Islamic finance is on the rise – and sharply. From an industry that was worth US$200 billion in 2005, total assets in the sector today amount to more than US$4 trillion. This astronomical figure will soar even higher, with the industry projected to reach a value of US$6.67 trillion by 2027.
With demand growing for financial services that adhere to Sharia principles – including ethical investing and risk sharing – banking organizations across the globe are turning to Islamic finance, even those that operate in Muslim-minority markets.
Ahli United Bank Group, Bahrain-based but with a regional footprint, is one of these institutions embracing a new way of operating. Thanks to a recent acquisition by Kuwait Finance House, the bank has changed its operating model from conventional to Islamic banking.
“Back in Q4 2022, the entire Ahli United Bank Group was acquired by Kuwait Finance House, which is a leading Islamic bank,” Ahli United Bank Group CEO Ahmed Alkharji tells The CEO Magazine.
“This entailed a massive project to convert the bank, since Kuwait Finance House is an Islamic bank and Ahli United Bank Group was primarily a conventional banking group.”
Despite the size of the project, Alkharji is confident that the bank’s long legacy of success will not only persist through this transformation, but will also be extended.
“Operational excellence will continue and even be enhanced after conversion to an Islamic bank,” he reveals.
Path to success
Alkharji’s confidence in steering the bank to yet more success is understandable considering his years of rich experience in the industry, which began in his native country of Kuwait.
“My involvement with the banking sector started back in 1998, when I was working in the banking industry in a local bank in Kuwait, before I moved to the regulator – the Central Bank of Kuwait,” he recalls.
“In 2003, I moved to Kuwait Finance House, and since then, I’ve been in different roles and assignments within the group including opportunity to serve the bank’s overseas operations. In 2008, I was seconded to the Turkish operation of Kuwait Finance House to spearhead the investment banking mandate, where we established the investment banking function.”
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“After that I was entrusted to lead the operation in Malaysia for Kuwait Finance House. I was the CEO and Managing Director of Kuwait Finance House – Malaysia for around two years on a special assignment.”
This success overseas led to a senior C-suite role for him in 2016, with a responsibility of overseeing regional operations.
“I came back to Kuwait Finance House as the Group Chief Corporate Banking Officer, for the entire group, covering all markets where Kuwait Finance House operates – Kuwait, Malaysia, Bahrain and Turkey,” he explains.
“After the Kuwait Finance House’s acquisition of Ahli United Bank, I moved to Ahli United Bank as the Group CEO, and that was back in March 2023.”
Now in his current role, based in Bahrain, he has experienced a rapidly changing business landscape over the past years.
Tackling conversion
Alkharji explains that there have been challenges to overcome in recent years. Nonetheless, Ahli United Bank has achieved some truly impressive milestones.
“On the Bahrain level, we migrated the entire Citibank retail banking business in Bahrain, and we successfully integrated that business into Ahli United Bank – Bahrain in 2023,” he says.
“Also, we successfully converted Ahli United Bank – Bahrain from conventional to Islamic, which is a major task, and it’s one of the largest conversions from a conventional to an Islamic bank. That was done in record time, and in a very seamless way for our clients.”
As he explains, the task of converting to an Islamic bank is far from straightforward, making the achievement all the more impressive.
“If you convert a bank, you are basically changing the whole operating model of the bank,” Alkharji says. “This does not only include the core banking system, processes, procedures and products but also the mindset of the entire team.
“Converting a well-established banking group from one business model to another is the opportunity of a lifetime, but at the same time, it’s also the challenge of a lifetime. I’m privileged to be able to work with a dedicated professional team at Ahli United Bank who took up this challenge and conclude it successfully, with the support of our parent, Kuwait Finance House, and the regulators. But most importantly without engaging any external advisors for this task.”
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Importantly to Alkharji, the bank’s customers have been kept at the forefront during the transition. “It was planned and executed efficiently and seamlessly in a record time, with the least disturbance to our clients,” he stresses.
Ahli United Bank Bahrain received an Islamic Banking license from the regulator on 10 December 2023. “This was followed by Islamic conversion of our subsidiaries in Egypt and the United Kingdom during Q3–2024.”
“Islamic conversion of AUB Group is the largest multi-jurisdiction conversion undertaken in a record time. Other previous conversions were primarily restricted to a single jurisdiction. This was first-of-its-kind Islamic conversion in Egypt and the United Kingdom.”
A bright outlook
The success of the conversion to Islamic banking provides the bank with exciting new prospects for growth.
“As a conventional bank, we can only cater to the segment who is not Sharia-sensitive,” Alkharji says. “But if we are Islamic, we can cater to both those who are Sharia-sensitive and can only bank with an Islamic bank, and to those who are seeking a better service and product offerings but are agnostic to the operating model, whether Islamic or conventional.
“The fact that we have converted to an Islamic bank widens the spectrum for us, because we can cater for both types of customers.”
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A rebrand is also on the horizon for Ahli United Bank in markets like Bahrain, Egypt and the United Kingdom, as it will be changed to the Kuwait Finance House brand, bringing with it its own host of opportunities.
“Kuwait Finance House is the second largest Islamic bank in the world and is a strong brand. The proposed change to the Kuwait Finance House brand, which is synonymous with Islamic banking, will provide further boost to Ahli United Bank, which is already a well-established brand in the region.”
“In addition, this will create huge synergies potential for us,” he enthuses. “Kuwait Finance House has a strong banking presence in Kuwait and Turkey, and Ahli United Bank has a banking presence in Bahrain, United Kingdom and Egypt.
“Together it has created a bigger footprint globally, which presents great synergy opportunities for the new group.”
Individual clients can also look ahead for wider coverage. “In terms of individual clients, there are also great opportunities, especially for private banking and wealth management,” he says.
Ahli United Bank’s presence in the United Kingdom will drive greater engagement for the combined entity, according to Alkharji. “It will again help the group to increase share of wallet from the high and ultra-high-net-worth clientele of Kuwait Finance House, by offering better products and wider coverage,” he says.
Overcoming obstacles
For many, the COVID-19 pandemic is now looked upon as a historical event that has been and gone. But for Alkharji, the pandemic’s legacy of economic disruption is ongoing.
“Most people think that the impact of the pandemic has ended. In my views, it hasn’t,” he says. “Look at the current monetary policies. The current interest rates, which is due to the central banks tightening the monetary policies to curb inflation. These are all a byproduct of the pandemic itself.”
“The inflation was actually a result of the pandemic, because governments needed to stimulate the economies and support the businesses by injecting liquidity in the market and increase the government spending.
“Inflation needs to be controlled, and controlling inflation was done through increasing the interest rate, which is impacting the growth of the banking books. However, recently the central banks have started to lower the interest rates.”
Despite the disruption caused by the pandemic, Ahli United Bank saw it as a great opportunity to transform the bank.
“Ahli United Bank has utilized the period of the pandemic where business was slow to focus more on transforming the bank by focusing on three key components of Transformation, namely technology, data and human resources, to achieve targeted benefits for the bank.
“The pandemic was very much an eye-opener for us on digitization, which was accelerated significantly. Our platforms, for example the B2B platform, is one of the best in the market. As a regional bank, we are competing even with international banks when it comes to our platforms, the supply chain and the B2B side. We have innovative products that position us differently from the competition, and the development of digital solutions will continue to be a focus going forward.”
These innovations and developments are all rooted in the overarching objective of Ahli United Bank, which is to provide an unmatched service to the customer, one of its key metrics of success.
He knows that bold new developments are only one side of the coin in achieving this success. On the other side, and just as important, is exercising caution.
“We have a balanced approach. We take opportunities but are also very mindful of the risks associated,” he reveals. “Success is to be able to position the bank uniquely to satisfy the customer needs in a seamless way while providing growth and development for the team and maximizing value for the shareholders.”
Enhanced appeal
Another factor that adds to the bank’s unique appeal is its international reach. Ahli United Bank currently operates in multiple nations globally.
“Our presence in major global markets really differentiates us. We are one of the few banks in the country that has a presence in the United Kingdom and Egypt,” Alkharji says.
Awards
In recognition of the bank’s impressive achievements, Ahli United Bank was named Bahrain’s Best Bank for 2024 by Global Finance Magazine earlier this year.
“We are honored to be recognized as Bahrain’s Best Bank by Global Finance,” Alkharji said at the time. “This award is a testament to the dedication and hard work of our entire team, who consistently strive to deliver exceptional value and innovative solutions to our customers.
“Ahli United Bank’s recent conversion will open up new avenues of growth for the bank to continue its excellence as the leading Islamic bank in the Kingdom.”
The Middle East is always a focus area for the bank, as it is continuously on the lookout to invest in complementary banking platforms across the region to serve as an intermediary for clients.
Following the acquisition by Kuwait Finance House, the combined group has banking operations in Kuwait, Bahrain, Egypt, Turkey, the United Kingdom and Germany.
Profound partnerships
Alkharji is aware that the success of the bank could not be achieved alone. He acknowledges the importance of strategic partners that not only push the bank to greater commercial heights, but also helps them give back to the community.
“Ahli United Bank, as a well-known banking group in the region, has important partnerships with other financial institutions,” he says. “But we also have partnerships that focus on CSR because we are a strong believer that we have to play a role in the societies in which we operate, as well as partnering with non-profit organizations.”
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Technology plays an important role in the sector, so partnerships with telco providers Batelco, STC and Zain, and leading IT firms such as Microsoft, are all valuable.
“When you partner with somebody from the industry, you create that relationship where they exactly understand you and you understand them,” Alkharji says. “Then you can cater for each other’s needs and requirements in an organic manner.”
These partnerships are partly to thank for its ongoing operational excellence as it enters a new era as an Islamic Bank.
With the strides it has made in previous years, it looks set to achieve yet more success as it continues to embrace an entirely new structure.
“Ahli United Bank’s conversion from a conventional to Islamic Bank should not impact us, should not make us more complicated from an operating model,” Alkharji says.
“Our operational excellence will continue.”
