Interview: Abdulbasit Ahmed Al Shaibei
What role can Islamic financial services play in facilitating the country’s move towards sustainable economic development?
ABDULBASIT AHMED AL SHAIBEI: The banking sector plays a pivotal role in Qatar’s economic development and there is no doubt that Islamic finance is an effective and important component of the Qatari economy. There are many factors that have strengthened the presence of Islamic banks and given them greater momentum, ultimately enabling them to achieve a stable growth rate of around 11% over the past few years, with total assets amounting to 26% of the domestic banking sector’s assets. This encourages us as Islamic banks, but at the same time brings greater obligations and obstacles. We must respond to market challenges and competition by promoting innovation and contributing to the improvement of banking services.
The contribution of Islamic banking to Qatar’s economic growth is reflected in our segment’s involvement in the financing of vital projects and programmes, including those in infrastructure, oil and gas, and industrial development. We also attach great importance to financing small and medium-sized enterprises. We believe these projects in particular are important for horizontal development.
Despite the importance of the commercial aspects of banking, it is worth noting that Islamic banks are very much interested in providing financing on an ethical basis, not just a commercial one. Financing productive sectors rather than for consumption is one of our top priorities. This in and of itself is a way we strive to support our community and contribute to the development of our country.
What is more, Islamic banks use flexible, effective, credible and low-risk financing instruments such as sukuk (Islamic bonds), which are very popular locally and internationally, as well as many other products and services that meet the aspirations and needs of various economic sectors and individual customers.
How can Islamic banks reduce financing costs, and what opportunities are being offered on the international debt markets?
AL SHAIBEI: We are part of the global economy and the Qatari currency is linked to the US dollar. The decision of the Qatar Central Bank (QCB) regarding the management of monetary policy in the best interest of the national economy has clearly lessened the impact of increased interest rates. Although the US Federal Reserve raised interest rates seven times since 2017 – from 0.5% to 2.25% – the QCB raised its lending rate only twice – from 4.5% to 5.0% – which helped limit inflation and the impact on the Qatari economy, reflecting positively on the banking sector, as well as on banks’ deposits and financing services. We can see that the costs of lending at the global level are still within reasonable limits and there are many calls to curb the rise in interest rates due to the risks they pose to the growth of the global economy.
We must balance the attractiveness of financing and the prices thereof. There is mutual satisfaction between banks and those seeking funding, and we will always be subject to supply and demand. Islamic banks have been requested to reduce financing costs according to available margins, and to focus on adopting the latest technological solutions, training and properly equipping personnel, and being prudent in managing risks and liquidity.
The offering of sukuk in international debt markets has been very effective. QIIB has significant experience in this field, the most recent of which was in the first quarter of 2019 when we issued a $500m sukuk on the London Stock Exchange. The offering was seven times oversubscribed, at a total of $3.4bn. The issue was priced at a spread of 175 basis points over the five-year mid-swaps, with a final return of 4.264% per annum. Participants included investors from around the world, with 30% from the Middle East and 70% from Europe, Asia and other countries.
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