Archive for the ‘Banking and Islamic Finance’ Category

Walid Aradi discusses why Dubai is well positioned to as a financial hub for international Islamic finance

Recently, Tahseen Consulting’s Chief Executive Officer, Walid Aradi, spoke with Philip Moore from Emerging Markets regarding his views on the emergence of Dubai as a global Islamic finance center. In a wide-ranging discussion, Aradi explained the competitive factors that Dubai has going for it as well as highlights the negative impact skills shortages and gaps may have on the evolution of the industry in the UAE.

Tahseen Consulting is honored to have its report on personal data privacy practices of financial institutions in the UAE cited by The National, one of the UAE’s largest English-language daily newspapers. In our report issued in July 2014, we found that UAE personal financial data privacy policies can be significantly improved to offer consumers more control over their personal data. Our original article is available here: http://tahseen.ae/blog/?p=974.

View Our Other Work on Data Regulations and Standards in the GCC

Is Open Data Leading to Better Government in the GCC?

Most UAE banks don’t give the right to opt out of sharing your personal information with affiliates, companies related by common ownership or third parties, Mr Schwalje adds. “So if a large bank has affiliated subsidiaries that offer private banking, financial management or insurance, all of your information can be freely shared for cross-selling services.”

Most UAE banks don’t give the right to opt out of sharing your personal information with affiliates, companies related by common ownership or third parties. If a large bank has affiliated subsidiaries that offer private banking, financial management or insurance, all of your information can be freely shared for cross-selling services.

You trust financial institutions to look after your money, but can you trust them to safeguard your personal financial information? By reviewing the data privacy practices of several of the major banks in the UAE, we investigate how UAE personal financial data privacy policies can be improved to offer consumers more control over their personal data.

As the internet continues to expand as a convenient way for UAE consumers to shop for financial services, we focused on understanding the personal financial data privacy practices of 14 of the UAE’s domestic and foreign banks from their websites. Nowadays safe banking involves making good choices particularly surrounding protecting your personal financial information to avoid costly surprises and even scams.

View Our Other Work on National Data Regulations and Standards in the GCC

Is Open Data Leading to Better Government in the GCC?

Banks know a great deal about consumers – they know how much you earn, how much you spend, where you spend your hard earned Dirhams, where you work, what your title is, your address, your phone number, your e-mail address, the languages you speak etc. How do financial institutions use this personal data?

As we discovered, many of the banks in the UAE use this personal data to market services to you directly or through third party affiliates. This is why you are receiving SMS messages on a Wednesday at 3 PM from your bank promoting a 40% discount on Japanese cultured pearl necklaces even though you are not in the market for pearls. There appears to be no easy way for consumers to compare UAE financial institutions’ personal financial data privacy policies. Because you likely haven’t read your bank’s data privacy policies, we analyze them for you in this blog post.

Are Some Banks Better (or Worse) Than Others?

According to the UAE Banks Federation Code of Conduct, banks must use reasonable care to prevent unauthorized disclosure of client information and can only release confidential information when permitted by law. By law, UAE banks require consumer authorization to share private financial information with affiliated companies and third parties that market products or services to customers. However, there are no laws in the UAE that specify how financial institutions should notify consumers of their institutional data sharing practices or which extend consumers the right to limit or opt out of sharing their private data. In some countries specific laws contain financial privacy provisions which give consumers the right to opt out of sharing their personal information with affiliates and third parties for marketing solicitations via telemarketing, SMS, direct mail marketing, or electronic mail.

Since institutional data sharing polices in the UAE are devolved to individual financial institutions, there are significant differences in financial institutions’ privacy practices. For example, there is significant variance in the provisions of online privacy policies of UAE financial institutions with several institutions failing to offer online privacy policies in Arabic. Institutional data sharing practices are also commonly buried in 50+ page terms and conditions documents which are not consumer friendly.

In the absence of standardized disclosure of institutional privacy practices, there is significant opportunity for UAE financial institutions to distinguish themselves by adopting more consumer friendly privacy practices. In a recent study Tahseen Consulting conducted on data sharing practices of financial institutions in the UAE, we found that only three of the UAE’s 10 largest banks allowed consumers to opt out of sharing their information for marketing solicitation. However, even these institutions failed to offer clear processes on how consumers could opt out of sharing their private data.

Data sharing practices of financial institutions in the UAE

In a recent study Tahseen Consulting conducted on data sharing practices of financial institutions in the UAE, we found that only three of the UAE’s 10 largest banks allowed consumers to opt out of sharing their information for marketing solicitation.

Mandated annual privacy disclosures in a standardized format which would explain with whom data is shared, what data is collected, how data is collected, why data is shared, and explain opt-out rights would significantly improve industry data privacy practices. Until the UAE mandates such disclosures, it is extremely difficult for consumers to distinguish between the data sharing practices of financial institutions. The only way for consumers to fully understand how their private information will be treated by a particular financial institution is to read their bank’s standard terms and conditions. Unfortunately, banks don’t make this easy for consumers, and consumers will have to search through a lengthy document to locate the bank’s data sharing provisions. However, the majority of UAE banks do not offer consumers the right to opt out of sharing their personal information with affiliates or third parties. UAE financial institutions generally make the holding of an account contingent upon consumers agreeing to the sharing of their personal information for marketing purposes. The only way to avoid having your information shared for marketing purposes is to cease to be a customer.

US Model Privacy Form for Financial Institutions

Financial institutions in the US are required to make annual disclosures to inform consumers of how their personal financial information is shared and what rights they have to limit the sharing of their data. The financial services industry in the US adopted a standard disclosure format to make it easier for consumers to compare privacy policies between financial institutions and more easily opt out of banks sharing certain types of information for marketing purposes.

I Never Agreed to This. Did Your Read the Fine Print?

While there is no federal law that protects personal information in the UAE, a number of laws have broad protections that prevent the sharing of information about an individual’s private or family life without consent. For example, the UAE Credit Information Protection Law contains provisions which require written approval to share confidential consumer credit information. However, many consumers in the UAE don’t realize that they provide written authorization to their bank to share credit, financial, and personal information with affiliates and third parties when they complete account opening procedures. After a consumer opens an account, banks continue to gather personal information, including data such as postal and e-mail address, phone numbers, employment, financial status, and credit history, from transactions and applications for services such as funds transfers and loans.

When consumers complete account opening application forms, they must agree to a declaration that indicates they have read and agree with the financial institution’s general terms and conditions for holding an account and using internet banking services. Within these documents, which are often difficult for consumers to read and understand, financial institutions retain the right to share a consumers’ private information with affiliates, companies related by common ownership or control, and third parties, nonaffiliated financial companies with a formal agreement with the financial institution to market products or services to the bank’s customers. Several banks also retain the right to share private information with affiliates and third-parties in countries outside the UAE.

Example Declaration From Account Sign Up Form Authorizing Your Information To Be Shared

You just signed this declaration when you opened your bank account, but did you read Clause 5 on page 7 of the General Terms and Conditions for Banking Services regarding how your personal information is used and shared for marketing and other purposes?

Since UAE laws do not contain provisions restricting information sharing among companies related by common ownership or control, personal information (such as name, address, and account number) and account information (such as type of accounts, account balances, and transaction history) can be shared for marketing purposes. For example, if a large bank has affiliated subsidiaries that offer private banking, financial management, or insurance services, all of the consumer’s information can be freely shared for cross selling additional services. The UAE’s approach is similar to the United States in which the Gramm-Leach-Bliley Act allows companies to share personal data with affiliated entities with the exception of information on creditworthiness. However, in Europe, the European Union Data Directive prevents banks from sharing personal data between affiliated entities to cross sell services unless the information was specifically collected for marketing a particular service.

When consumers complete account opening application forms and agree to a financial institution’s general terms and conditions, they also typically authorize the financial institution to share their information with third parties which have formal agreements to market products and services to consumers via telemarketing, SMS, direct mail marketing, or electronic mail. Generally, third-party service providers have access to Personal information (name, address and account number), Account information (type of accounts, account balances and transaction history), and Transaction information (dates, amounts, locations and type of transaction) but not account numbers.

Because the UAE has residents from so many countries, reactions to telemarketing, SMS, direct mail marketing, or electronic mail marketing solicitations range from apathy to consumers becoming extremely irate because they do not know how a particular entity received their private information and are unable to remove themselves from a marketer’s database. The marketing departments of financial institutions use personal data to market directly to existing clients, cross sell products of affiliated companies, and form joint marketing partnerships that allow third parties to target customers with solicitations for other products and services. Financial institutions and third parties who have entered into formal agreements with a particular financial institution do not need to purchase databases to sell into their existing client base since they already have substantial private information about consumers already.

What Could Regulators Do to Prevent This Issue?

  1. Mandate annual privacy disclosures in a standardized format in Arabic and English which would explain with whom data is shared, what data is collected, how data is collected, why data is shared, and explain opt-out rights would significantly improve transparency of industry data privacy practices;
  2. Similar to Europe, the UAE could enact a law which would mandate that data must be collected for specified, explicit purposes and not further processed in a way incompatible with those purposes;
  3. Enact federal laws which would compel financial institutions to implement simple opt-out processes so that consumers canlimit the transfer and use of personal information;
  4. Require financial institutions to provide easy access to privacy policies at branch offices and online through a single web site with opt-out information;
  5. Financial institutions could be required to provide simply stated and clear privacy policies following common standards for readability to stop the current practice of banks including data sharing provisions in general terms and conditions that must be agreed to in order to hold an account;
  6. Clarify the rights of individuals to protect their privacy and seek remedies if their privacy rights are violated and stop the practice of allowing banks to indemnify themselves from damages which might result from the sharing of personal information with third parties;
  7. Regulate the sharing of private information to countries outside the UAE;
  8. Give individuals the right to review information that is disclosed or to correct inaccurate or incomplete data.

Tahseen Consulting’s research on labor market requirements in the UAE’s Islamic finance sector was cited in the New York Times’ article Dubai Seeks to Become Islamic Economic Hub.

Last year we projected that another $87 to $124 billion could potentially enter the Islamic banking system in the UAE by 2015 which will create approximately 7,800 new jobs at Islamic banks in the UAE. By 2015, the UAE’s Islamic financial services sector will likely double in size from approximately 10,000 employees currently to 20,000.

You can view the original blog post here

Tahseen Consulting’s Research on the UAE’s Islamic Finance Workforce Featured in the New York Times

Tahseen Consulting’s research on labor market requirements in the UAE’s Islamic finance sector was cited again in the New York Times’ article Dubai Seeks to Become Islamic Economic Hub.

Tahseen Consulting’s research on labor market requirements in the UAE’s Islamic finance sector was cited again in the Gulf News’ article Islamic Finance Talent Gap to Reach 8,000 Plus.

Last year we projected that another $87 to $124 billion could potentially enter the Islamic banking system in the UAE by 2015 which will create approximately 7,800 new jobs at Islamic banks in the UAE. By 2015, the UAE’s Islamic financial services sector will likely double in size from approximately 10,000 employees currently to 20,000.

You can view the original blog post here

Tahseen Consulting’s work on identifying skills shortages in the Islamic finance sector in the UAE has been frequently cited by the media and in the run up to the Global Islamic Economy Summit

Tahseen Consulting’s work on identifying skills shortages in the Islamic finance sector in the UAE has been frequently cited by the media and in the run up to the Global Islamic Economy Summit

Dear Readers,

As 2013 draws to a close, here is a look at our most popular content of the year. We hope you are enjoying Tahseen Consulting’s Research and Insights, and we look forward to continuing to engage with you in 2014.

Best wishes for a happy and productive new year,

The Tahseen Consulting Team

Tahseen Consulting’s Walid Aradi Interviewed on Dubai TV’s Money Map

Tahseen Consulting’s CEO Walid Aradi appeared on Dubai TV’s Money Map to discuss the role of entrepreneurship policy in economic development and meeting the region’s youth unemployment challenge.
 
Women Wanted: Attracting Women to Technical Fields in Qatar

In this article, we discuss the difficulties Qatar faces in terms of promoting technical and vocational education amongst females. Over the past several decades Qatar has dramatically reformed its education and training system to align it with macroeconomic policies aimed at advancing towards a knowledge-based economy. However, technical vocational education and training (TVET) has not been a significant focus of educational reform.

   
Promoting Entrepreneurship in the Arab World: The Need for Tailored National Approaches

Understanding the determinants of self-employment and how they might differ across the region is critical to meet the region’s youth unemployment challenge

   
An Arab Open Government Maturity Model for Social Media Engagement

While embrace of social media as a component of open government initiatives is still in its infancy in the Arab World, there is much expectation that public sector social media use will have a transformative impact on citizen participation in government, policy formation, and the way public sector entities conduct business. However, existing evolutionary models of e-government and open government maturity based on the experiences of Western democracies offer little support to Arab entities that operate in an institutional environment characterized by much different governance traditions.

   
Arab Knowledge Economies Require More Effective Skills Formation Systems to Generate High Skill, High Wage Employment

As Arab countries pursue knowledge-based economic development, national skills formation policies require significant rethinking says this report from Tahseen Consulting in collaboration with the Sheikh Saud bin Saqr Al Qasimi Foundation for Policy Research.

   
Skills Shortages and Gaps May Limit the UAE’s Islamic Finance Hub ambitions

Based on our projections that a another $87 to $124 billion could potentially enter the Islamic banking system in the UAE by 2015, approximately 7,800 new jobs will be created at Islamic banks in the UAE assuming current asset concentration ratios remain similar.

   
Arab Corporate Social Responsibility Rapid Appraisal Diagnostic

Given the scattered use of Global Reporting Initiative standards in the region, Tahseen Consulting has developed an Arab Corporate Social Responsibility Rapid Appraisal Diagnostic based on analysis of a representative sample of 128 regional CSR initiatives and previous literature.

   
The Arab World’s Most Generous Philanthropists Could Mobilize $24 billion by Signing the Giving Pledge

If the Arab World’s billionaires signed a pledge to donate their wealth to philanthropy, an estimated $24 billion would be mobilized.

   
Arab Students Studying Abroad Contribute $77 Billion to Other Economies

Arab students studying abroad have generated $77 billion in income for other countries over the last decade without even considering other economic externalities.

   
Only 11% of Arab Educators Regularly Use Educational Technologies in their Classrooms a Tahseen Consulting Study Finds

Due to the region’s youthful demographics and widespread use of mobile technologies, Arab educators face the challenge of meeting new expectations of learners who want engaging, interactive, and individualized learning experiences.

 

In January 2013, we highlighted the issue of skills shortages and gaps potentially limiting the ambitions of aspiring Islamic finance hubs in the Arab World. A key challenge that all aspiring Islamic finance hubs face is developing a banking workforce with Sharia knowledge, the ability to clearly explain Islamic banking products, and the ability to contribute to product development. Without these competencies staff in Islamic financial institutions have difficulties explaining products to customers and are unable to contribute to product innovation. In the run up to the recent Global Islamic Economy Summit in Dubai, our research on skills needs required by emerging Islamic financial hubs was cited in by several news outlets and institutions in the GCC.

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View Our Other Work on Islamic Finance and Banking in the Arab World

In our blog post Skills Shortages and Gaps May Limit the UAE’s Islamic Finance Hub ambitions (http://tahseen.ae/blog/?p=597), we highlight that the UAE, for example, faces tremendous skills shortages in forging a vibrant Islamic finance industry.

In our blog post Tahseen Consulting’s CEO Sees Strong Growth Potential for Local Banks in the UAE (http://tahseen.ae/blog/?p=735), Walid Aradi outlines why local banks have been gaining market share from international competitors in the UAE

In our blog post Tahseen Consulting Analysis Cited by Abu Dhabi Council for Economic Development in its Analysis on the Growth of Islamic Finance in the UAE (http://tahseen.ae/blog/?p=694), Tahseen Consulting’s Wes Schwalje comments of on the growth of Islamic finance in Abu Dhabi

Walid Aradi outlines why local banks have been gaining market share from international competitors in the UAE

When it comes to business news and regional economic analysis, government and business leaders in the GCC turn to Gulf Business. Tahseen Consulting is honored to have its work highlighted in the publication’s October issue. We have posted the full article below.

Recently, Tahseen Consulting’s Chief Executive Officer, Walid Aradi, spoke with Ryan Harrison from Gulf Business regarding his thoughts on the competitive landscape evolving in the UAE retail and commercial banking sector. In a wide-ranging discussion, Aradi explained some of the reasons why local banks such as Abu Dhabi Commercial Bank, Emirates NBD, Mashreq, and First Gulf bank have been performing well while internationals have been downsizing their operations.

Gulf Business: What is driving this shift and how long will it continue?

Aradi: As a consequence of the economic crisis, some international outfits reassessed their presence in the region and redirected their resources back to their home markets, as they were seeking to limit their exposure, focus on rebuilding their competitive advantage in their home countries, and improve their balance sheets. This left the local banks, which came off a period of consolidation, ready to pick up the slack should the economic conditions improve.

With economic growth hovering around 4%, and an increased appetite to lend due to the introduction of loan caps and more defined lending criteria, banks in the UAE responded to the increased pace in government infrastructure projects by aggressively marketing their existing products, and offering new ones.

Gulf Business: How much business is for the taking?

Aradi: The UAE Monthly Banking Indicators, published by the Central Bank, show that despite experiencing modest year on year growth of 2.6% in 2012 in loans and advances, the increase in the first seven months of 2013 exceeded 4.3%. Championing this growth were local banks such as ADCB, Emirates NBD, Mashreq and First Gulf banks, which competed aggressively to fill the gap left behind by the downsizing of operations among some international banks.

While local banks managed to increase their share of the corporate and consumer lending markets, they will find it increasingly difficult to maintain past levels of profitability. This is because while the growth in the economy is expected to be solid over the next two years, it will not reach the spectacular levels posted in 2005 or 2007, thus limiting the ability of local banks to expand their revenues. Additionally, changes to capital and liquidity requirements have raised cost pressures on the banking sector.

Gulf Business: How can local banks improve their products and services to build their corporate lending business?

Aradi: To maintain their margins, local banks must bolster their revenues by expanding their product offerings, enhancing services to higher margin segments of the business, building upon their knowledge of the local market from operational and marketing perspectives, attracting global talent, and forming alliances with global banks to overcome their limited international footprint. On the other hand, local banks should aggressively pursue reforms to their business strategies by enhancing their systems and moving towards more efficient payment infrastructures.

Without fully capitalizing on the opportunity to solidify their place in the market, local banks will find themselves having to fend off pressures from global banks when their appetite to invest in emerging markets returns as a consequence of improved market conditions in their home countries.