KUWAIT CITY, March 8:  Kuwait Finance House (KFH), the largest Islamic lender in the country, has triumphed over the dire consequences of the global financial meltdown despite a decline in its net profits in 2009, which amounted to KD118.74 million ($412.7 million), compared to KD156.9 million in 2008, says KFH Chairman and Managing Director Bader Abdul Muhsen Al-Mukhaizeem. 
Al-Mukhaizeem made the announcement during the 31st general assembly meeting of the bank Monday.  He confirmed the bank has succeeded in implementing its strategy to operate based on the Islamic Sharia, assuming a leading position in the Islamic investment sector not only locally but also in the regional and international markets.  He said the bank gained this status by conducting comprehensive studies and laying down excellent expansion plans, as well as effective risk management policies.
Confirming KFH presented its successful business model and increase its assets base to KD11 billion by the end of 2009, Al-Mukhaizeem asserted this step had a positive impact on the Islamic financial sector, improved performance of the bank, promoted the level of transparency and competence of KFH locally and internationally, and greater contributed in fortifying the leadership of Kuwait as a staunch supporter of the Islamic financial services industry.
Here are excerpts from KFH Chairman’s speech:
Dear Brothers and Sisters,
It gives me great pleasure to welcome you at the 31st General Assembly Meeting, and present to you the Kuwait Finance House (KFH) Annual Report for the year ending December 31, 2009 including the Al-Fatwa & Shareea’ah Supervisory Board (FSSB) Report, the key annual achievements, the local, regional, and global developments, Capital Adequecy Report and the Consolidated Financial Statements of KFH and its subsidiaries, as well as the Auditors’ Report.
Thanks to Almighty Allah, KFH Group has been able to overcome the adverse repercussions of the global financial turmoil and maintain its prudent strategy which has effectively helped KFH enforce the foundations of the Islamic financial services industry, not to be tempted by the pursuit of record returns on investment, and hold a powerful grip on the ethics and morals of Shareea’ah-compliant Islamic banking. KFH, therefore, is able to  position itself as a key leader of Islamic investment on the local, regional, and international levels backed by diligent studies, promising expansion plans, and prudent risk management policies aiming at maintaining KFH’s diverse base of assets including clients’ and shareholders’ funds.
Given the close relevance to the economic environment in which it operates and to the global capital markets which have been hit by a severe recession which recalled to minds the memories of the Great Depression, KFH has been affected to a lesser extent by the adverse repercussions of the economic downturn, due to its reliable instruments and sound investments. In response, KFH worked towards realigning the components of its investment portfolio by maintaining its geographic diversification policy, monitoring the performance of its subsidiaries, increasing the risk-limited and fixed-income investment instruments, increasing the liquidity ratios, maximizing  revenues, rationalizing expenditures, promoting KFH financial, economic, and social  role, and targeting new markets; chiefly, the regional markets.
KFH enhanced its focus on the Saudi market which is well positioned for an economic turnaround, and to Turkey as KFH Turkey boomed and expanded its branches to 120. In line with its outlook for an international presence, KFH obtained a license to operate in Germany. In addition, KFH inaugurated its 7th branch in Malaysia and 9th branch in Bahrain, so that the total number of KFH branches extending nationwide, regionally, and internationally has increased to 186 branches; which reflected the multiple accomplishments of KFH over the past thirty years and stressed the fact that  KFH is amazingly exceeding the expectations of its clients, developing an array of services and products in order to cater to the changing requirements of the diverse segments of clients and solicit new clients, improving the quality level of the existing services and upgrading the performance level of employees to the highest standards, maintaining effective communication with society, and increasing expenditure on technological infrastructure.
It goes without saying that 2009 was of significant importance for KFH, given the events and challenges associated with the aggravated repercussions of the global financial and economic turndown, the adverse impacts of such challenges on the local economic, monetary, and banking conditions since Q3 of 2008, and the turning of the financial crisis into a global financial and economic crisis. As the pressing need arose for a quick action to ease out the adverse impacts of the global turmoil on KFH’s stability, KFH took the lead to stabilize its operations as it allocated adequate provisions for facing such challenges and acted in compliance with the international supervisory standards and Basel II.
In the meantime, the issue of collecting revenues during the year was not a big concern to KFH; rather KFH focused its attention on seizing the right opportunities while bearing in mind that while a crisis usually results in challenges, it also creates opportunities which should be properly seized. KFH, therefore, mobilized its resources, capabilities, and strengths into four key directions; coping its strategy with the current economic developments, ensuring proficiency and effectiveness of its risk management techniques, expanding locally and internationally and moving with the advancement in technology, and developing and diversifying its base of services, products and human resources.
Thanks to Allah, KFH demonstrated its successful business model and enlarged its base of assets to KD 11 billion by the end of 2009. This has, in fact, influenced the Islamic financial business positively, enhanced the efficiency of performance, promoted the level of transparency and caliber of KFH both locally and internationally, and contributed to strengthening Kuwait’s leadership and endeavors as a sincere advocator for the Islamic financial services industry, which have become a successful business model worldwide in terms of containing the adverse repercussions of the global turmoil that hit the entire global banking system. Islamic banks stood resilient to the global turmoil as they operated away from the Risky Triangle; the usurious interest, debt trading, and investment in derivatives.
Balance Sheet
Total assets reached KD 11.291 billion at the end of the year with an increase of KD 747 million as compared to 2008 equal to 7 percent compared to the previous year. As for liabilities, clients’ accounts balances have reached KD 7.262 billion with an increase of KD 650 million equal to 10 percent over the previous year. Shareholders’ equity has reached KD 1.242 billion.
Revenues:
Total realized revenues for this year have reached KD 766 million. After deducting the various expenses and provisions, profit before allocations reached KD 317 million.
Shareholders’ Profits:
Net profits for shareholders’ reached KD 118.741 million.
Profit Allocation:
Profits are allocated to investor depositors for the Financial Year ending Dec 31, 2009 as per the following table:
Economic Developments Review
Kuwaiti economy reacted, and is forecasted to register a negative growth rate of 2.4 percent in 2009 as compared to the previous year and to rise in 2010 to 2.1 percent.
Despite the tangible efforts exerted by the Government of Kuwait; mainly the Rescue Task Force which has carried out several measures aiming at maintaining the integrity of and regaining confidence to the financial sector through the quick intervention by the Kuwait Investment Authority (KIA) in the Kuwait Stock Exchange (KSE) to reinvigorate and regain confidence to KSE, approving an expansive monetary policy by the Central Bank of Kuwait aiming at procuring liquidity at banks, reducing the discount rate four times since the global financial turmoil to decrease from 4.50 percent to 3 percent, issuing a law for guaranteeing the deposits at local banks, and issuing the Financial Stabilization Acts yet, Kuwaiti Economy experienced the adverse repercussions of the global financial turmoil.
In a positive initiative on its part, the Kuwaiti Government is planning to launch mega companies in different sectors of the economy, offer their shares for public subscription, and pump new investments into the Kuwaiti economy. The Kuwaiti Government has also announced its five-year budget (2009-2014) aiming at setting up mega projects such as Jaber Bridge, and setting up new residential towns, developing the production of oil and its derivatives, setting up power generation plants and gas stations, in addition to a number of service projects aiming at diversifying the sources of income, attracting more investments, and encouraging the Private Sector’s participation in the government-led projects.
This is a very significant step as the positive financial policy and the government expenditure are essential to the infrastructure projects in Kuwait in light of the huge reserves made during the past five years, which can be used in supporting and boosting the local economy. This, in fact, will broaden the Private Sector’s role, maximize the size of production, and diversify the sources of income to spare the Kuwaiti economy and budget from the fluctuations of the oil revenues caused by the global financial turmoil or any future crisis.
Kuwaiti Economy Indices during the period 2005 – 2010
GCC economies have been directly affected by the global financial turmoil, marked by a sharp decline in oil prices; especially at the very beginning of the crisis, given that oil prices fluctuated between $30 to $40 per barrel and touched $70 in August of the same year, driven by the global economy downswing and the sudden depletion of capital flows which slowed down the GCC economy growth at 0.7 percent.
The outlook of the global economy remains ambiguous despite some international institutions’ assertions for optimism and stability following the rigorous recession and the crushing global downswing ever witnessed since World War II; thus, creating a potential mix of positive and negative indices. As for the positive outlook, improvement in the financial positions is expected if backed by the governments’ intervention for reinforcing the economies, changes in the inventory cycle, and the financial and monetary leverage, not to mention the signs of a noticeable improvement in the recent forecasts and the positive prospects showed by forecasts of the economic activity which is progressing slowly in the developed countries.
A slow growth of 1.5 percent is expected in the advanced economies during 2010 and the unemployment ratios are expected to continue rising to touch 10 percent for the first time over the last decades, while an accelerated growth is expected for the emerging economies as the actual GDP is forecasted to reach 5 percent in 2010 as compared to 1.75 percent in 2009. China and India achieved a growth rate of 8.5 percent and 6.5 percent respectively during 2009.
On the other hand, some emerging economies especially in middle and east of Europe and Africa are still facing certain difficulties, while growth was reported in Asia and Latin America; however, these regions seemed to enable the West to come out of the recession.
Despite these positive forecasts, the global downswing is yet dispersed, and the economic recovery is forecasted to remain slow amidst concerns of the diminishing support provided by the public policies within the course of time.
In this regard, the recent meetings of the G20 recommended that the existing measures of reinvigorating the economy shall remain in place in order to ensure complete recovery from the global crisis backed by the IMF, the global financial system should be rectified, effective measures to avoid falling into troubles should be taken, and policies should be well coordinated among the member states of the G20.
In conclusion, we wholeheartedly thank Allah for his countless blessings, and call upon Allah to help us achieve KFH objectives in a way that ensures what is good for our society and our valuable clients, driven by the wise leadership of HH Amir of Kuwait Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah and HH Crown Prince Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah.
I would like to seize the opportunity to express my gratitude for all official authorities, respectful clients, and KFH staff members who do not hold back any effort to support the progress and cause of this great Islamic financial institution.
Bader Abdul Muhsen Al-Mukhaizeem
Chairman and Managing Director


KFH Credit Ratings by the International Rating Agencies (IRAs)
Major international rating agencies have underscored their trust in KFH through asserting their ratings despite the global crisis in a clear sign to KFH’s high credit standing, KFH’s ability to put its strategic plans of expansion, growth, and competition into effect, and KFH’s high potential of overcoming the adverse repercussions of the global financial turmoil with minimum risks. As a new international recognition of the strong financial standing of KFH, Capital Intelligence stated that KFH, established more than 30 years ago, is the most prominent and advanced Islamic institution in Kuwait which is evident by the large market share that it dominates in terms of credit, deposits and assets. In addition, KFH uses its powerful position in the local market to reinforce its global stature where the need for Islamic banking products and services is on the rise, especially after the unprecedented profit which KFH achieved over the past years. Furthermore, Moody’s, Fitch Ratings, Standard & Poor’s, and Capital Intelligence reasserted KFH long term and short term rating.
Clients’ Trust and Significant Influence
Throughout 2009, KFH continued to dominate by a large market share in the Kuwaiti banking industry despite KFH’s leading market share in financing and deposits; a matter which reflects the trust  and the strength of its relationship with its clients. KFH spared no effort in meeting the needs and requirements of its clients and targeted all segments of Kuwaiti society.
Ongoing Development of Communication Channels
Despite the global financial turmoil, KFH continued its efforts to use all communication channels. Therefore, KFH broadened its network of branches extending nationwide in order to achieve more penetration into the market, increase its market share, and provide its services to a larger customer base more qualitatively, flexibly, and quickly while making use of the information technology to improve efficiency and rationalize expenditure. The number of local branches rose to 50 and the ladies sections rose to 36 along with the banking branches; in addition, the number of ATM Machines rose to 99 machines. The Cash Deposit Machines (CDM) service which was introduced in Kuwait for the first time and has been expanded by entering 15 additional CDMs into service; thus, increasing the number to 35 CDMs throughout Kuwait.
KFH has always presented its credit-card holders with innovative services. Following the popular demand by KFH clients on Al-Tayseer Credit Card Package (Shareea’ah-compliant cards), KFH then introduced Al-Kheir Credit Card, Diamond Credit Card, and the first Takaful Insurance Product ever offered in Kuwait; reflecting how far KFH progressed in providing comprehensive and innovative services. Viewed as the first initiative of its kind nationwide, KFH launched its BlackBerry Application Service whereby clients can get access to the currency exchange rates, review the financing deals calculation, and get access to the available offers via their BlackBerry device.
KFH presented a bouquet of products to ensure instant access to its services, achieve record growth rates, and cut down the costs associated with the provision of products by updating the KFH Website. In another development, the KFH Online service was upgraded through launching “Site Key”, which provides the highest safety and security criteria and protects clients from suspicious websites. In addition, the second phase of “Baitak to Baitak” service related to the instant money transfer was brought into service.
On another front, KFH developed its IT systems and platforms and innovated new systems to keep pace with the technological updates in order to enhance efficiencies and cut down expenditures in the long run. To this effect, KFH is in the process of bringing two new systems into service at the Credit Department and the Local Real Estate Department, and is performing the final commissioning of the automated solutions at the Commercial Sector.
To facilitate customer services throughout KFH, we developed a new electronic archiving system, which can accommodate 20 million documents with a data retrieval rate not exceeding 30 seconds. Furthermore, the remote operation of branches was brought into service in order to enable direct selling by the Banking and Commercial Sector employees.
Local Market
The local market is a top priority in KFH’s strategy, given that its share in the local market is on the rise. To this effect, KFH has been developing its services in the local and real estate markets as well as the corporate finance area.
KFH has taken the lead in consumer finance and achieved a remarkable growth, especially in the motor vehicle and construction material finance. KFH has sustained its support of the local market through financing actual buying, selling, and Ijarah transactions; and through the support of an integrated base of clients and vendors leading the way for many others to companies, banks, and others aspiring to enhance Islamic financial products.
In compliance with its geographic diversification strategy, KFH established new showrooms, banking branches, supplier showrooms in different areas, and work is underway to inaugurate the Farwaniya showroom after completing the renovation works.
Real Estate Services
KFH has maintained its central and leading role in the real estate management and finance fields backed by a proficient team that is well versed in development and management of real estate in the MENA region.
In 2009, KFH secured a judiciary judgment allowing KFH to provide finance to residential real estates, as an exception from Law No. 8 and Law No. 9, with a positive effect on home financing. In response, KFH dedicated its efforts during 2009 towards developing and offering a number of profitable real estate portfolios for clients, and therefore, launched its KFH Real Estate Portfolio with a capital worth KD 50 Million. In addition, KFH developed a number of fixed-income real estate properties; about 50 real estate properties, throughout Kuwait which will reinvigorate the local economy through private funding by KFH.
In line with KFH’s strategy to raise public awareness of the real estate industry, KFH continued to issue quaterly real estate reports on the development, trends, and rates of real estate properties in Kuwait reaching the status of a key reference to investors and decision makers.
Corporate Finance and Business Sector
KFH sustained its significant role in the corporate finance and business sector and increased its market share, enforcing its position as a key player in corporate finance. In this regard, KFH is currently managing a credit portfolio of high quality assets. In addition, KFH launched a set of initiatives to reinforce KFH’s relationship with its clients, as the Credit Department played a significant role in rescheduling the debts of the big investment companies in line with KFH’s goals of reinforcing the national economy and creating an investment-enabling environment.
Human Resources
KFH focused its attention on its employment policy and is always committed to solicit the competent human resources that can cope with the latest developments in the banking industry and provide top-notch services to clients. To KFH, human resources are a key strategic asset. KFH dedicated its utmost efforts during the last year towards developing and enhancing the knowledge, skills, and expertise of its human resources, and increased the ratio of Kuwaiti labour to exceed 63 percent. However, KFH kept a level of expenditure similar to the previous year in spite of the increasing number of employees.
Social Responsibility
We, at KFH, do realize that we are a part of society and therefore interact with it through assuming our social responsibility role in coordination with the government and other active institutions interested in providing philanthropic assistance and social activities. Therefore, KFH designated KD 6 Million for performing its role; of which KD 3 Million was given to Bait Al-Zakat (Kuwait Zakat House) for spending on philanthropic activities, assisting poor families, completing charitable projects in the name of KFH in poor countries, and for the relief and disaster recovery activities outside Kuwait.
On another front, the Special Needs Project owned by Ministry of Social Affairs and Labor at Al-Zoor area, with a total cost of KD 1 Million, was completed. The Project includes a multi-purpose hall, an entertainment centre, 3 furnished residential units, and a covered swimming pool. The Project accommodates 50 guests who will have the chance to visit the Centre at anytime throughout the year. In addition, in line with KFH’s initiative to establish 15 emergency ambulance service centres with a total cost worth KD 1.5 Million, KFH completed 3 emergency ambulance service centres in Al Fahaheel, Rumaithia and Jleeb Al Shoyoukh; not to mention KFH’s contributions in other social programs designated for those of special needs.
In addition, KFH disseminated 1 million copies of English translations of the Holy Qura’an, sponsored several worldwide conferences and seminars, and honoured many tiers of the Kuwaiti society including traffic police officers, Capital Governorate patrols, and top students of the high school certificate holders.
Balance Sheet
Total assets reached KD 11.291 billion at the end of the year with an increase of KD 747 million as compared to 2008 equal to 7 percent compared to the previous year. As for liabilities, clients’ accounts balances have reached KD 7.262 billion with an increase of KD 650 million equal to 10 percent over the previous year. Shareholders’ equity has reached KD 1.242 billion.
Revenues:
Total realized revenues for this year have reached KD 766 million. After deducting the various expenses and provisions, profit before allocations reached KD 317 million.
Shareholders’ Profits:
Net profits for shareholders’ reached KD 118.741 million.
Profit Allocation:
Profits are allocated to investor depositors for the Financial Year ending Dec 31, 2009 as per the following table:
Economic Developments Review
Kuwaiti economy reacted, and is forecasted to register a negative growth rate of 2.4 percent in 2009 as compared to the previous year and to rise in 2010 to 2.1 percent.
Despite the tangible efforts exerted by the Government of Kuwait; mainly the Rescue Task Force which has carried out several measures aiming at maintaining the integrity of and regaining confidence to the financial sector through the quick intervention by the Kuwait Investment Authority (KIA) in the Kuwait Stock Exchange (KSE) to reinvigorate and regain confidence to KSE, approving an expansive monetary policy by the Central Bank of Kuwait aiming at procuring liquidity at banks, reducing the discount rate four times since the global financial turmoil to decrease from 4.50 percent to 3 percent, issuing a law for guaranteeing the deposits at local banks, and issuing the Financial Stabilization Acts yet, Kuwaiti Economy experienced the adverse repercussions of the global financial turmoil.
In a positive initiative on its part, the Kuwaiti Government is planning to launch mega companies in different sectors of the economy, offer their shares for public subscription, and pump new investments into the Kuwaiti economy. The Kuwaiti Government has also announced its five-year budget (2009-2014) aiming at setting up mega projects such as Jaber Bridge, and setting up new residential towns, developing the production of oil and its derivatives, setting up power generation plants and gas stations, in addition to a number of service projects aiming at diversifying the sources of income, attracting more investments, and encouraging the Private Sector’s participation in the government-led projects.
This is a very significant step as the positive financial policy and the government expenditure are essential to the infrastructure projects in Kuwait in light of the huge reserves made during the past five years, which can be used in supporting and boosting the local economy. This, in fact, will broaden the Private Sector’s role, maximize the size of production, and diversify the sources of income to spare the Kuwaiti economy and budget from the fluctuations of the oil revenues caused by the global financial turmoil or any future crisis.
Kuwaiti Economy Indices during the period 2005 – 2010
GCC economies have been directly affected by the global financial turmoil, marked by a sharp decline in oil prices; especially at the very beginning of the crisis, given that oil prices fluctuated between $30 to $40 per barrel and touched $70 in August of the same year, driven by the global economy downswing and the sudden depletion of capital flows which slowed down the GCC economy growth at 0.7 percent.
However, GCC countries adopted effective economic policies that mitigated the negative impacts of the global crisis, as such policies aimed at pumping liquidity to the financial institutions, expanding credit by the central banks, cutting down interest rates, guaranteeing deposits, and acquiring shares. Furthermore, the majority of the GCC countries; namely, KSA and UAE, have put in place certain expansive monetary policies to reinvigorate their economies. In the meantime, GCC markets have been able to face recent crises (Gulf Bank crisis, the crisis of the Saudi conglomerates “AlGosaibi Group and Saad Group”, and the debts of Dubai). Given the continued compliance with these policies and the forecasted increase of oil prices beyond $75 per barrel, growth is forecasted to rise to 5.2 percent in 2010.
Data also shows slow inflation rates in GCC driven by the decrease in real estate prices and rentals and the devaluation of the US Dollar serving as the basic currency of oil trade. The inflation ratio in GCC in general slumped from 10.8 percent in 2008 to 3.7 percent in 2009; yet, in Oman, Kuwait, and KSA, inflation ratios dropped from 12.4 percent, 8.6 percent, and 9.9 percent in 2008 to 4.3 percent, 4.1 percent, and 3.4 percent in 2009 respectively. The last global financial crisis unveiled the weaknesses in certain units of the banking sectors and investment companies, and therefore, exceptional measures should be taken to ensure stability, reinforce corporate governance, mobilize resources, and diversify risks.
The outlook of the global economy remains ambiguous despite some international institutions’ assertions for optimism and stability following the rigorous recession and the crushing global downswing ever witnessed since World War II; thus, creating a potential mix of positive and negative indices. As for the positive outlook, improvement in the financial positions is expected if backed by the governments’ intervention for reinforcing the economies, changes in the inventory cycle, and the financial and monetary leverage, not to mention the signs of a noticeable improvement in the recent forecasts and the positive prospects showed by forecasts of the economic activity which is progressing slowly in the developed countries.
A slow growth of 1.5 percent is expected in the advanced economies during 2010 and the unemployment ratios are expected to continue rising to touch 10 percent for the first time over the last decades, while an accelerated growth is expected for the emerging economies as the actual GDP is forecasted to reach 5 percent in 2010 as compared to 1.75 percent in 2009. China and India achieved a growth rate of 8.5 percent and 6.5 percent respectively during 2009.
On the other hand, some emerging economies especially in middle and east of Europe and Africa are still facing certain difficulties, while growth was reported in Asia and Latin America; however, these regions seemed to enable the West to come out of the recession.
Despite these positive forecasts, the global downswing is yet dispersed, and the economic recovery is forecasted to remain slow amidst concerns of the diminishing support provided by the public policies within the course of time.
In this regard, the recent meetings of the G20 recommended that the existing measures of reinvigorating the economy shall remain in place in order to ensure complete recovery from the global crisis backed by the IMF, the global financial system should be rectified, effective measures to avoid falling into troubles should be taken, and policies should be well coordinated among the member states of the G20.
In conclusion, we wholeheartedly thank Allah for his countless blessings, and call upon Allah to help us achieve KFH objectives in a way that ensures what is good for our society and our valuable clients, driven by the wise leadership of HH Amir of Kuwait Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah and HH Crown Prince Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah.
I would like to seize the opportunity to express my gratitude for all official authorities, respectful clients, and KFH staff members who do not hold back any effort to support the progress and cause of this great Islamic financial institution.

Bader Abdul Muhsen Al-Mukhaizeem
Chairman and Managing Director