‘Innovation is Islamic’: An interview with Boubyan’s CEO and vice chair

Adel Abdul Wahab Al-Majed, the CEO and vice chairman of Kuwait-based Boubyan Bank, remembers his initial response when he was first approached to head the financial institution. The sounding-out came in 2009, when banks in Kuwait and worldwide were in the depths of the global banking crisis. Boubyan Bank, an Islamic bank founded in 2004, ranked exactly last in asset size among all Kuwaiti banks and was hemorrhaging money. “At first, I said no.”

It wasn’t because Al-Majed believed that Islamic banking would fare poorly. On the contrary, Al-Majed, at the time the deputy CEO of consumer banking at the National Bank of Kuwait (NBK), a conventional (non-Sharia-compliant) financial institution and one of the largest banks in the Middle East, was keenly aware of the increasing consumer demand for Sharia-compliant products and services, and he had long recognized Islamic banking’s market potential. Competing in Islamic banking, at least directly, wasn’t possible for NBK, which was not authorized to engage in Islamic banking. (Islamic banks cannot charge interest as conventional banks do.1) But in 2009, in the aftermath of the global financial crisis, Kuwait’s banking authorities permitted NBK to purchase an equity stake in Bank Boubyan and provide it with a capital infusion.

Al-Majed’s initial concerns about running Boubyan were not about the scope or potential of Islamic banking but about the depth and reach of his mandate: he did not want to be a “white knight,” a temporary turnaround artist tasked merely with staving off Boubyan’s losses or doing a patch job. “I wanted the mandate to build a well-performing bank, a profitable bank—and a great bank.” Having begun his career as an NBK teller 28 years before, Al-Majed wanted Boubyan to be his legacy.

Assured that his mandate would indeed be to build a well-performing bank for the long term, Al-Majed accepted the position. Now, more than a dozen years later, Al-Majed has made Boubyan his capstone—and then some. Since 2009, he and his team have achieved double-digit growth every year across multiple financial metrics, positioned Boubyan as the digital leader in the country, expanded the bank’s operations overseas, and turned Boubyan into not just the country’s second-largest Islamic bank but also a magnet for talent and innovation. Those elements go hand in hand, as he recently discussed with McKinsey’s Mazen Najjar and David Schwartz. An edited version of the conversation follows.

McKinsey: Take us back to your first day at Boubyan Bank. What was your impression, and what was your vision?

Adel Al-Majed: Reporters asked me the usual question, “How do you see your bank five years down the road?” Well, who really knows what things will look like in five years? Who knows what things will look like next month—or even tomorrow? I don’t. But I knew right away we had to set meaningful, achievable aspirations. When I became CEO, Boubyan Bank was ninth—absolutely last—out of Kuwait’s nine banks. We weren’t going to become its largest bank in five years. Realistically, we weren’t going to become its second-largest bank, either. So, by elimination, I said “We’re going to be Kuwait’s third-largest bank in five years.” It was a high bar. But you have to set high aspirations for performance. And by the way, we did it, though not quite in five years.

I knew the type of organization I wanted—an organization based on performance and teamwork—and I knew we needed to shake things up. That first day, when I walked into our main building, there were three elevators. One of those elevators was reserved for the CEO. I told our staff, “No more CEO elevator. From now on, every elevator is for everyone here. We’re in this together.” We made that change right away, and it’s been the policy ever since. And by the way, I see our employees every day on the elevators; a lot of times, I know what floor they’re going to as soon as we get in the elevator, even though we’ve since added many new employees. We laugh about that.

Performance, aspirations, and working together were my Day One messages, and they’re my messages today. They are the core of our approach.

Also on that first day, I saw that employees had to clock into and out of work by scanning their thumb prints. I was told: “This is how we measure and ensure attendance.” I said: “Get rid of it. From now on, we’re not going to keep track of attendance. We’re going to keep track of performance.” Today, our workers are on Tik-Tok, Instagram, Twitter, and I’m glad that they are. It keeps us in step with the real world. If you’re doing your job, and you’re doing it well, that’s what matters. Your performance matters. How we work together matters. Performance, aspirations, and working together were my Day One messages, and they’re my messages today. They are the core of our approach.

McKinsey: How does being an Islamic bank factor in?

Adel Al-Majed: Being an Islamic bank is hard-coded into what we are. Boubyan was founded specifically as an Islamic bank. Being an Islamic bank is our brand, and customers take that as a given. Islamic banking has been growing significantly, and it’s growing among the younger demographics. But we don’t think in terms of being a high-performing Islamic bank. We think in terms of being a high-performing bank, period. That’s the value proposition you have to have, particularly for savvy, younger customers. You can’t say to them that they should choose you over a competitor because you’re an Islamic bank. Good luck with that! Your value proposition, particularly for the younger segment, has to be products, services, and innovation.

In fact, across all segments of our customers, there’s almost always a normal statistical distribution. That’s not unique: you always see distributions across and within countries, whether it’s political leanings or religious inclinations. In America, some people are Democrats, some are Republicans—and a lot of people are in the middle. As far as banking among Muslims is concerned, some people are devout, some people are more liberal, and some 60 percent to 80 percent are conservative. These are the deciders, the ones who say “Right, I am Muslim, and yes, I can see the appeal in Islamic banking. But don’t expect me to shift from a well-managed conventional bank just because you’ve got the ‘Islamic’ license on it.” I compete with conventional and Islamic banks for that deciding market share. I compete for talent, too, and employees are choosing to come to us—and our competitors are paying a premium to hire our employees away—not because of religion, but because our employees’ talent and innovation match our bank’s reputation. We’ve got the “modern Islamic touch”; we’re in touch with the innovation and culture around us. We encourage that.

I’ll give you an example: in Kuwait, the winters are very pleasant. People often go out to coffeehouses. I do. My employees do. I’ll see some of them there, and they’ll wave to me. And I’ll wave back. When I started in banking, and for many years after, going to a coffeehouse in the middle of a workday was a fireable offense. But why? I want my employees out and engaged. I’ve had employees see me and take a selfie with me—and send it to their parents. It’s funny, because sometimes I’ll even know their parents. That’s my generation, after all. Imagine being a father and getting a picture from your daughter with the CEO, the pride you feel when you share that picture with your friends. “This is my daughter from Boubyan, meeting with the CEO.” I want my employees to feel engaged. Employee engagement is also a form of market intelligence.

McKinsey: How so?

Adel Al-Majed: When I go out, I can’t imagine leaving without at least some cash. But [many of] our employees, particularly the younger ones, don’t take any cash with them at all. I ask them how much cash they’re carrying; I ask my senior managers to ask them how much cash they’re carrying. The answer is usually, “Zero.” Well, that tells you something: people are moving away from cash, and the younger generation is definitely going cashless. That informs us about the importance of digital banking. We encourage information and technology to flow through the organization.

That’s how we came up with cardless withdrawals, which lets customers use ATMs through SMS codes on a mobile app. We were one of the first banks in the world to do that, and the public noticed. Demand was tremendous, and it was a revelation for a lot of people: “Really? That’s from Boubyan?” We’ve got another initiative where customers can link up their license plates and pay for parking seamlessly, and another that allows for electronic and third-party bill paying. All of that reinforces our reputation for innovation, which is something we’re relentless about encouraging: bubbling up ideas from within our organization.

McKinsey: Could you give some examples of how that plays out in practice?

Adel Al-Majed: You have to make openness a part of your everyday model. My office doesn’t have a desk: just chairs, on the same level, to make it easier and more natural for conversations. We make it part of our culture. Come in and have a discussion. We call it “Coffee with the CEO.”

One employee came in recently—she works in the call center, and she’s been here for only eight or nine months—and she had two suggestions. She said: “The customers are asking for these parts of the process to change, and I think I have a solution.” They were great ideas. We seek out and implement feedback like that all of the time. She’ll get a nice, congratulatory note and a bonus, but the real incentive is the feeling of being involved in offering innovative solutions.

We try to make things fun. We have contests for specific categories, like improving service, and reducing costs. I pick the winning ideas—first, second, and third place—in each category. We also have problem-solving sessions. In one of them, we were discussing the best way to keep the ATM sections clean; from what we were seeing, customers would get their receipts from the ATMs and just throw them away, with receipts accumulating on the floor. We were solving for how can we keep that section of the bank tidy. Perhaps we could do more maintenance during off-hours, perhaps more at nights or on weekends. One of our employees, though, asked, “Why are we printing these receipt slips at all?” She was right, and we stopped printing them. It’s not only more cost-effective, it’s better for the environment. We were an early mover in taking that step.

We also have signing ceremonies—big, ceremonial contracts—where senior executives sign on to commit to key targets and initiatives. I have a copy of the contract, and so do they. They really do sign, by the way, and we’ve found that there’s something almost magical in that. Once they’ve affixed their signature, even though we both know it’s ceremonial, it’s remarkable how people will really commit.

I want to be clear, though, that there are going to be trade-offs to openness and flattening existing hierarchies. For example, digital products used to be the province of our IT department. But as digital became so essential to our value proposition, I decided that it couldn’t just be the domain of IT. Digital had to be organization-wide. One senior executive at the time, whom I have enormous respect for, said to me: “If you do that—if I can’t lead digital products any longer—I’m going to leave.” But I believe in this direction, and I stuck to the decision—and he did choose to leave. You have to make choices, even when they aren’t easy.

McKinsey: What other choices went into your strategy? How do you think about being a digital attacker?

Adel Al-Majed: You have to be very clear and very realistic about the challenge and recognize what you can and cannot do. Of course, you can never be 100 percent sure. There’s a football and soccer expression—80 percent, 90 percent, and shoot. Put the shot on goal. Have a bias for action. When we first heard a few years ago about being a “digital attacker,” we thought, well, that certainly sounds good. But what is an 80 percent likelihood of scoring, really? You can make a domestic play and attack competitors in your own market; but we’re already a digital leader in Kuwait, and this is a smaller market. You can make an international play and attack competitors abroad, in their markets. But the more we looked at digital attackers all over the world, the clearer it became to us that it wouldn’t be value-creative to compete with big banks in their home markets. It would mean competing on price, often in lower-value segments. But to win, we’d have to play in the higher-value segments, where personal relationships are very important. And we had to be realistic: higher-tier customers have strong banking relationships in their home-market countries already. Would we really be able to go in and compete? Or to create value by buying our way in—a significant cost, given the size of, say, banks in the Saudi Arabian market?

We studied the problem, and then it hit us: there was a third way to be a digital attacker and to capture the high-end market. We happen to already own a bank in London, called Bank of London & the Middle East. There is a sizeable community of affluent Muslims in Europe: people not just from Kuwait, Saudi Arabia, and elsewhere in the GCC [Gulf Cooperation Council] but from other countries, such as Egypt and Lebanon. This is an enormous market of affluent Muslim customers. Yet when the big banks in Europe, or even in the US, look at these customers, they’re often thinking about KYC [know your customer] regulations and other risks, or what they perceive as risks. Customers with names like Mohammed, or Jihad, or Osama—even very affluent customers—were suddenly finding that banks were not accepting them as customers, or that their accounts were being closed. Well, we know these people better. And we had a compelling proposition for them: an Islamic bank that’s also a digital bank, in Europe. We’ve recently introduced “Nomo,” a Sharia-compliant UK-based digital bank. If you want to open an account for yourself or for your child, if you want money available while traveling, or an overseas mortgage—we’re your bank.

We’ve become a digital attacker in a unique way. We didn’t capture the high-end, international segment by going into the customers’ home countries; we did it from Europe. We combined Europe and the Middle East. It’s similar to the way that we combined Islamic banking, which people had assumed had to be very austere, with digital innovation. Now, our customers in Europe and in the Middle East see Boubyan as digital and as Islamic—as a young, digital-savvy Islamic bank. There’s no contradiction. Islamic is innovation.

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