Profile: Nothing ventured, nothing gained

This article first appeared in Enterprise, The Edge Malaysia Weekly, on December 25, 2017 - December 31, 2017.
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Renowned Malaysian shariah scholar Datuk Dr Mohd Daud Bakar started a shariah consultancy in 2005, just before the surge in demand for such services. He travelled the world, setting up offices (sometimes too early for a particular market, so he had to close them), meeting people and making contacts.

His company, Amanie Advisors Sdn Bhd, became known and started generating business from all corners of the globe. “We started in Malaysia, then moved on to Dubai. From these two places, we are well positioned to serve clients from all over the world. The Malaysian office takes care of business in the Far East while the Dubai office oversees business in Europe, Central Asia and Africa,” says Mohd Daud.

When he started the Dubai office, its location was important to establish credibility. “We are based in the Dubai International Financial Centre (DIFC), which is good as we are surrounded by all the regulators and large firms. Not many shariah firms are based in the DIFC,” he says.

A few years ago, Mohd Daud opened offices in other parts of the world — Australia, South Korea, Oman, Ireland, Luxembourg, Egypt, Tunisia and Kazakhstan — but ended up having to close some of them. “I had to close almost one-third of them because we set them up with expectations that Islamic banking laws would be passed in the country and we would get some business. But the laws have not been passed until today and it became a bit costly to maintain the offices. I closed down the Luxembourg office and transferred clients to the Dubai and Australian offices,” he says.

Mohd Daud has also put the Libyan and Egyptian offices on hold because of the political unrest there. “I am not suffering any losses in these markets. There is no activity, but there are also no compliance costs. We can put them on the shelf at the moment, until things go back to normal,” he says.

Mohd Daud likes to recount a trip to Libya where he had to be smuggled out via back routes when trouble broke out. His partner in that market was familiar with the militia guarding the alternative routes and convinced the various factions that he had nothing to do with the war and was only intent on bringing Islamic finance into the country. So, Mohd Daud was allowed to pass. He made it to the airport and flew to Tunisia before heading to Dubai.

Mohd Daud does not regret his mistakes as they are part and parcel of being an entrepreneur. “I have learnt my lesson. Now, we focus on markets that already have legal frameworks, such as Casablanca, Morocco,” he says.

“It makes sense to open in Casablanca rather than in Tunisia, South Africa, Kenya or Tanzania. I like Kenya and Tanzania very much, but they do not have Islamic banking laws. So, it becomes a bit risky.”

Not that he avoids markets that do not have the legal frameworks. “In countries that do not have Islamic banking laws, I focus on sukuk because that does not require any special laws,” says Mohd Daud.

He has been engaged by the central bank of Afghanistan to come up with an Islamic banking framework for the country and he has already been to Kabul about 10 times. “Afghanistan is a good market because there are a lot of donors from overseas. Interestingly, the Europeans and Americans think that if you can create stability in Afghanistan, it will affect the whole world. But to do that, they will have to create job opportunities, financial institutions and things like that,” he points out.

Having done the research, the central bank realised that the Afghans would only go for Islamic banking and finance. Mohd Daud was one of the shariah advisers invited to participate in the discussions. “To be honest, many others were invited. But who is willing to make the trip to Kabul?” he says.

“We took up the challenge. Of course, it was scary. There were bombs going off every day and once, when I was staying at a five-star hotel at the behest of the central bank, some insurgents broke in and killed the first layer of security in the hotel before being driven back by the second layer at 4am in the morning. That was quite terrifying.”

Car bombs go off all the time and the locals pause when they happen before continuing with their business. A Malaysian in such situations panics and wants to get to the airport as quickly as possible. But Mohd Daud has gone back time and again because he believes that entrepreneurs must have courage. “We helped the central bank set up the standard operating procedures for Islamic banks. So now, it is just plug and play,” he says.

Mohd Daud is a little disappointed that it has been delayed. “We did the work three or four years ago, making sure the banking laws were neither too strict nor too flexible. I went through everything — word for word, line by line. But the parliament has yet to pass the legislation,” he says.

Why not? “They feel if they passed the legislation without abolishing the conventional banking laws, it would look bad because they would have two systems in the country. But that is a very idealistic perspective,” says Mohd Daud.

“I said, ‘Dear sir, go for the Islamic banking laws and build up your Islamic banking portfolio, then you can slowly diminish your conventional banking system. Because 99% of your people are Muslim and they are sure to migrate to the new system. If you don’t give them a chance, they will not come to you.’

“And sure enough, after four years, the Islamic banking assets are negligible. They are not even 1% to 2% of the total banking assets.”

It is a pity because without a proper banking system, the central bank cannot curb unhealthy practices and keep tabs on who has the money and where it is going. “The banking system can help manage cash transactions — Islamic, conventional — it doesn’t matter. The moment you have a banking system and there are laws that say you cannot pay cash for transactions over a certain amount, you can curtail unhealthy financial transactions,” says Mohd Daud.

He has mentioned before how when he goes into these Middle East markets, most of them ask why he had not brought any Malaysian companies with him. They are looking for hospitals, airport managers, tourism chains and even Islamic banks. But when he broaches the subject with local companies, most are reluctant.

“They tell me that the market is already big in Malaysia. So, why should they go overseas? Also, they are reluctant because they are unfamiliar with these markets. It is an additional cost that they are not willing to bear,” says Mohd Daud.

He thinks they are wrong. “The margins over there can be higher. Let’s say that for every ringgit you put in over here, you get a margin of 20% to 30% as a hospital or airport operator. Over there, the margin could be as high as 40% to 50%.”

Mohd Daud reiterates that Malaysians have a good name in the Middle East and they should seriously consider going there. “Of course, we need to make sure we have the right local partners and do our own due diligence,” he says.

Having built a base with his shariah advisory, Mohd Daud is expanding into other areas. He now owns a business magazine (Malaysian Business) and a financial technology company (MyFinB).

“I don’t want to open new offices, but have new companies with new focuses. My shariah business is good enough and we don’t need to open new offices. We can stop with the offices in Malaysia, Dubai, Morocco and Kazakhstan. I want to convert the other offices into trading companies,” he says.

Basically, Mohd Daud wants to bring hospitals, resorts and oil and gas companies, among others, to other parts of the world in which he has established himself. “Kazakhstan is a good country for ski resorts. In Africa, perhaps trading, crude palm oil and oil and gas. I want to play that role now. If I cannot, I can bring in my Malaysian partners,” he says.

Mohd Daud has teamed up with many small businesses, especially those in the IT sector. “We will appoint distributors in these markets and go for a franchising model so we don’t take on any risk but still manage to sell our products overseas,” he says.

He is also keen to help young people expand abroad. “They have no clue whatsoever and no contacts. I have the contacts,” he points out.