In London to sign off a new Murabaha transaction geared towards a wider European and Asian investor base, the former Hull University graduate says GFH’s investment strategy is widening. “We did some sizeable transactions in the UK and Spain during 2006. Recently we were in Germany doing a real estate transaction for €650m. But that’s not our real focus now. We’re looking at private equity and asset management in the UK, France and Italy as well as Eastern Europe.” Mr Janahi insists GFH is not simply diversifying their business model simply along traditional accepted institutional lines. He says it’s about creating business models alongside existing, solid infrastructure projects, like oil and gas development. “For example, Energy City in India where there’s a mercantile exchange and residential and commercial development. But we’re looking overall at the whole economy to see where the growth potential is. Also, a lot of financial institutions will tend to focus on one market – say, Eastern Europe – simply because of the overall good conditions or economic indicators.” Such an approach is obviously too loose for his taste.
The growth potential of India and China he says is also looking interesting. GFH’s investment approach, he says, comes down to three basic principles. “I call it an A,B,C approach,” he says. “A stands for a positive attitude for all opportunities; B for belief, in the sense that we are strong believers in the transactions that we provide. And C is for commitment. We have strong commitment to the deliverables we promise.” His track record in deliverables appears strong. From GFH’s 1999 inception GFH says they’ve launched projects and investments exceeding $12bn. Projects range from Bahrain Financial Harbour to the Gateway to Morocco and a recent transportation infrastructure development project in Egypt. Exit profits from investments, GFH claims, run between 45 percent and 170 percent in the last three years. And their just-completed Murabaha transaction was considerably oversubscribed from European investors. Sharia’a-based banking is on a roll, obviously.
Nevertheless some argue still that though its rise is welcome, the lack of a clear law or practice applicable to all Sharia’a banking issues – both retail and commercial – is a concern. Put this to Mr Janahi, though, and he says it’s an issue past its sell-by date. “These concerns are old economy concerns of the 1980’s and 1990’s when the industry was just establishing itself. Today when you talk about Islamic banking, you’re talking about $500bn under management with double digit growth potential. There are a lot more sophisticated players in the market too now, like the JP Morgan’s of this world. And accordingly they have their own cross-checking of compliance issues relating to Sharia’a law. Of course, everyone’s had a short learning curve. But these are old economy concerns.” What of Gordon Brown’s claim to make the UK the most Islamic-friendly economy in the world? Is Mr Brown succeeding on this front? “From an Islamic finance point of view, looking at both Europe and the US, most of the focus is still with London. Business comes to London. For example, we have a lot of transactions in the Gulf region. But we came here because you have the right indexation, the right pricing. So, yes, I think it is coming Mr Brown’s way.” However, the adoption of Islamic banking is not without complications for Western partners. When GFH snapped up a £41m property in the Gatwick Business Park in 2002 – now leased to BT – Mr Janahi acknowledges it was a tough learning experience for all, including mortgage provider Nationwide, the deal was one of the first of its kind in the UK constructed on Sharia’a principles. “We had a very good team, and Nationwide were good listeners. “And I think other British banks and institutions learnt a lot from that deal. We are pioneers. And we do share the information with others because we want the industry to grow with us.” Mr Janahi doesn’t spell out the specific problems encountered, but when pressed, he says issues came down to differing mind-sets; Islamic banking in the UK was, until then, primarily retail based. “The learning curve was not just about ethical standards but technical know-how.” Meanwhile, a swathe of established banking names – HSBC, CitiBank and UBS – are now actively mining the Islamic banking sector. Not surprising perhaps when you look at its growth potential. “It’s a good business to be in.” says Mr Janahi, “because if you capture just $1bn this year, your growth potential for the following year – or the next year after that – is very big. You can double your funds under management within two or three years.” He goes on; “If you ask me as a businessman sitting on a board where growth comes from, whether from a region or a product, the first is likely to be single digit, the other double digit. It is a convincing story for decision makers. But you need the right intellectual assets around you. Today you have a lot of graduates that have that know-how. Ten years ago it was much more difficult.”
Brief biography
Name: Esam Yousif Janahi
Position: CEO and Board Member of Gulf Finance House
Nationality: Bahraini
Date of birth: 1965
Honours: Master in Business Administration (Hull University), BA in Industrial Management
