Khalid Abdulla Al Bassam Chairman of Bahrain Islamic Bank INTERVIEW

slamic finance is based on the laws of Shariah, which forbid the charging or paying of interest, and prohibits investment in businesses that are considered un-Islamic, such as producers of pork, alcohol or pornography. Many Islamic finance products are instead based on different forms of profit sharing.

Bankers in many Muslim countries have spent decades developing financial products that are Shariah-compliant, some based on instruments first invented by traders more than a thousand years ago. The current financial instruments are thoroughly modern, though, and have met with great success in the countries of the Gulf Cooperation Council, or GCC, and outside them as well.

“The concept of Islamic banking is gaining greater recognition and acceptance not only in the Islamic world, but worldwide,” said Khalid Abdulla Al Bassam, Chairman of Bahrain Islamic Bank. “We have seen that the Financial Services Authority in the U.K. has been issuing licenses for both, Islamic retail and investment banks. Singapore opened up its financial sector for Islamic banking, and other countries are following.”

Bahrain is already a center for Islamic banking in the region. The country's population is only about 2% of the total population of the GCC countries, but it accounts for 7% to 9% of the region's total financial sector revenue, and for 17% of revenue from Islamic finance activities.

Bahrain has in fact been a pioneer in Islamic finance, and the country's central bank has worked to spur its spread by promoting the standardization of products. Western banking products have reached a uniformity in their definition over decades or even centuries of use, and Islamic financial instruments need to reach a similar level, said Rasheed Mohammed Al Maraj, Governor of the Central Bank of Bahrain.

“Bahrain’s contribution towards Islamic banking has been very critical,” he said. “We worked with the stakeholders in the industry to come up with suitable products to work on the regulations. Bahrain’s contribution towards Islamic banking has been very critical. We helped in terms of raising the profile of Islamic banking from a regional to an international phenomenon, increasingly becoming part of the global financial architecture.”

The central bank's work has been instrumental in the growth of their popularity in Bahrain and in other countries, according to Al Bassam of the Bahrain Islamic Bank.

“The CBB was the first central bank in the world to take the lead in terms of developing specific regulations for Islamic banking,” Al Bassam said.

Islamic banks also work hard to comply with other aspects of the Muslim faith. One of the five pillars of Islam, which are the duties incumbent on every Muslim, is charitable contributions to the poor, and banks have been generous in this area.

Bahrain Islamic Bank dedicates 2.5% of its profit to Zakat, as the giving of alms to the needy is known. The bank contributes to the country's major charities, sponsors several training and scholarship initiatives, gives to religious training centers and provides grants to organizations and publications that deal with and increase awareness of family violence and child abuse.

“Bahraini banks have always had a strong commitment towards the development of the community,” Al Bassam said proudly. “When it comes to social responsibility, I would rank Bahrain Islamic Bank among the high tier.”

Bahrain Islamic Bank operates through 12 branches and offers clients a full range of financial products and services

Bahrain Islamic bank Bahraini financial institution sees first quarter profits soar

With first quarter profits up 92%, Bahrain’s top Shariah compliant bank is growing at an unprecedented pace

Bahrain Islamic Bank, the first commercial Islamic bank in the country, was founded in 1979 and has been providing Shariah-compliant financial products, contributing to charitable causes and turning a profit ever since.

BisB, as the company is known, had net income growth of 92% last year, 77% in 2006 and almost 100% in 2005. Strong profit growth isn't just limited to BisB, and is in fact a trend across the Islamic finance sector, said Khalid Abdulla Al Bassam, BisB's Chairman.

“By nature, Islamic banks tend to invest in real assets,” he said. “For instance, a good part of their investment goes into real estate developments, i.e. productive assets, that generate added value to the economy, as well as to investors.”

BisB has also been rewarding its shareholders, by paying dividends and issuing bonus shares over the past four years, and it will probably do the same this year, Al Bassam said. At the same time, the bank has expanded its capital base, partly through a rights offering of 85 million Bahraini dinar in September of last year.

That money will be used to help the bank grow. BisB has traditionally been strong in retail banking and has been expanding into corporate and investment banking as its product range has grown and become more sophisticated.

“We are now placing special emphasis to improve our investment and private banking capabilities,” Al Bassam said. “Investment and private banking is again an important area for us going forward.”

In all its commercial areas the bank provides products and services that are truly Islamic, such as business financing, leasing, project finance letters of credit and letters of guarantee that are fully Shariah-compliant, as well as foreign exchange and other treasury services.

The bank also offers wealth-management services such as real estate investments, mutual funds, structured products, and private equity, all designed to offer clients a high return on their investment.

Retail clients have access to a wide choice of products including personal financing, car financing, current and savings accounts, credit cards and automated teller machine cards, all made possible by BisB's modern and efficient banking technology.

“The key to success is the ability to provide better services and a wider product range that meets the clients' needs,” said Al Bassam. “Our top priority at the bank is to improve customer and client services, on both corporate and individual levels. We have concluded a major implementation of our core banking system, which will significantly improve the operational work of the bank.”