Interview: Mustafa Al Khalfawi
What factors drive growth in the banking industry?
MUSTAFA AL KHALFAWI: Ajman’s banking sector is experiencing robust expansion, supported by a dynamic financial ecosystem and increasing economic opportunities. The industry’s profitability is driven by the adoption of Islamic banking, which is gaining momentum due to its ethical and sharia-compliant principles. Corporate clients, for example, benefit from ethical financing solutions that emphasise transparency, risk-sharing and asset-backed lending. Businesses seeking alternative financing structures appreciate the predictability of cost structures in murabaha-based (cost-plus financing) transactions, which eliminate the uncertainty of interest rate fluctuations. Additionally, digital banking is transforming financial services, offering seamless and innovative customer experiences.
Which strategies can strengthen credit risk management while fostering financial innovation?
AL KHALFAWI: Credit risk management remains a challenge, particularly in addressing high volumes of non-performing loans. To address this, banks are implementing risk assessment frameworks that establish market acceptance criteria for various business segments. Portfolio diversification plays a role in boosting financial resilience, with lenders expanding their corporate client base to include public entities, large corporations and multinationals while gradually reducing exposure to higher-risk sectors. Real-time data analytics and early warning systems enable banks to monitor credit risk and take corrective action when needed. Enhanced governance and policy alignment reinforce financial integrity, ensuring that decision-making processes adhere to risk-sensitive approval frameworks.
Islamic banking principles drive financial innovation, offering sharia-compliant alternatives that align with ethical finance. The sector has introduced murabaha, sukuk (Islamic bond) and takaful (Islamic insurance) products, emphasising risk-sharing and asset-backed financing. Technology plays a transformative role in this evolution, with digital banking platforms and instant fund transfers enhancing accessibility and efficiency. Moreover, the growing emphasis on sustainability within Islamic finance has inspired the development of green finance solutions, reflecting the sector’s commitment to environmental and social responsibility.
How can the banking sector enhance support for small and medium-sized enterprises (SMEs) while integrating sustainability into financial strategies?
AL KHALFAWI: Supporting SMEs is crucial to Ajman’s economic diversification strategy and the banking sector plays a pivotal role in fostering their growth. Sharia-compliant and asset-backed loans provide SMEs with ethical and sustainable financing solutions. Banks are also engaging with SMEs through advisory and support services, helping them build resilience and adopt sound financial practices. Digital transformation is streamlining banking services, making financial processes more efficient and accessible for small businesses. Collaboration with government agencies, economic zones and trade organisations is strengthening SME integration into broader economic networks, while financial literacy initiatives are equip ping entrepreneurs with the skills necessary for long-term success.
Sustainability is becoming a defining factor in the future of banking in Ajman, aligning with the UAE’s national vision for a greener economy. Banks are embedding environmental, social and governance principles into their operations by developing renewable energy financing, eco-friendly business loans and impact-driven investment solutions. Climate action initiatives are gaining traction, with banks supporting projects that address financed emissions and promote measurable environmental outcomes. Through community engagement and sustainability-focused initiatives, lenders are aligning their business objectives with broader goals targeting environmental stewardship.
Read More from OBG
