The first session of the second day of the Oman Islamic Banking and Finance Conference 2012 saw experienced speakers touch upon issues of a slightly different nature, related to Islamic Banking.
Jamsheed Hamza, Senior Manager-Branch Network Expansion in the Islamic Banking Division, Bank Dhofar, spoke on the topic, ‘Customer Care and Understanding: Key to success Islamic Banking’.
He said: “How do we care for our customers? Your clients will stay with you if you can PRAISE them. PRAISE stands for Purpose, Relationship building, Appreciation, Intelligence, Service and Empathy. You need to understand the purpose of the customers coming to you.
If the customer is coming to the bank with a Halal need, the bank must genuinely take it upon itself to meet their needs. A bank is not here to sell but to develop awareness and build relationships.
By focusing on relationships you can turn a dynamic customer into a delightful customer, where one must invest in long term relationship building. You need to appreciate your customers.”
He urged Islamic bankers to “go the extra mile” in appreciating the client’s success and helping him make appreciative investment choices. “Apply your intelligence by educating your clients and developing awareness. Ask the question WHY?
Every decision based on the question WHY that we make in our lives, is attached to an emotion. You must serve your customers. Give your customers perfection, inculcate an attitude to serve and you will generate loyalty.
Empathise with your customers. Think in the shoes of your customers and you will win their trust and loyalty. Remember in short to always PRAISE your customers,” he said.
Arsalan Ahmed Qureshi, AVP - Senior. Manager, Operational Risk-Risk Management Department, Al Baraka Islamic Bank, spoke on ‘Operational Risk Management Strategies and Best practices in Islamic Banking’.
He said: “The principles of Islamic Banking are based on Prohibition of dealing with interest — Riba, Clearing of Financial Contracts from contractual uncertainty — Gharar, Exclusion of gambling (Maysir) in any financial activity, Non-Origination of profit from Haram economic and financial activities, reference of a Financial Transaction to a tangible, identifiable underlying asset and sharing of risks and rewards by all parties to a financial transaction.”
Banks, he explained, face a number of risks – Business, Financial, Event and Operational risks. “Risks specific to Islamic banks are Commodities and inventory risk, Rate of return risks, Sharia non-compliance risk, Equality position risk and Displaced commercial risk. Operational risks include Shariah compliance risk, fiduciary risk, people risk, technology risk and legal risk.
In short people, processes, systems and external events may trigger Operational risks. The reasons could be fraud, trade, input error, system failure etc.
The consequences could be Monetary Loss, and Reputation damage.”
Qureshi listed two approaches for assessing operational risks: Top-Down Approach which takes the product into consideration, and the Bottom-Down Approach which takes events into consideration.
“Nowadays banks use a combination of both these approaches. Operational Risk Management Framework compromises of a governance structure, Operational Risk Guiding Principles and Role & Responsibilities of Operational Risk Management Function and Business Units.
To overcome operational risks we should have strong corporate governance and strong operational policies and mitigation and downsizing through each and every part of the organization.
Any operational tool kit program should consist of a Risk Register, Internal Loss Database, External Loss Database, KRI-Key Risk Indicators, RCSA-Risk Control Self Assessment and Risk Mitigation programme,” he added.
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