Islamic Banking’s Evolution: Q&A With Ahli United Bank Group CEO Ahmed Alkharji

Global Finance: Last year, Ahli United Bank [AUB] completed its conversion to an all-Islamic bank. Why did you choose to drop conventional banking?

Ahmed Alkharji: AUB converted its banking license and business model to an all-Islamic bank following the acquisition by Kuwait Finance House [KFH], a leading Shariah-compliant banking group, in October 2022. Given the growing acceptance and demand for Islamic banking, AUB’s conversion to an Islamic bank will open many avenues of growth and contribute to the further development of Islamic banking in Bahrain as well as in the wider region.

In Egypt, for example, where AUB has a long-lasting presence, being a Shariah-compliant lender allows us to seek significant growth opportunities. As of now, Islamic banking only accounts for 5% of the Egyptian banking market. Furthermore, in markets like Egypt and the UK, AUB has been a relatively smaller player among conventional banks but will be one of the larger players among Islamic banks, thereby providing us with better growth opportunities.

Overall, AUB’s conversion to Islamic banking is a significant milestone in the bank’s growth journey and is a testament to its commitment to providing a comprehensive range of Shariah-compliant banking products and services.

GF: What does that entail for clients?

Alkharji: With the conversion, there have been changes. Products and services offered to clients have been converted to meet Shariah compliance requirements. Our goal is to continue providing solutions to our existing client base while targeting new customers who are drawn to our innovative Islamic banking and investment offerings, both within our current geographical reach and beyond.

In the recent years, Islamic banking has undergone a remarkable evolution. Thanks notably to innovation, we now offer products and services which compete with those of conventional banks at a regional and international level. This has spurred an increased interest from a wider pool of retail, corporate, private and wealth management clients, whether they are Shariah-sensitive or not.

GF: Post-merger, you are now the second largest Shariah-compliant lender by assets globally. What markets you are interested in?

Alkharji: For us, the immediate priority is to convert our conventional banking subsidiaries in Egypt, the United Kingdom and Iraq to Islamic banks. In these jurisdictions, there is a significant potential for Islamic banking growth, and we hope to leverage it.

GF: What products and services will you focus on?

Alkharji: We believe that our customers look for convenience and simplicity. If we can provide that in addition to being Shariah-compliant, we will succeed in our mission. AUB Group currently offers comprehensive and improved Islamic banking products in sectors including corporate, retail, private investments, trade finance and financial markets. We will strive to ensure that the financial needs of all our target customers are met through services that are Shariah-compliant, be it for saving, investing, borrowing or transactional needs.

We are also very focused on introducing a wider range of innovative offers and digital solutions encompassing banking, financing, international trade, multiasset investments and private banking as well as wealth management solutions. Our aim here is to continually cater to our clients’ evolving needs and, at the same time, to enhance their banking experience.

GF: How do you see the future of Islamic finance?

Alkharji: The future of Islamic finance is promising. We believe it holds significant potential for growth and global recognition beyond traditional Islamic markets as demand for ethical and responsible financial practices continue to evolve, coupled with increasing efforts for cross-border collaboration, standardization and innovation.

The Islamic finance sector has witnessed strong growth, supported by increased banking assets and a fast-developing sukuk industry. As per rating agency Standard & Poor’s, global Islamic finance assets recorded 12.2% growth in 2021 and 9.4% in 2022, which helped it to cross the $3 trillion mark in 2022. In 2023-2024, S&P expects the sector to register a further 10% asset increase.

The growth of Shariah-compliant finance continues to be driven by factors such as greater standardization, new product development, increased sukuk issuance, a focus on sustainability-related themes by core Islamic finance players, the development of fintech platforms and apps, shariah-compliant wealth management products and the digitalization of financial services.