Al Rajhi Bank awarded second Malaysian licence

By Habhajan Singh
AL RAJHI Bank KSA, the largest bank in Saudi Arabia, has recently been awarded its second banking licence in Malaysia to enable the group to tap into the non-ringgit financing markets, close to three years after launching a full-fledged local Islamic banking subsidiary in the country.
The International Islamic Banking licence issued under the Malaysia International Islamic Financial Centre (MIFC) was granted to Al Rajhi Bank KSA to operate as a branch office, the bank said in a statement issued on April 16.
The new Malaysian branch, referred to as ARIIB, will serve as the banking group's regional Islamic investment banking base to support the growing demand for Islamic investment banking services in the region, the statement added.
It will also complement the franchise built by Al Rajhi Banking & Investment Corporation (Malaysia) Bhd, says ARIIB's principal officer and director of investment banking Leong See Meng.
ARIIB is probably the third bank to receive the international Islamic banking licence under the MIFC initiative, with the two others being Unicorn International Islamic Bank Malaysia Bhd and Indonesia's PT Bank Shariah Muamalat Indonesia Tbk.
Al Rajhi Bank, which started its operations in Malaysia in October 2006 and has 19 branches spread throughout the country, is allowed to operate similar to other Islamic banking outfits Maybank Islamic Bank Bhd, Hong Leong Islamic Bank Bhd and OCBC Al-Amin Bank Bhd.
The major difference is that Al Rajhi Malaysia, led by Ahmed Rehman as its chief executive officer, is a subsidiary of the Saudi bank, while the latest entity is a branch of the Saudi bank.
As a branch of the main bank, which bills itself as the largest Islamic bank in the world with total assets of 165 billion Saudi Arabian riyals (RM158.4 billion), ARIIB will be able to leverage on the parent's balance sheet when cutting large financing.
Over the past two years, Al Rajhi Bank KSA has achieved a leading position in the areas of project and structured finance, advisory, Islamic debt arranging and corporate finance as well as asset management and brokerage, the statement said.
It is primarily involved in the fields of project and structured finance, in which Al Rajhi has excelled, bringing innovation and Shariah structuring skills to project sponsors in the Middle East, it added.
In the same statement, Al Rajhi Bank Malaysia's Ahmed said the MIFC provides an excellent platform to provide Islamic investment banking services to cater to the growing sophistication demanded by top tier players in the region.
"ARIIB is looking at introducing Islamic structures and advisory services based on global best practices that appeal to Malaysian, regional and Middle Eastern customers and investors in recognition of Malaysia as a true international Islamic banking hub," he said.
ARIIB's focus will be on leveraging on the parent's capabilities in leverage finance, mergers and acquisition advisory, Islamic sukuk, corporate finance advisory, private equity, sales and distribution, equity capital markets, and structured finance.
The time is ripe for the group to broaden its proliferation into the region amid the slower global economic growth as ARIIB intends to nurture and promote Islamic investment banking as a viable alternative to conventional finance as governments and corporate in the region embark on their initiatives to move ahead of the challenging times, the statement said.
"We have the technical capability and more importantly, the human capital and the Islamic finance intellect to make this a reality through the MIFC platform", said Leong.

(This story appeared in The Malaysian Reserve on Apr 7, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)