Bahrain-based, Islamic banking major, Al Baraka Banking Group (ABG), on Tuesday that it was embarking yet on another major project by working closely with World Bank on risk management project.
The ABG collaboration with the World Bank paves the way for a research partnership that will be beneficial to the global Islamic banking industry.
The partnership’s first initiative, part of a planned series of research projects, will be a study examining the risk-management challenges facing Islamic banks, with a particular focus on Musharaka and Mudaraba under the profit-and-loss-sharing system.
“This collaboration with the World Bank is yet another demonstration of the Group’s commitment to research and knowledge-building in the Islamic financial services industry.” Al Baraka is recognized as a pioneer in the Islamic banking sector for its longstanding think tank, Al Baraka’s Annual Islamic Banking Symposium (The Nadwa). The Nadwa is the only platform of its kind that annually provides the industry with resolutions and fatwas, which form the basis of new products, standards and policies,” the Group President and Chief Executive, Adnan Ahmed Yousif, said.
The research project is now under way. Its preliminary findings are expected to be available in the first quarter of 2015.
“We are committed to serving the sector by addressing several pressing issues that the industry is facing today. The research collaboration with the World Bank is yet another step in this direction,” Yousif said.
“The most pressing challenge facing the industry today is to prepare the ground for the profit-and-loss system to flourish,” Abayomi Alawode, Head of Islamic Finance at the World Bank, said.
“After a series of discussions with Al Baraka’s Executive Management and Research Team, we recognize that the industry must address concerns that the majority of Islamic banking assets are debt-based and that the proportion of equity-based investments, such as Musharaka and Mudaraba, does not form a significant portion of the Islamic investments portfolio. The enabling support system to mitigate these inherent risks and challenges is either limited or nonexistent. As a result, equity-based investments remain under-represented in the Islamic banking industry.”
“Being the first of its kind, the research project will not only collect data from a number of countries where Musharaka and Mudaraba are being used in banking transactions, but the project will also examine what enabling legal and regulatory environment would be needed to support the adequate risk management of Musharaka and Mudaraba,” Adnan Ahmed Yousif, added.
“We look forward to our collaboration with Islamic financial institutions, such as Al Baraka, drawing on their front-line experience in the use of Islamic financial products. Their insights will contribute to producing a study that will encourage innovation and contribute to the sustainable growth of the industry. The Islamic banking and financial industry has reached a level where further growth is possible, if it develops new tools and innovative products that address those core issues,” Abayomi Alawode, said.
Al Baraka Banking Group is a Bahrain Joint Stock Company licensed as an Islamic wholesale bank by Central Bank of Bahrain, listed on Bahrain Bourse and Nasdaq Dubai stock exchanges. It is a leading international Islamic banking group providing its unique services in countries with a population totaling around one billion and is rated by Standard & Poor’s at BB+ (long term) / B (short term). Al Baraka offers retail, corporate, treasury and investment banking services, strictly in accordance with the principles of the Islamic Shari’a. The authorized capital of Al Baraka is US$ 1.5 billion, while total equity is at about US$ 2 billion.
The Group has a wide geographical presence in the form of subsidiary banking Units and representative offices in fifteen countries, which in turn provide their services through more than 480 branches. Al Baraka currently has a strong presence in Jordan, Tunisia, Sudan, Turkey, Bahrain, Egypt, Algeria, Pakistan, South Africa, Lebanon, Syria, Indonesia, Libya, Iraq and Saudi Arabia.