Deloitte Middle East Point of View: Disruptive innovation in Islamic Finance, medical tourism and family businesses in the GCC, and Saudi nationalization

24 November 2016 – Institutions offering Islamic Financial Services (IIFS) need to revamp their Governance, Risk and Compliance (GRC) practices in order to drive sustainable growth and ultimately reinvent the value proposition of Islamic finance. The opportunities presented to the Islamic finance industry are among the topics discussed in the fall 2016 issue of Deloitte’s quarterly publication, the Middle East Point of View (ME PoV).

The fall 2016 issue tackles several hot topics: from Islamic Finance and medical tourism in the UAE to maximizing value in a family business, nationalization of the Saudi workforce, accounting and audit new standards as well as Integrated Reporting.

The Islamic financial services industry continues to experience profound regulatory and practical challenges and there is continued pressure on industry stakeholders to revisit their governance and business models.

“Key to these issues is the regulatory inconsistency that exists due to different regulatory regimes, and in some markets where the industry has operated and evolved, different products structure offerings,” said Dr. Hatim El Tahir, Director, Deloitte Islamic Finance Knowledge Center, in his report “Disruptive innovation: Reinventing the model”.

“Several institutions offering Islamic Financial Services maintain multi-country operations and face the challenge of dealing with the different regulatory and financial reporting standards, such as IFRS (International Financial Reporting Standards) versus AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) as well as modes of financing and capital requirements, to name a few,“ he continues.

Abid Shakeel, Partner, Financial Services, Consulting, Deloitte in the Middle East, highlights in his report “Islamic megabank – The redeemer?” whether an Islamic megabank can redress liquidity and other challenges in Islamic banking. Shakeel explains: “While the formation of Megabanks with wide ranging remits would be a real game changer to make US$6 trillion by 2025 a realistic ambition for the Islamic finance industry, it should be noted that there also needs to be political will and national level regulations to embrace such institutions in the respective jurisdictions.”

In “Change is inevitable – Accounting and audit embark on a new journey”, Bilal Marroush, Partner, Audit, Deloitte in the Middle East, discusses the reengineering core concepts in accounting and auditing standards. The direction in Enterprise Resource Planning, he explains “is toward more transparent and advanced tools that practitioners need so as to cope with the fast changing economy and public needs.”

Other articles in this issue of Middle East Point of View include a look at the rise of medical tourism in the region and Saudi Arabia’s efforts at nationalizing the workforce. In his report “Test. Plan. Train. Repeat. Nationalization of the Saudi workforce in 2017,” Amir Mayo, Senior Manager, Global Employer Services, Deloitte in the Middle East, says the Kingdom’s plan to nationalize the workforce is finally coming of age. “Companies within the Kingdom that do adapt to the increasing demands to nationalize the workforce are cognizant that further protectionist measures will be introduced in the near future,” Mayo explains.

On healthcare, Sachin Singhal, Principal, and Manish Gourisaria, Senior Manager, Audit, Deloitte in the Middle East, explain in their article “The healing touch – Medical tourism in the UAE” the outlook and challenges of medical tourism in the region. The authors explained: “The UAE healthcare market is projected to grow at an average annual growth rate of seven percent (7%) between 2015 and 2020 to reach a market value of US$19.5 billion, as per the UAE Healthcare Sector Outlook 2020. Healthcare tourists in Dubai can choose from over 30,000 healthcare professionals spread among 3,000 facilities.”

In “1+1=3”, Scott Whalan, Director, Valuations, Deloitte Corporate Finance Limited, highlights the importance of maximizing value within a family business. Whalan wrote: “A key factor that drives value within family businesses is the ongoing effective allocation of capital across asset types and sectors as markets transition over time. This is a common oversight in many family businesses across the region.”

On Integrated Reporting (IR), Rami Wadie, Partner and Corporate Governance leader, Risk Advisory, , Deloitte in the Middle East, says in his report “IR you reporting optimally?” that “IR is expected to bring enormous benefits both, internally and externally to an organization. Internally, IR is likely to improve conversations between the board and management, better decision-making through the early breakdown of silos and increasing respect and understanding between departments.”

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Deloitte provides audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with more than 3,300 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region since 2010 (according to the International Tax Review World Tax Rankings). It has also received numerous awards in the last few years which include best employer in the Middle East, best consulting firm, the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW), as well as the best CSR integrated organization.