The Dubai Financial Market Focus on Dubai Islamic Bank - Example

Dubai Islamic Bank (DIB) s 5th May The Dubai Financial Market focus on Dubai Islamic Bank (DIB) The Dubai Financial Market (DFM) was founded in 2000 with its main objective being provision of a transparent and fair system to trade in bonds, equities, commodities etc. DFM has listings in the UAE and had a listing of 63 companies in the year 2007. The companies are composed of both international and national companies (Dubai Financial Market, nd). DFM plays a vital role in financial activities in the UAE because it was founded to trade in securities of Public Joint Stock Companies (PJSC), government bonds and investment institution’s funds. DFM contributed to the financial wellness of the UAE that so the expansion of investment by attracting both local and foreign investment (Khan & Bhatti, 2008). This study will focus on Dubai Islamic Bank (DIB) which is listed or is part and puzzle of the DFM. DIB was started in 1975 in an effort geared at maintaining a high competitive advantage and offer customers diversified banking services. It was the first Islamic Bank in the world that was undisputed in the banking field. It is a platform under which standards are set for other banks in the region. DIB is a public joint-stock company listed in the DFM. It ranks as one of the best by combining current innovations with traditional Islamic values. Mission, Vision and Objectives The vision of DIB is to become a leading Islamic financial services institution with more emphasize of strong commercial and retail franchise. The vision focuses on taking the Islamic financial services to another level through success and expansion at both local and international levels (Dubai Islamic Bank, nd). Its mission is to provide innovative and high standard financial services and products on Islamic Shariah foundation with an aim of establishing a financially successful society. The mission focuses on the current and future needs of the Islamic society. Further, it also focuses on implementing current innovations for the creation of effective products and services in order to meet the needs of the customers (Dubai Islamic Bank, nd). The company’s major objective is to establish its markets across the world and to expand them, and to increase its customer base in order to increase the revenues and popularity in the global market. Activity DIB is concerned with the social well-being of its shareholders, customers, society and the nation at large. The bank focuses in facilitating a better world in all of its activities because the Islamic society believes in giving back to the society; hence DIB considers corporate social responsibility as very essential in its philosophy and principles. The bank sets parts of its revenues to promote and implement community development. Furthermore, the bank engages in consultancy, retail and brokerage as some of its activities. Products/ Services DIB ensures that it delivers excellent services and products to its customers. The main products and services are: Murabaha Murabaha is an Arabic word that literally translates to ‘selling on profit.’ In the Murabaha agreement, DIB helps its customers to easily purchase the buildings of their choice. After the choice of the building is made, the agreement is drawn and the customer promises to buy the property using deferred payments from the bank (Dubai Islamic Bank, nd). Therefore, the bank directly buys the property from the seller and transfers the land ownership to the customer at fixed amount or a percentage of the profit. Hence, the customer must provide security to the bank as guarantee that the payments will be timely as per the Mubaraha terms. However, it is important to note that the ownership of the goods remain in the name of the seller from purchasing it to the supplier until the customer completely buys the property. Therefore, the liability of the property lies on the bank as it bears the risk as the owner (Yousef, 2004). Diminishing Musharaka It is a form of partnership which ends with one partner buying all the shares of the other partner’s property in a redeeming mechanism given a particular project (Dubai Islamic Bank, nd). In this mechanism, DIB enters into an agreement with its clientele while purchasing property by having common ownership in the property. The bank then leases the property to the client at the agreed rentals and the client must purchase the pre-agreed percentage of the bank’s share in order to increase in the ownership of the property to the client. Upon the completion of payments, the ownership of the entire is passed to the client. Istisna It is a sales contract whereby DIB agrees to deliver a commodity to a client at a future time that is pre-determined but at the agreed price. It is commonly used by Islamic banks and financial institutions in financing constructions for instance, in the real estate industry (Song & Oosthuizen, 2014). Ijara Ijara is a lease agreement whereby the Bank leases the property to the client/customer. However, the customer must make a rental payment for a specific financing period for the lease to be successful (DiVanna, 2006). In return, DIB promises to transfer the property title to the customer when all the payments have been made at the end of the financing period. It is very practical and effective for it provides businesses with the opportunity to acquire equipments, machinary and property without outright purchase but through leasing. The businesses are saved from the immense burden of capital expenditure. The leasing period is 3-7 years after which the customer purchases the property. Finally, the DIB treasury commits it customers to Islamic banking market through the presence of the UAE. Thus, DIB uses the combination of its expertise and strengths in offering risk advisory products and services. In overcoming growing uncertainties, DIB understands the ever growing need for risk management and investment solutions. Therefore, the bank offers treasury products that include profit enhanced products which tailor the swaps in profit rates and foreign exchange. Operations The operations of DIB include nurturing a corporate culture that values expectations, values and shared beliefs. The current culture strives to meet the vision, mission and objectives of the bank (DiVanna, 2006). On the other hand, DIB has strategized to manage and diversify growth by expanding its business. They have targeted an increased customer base by expanding their branches in the UAE and other international markets. In the first quarter of 2015, DIB experienced strong growth of financing assets up by 11%. Consumer banking increased by 6% valued to AED 33 billion in relation to gross financing assets. The real estate sector of DIB also grew by 12% as compared to 2014 to reach AED 54 billion. Further, the bank saw an increase in net profits from AED 637 million to AED 850 million up by 34%. Therefore, based on the current financial reports, it is evident that the operations of DIB are increasing implying growth and expansion of the bank (Dubai Islamic Bank, nd). Rules and Regulations Every financial institution’s has set rules and regulations. DIB is bound to follow the Shariah laws of Islamic Banking for example, Riba which is meeting the interest rates payments among many more (Song & Oosthuizen, 2014). In this case, the Dubai Islamic Bank requires its customers to notify them in case of losses, misuse of passwords and disclosure so that they can take the necessary requirements to solve the problem. When issuing a new password to the customer, the customer takes full responsibility to any transactions affected by the account at the occurrence of such an event as loss of password. The bank has the authority to change terms and conditions in an agreement. Furthermore, the bank operates under the legal provisions provided by the financial authority in the UAE. Under the Shariah laws, DIB has established a Shari’s board that ensures that it adheres to the rules and regulations of Islamic banking (Khan & Bhatti, 2008). Benefits and Usage Dubai Islamic Bank offers a range of benefits to its customers. The customers enjoy the usage of a Halal Current, Savings, Saving Plus and a Fixed Deposit Account that are essential in meeting online banking needs. It was the first bank to issue a Visa Card in the UAE and Middle East in general that facilitates purchases at any place in the world. Additionally, customers enjoy a wide variety of products and services as listed above in the discussions. DIB offers high quality and reliable services that meet the needs of its clientele base. The interest rates are flexible to meet the customer’s needs facilitating better performance of the bank in the Dubai Financial Market (Farah, 2009). Conclusion The Dubai Financial Market was established in 2000 and has promoted growth, stability and expansion of the financial market in the UAE. In relation to the DFM, the paper focused on studying the Dubai Islamic Bank established in 1975. It was the first Islamic Bank to be established. DIB has experienced growth and expansion due to its expanding network of branches globally due to its increasing customer base. It also implements the Shariah laws of Islamic banking through its Shari’s board that ensures that the laws are followed. On the other hand, the bank offers a range of services and products such as Murabaha essential for customer satisfaction. In the first quarter of 2015, the bank has witnessed growth with an increased net profit. Surely, it is evident that the bank is destined to achieve greatness. References DiVanna, J. (2006). Understanding Islamic banking. Cambridge: Leonardo and Francis Press. Dfm.ae,. (nd). Dubai Financial Market, PJSC. Retrieved 5 May 2015, from http://www.dfm.ae/ (Dubai Financial Market, 2015) Dubai Islamic Bank,. (nd). Diminishing Musharaka. Retrieved 5 May 2015, from http://www.dib.ae/corporate-banking/products-and-services/ijara Dubai Islamic Bank,. (nd). Injara. Retrieved 5 May 2015, from http://www.dib.ae/corporate- banking/products-and-services/ijara Dubai Islamic Bank,. (nd). Murabaha. Retrieved 5 May 2015, from http://www.dib.ae/corporate-banking/products-and-services/ijara Dib.ae,. DUBAI ISLAMIC BANK. Retrieved 5 May 2015, from http://www.dib.ae/ Farah, A. (2009). Introduction to islamic banking and finance. [S.l.]: Ajman Chamber Of Commerce. Khan, M., & Bhatti, I. (2008). Developments in Islamic banking. Basingstoke [England]: Palgrave Macmillan. (Khan & Bhatti, 2008) Song, I., & Oosthuizen, C. (2014). Islamic Banking Regulation and Supervision. Washington: International Monetary Fund. Yousef, T. (2004). The Murabaha Syndrome in Islamic Finance. Edinburgh: Edinburgh University Press. Read More