Brash advertising campaigns dangling the chance of lucrative prizes may be common among conventional banks. But it has been less so among their Islamic counterparts.
That is set to change as Islamic banks across the Emirates invest in developing their brands in a bid to broaden their appeal and win more market share at the expense of global names.
Abu Dhabi Islamic Bank has become the latest Sharia-compliant lender to boost its retail appeal with the launch of a mass market campaign – a move that global banks here and their local competitors should not ignore.
ADIB last week began enticing customers with a package that gives them the chance of winning 24 times their monthly income twice a year and throws in such perks as free monthly remittances.
The bank, which has the third largest retail network by number of branches and ATMs in the UAE, is not only trying to win a greater share of the thriving consumer banking market but is also striving to make Sharia-compliant banking more palatable to western tastes with the kind of attractions that one might not typically associate with frugal Islamic values. (The bank says the draw has been approved by Islamic scholars.)
Not since the arrival of Al Hilal Bank in 2008 has an Islamic bank been so aggressive in its attempts to win over new customers. Residents of Abu Dhabi will already be familiar with the eye-catching ADIB billboards offering the chance to win Bentley cars and gold bars.
Despite the showy marketing however, appealing to non-Islamic customers will remain the industry’s biggest hurdle. Efforts to pitch Sharia banking as an ethical value proposition are intensifying just as much as the drive to reach as many customers as possible. The latest campaign has a particulary low barrier to entry – a monthly salary transfer of Dh5,000.
“It’s rare that banks go out with such a bold statement on salary, usually they focus on one product, like taking out a loan,” said Philip King, the head of retail banking at ADIB. “If you look at us, however, we have this ethical approach, universal appeal. Our strategy is to become all-inclusive, all-encompassing.”
A veteran Citibank executive, Mr King was hired by ADIB last year with the remit of making Islamic banking more interesting to westerners who may naturally gravitate to international banks operating in the UAE. However, a dissatisfaction with western banks following the 2008 financial crisis has helped Islamic banks like ADIB. They are now touting themselves as fairer alternatives in an industry mired in interest rate fixing scandals, fines for shady dealings and new regulations like Basel III that may hinder growth.
Recent surveys show that there is a national trend of migration towards Islamic banks in the UAE, although a lack of understanding of how these banks work is holding back further customer growth.
The challenge for ADIB is not just about selling Islamic banking. It is also competing in a tough local environment that is not only overbanked but full of formidable Islamic competitors such as Dubai Islamic Bank and Emirates Islamic. And it comes at a time when competition for retail banking is heating up as an improvement in the economic fortunes of the country and consumer confidence prompts an increase in demand for the entire spectrum of personal loans.
That represents good news for these banks because the margins they receive from lending to individuals are higher than those to corporations where the risk is typically less. ADIB is trying to ensure it stands out in this category.
“Retail has always been a core part of ADIB’s strategy,” said Shabbir Malik, a Dubai-based analyst at the Egyptian investment bank EFG-Hermes. “Even though over the last 12 months they’ve seen strong growth on the corporate side I think retail remains a central part of their business. This focus on the mass market is an extension to their retail strategy.”
Mr Malik said that such campaigns are likely to boost the bank’s loans, deposits and related fees but that competition is likely to intensify in the coming years amid a backdrop of an improving economy. ADIB, however, is likely to continue focusing on the retail segment with corporate banking of secondary importance, he added.
The lender, established in 1997 based on Sharia principles, grew its customer base by 13 per cent in 2012 to 550,000 customers. Its expansionary drive in Dubai – offering air miles on covered cards (the Islamic equivalent of credit cards), and competitive fees – has attracted Arab expatriates and non-Muslim westerners, according to Mr King.
mkassem@thenational.ae
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