Recently, Amana Bank’s Managing Director/CEO, Mr Mohamed Azmeer, shared his perspectives on “Banking Beyond Borders: Navigating Economic Growth and Stability” with the Global CEO magazine.

In this exclusive article, Mr Azmeer shares profound insights into Amana Bank’s strategic approach to collaboration with the central bank and other financial institutions to bolster economic growth and stability in Sri Lanka. He discusses how Amana Bank’s Development Focused Banking Model aligns seamlessly with the nation’s economic revival efforts, particularly during times of crisis, through initiatives such as trade financing and support for SMEs.

Furthermore, Mr Azmeer explores Amana Bank’s strategies for navigating challenges and opportunities in international markets and cross-border transactions, leveraging partnerships with organisations like the Islamic Development Bank Group. He sheds light on the bank’s digitalisation initiatives, aimed at enhancing banking services, promoting financial inclusion, and contributing to economic development locally and globally.

Q: How does your bank collaborate with the Central bank and other financial institutions to support economic growth and stability within the country, and what initiatives have been particularly successful in driving this collaboration?

Amana Banks inherently unique Development Focused Banking Model is well aligned with the Central Banks role in driving economic revival and prosperity for Sri Lanka. Such focus is embedded in the Banks Mission statement of ‘Enabling Growth and Enriching Lives’.
This alignment enabled the Bank to play a pivotal role during the height of the economic crisis by assisting the supply chain in the essential areas of food, fuel, pharmaceuticals, medical supplies, etc. through our trade financing engagements facilitated by a strong network of Global Correspondent Banking Relationships. The SME segment which is the back bone of the Sri Lankan economy, was the most effected and the Bank continues to play a supporting role by providing the required relief towards their revival, helping them to consolidate and sustain presence in their respective domains and livelihoods.

At the critical moments of the crisis Amana Bank, though relatively small in size came together to team up with the other industry players to support the initiatives taken by the Central Bank and other Government Authorities towards maintaining financial stability and support essential services.

Q: In an increasingly interconnected global economy, how does your bank navigate challenges and opportunities arising from international markets and cross-border transactions, and what strategies do you employ to ensure resilience and sustainability in the face of external economic factors?

Amana Bank is honoured to have as its primary strategic shareholder the Islamic Development Bank Group, which is a supra-national development organisation, through which the Bank has been able to leverage on many opportunities as well as support our resilient performance. Despite not-being an OIC member country, Amana Bank was invited by IsDB Group to participate in their annual general meeting, where in 2023 witnessed over 77 multilateral agreements signed to the value of USD 5.4 billion, covering sector such as healthcare, agriculture, food security, SME, education, and humanitarian support. These agreements are not limited to OIC member countries and include observer countries like Russia and Thailand. Amana Bank hopes that Sri Lanka will soon benefit from these development agreements by securing an observer membership for which Amana Bank is working towards with the G0SL.

Our Bank is committed to leveraging digitalisation to transform banking services, drive financial inclusion, and stimulate economic growth. As a young bank, Amana Bank possesses a distinct advantage in digital transformation.

Further to facilitate cross border trade Amana Bank has established a 60+ strong correspondent banking network. To facilitate the growing bi-lateral trade with India, Amãna Bank was one of the early banks to introduce a trade channel that allows businesses to transact directly in Indian rupees (INR) last year.

Q: With the rapid advancement of digital technology and fintech innovations, how is your bank leveraging digitalisation and technological advancements to enhance banking services, improve financial inclusion, and contribute to economic development both locally and globally?

Our Bank is committed to leveraging digitalisation to transform banking services, drive financial inclusion, and stimulate economic growth. As a young bank, Amana Bank possesses a distinct advantage in digital transformation. Our transition from traditional brick and mortar network to digital banking is easier owing to the scale of our operations for which we have put in place a 5 year plan to achieve key digital goals. We recently launched several digital banking solutions to enhance customer convenience, including WhatsApp banking. In 2023, we witnessed our digital outreach surge where retail App transactions grew by 138%, SMS activations by 43%, and Corporate Internet Banking registrations by 36%. We also adopted eco-friendly customer engagement measures such as online account opening with E-KYC within the regulatory framework

Through rigorous risk management practices, including stress tests and portfolio reviews, we prioritise timely engagements along with revival & recovery efforts to minimize impairment and maintain asset quality.

Towards making our banking more accessible and inclusive, over the last few years, we have invested heavily in expanding our Self Banking Centre (SBCs) network which offer 24/7 cash deposits, cash withdrawals and cheque deposits. We strategically located SBCs in areas where there is a limited banking presence. In the past 12 months, we have established 8 new SBCs, bringing our total network to 29, in addition to our 33 branches. Prior to establishing such SBCs, customers had to travel a considerable distance to reach traditional branches to access banking.

Q: What strategies does your bank employ for provisioning Stage III non-performing loans, and how does this contribute to maintaining financial stability and regulatory compliance?

Provisioning for Stage III non-performing advances is well defined in regulatory guidelines, accounting standards and internal prudential policies. Further, the bank provides additional management overlays to take account of businesses operating in risk elevated sectors as well as businesses exposed to economic shocks. Within these frameworks, we continue to support our business customers, primarily SMEs, Manufacturers, Exporters, etc. often providing assistance and advisory services to help improve their cash flow and liquidity position and strengthen their financial resilience and revival efforts in difficult times. Understanding their unique circumstances, the Bank stood by our customers to ensure their business continuity in regard to their financing arrangements.

Through rigorous risk management practices, including stress tests and portfolio reviews, we prioritise timely engagements along with revival & recovery efforts to minimise impairment and maintain asset quality. Collaborating with industry stakeholders, we align with best practices to safeguard financial stability. Additionally, Amãna Bank has established a Business Revival Unit (BRU) to objectively engage with businesses in difficulty and support their business recovery which is very much in line with our unique model of development focused people friendly banking. This initiative also fell perfectly in line with the recent guidelines by the Central Bank and facilitated in maintaining financial stability and the momentum in economic recovery.

Q: Sustainability and environmental, social, and governance (ESG) considerations are becoming increasingly important in the banking sector. How does your bank integrate sustainability principles into its operations, investment decisions, and corporate strategy to promote long-term economic resilience and responsible banking practices?

Sustainability and ESG considerations are an essential part of our unique banking model. As an early adopter, the Bank became one of the first principal signatories to the Sustainable Banking Road Map initiated by the Sri Lanka Bankers Association (SLBA) and the Central Bank of Sri Lanka in 2016. Amãna Bank has formed early partnerships and alliances with key sustainability advocates like the United Nations Global Compact (UNGC), United Nations Development Programme (UNDP), Green Building Council of Sir Lanka, and Bio-diversity Sri Lanka (BDSL) to keep up with global developments in the sustainability sphere and facilitate early action on these efforts.

Amãna Bank values ESG in credit analysis and is committed to economic and social sustainability. The bank provides support to Small and Medium Enterprises (SMEs) and green financing projects such as the ‘Horana Solar Power Plant’, which is the largest green financing project to date. Towards ensuring social sustainability in line with the model, Amãna Bank promotes funding to priority sectors identified by the Central Bank and does not finance industries that are harmful to society such as Alcohol, Tobacco, Gambling, etc. The bank promotes financial inclusion through its non-interest-based banking solutions, encouraging gender equality in access to finance. One such solution is the Gold Certificate Financing, which is an innovative product that provides an alternative to pawning, and helps increase financial inclusion among the unbanked and under-banked segments of society.

The Bank sponsored OrphanCare initiative seeks to make an impactful contribution in the society towards addressing the needs of orphans to avoid a second abandonment. Guided by Article 2 of the United Nations Convention on the Rights of the Child, OrphanCare remains committed to operating without any form of discrimination. The OrphanCare Trust is overseen by an eminent panel of Trustees who are professionals with a strong reputation and track record on social service and is being audited by Ernst & Young.

Q: As a leader in the banking industry, what role do you see your bank playing in driving innovation, fostering entrepreneurship, and supporting small and medium-sized enterprises (SMEs) to stimulate economic growth and create employment opportunities within the country and beyond borders?

The development-focused people-friendly banking model adopted by the Bank, guides the alignment of the strategic focus of the Bank towards the SME sector, which is the backbone of the Sri Lankan economy. Further since our banking model is focused on the Real Economy, the progress we enable and achieve, directly translates in to making a meaningful impact to the national economy and its efforts on recovery.

In addition, the Bank played a key role in supporting the SME segments, helping them to consolidate and sustain presence in their respective domains and livelihoods by providing much needed relief. We went beyond to deepen relationships with our customers and truly understand their unique circumstances in order to guide them through this period of unprecedented challenges. Moreover, the Bank realigned its financing offerings, enabling the export oriented businesses and other companies generating much needed foreign currency to the country, to be adequately and comfortably supported for growth.

The development-focused people-friendly banking model adopted by the Bank, guides the alignment of the strategic focus of the Bank towards the SME sector, which is the backbone of the Sri Lankan economy.

Amana Bank has shown a strong dedication to building long-lasting relationships with its customers, understanding their unique circumstances, and guiding them through challenging times. At the same time, we are keen to tap into new and emerging SME segments, the Bank launched a campaign targeting micro-entrepreneurs, with special emphasis on enabling women-led businesses. This was driven by the network of exclusive Ladies’ Banking Units across the Amana Bank branch network.

Q: Over the last few years, what key initiatives has your bank implemented to enhance its performance and competitiveness in the global market? Looking ahead, what are your expectations for your bank’s performance and growth in the coming years, particularly in the context of expanding operations beyond borders?

During the challenging period in which the overall banking industry experienced negative credit growth, Amãna Bank transitioned to positive growth by tactically shifting its focus towards top-tier corporates selectively. Anchored to our ethos of people friendly banking, we went beyond to deepen relationships with our customers and truly understand their unique circumstances in order to guide them through this period of unprecedented challenges. Such strategic moves increased the acceptance of Amana Bank amongst both customers and other stakeholders.

Further in 2023, the Bank demonstrated its unwavering commitment to supporting growth and stability by conducting a successful Rights Issue, raising LKR 6 billion. This was one of the largest Rights Issues in recent history and garnered an inflow of approximately USD 5 Million in much-needed Foreign Investments. With the participation of existing and new shareholders, including strong foreign, corporate, and HNW investors, regulatory bodies and investors supported this capital raising. This highlights Amãna Bank’s credibility in the market and its potential to emerge as a leading financial institution in the country.
We are committed to innovation, customer-centricity, and sustainable value creation, and we expect our bank’s performance and growth to remain strong. Our strategic priority is to expand our operations beyond borders as this will provide opportunities for geographic diversification and market expansion. Amãna bank is well positioned with the fresh capital infusion to expand our footprint beyond Sri Lankan boarders to cater the rising demand for non-interest based banking in the region.

A key challenge for further growth has been the need for non-interest-based instruments like alternative bonds (Sukuk). This solution is widely practised in other countries such as the United Kingdom, Germany, China, Hong Kong, South Africa, Luxemburg and Singapore, besides Middle Eastern and Far Eastern countries. I am glad to note that we have made significant progress with positive reception from the highest offices in the country along with the acceptance of the legal fraternity regarding the potential of alternative bonds to fast-track Sri Lanka’s economic recovery.

Q: How does Amana Bank portray its unique model of banking? Can anyone open an account with Amana Bank?

As commonly misconceived by many, the benefits of this people-friendly banking solution are not limited to Muslims but for all mankind . Therefore, every Sri Lankan, irrespective of their religion, can Bank with us and many such customers are already enjoying the differentiated benefits of our unique banking model.

To address the common misconceptions, the Bank has established a dedicated unit for Knowledge Marketing, which has released a series of informative animated videos highlighting the features, benefits and product structures of how our unique banking model differs from conventional interest-based banking. They can be accessed via the Bank’s website and the Bank’s YouTube channel. These videos have gained both local and international acceptance. The Knowledge Marketing Unit also conducts programmes on physical and virtual platforms, engaging with Trade Associations, Professional groups and Educational Institutions which have proven to have a significant impact.