I was a keynote speaker at the Middle East Banking Forum in Dubai this week, the first such event organised by the UAE Banking federation. The forum was addressed by the Governor of the Central Bank, Sultan As Suawaidi.
I believe this part of the world has many opportunities for people with good financial knowledge.
A number of interesting points came up at the Forum
Only 20% of the overall population and 12% of women have bank accounts so there is great scope for expansion. Globally only 11% of Muslims have a bank account. Having a bank account enables people to use their money more efficiently, and is a way of escaping poverty.
Banking is growing in other parts of the world ,while it is contracting in Europe.
Of the top 1000 banks in the world in 1990, 444 were in Europe and 58 in the Middle East. Now, in 2013, only 283 European banks are in the top 1000, and 92 are in the Middle East. 257 of the top 1000 banks are now in Asia as against only 104 in 1990.
CAN WE LEARN FROM ISLAMIC BANKING ? …… QUESTIONS ABOUT RATING AGENCIES
Islamic banking is growing at 13% per year (from a very low base) whereas conventional banking is growing at 4%. It takes a more patient approach to seeking a return on its investment, which insulates it from some of the recent errors of the Western banking model.
The role of Rating Agencies was strongly questioned.
Although they are relied upon to provide totally objective information, and are key players in deciding who can borrow and at what rates, Rating Agencies failed to see the crisis coming in US and European Banks.
One participant suggested that it was wrong that Rating Agencies seek to make a profit on their work because this creates a potential for conflicts of interest, and that they should operate on a non profit basis. A representative of a rating agency replied that the IMF is a non profit organisation and it did not foresee the crisis either!
THE FUTURE OF BANKING
I said that the banking industry worldwide needs to
1. innovate to provide the timely, accessible and secure banking service that a young, mobile and discerning customers base needs.(There are a lot of young people in the Middle East so this will be a particular challenge there)
2. strike the right balance between face to face contact with customers, and electronic speed and convenience (many customers still value a personal relationship with their bank and their needs should not be neglected in the rush to automate)
3. develop systems to provide finance for small and medium sized business on the basis of good and reliable information about creditworthiness. Big companies may have no trouble getting credit for bad investments, while small companies may not get finance for good ones.