Role Of Islamic Banks In Serving Local Communities And Promoting Inclusion - Ahmad Shahriman Shariff (CIMB Islamic CEO)

Transcription

1. Leadership Series Tuesday - 13 October 2020 Role of Islamic Banks in Serving Local Communities and Promoting Inclusion Interviewed by : Daud Vicary, Chairman of Advisory Board, IslamicMarkets.com AHMAD SHAHRIMAN BIN MOHD SHARIFF CEO, Group Islamic Banking CIMB As economies go through this pandemic, Islamic Banks have to rethink their role in serving the local community. Malaysian banks can learn from the Indonesian experience in engaging with local communities while the Indonesian banks can learn from Malaysia on how to mobilise large funds for infrastructure development. The effective use of data can bring about a significant change in the way the bank adapts to becoming a more inclusive organisation focused on serving local communities. C ommunity Engagement: Daud Vicary invited Ahmad Shahriman Shariff to commence the discussion explaining his personal view on the role of Islamic banks in serving local communities and promoting greater inclusion, as well as the measures taken within CIMB Islamic to facilitate such changes. Putting the size of operations into context, Shariff noted that CIMB Islamic is the second largest Islamic bank in Malaysia as well as the largest Islamic window in Indonesia. He acknowledged that the on-set of the COVID-19 pandemic has really shifted focus, making management more aware of the role that Islamic banks can have in promoting inclusion and serving local communities. Talking specifically about CIMB Islamic’s Malaysian operations, Shariff highlighted that the development of Islamic finance has taken on a more structured, top-down approach, given that it has always been a part of Malaysia’s national agenda, with a clear roadmap and a central push to develop and grow. As such, industry growth in Malaysia has been quite fast, albeit with less differentiation and experimentation. Indonesia, on the other hand, has witnessed Islamic finance growth led by the community and whilst this has been less structured and centrally planned, a key benefit of this approach has been a variety of new products offered through active experimentation, resulting in unique ideas with a stronger level of affinity amongst the Indonesian community. Given these differing approaches, Shariff pointed out that the experiences in both countries presented key takeaways for cross-implementation of best practices, where CIMB Islamic’s Malaysian operations need to engage more with the community, and Indonesia’s operations could seek ways to better mobilise larger amounts of funding for infrastructure development within the country. Shariff then delved into specific initiatives taken by its two operations to adjust to the new normal in the wake of the on-going pandemic. Commencing with Indonesia and given the sheer size of the country and its immense population, Shariff noted that there were varying degrees of effectiveness on the part of the government to serve its local communities. This has given rise to several community-based organisations in Indonesia, whereby the local communities self-organise and pool in their resources to meet the needs of the community and ensure that no one is left behind. Shariff stated that CIMB Islamic had capitalised on this opportunity and developed a cash-management solution for communities, allowing them to pool in the funds together and then effectively mobilise their resources as needed. Using an example out of Malaysia, Shariff explained how CIMB Islamic had made changes to how it distributes Zakat funds on behalf of Zakat authorities, by using it as part of a more effective, consumer-engaged assistance that will help to develop communities for the long-term. In this regard, Shariff discussed the entrepreneurship program introduced four years ago, where CIMB Islamic focuses not only on handing over funds to the needy, but rather on providing end-to-end solutions through the development of a hybrid model starting Financial Inclusion From Islamic Banking's Perspective 04 Training and mentorship 03 02 Social finance tools: Zakat, Waqf, etc Community development Finance entrepreneurship programmes 01 from social financing and ending with commercial financing. According to Shariff, this inclusive model supports these individuals and communities, making them self-sufficient, essentially converting Zakat users to Zakat payers, and potentially creating micro-financing customers for CIMB. Signatory of UN PRB: Vicary then directed the discussion onto the challenges posed to CIMB as a result of having become a United Nations Principles for Responsible Banking (UN PRB) signatory a year earlier. Shariff confirmed that this adoption was a necessity and that it was better to adopt a more voluntary approach now than being forced into its adoption in the future. Shariff acknowledged that adopting these new value-based initiatives would take time, and in that sense, a systematic adoption would work best. Shariff also commented on CIMB Group’s internal policy frameworks, citing the adoption of sustainability considerations into credit policies as an example. The next focus area would be converting behaviour to be in line with CIMB’s Sustainability values. Shariff spoke of the bank’s sustainable exporter initiative in collaboration with Malaysia External Trade Development Corporation (MATRADE), which aims to engage small, medium enterprises (SMEs) and train them to become sustainable exporters, further supporting their financing requirements to ensure that all standards are met. Overall, Shariff noted that CIMB Islamic was seeking convergence in the values it upholds with the national agenda of Malaysia to ensure that Malaysia as a whole, remains competitive. Shariff also stated that simply moving to a majority stake of sustainable financing in terms of asset base was meaningless unless CIMB Islamic could deliver added value to its customers, and more importantly customers could clearly identify this value creation. Digital Readiness During Crisis: Shariff explained how CIMB’s Touch ‘n Go E-Wallet service was of particular importance during the height of the pandemic, allowing the Group to continue to effectively serve its customers. Added to this, Shariff observed that emerging fintech players in both its core markets (Indonesia and Malaysia) offered unique value propositions, which made collaboration more desirable. Shariff’s view was that in the digital space, learning from other fintech players is crucial to ensure business readiness during this turbulent phase and adopt what works best for the bank. Vicary then questioned Shariff on his thoughts regarding the five digital banking licenses being offered by Bank Negara Malaysia (BNM), and the ability of digital banks to create more impact and increase inclusion. Shariff highlighted that financial inclusion and a community approach were already part of the conditions imposed by BNM as part of its guidelines to digital license adoption. Speaking on CIMB’s digital journey, Shariff touched upon the 3Ds (Data, Digital, Disruption) workforce target, an internal initiative to ensure digital readiness by investing in staff training. Given this, CIMB has rolled out several group-wide training programmers, covering areas such as data science and programming for example, to ensure that the bank can capitalise on the digital economy. In his closing remarks, Shariff concluded that effective use of data was the single most important focus area for CIMB Islamic that could bring about a significant amount of change in the way the bank adapts to becoming a more inclusive organisation focused on serving local communities. Shariff noted that a lack of adaptation to this change would pose challenges to the way in which the bank is able to sell to the market. Watch again on IslamicMarkets.com