Bosna Bank International (BBI), the only Islamic bank in Southeast Europe, has a unique business model that successfully weds Islamic banking with socially-responsible projects. One of the bank’s important activities has been to create a platform for new business development and investment from the Middle East. The final outcome of this business model is that BBI managed to increase its market share while improving efficiency and profitability ratios. For these reasons, it was no coincidence that a leading financial portal in the UK, the Global Banking and Finance Review, honored BBI with the ‘Best Corporate Social Responsibility Bank Award’ in Bosnia and Herzegovina in 2015.
Review of 2015
BBI’s efforts to attract foreign direct investment (FDI) were very successful in 2015. Through BBI’s Sarajevo Business Forum (SBF) and the VIP Business Club, the bank was able to attract EUR100 million (US$109.19 million) in agriculture investment to Bosnia. The resulting agriculture company had its sights set on developing Bosnia’s entire value chain and quickly made an investment in Bosnaplod, a historically-significant agriculture company. Early returns are promising; Bosnaplod has already completed two harvests and created many jobs. More investments in the companies and people of Bosnia are to come.
An increase in FDI was a result of BBI’s long-term commitment to its annual SBF, an international investor conference in Sarajevo. The bank took major steps to revitalize SBF in 2015. For the first time, BBI gave project owners the opportunity to present their ideas to a live audience. NGOs and other important value multipliers were given an opportunity to show how investment in Bosnia can develop quickly and effectively. The forum’s ever-popular panel discussions were a huge success, attracting top regional representatives from Fortune 500 companies. Finally, BBI strengthened SBF’s feedback procedures to make sure 2016 is an even better year.
The BBI VIP Business Club improved BBI’s international presence in 2015. The club not only added a greater number of regional businesses partners but also created important relationships in India and strengthened business ties to Malaysia. The club’s strong relationship with Malaysia in particular has reaped dividends. In October, the VIP Business Club and the Perdana Global Peace Foundation organized another Malaysia-driven conference celebrating 20 years of peace in the region. In November, Malaysian businesspeople will come to Bosnia to participate in an investment conference in Srebrenica. By re-emphasizing Bosnia’s civil stability to Malaysian investors, BBI anticipates that the peace conference and investment conference will continue BBI’s success in attracting FDI.
BBI improved its outreach efforts to the community in 2015. The bank opened its first call center to enhance community outreach. BBI also expanded its presence in cyberspace with a Facebook page. With over 15,000 likes in a matter of a few months, the page has been a success for keeping in touch with the needs of customers and informing the community about the bank’s promotions. In combination with BBI’s Facebook efforts, the bank also increased its web presence on several other Bosnian internet portals.
Based on 2015 results to date, BBI ranked fourth among banks in the growth of total assets, financing and deposits in Bosnia and Herzegovina. According to September 2015 financial results, annual growth of total assets was 12% year-on-year (y-o-y), deposit volumes grew 16% y-o-y, and financing volumes 20% grew y-o-y. This represents extraordinary growth while the rest of the local banking market remains stagnant. Moreover, the bank managed to improve its profitability and efficiency ratios. The net profit of the bank rose 57.1% y-o-y whereas the cost income ratio fell to 69% from 73% in the same period of the previous year and is expected to reach 66% by year-end.
Preview of 2016
BBI will continue to grow and raise its share of Islamic finance in the country, as it is the only bank in the region that offers Islamic banking. The bank strengthened its position as a mid-size bank in the country in the past year. The total assets of the bank grew by 21.8% in compounded annual growth rate from 2011-14, driven by customer deposit growth of 16.7% and finance growth of 19.1%. Though this period was marked with a strong fall of foreign credit lines for local banks, BBI managed to attract new credit lines totaling EUR100 million from the Turkish government. These funds were aimed at enhancing refugees’ return.
The focus for 2016 will be to continue BBI’s 2015 growth momentum from previous years, engage in consulting services for the newly-formed agricultural company and start a BBI Takaful company. Starting a Takaful company would enrich the spectrum of Islamic finance products in this part of Europe. Furthermore, the BBI team plans to bring more innovations to the 7th annual SBF, which is anticipated to increase the flow of foreign investments in the country.
As a look back at 2015 has shown, the BBI business model can serve as an example to other Islamic banks in Europe on how to achieve efficiency and access sources of investment from the Middle East.
Amer Bukvic is CEO and Elma Agic-Sabeta is the head of special projects at Bosna Bank International. They can be contacted at [email protected] and [email protected] respectively.