As the first bank in Germany and the Eurozone to introduce comprehensive financial products and services according to the ethical, sustainable and transparent Islamic banking principles, KT Bank AG continues to be a pioneer and leader in Islamic finance. Today we sat down with the bank’s CEO and Chairman of the Management Board, Mr. Ahmet Kudsi Arslan, to talk about their journey to today’s success and how they carry on their mission to become the leading socially responsible and first choice house bank for the Muslim community as well as for all customers who are interested in ethical investments.
Good day, Mr Arslan! Thank you for spending time with us through this interview. You have been sharing your expertise with the Kuveyt Türk for almost two decades now. Can you share with us your professional journey – the positions you held with Kuveyt Türk along with the challenges in climbing up the ladder to success until you became the CEO of KT Bank? And how does a successful person like you would jumpstart a busy day?
Thank you for having me, the pleasure is all on my side. My personal journey and career path are very much intertwined with that of Kuveyt Türk Participation Bank in Istanbul, and since then it’s been more than two decades. Kuveyt Türk is leading the Islamic banking market in Turkey for three decades. Its main shareholder is Kuwait Finance House, the most important financial institute with Islamic business model in the Gulf region.
I am with the group since I graduated in 1997 with a Bachelor of Science from the Middle East Technical University in Ankara. In September the same year, I joined my employer and gathered experience in different fields, including financial analysis, commercial and corporate marketing as well as branch management. From October 2009 until August 2013 I served as Corporate & Commercial Credit Manager and from September 2013 as Group Head of Wealth Management and Private Banking. Two years later I transferred to Germany to support KT Bank with its market establishment. KT Bank is a 100% subsidiary of Kuveyt Türk and the first bank in Germany and in the Eurozone, which introduced comprehensive financial products and services according to Islamic banking principles – a very exciting project. In January 2016, I was appointed as Deputy CEO of KT Bank and following that, in January 2017, I was made Board Member. Then, in April 2017, I was appointed as KT Bank’s CEO and Chairman of the Management Board. This is a role that I enjoy very much and gives me a lot of energy as I work on a pioneering project in a promising market. My motivation and love for my job are the ultimate jumpstarts for my busy days but if you are looking for a specific winning formula I would simply say – try some Turkish coffee!
Last October 2018, the Global Finance Award once again recognised the KFH GROUP in several categories, and KT Bank AG was acknowledged as the “Best Islamic Bank in Europe”. How important is this recognition for KT Bank AG?
As accolades like the Global Finance Award are happening on an international level with a lot of great publicity, we are delighted that our hard work as Islamic banking pioneers in Western markets has been recognised.
KT Bank AG was the first Islamic finance to open in 2004 in a country like Germany, which is home to one of the most competitive banking sectors in the world. Over the years, what have been the major challenges and barriers you have had to tackle?
Our market entry started with opening a representation office in Germany in 2004 followed by the granting of the financial services license from Germany, the third country deposit brokerage license in 2010 and resulted in the fully-fledged banking license in 2015 under German law for the provision of deposit and credit business in Germany. Kuveyt Türk had assumed a pioneering role in providing information about the ethical and socially responsible Islamic banking system in the German market from the very beginning. The duration of the licensing process was not surprising for the nature of such a trailblazing project in a foreign environment. The regulative implementation process was a challenge but we were supported all the way by the authorities and stakeholders who welcomed us with open arms. Yet the Islamic banking system had to be adapted to the legal framework in Germany, with all of its specific features and risks and we had to comply with all the regulatory, legal, and fiscal requirements applicable for conventional banks. The greatest challenge we faced in the process was the taxation. Germany does not provide an exemption or adaptation for our business model in that area. With regards to specific challenges, such as Islamic car purchase and real estate financing, we had to develop approaches to comply with the German legislation – e.g. our real estate financing products are set up in line with the model of the German civil-law association “Gesellschaft bürgerlichen Rechts” (GbR) to avoid double taxation.
What are the key factors of the Western market that affect Islamic banking and financial practice in Germany? How do you integrate these factors in making Islamic banking a universally ethical alternative to conventional banking in the country?
As a first mover in Germany and in the Eurozone, we have observed over time that European markets are becoming increasingly aware of the universally ethical qualities of Islamic banking’s Quran-based values, thus attracting value-conscious clients of all beliefs. We are in a constant exchange with business communities and scholars and also support scientific research in our area. It quickly became very clear that faith-based finance models, in general, are on the rise in the Western world. Our business model shows that profits and ethics are compatible. Not only the Muslim communities here, but also the European clientele is becoming increasingly aware of the contribution of our business model to the real economy. We as Islamic bankers in Germany are thus carving out our position within the conventional banking sector, shoulder to shoulder with the ethical banking segment and on the way to sustainable profitability.
KT Bank AG continuously develops state-of-the-art and unique Islamic banking products and services. Can you tell us more about your offerings and products that make you at par, or even superior compared to conventional banking?
Our multifaceted product portfolio for retail, corporate and institutional customers includes a wide range of Islamic financing and investment products and services and is continually advanced and developed. We provide current and participation accounts, real estate financing in Germany and in Turkey, savings plans, remittances to Turkey, instalment loans, instalment commercial finance, enterprise finance, and euro account services for institutional clients. Our products satisfy our standard for ourselves as pioneers, featuring brand-new concepts like our automated instalment payment solution Jetzz Card which substantially simplifies instalment shopping based on the Debit Mastercard. Our solid KT Participation Account provides our clients with the highest returns that can currently be obtained in the fixed-term deposit area in this country. We are also embracing the strive for digital maturity and are continually advancing our technological infrastructure, digital services, and online direct banking structure.
What practices or principles do you think the Western or the conventional banking system can learn from the Islamic banking system?
Our banking model prioritises unequivocal values over a narrow focus on profits and is guided by historical principles of an integral society that are 1,400 years old and still tremendously relevant today. The Islamic economic law, in general, is based on justice and the economic well-being of society, with the market symbolising freedom and solidarity. In pre-Islam times in the Middle East, a diversity of non-transparent and arbitrary sales agreements and purchase contracts existed. With the introduction of the pillars of Islam and the belief in an afterlife, economic and social responsibility grew. The new prohibition of interest, speculation and lack of transparency ensured that trading did not cause damage to society. The moral requirement for traders was a charitable and benevolent market participation. Islamic banking today implies interest-free, asset-backed banking on the basis of profit sharing with clients. Interest-bearing moneylending and high-risk trades are prohibited, as well as investing in businesses that provide goods or services considered contrary to Islamic principles, like those involving alcohol, pork, gambling, arms, and tobacco, among others. The Islamic model is thus a stable and ethical system that has proven to weather many storms, devoid of the repercussions of highly volatile financial instruments.
The Muslim community in Germany rose dramatically between 2010-2016. Research also shows that Islamic finance is spread to more than 60 countries all over the world, concentrated in countries/areas where most of the Muslim population thrives*. Do you think that Islamic banking and finance is just for Muslim-majority countries?
Not at all, and let me explain why we make a fine example to support that perspective. The introduction of Islamic banking in a country like Germany seemed to respond to needs arising out of the increased influx of Muslim immigrants within the last few years. Germany, with its current Muslim population of about 4.7 million, is, alongside France and the UK, classified as one of the predestined Western key markets for Islamic finance. Yet during our last four years of operational business development and analysis of the value-based methodology of Islamic banking, it became apparent that it does not only fulfil the requirements of the Muslim community, but also the ethical standards of the majority of German society. We have established the Islam-compliant finance model as a new field of socially responsible investment (SRI), which is in high demand after the financial crisis. We welcome clients from all religions and worldviews, backgrounds or nationalities. Within our client structure, 60 nationalities are represented; some of them are from European neighbouring countries.
At present, where does Islamic banking and finance stand in the Western world? Where do you see KT Bank AG five years from now?
Islamic banking is a business segment that is growing worldwide and has also been acknowledged by the finance ministers of the G20 states as a progressive alternative for Western economies. It is going to be integrated more into the global finance structure to foster a cultural change. KT Bank in five years will still be on a sustainable expansion path, including the steady growth of our client base, and pursuing the further advancement of our portfolio, branch services and digital environment.
Nowadays, it is very important to keep a healthy and positive working surrounding, how do you usually address work pressure and motivate yourself and your colleagues at work? And what is the one thing you always tell your employees?
We at KT Bank are in a very special position as the values of our company reflect our personal beliefs, so the level of motivation and identification with our tasks are extremely high which naturally supports a healthy working atmosphere and helps us to cope with the pressure. Now, not everybody who works at KT Bank is a Muslim, yet everybody at KT Bank appreciates the positive spirit of our faith and the resulting corporate culture of ethical integrity. We include our religious, ethical traditions in the corporate environment, from our office prayer rooms to our ecological company equipment. This continually supports our awareness of the bigger framework – that we are actually working on a very meaningful task.
And lastly, on a lighter note, what do successful people like you do after a hard day’s work?
I can recharge completely when I spend time with my family. I am also very fond of exploring my new home in Germany together with them.
Thank you very much, Mr. Arslan! It was a pleasure speaking with you.
Ahmet Kudsi Arslan is CEO and Chairman of the Management Board of KT Bank AG since April 2017, following his appointment as Board Member in January 2017 and holding the position of Deputy CEO since January 2016. Prior to these roles, he was part of KT Bank’s parent bank Kuveyt Türk Participation Bank in Istanbul for more than two decades and in several leading positions, such as Group Head of Wealth Management and Private Banking, and Corporate & Commercial Credit Manager. Other stations of his career at Kuveyt Türk, which he started in September 1997, include branch management and financial analysis.