Chairman’s Massage

Our dear Shareholders,

I am delighted to welcome you, on my behalf and on behalf of the members of the Board of Directors, to the twenty-fifth annual meeting of the General Assembly of the Arab Islamic Bank. We were hoping that the COVID-19 pandemic would be over by the time this meeting took place.  The COVID-19 pandemic had a devastating effect on Palestine’s social and economic levels in 2020, as most economic activities lost added value, resulting in a 12% decline in the Palestinian economy, a significant drop in GDP per capita, and an increase in unemployment rates, dropping the level of general demand for consumption and total investment indicators. This coincided with the Israeli side's suspension of clearance transfers and a government budget shortfall, which was reflected in the 50% and irregular payment of public sector employees' salaries. As a result of the borrowers' inability to pay their due installments, combined with the Palestinian Monetary Authority's procedures imposing grace periods and financing postponements for a period of four consecutive months, all of these factors had a direct effect on the Arab Islamic Bank, resulting in losses due to the non-collection of financing profits. Furthermore, AIB's staff was affected by COVID-19 because many employees had the virus, thus the bank took several precautionary measures to ensure the safety of its employees and customers and to operate in accordance with the emergency plan, which was reflected in the slowdown in the workflow during the first months of 2020.

Despite all of the obstacles that Palestine, in general, and the AIB, in particular, have encountered, the Bank has continued to be innovative and creative to maintain its work and  has served the Palestinian economy by developing work mechanisms and emergency plans that have positively reflected on the Bank's performance.

Allow me to provide you with a review of the Bank's significant efforts and accomplishments, as well as a summary of the Bank's audited financial statements for the fiscal year ending December 31st, 2020.

The Bank has completed its twenty-fifth year and continues to move ahead as one of the leading Islamic banking institutions in Palestine. The year 2020 was a continuation of the Bank's journey towards the accomplishment of its objectives, which are part of its aspiring strategic work plan and reflect the Bank's ambitions and vision for the future, in which AIB strives to become the public's first choice. The achievement of the bank's objectives had a positive impact on the bank's performance results and achievement of its annual objectives, primarily because the bank ranked fourth among banks operating in Palestine, up from sixth in 2019. With this position, AIB became Palestine's largest Islamic banking institution, as evidenced by the bank's receipt of four international awards as the best Islamic bank in Palestine in 2020. The bank was able to accomplish exceptional financial achievements, becoming the fastest-growing bank in terms of assets this year among all banks in the banking sector. In terms of services and products, AIB continued providing and developing Islamic banking services and products, which increased its client base and the bank's market share in the Palestinian banking sector. AIB's asset market share climbed to 7.8% of the Palestinian banking sector.

The bank continues to promote financial inclusion policy through its expansion and geographic spread plan by opening new branches and offices in Hebron governorate (Wadi AlHaria Office) and Jerusalem, Palestine's capital (Dahyet AlBarid Branch). Furthermore, the Jericho branch was expanded to become an independent branch, while the Gaza branch was relocated to Palestine Square. AIB now operates 29 branches and offices across the country, as well as 61 automated teller machines (ATMs). Furthermore, the Bank began planning for other new branches and offices that will open in 2021, including the Ni'lin branch, a new bank in Jenin City, and the expansion of the Qalqilia branch, in addition to the relocation of the Khanyunes Branch. With the addition of these new branches, AIB will have 31 offices and branches, placing it in a strong competitive position in the Palestinian banking sector in general and the Islamic financing market in particular. Furthermore, with the restructuring of the bank and the opening of new offices and branches in 2020, the number of employees increased to 640, an 8.5% increase over 2019.

Financially, despite the COVID-19 outbreak and the resulting lockdowns, AIB was able to raise its assets by USD 285 million in 2020, reaching roughly USD 1.557 billion, a 23% increase. Client deposits increased by USD 272 million (27%), totaling over USD 1.296 billion. In terms of direct financing, the bank's growth climbed by USD 187 million (25%), reaching around USD 945 million. Thanks to such outstanding results, AIB earned a pre-tax net profit of around USD 11 million and an after-tax net profit of around USD 8 million, despite the allocation of USD 2.4 million for anticipated credit losses as a result of the financial and economic crisis caused by delayed government sector salaries, economic shutdowns, and the Palestine Monetary Authority's instructions to postpone installments to clients.

AIB has also adopted a policy that encourages customers to use electronic services instead of visiting a branch and has worked to develop the call center to provide a more comprehensive and wider range of services to customers, allowing them to obtain service via phone directly or through approved electronic communication channels, in accordance with public safety and social distancing measures imposed as a result of the COVID-19 pandemic.

The Bank was able to maintain reasonable operating expenses in 2020, despite opening new branches and offices and developing certain old branches. This is due to the bank's ability to attract new clients and deposits, as well as increase direct financing and operational revenues. This will promote revenue and dividend growth, whether in cash or stock, in order to find a balance between shareholder dividends and capital sufficiency. Currently, the bank is raising its paid capital from around USD 88.4 million to USD 100 million over the next few years. This is part of its strategic plan, which strives to ensure compliance with all local and international control requirements, as well as the applicable international instructions and standards.

As part of its social responsibility, the bank funded numerous humanitarian and charitable activities and events, spending approximately half a million dollars in the previous year. This amount represents 6.3% of the bank’s net profit during the same period.

Finally, on behalf of the Board of Directors and shareholders, I would like to express our appreciation and gratitude to the Palestine Monetary Authority (PMA), the Palestine Capital Market Authority (PCMA), the Companies Controller, the Ministry of National Economy (MoNE), the Palestine Exchange (PEX), the security departments, and all ministries, institutions, and official departments for their cooperation and support. We would also like to thank our devoted customers for their trust in us. We pledge to meet their expectations and to be deeply devoted to offering the best Islamic banking services that meet their demands and ease their lives. We would also like to take this opportunity to thank the Consolidated Fatwa and Shari'a Control Committee, the General Manager, Mr. Hani Nasr, the Executive Management, and our employees for their tireless efforts in achieving AIB's objectives. We also thank our shareholders for their trust in the bank's board of directors and executive management.

May Allah grant us all success in our journey towards realizing further progress, development, and prosperity of our organization to promote its position in the banking sector in a manner that serves our beloved country, our national economy, and our divine Shari’a.

Rushdi Ghalayini

Chairman of the Board of Directors