Ajman Bank to focus on UAE amid global Turmoil

03 Nov, 2008

Ajman Bank said it could curb its foreign growth plans to focus on the United Arab Emirates in light of the global financial crisis, but it believes Islamic banks could benefit from the turmoil.
"We need to be extremely careful at this stage whether we will consider investing anything outside the UAE market," Chief Executive Officer Yousif Khalaf told Reuters in a telephone interview.
"Before we had some sort of allocation for overseas investments. I think at this stage we will probably restrict it to the local market and wait and see how things will develop." The seventh Islamic lender in the UAE, Ajman Bank listed on the Dubai bourse in June, saying at the time it planned to establish itself in the UAE then look to other Gulf and Islamic countries for future growth.
The credit crisis has since caused turmoil in international markets and has also squeezed liquidity in the UAE, the world's fourth largest exporter of crude oil, prompting the government to offer banks extra funds and guarantee deposits.
The crisis is widely expected to slow down a Gulf Arab real estate boom, which is also prompting Ajman Bank to rethink its strategy.
"When it comes to the strategy to allocating our assets to liquidity positions and risk management scenarios, those will all be revisited because obviously now there is a need to set aside more liquidity than before, just in case," he said.
"Real estate has been one of those sectors which may face some difficulties so obviously we have to be careful. Some sectors in which we feel more comfortable are trade finance, financing small to medium-sized enterprises, consumer finance."
The bank expects to open its first flagship branch in Ajman, one of the seven emirates comprising the UAE, in the fourth quarter, as planned. Khalaf said it would also have a presence in the main emirates, Dubai and Abu Dhabi, in the next year.
As Ajman Bank has yet to make major investments, it has escaped lightly from the financial turmoil, and Khalaf said that Islamic banks could ultimately benefit from the crisis that has hit confidence in conventional banks.
Demand for investments and financial services that comply with Islamic law - which includes a ban on interest - has already been growing as Muslims seek what they see as more ethical ways to invest their money.
"Our money is physically placed with local Islamic banks in the form of deposits. So it is a blessing for us because at least we are in a better position to assess what is happening in the market and revisit perhaps our strategies," Khalaf said.
"Because of the recent events I think Islamic banking has proven to be stronger. The nature of Islamic banking, the way that business is done, because it is basically asset-backed which I think puts it in a much stronger position."

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