Since that time Islamic banks and institutions have grown at a considerable pace and history has not shown any trends to reveal any slow down. In fact, many trending studies have indicated that the industry should continue to grow at a rapid pace annually over the next few years. According to Arabnews.
com, as of January 2008 the Islamic banking industry is set to achieve an estimated 20% growth annually. Management consultants McKinsey & Co have forecasted the sector to reach $1 trillion in assets by 2010.New sukuk instruments have been introduced recently to the market to aid in liquidity management. Another booming part of the Islamic banking industry, the sukuk market has grown considerably in the last few years (from $8 billion in 2003 to $70 billion in 2007) and is poised to grow at an even more rapid pace in the near future, with projections of $140 billion in three years. Kuwait Finance House (KFH) is one of the largest Islamic banks in the world.
Incorporated in the State of Kuwait in 1977, Kuwait Finance House (KFH) is listed on Kuwait Stock Exchange.KFH has operation in many countries like Bahrain, Turkey, Jordan and Malaysia and has banking affiliates in the United Arab Emirates, Singapore, Australia, Oman and Bangladesh. In terms of ownership, the Government of Kuwait owns 44. 26% of KFH’s equity, and the general public holds the remaining shares. As a market leader in the Islamic banking industry in Kuwait, KFH is engaged in providing Islamic banking services, including consumer banking, real estate financing, lease financing, trade finance, direct investments and portfolio investing, all of which are conducted in strict compliance with Islamic law.
KFH has total assets and total gross profit amounted to USD32 billion and USD1. 92 billion as at the end of 2007. Kuwait Finance House (Malaysia) Berhad (KFHMB) is a wholly-owned subsidiary of KFH and was officially opened by the Honourable Prime Minister YAB Dato’ Seri Abdullah Bin Haji Ahmad Badawi on 17 February 2006. The date of commencement of operation is on 8 august 2005 after Islamic banking license was granted by Ministry of Finance from May 2005. The main office as well as the first KFHMB branch in Malaysia is at Etiqa Twins, Jalan Pinang, Kuala Lumpur.
As at 8 May 2008 KFHMB has 4 branches which are in Shah Alam, Pulau Pinang, Pavilion Kuala Lumpur and Taman Molek (Johor Bahru). By the end of 2008, KFHMB plan to open another branch in Klang and Kuching. KFHMB has an initial paid-up capital investment of RM380 million and its capital increase tremendously to reach RM727 million in May 2008.
For the year 2007 KFHMB own worth of US$1. 5 billion assets and US$7. 3 million net profits. KFHMB currently have 588 staff and the number of staff will increase in near future as the company plan to open a new branch in some selected states for the future growth.As the first foreign Islamic bank to be licensed by the Ministry of Finance, Kuwait Finance House (Malaysia) Berhad aims to ensure and maintain close relationships with customers by providing exceptional service that suits any specific need. KFHMB businesses cover divisions such as Corporate and Investment, Commercial, as well as Retail banking. Kuwait Finance House is the first foreign bank that has been given license by Bank Negara Malaysia to operate in Malaysia.
Few years later, two foreign banks, Al-Rajhi and Asian Finance, entered Malaysian Islamic Banking market.Hence, besides the local competitors Islamic bank in Malaysia, those three foreign banks have expand the number or competitors for KFH. Bank Islam emerged as Malaysia’s maiden Shariah-compliant financial institution when it commenced operations in July 1983. Since then, Bank Islam has become the symbol of Islamic banking in Malaysia. From only RM80 million initially, Bank Islam’s paid-up capital swelled to RM1.
73 billion as at June 2007, which was instrumental in making possible the growth of its assets and the implementation of its expansion programmes.Being a pioneer, Bank Islam has played a leading role in promoting the expansion of Malaysia’s brand of Islamic finance into other markets, especially in the region. This has helped develop Bank Islam into a well-established and universally recognized brand. With another strong earnings of RM182. 3 million profit before zakat and tax (PBZT) for the six months ended 30 December 2007, Bank Islam Malaysia Berhad (Bank Islam), today signaled it will be more aggressive in growing market share.CIMB Islamic Bank began as the Islamic financial boutique of CIMB Banking and became a universal Islamic bank following CIMB’s merger with Commerce Tijari in 2005. It has more than 100 Islamic investment bankers and specialists in shariah-compliant finance and is the leading underwriter of domestic sukuk. CIMB Islamic offers investment banking, consumer banking and asset management products and services.
Last year CIMB launched Malaysia’s first private banking service based on shariah principles.It cited growing demand for Islamic wealth management products, including sukuk, equity-linked notes and structured products. CIMB Islamic has been awarded for Regional and Country Award by Islamic Financial Institutions Awards in an annual survey of Islamic finance in 2008. CIMB Islamic has been the top lead manager for Islamic bonds in Malaysia since 1990 with an average market share of 20% and it commands a 27% market share of the Sukuk market globally (Hill ; Knowlton, 2005). Maybank, one of KFH’s competitors has become the country’s Islamic banking leader with an asset size of over RM23 billion.”Over the last 5 years, we have more than doubled our total Islamic assets as well as financing and deposits, giving Maybank a clear dominance in Islamic banking. Our market share for Islamic financing for instance, stood at 25% as of end October 2007.
In certain segments, our dominance is even greater. For example, in Islamic trade financing, our market share stands at 47% while in Islamic home mortgage, we have 33% market share,” said by Datuk Amirsham A Aziz, President and CEO of Maybank.Asian Finance Bank Berhad (AFB), a full-fledged Islamic Bank, was incorporated on 28 November 2005 and backed by a consortium of Shareholders from leading Middle Eastern financial institutions which consists of Qatar Islamic Bank and associates (70%), RUSD Investment Bank Inc of Saudi Arabia (20%) and Global Investment House of Kuwait (10%). AFB believes that the way for them to grow and expand is by forging strategic collaborations with the Islamic investment banking fraternity in Malaysia and abroad.Building strategic partnerships and an ability to offer innovative products that focus on customer needs are deemed to be important foundations for the bank’s success (Dhesi, 2008). Similar with KFH strategy, AFB perceive to act as a bridge for local companies in Malaysia to venture into the Gulf Cooperation Council (GCC) countries and vice-versa.
Al-Rajhi Bank is the largest Islamic banking group in the world recognized for being instrumental in bridging the gap between modern financial demands and intrinsic Islamic values.One of the fastest growing and most progressive banks in Saudi Arabia, it owes its banking excellence to its unwavering commitment to Shariah principles and the use of technology to offer diverse products to meet customer needs. Though Kuwait Finance House can be said that it is the second largest Islamic bank worldwide after Al-Rajhi, nevertheless, KFH does not consider Al-Rajhi as one of its competitors as Al-Rajhi has more focus on retail banking services (B2C) while KFH focuses more on B2B relationship (loans to businesses).