ASTANA – In a recent interview, Gordon Haskins, the CEO and Chairman of the Management Board of Al Hilal Islamic Bank, provided insights into the bank’s activities and the country’s economic landscape.
Al Hilal Islamic Bank. Photo credit:worldmonitor.kz
Lucrative opportunities for Islamic banking
Gordon Haskins.
Al Hilal Bank in Kazakhstan, operating as part of the Abu Dhabi Commercial Bank Group (ADCB Group) focuses on corporate customers. The bank is working on new financing transactions for customers in the oil and gas, mining, transportation, and pharmaceutical sectors.
“As at the end of 2023, we have approximately 130 billion tenge (US$287 million) of Islamic finance assets (similar to loan assets at conventional banks). At the same time, we are introducing certain large corporate clients to our UAE-based colleagues in the Corporate and Investment Banking division in ADCB Group. In particular, they are working on large transactions for a number of the National Companies and large multinational clients doing business in Kazakhstan. All of this is in line with our Group strategy for increasing our exposure and presence in Kazakhstan,” said Haskins.
Haskins noted the challenges and opportunities in promoting the Islamic finance principles within Kazakhstan. According to him, the bank has a number of loyal customers who come for faith-based reasons, to ensure they are transacting in a way that is compliant with Sharia principles. Equally, many clients choose the bank because of our reliability, pricing, and quality of service.
“We are careful and conservative in choosing the customers and projects for which we provide financing, investing only in the real sectors of the economy and avoiding speculative transactions,” he explained. “That said, at times we do face challenges in promoting Islamic finance. Sometimes this is owing to a lack of clarity, for example, in the Tax Code or other legislation that does not fully contemplate Islamic finance structures. At other times, we see customers or counterparties booking or accounting for transactions in ways that do not reflect their real substance as financing transactions. However, we do see continuing opportunities for the growth of Islamic finance in Kazakhstan.”
Geopolitical variables
Addressing broader economic factors, Haskins acknowledged the impact of the geopolitical and external events on the banking sector. Despite all these factors, 2023 was the most profitable year yet in 14 years of operating in Kazakhstan.
“We have already seen some major banks leave the local market in the last couple years as a result of regional conflicts,” he said. “We face ongoing changes in sanctions regimes implemented by the USA and European Union, for example – the complexity of these rules and the speed of changes can be especially challenging for banks to manage. I do not really think these developments or challenges are different for an Islamic bank like ours. We need to address these in the same ways as conventional banks – through, among other things, our risk management framework, our internal compliance processes, and our risk appetite. Overall, the bank has managed its way through these challenges quite well. And we have grown our assets over prior years with significant additional appetite for new asset growth in the coming three-five years.”
Haskins also observed that Kazakhstan’s economy has also actually withstood the challenges quite well. The National Bank is bringing down the base rate (again at its most recent meeting this month), having managed to get inflation back down into single digits recently, while also maintaining healthy and sustainable growth in the economy. The government fiscal position is quite healthy, especially in comparison to many advanced OECD economies.
“In ADCB Group, we see some good opportunities here (hence our increased appetite to grow assets). And we think other foreign investors are likewise seeing opportunities here, not only in the traditional oil and gas sectors but also in critical minerals, agriculture, and logistics, to name just a few. Some of these sectors will be key to Kazakhstan continuing to navigate these challenges and will open up new opportunities – critical minerals, for example. I have spoken with a number of new or potential foreign investors over the past 12-18 months who are looking at such opportunities, and I recently attended a mining conference where several speakers emphasized the key role that Kazakhstan can play in the energy transition. So I think foreign investors will continue to play an important role in the Kazakhstan economy,” he said.
“The future of the investment climate in Kazakhstan looks promising”
Haskins also spoke about Kazakhstan’s role as a middle power country.
“For me personally, coming originally from Canada, this is an interesting comparison. Not only are the economy, geography, and climate of Kazakhstan similar in many ways to those of Canada, but also the influence that this country can have on the world stage. Living next door to large and powerful neighbors (in Kazakhstan’s case, two of them) makes for a sometimes delicate balancing act for the two countries. Kazakhstan has managed this well since independence, and I think it can offer important views and perspectives on the world stage. If it continues to focus on economic development and stability, it should be able to continue to capitalize on this status,” he added.
Looking ahead, Haskins noted “the future of the investment climate in Kazakhstan looks promising.” It is necessary to ensure transparency, predictability, and stability in all areas, especially in the legislative and regulatory spheres. These are key elements that all foreign investors will look to when assessing the attractiveness of an opportunity.
“Current foreign investors like us, with established histories and experience in Kazakhstan, can often be some of the best promoters for new investment. But that depends crucially on transparency, predictability, and stability,” he added.
Haskins said the bank executives have seen some progress on the government’s diversification efforts, although “there remains a long road ahead to materially change the overall mix in the Kazakhstan economy where oil and gas remains such a huge contributor to the economy.”
Agriculture is a promising sector and critical minerals should play an increasingly important role in further developing the economy.
“The fact that new foreign mining companies (both smaller exploration companies as well as many of the largest global players) are looking at opportunities here, especially since the government’s introduction of the revised mining code a few years ago, is tangible evidence of the success of some of these efforts. However, as I said, these efforts will take time – new production facilities in the mining sector, for example, can take at least 12-15 years to come online when considering exploration time, permitting processes, construction periods, and so on. In the meantime, there needs to be that ongoing focus on transparency, predictability, and stability to ensure that foreign investors remain here and for these efforts to really pay off,” he said.
