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Financial services

Prepared by: Budoor Abdallah Hassan

Prepared for: Ms.Carol & Ms.Hellary

10 March 2004

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Table of contents

INTRODUCTION: ............................................................................................................ 3

PEST ANALYSIS: .............................................................................................................4

POLITICAL FACTORS.............................................................................................................. 4

ECONOMIC FACTORS: ............................................................................................................ 6

SOCIOCULTURAL FACTORS..................................................................................................... 8TECHNOLOGY....................................................................................................................... 9

FINANCIAL SERVICES IN THE UAE ........................................................................12

ISLAMIC BANKING ...................................................................................................... 14

RECOMMENDATION: ..................................................................................................16

BIBLIOGRAPHY ...........................................................................................................18

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INTRODUCTION:

The purpose of this report is to help Mr. Prakesh who is the highly motivated and

dynamic new Regional Marketing Manager on deciding the best way of using Internet

marketing. Regarding to my job, which is marketing and public relations assistant, I have

to help Mr Prakesh and give him brief information about the UAE Financial Services

Market, the UAE market according to the PEST analysis, the competitors and their

products and services, pricing, marketing and distribution.

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PEST ANALYSIS:

POLITICAL FACTORS

Political factors are generally about government rules and regulations.

How stable is the political environment?

Since 1971 UAEbecame one of the safe countries that doesnt faced political problems

either inside or outside the country. In the UAE there are a limited number of crimes that

doesnt affect the market or the business inside the country. Furthermore, UAE has good

relationships with other world countries that might be helpful in developing the market.

For instance, UAE is an active member of many international organizations such as Arab

League, the United Nation, the Non-Aligned Movement, the Arab Gulf CooperationCouncil, and the Organization of the Islamic Conference. These good relationships with

many countries of the world, specially the Western countries, have been actually

excellent for developing markets. The political stability has paved the way for

investments for all investors, so this stability will help Mr. Prakesh to start his business

without facing any political problems that might stop his business.

Will government policy influence laws that regulate or tax your business?

Our government supports the Central Bank of the UAE, which provides rules, and laws

that set to control the finance and banking issues and make policies, which help the trade

and the economy sectors to grow. By offering excellent facilities that make the trading

and exchanging goods and expertise easier for traders and investors. In addition, in our

country we dont have to pay taxes for our government.

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What is the government's position on marketing ethics?

We dont have like other countries strong policies in this side because here mostly they

takes care about marketing strategy which not include something bad that affect our

religion and our country.

What is the government's policy on the economy?

The period of economic development in the UAE began in the early of 1970s. In that

time also the UAEs economic established with a huge increase in oil productions. After

this epoch when the oil prices dropped, so our country provides many kinds of economy

such as tourism, manufacturing and transportation. That made the economy stronger

because there is something else to make money from.

Does the government have a view on culture and religion?

Our government protects our religion and our culture in right way; they dont let any one

to do something bad against our religion and culture. Although there are too many

expatriates in our country, but that didnt affect our religion and culture.

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ECONOMIC FACTORS:

Principally, the economic factor is one of the factors that affect the financial investment

in the UAE. This factor include some forms which are:

Interest rates

Inflation.

Gross Domestic Product (GDP) per capita and population

Economic growth

This graph represents the period between 1972 to 1997 that gives us 26 years figures.

As you see in this graph the Gross Domestic Product of the UAE has increased from Dh

7 billion to Dh 176 billion. However, the crude oil sector has reached the peak in 1981

and it has decreased in the following years. According to this graph there is notable

growth at the non-oil sector. In 1972 the non-oil sector of the GDP has increased from

about Dh 5 billion to Dh 122 billion.

Figures & graphs:

http://www.econresearch.com/Datapak/Economic/bb99q1b.html

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Generally, our governments economy includes monetary and authoritarian policies,

which they used to influence private economic activities. Economic policies contain the

taxation, funding and direct government spending; monetary policies include interest

rates and exchange rates. However, in the UAE we dont use any tax system. We also

dont use interest rates or exchange rates as a policy. In the UAE we use the authoritarian

system as a main things that push the investment in the UAE.

Regarding to this graph the ratio of investment is lower than what dose it has to be. The

ratio decreased from 75% in 1975 to 32% in 1997. Generally, that happened because the

foreign investment is limited here in the UAE. In the UAE they use many rules and

policies that limit the foreign ownership of land, property and companies or service

agents. Whats more there are a large number of unemployed UAE nationals. However,the ratio has increased in 1991 because of the strategy that the UAE followed which

based on an open economy with investment incentives such as the free zones, utilities and

tax exemption. The ministry also has encouraged locals to enter the labour market. On the

other hand, we have to increase the investment in the non-oil sector to have good

achievements by welcoming the foreign investment on equal terms with local investors.

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SOCIOCULTURAL FACTORS

Social factors is an essential thing that affect our society, particularly in the financing

issue because over years of development there are many things change in people life such

as obtaining behavior. This factor includes some topics such as:

The people in the UAE:

The population in the UAE in 2002 was about 3 million, which is growth in percent 6.5%

per year. 86% out of them are urban. However, this is estimated to be to 2.9 per cent by

2005, when the population will be about 3.48 million.

The population has increased rapidly in unusual way. For example, in 1995 thepopulation was 15 times larger than what it was in 1965. In additional, Mr. Prakesh will

get benefits from this point because the number of population is increasing and he can

start his new business to satisfy all people needs.

Language and religion

The UAEs official language is Arabic; however, many people speak English besides

other language such as Hindi, Urdu, and Persian. Islam is the official religion in the UAE

and all of emeriti are Muslims, which will be helpful for Mr. Prakesh to deal with Islamic

Banking and market his new products and services because I think only Muslims

interested in dealing with Islamic Banking.

Way of life

The culture of the UAE is mixture of traditional and modern essentials. In Dubai they

give their resident the non-Emeriti some opportunities to enjoy their own culture and

religious association. Most of younger women are benefiting from accessing the modern

education and they playing an effective role in the society. Even though, Emeritis men

are playing an ever-wider role in all fields of society which shown clearly in the labour

force. All of that will be helpful for Mr. Prakesh to get more and more customers.

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TECHNOLOGY

Technology is one of the basic things that have to be considered before starting in any

kind of businesses especially in financial banking sector.

1Internet in the UAE

Etisalat, which is the national telecommunication, company provides the Internet services

since 1995. While the number of Internet users have increased significantly from 380 to

332,000 dialup users. The UAE is one of the countries that have the highest percentage of

Internet accesses in the Arab World, which is about 30%. Etisalat lunched Emirates

Internet and Multimedia to the United Arab Emirates on 5 March 2000 and it provides

different kinds of services such as creating awareness, enhancing infrastructure and

developing the needed tools to make the Internet access easier. In December 2001

Emirates Internet & Multimedia had a big increased in the number of Internet users,

which reached approximately 920,000 Internet users.

2

This is the chart that shows the percentage of the number of Internet users worldwide

and Internet users in the Gulf States too.

Facts & figures:1

http://www.uaenic.ae/uae/internet_in_uae.html

2http://www.american.edu/carmel/lr2962a/internet.html

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.

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Even though the Middle East covers only about 2% of Internet usage via the worldwide,

the UAE has a highest percentage of Internet users in the Gulf States. In the UAE people

used Internet commonly in many fields of their life. For instance they used it by their

own, in their schools, business, banks, health fields and also in government.

As Etisalat reported the average of monthly usage is 1.6 million hours over 500,000

persons. In addition, they said that the average usage per user is 72 hours during a month

and they figured that 20% of the population has access to Internet. Furthermore, they

formed that the number of Internet users in UAE are divided into four groups of users,

which are:

Private users (40 percent),

Schools and other educational facilities (20 percent)

Businesses (30 percent)

Government (10 percent).

All of these information shows that Mr. Prakesh can use the Internet marketing to market

his business because there is a big number of Internet users in UAE.

3Internet & Banking:

Banking is one of the most active users of technology. Banks use the Internet to provide

their products and services to their customers in easier and effective way. There are many

ways to market all banking products and services via the Internet such as:

Etisalat helps all banks to market their products and services through the

networking by providing them with Banknet service.

Bangalore-based Infosys Technologies, Ltd provides banks with a service called

Bankaway, which is a mobile banking service.

The ecommerce offer a good solution for banks, which is a National Bank that

offered to perform business. This solution contains number of software that

allows traders to recognize credit card payments and arrange service delivery.

Figures& graphs

http://www.american.edu/carmel/lr2962a/uses.html

3http://www.american.edu/carmel/lr2962a/uses.html

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4FINANCIAL SERVICES IN THE UAE

UAE is one of countries that have made considerable growth in the financial services

sector.5 The past couples of years this sector has been developed significantly,

particularly in 1998. Its one of the active sectors in banking, asset management, capital

markets and has been gradually expanding in capabilities and market research.

1. Locally Incorporated and Foreign Banks:

This banking system in the UAE are divided into two main elements:

Locally incorporated banks, which are public shareholding companies and

branches of foreign banks that have acquired the authorization of Central Bank to

be operated in the country.

Historically, national banks, which are national shareholding and other foreign

banks that was available before the Currency Board and the Central Bank. The

number of those banks and their branches in the country and abroad increased

very quickly, so the government puts a new law that says each bank should just

have eight branches.

The number of national banks was 20 banks out of 274 branches with 37 pay office.

However, the number of foreign banks was 26 banks with a total of 109 branches with

just one pay office in 31December 2000.

1. Restricted License Bank: Is a commercial bank, which is not approved to

recognize deposits from people in Dirhams, but they able to get deposits in

foreign currencies. Example for this type of are: Banca Commercial Italiana and

Abu Dhabi Commercial Bank.

Fact & figures:

4http://www.arabbank.com/review/vol3_no2/Page27_32.pdf

5

http://www.emirates.org/economy/banks.html

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http://www.arabbank.com/review/vol3_no2/Page27_32.pdfhttp://www.arabbank.com/review/vol3_no2/Page27_32.pdfhttp://www.arabbank.com/review/vol3_no2/Page27_32.pdf

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2. Investment Banks: which are banks that arent able to get deposits from whose

development are less than two years; on the other hand, they can borrow from

their head office either from local or foreign banks or from the financial markets.

For example, Arab Emirates Investment Bank, Arab Bank for Investment and

Foreign Trade, Abu Dhabi and HSBC financial services.

Products & Services

To define the products and services that banks offer in the UAE, I will take one of the

banks that locate in the UAE as an example, which is HSBC Group. HSB was established

in 1889 and it provides different and wide varieties of banking services and products for

corporate and individual customers.

As I said above HSBC offers many different products & services such as:

Account services

Making and receiving

Payments

Cash Management

Trade Services

Loans and Finance

Treasury Services

Islamic Financial Services

.

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ISLAMIC BANKING

Islamic Banking is a financing system, which includes capital owners, shareholders,

investors, and depositors, who are working to develop the financing sector in many

regions such as Investment, Banking, Insurance and Economic Development. The main

purpose for this system is that dose not involves the paying of interest according to what

our Holy Quran says that earning interest is taking the wealth of others. Islamic banks

dont pay interest or a rate of profit to the lender. Islamic banks offer similar products

that other banks offer like current account, credit cards and mortgages, but they offer also

special Islamic products.

In the UAE Islamic finance is growing rapidly. There are a number of Islamic banks that

operating in the UAE such as Abu Dhabi Islamic Bank and Dubai Islamic Bank. Beside

that there are some international banks that offer Islamic financial products such as

HSBC and Citibank.

If Mr. Prakesh started his new business he will face some active competitors such as:

1Abu Dhabi Islamic Bank

2Dubai Islamic Bank

3Citibank

4HSBC

vices &

oducts

Financing

products: Al

Manzel,

Musharakah,

Murabaha, Ijara,

Tamleek

Real Estate

Services

Investment funds

Personal Banking:

Real Estate

services

Products:

AL Manzel,

Musharakah

Community

services

: Zakat fund, Qurad Al

Hassan

Advisory Journal

Products:

certificates of

deposit, checking,

savings,

ATM/Debit

Cards, IRAS and

Rollovers,

Insurance,Investing, Lines&

Loans,

Account

services

Making a

receiving

Payments

Cash

Managem

Trade Ser

Loans and

Finance

http://www.e-adib.com/Main_E/index.asp Interview: Ahmad Al Shamlan the Manager of Dubai Islamic Bank in RAK.http://www.citybank.com/about Interview:Nourah Askar, Calculator in Credit Management Unit, HSBC Bank.

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Cards, Deposit

products and

services such as: Al

Barq Telephone,

ATM services,

Demand Draft,

Ladies Banking.

Private Banking:

SMS, Telegraphic

Transfer.

Corporate

Banking: Deposit

products.

Investment:

Direct investment,

Internasional Investment,

Treasury Corresponding

Co-operate

Banking:

Trade finance, Credit

Card, Retail banking.

Online banking

Mobile banking

Current account,

saving account,

electronic cards

Mortgages,

Prising Packages,

Small business.

Islamic

Financial

products.

Services: Bills

payments, citipro

financial checkup,

Deposit Methods,

Email & wireless

Banking Alerts,

Transfer Money,

Linking accounts,

online Account

Access, Online

Bank statements.

Treasury

Services

Islamic

Financial

Services

rketing

omotion

Their Website, Brochures,

Magazines, Newspaper,

Ads in TV.

Their Website,

Brochures, Ads in the

TV, Magazines.

Their Website, Ads in

TV, magazines,

Brochures.

Their Websites,

Brochures, Ads in

newspaper, maga

and other website

mber of

nches

14 branches all over the

UAE.


UAE.


UAE.

8 branches all ov

UAE.

cing Exchange Rates,

Investment Fund prices and

Tariff of change

Competitive interest

rates.

%3 loan for car

%25 from the price of the

house, if it a loan for a

bank.

Auto Loan Interest Rate

Salary Transfer Loan

Interest Rate

Salary Transfer Loans

Check Collection Fee

The rate fees or p

depend on the typ

products or servic

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RECOMMENDATION:

In my recommendation I recommend for Mr. Prakesh to start his business by using the

system of Islamic Banking because UAE is Muslims country and many people here are

interested in these banks. Furthermore, after along research in this issue I found that most

of international banks who offer Islamic financial products are having a good

achievements and results. For example, HSBC has been recognized as Best International

Provider of Islamic Financial Services and Best International Sukuk House in

Euromoney's 2003 Islamic Finance Awards(www.ameinfo.com). Also, the Islamic

banking system is economically profitable because in this system the financial risks aredistributed between a large group of investors and that in financial terms considered as

the way for more profit and higher investment returns.

In addition, I think that its better to market his products and services via Internet

according to the Technology factors in the UAE he will succeed because the number of

Internet users is increasing rapidly. He can create attractive banners and publish them in

other famous sites such as google and yahoo.

Another recommendation might be using the mobile banking service because as we know

most of people have mobiles and it would be helpful for Mr. Prakesh to promote his

products and services via this services.

The last point that I think it would be good outsourcing Etisalat to promote your products

and services by using Banknet services.

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BIBLIOGRAPHY

Banks& Insurance UAE Banks & Insurance 7 March 2004

< http://www.emirates.org/economy/banks.html. >

Investment and economic growth in the United Arab Emirates BBME 1999Q1 article

8 March 2004

Ebrahim.Ahmed the importance of Islamic banking for Muslim minorities The

Importance of Islamic Banking 9 March 2004

Kahf.Monzer Strategic Trends in the Islamic Banking And Finance Movement 7

March 2004

Banks in the UAE Central Bank of the United Arab Emirates 5 March 2004

Islamic Financial Services 5 March 2004

SOCIAL AND CULTURAL INDICATORS About us - Society and Culture 4 March

2004 < http://www.sharjah.gov.ae/new/default.asp >

Dubai Islamic Bank opens three new branches in Dubai and Sharjah 5 March 2004

Dubai Islamic Bank 6 March 2004

18
http://www.emirates.org/economy/banks.htmlhttp://www.econresearch.com/Datapak/Economic/bb99q1b.html.http://www.islamsa.org.za/library/pamph;ets/importance_of_islamic_banking_.htmhttp://www.cbuae.gov.ae/banks.htmhttp://www.uae.hsbc.com/hsbc/uae_cor/islamic-financial-serviceshttp://www.sharjah.gov.ae/new/default.asphttp://www.ameinfo.com/news/Detailed/32899.htmlhttp://www.alislami.co.ae/real_estate/intro.htmhttp://www.emirates.org/economy/banks.htmlhttp://www.econresearch.com/Datapak/Economic/bb99q1b.html.http://www.islamsa.org.za/library/pamph;ets/importance_of_islamic_banking_.htmhttp://www.cbuae.gov.ae/banks.htmhttp://www.uae.hsbc.com/hsbc/uae_cor/islamic-financial-serviceshttp://www.sharjah.gov.ae/new/default.asphttp://www.ameinfo.com/news/Detailed/32899.htmlhttp://www.alislami.co.ae/real_estate/intro.htm

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Abu Dhabi Islamic Bank 6 March 2004

< http://www.e-adib.com/Main_E/index.asp>

Information Technology in the UAE 7 March 2004

Interview:

Noura Askar, Calculator, Credit Management Unit in the HSBC Bank.

Ahmad Al Shamlan, Manager of the Dubai Islamic Bank in RAK.

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http://www.e-adib.com/Main_E/index.asphttp://www.american.edu/carmel/lr2962a/internet.html#Overviewhttp://www.e-adib.com/Main_E/index.asphttp://www.american.edu/carmel/lr2962a/internet.html#Overview