CAIRO: The National Bank for Development (NBD) introduced two new Islamic banking products last week: sukuk, a debt instrument, and yosr murabaha, a personal finance tool. Since the acquisition of 49 percent of NBD's stock by the Abu Dhabi Islamic Bank (ADIB) in 2007, NBD has been transitioning to Sharia-compliant financial services. Prior to ADIB's buyout, NBD had experienced significant problems, including losses and debts which ADIB agreed to purchase. ADIB will acquire majority stock in the bank once it achieves full Islamic compliance. The bank's Managing Director and CEO Nevine Loutfy explained that last year saw extensive infrastructural development as NBD's extensive branch network came online under a new IT system approved by ADIB's Sharia advisory board. NBD also began offering Islamic savings accounts, current accounts and murabaha - what would translate to loans in non-Islamic finance - for car purchase. The new sukuk plan - comparable to a certificate of deposit (CD) account in non-Islamic banking - allows individuals and companies the option of a one-year sukuk plan, while previously only three- to five-year plans were offered. With a minimum of LE 1,000 and no maximum, a client can earn 7 to 7.5 percent profit annually. Each month, profits from investments made by the bank with the money are sent to the client, and the initial amount returned at the end of the year. The contract between bank and client is based on a wakala, a Sharia-compliant agreement stipulating that should profits not meet expectations, the contract is not null. NBD also announced yosr murabaha, a personal finance instrument allowing an NBD customer to receive an amount of LE 10,000 to LE 200,000 to finance personal transactions, then repay the money over a period of 12 to 60 months. The new personal finance product also carries "takaful insurance to continue meeting installments in case the client should pass before the sukuk's fulfillment. NBD will soon offer ijara, or Islamic leasing, through a subsidiary company. Loutfy explained that the bank will offer the product itself after approval from the Central Bank of Egypt (CBE). Amal El-Saied, NBD's head of retail banking; Zuhair Idris, chief operating officer at NBD; and Anil Kumar, consumer business head of the NBD also attended the announcement of the new products. Since joining NBD in August, Kumar has witnessed its rapid transformation to full Sharia-compliance. Asked about the extent of the transition, he replied, "NBD is not starting from scratch, the products and services are already present and can be made into Sharia-compliant variants. It just takes time. In his role as Consumer Business head, Anil Kumar is also responsible for the bank's microfinance products. NBD is the largest provider of microfinance among Egypt's financial institutions, excluding NGOs. "We've been in the microfinance business for 17 years, and are the most prominent in the market. In the last year or so we have introduced Sharia-compliant microfinance, both murabaha [microcredit] and musharika, [comparable to short-term joint-venture financing]. "There is definite affinity and liking for the product.it fulfills a latent or acknowledged need for finance that is compatible with religious beliefs. There is a huge market in microfinance, Kumar explained, adding, "A lot of conventional loans can be easily converted to Islamic products. He clarified the basic differences between Islamic and non-Islamic finance. "The whole concept is based on transparency, simplicity and following ethical values. For the Egyptian market, where knowledge and awareness of financial services remains limited, Kumar expressed the opinion that Islamic banking may feel more accessible, but admitted that Egyptians "need financial education, whether Islamic or not. NBD does not provide a micro-savings instruments, often considered of greater or equal importance to microcredit for poverty reduction, because the CBE has yet to regulate such products. In his opinion, "the need really is credit to help build a business, rather than savings. Asked about NBD's weathering of 2009, a difficult year for many banks around the world, Kumar smiled, "The new financials will not be announced until mid March, but we have seen substantial growth. It was really a great year, in microfinance the growth has been tremendous. Questioned about the effect of the financial crisis on Islamic banks in general, Kumar pointed out that, "Islamic banking is all about ethical banking, transparency, and being conservative; these values are appealing right now. Islamic banks have come out stronger since the crisis, they were not as affected and have been growing fast in various parts of the world. He identified challenges in distribution and reaching out to customers in remote areas as issues NBD plans to address. "Last year we renovated our branches, and we continue to impart skills to employees. We should be fully online in the next month or so on the new Sharia-compliant IT system, he affirmed.
