The acquisition of Barclays UAE retail business in 2014 by Abu Dhabi Islamic Bank (ADIB) represented the most significant expansion in the domestic Islamic banking market of recent years. However, while the headline-generating event was a very visible demonstration of the growth of sharia-compliant financing in the UAE, the expansion of Abu Dhabi’s Islamic banks beyond the nation’s borders is just as important a story. Both of the Islamic banks headquartered in the capital have made significant international forays, although in terms of geography their strategies have differed. The foreign expansion of ADIB began in 2008 with the purchase of Egypt’s National Bank of Development, a commercial lender, which brought ADIB 70 branches distributed across all of Egypt’s governorates. Within a year it had transformed its new acquisition into a fully sharia-compliant operation and a profitable entity in its own right. ADIB Egypt is now one of the largest Islamic financial institutions operating in the country, offering wholesale, retail and microfinance products through its renovated branch network.
While opting for the acquisition route in Egypt granted ADIB an instant presence in that nation’s competitive retail space, its pursuit of corporate business in other markets has allowed it to deploy a more nimble greenfield strategy. ADIB’s move into Iraq a few years later was led by corporate finance, investment banking, treasury operations and trade finance, and therefore a branch opening rather than an acquisition of an existing network was the chosen route into the market: the bank opened its first branch in Baghdad in 2012, aiming to use the facility as a conduit for UAE and GCC investment into the country. ADIB is the first UAE bank to open for business in the country, and has followed up its initial investment with a second branch in Erbil to take advantage of the growth opportunities arising in the Kurdistan region. Two more branch openings in 2012 demonstrated ADIB’s diverse global interests: that year saw the bank open its first branch in the UK, a high-profile unit near Hyde Park intended to attract high-net-worth clients from the UAE who use London as their base for business. The bank’s Sudanese branch was also established in 2012, again offering wealth management and corporate services.
The following year ADIB entered the Qatari market, opening a branch in the Qatar Financial Centre, a move which enabled it to take advantage of a 2011 ban on conventional banks operating Islamic financing in the country. Aside from the Egyptian operation, the only exception to ADIB’s corporate-led, greenfield strategy was its 2011 acquisition of a 51% stake in Saudi Finance Company, a pioneer of Islamic finance in the Saudi Arabian market. The company offers a variety of sharia-compliant products to the retail, high-net-worth and small and medium-sized enterprise segments through its branches in Riyadh, Khobar and Qassim. The international expansion of the comparatively young Al Hilal Bank has taken a different form, with the bank choosing the frontier market of Kazakhstan for its first foreign move in 2010. Despite its population of around 17m people, roughly 70% of whom are Muslim, Al Hilal is the first Islamic bank to establish an operation in the country, and by 2013 it had established three branches in the capital, Almaty, and two further branches in Astana and Shymkent. As well as facilitating UAE investment in the country, the bank offers locally-focused corporate and retail services, including a range of sharia-compliant products for small and medium-sized businesses.
Kazakhstan is considered by Al Hilal to be one of the most progressive members of the Commonwealth of Independent States, and the bank views its facilities there as not only a route into the natural resource-rich Kazakh economy, but also as an entry point to the markets of neighbouring Russia, Turkmenistan, Uzbekistan, Kyrgyzstan and China.
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