LONDON, 8 November 2004 — Dr. Saleh Jameel Malaikah, chairman of Rusd Investment Bank Inc., is one of the most experienced Islamic bankers of his generation. For many years he headed the banking and financial services sector of the Jeddah-based Dallah AlBaraka Group (DBG), where he was also the chief executive officer of its pioneering asset management entity, Al-Tawfeek Company for Investment Funds and Al Amin Bank in Bahrain. He is currently the chairman of several Islamic insurance and reinsurance companies. Two years ago, Malaikah started a new venture, Rusd Investment Bank, which is incorporated in Labuan, the Malaysian offshore financial center, and whose shareholders are mainly from the GCC countries. In the following interview, Malaikah discusses with Mushtak Parker of Arab News why it is vital to bridge the business and financial sector gap between the GCC region and Malaysia; and the importance of wealth management and future financial planning for Muslims in general. Excerpts:
Q: What is the significance of the Malaysian universal Islamic banking license to Rusd Investment Bank and its partners, and to the global Islamic banking sector in general?
A: The approval of the banking license is a significant milestone for Rusd Bank in its efforts to bring the financial strength and Islamic banking experience of top Islamic financial institutions of the GCC to the new Islamic bank in the process of being established in Malaysia. The participation of a wider-based investor group from the GCC countries, with the appropriate capital strength, strong credit and risk management expertise, and a commitment to providing value-added Islamic financial services, will provide a strong foundation for the new Islamic bank in achieving its business objectives. The proposed bank will also be a befitting vehicle to achieve our goal of enhancing the business and financial collaboration between the GCC economies and Malaysia in particular, and the ASEAN region in general. We will seek to establish broader Shariah-compliant business and financial linkages between the two regions in target sectors including healthcare, higher education, water and wastewater treatment, power, oil and gas, agro-based and food industry, biotechnology, and tourism.
Q: Have you decided on the name for the new consortium bank in Malaysia?
A: We are in the process of finalizing these details. We only got approval from Bank Negara Malaysia, the central bank, on Oct.11, 2004.
Q: What is the basic equity structure of the proposed consortium bank?
A: The bank will be a consortium bank led by Rusd Investment Bank Inc., which was incorporated as an offshore investment bank in Labuan, Malaysia in 2002. Qatar Islamic Bank, the premier Islamic bank in Qatar, will have 70 percent equity stake, followed by Rusd Bank with 20 percent, and Global Investment House, the Kuwait-based investment bank.
Q: What was the rationale behind the establishment of Rusd Investment Bank itself, and what are your core strategies, targets, and objectives for the bank?
A: The idea of Rusd Investment Bank (RIB) was conceived by a group of Islamic insurance (Takaful) companies of which I happened to be the chairman. We brought them together to become the main founders of Rusd Bank. The idea was to build a new breed of Islamic banks which would offer more sophisticated wealth-management capabilities.
The main reason for having insurance companies as founders is to create synergies between the bank and the insurance companies. The founder members are also keen to introduce Takaful (life insurance) products to their respective markets. To manage the funds generated by Takaful requires a strong asset management capability.
As such Rusd Bank can play an important role in managing the assets deriving from the Takaful products; the funds generated from the capital of the Takaful companies; and from non-life Takaful underwriting. The insurance companies will generate a lot of cash which requires investing. This is the first area of a strategic link between Rusd Investment Bank and the Takaful companies.
The second area is the development of sophisticated wealth-management techniques. For instance, we are introducing the first Islamic trust product this November. We have already incorporated a trust company in Labuan in Malaysia called Al Aman. We also have a joint venture with a leading international trust company called Equity Trust. And with the bank as a potential asset manager, if the beneficiary (the person who holds the wealth) wishes the bank to play a role in asset management, we can provide a total solution for future wealth management.
Our plan is to provide sophisticated wealth management and future financial planning services for Muslims across the globe on an off-shore basis, under a trust, Waqf, or any financial vehicle which we can legally create, and which can give Muslims that leverage to control the fate of their future wealth past their lifetime.
We are in fact re-engineering and re-introducing many of the great Islamic concepts such as the Waqf, and Rasad, a derivative of the Waqf, in a modern context. This is where the bank’s name comes from and underlines our commitment. The bank’s name was Rasad originally, but we prefer to call it Rusd, because it has other relevant connotations. Rusd in Arabic has two meanings related to financial activity, first, the meaning of targeting investments and opportunities and second, the saving and allocation of capital.
Our asset management capabilities are going to be across the board, covering real estate development; private equity; listed equity; and structured finance.
Another area of focus is structured finance and privately-marketed corporate Sukuk, which has huge growth potential and would also contribute to the developing Islamic capital markets. We have the expertise to structure innovative structured finance products and Sukuk offerings.
I cannot go into detail, but we are about to close our first structured finance deal for a Saudi Arabian public shareholding company. We have two further structured finance products on the way. We are also talking to a number of Muslim governments regarding the issuance of Sukuk.
Q: Who are main shareholders of Rusd Bank, and what is its capital structure?
A: The bank has a capital of $50 million, and the shareholders are diversified. They include four Takaful companies; a number of large and rated Islamic financial institutions.
The four major founder members are the UAE-based Arab Islamic Insurance Company, the oldest Islamic insurance company in the world, incorporated in 1979; the Bahrain-based Islamic Insurance and Re-insurance Company (IIRCO), which is a holding umbrella for many Takaful companies across the Muslim world; Best Re, the premier Re-takaful company in the world, assigned a BBB investment grade rating by Standard and Poor’s; and Bahrain-based IAC, which is also established in Saudi Arabia, and has been operating for 25 years.
Q: I notice that Rusd Bank is incorporated in offshore Labuan. Does this mean that the bank will be trying to bridge the business and market gap between MENA and Southeast Asia?
A: That is exactly our strategy, which has two anchors. The Malaysian anchor, which can advance with Malaysia as a base, a country with a stable and growing economy, and to expand regionally in the Pacific Rim countries.
Then there is the Gulf anchor, where the GCC has the most promising economic prospects in the MENA region, offering tremendous growth opportunities. We are focused on a strategy of two areas of growth, which is a balanced formula in terms of diversification, risk management, and growth opportunities.
Q: Private wealth management for high networth Muslims has hitherto been the preserve of the Western banking majors. How confident are you of a fundamental shift to Islamic wealth management over the next few years?
A: We are bringing the Islamic investment value system into a modern context. We feel from our interaction with the market and our client base that there is big demand for Shariah-compliant wealth management products and services. Our clients want to rest easy, knowing that if they are committing investments, they are getting a Halal (permissible) return.
Q: Gulf institutions and investors are not familiar with Malaysian risk, and vice versa. How do you overcome this perception problem between the two regions?
A: We have to start somewhere, and we have to educate the market. Our mission is to bridge the gap between the two regions. The $600 million Malaysia Global Sukuk was well oversubscribed by Gulf investors. My understanding is that over 50 percent was subscribed by Gulf institutions. On the other hand, subscription to the $700 million Qatar Global Sukuk attracted Malaysian institutions. It is only a matter of time before the gap is fully bridged.
Q: What about securitization, which seems to be the flavor of the moment?
A: We have completed our first securitization for Tajeer, a Saudi consumer finance company, for SR45 million. We securitized the company’s portfolio of leased assets, which are mainly vehicles. We are planning to do more. Securitization, especially small-ticket deals; structured finance; and Sukuk (both sovereign and corporate) are going to pick up a lot in the GCC region.
Q: What are your plans in terms of structured finance and syndications?
A: We have just closed our first structured finance deal amounting to $60 million for a major shareholder in a Saudi public share-holding company. We have also led a syndication for a Saudi shareholding company. We have two more in the pipeline, and we are also working on our first Sukuk.
