A key partner in Kuwait’s energy projects

May 26, 2023

Sheikh Ahmad Duaij Al Sabah, chairman of the Commercial Bank of Kuwait (Al-Tijari), talks to The Energy Year about the importance of the energy industry and the role digitalisation plays in the bank’s strategy. Al-Tijari is a financial institution in Kuwait with a growing corporate and retail banking franchise providing innovative financial and investment solutions to its customer base.

This interview is featured in The Energy Year Kuwait 2023

How strategic is the energy industry for the Commercial Bank of Kuwait?
The energy sector is important for Kuwait because it is a critical component of the national economy. That is why, at Al-Tijari, we endeavour to have proper competence and understanding of the industry. We have a good team that knows the ins and outs of the energy sector, and we try to be a key partner in all energy projects. This is one of our aims, and we’re achieving it.
There is also a general push by the government through Kuwait’s Vision 2035 to create infrastructure and growth for local companies. Our bank definitely works to be a key partner in the development plan for many of these projects. We always strive to be at the forefront, to be a partner in financing or consulting, in order to help achieve the aspired-for growth results for our bank on one hand and contribute to Kuwait’s economy on the other hand.

What are the key strategic pillars underpinning Al-Tijari’s drive to service the Kuwaiti economy?
Between all the different banks in Kuwait, I think our key drivers are our competitive advantages: our flexibility, tight-knit teams, compressed adaptability, speed in decision-making and compressed hierarchical organisational chart, so decisions do not have to go through multiple hands. We have one-team professional management capable of diagnosing problems and finding mature solutions for them.
Communication between different divisions and sectors is another key success factor within the bank.
We are one of the oldest established banks in Kuwait, with historical business relationships with our customers. We believe in teamwork and encourage staff involvement in improving business. That is why I think we have an edge over others: our adaptability and our ability to stand for our customers’ expectations, which reflects positively on our bank and helps us to achieve our targets.

 

What are the bank’s key goals for 2023?
Our main goals are to keep growing through our balance sheet and profits. I think the key component is helping our partners and clients succeed. That will be reflected in our financials. Most prominently, I want to confirm that investing in our team and providing them with the best training will ultimately result in catering to our customers’ banking requirements.
We have always had and still have a significant presence in the banking industry in Kuwait, and we endeavour to remain the bank of choice for customers through the innovative banking services and products we offer them.

What are the key challenges that Kuwaiti companies face?
Kuwait is undergoing significant expansion in the construction industry. The government has approved a USD 104-billion national development plan that includes the construction of major roadways, a new airport terminal, new hospitals, new residential developments, a new Kuwait University campus, a new oil refinery, oil exploration, new power projects and a new railway and metro system. Private construction and project development, as in other GCC urban centres, are planned and expected to move forward in the future.
Upcoming projects include a proposed USD 10-billion expansion in desperately needed electricity generation capacity (through public-private partnerships), investment in environmental clean-up projects and defence and security opportunities.
The government is supporting companies to easily do business in Kuwait and to become partners in the country’s development plans. However, the government should also try to support the SME sector. Historically, this happened during the Covid-19 pandemic. The Kuwait government has been responding to the needs of the SME community in Kuwait and announced initiatives to help SMEs with their recovery process.
The government announced a stimulus package through the Central Bank of Kuwait to help SMEs with their working capital requirements for 2020, such as rental expenses, salaries and other contractual obligations, through the provision of soft loans, which are capped at 2.5% interest with flexible repayment terms. Not only that, but the government also relieved entities from paying social security contributions for a period of six months, beginning in March 2020.

How important is digitisation investment in Al-Tijari’s strategy?
Today, people have round-the-clock access to banks due to online banking. Managing large amounts of cash has also become easier. Digitisation has also benefited customers by facilitating cashless transactions. Customers need not store cash anymore and can make transactions at any place and time.
With the increasing usage of smartphones, the digitisation of the banking sector is inevitable to catch up to the increasing expectations of the world. It reduces human errors and increases convenience. However, due to the fact that cyber threats are on the rise, banks must be very careful and should be prepared to handle cyber attacks.
Digitisation is not just an option for the banking industry; rather, it is inevitable because every industry is being digitised and the banking sector is no exception. Mobile banking is increasing at a faster pace than online banking.
The bank has made a leap in digitisation of processes to enhance customer experience at various touch points, and we will continue investing in technology and human capital to exceed customer expectations by providing effective and efficient virtual services and minimising the need to visit the branch in person.
The bank continuously invests in automation through self-service kiosks and virtual banking for digitisation to enhance branch functionality. This can be noticed through the transformation of branches towards self-service banking, virtual banking services, branch automation and increasing the customer’s awareness and knowledge of the bank’s digital channels.
We are also focusing on promoting digital channels through social media via normal posts or animated ads and listening to customer suggestions to keep enhancing these channels.

What are the key risks for the growth trajectory of banks?
Kuwait’s banking sector demonstrated its resilience during the global financial crisis and the Covid-19 pandemic. However, there are a number of risks all banks are facing, not just ours. Some commonly known risks include market liquidity and operational risks. Banks are facing other challenges as well.
These include, but are not limited to: understanding customer expectations, optimising the mobile experience, leveraging social media to increase foot traffic and regulatory compliance. The fierce competition in the banking sector is another challenge, but at Al Tijari, we stand well prepared to meet such challenges and overcome them.

How has the Kuwaiti investment atmosphere been evolving in recent years?
The government of Kuwait launched an ambitious development plan in 2018 known as Vision 2035, which aims to transform the country into an international trade hub and diversify its oil-centric economy. The goal is to increase private sector participation in Kuwait’s economy by creating a more investor-friendly environment as well as to invest in the nation’s economic infrastructure via the construction of new airports, ports, roads, industrial areas, residential developments, hospitals, a railroad and a metro rail.
The Northern Gateway initiative, which encompasses the Five Islands, or New Kuwait projects, envisions public and private sector investment in the establishment of an international economic zone that could exceed USD 400 billion over several decades.
With one of the world’s largest sovereign funds, with more than USD 670 billion in assets as of March 2021, minimal taxes and low-cost labour, Kuwait provides a great opportunity for investment. However, bureaucratic red tape and the frequent changing of the government have stalled the progress of many initiatives.
Several public-private partnerships are in the pipeline in the power, water management and renewable energy sectors. Two billion-dollar hospitals were completed in the last two years. These institutions need foreign investment to operate and train hospital staff, as well as to deliver world-class equipment and IT infrastructure.
Given all the above, I think the Kuwaiti market is appealing. The GDP has increased, infrastructure spending is growing and the consumer level and consumer and corporate balance sheets are all strong. The market looks attractive for all business activities. The banks in Kuwait are solid, and that’s due to the prudent regulation of the Central Bank of Kuwait and its adaptable monetary policies. The capitalisations are high, the profit levels are quite acceptable and we should build on this in the future.

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