Case Study: Al Hilal Bank and the UAE Banking Market - FIN 320

This case study examines Al Hilal Bank's entry into the UAE banking market during a period of financial crisis. It highlights the key issues faced by the government at the time, including increased domestic product growth, population growth, and competitive advantages. The study identifies factors contributing to Al Hilal's success, such as team specialization, superior customer service, and robust risk management. It also addresses challenges like liquidity pressures and credit growth decline. The analysis concludes by comparing Al Hilal's operational strategies with traditional banks, emphasizing the importance of effective teams, established policies, and a future-oriented approach for achieving similar results. The bank's focus on expansion, internet banking, and international operations signals a promising future.

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Banking market at the UAE
During the launch of Al Hilal, an Islamic bank owned by the government of the United Arab Emirates
(UAE), the UAE banking market was facing a lot of financial crisis, the financial environment was
also facing a lot of uncertainties and most banks were being shut down due to a lot of risk of losses
during that time. However, Al Hilal bank was not affected by these market uncertainties, instead, the
growth of the bank was observed to be very fast, more branches were opened and the bank ensured
worthwhile projects continued.
Key issues the government faced
During the launch of Al Hilal bank, the government faced various issues which include; the growth of
domestic product has increased by 9% since the launch of Al Hilal which has resulted in the rapid
economic growth of the country. Population growth has also been experienced by the government
which led to growth of the non-hydrocarbon sector. In addition, the government also experienced a
great competitive advantage over other banking sector of other countries, Al Hilal improved the credit
growth that made the banking sector of UAE to grow fast and become highly competitive.
Factors that contributed to Al Hilal success
Al Hilal first set up various teams each team had specific task to perform at different section of the
banks operation process. The management team identified the financial crisis that banking sector was
experiencing and used the crisis as their opportunity to grow, leading to success of Al Hilal. The team
also ensure superior customer service is practised to maintain a long term customer relationship. The
risk management team on the other hand, ensured proper risk policy tools have been put in place to
guide operations to enable the bank avoid facing any risks associated with the banking sector.
Challenges faced by Al Hilal
Liquidity was the major challenge that the bank faced. Too much pressure on liquidity as a result of
negative interest rate received leading to decrease in deposit growth, therefore resulting to dry up of
interbank market and a lot of defaulters observed. The fall of credit growth is also another challenge

that Al Hilal faced, its decrease forced lenders to tighten their credit requirements leading to
slowdown of economic growth.
Future of Al Hilal
The bank focuses on a great future since it works towards expansion for continuous growth. Highest
growth increase in deposits, financing and rates have been witnessed since 2008, this shows that the
bank has a great future ahead and it will be able to open other more branches and expand more on its
growth. The bank is also focusing on internet bank and international business operations.
Conclusion
Achieving same results as Al Hilal by traditional banks may not be possible because, first, Al Hilal
have put in place effective operational teams that are from the management section to risk
management which governs all operations; it also has well established policies and procedures of
operations as compared to traditional banks which only operate in an informal way. In addition, Al
Hilal mainly focuses on the future to have a clear expectation of the market compared to traditional
banks which only focus on present. Most traditional banks fails to put up such operation in order to
achieve same result as Al Hilal because they lack full support to do so and the management team of
such banks have an ingrained way of thinking. The traditional banks are also not able to put up a firm
standard of operations from the beginning to enable the banks gain competitive advantage and
maintain a unique culture as it is the case in Al Hilal.