Financial services

Prepared by: Budoor Abdallah Hassan

Prepared for: Ms.Carol & Ms.Hellary
10 March 2004
 Table of contents
INTRODUCTION:............................................................................................................3
PEST ANALYSIS:.............................................................................................................4
POLITICAL FACTORS..............................................................................................................4
ECONOMIC FACTORS:............................................................................................................6
SOCIOCULTURAL FACTORS.....................................................................................................8
TECHNOLOGY.......................................................................................................................9
FINANCIAL SERVICES IN THE UAE........................................................................12
ISLAMIC BANKING......................................................................................................14
RECOMMENDATION:..................................................................................................16
BIBLIOGRAPHY...........................................................................................................18
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 UAE became one of the safe countries that doesn’t faced political problems
either inside or outside the country. In the UAE there are a limited number of crimes that
doesn’t 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 Cooperation
Council, 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 don’t have to pay taxes for our government.

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What is the government's position on marketing ethics?
We don’t 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 UAE’s 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 don’t let any one
to do something bad against our religion and culture. Although there are too many
expatriates in our country, but that didn’t 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 government’s 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 don’t use any tax system. We also
don’t 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. What’s 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 the
population 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 UAE’s 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, Emeriti’s 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.

1
Internet 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.

 1
Facts & figures: http://www.uaenic.ae/uae/internet_in_uae.html
 2
http://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.

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

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4
FINANCIAL SERVICES IN THE UAE

UAE is one of countries that have made considerable growth in the financial services
5
sector. “The past couples of years this sector has been developed significantly,
particularly in 1998”. It’s 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.

 4
Fact & figures: http://www.arabbank.com/review/vol3_no2/Page27_32.pdf

 5
http://www.emirates.org/economy/banks.html

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 2. Investment Banks: which are banks that aren’t 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 Qu’ran says that earning interest is taking the wealth of others. Islamic banks
don’t 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:

1 2 3 4
Abu Dhabi Islamic Bank Dubai Islamic Bank Citibank HSBC
Services & • Financing • Real Estate • Products: • Account
Products products: Al services certificates of services
Manzel, • Products: deposit, checking, • Making and
Musharakah, AL Manzel, savings, receiving
Murabaha, Ijara, Musharakah… ATM/Debit • Payments
Tamleek • Community Cards, IRAS and • Cash
• Real Estate services Rollovers, Management
Services : Zakat fund, Qurad Al Insurance, • Trade Services
• Investment funds Hassan Investing, Lines&
• Loans and
• Personal Banking: Advisory Journal Loans,
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 • Investment: Mortgages, • Treasury
products and Direct investment, Prising Packages, Services
services such as: Al Internasional Investment, Small business. • Islamic
Barq Telephone, Treasury Corresponding • Islamic Financial
ATM services, • Co-operate Financial Services
Demand Draft, Banking: products.
Ladies Banking. Trade finance, Credit • Services: Bills
• Private Banking: Card, Retail banking. payments, citipro
SMS, Telegraphic Online banking financial checkup,
Transfer. • Mobile banking Deposit Methods,
• Corporate • Current account, Email & wireless
Banking: Deposit saving account, Banking Alerts,
products. electronic cards Transfer Money,
Linking accounts,
online Account
Access, Online
Bank statements.
Marketing Their Website, Brochures, Their Website, Their Website, Ads in Their Websites,
& Magazines, Newspaper, Brochures, Ads in the TV, magazines, Brochures, Ads in TV,
Promotion Ads in TV. TV, Magazines. Brochures. newspaper, magazines
and other websites.
Number of 14 branches all over the 19 branches all over the 5 branches all over the 8 branches all over the
branches UAE. UAE. UAE. UAE.
Pricing Exchange Rates, Competitive interest Auto Loan Interest Rate The rate fees or prices
Investment Fund prices and rates. Salary Transfer Loan depend on the type of
Tariff of change %3 loan for car Interest Rate products or services.
%25 from the price of the Salary Transfer Loans
house, if it a loan for a Check Collection Fee
bank.

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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 are
distributed 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 it’s 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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17
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 <http://www.econresearch.com/Datapak/Economic/bb99q1b.html.>

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

Importance of Islamic Banking 9 March 2004
<http://www.islamsa.org.za/library/pamph;ets/importance_of_islamic_banking_.htm>

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

March 2004 <http://www.strategic%20trends%20in%20islamic%20banking%20and
%20finance.pdf>

“Banks in the UAE” Central Bank of the United Arab Emirates 5 March 2004
<http://www.cbuae.gov.ae/banks.htm>

“Islamic Financial Services” 5 March 2004

<http://www.uae.hsbc.com/hsbc/uae_cor/islamic-financial-services>

“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

<http://www.ameinfo.com/news/Detailed/32899.html>

“Dubai Islamic Bank” 6 March 2004 <http://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

<http://www.american.edu/carmel/lr2962a/internet.html#Overview>

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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