Islamic finance is a global business, says Majid Al Sayed Bader Al-Refai, founder and CEO of Unicorn Investment Bank. And according to his CV, he's the embodiment of that maxim: born and educated in the US, he moved to Kuwait as a young graduate and has worked in finance across the Middle East, as well as in Malaysia. He has been active in the sector since 1982, and has never worked in a conventional financial institution.
After a career in Islamic banking that began at Kuwait Finance House and took him around the Gulf and beyond, in 1996 Al-Refai set up First Islamic Investment Bank, now Arcapita. Then, in 2004, he founded Unicorn. Both banks are based in Bahrain.
"There was, and is, an acute shortage of competitive Shari'ah-compliant products on offer," he says. "Most Islamic banks don't recognise the value of research and development - they won't accept the reality that some innovations will succeed and some will fail."
Al-Refai's aim is to apply the Western concept of investment banking in an Islamic way. He points to First Islamic Investment Bank as a private equity boutique similar to Investcorp, but his real achievement to date is Unicorn. With its five business lines - corporate finance, private equity, leasing, asset management and treasury - it is the first Islamic institution to take the multi-divisional approach of Western banks. Other Islamic banks, he says, focus on just one area, most notably real estate.
This emphasis on sophistication took Al-Refai to Malaysia in 1995, where he founded Commerce MGI, a bank specialising in project finance and Islamic bonds.
"At that time, Malaysia had the money and financial sophistication I needed to pursue my ideas for the market," he says. "I am Kuwaiti but I couldn't wait for the Gulf to catch up."
While he was happy to go to Malaysia to further his career in a more developed environment, Al-Refai says it is wrong to view that market as inherently different from the Middle East. "Islam is flexible," he says. "While some concepts, such as bai al-dayn, or debt trading, are accepted in Malaysia and not in the Gulf, the difference is one of scholarship, not territory. People in the West often make the mistake of trying to standardise Islam, but there are many voices and investors can choose between them."
If Al-Refai is conscious of occasional misunderstandings about the nature of Islamic finance, he emphasises the need for local institutions to work with, as well as emulate, Western banks.
One of the highlights for Unicorn last year was a $23 million securitisation for Saudi Arabia's Kingdom Installment Company, for which Unicorn worked with Standard Bank. Credit enhancement was provided by International Finance Corporation. Standard Bank and WestLB were also partial underwriters on this year's $600 million sukuk for Dal Al Arkan Real Estate Development Company in Saudi Arabia.
Western banks are essential partners for local institutions hoping to effect broad international distribution of their deals, and the expansion of Unicorn's geographical reach is high on Al-Refai's list of priorities. He has acquired interests in banks based in Pakistan, Turkey and other Muslim countries, and has ambitions to reach large and prosperous Muslim populations across the West. But his intentions do not stop there.
"This market is going to expand and not just among Muslims. Yes, these structures emerged to satisfy the needs of believers specifically, but we believe in them as products, not simply instruments of religious expedience," he says. "The ultimate success will be when an old lady in my home state of Mississippi goes to her bank and asks to open a musharaka account."
IN A NUTSHELL
What is your career high? Establishing First Islamic Investment Bank and Unicorn Investment Bank What is your career low? Trying to raise capital for First Islamic Investment Bank and Unicorn Investment Bank What do you read first thing in the morning? The Koran Where do you want to visit before you die? Mongolia What would you take a day off to do? Spend time with my kids.
The week on Risk.net, July 7-13, 2018Receive this by email