him? Please guide me in this regards.
Yours truly
Prabal Rai
Kathmandu Nepal
Posted by Ibrahim, Abu Dhabi, UAE on 6 December 2007 at 09:43 UAE time
I've worked in the oilfield since 1989, mostly in the UAE but also all over the MENA region, and this is the first time I've heard of this company (SS Lootah). What about Al-Dulaimi group (Qatar) or Mohammed Barwani (Oman) or AlMansoori (UAE)? I wonder what the definition of "Energy Industry" is? I suspect the people who selected the winners don't understand how our industry works.
Posted by Omair bin Zahid Al Husain on 5 December 2007 at 22:07 UAE time
It is interesting information. Being an entrepreneur myself, I don't mind knowing who could be of advantage to me and where I can find products and/or services I need. I wonder what was the criteria for selection though, but a wiseman said that the modern day winner in the corporate world is the one who could "learn, unlearn and relearn!" Keep us up to date Arabian Business.com. Thank you very much.
Posted by Nikhil Sindhu on 5 December 2007 at 19:03 UAE time
Thank you Anil for the insight about an extraordinary person.
Posted by Faris AlQURESHI, Riyadh, Saudi Arabia on 5 December 2007 at 12:53 UAE time
Dear Anil,
The best best interview for the most admiring and decent personality.
Best of luck for everything!
Cheers,
Faris
Posted by Prof Philbert, Salmiya/ Kuwait, Kuwait on 5 December 2007 at 10:57 UAE time
If the company is going to achieve something of some recognition, they must follow three I's - Innovation, Infrastructure and Integration.
Innovation is importnat to give the company an ability to extend the product and service life cycle from point of stagnation to new thinking - a sort of sigmooid curve that repeats itself - saying in simple words - an old wine in a new bottle.
Infrastructure for aiding innocation is another key dimension that can add value to corporate growth. A CEO must take a balaced scorecard to organizational development.
Integration is keeping all elements of the orgnization togehter and take a unified approach to the big picture.
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