IBS Journal May 2015
Jakarta ©World Bank Photo Collection, Flickr
banking arms of three state-owned banks, Bank Syariah Mandiri (BSM), Bank Rak- yat Indonesia and Bank Negara Indonesia (BNI), plus potentially the Shari’ah-compli- ant banking unit of Bank Tabungan Nega- ra (Bank BTN). There are plenty of pack- ages used across the different banks and, if the plan goes ahead, there will clearly be winners and losers among the system suppliers. The happier story from Path is that
existing Islamic banks are busy, with much of their activity mirroring that of conven- tional banks, with which they have to compete. So the areas cited by Kateeb as in focus are mobile and internet banking, for both retail and corporate customers, and overall customer experience, followed by risk management and business intelli- gence. ‘That’s what’s keeping our numbers decent.’ The sector is also going through a sig-
nificant amount of M&A activity, particu- larly in the Middle East and some parts of Asia, as a number of global banking groups undergo restructuring and down- size. In 2014, Pakistan-based Meezan Bank, the country’s largest Islamic bank, bought
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the local operation of HSBC, while Abu Dhabi Islamic Bank (ADIB) took over the retail banking unit of Barclays in UAE. Temenos’ Yazbeck sees new lines of Islamic business emerging, particularly microfinance and private wealth man- agement. Although Temenos did not win many new selections in 2014, additional sales to existing customers meant it was not far off a similar performance to pre- vious years, he says. Being able to offer Shari’ah-compliant banking is no longer a differentiator, he says. ‘With increasing competition, a lot of Islamic banks are focusing on their customer experience.’ As well as channels and compliance, anoth- er area of activity has been treasury front office, he adds, driven by the ability to trade some Islamic derivatives. Among other geographical areas for
potential growth, Yazbeck cites the likes of Kazakhstan and Azerbaijan, with gov- ernments keen to attract foreign investors. Russia is also looking at regulations, with a similar incentive. In Kazakhstan, for exam- ple, the Islamic Corporation for the Devel- opment of the Private Sector (ICD), has been eyeing a stake in Zaman Bank, with
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a view to convert it into an Islamic bank- ing entity.
A lot of the large banks already have
established core banking systems, con- cludes Kateeb, so suppliers need to look for new banks or opportunities to replace in-house systems. In this, as in many other aspects, the dynamics of the Islamic bank- ing systems market are similar to those of conventional. The main difference is the impact of regulations as a driver for change and, as a result, it has been dif- ficult to predict what will happen in the Islamic sector with much certainty. Now, in addition, so much geopolitical upheaval in many of those countries that had emerg- ing Shari’ah-compliant banking sectors has made things harder still. Nevertheless, ITS’s Mohamed is
upbeat: ‘Even though Islamic banking’s higher costs and operational inefficiencies lower the shareholder returns to around 20 per cent, and the sector is still lagging behind in coming up with new products, we see no slow-down in new Islamic win- dows being launched or conventional banks converting to Islamic. So there is a market.’
ibs sales league table
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