The Islamic finance market is likely to grow at a steady pace in 2007-08, with the positive macroeconomic environment supporting the banking sector working in its favor. Over the past five years, the industry has matured in terms of size and sophistication and it is no longer viewed as outlandish by Western institutions. Indeed, according to research by the National Bank of Abu Dhabi, Islamic banking assets accounted for 13.1% of total banking sector assets in the UAE in the third quarter of 2006. And, as it is growing at a faster rate than conventional banking, it is predicted that the Islamic sector could account for 20% of the market within three years. Abu Dhabi Islamic Bank, the emirate's main Islamic financial house, is an example of this positive trend, thanks to some innovative ideas such as a sharia-compliant credit card. It closed 2006 with assets valued at about $8.06bn. Meanwhile the takaful, or Islamic insurance market, is seen as having potential for growth - of the 49 insurance firms in the UAE, only three are currently designated takaful firms, two in Dubai and one in Abu Dhabi. There are challenges in the Islamic finance sector, however: an increasingly crowded market; the lack of an adequate Islamic inter-bank market; and the prospect of banking yields narrowing in the future to a level which Islamic banks cannot absorb. While the market has grown during the good times, some analysts wonder how it would fare should the economy experience a downturn.
Abu Dhabi Islamic Bank was established on 20th May 1997 as a Public Joint Stock Company through the Amiri Decree No. 9 of 1997. The Bank commenced commercial operations on 11th November 1998, and was formally inaugurated by Abdullah Bin Zayed Al Nahyan, UAE Minister of Information and Culture on 18th April 1999. All contracts, operations and transactions are carried out in accordance with Islamic Shari'a principles
ADIB's Investment Banking division has two main functions: firstly, to manage ADIB's portfolio of listed and private equities and funds, strategic investments, income producing instruments such as Sukuks and real estate investments; and secondly, to develop and operate ADIB's investment products, asset management and investment placement business. The Investment Banking Department reviews all investment opportunities presented to ADIB or otherwise identified by it for inclusion in the proprietary portfolio or for structuring into an investment vehicle for ADIB's clients. All investment proposals or funds must meet certain criteria set by an Investment Policy and must be further reviewed by ADIB's Credit & Risk Committee and finally approved by ADIB's Executive Committee. A guiding principal of structuring funds is that ADIB must be prepared to risk its own proprietary money in its own products. So co-investment is often part of a fund launch strategy. The Investment Banking divisionis responsible for developing asset management products and services which are distributed to ADIB's customers by the Investment banking in the first instance and then by Private banking, Royal banking, Retail, Commercial and Corporate divisions.
Vision Of The Bank
The vision of the bank is to become the premier universal Islamic financial institution, operating in accordance with Shari'a principles, by sharply focusing on customer needs, offering innovative products and services, motivating and rewarding our employees, and using state-of-the-art service delivery systems, while maximizing investors and shareholders' returns'
Mission Of The Bank
Develop a corporate culture that revolves around satisfying customer needs.
Provide customers with quality, cost-effective and Shari'a compliant financial services.
Use financial innovation to satisfy the varied preferences of depositors.
Use state-of-the-art technology in developing banking products and services.
Ensure that each employee's goals and objectives are aligned with those of the Bank
The information on Islamic Banking & Finance is available in many forms, e.g., PhD dissertations (El-Bdour, 1984; Khan, 1983), books written by leading academics and practitioners (e.g. Homoud, 1985; Shirazi, 1990), published research in the form of reports (Ahmad, 1987; Iqbal and Mirakor, 1987) and journal articles (e.g. Erol and El-Bdour, 1989; Erol et al., 1990; Shook and Hassan, 1988; and Sudin et al., 1994). Because of Riba, Islamic banks have had to develop financial products which are not in conflict with the Sharia'h. The task has been achieved by creating a number of special financial products (Ali and Ali, 1994).
Similar results can be seen when comparing Dubai Islamic Bank (Islamic) with National Bank of Dubai (conventional) - two banks under Dubai Government (Figure-6). Exceptionally larger growth for the Abu Dhabi Islamic Bank may be due to its short history - the bank might be growing at this unprecedented rate because it has recently come to fulfill the unsatiated need of the people of Abu Dhabi (or UAE). But, the growth rate of Dubai Islamic Bank, the oldest Islamic bank of the modern world, provides enough empirical evidence in favour of much larger growth rates for the IFBs.
In addition to establishing attitudes towards Islamic banking, Erol and his co-researchers (1989 and 1990) sought to establish, then compare, the bank selection criteria of customers of conventional and Islamic banks in Jordan. Sudin et al. (1994), among other things, sought to establish the relative importance of certain bank selection criteria using a sample of Muslims and non-Muslims, none of whom had to be patronizing an Islamic bank at the time of the study. The three most important criteria in the bank selection process for Muslims were: first, "the provision of a fast and efficient service"; second, "the speed of transaction"; and third, "friendliness of bank personnel". As regards the non-Muslims, the three most important bank selection criteria were: first, "friendliness of bank personnel"; second, "the provision of a fast and efficient service"; and third, "the reputation and image of the bank".
In this context we can assume many problems affecting the Islamic bank System; from these problems we can include the following:
1- Islamic banks cant cope with all needs of customers
2- Islamic banks only work under sharia laws while some people like to obtain direct loans.
The main problem, both for the banks and for the customers, seems to be in the area of financing. Bank lending is still practiced but that is limited to either no-cost loans (mainly consumer loans) including overdrafts, or loans with service charges only. Both these types of loans bring no income to the banks and therefore naturally they are not that keen to engage in this activity much.
The research methodology was mainly conducted through collecting information, researching, and designing a questionnaire. Some visited were made do the bank and where the questionnaire was answered by concerned business department. Other information was obtained by surfing the net and reaching relevant data about the bank.
The questionnaire was designed to be answered by one of the bank principals and later questions and answers were revised and included in the study. Results were extracted from the questionnaire and facts were collected. The questions included in the data were only concerning the market mix of Abu Dhabi Islamic bank.
The questions included different kinds of questions like
1- yes , no questions
2- open end questions
Comparisons between (Islamic and Traditional) Banks, for more information see the Appendix:
Based on Shari' a loans
Based on secular banking loans
Equity financing with risk to capital
o Provide equity capital
o The enterprise can be in one of several forms of financing is through Mudarabah, Musharaka
Not generally available through commercial bank
Profit and loss sharing
Returns are available and not guaranteed
Risks are managed to ensure better returns than deposit account
· Depositor doesn't share in the success of enterprise beyond
· Depositor can't theoretically gain subject to improve bank performance
Promotion And Advertising Strategies
New ways of promoting for product and services must be considered, especially if there is an online existence. In addition, it is important to know what the targeted market is. The majority of the banks use almost the same ways to promote their products and services by marketing in:
Nowadays, advertising online takes a large part, where most of the banks have an online existence and attract large number of customers online. For example, Dubai Bank creates an attractive image by promoting and advertising in a unique way in their website and local newspapers.
Client needs can be satisfied in three main ways that most of the banks in the UAE do use:
Online banking: transactions can be done by registration from the bank's website.
Visiting branches: specific transaction can physically be done through the banks branch.
Phone calls: Calling the bank's 24 hours line can do some transactions and give clients the chance to put orders; some banks like Mashreq Bank have a 24 hours free number to receive customers' orders.
ATM's: Clients can withdraw cash by using ATM's, which are located in many places like malls, banks,
Product And Services
There are many services and product that ADIB offers to its customers to attract them to the bank such as: Al Barq telephone banking which allows the customer to execute his business while sitting at home or his office by just calling the toll free number“8002288” and following the instructions.
Another service that the bank offers is sending SMS messages to the customer allowing him to follow the transactions that are going on his account when he withdraw cash or paying using Visa Electron.
ADIB offers a very selective range of investment products carefully designed to produce excellent risk adjusted returns while being Shari'a compliant. The productsinclude a balanced fund (exposure to global Equities and International Ijara), Sukooks and a US property Fund. Before being offered to our clients the products undergo a rigorous due diligence process which seeks to ensure that the products meet important risk/return criteria.
Al Khair is one of the products that ADIB offers to their customers and it is simply to help them in their financial liabilities. The thing that makes AL Khair special is that they are using fixed rates, payments could be till 72 months, there are no administrative fees or extra charge for late payments, and rewards on early payments.
There is a competition between banks, to provide and satisfy the customers needs.
Every bank in the UAE presents different services such as:
Cards: Credit and Debit Cards
Deposit Accounts: Current, Savings Accounts and Term Deposits
Loans: Personal Installments, Car, Real Estate Loans and Loan Calculator
Private Banking & Investment Services
Online services (limited banks, example: National Bank of Dubai and emirates Bank International)
1- What are the pricing objectives?
2- How to set the prices?
3- Should there be a single price or a multiple price ?
4- Should price change in various geographical areas, referred to as zone pricing?
5- Should there be quantity discount?
6- What prices are competitors charging?
7- Do you use a price skimming or penetration pricing strategies?
8- What image do you want the price to convey?
9- Do you use psychological pricing?
10-How important are customer price sensitivity and elasticity issues?
11-Are there legal restrictions on retail price maintenance, price collusion, or price discrimination?
12-Are there transfer pricing considerations?
13-What is the chance of getting involved in a price war?
14-How visible should the price be? Should the price be neutral/
15- What sort of payment should be accepted?
1- What products are offered?
2- Who are the target customers?
3- How do the products reach those customers?
4- Why the company thinks that customers prefer their products to those of their competitors?
5- How many product lines does the company have?
6- In which stage is your product? (Decline maturity)
7- Are any of your products going under auditing?) Improving, detailing and modification)
8- What branding strategy do they have?
9- How does your design of broachers make it more attractive?
10-Do all your products go through all stages of products planning and development process?
11-Does the company customize their services according to the needs of the customers?
1- Are the company products sold through retailers?
2- Are the company products distributed through wholesale?
3- Are the company's products multi-level marketing channels used?
4- How long is the channel? How many remembers?
5- Where should the product or service be available?
6- Is the companies' distribution exclusive, selective or intensive?
7- Who controls the channel?
8- Are the companies' channel relationships informal or contractual?
9- Are the companies' channel members sharing advertising (cooperative ads)
10-What electronic method of distribution should be used( internet)
11-Does it cost to keep an inventory of products on store shelves and in channel warehouses (referred to as filling the pipeline?)
1- Which promotion techniques (ads. Direct mails) is most effective?
2- How is the budget allocation down for promotion?
3- Which element of promotion mix do you use in promoting your products( ads, sales promotion, PR, direct marketing)
4- How helpful has the marketing plan been/
5- Who determines the price of the services and the products in the bank?
6- What is the sales promotion strategy (push and pull)
7- Which types of media, ix does the company use? (Newspapers, magazines, internet)
8- What are the different types of message strategy does the company use?
The kinds of products in the bank have important implications for the survival, profitability, and long run growth of the bank. The bank has many types of products, the matter that copes with clients' needs and increases the services of the bank. These kinds of products and services produced bring the purchaser a feeling of self-enhancement and security in addition to the tangible benefits they offer.
The bank tries to exercise flexibility in the types of products and services they offer, bearing in mind the fierce competition in banking services, the bank by doing so, increasing its efficiency and approves its good posture in the banking industry in the UAE. The different kinds of products offered by the bank helps the marketing manager program in developing his marketing strategy in the best way possible in a way that flexible and convincing products attract the clients and support the role of market mix and the marketing process at the same time. In addition to the diversity in products we found out the quality approved by the bank which we could describe as compasses both tangible and intangible aspects. Though the bank is newly opened but the quality, different, and competitive products help the bank in forming its brand name and build its independent cornerstones.
Their products are not corporate products but services. They are services to provide for the big business sector in terms of size of products. They try to accommodate that particular product and this particular product and do the financing for them in whatever way suits their needs. They go into the details and see whatever Islamic structure can be applied to this particular project and give advice to the investor or the client and tell him that they can do it is such a way that will be more beneficial for them, and they tellhim the period of time and guide them through the entire process as a partner. The customer likes it. It is more work for them, but they definitely secure themselves with such a practice. The customer doesn't mind that marginal increase in the profit that they take, compared to other banks, where they sell themselves or go extremely low in their prices.
Regarding the pricing strategies we can find out hat the prices are related to the products and services in many ways. The prices competitive and attract the clients to deal with the bank and trust its products. The prices are not too high nor too low , in a way that they don't lead to a loss nor give clients an opportunity to buy competitive products. The pricing policy makers in the bank consider demand and supply in pricing the products and the services and bearing in mind the demographic factors, psychological factors and the price elasticity. The three considerations are relatively considered to increase the clients' perceptions to the services and products given and increase the competitive advantages as well. Pricing policies are derived from corporate objectives to maintain profits in the long run.
The promotion strategy adopted by the bank is a kind of interrelated relationship with the customers and based on professional concepts to attract the clients using many kinds of communicational tools like advertising through the media, sales promotions, public relations, direct marketing and personal selling. The bank makes sure through its promotion campaigns that its products and services are well advertised, well publicized and well delivered to the clients. Marketing campaigns change over time and place depending on the needs of the clients, the changing needs of the market, competition and product life cycle. Integrated marketing communication is also adopted by the bank to allow potential buyers to experience the services and products.
Islamic banking is about not taking advantage of the other party. Islamic banking is about safeguarding everybody's interests, being fair, and being honest with the other party, such that both parties benefit. An Islamic bank cannot take advantage of your needs as a customer, and has to share the risk with its customers. Customers are in need of something and the bank has to help them; The bank has to work together with customers to try achieve their goals. The bank provides them with help such as financing, and they have the idea, they create the opportunity, where both parties benefit as a partnership.
The locations of the branches of ADIB consider its being sufficient to attract clients in all the cities in the UAE. The locations are carefully chosen in order to distribute the products in exclusive, selective and intensive ways. The location of ADIB has played a significant role for the development and the marketing since it occupies very remarkable places all over the cities it exists in, for example the bank occupies very distinguished places in Al-Ain the places are as follows:
1- The town centre ( clock roundabout)
2- Murabaa district( opposite to Al-Ain Mall)
3- Jimi district( Inside Carrefour)
The three places are very remarkable and important places since they are crowded with thousands of people who go shopping or do a business. In all locations, ADIB enjoys good sites and convenient parking lots for the customers that customers don't feel parking their cars a very hard job. The locations are very easy to reach by the clients passing by the centre of town. The can make use of the ATM machines working 24 hours.
Conclusion And Recommendation
Over the past few years, the Bank has witnessed many successes that have drawn an increasing number of customers and dealers to its fold. As the leading Islamic Bank in the region, Abu Dhabi Islamic Bank offers a range of Islamic financial products that offer innovative financial solutions to individuals. It is evident that Islamic financing has proved itself in the UAE and has become a practical legal choice that competes with traditional financing.
ADIB-About us-ADIB Financial Info." Abu Dhabi Islamic Bank. 29 Feb. 2005 <http://www.adib.co.ae/Main_E/Index.asp?dff=ofnI%20laicnaniF%20BIDA-sU%20tuobA&g=0&i=6>.
"Banks in the UAE." HCT Electronic Library. 28 Feb. 2005 <http://el.hct.ac.ae/UAE/Business/Banks.htm>.
Dubai Islamic Bank
Dubai Islamic Bank has the unique distinction of being the world's first fully-fledged Islamic bank, a pioneering institution that has combined the best of traditional Islamic values with the technology and innovation that characterize the best of modern banking. Since its formation in 1975, Dubai Islamic Bank has established itself as the undisputed leader in its field, setting the standards for others to follow as the trend towards Islamic banking gathers momentum in the Arab world and internationally.
Islamic banking and finance is now one of the world's fastest-growing economic sectors that comprise more than 400 institutions with assets under management in excess of US$ 1 trillion (US$1,000 billion).
In this context, the role of Dubai Islamic Bank is even more impressive. Yet, the bank remains true to its roots as a customer-centered organization where close personal service and understanding form the basis of all its relationships. Tradition and heritage join with a commitment to flexibility, innovation and modernity, so that customers of every nature are provided with comprehensive solutions to all their financial needs.
To be the leading provider of innovative financial services in accordance with the legislation of Allah.
We are proud to be the first Islamic Bank worldwide that has translated true Islamic economic principals into practice, out of firm belief in the need of mankind for an economic system based on the final Revelation. By partnering with our customers in halalearnings, employing best business practices, the latest financial services technologies and placing our trust in Allah, we are confidant of our success.
Calculation of some Ratios:
Calculates Return on Assets (ROA) by dividing net operating income by total assets.
Return on Average Assets = (Net Operating Income/ Total Assets)
= 4,576,457 / 64,433,936 = 0.071.
Return on Equity = (Net Income/Stockholder Equity)
4,576,457 / 8,824,250 = 0.519
Loans to Assets = (Loans / Total Assets)
= 14,991,239 / 64,433,936 = 0.233
Equity to Assets = (Stockholders Equity / Average Total Assets)
= 8,824,250 / 64,433,936 =0.137
Dubai Islamic Bank was established in Dubai in 1975. The economic and business philosophy of Islam encourages generation and sharing of profits. However, it forbids giving or taking of interest. Dubai Islamic Bank is the first Islamic bank in the world to practically implement this concept. Its head office in Dubai, the bank operates through seventeen branches in the UAE.
Type of business is providing banking services of the highest standards according to Islamic Sharia without dealing in riba (interest on money) and by using the-state-of-the-art technology in computer, telecommunication and information system.
Investing funds prudently achieve optimum and not maximum profits, for the mutual benefit of customers and the bank. The Investment Banking Group (IBG) in Dubai Islamic Bank is a trusted provider of integrated capital markets and advisory solution to clients' worldwide working within the jurisprudence of Islamic Sharia. IBG has extensive relationship with corporations, financial institutions, governments and institutional investors in the Gulf Cooperative Council countries and beyond.
Vision And Mission
The Bank's vision is to be a leading provider of innovative financial services in accordance with the legislation of Sharia worldwide.
The bank is proud to be the first Islamic Bank worldwide that has translated true Islamic economic principals into practice, out of firm belief in the need of mankind for an economic system based on the final Revelation. By partnering with our customers in halal earnings, employing best business practices, the latest financial services technologies and placing trust in Allah.