Sitting at a coffee table in the soaring lobby of the Monarch, Dubai’s latest five-star hotel, the normally reserved Hussain Al Qemzi fires back a bold response when asked where his upstart bank is shopping for acquisition targets. “We are looking at continents, not countries,” the CEO of Noor Islamic Bank tells Institutional Investor. “In five years we want to be the largest global Islamic retail bank, and to achieve that we want to acquire banks in Asia, Africa and Europe.”
Coming from such a quiet man — many of Al Qemzi’s sentences trail off into whispers — these grand ambitions sound out of place. But discounting the objectives Al Qemzi has for Noor, which means “enlightened” in Arabic, would be a mistake. He aspires to not only expand the use of Islamic banking among Muslims but to crack the non-Muslim market as well, particularly in Europe. “Our model is simple,” he says. “Everyone in the world has the same financing needs, and we believe we can serve customers competitively no matter what their faith.”
Islamic finance adheres to the Koranic prohibition against charging interest. On a corporate loan, an Islamic bank might draw income from equipment leased to the borrower. With credit cards, the bank buys goods and sells them to the cardholder at a markup, on a deferred payment basis. Islamic banking has grown into an industry with $700 billion in assets, according to Moody’s Investors Service. Assets have increased 20 percent a year, on average, over the past eight years, and analysts at HSBC Holdings say that in ten years, Islamic banks could capture half of the savings of the world’s 1.6 billion Muslims.
Noor opened its doors in January with 3.2 billion dirhams ($865 million) in capital and ten branches. It will end the year with 20 and plans to open ten more next year, all in the United Arab Emirates. The bank now has more than 6,000 clients and 10 billion dirhams in assets. It is 25 percent-owned by Dubai Group, the investment vehicle for financial services owned by Dubai’s ruler, Sheikh Mohammed Bin Rashid Al Maktoum; 25 percent by Dubai Investment Corp., a state-owned holding company; 5 percent by the UAE government; and 45 percent by 15 unnamed investors.
Al Qemzi announced in May that Noor’s flagship branch would become the first bank in the UAE to offer round-the-clock services. To complement Noor’s core mortgage lending, he plans to begin offering insurance this month and asset management services by year-end.
Al Qemzi, 50, is negotiating potential acquisitions in Malaysia and North Africa, but his ambitions extend much further. He is hoping the European Union’s estimated 16 million Muslims will form the core of Noor’s new clientele. A former Middle Eastern corporate banker at Citigroup and the Dubai International Financial Center’s first COO, Al Qemzi plans to buy midsize banks in the EU and convert them to Islamic banks. “We want to exploit an existing distribution network, as well as existing customers and the talent and know-how of local management.”
The sector can’t compete on pricing with traditional banking, which uses various liquidity instruments to generate interest. Similar products will have to be developed for Islamic banks, and Al Qemzi is confident this will happen soon.
But attracting a wider clientele won’t be easy. It will take “major experimentation — not just developing messages for non-Muslims but also creating standardized industry products that are competitive with the relatively efficient money market instruments of traditional banks,” says Joe DiVanna, managing director of Cambridge, England–based consulting firm Maris Strategies and the author of Understanding Islamic Banking. “Noor’s goal is tough, but it is possible to achieve.”
