The success story of Islamic banking

An Ask the Expert feature with International Turnkey Solutions

Shariah compliant banking has exploded into a multi-billion dollar industry in the space of 20 years. Haitham Abdou offers his thoughts on what the future holds.

Having been virtually unheard of two decades ago the concept of Islamic banking has since become a powerful force in mainstream banking and is now an industry worth an estimated US$300 billion with an annual growth rate of between 15-25%. This makes the Islamic banking and finance industry a very lucrative opportunity for conventional and Islamic banks alike. Although most of the Islamic banks and financial institutions in the world reside in the Middle East, they are rapidly mushrooming in Asia, Europe and the US. Demand for Shariah compliant banking products and services is now so great that conventional banks are rushing to offer such products, referred to as Islamic windows, to cater to the demands of their customers. Increasingly, non-Muslim customers are being attracted due to the principles of Islamic banking that dictate risk-sharing and no interest policies.

Challenges
Despite the immense potential of Islamic banking and financial products there are numerous challenges that the industry faces. As a result of accelerated globalisation and fierce competition between Islamic and conventional banks, Shariah compliant products need to provide competitive products that are customised to suit local needs. At the same time, these products must meet international standards. Specialist support is therefore strategically essential to implement information technology solutions that are specific to the different modules used in Islamic banking products.

It is also essential that providers have the capability to integrate with other banking systems and comply with Central Bank rules and regulations. For over two decades International Turnkey Systems (ITS) has been the leading ICT solutions provider for Islamic banks and Islamic finance organisations. The ITS solution is specifically designed to fulfil the needs of the Islamic banking and financing sector. To that end, the ITS products take into account the great importance of the Islamic Shariah in the community’s financial dealings while remaining easy to use, with simple interfaces.

ITS has a keen understanding of what its customers really need from an ICT partner. In short, to enable technology utilisation in order to allow your business to grow. ITS realises the importance of the Islamic banking field and how dynamic the industry is. Based on subsequent changes in central bank rules, the ITS Islamic Banking Solution has been developed to comply with multiple Islamic rules. ITS appreciates the unique structure of Islamic banking as well as the differences between Islamic banking and conventional loan or debt markets.

Firmly rooted
The ITS Islamic banking solution enables providers to offer a competitive range of alternative financing vehicles, different to those offered by commercial banks, while, staying firmly rooted in Islamic principles. The Islamic banking solution also allows conventional banks to employ Islamic financial techniques in their banking, giving a profit/sharing framework as an alternative to an interest rate mechanism. Over 80 banks and financial institutions operating worldwide utilise ITS’ banking solutions.

Currently, the ITS Islamic banking solution processes an average of one million  transactions daily, although the solution’s transaction processing capabilities are unlimited. Islamic banking solutions for newly launched Islamic banks and financial institutions can be implemented in less than two months. In less than six months, ITS can provide solutions for banks that are converting from a conventional framework to an Islamic framework. Furthermore, ITS offers Islamic banking solutions for conventional banks that provide Islamic banking products (Islamic window). Lastly, ITS Islamic banking solutions can also be implemented in Islamic financing companies. ITS also provides value added services that include facilities management. Through this product, ITS handles the management and operation of a corporation’s existing IT facilities for a predefined period of time, this ensures the high availability, efficiency, and robustness of the facilities throughout that period.

Haitham Abdou, Group Director of Marketing at International Turnkey Solutions, has over 13 years’ experience in the banking industry. His areas of expertise include IT strategies for financial institutions, SOA for Islamic finance banks, automation projects, core replacement, AML, electronic banking and payment systems.