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Lying at the tip of the Arabian Gulf, Kuwait is a member of the Organisation of the Petroleum Exporting Countries (OPEC), sitting on large proven oil reserves, and has an economy rivalling some of the world’s strongest, backed by years of accumulated budget surpluses. Supported by advantageous financial conditions and tight regulations from the country’s central bank, Kuwait’s banking sector remains secure despite economic strife elsewhere in the region.
Founded in 1973, Kuwait International Bank (KIB) has grown to become one of the country’s most active institutions – especially within the Islamic finance sector, after it became fully sharia-compliant in 2007. Massoud Antoun, General Manager and Head of International Banking at KIB, spoke to World Finance about the country’s changing financial sector, how KIB is playing a part in the national development plan – through which Kuwait is to spend $100bn – and how the bank is growing its international correspondent banking network, while holding its own in a highly competitive environment.
Kuwait International Bank (KIB) has grown to become one of the country’s most active institutions – especially within the Islamic finance sector
How would you describe the Kuwaiti banking sector, and what changes have taken place recently?
The Kuwaiti banking sector comprises of 16 conventional banks – including 11 foreign conventional
banks, six Islamic banks – including one foreign Islamic bank, and one specialised industrial bank. The Kuwaiti banking sector is solid, robust and remains relatively unaffected by the regional turmoil. It continues to benefit from a favourable business environment characterised by a strong economy, the vigilant supervision of the Central Bank of Kuwait, and the vast nation’s oil wealth and
reserves.
Above all, the Kuwaiti banking system is highly regulated and supervised by the Central Bank of Kuwait, regularly evaluating the performance and strength of each bank based on the CAMEL/BCOM rating system. Already, the Basel III framework has been introduced, and requires higher capital ratios and improved leverage positions than already in place. The full Basel III capital requirements will be gradually and fully implemented by all banks in Kuwait.
The Islamic banking model is cementing a prominent position in the local banking sector. Five of the 10 Kuwaiti commercial banks operate under Islamic sharia law. The market seems to have spoken in favour of the prudent and transparent nature of Islamic banking. Furthermore, Kuwaiti banks play an important role in facilitating the $100bn national development plan that is currently in motion.
The endeavour aims to bolster the economy through a series of mega projects that will see Kuwait establishing itself as a major attractive market in the region. At KIB, this period is considered a special opportunity to employ the innovative structures already in place at the bank towards the vision pursued by the government.
How did KIBs conversion into a fully-fledged Islamic bank in 2008 impact the bank’s current status?
In the years leading up to the crisis, the Kuwaiti banking sector was highly vibrant and competitive.
It was in this environment that our board of directors took the decision in 2007 to proceed with a two-pronged transformation: from conventional to Islamic, and from a specialised real estate bank to a fully-fledged commercial bank. KIB was in essence entering into new market segments, embracing the Islamic sharia law. This challenge was fully understood by our leadership, and we prepared to move forward in this dynamic environment.
When the global crisis entered the Kuwaiti business environment in the final months of 2008, it acted as a stress test that was successfully overcome due to the prudent measures taken as part of the economic transition process. The economic recession resulted in a reticence in the banking industry, creating favourable conditions for KIB to continue in a less competitive market restrained by the financial crisis. KIB is now actively engaged in providing the full spectrum of sharia-compliant retail and wholesale banking products and services to clients operating in all sectors of the economy, including trading, manufacturing, construction, services, real estate, and SMEs.
What is KIB doing to facilitate international banking in Kuwait?
In light of the above, it is standard to place special emphasis on international banking, as it is a major conduit for business transactions that complement Kuwait’s banking industry. Our strategy is focused on expanding and consolidating our international correspondent banking network, working diligently with banks to create flows of work beneficial to both.
By combining and sharing our local market expertise and insight to the national development plan with correspondent banks, we were able to attract EPC contractors bidding for major projects in Kuwait. Similarly, we are able to service our domestic clients’ foreign trade and contracting related requirements through our enhanced web of correspondent banks.
We have become more responsive to the needs of both our clients and our correspondent banks in an agile, lean and flexible working environment, that is able to provide a vast array of banking products and services, catering to the diverse business needs of our clients. We have also expanded into the financing of transactions outside the boundaries of Kuwait, whether in participation with international banks or on bilateral basis, tapping into the commodity trade finance and continue to expand in this sector.
We are providing banking facilities to projects ranging from oil and gas to infrastructure, and for large tickets we are entering syndicated facility arrangements with local and regional banks. Our activity in this area has expanded greatly over the last two years, with KIB having gained involvement in key mega projects associated with the national development plan.
The Kuwaiti banking sector is competitive. In what ways does KIB stand out?
As a leading Islamic bank with a 40-year heritage in the local sector, KIB offers a valuable proposition
that is difficult to imitate. The bank enjoys strong ties with key governmental and corporate entities built on decades of positive cooperation. At the same time, KIB markets itself as a flexible, modern bank operating within a lean corporate structure and in accordance with global best practices.
Most importantly, we have long recognised that KIBs continued success relies on the people who represent us. Within international banking, we have invested heavily in the long-term development of human capital, to maintain a competitive edge. These professionals are highly experienced, knowledgeable and acquainted with the diverse needs of the market.
Every member of the team is engaged with on-going training, workshops and initiatives aimed at fostering a better work-life balance. These efforts have resulted in a level of workplace confidence that permeates through to our clients. Alongside that, KIB works diligently to strengthen relations with overseas firms engaged in business activity in Kuwait.
This effort involves a dedicated unit within the bank, tasked with intense follow-ups of every mega project being floated by the Kuwaiti Government. Using this information, we are able to pursue leads effectively, while providing additional value to our clients. It is through this type of activity that we have succeeded in building a reputation as a reliable bank with powerful capabilities.
What role is KIB playing in Kuwait’s social development?
Social development is considered a key theme in Kuwait due to its burgeoning young population (see Fig. 1). With a large portion of the local population under the age of 25, KIB has adopted a
programme focused on educating the youth in Kuwait to the importance of saving for their future and practicing responsible money management.
We forged a partnership with a UNICEF-related organisation for this purpose, and are currently conducting school visits and holding student lectures on this topic. We consider KIBs reach to the youth to be central to our role as an Islamic bank, and a responsible Kuwaiti financial institution committed to social development.
