Yousaf Hussain, Presi-dent & CEO Faysal Bank, has around 25 years of diverse professional experience. Yousaf has also been at the forefront of two banks acquisitions and integration transactions. He has been with Faysal Bank since August 2008 and was elevated in early 2017 to become the President & the CEO of Faysal Bank Limited.

Under his leadership, the Bank has embarked upon a well-structured plan to convert into a full-fledged Islamic Bank from a conventional bank. Simultaneously, the Bank has also adopted a growth strategy through major network expansion, new product offerings and enhanced distribution efficiency coupled with customer centric approach and increased focus on technology.

Yousaf is an Electrical engineer with an MBA from Lahore University of Management Sciences. He is a member of the Executive Committee of Pakistan Banking Association, a Council Member of the Institute of Bankers-Pakistan, Director at Pakistan Business Council and Pakistan Institute of Corporate Governance. He is also a member of the Management Committee of IBA- CEIF (Centre for Excellence in Islamic Finance).

Following are the edited excerpts of a recent conversation BR Research had with Mr. Yousaf Hussain:

BR Research: Can you tell us about Faysal Bank’s ongoing transition from a full-fledged conventional bank to a full-fledged Islamic bank? Why do you think it’s a good decision?

Yousaf Hussain: First of all, our parent entity is Islamic, so it made sense for Faysal Bank to have wholly Islamic banking operations.Majority of Faysal Bank’s shareholding rests with Ithmaar Bank Bahrain, which is a subsidiary of Ithmaar Bank which in turn is a subsidiary of Dar Al-Maal Al-Islami Trust (DMI)

Second, from a commercial perspective, the growth and opportunities in Islamic Banking were apparent. Apart from the Islamic banks, today, almost all conventional banks have a commercial orientation towards Islamic banking. So I would say growth opportunities within Islamic banking space are strong reasons for Faysal Bank’s transition.

Yes, it was a mammoth challenge regarding the decision to convert and grow. Not only have we been converting, but we have also been expanding. From over 250 branches, we will close this year at 700 branches. Plus, there was a personal inclination of the Board to do the right thing from belief perspective.

We planned this conversion for over 1.5 years when we first started it. However, we soon realized that it was much more complex and subsequently engaged PWC who helped develop a Business Transformation Plan for us that envisaged 3-5 years for the planned conversion. The plan segregated the complete conversion of Faysal Bank into various parallel and interdependent journeys. The parallel journeys included systems, procedures, and processes which unfortunately did not exist or were not well defined for Islamic banking at the time. The parallel journey thus entailed a program where the first 2-3 years were inward-focused, as we prepared ourselves for this massive conversion.

At the same time, we were expanding our branch network also. After three years of inward-focused exercise, almost a million customers have converted since we moved on to the actual conversion. We were pleasantly surprised at the response of our existing conventional banking customers who were very receptive to switching to Islamic banking. When presented with a choice, we saw that the existing customers preferred Islamic even though the rates, at times, are lower in Islamic banking than in conventional. A study done by SBP also reaffirmed that the availability of Islamic banking branches is also an important factor for the unbanked population. Unfortunately, the windows of Islamic banking have been unable to lure in these people. The whole conversion process included the conversion of old branches, the transformation of customers, and the parallel opening of new branches. It was encouraging to note that we did not lose deposits or customers in the process; instead, we grew at a faster pace.

BRR: How much workforce contribution did this change require?

YH: It would be best to have a team of believers in a cause. This is exactly what we needed for a successful transition. The conversion of Faysal Bank was not only a cause for the board but also for many in the management. This resulted in the drive and commitment that was required for this transition. I believe that it is a journey of faith, belief, and commitment. We did not have a track record or any example on a global basis, no model or framework - the model was built from scratch.

Besides the mechanical change that included systems and processes, a considerable part of the transformation focused on the mindset change of our people most of who were professionally trained in the conventional side of banking. It was important to inculcate a sense of belief and understanding of Islamic Banking and motivating them to stay committed to the cause as the right thing to do not only at a professional level but also at a personal one. When you believe in something yourself, it’s easier to sell it to others. And in this case, mindset conversion internally at a personal level helped us grow and get more customers. We made them understand the Islamic Banking concepts, its differences and how it matched with Quranic guidance on Riba. They were deeply motivated & inspired through heart & soul with a firm belief that riba-free banking was indeed a better choice for them as individuals, as a conduit for rizq.

And then, leadership plays a significant role. This is a cause where you must fully and personally commit to making the change happen. I look up to Maulana Taqi Usmani, a legend in Islamic banking. I engaged in consultations with the veterans of Islamic banking and mypeers, who guided me that the approach would only work if it was top down; where there is belief and commitment at the top that you are doing the right thing - not just for commercial purposes.

At the professional level, the Islamic banking sector is the fastest-growing sector, with untapped opportunities and better profitability. This convinced the management at the professional level of the kind of growth we were achieving, given the arduous task of conversion that we were undergoing.

BRR: The conversion from a conventional to an Islamic bank must come with some changes to the Bank’s principles and values.

YH: As a quintessential requirement of our transformation, we introduced new corporate values for everyone to live by based on the concept of Ehd-e-Nas Sirat Al Mustaqeem. These relevant new values which are in sync with our overall strategic direction resonated very well with our employees and customers at a personal spiritual level and strengthened their resolve to stay committed to the right path. Besides searching for the right path to follow, other values relevant to Islamic banking include compassion, passion, teamwork, truth, trustworthiness, etc. This journey of redefining our core values, making them relevant for our people, and propagating them with our customers is an on-going process of self-improvement.

BRR: Without going into detailed differences between Islamic banking and Conventional banking, how do you ensure that the products offered are 100 percent representative of the Islamic teachings or ruling by various religious sects?

YH: At times it is considered fashionable to critique Islamic banking. However, like every regulated sector, it has its regulations and methods. Every Islamic bank has a Shariah board comprising qualified people for this sector. They are backed by the Shariah board of SBP, a very representative board of the differences in beliefs among various sects. So all the offerings by these Islamic banks are approved by their Shariah board and the central bank’s Shariah board. Hence, Islamic offerings are as authentic as they can get. The issue in Islamic banking is the gap in understanding by the general public. And we are trying to play our role in narrowing that gap.

BRR: You spoke about a mindset change. But we still don’t see Faysal Bank’s name as an Islamic bank in the industry like some pioneers. Does it not make you vulnerable to criticism that you are only converting for commercial reasons or your parent company’s instructions?

YH: We are cognizant of the fact that change does not happen overnight, especially one that involves mindset and behavioral change - it is a process. Yes, there are challenges, but we have also seen successes. As I mentioned, it’s not just conversion; we have been growing and expanding and getting new customers in our new branches. We did not face attrition in customers and deposits in the conversion process, which shows that we are getting there. We were also rated independently by an International Islamic rating agency for our products, people, processes, etc. and received the highest Shariahrating attainable in Pakistan, indicating that we must stand well against the standards required for an Islamic bank.

It is still a journey, and there is room for improvement. However, we have been able to change the mindset within the organization; embedding it in the bank’s culture, where it becomes second nature. We have also invested in our brand identity and revamped it with a fresh logo and corporate tag line of “Barho – Yaqeen Kay Saath”. The new brand logo and imagery coupled with the brand’s personification in all our communication as an Islamic Bank is helping strengthen our Islamic identify. The certification, done externally, also reaffirms our resolve to provide the best Islamic banking products and services. Last but not least, the Bank’s leadership at the board and management levels is aligned on the belief of doing the right thing and is committed to being the change agents.

BRR: When did the actual conversion of the bank begin, and how long is it before you are completely transformed into a full-fledged Islamic bank?

YH: We started in 2016-17, which is around six years. We are still opening branches and will be 700 by the year-end. Currently, weonly have one branch at this point, which is conventional and this too will be converted very soon. Every other branch has been successfully converted. Some treasury positions are left. We have a small portfolio of PIBs and T-bills being shed off. Term deposits will be converted at rollover. We have assets (loans) that are not convertible, which will be novated. Insha’Allah we hope to become a full-fledged Islamic Bank by end of this year.

BRR: What does the future hold for Faysal Bank?

YH: One of the pillars of growth for Faysal Bank is and will be technology. We believe in it, and we have been investing in the infrastructure which will support future development on the digital side. The thing with digital is that it is the enabler that helps the person doing the transaction. Digitizationin Pakistan has still not reached the level where one can be solicited via a digital channel. So our bank is embarking upon a complete digital strategy that includes account opening and lending, products and services. We aim to park all the digital acquisition channels under the digital function. This basically means that along with the routine business, we will focus on targeting new customers through digital channels. This kind of technology is already applicable in Roshan Digital Accounts, but we are not using it in local settings. We have started working on that. We think that the expansion in inclusion and conversion will have to be facilitated through value addition, relationship building, and incentives to make the decision easy for the customers.

BRR: During the journey, how does Faysal Bank feel about the financial inclusion of women, diversity, and community?

YH: Diversity and Inc-lusion remain at the heart of our core values at Faysal Bank. We are the highest within the Banking sector in terms of financial inclusion and diversity of women. Nineteen percent of our staff are females, and we are an equal opportunity employer. Slowly but surely, we want to take this percentage to 25 percent with female representation at all levels.

We are also very active in CSR activities. In light of Islamic teachings, we strongly believe in compassion and giving back to the community. This has laid the foundation for the Faysal Islamic Rehmat Accounts, which embrace the Islamic value of compassion (Rahma). Upon maintaining a Faysal Islamic Rehmat Account, Faysal Bank pays for the treatment of underprivileged patients at The Indus Hospital or Shaukat Khanum Hospital from its profits without any deductions of any sort from the customer’s account so it can continue to go the extra mile to protect the community and provide care and treatment to the underprivileged which also include young children suffering from various types of cancer. Two kinds of Rehmat Accounts (Individual and Business) provide a host of unmatched free services and transactional benefits.