150,000 people benefit from Jordan Islamic Bank’s SME loan services. The Islamic finance model is helping to address Jordan’s
unemployment and poverty issues, writes Lyndon Driver
Jordan Islamic Bank (JIB) was established in 1978, as a public shareholding limited company with the mandate of providing a range of banking services including corporate, personal, business and SME banking, financing and investment business operations in compliance with Islamic Sharia law.
Today, the bank offers its consumer, retail, financing and investment services through 62 branches and 13 cash offices across locations in Jordan and has a number of key, global banking relations.
JIB currently holds a Standard & Poor’s affirmed BB/B rating. As this is the same as the rating attributed to Jordan, this is regarded as the bank’s anchor in terms of its credibility. As such, it has a solid business position, adequate funding and strong liquidity. These attributes help it to maintain its market-leading position.
JIB was founded 33 years ago and today has more than 300 relations with other global banks. The bank has established close relations with several international banks, especially in its dealings with the international banks, which it works with in terms of helping the transfer of knowledge about Sharia-compliant instruments. The core of its business is in the settlement of trade banking, and as such the strongest relationships forged to date are with the Middle East, Great Britain, the US, Japan and the Far East. The bank’s trade financing division serves these relationships, and in doing so also enhances Jordan’s import and export industry.
One of the key roles of JIB is to apply the latest technological developments available to the banking industry. As such, throughout the course of 2011 JIB installed 12 new ATMs, taking the total to reach 104. It has also focused heavily on the continued developing and upgrading of its systems, and has implemented the latest technology in 31 branches and cash offices. The bank also offers cutting-edge i-banking, including SMS services, and was the first bank in Jordan to issue (the chip and pin) debit and charge cards.
In order to provide more convenient services for customers, it has sought to centralise its for overseas operations. As an example of how these developments make a difference in real terms, by automating the processing of salaries for both public and private sector staff has meant that workers’ wages are received on the second day of receipt of the order of payment.
Financial milestones and strategy
Today, as the third-largest bank in Jordan, JIB has total assets of approximately $3.8bn as at 30th June 2011. It enjoys a market share of approximately 11 percent of all funding provided in the country, and has an approximate 12 percent share of all deposits. Its total assets register at $4.075bn and deposits at $3.6bn at year-end.
These key indicators have been achieved as a result of JIB’s relatively conservative policy when it comes to providing financing for businesses. Liquidity is a priority for the bank and its shareholders. Social responsibility also features highly on its list of priorities; the message being that the bank is to serve all people in society.
Sharia compliant banking
One of the core features of JIB is that it is able to provide the full range of banking services and products according to the requirements of Sharia law. That is to say: interest free. To this end, all new services need to be approved by the Sharia supervisory board which consists of four scholars of Islamic teachings, who are selected by the shareholders.
Furthermore, all Islamic banking services are approved by the Sharia supervisory board before implementation, and the Sharia board also reviews all banking services and contracts.
The bank also offers financing according to the methods Murabaha, Musharaka and Mudaraba. By approving interest-free current accounts, accounts which share in profits, and interest-free loans, JIB is actively helping to remedy the country’s issues of poverty and unemployment.
Corporate social responsibility
JIB is committed to providing socially responsible services in terms of participating in conferences and seminars that aim to develop the business of Islamic banks and the financing of scientific research. It is also highly active in granting interest-free loans to assist in three core areas of education, medical treatment and marriage.
JIB has also played a pivotal role in funding professional craftsmanship, thereby helping alleviate unemployment and reduce poverty levels. Furthermore, JIB established a budget of $25m to provide social housing for low-income families and has also remained committed to financing the SME sector by providing financings of up to $70,000.
Banking for SMEs in Jordan is not just focused on the capital, Amman, but is spread throughout the country in the rural areas. Indeed the main depositaries for SME banking are located outside the cities. Here, JIB has approximately 500,000 account holders, with a total of 150,000 people benefitting from its SME loan services. Furthermore, in 1994 the bank launched its own insurance scheme, whereby customers are able to continue to repay loans in the event of, for example, insolvency, disability or death.
JIB has continued to implement all the new legislation of the Central Bank of Jordan which are designed to benefit Jordanian citizens. JIB also welcomes the Central Bank of Jordan’s guidelines which encourage Islamic financing methods. Due to its ethical nature, Islamic financing benefits Jordanian society as a whole and to address some of the unemployment and poverty issues. As such, it helps to keep the country in a safe and stable environment, in contrast to some neighbouring states, which in turn provides some comfort for overseas investors.
Going forward, JIB will continue to diversity and develop banking services, including the expansion of financing by means of Ijara Muntahia Bittamleek. It will also seek to issue tradable Islamic bonds (Sukuk) at the exchange market along with seeking to finance the governmental needs with the direct financing through Murabaha.
The continued expansion of financing programmes for SMEs, professional craftsmen and small industries to help in creating new job opportunities is also of pivotal importance, as is the opening of new branches in order to offer Islamic banking services at the heart of the community.
Following the bank’s principles, JIB will also continue to assist clients through the provision of products and services provided by the AlBaraka Banking Group. Furthermore, it will complete the installation of the proposed new banking system in branches and roll out new techniques to enhance the banking business as a whole.
JIB 2012 outlook
- Increasing market share
- Growing profits in order to satisfy the stockholders
- Expanding its portfolio
- Continuing to improve the quality of its product and services portfolio
- Increasing the number of branches
- Enhancing the relations with investors and clients
- Developing the HR and operational structure
- Constantly revisiting strategy
- Reviewing its regulatory and technical structure