Taking Islamic banking to next level

KUALA LUMPUR: AmBank Islamic, the Islamic banking arm of the AmBank Group, has put in motion several initiatives in its quest to integrate value-based intermediation (VBI) characteristics into its practices, conduct and offerings.

VBI is a major agenda under Bank Negara’s latest move to lift Islamic banking to a higher level. Underpinned by syariah as its moral compass, VBI encourages good and ethical behaviour.

Towards this end, AmBank Islamic CEO Eqhwan Mokhzanee (pic) told StarBiz that for the next couple of years, the bank would focus on two VBI-based “pillars” as it seeks new customers, market share and boost its bottomline.

“The first such pillar is on financial inclusion and responsible financing whilst the second is on environmentally and socially responsible investment.

“We will roll out new products and aim for targeted segments under both these pillars.

“There are plans to launch an affordable home financing product some time by this year to uplift the social economic welfare of society.

“We are also targeting the small and medium enterprise segment (SME) by taking measured approach in providing the necessary tools to move them forward and scale up their businesses, which is consistent with the central bank’s VBI strategy of supporting the real economy.

“Furthermore, SMEs constitute more than 90% of business establishments in the country, and this segment has a large impact on the country’s economy,” Eqhwan said during an interview.

VBI encapsulates customer experience, ethics, IT security, staff development and responsible marketing. Its aim is to strengthen the roles of Islamic banks and enable them to have a positive impact on the country’s economy, environment and community.

Whilst financial returns and shareholder value are paramount, the value-focused platform embraced by AmBank Islamic will enable it to be more purpose-based.

It is a value that the central bank wants Islamic banks to adopt in their daily business operations, as part of truly embracing the spirit of syariah, and in order to set them apart from conventional banks.

The central bank is expected to launch the VBI scorecard in October this year and have consulted key stakeholders in developing strategies that strengthen the roles and impact of Islamic banking consistent with the shareholders’ sustainable returns and long-term interests.

On the SME front, he said the bank was expanding its distribution channels and reach, including enterprise banking centres and deploying SME relationship managers in order to strengthen this segment.

Under its enterprise financing programme, AmBank Islamic could expeditiously provide financing to SMEs with annual revenue of less than RM50mil.

As for the second pillar on socially/environmentally responsible investments, the group is looking in the medium term to integrate certain considerations in its customer credit assessment processes.

Moving forward, Eqhwan is confident that value-based considerations would boost earnings in the long term while not impacting any in the short term.

He said banks which focus on sustainability, which mirrors elements of VBI, have proven to have higher return on asset (ROA) and return on equity (ROE).

They are also less volatile compared with conventional banks.

Banking , VBI