By: Riyadh Al-Rabiah Saudi Steel Pipe Co. November 2015

1. Part one: The Concept By: Riyadh Al-Rabiah Saudi Steel Pipe Co. November 2015

2. The Concept of Positive Banking Traditional Banking + 4% = 5% Traditional Interest = 1% 4 times X5% Annual Sales Margin= = 20% Positive Banking Positive Banking commission = - 4% 16% Positive Banking Profit = Win, Win, Win situation for the Borrower, the Seller and the Bank

3. The Name of Positive Banking Positive Banking + In Traditional Banking the revenue of the Bank comes from the borrower who has a Negative Balance ( - ). In Positive Banking the revenue of the Bank comes from the depositor who has a Positive Balance ( + ). So it is called:

4. 4 Positive Banking Commission as a Function of Sales instead of Deposit 4% = 1% Per quarter 1% OF SALES Which means: More sales more commission. No sales no commission. Commission is a function of activity not time. Seller could be different from Depositor.

5. Practical Experience Banks using Positive Banking 5

6. Positive Banking in Saudi Steel Pipe Company Positive Deposit

7. Risk Sharing المشاركة في المخاطرة • In traditional banking, the bank bears 100% of borrower’s risk and there is no relation between the depositor (seller) and the borrower. • In Positive banking, the seller could share the risk with the bank. This is in addition to all the usual guarantees expected from the borrower. • Bank risk is Less.

8. The Future المسـتـقـبل The Future

9. The Third Window Traditional Banking Islamic Banking Positive Banking

10. Definition of Positive Banking Interest • Is Simply: • Borrowing without interest • Deposit without interest • Bank commission is a percentage of sales

11. Who will deposit without interest? Consumers with Saving Accounts without interest are given priority to take loans without interest. 2. Traders who deposit without interest are given priority to purchase from them with the loans without interest.

12. Borrower Employee Retailer Manufacturer or Importer Traditional Banking 5% 4% 1% Whole seller

13. Borrower Employee 1% 2% Manufacturer or Importer Retailer 1% Positive Banking Economic cycle and Zero is the Logo of 4% Whole seller

14. Types of Loans

15. Purchase Price Price • All Existing Banking • Credit Price > Cash Price Positive Banking Credit Price = Cash Price Because the bank pays to the seller cash in advance

16. Positive Projects Increase Bank resources. Reduce Risk. Improve cash flow. Increase Bank’s Income. Cement Factory Steel Factory Aluminum Importer 1% 1% 1% Concrete Factory Steel Trader Windows Main Contractor 1% 1% 1% 1% Real Estate Developer 1% Land lord Furniture Factory 1% 4% 3% House Owner Furniture Store Tenant 4% 16 16

17. Saudi Monetary Agency (SAMA) Regulations Positive Banking fits exactly with SAMA Regulations: Banks should not work directly or by commission in trade, whether wholesale or retail, including importing and exporting. Banks should work only in Banking services such as current and savings accounts, loans, money exchange and transfers, letters of credit and guarantee, credit cards, etc. Banks should not invest in any commercial, industrial, agricultural or real-estate projects, nor buy shares or real-estates or any other kind of investments. The deposits liability should not exceed 15 times the capital and reserves. Depositing with SAMA, a percentage about 15% from the deposits obligations. No need for new regulations.

18. Traditional Banking & Positive Banking in the International Financial Crises 18

19. Benefits for Consumers Provide interest free loans. Encourage savings. Reduce costs of products and services. Reduce inflation by lowering the costs of goods and services. Reduce the problems related to paying rent and other related social issues. Increase credibility among citizens in payments since transactions will be through the bank. Increase job opportunities in the banking and other sectors for men and women.

20. Benefits for Business Sector 1. Increase sales. 3. Reduce receivables . 2. Reduce production costs and therefore product prices. 4. Streamline production with smooth cash flow. Getting interest free loans Focus on production . and sales and not on collections. Best investment for extra liquidity.

21. Small & Medium EnterprisesSME’s Banks will be more willing to finance SME’s because: • They are the customers or suppliers of large businesses. • Large businesses will provide: • Financing. • Information. • Risk Sharing. • Pay service charge. • Transactions under Bank’s control. • More transactions, more income in advance .

22. Benefits to the Banks Introducing a new banking system without interest. Providing a competitive edge internationally with a new, unprecedented banking system in the era of globalization. Funding new projects with less costs. Solving the existing problem between banks and Islamic law (Shariaa). Providing mortgages and guarantees for Banks. Higher real income for the Banks. Less risk on Banks because of Risk Sharing with Traders. Less stress and more peace of mind for Bankers.

23. Benefits to National Economy Balanced Growth of the National Economy . Higher efficiency of financial resources. Better utilization of human and capital resources. Providing natural tools to cope with Inflation and Recession, in the mid and long-term by fulfillment of demand or supply. Solving the existing problem between banks and Islamic law (Shariaa). Cheaper borrowing for good Government’s programs. Creating more jobs in the Banking sector with more income for the banks.

24. A Journey outside the Box

25. Part Two:الجزء الثاني The Projectالمشروع

27. الانطباعات عن المصرفية الإيجابيةReactions to Positive Banking Shaikh Saleh Kamilالشيخ صالح كامل

28. الانطباعات عن المصرفية الإيجابيةReactions to Positive Banking Dr. Ez-EddinKhojahالدكتور عز الدين خوجة رئيس بنك الزيتونة – تونس President Zaytonah Bank – Tunisia

29. Feedback From Banks Almost all Banks liked the idea at the Chairman and CEO level but once it goes down it gets lost and people get busy in their usual business. Too much time was lost in arranging for meetings or presentations and waiting for feedback. Banks did not yet go downstream with Positive Banking so they did not feel the potential benefits from it for them. Almost 15 years were lost in trying to convince a Bank to adopt Positive Banking in full form. It is time to Establish an Independent Bank for it.

30. Why Positive Banking is not widely used ?! • New Idea. Faced with Doubts! • Too Good to be True. But it is Good and it is true. • Many Bankers do not know about it. • Banks are busy and satisfied with other Banking . No motive for innovation. • Shortage of Banks’ staff. • Frequent change of Banks’ staff.

32. Can Positive Banking support an Independent Bank ? Yes. It can generate income at different levels: Large corporations. Medium corporations ( Same as ). Traders. Consumers. The best example is Real Estate:

33. Positive Bank Will do all Banking Services: • Current Accounts • Savings Accounts, • Positive Deposits, • Currency Exchange, • Transfers, • Letters of Credit, • Letters of Guarantee, • Refinancing, • Credit Cards….. Etc. All without interest.

35. Credit Building The depositing client, whether an individual or a company, is given a small loan after studying his financial position and taking all the possible guarantees. After paying back the loan, the client is given a bigger loan until reaching large loans such as houses and projects. This procedure could achieve the following benefits to the bank: Spread the Bank’s reputation and its credibility among the people. Reduce risks to the bank. Experience lending techniques, as well as payments and collections. Recognize customers’ behaviors. Increase the Bank’s income since commissions of small loans are bigger and their load on the sellers are lighter. Build the customer’s credit record and guide him towards saving and borrowing while maintaining his reputation and credibility. Exclude troublesome clients.

36. Positive Bank Income

37. Credit Card vs. Positive Card Payment Tool Credit Tool

38. Manuals and Forms are readyدليل العمليات Operation Guide

39. إتفاقية إطارية للمصرفية الإيجابيةFrame Work Agreement for Positive Banking

40. Positive Facilities Approval موافقة تـسـهيـلات إيجابية

41. Decision Document Party Action Positive Banking Flow Cart(Phase I) Buyer Bank Framework Agreement Form # 1 Seller Seller Bank Initial Screening Buyer Yes Customer Visit & Data Collection Customer List Form # 2 Seller No Credit Assessment No Customer Approval Form # 3 Seller Yes Buyer Positive Financing Agreement Form # 4 Sales & Purchase Contract (Payment Terms - Appendix # 5) Seller Buyer Deposit Request Form # 7 Buyer Payment Request Form # 6 Bank Seller Bank Deposit Seller Payment After 90 days Buyer Bank Settlement Buyer Payment Request Form # 6 Bank Seller Payment

42. Positive Banking Flow Cart(Phase II – Deposit is replaced by Financial Points) Buyer Seller Bank Initial Screening Buyer Yes Customer Visit & Data Collection Customer List Form # 2 Seller No Credit Assessment No Customer Approval Form # 3 Seller Yes Buyer Positive Financing Agreement Form # 4 Sales & Purchase Contract (Payment Terms - Appendix # 5) Seller Buyer Seller Buyer Payment Request Form # 6 Bank Payment After 90 days Buyer Bank Settlement Buyer Payment Request Form # 6 Bank Seller Payment

43. Positive Banking Needs: • To Know about it. • To inform Decision Makers about it. • To License for the first Bank to utilize Positive Banking fully same as: • Holland for Traditional Banking. • Dubai for Islamic Banking. • Bangladesh for Micro Banking. • Will Saudi Arabia be for Positive Banking?

44. Next Steps Green light to go ahead. Feasibility Study with an International Banking Consultant. Establishing Committee. Application of Positive Banking on Establishing Members, their employees, their customers and suppliers. If successful then offering it to the Public.

45. Is Prosperity For All Thank you