Islamic banking continues to maintain its growing force in the financial world, and as a pioneer of Islamic banking services in Jordan and beyond, Jordan Islamic Bank (JIB) is thriving despite enormous uncertainty. While many banks have seen their balance sheets propped up by huge central bank cash injections, Jordan Islamic Bank continues to go from strength to strength, completely unaided.

There are a number of reasons for this, says CEO Mr Musa Shihadeh, unique to Jordan Islamic Bank. “We are very proud of our achievements and our growth in the last 30 years and we remain highly committed to providing products that adhere to Sharia law which do not charge interest. There are very few banks like us who are committed to this principle, and that has helped extend and support our client base.”

Indeed. A robust track record of consistently financing in solid, tangible assets  /commodities while ensuring 100 percent Sharia compliance in its markets, products and institutions continues to attract huge inflows of capital. “We have always led from the front with a 100 percent Islamic product range,” says Mr Shihadeh, “while always ensuring it has been at the forefront of developing innovative high-tech banking tools and services for clients, corporate and retail.”

Such confidence in its product range, customer service and ethical commitments to Sharia compliant products and service undoubtedly gives JIB an ethical edge other banks can only hope to achieve. Although the Islamic banking model is comparatively new, market performance and ethical differentiation is growing among Islamic banking players. JIB is justly proud of its record and of its plans for the future. That makes it a stand-out player in this market.

More growth to come
Mr Shihadeh anticipates more growth for 2011. “We plan to achieve at least five percent growth in 2011 compared to our 2010 position. We state frankly that our estimate is conservative here. But well-developed plans to continue to retain current customers and attract new ones as well as submit a range of new innovative services are well underway.”

Brand new branches are also part of the plan. Many Jordanians choose to bank with JIB because of the trust and operational transparency it has built up over the years. For example, the Bahrain-based International Islamic Rating Agency has again renewed JIB’s AA (SQR) Sharia Quality Rating for the year 2010 – the second year running. The agency commended the bank’s excellent commitment to Sharia principles in all its transactions. This rating is the highest Sharia rating that any Islamic bank has achieved so far. Highly impressive.

“We are developing our work strategy for the purpose of enhancing the bank’s pioneer status in Islamic banking locally and internationally,” says Mr Shihadeh, “which has become the centre point of the biggest international rating agencies along with the bank’s ensuring a more variable series of services and financial products that are compliant with the provisions and principles of Islamic Sharia.”
JIB growth and trust is based on:
– Careful financing and investment growth
– A steady, sustainable level of deposit and profits
– The people of Jordan are convinced and satisfied from jib banking services.
– Many professionals and business people preferring to engage with a service provider that meets their own beliefs

New banking laws and new auditing requirements are also helping to solidify JIB’s growth curve.

As JIB CEO Mr Shihadeh outlines, JIB’s growth narrative rests on its undisputed commitment to genuine Islamic banking. JIB carefully finances assets and commodities, then shares the profit with depositers. This strategy has turned out to be a hugely successful business model. There are not many bank operators in Jordan that are able to claim such a pure Islamic business model – if any.

All options are open
Meanwhile the market for Islamic bonds continues to grow. A recent report from Standard & Poor’s indicated that sukuk issues hit a record $51.2bn last year – a massive 34 percent increase on 2009. Given the huge pipeline of government projects in Jordan and the Middle East generally, more sukuk activity is anticipated.

This is an area in which JIB could continue to play a major part.

Certainly there’s an acknowledgement that you can’t grow your business in the 21st century without genuinely innovative products. “We are certainly evolving our market share,” says Mr Shihadeh. “Yes, competition is growing. But we are confident we have a solid grip in the Islamic banking services market. There remains much demand for Sharia products and we will meet that demand, despite the competition.”

Jib continue implementing Basel II, the second of the Basel Accords. Basel II’s remit is to create an international standard that banking regulators use when creating regulations and relates to how banks maintain sufficient reserves to protect themselves and their depositors – the more risky the bank or its business model, the more capital it will need to put to one side to counter this.

Results to be proud of
Recent JIB pre-tax profits reached $57.4m, with profits after tax hitting $41m, up 4.3 percent. The JIB board is now proposing a 15 percent cash dividend to all shareholders.

Total client deposits now amount to $3.31bn – an increase of $585.3m, or 21.6 percent, in 2010. Total financing $1.73bn and the growth 15 percent. No surprise that Mr Shihadeh is very proud of these achievements.

Mr Shihadeh states that shareholders’ equity during 2010 grew to $273.1m compared to $249.4m at the end of 2009, with a growth rate of 9.5 percent. Also, the return rate on average shareholders’ equity before tax climbed to 22 percent and after tax, 15.7 percent. The return on paid up capital (EPS) reached 29.1 percent. Truly a raft of results to be proud of.

The future’s bright
So the future looks exciting as well as innovative. Witness the market expansion of Muqarada Bonds and tradable Islamic Bonds. There’s also the opening of three all-new offices and branches, the installation of new ATM facilities and a wide-ranging programme to update JIB’s communication systems.

“We’re also issuing smart visa electro cards that use chip technology to provide better protection and security to card holders – JIB was the first local bank that issued such chip cards and printed in-house,” says Mr Shihadeh.

JIB will also continue to expand the development of Islamic banking by demonstrating clearly that Islamic banking is able to deal and respond effectively with the realities of today’s commercial world.

That also means Murabaha financing for buying building materials, houses, cars, furniture, medical equipment as well as allowing JIB clients to benefit from the assets and security of takaful insurance cover.

A new corporate identity and logo as part of JIB’s plans to enhance the Islamic banking experience has been approved. Vibrant red and orange colours with a unique design inspired by Islamic calligraphy should inspire confidence in the ingenuity, quality and commitment to service that JIB commands.

But much of the credit for JIB’s growth and progress has to go to the general manager of JIB, the high experienced Mr Shihadeh ,and JIB staff. He has piloted the bank virtually since its beginning. And with JIB assets, deposits and equity continuing to grow, Mr Shihadeh has every reason to feel confident of the future – a belief plainly shared by many of JIB’s fast-growing client base.

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