Islamic Finance 

The role of Islamic banks in promoting financial inclusion through corporate social responsibility practices

| 20 December, 2016 | General
 Iyad G. Asali, General Manager, Islamic International Arab Bank PLC


As part of the ICD-Thomson Reuters Islamic Finance Development Report 2016 which covers the latest trends from the industry, and highlighting key figures and top performers, Mr. Iyad G. Asali, General Manager, Islamic International Arab Bank PLC, explains how Islamic banks can promote financial inclusion through corporate social responsibility (CSR).

The report can be downloaded from HERE.

Corporate Social Responsibility in the Middle East and North Africa is focused on addressing social and economic challenges that obstruct development, most notably tackling the shortage of jobs and declining government subsidies. People in the MENA region hold high expectations that Islamic banks will sustain and promote societies through the inclusion of wide segments of the population including the underprivileged, as well as launch enterprises that provide financial solutions that work towards meeting the United Nations’ Sustainable Development Goals (SDGs.)

Within the Islamic banking industry financial inclusion is used as a tool for economic development. Financial institutions seek out to target wide segments of individuals and businesses via tailored banking solutions that balance profitability against risk. This process can sometimes deprive large segments of society from getting the particular financial support they need due to unreachable terms and expensive costs. As a result we believe that integrating CSR practices into the banks’ core business will support all segments of the sociodemographic. Banks that offer financial solutions with affordable costs and easier terms and conditions will consequently expand the economy by creating new jobs and ultimately improve standards of living, exceeding the classically philanthropic role of CSR.

The Islamic International Arab Bank in Jordan (IIAB) has an active CSR programme that is considered to be an integral part of its business model, focusing on low-income individuals and micro-, small- and medium-enterprise businesses’ financial needs, as well as maintaining a balance between the bank’s profitability, national economic progression and the good of societies. 0% financing for Hajj, Umrah, and Udhiah are examples of CSR products IIAB offers to individuals, in addition to charity loans and the first Islamic Qard Al-Hasan revolving credit card in Jordan.

It is worth noting that aside from regularly supporting initiatives to combat poverty, hunger and support orphans and the needy IIAB also contributes to society by sharing the true values of Islam through the media. IIAB produces and sponsors television and radio programmes and is involved in building awareness of Islamic finance through organizing and sponsoring local and regional workshops, conferences, and other academic events. In 2012, IIAB launched the Arabi-Islami small- and medium-enterprises (SMEs) initiative — a 10-year active CSR plan to support 250,000 new jobs. In order to achieve this objective, IIAB launched innovative Shariah-compliant financial solutions.

The “Kafala” scheme was launched in cooperation with Jordan Loan Guarantee Corp. and allows SMEs to access Islamic finance without having to focus on collaterals. This led to the first Islamic start-up financing product offered by IIAB. This initiative provided financial solutions for thousands of SMEs throughout Jordan. It takes advantage of the Central Bank of Jordan’s (CBJ) Shariah-compliant funding channels for SME financing and CBJ channels that mobilize loans from entities, including the World Bank and Arab funds at subsidized costs.

IIAB’s active CSR practices consider financial inclusion the cornerstone of Islamic finance. New Shariah-compliant soft financing products have been developed and introduced to retail, Corporate, SMEs and start-ups. These practices conform with the bank’s business objectives. IIAB’s transparent terms and conditions and low financing costs create an ideal situation between all parties. IIAB hopes for a wider adoption of this model by other Islamic banks in order to deliver the true message of Islamic banking. IIAB emphasizes that the CSR of Islamic banks can be an agent for genuine and much-needed economic progress by providing reliable and sustainable initiatives within preset goals in order to achieve SDGs. IIAB plans to expand its own CSR practices becoming more active within all aspects of society.


ICD-TR Islamic Finance Development Report 2016

Copyright Thomson Reuters 2016

IYAD ASALI has been General Manager of the Islamic International Arab Bank (IIAB) since 2011. He has held senior positions in a number of banks in his 27-year career in Jordan and the GCC. Previously, he was Deputy General Manager and Head of Commercial Banking at the Arab National Bank in Saudi Arabia. Mr. Asali holds an MA in Management from the American University in Cairo, Egypt. Since joining IIAB, Mr. Asali has contributed towards the bank’s turnaround through new Shariah-compliant products which resulted in a tripling of the bank’s investment portfolio and deposits and an expansion of its network to 41 branches. Mr. Asali is a member of the Jordan Strategy Forum, the Federation of Arab Businessmen, Jordanian Businessmen Association, INJAZ Jordan, and the French Jordanian Chamber of Commerce (CAFRAJ). He is also a BOD member for the Postal Saving Fund of Jordan.

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