Though the Islamic finance market has shot to prominence in the past few years, Jordan Islamic Bank (JIB) has been committed to the betterment of the industry for many decades. HE Musa Shihadeh, Vice Chairman, CEO and General Manager of the bank, has been a leading figure not only within the industry, but also in the development of socioeconomic conditions for the people of Jordan.
He spoke to World Finance about how JIB has evolved over the years and become a powerhouse in developing new, innovative and profitable Islamic banking products.
In what key ways have you seen Islamic finance change in recent years?
Islamic finance is improving and the number of institutions using it is increasing annually. As the industry develops, the Islamic banking system will continue to offer financial services in compliance with sharia regulations. This is a principle and commitment, and all Islamic banks are committed to applying this system, which is based on financing trade and forbids usage of the conventional banking system, which is based on accruing interest.
Islamic banking is popular in Islamic countries, but industrialised countries are very interested in the system as well. All over Europe, a lot of countries are introducing the system and have started banking using Islamic methods.
In terms of complexity and market share, how does Islamic banking rank alongside conventional banking in Jordan?
In Jordan we have four Islamic banks, 13 conventional banks and nine foreign conventional banks. We are sure that the Islamic banking marketplace share is increasing because the people in Jordan are becoming more accepting of the methods of Islamic banking.
Before 1978, the conventional banks were alone in Jordan, but JIB was established to offer Jordanians Islamic banking services. As we keep moving forward in line with innovation and being the pioneers of Islamic banking in Jordan, we are committed to applying the latest products and technology. We keep upgrading our systems and working network, as well as developing new products and services in compliance with sharia principles. JIB is proud to have achieved a yearly sharia quality rating of AA SQR.
What new products and services does JIB offer to the Jordanian market?
JIB is committed to introducing new banking services and products to satisfy the customers. We are currently working on a number of innovations, from new banking programmes to loan products. We are completing the implementation of a new banking programme in order to satisfy our clients and fulfil their needs, offering quick, accurate services. Over the past few months we expanded our branch and ATM network to reach 83 branches and offices, plus 140 ATMs, located all over the country.
After studying market demands, we developed new products, two of which have been launched this year with competitive profit rates and flexible terms targeting the student segment – all Jordanians. The first is Labbayk, an Omra and Haj financing solution to assist with every Muslim’s wish to visit Mecca to carry out the holy rituals of Haj and Omra. This product solves their financial needs with the view to completing these holy rituals.
Secondly, we have a new financing programme for students – Iqra. Learning is essential for everyone and JIB introduced this service to help the process of learning. Iqra is a new financing solution for university and school fees.
JIB’s call centre was developed to support our clients and all the people in the kingdom. Current clients with existing accounts and other services can contact our call centre to make inquiries about their accounts and we provide all the help they need 24/7. Currently we have 30 employees working in our call centre, and the plan is to increase the number to 60 employees to offer better and faster services to all of our current clients and/or anyone in the kingdom.
We have also recently added to our I-Banking system, implementing free-of-charge money transfers between customer accounts within our bank, as well as allowing for the settlement of telephone bills for free. These innovations are designed to support growth and empower our customers both financially and spiritually, as well as increasing our marketing and online presence.
How have new market entrants introduced new challenges?
As the competition in the Islamic finance sector increases, JIB has continued to focus on its own priorities. Client satisfaction is our number-one goal. We also remain committed to introducing new and innovative products, through which we can maintain the trust of our clients.
Our products and services differ from those of our competitors because we are a pioneer in Islamic banking services; as such, our products are committed to offer Islamic banking in compliance to the principles of Islamic sharia. We monitor our clients’ satisfaction levels via our Sharia Supervisory Board.
But what really sets us apart from the competition is that we offer the best and fastest services. JIB is committed to introducing new services and products each year, which satisfy the needs of our customers in addition to our geographical coverage throughout the entire Hashemite Kingdom of Jordan. And finally, JIB has the most highly qualified staff and employees, who all have vast experience in offering Islamic banking services.
What do you believe to be the reasons for JIB’s success in recent years?
JIB has been offering unique and diverse Islamic banking in Jordan since 1978, with great success. Since establishment, our balance sheet has grown exponentially as new and innovative products have continued to attract clients (see Fig. 1).
How does JIB’s influence extend to international markets?
JIB deals with local and international banks, but our main priority is to ensure that our international partners operate within and accept our commitment to sharia law. Therefore, no interest is involved in any transactions between JIB and these banks, and is forbidden in any banking deals. We do not make any deals on derivatives.
JIB has arrangements with about 300 international banks outside Jordan and all of these international banks are happy and satisfied with our dealings with them. We mostly collaborate with the opening letters of credit for importing commodities to Jordan on behalf of our customers; investing client deposits via Islamic methods. We are also actively looking to increase our dealings with foreign banks, and have been committed to disseminate education on Islamic finance to our international partners by conducting training sessions with the staff of new Islamic banks.
What role has Islamic finance played in instigating social change in Jordan?
JIB has long since been committed to offering the best possible banking services to the people of Jordan, promoting social welfare and services along the way.
Last year, JIB issued a report covering our social responsibilities in which we detailed the activities of our two social responsibility committees – one including board members, and one including management. The first committee implement policy plans, while the second will ensure those plans are being followed.
JIB is committed to empowering the citizens of Jordan by helping them avoid dependence on philanthropic activities. Our plan is to finance the citizens’ small projects, which will, in turn, help to solve poverty and unemployment problems. JIB is also committed to supporting the activities of the Ministry of Environment by helping to support health, safety and environmental pollution projects.
The bank will also support a number of smaller scale, but no less important, social programmes, from employees donating blood to arranging lectures for our employees regarding safety from civil defence. Last year, JIB began a new programme to achieve the ISO 26000 certification for social responsibility. JIB has begun implementing a new project to use solar power to generate electricity to cut costs and help protect the environment, and is always ready to finance local companies who wish to implement the solar energy system.
JIB established the Social Services/Joint Insurance Fund in 1994 and supported it by paying $705,000 as a donation. The idea of this fund is that participants will jointly indemnify part of any damage incurred on them according to takaful principles (‘takaful’ is an Arabic word which means helping each other), meaning that participants are helping themselves without additional obligations or risk.
In the future, JIB plans to continue to diversify, develop and improve the quality of its banking services; to expand the issuance of Mugarada bonds; strengthen and develop its application to meet the Basel 2 requirements (as well as making preparations for Basel 3); expand programmes for financing professionals, craftsmen and small- and medium-size enterprises; and to attract new customers from both the public and private sectors.