0. Islamic Finance Driving Forces The Management Team Perspective
March 2010, Dead Sea, Jordan
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of Al Rajhi Bank is strictly prohibited

1. Contents
Islamic Banking Trends & Challenges
Al Rajhi in Jordan

2. Islamic Finance represents 1% of global assets
Islamic Finance represents 1% of global assets. The market has been growing over 30% annually since 2000 and is set for continued strong growth.
Financiers in the Islamic world as early as the 8th century
Sarrafs
Mostly Retail Banking
Prior to 1990
Commercial Banking
1990s
Project finance & Syndication
Capital Markets
Leasing
2000s
Advanced treasury services
Innovative asset management
Investment Banking
Future
Retail
Corporate
470
1,000
22%
34%
175
420 50 20 60 28
Source: Oliver Wyman; Figures are in Billions

3. Islamic banks outperform market growth in core geographies8
Islamic banks outperform market growth in core geographies
Al key market have their share of Islamic assets increasing.
Growth above 30% in most of the markets
Even in the UAE, the figures shows some flattening, but this is was a temporary effect of end of 2007, which was due to excess cash and looking into the share as of mid 2008 shows
Growth drivers are
- general economic growth and banking under penetration
- demographics and Islamic preference
- increasing awareness of Islamic finance
- improved supply from Islamic banks which have bridged the gap with conventioanl banking of product offering, e.g. credit cards, sukuks,
The key question is what will be the cap for islamic banks? Some industry experts consider that in GCC countries for example a majority of retail, up to 80% in some countries will be Islamic, while corporate will be more selective based on product offering and service levels
% in 2003
% in 2008
17%
20%
30%
10%
12%
16%
13% * ** 4%
Notes: * Malaysia at 16%, Indonesia at 2% ; ** Estimated total (including Islamic windows) around %
Source: Bankscope, CIA Fact Book and Oliver Wyman analysis

4. Top ten largest Muslim populations
Source: CIA Factbook and Oliver Wyman Analysis

5. Islamic banking players increasing interest to become global
NOT EXHAUSTIVE
2007- Oct 2009
France
Islamic banks from Bahrain and Qatar reportedly applied for licenses
Kuwait Finance House, Al-Baraka, Gatehouse also reported to be interested
Jordan
2 new entrants: Dubai Islamic Bank and Al-Rajhi Bank.
Turkey
3 out of 4 Turkish Islamic Banks (Turkiye Finans, AlBaraka, Kuveyt Turk) have a strategic GCC partner
Azerbaijan
2008: International Investment Bank (Bahrain) bought 49% of Amrahbank and converting it to an Islamic bank
Pakistan
2009: Unicorn increases stake in Dawood Islamic Bank to 37%. Dubai Islamic banks have started operations. (Emirates Global Islamic Bank, Dubai Islamic Bank)
Morocco
2007: Government authorizes segments of Islamic finance; 10 banks reported to have express interest
Malaysia
2005-7: New Entrants: KFH, Al-Rajhi Bank, AFB (QIB)
2009: Two new foreign players reportedly shortlisted for licenses & takaful license available
Egypt
2008: Abu Dhabi Islamic Bank buys 51% of Egypt’s National Bank for Development
Among the largest cross-border acquisitions was the 2007 purchase by National Commercial Bank (Saudi Arabia’s largest bank) of a majority interest in Türkiye Finans Katilim Bankasi A.S. (one of Turkey’s largest Islamic banks). More details about this purchase are presented on the next slide.
India
2009: Government issues its first Islamic banking license; operations to commence in 2010.
Bangladesh
2009: Sonali and Janata banks, state players, to open Islamic windows.
Indonesia
2008: Asian Finance Bank of Malaysia announces investment, operations to commence in 2010
This year’s report will discuss potential expansion opportunities in North Africa
Al-Baraka Group (12 countries): Jordan, Egypt, Tunisia, Sudan, Turkey, Bahrain, Pakistan, South Africa, Algeria, Lebanon, Syria, Indonesia
KFH Group (4 countries): Kuwait, Malaysia, Bahrain, Turkey

6. Reported profitability remains higher for Islamic banks especially in the GCC region
Return on Average Assets for Top 5 banks versus Islamic banks1
Percent , 2008
SELECTED MARKETS
Profitability for Islamic banks remains generally higher as usual, mainly driven by reliance on deposit funding which is less expensive and also premium for Islamic products for some players. However, the operational efficiency of Islamic banks remains generally lower than conventional banks as we’ll see later in this presentation
Kuwait
Qatar
Saudi Arabia
UAE
Malaysia
Indonesia
GCC
Non-GCC
1 Top 3 Islamic banks by assets considered for all countries except the UAE (top 5) Malaysia and Indonesia (top 4).
Source: Central banks; annual reports; Bankscope; McKinsey

7. There are still four main priority areas which Islamic banks should focus on going forward
Potential actions for Islamic banks
Change business mix in product areas where Islamic banks have not been traditionally focused or where there is growth potential such as
Credit cards / Personal Loans
Fee-based businesses such as Asset Management, Treasury operations, Capital Market
Islamic Investment Banking(as an upcoming growth area)
Enhanced and diversified business mix 1
Make efforts to lower cost of operation and improve service quality in order to improve competitiveness
Efficiency in operations 2
Well positioned Islamic banks can consider international growth opportunities in countries with
Sufficient target population and strong un-met demand
Feasible market entry based on competitive environment and regulatory climate
Explore global growth options 3
Upgrade risk management systems and capabilities in anticipation of required capability to manage in crisis environments, i.e. focus on
Credit risk as an important area of focus given high real estate concentration and potential for increased non-performing loans.
Liquidity risk via improved sources of funding, new hedging tools and enhanced infrastructure. Critical to manage liquidity in light of limited sources of funding for Islamic banks.
Risk management 4

8. Robust Business Model is a prerequisite to success in any business
Performance Measures
Robust Risk
Management
Stable IT
infrastructure
Efficient
Processes
Good
Governance
Talent
Brand
Customer
Channels
Products & Services

9. Contents
Islamic Banking Trends & Challenges
Al Rajhi in Jordan

10. 17
The Islamic market in Jordan is smaller than peer countries, but is growing quickly
Share of total market; %
Size of Islamic banking market based on assets, $b
Total Jordanian Islamic assets $m
Bahrain
9.8
3,886
+17%
Kuwait
29.3
3,091
2,878
Qatar
20.3
2,420
IIAB
Malaysia
15.9
2,607
UAE
16.9
2,253
2,066
JIB
1,867
10.7
Jordan
2005 06 07
2008
Turkey
3.5
8.9
8.8
8.8
10.7
SOURCE: Company annual reports; Zawya; Association of banks in Jordan 10 10

11. Al Rajhi Bank in Jordan
Regional
Presence
Our expansion to Jordan is an integral part of our regional strategy
We estimate that 700K Jordanian expatriates will be residing in GCC by 2012 (out of which 350K are in KSA / Kuwait)
KSA / Jordan
ties
Trade between KSA / Jordan is increasing with export flows reaching approximately 3.5 Billion $ in 2008
Seats on flights between KSA / Jordan are increasing by 12% YoY
Regulation /
Macro Climate
Jordanian government continuously shows significant progress by reducing debt to GDP, increasing privatizations & public investment as well as opening trade routes.
Central Bank of Jordan has significantly upgraded banking regulations in recent years
Increasing bankable population
Installation of innovative Islamic Banking solutions and products already proven successful in KSA and Malaysia 11

12. We are on track to launch operation in Jordan by end of 2010
Business / Operating Model Design
Registration with CBJ
Systems development kick-off
HO / Main Branch location finalization
CEO in place
Launch of Commercial Operations
Sep 2009
Nov 2009
Jan 2010
Mar 2010
Apr 2010
Nov 2010 2 3 4 5 6