In an interview with The Banker Magazine, Abdulwahab Al-Roshood, Acting Group Chief Executive Officer at Kuwait Finance House (KFH), said that the outlook for Kuwait economy cannot be perceived in isolation from the inherited core issues it usually struggles with such as the heavy reliance on oil, generous social benefits, and undiversified economy.

He added that these issues added stress on Kuwait`s financial position and economic activity and limited its ability to move forward with its diversification plans and bold reforms.

However, Al-Roshood believed that the current standstill could see some breakthrough given the strengths Kuwait enjoys including strong underlying fundamentals, sound financial and banking sectors, high income economy, vast wealth accumulated during times of high oil prices, low external obligations and a young, entrepreneurial population.

He added that these factors can assist the country in diversification plans under Kuwait's 2035 vision, transform its energy resource-driven economy into a knowledge-based as well as create sustainable growth.

Al-Roshood confirmed that the local economy and businesses require the government to make a move on diversification plans away from hydrocarbons, taking aggressive measures to prop up the economy and sustaining reforms to boost private sector- led and diversified growth.

Strategic priorities

Commenting on the KFH`s key strategic priorities of KFH for 2021/2022, Al-Roshood said:” We are working on minimizing manual work to near zero and moving forward in our digital strategy to keep abreast of the latest developments in the banking industry. In addition, we are relying more on Robotics in all our business operations.”

He added that: “KFH is also keen on fortifying its cyber security strategy and employing the best practices to keep ahead of any cyberattack threat. This is a priority amid the rapidly evolving digitization landscape. As part of our strategy of digital transformation, we are keen on providing high-quality mobile banking services without interruption and focusing on health and safety of our employees and customers amidst the pandemic.”

Credit growth

Al-Roshood said that credit conditions will remain strong as Kuwait`s banking system is stable, and the Kuwait economy is supported by strong accumulated assets managed by the country`s sovereign wealth fund.

He confirmed that Kuwaiti banks enjoy strong capital ratios and high liquidity levels, adding that KFH`s predictions for 2021/2022 rely on the recovery of the economy and sentiment of the market which are of course associated with the status of Covid-19. Having said that, the key drivers for credit growth in light of gradual improvement are mainly the retail sector, corporate and SMEs sectors and the government investment spending on the infrastructure under Kuwait Vision 2035.

Al-Roshood explained that as a result of lockdowns and dampened economic activity in Kuwait, the Kuwaiti banking sector non-performing financing (NPFs) ratio increased 0.5%, from 1.5% in 2019 to 2.0% in 2020. This figure remains at a historically low level, inspiring even more confidence in the strength of the banking sector.

“The NPF coverage ratio dropped from 271% to 222%, mainly as a result of utilizing provisions to NPFs. This ratio remains at a healthy level, boosting asset quality and serving as an additional buffer to counter any potential worsening in the credit portfolio that may arise if the pandemic persists.” He confirmed.

Al-Roshood said that “All the business and economic activities have significantly been resumed. As the pandemic is not yet over and the other side the vaccination is expected to take longer, we are of the opinion that it is not prudent to give a guidance on non-performing financings.”

Digital offerings

Al-Roshood said: “We have always been diligent and proactive in our business model and in our methodology in embracing change and in dealing with crises. During COVID-19, we succeeded in utilizing the crises as an opportunity where KFH presented itself as part of the solution rather than part of the problem, fully utilizing its digital tools to facilitate customer services.”

He explained that Covid-19 has accelerated KFH`s strategy of digital transformation in terms of providing high-quality mobile banking services without interruption and focusing on health and safety.

Al-Roshood added that KFH announced the successful launch of the digital service “opening bank account online” for new customers, citizens and residents within minutes without having to visit the branch. KFH tremendously demonstrated its CSR strategy of supporting the government in its efforts and measures to face the pandemic.

He confirmed the efficiency of KFH`s digital services as transactions completed by its customers through KFHonline on the website or the mobile app exceeded 140 million transactions in 2020.

“This emphasizes the successful digital transformation strategy of KFH and its keenness to provide innovative banking solutions via mobile and alternative channels to enable customers to complete their transactions around the clock, from anywhere, easily and safely.” Al-Roshood added.

Meanwhile, Al-Roshood emphasized that moving forward in the strategy of digital transformation, KFH increases investments in technology through adopting the latest FinTech innovations, using the artificial intelligence and robotics in the banking transactions as well as achieving excellence in mobile banking and the self-banking station KFH Go services. This could strengthen the digital customer experience, drive the digital development in the banking industry, as well as successfully activate the business continuity plan in emergency cases.

Awareness campaigns

Al-Roshood said that given the increased access to financial services, development of e-banking transactions, accelerated digital activity and higher online penetration, financial literacy becomes a growing challenge.

He stressed the importance of cybersecurity and continuous customer awareness of potential risk of e-crimes which can be achieved through dedicated campaigns such as “Be Aware” (“Diraya”) recently launched by the Central Bank of Kuwait (CBK) in cooperation with Kuwait Banking Association (KBA) with the aim of raising public awareness of the role of the banking sector and enhancing the financial literacy of society.