The Islamic Bank of Britain (IBB) is the only UK’s wholly Sharia complaint retail bank. It is based in Birmingham. Last year, IBB celebrated its 10th anniversary and declared significant expansion plans as it enters the second decade (Mullen, 2014). The aim of this paper is to study the organization’s objectives, strategies and challenges. Besides, the detailed account of IBB will include results and recommendations. Currently the following analysis is particularly important after the company’s acquisition by Masraf al Ryan, which is the fifth largest Islamic bank in the world because this would have a significant impact on IBB’s performance (Mullen, 2014).
The objectives of IBB are based on its vision and values. According to the organization’s official website, it is aimed to be the most popular British ethical Sharia compliant bank. It tries to be a leading provider of long-term value for all the sides including individuals, shareholders and customers. To achieve all these objectives, IBB follows five core values. First, it is Sharia complaint, which means adhering to the Sharia by conducting all the operations in the honest, ethical and socially responsible way. The bank does not use interest, but it follows Islamic finance principles obtained from such areas as trade, risk sharing and entrepreneurship. Second, IBB aims to be pioneering. This means that the bank’s objective is to achieve the image of the organization that is inspiring, dynamic and innovative. It also tries to provide unique product offerings to its customers. Third, IBB is dedicated, so it aims to create strong, long-lasting relationships offering positive experience to its customers. Fourth, the bank aims to be aspirational. For this, it is planning to be professional and trustworthy, fulfilling all the promises and providing products and services of high quality. Finally, IBB is dependable due to being the part of Masraf Al Ryan Group of organizations. This presupposes durable commitment to Islamic finance that is provided to customers with high level of credibility and stability.
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IBB was the first player of British Islamic Banking and its results are significant. In particular, it managed to create the widest range of “Sharia-compliant retail financial products” in the United Kingdom (Muller, 2014). IBB has a strategically situated branch as well as agency network across the whole territory of the UK, a qualified contact center; 24 hour automated telephone banking and secure online banking services. The bank provides “Sharia complaint savings, finance and current account services” to more than 50, 000 personal, corporate and VIP customers (Al Rayan Bank, 2014). However, after changing the name, IBB is planning to strengthen its product range even more in order to attract new customer groups. Expanding of retail and commercial product offering will be done along with Masraf al Ryan support, which is considered a strong and highly successful parent. In particular, IBB would use the global recognition of its parent. At the same time, the bank will save its spirit. It will continue be a financial institution with strong, faith-based ethics as well as excellent customer service. The organization is planning to increase the presence in London by making commercial and GCC operations there. It is necessary for proper functioning corporate and real estate finance. Retail banking and operations headquarters will be further kept in Birmingham (Muller, 2014).
IBB operates in the burgeoning industry, so it needs to deal with many challenges. For instance, it suffered from financial problems in the beginning of the financial crisis of 2008. This forced the bank to perform reconstructing and staff downsizing as well as caused operating losses. After that, IBB was re-capitalized by its major shareholder, which is the Qatar International Islamic Bank. In the next years, the financial performance of IBB has improved, particularly its home financing grew by 63 percent and long-term savings deposits grew by 43 percent (Raconteur, 2013). However, it is still not enough. Another challenge is lack of education in those ways in which Islamic products work. Therefore, main competitor of IBB is conventional banking because consumers prefer choosing it instead of unclear Islamic banking.
Apart from that, IBB faces general challenges, which are common for most of the banks. First, it is dependable on changing Macro economic conditions because they affect consumer consumption and demand. The presence of burden between business and clients also has influence. Besides, Macro economic conditions affect the availability of necessary capital and funding for IBB. Overall, all these aspects have impact on the performance of the bank. Second, IBB operates in markets that are controlled by a broad range of regulation, legislation and codes of conduct. The problem is that it is difficult to predict the effects and nature of future alterations of laws and regulations. Third, there is some liquidity risk, but IBB has enough liquid assets for meeting its obligations during short time period. Finally, the bank is dependable on changing geopolitical environment. As IBB mainly operates in the UK, it can have problems with managing capital flows or cross border funding in the case of geopolitical conflicts (Islamic Bank of Britain PLC, 2012).
Results of IBB are significant. The bank is only about ten years in the market, but it managed to attract more than 50,000 customers. Moreover, the organization was the first Islamic bank, so it had to develop its own ways of providing services. Today, IBB provides a wide range of Sharia complaint banking services for corporate and individual services. In particular, customers can use such banking solutions as current accounts, Home Purchase Plans, savings accounts and business accounts (Islamic Bank of Britain PLC, 2012). To deliver these solutions, IBB has built a wide network of branches and agencies, which are supplemented by such channels as telephone, Internet and post. Moreover, the bank tries to expand access to potential clients with a help of independent brokers (Islamic Bank of Britain PLC, 2012).
Despite leading position in UK, IBB is able to increase its results more. First, it needs to raise awareness about Islamic banking. In fact, British government is also active in promoting the industry; particularly it declared Islamic Finance Task Force. As for IBB, it should focus on satisfying customers’ needs and improving profit models. Thus, the bank needs to demonstrate its advantages over conventional banks, which large amounts of Muslims associate with financial issues that the economy experiences today. For example, IBB has to improve its ways of explaining how their products are Sharia-compliant. These methods should be simpler than they currently are because existing explanations make many potential customers confused and skeptical. Apart from that, IBB could use positive experience of Gatehouse Bank and Bank of London and the Middle East that increased their results despite the general weakness of British economy and appearing of new tough banking regulations. These banks focused on wholesale banking, which is not covered by IBB. Finally, IBB could try to attract to non-Muslim customers. Nowadays, many of non-Muslims are searching organizations where they could invest some of their money in a more ethical manner. During advertising campaigns, IBB should underline its moral and social effects (Raconteur, 2013).
In conclusion, IBB is a successful bank, which mainly operates in the UK and focuses on Muslims. Last year, it was rebranded, so its strategies were also modified. Thus, the bank aims to expand product offering and customer base. This could be done by raising awareness about benefits of Islamic banking. In fact, lack of education about Islamic banking is one the most prominent challenges of IBB. Another way of expanding is attracting non-Muslims, which are currently searching places where they can invest their money in an ethical way. Government is also promoting Islamic banking, so IBB has many opportunities for growth.
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