By James Cordahi
DUBAI (Reuters) - National Bank of Abu Dhabi NBAD.AD (NBAD) expects its Islamic finance unit, which will start operations next month, to be profitable in its first year of business as demand for sharia-compliant services surges.
Abu Dhabi National Islamic Finance (ADNIF), a unit of the second-largest lender in the United Arab Emirates, will offer a full range of banking services, with its initial focus on corporate and retail finance, General Manager Aref al-Khouri told the Reuters Islamic Finance Summit in Dubai on Tuesday.
"The market demand is huge," said Khouri, who helped start the emirate's first sharia-compliant lender, Abu Dhabi Islamic Bank ADIB.AD. The unit plans to hire another 30 people before the end of the year, taking the total to 75, Khouri said.
About 14 percent of the UAE banking market -- measured by loans and advances -- complies with Islamic law and is growing by as much as 20 percent a year, compared with growth of between 10 and 12 percent in the conventional market, said Khouri.
Among other restrictions, Islam bans the receipt of interest, equating it with usury, and instead requires banks to invest with its customers, sharing the risk.
For instance, rather than lend money to a customer to buy a car, the bank buys the car and rents it back to the customer until the cost -- and a profit for the bank -- is paid.
Khouri had said in September, the month he joined ADNIF, it would take him two years to be profitable. ID:nL25509914
NBAD, which is controlled by the government of Abu Dhabi, is competing with other conventional lenders in the emirate, such as First Gulf Bank FGB.AD and Union National Bank UNB.AD, which are growing their sharia-compliant businesses. Continued...
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