I built it...and they came

I built it...and they came

Sultan Choudhury, the boss of the Birmingham-based Al-Rayan Bank, chats with Ian Halstead about ambition, overcoming challenges and cornering the market in Islamic finance

Sultan Choudhury was but a young sprog back in 1989, when Kevin Costner’s Field of Dreams dominated box offices around the globe with its whimsical tale about an Iowa farmer, baseball and the unlucky Shoeless Joe.

However, as he recounts his journey – from ambitious teenager to a pioneer of Islamic finance within Britain’s banking community – the theme to his career over the last decade  or so has to be the film’s catch-phrase: ‘Build it and they will come’.

Today, as the chief executive of Britain’s only fully Sharia-compliant retail bank, its balance sheet bolstered by £100m capital investment from its Qatar parent, Masraf Al Rayan (MAR), Sultan’s vision has finally been realised.

“The owners want to make their bank into a global brand, and we will be the European footprint of that ambition,” he says. “Our name will change in December 2014 from the Islamic Bank of Britain (IBB) to Al Rayan Bank plc, but we will always be a bank for retail customers, and our headquarters will remain in Birmingham. However, we will become more of a commercial bank, so there will be a greater focus on corporate and real estate finance which will run out of London.

“As IBB, we had the vision, the innovation and the potential, but not the capital. However, we’ve already attracted more than 50,000 customers by our ethical approach and the quality of our products. Now we have to get our message across to the wider community.” As Sultan sits in IBB’s head office, off Hagley Road, he’s every inch the modern banking professional: sharp of suit and mind, and with a reassuring presence. However, his confident demeanour belies the many challenges which IBB encountered since it was formed in 2004.

Sultan believed if a bank based on Islamic finance could become established that the customers would come, but he wasn’t just constructing a small baseball diamond on the fertile grasslands of North-East Iowa. He had to learn about the banking system, build a bank and its brand, and make potential customers, the finance community and even software houses understand what Islamic finance was.

“There were times when the challenges were immense,” admits Sultan. “IBB lost money for nine successive years because we just didn’t have the capital. Now though, our balance sheet is over £600m, our book has doubled for each of the last three years, and we are recording a profit month-by-month.”

IBB now operates from five branches and three agencies. As of December 2013, it had retail deposits of £320m – up 35% year-on-year – and total customer financing was up 87% to £241m. Commercial property finance was up 196% to £34.3m. But the most impressive statistic is that non-Muslim customers are flocking in ever-increasing numbers. When its fixed-term deposit account launched in January 2013, almost 83% of customers were non-Muslim.

So what is ‘Islamic banking’? Islamic banking operates without interest (known as ‘riba’), which is not permitted in Islam. And the source of its funding, profit and business investments cannot be in, or from, companies which deal in interest, gambling, pornography, speculation, tobacco or other commodities contrary to Islamic values.

Instead, the principal means of Islamic finance are based on trading, with any risk involved in trading activity. Any gains from that trading are then shared between the person providing the capital and the person providing the expertise.

Despite the ethical appeal of Islamic finance though, no investor is going to park their savings with any institution unless the returns from its products are appealing. And in early November, IBB products held first place in the Money£acts tables for the best fixed-rate bonds over one year, 18 months and two years. “We focus heavily on creating attractive products, but also invest in IT infrastructure so customers can open accounts online with minimum fuss. We’re also big on having excellent support structures, because it’s vital to offer the highest service standards,” says Sultan.

His CV features a first degree from Nottingham University in economics and econometrics, and an MBA from Aston University, but he learned the critical importance of customer care in a rather different environment – running his dad’s Indian restaurant.

“My parents came from Bangladesh in the 1960s, and dad opened an Indian restaurant near Bude, then another in Bodmin. Although we were settled in Birmingham, Cornwall became my second home,” recalls Sultan. “When I was 16, I started helping out and quickly progressed to running the restaurant, being front-of-house, and looking after the staff. I realised you could overcome many obstacles through hard work, and that looking after your customers is absolutely vital.”

Sultan’s experiences also taught him that talent must be dovetailed with tenacity to deliver success. “When I’m looking to bring new people to the bank, I always think a person who looks to jump off at the first sign of trouble is probably not for us,” he admits.

However, Sultan is certainly not someone to linger on the negatives, neither today nor as he looks back. “When I was young, we lived in Sparkbrook, so right in the middle of Peaky Blinder territory, in one of the terraced houses built for BSA workers. It was very much a white working-class area then, with a smattering of West Indians and some Asians.

“I went to Montgomery School, a lovely Victorian building. But it had a lot of old-fashioned teachers and no-one was going on to grammar schools, so dad had me sit the entrance exam for King Edward’s and I went there. It had a big influence on my character. It was excellent academically. There were only four pupils from ethnic backgrounds in my class, so it was tough at first, but I had a really happy and fulfilling time.”

The teenager also developed ambition. In the ‘What do you want to be?’ section of a job advert, he wrote ‘A CEO’. He was recruited, but lasted just two days!

“The job turned out to be selling really tatty stationery from Taiwan by cold-calling firms on industrial estates in the Black Country, which taught me another lesson. Always do your research.” Sultan was soon off to university though, sponsored by Sainsbury. “I worked at their head office during the summer, and was impressed by their focus on quality, but it
was a very hierarchical organisation and I could see it being restrictive in terms of what you could achieve as a newcomer,” he recalls.

“I’d chosen an accountancy course, because it was an expanding profession, and after graduating, I joined Deloitte in Birmingham. I really enjoyed being in the field, talking to their clients, but the administrative element of accountancy was not very interesting.”
Four years on, a mix of wanderlust and ambition saw Sultan move to one of Deloitte’s clients, Charles Schwab Europe.

“I was working with them to make their call centres more efficient, and mentioned to a colleague that I was thinking about an MBA. Schwab offered to take me on, give me a rise and pay for my MBA, so that was an easy decision.” Sultan was later appointed director of the company’s brokerage operations, which further honed his management skills: “I liked the ‘can do’ philosophy of the Americans. I’d got a background in accounting, auditing and strategy, and they gave me the chance to turn round several ‘problematic’ departments. I managed to flip them around into some of their strongest units, which was very satisfying.”

The European arm was unexpectedly sold to Barclays Private Banking, but Sultan escaped the inevitable management cull, and was soon operating a sizeable chunk of his new employer’s business.

“It was slightly unreal. I had between 300 and 400 people operating on two sites, and the volume of work was so great they gave me three secretaries. Then I heard a buzz about people looking to set up an Islamic finance bank.“I’d been interested in that form of finance since university, and the chance to build a High Street bank from scratch was too good to miss. Right from the start, I had a vision of how it could work, from the call centre right through to the staff and the products.

“In January 2004 though, IBB had just three staff, an MD, a CEO and some banking software. We gradually built the structure, persuaded the Financial Services Authority to grant a licence, and then set off round the country talking to people.

“We weren’t driven by the desire to make a return, and hadn’t got the capital to make an impact, so it was all about passion. I was doing seminars in mosques and for business leaders, then we started building a branch network and I spent two years on the road.

”Unfortunately, all the fixed overheads burned our cash. We strengthened the management team, and started pushing deposit accounts, but the fuel was still running out.” Finding a new, capital-rich owner was long and challenging, as Sultan pitched relentlessly through Bahrain, Abu Dhabi and Dubai, but ultimately, MAR recognised the bank’s potential, and now Sultan expects significant progress over the next two to three years.

“I’d expect to see us engaged in wider areas of banking. We’ll have products available for SMEs, for example, and wealth management is another area we’ll move into. By then, I’d hope we’ll also have a foothold in Europe, although that will obviously be challenging. In the UK, we now have a climate in which Islamic finance can flourish, but not so in Europe, so we’ll have to put a lot of effort into explaining the concept.”

With two sons and a daughter, there’s not a great deal of spare time, although intriguingly, for a technocrat, the main hobbies Sultan shares with his wife are the National Trust and English Heritage.

At the moment though, his biggest ‘guilty pleasure’ is popping back to Sparkbrook.

“I dine out a lot,” he admits. “My number one choice this year is La Favorita, off Ladypool Road, which does wonderful Italian and Asian food. It sounds an odd mix, but the proprietor is Algerian, and they are his favourite cuisines. I love eating there, perhaps just a little too much.”