Abu Dhabi's government-owned Al-Hilal Bank plans to open Kazakhstan’s first Islamic bank in December, starting with two branches, and wants to expand to other former Soviet Union states, its CEO said recently.
The lender is on track to break even by end 2009 and will be profitable in 2010, Mohamed Berro also told Reuters in an interview.
Al-Hilal will headquarter the new bank called Al-Hilal Islamic Bank in Almaty, with an initial capital of about 100 million dirhams ($27 million).
“We plan to start operations in December this year with two branches — in Almaty and Asthana. We will be the first Islamic bank in Kazakhstan, which has passed a new Islamic banking law,” Berro said.
“It will be a stepping stone to enter former Soviet Union states,” he said, declining to elaborate. Some 75 percent of Kazakhstan’s population is Muslims, he said.
Kazakhstan is central Asia’s biggest economy and oil and mining are its key industries.
Al-Hilal Bank, which opened its 11th branch in the United Arab Emirates this month, said it also plans to open four more in the UAE by the end of this year to tap growing demand for Islamic banking.
The global credit crunch and the slowing of economies in key Islamic financial centers are putting pressure on the $1 trillion Islamic finance industry, its biggest test since it began 30 years ago.
The Islamic lender, which opened in June last year, has an authorized capital of 4 billion dirhams and a paid-up capital of 1.5 billion dirhams.
“We will be raising it to two billion dirhams. We added 500 million dirhams recently and will add 250 million dirhams end September and another 250 million dirhams in November,” he said.
Al-Hilal plans to expand its branches in the UAE to tap the growing retail market. “We have 11 branches now, we will add four more before December. We want to open eight to 10 branches a year,” he said. “There is retail growth especially for Islamic banking. We are getting new customers as well as relying on existing customers who want new products.”
The bank has a 5 percent market share in deposits, loans and assets in the UAE’s Islamic banking sector, he said, adding the bank’s total assets ending June stood at around 13 billion dirhams.
Credit extended by the bank totaled around 7.5 billion dirhams this year until June, making it the largest Islamic lender in the UAE, he said. Loans growth is expected to continue in the second half, he said, without giving figures. “We are not shying away, we are selective and you will see credit flowing in the second half too despite problems.”
The bank’s loan book stands at 9 billion dirhams while deposits total 11 billion dirhams, he said.
Islamic banks in particular are looking to tap booming demand from the world’s 1.3 billion Muslims for investments that comply with their beliefs.
