The winds of change in Islamic finance are really blowing across the southern tip of the African continent - South Africa to be precise. At close of business on Dec. 21 the deadline for financial institutions to submit proposals for advising the South African government on the structuring and issuance of its debut sovereign Sukuk will expire.
In these volatile times managing global political risks is a major challenge for investors and financiers alike. As the global economic and financial crisis and its impact on markets the world over; the euro zone sovereign debt crisis; and the fallout of the Arab Spring continue to fester, demand for investment, political risk and sovereign risk insurance is soaring as part of risk management and mitigation strategies. In the MENA countries, demand for Shariah-compliant PRI has increased significantly, according to various providers.
Sukuk markets in Saudi Arabia have seen steady, albeit unspectacular growth, as leading blue chip names — notably Saudi Electricity Co. and SABIC (Saudi Basic Industries Corp.) —have repeatedly tapped the market and a handful of others have followed suit. The Saudi Stock Exchange Tadawul now has secondary trading platform for sukuk with a total eight of listed issuances at present.
"The sukuk market is the fastest growing part of Islamic finance. Indeed it is one of the fastest growing segments in the global financial market. Having attracted interest from the business community worldwide, it has helped place Islamic finance as a viable industry and as an asset class that is not confined to Muslim countries but as part and parcel of the international financial market," says Muhammad Al-Bashir Muhammad al-Amine, who is currently group head of Shariah compliance at Bank Al-Khair (formerly Unicorn Investment Bank) in Bahrain, in the introduction of his book titled “Global Sukuk and Islamic Securitisation Market - Financial Engineering and Product Innovation”.
MADRID: Ahmad Mohamed Ali, the president of the Islamic Development Bank (IDB), the multilateral development agency of the Muslim world, has warned that the euro zone sovereign debt crisis is adversely affecting the Bank's member countries and urged European leaders to come up with the right solutions and not to repeat the mistakes of the past.
Islamic finance and business education has flourished over the last decade or so in line with the growth of the industry. Universities, business schools, colleges and professional bodies - both in the Muslim countries and in other countries especially Europe, Singapore and the US - have introduced courses on Islamic finance purportedly helping to meet the demand for trained human capital, the dearth of which is a major bottleneck threatening the continued growth of the industry.
Governors of central banks and monetary authorities of the Organization of Islamic Cooperation (OIC) member countries, meeting at Sasana Kijang in Kuala Lumpur in November under the aegis of the Statistical, Economic and Social Research and Training Centre for Islamic Countries (SESTRIC) and hosted by Bank Negara Malaysia (BNM), could be excused for being pre-occupied with matters pertaining to the euro zone sovereign debt crisis and its impact on member countries.
DUBAI: Stock markets in the UAE and Qatar rose on Sunday on hopes for an index upgrade by MSCI, and gains by world equities last week helped boost most Gulf bourses.
The Kuala Lumpur-based International Shariah Research Academy for Islamic Finance (ISRA), the Shariah research entity of Bank Negara Malaysia, the central bank, has embarked on an ambitious strategic plan for 2012 which focuses on strengthening its global reach, further enhancing the quality of its activities and increasing its connectivity with market players and industry stakeholders.
The launching of the Islamic Interbank Benchmark Rate (IIBR) by Thomson Reuters in Bahrain last week is the latest manifestation of how the technical architecture of the global Islamic financial industry is maturing. To many the pace of maturity remains frustratingly slow, especially in the Middle East and North Africa, while Asia is galloping ahead, which has resulted in a lob-sided West Asia and East Asia fault line.
Islamic finance in the European Union may be taking a back seat as the continent is gripped with a dire euro zone sovereign debt crisis which has even impacted on sovereign Germany's attractiveness as a bond investment asset class.
Sovereign Germany might be disappointed that its recent Eurobond offering was not fully subscribed. Perhaps in hindsight, had it instead opted to issue a debut Eurosukuk for the same amount, the story might well have been different.
MANAMA: British-based, Shariah-compliant investment firm Solum Asset Management will launch the first “investment sukuk” in the first quarter of next year, treating Islamic bonds as investment vehicles rather than debt instruments, its chief executive said.
Innovation is the key to the future success of the Islamic finance industry and to meet the challenges of contributing to economic growth and to facilitate internationalization of the industry. According to Nor Mohamed Yakcop, minister in the prime minister's department in Malaysia, "the Islamic financial system has to continually innovate and adapt in order to be competitive.
Indonesia, the most populous Muslim country and potentially the largest market for Islamic finance, has received a major boost to press ahead with the issuance of its proposed benchmark global Islamic trust certificates (sukuk) which will be issued by Perusahaan Penerbit SBSN Indonesia II (PPSI II), a special purpose vehicle (SPV) on behalf of the Ministry of Finance of Indonesia.
Following its announcement earlier this month that the Abu Dhabi National Energy Company (TAQA) "is setting up a RM3.5 billion sukuk program to diversify funding sources" the issuance process is likely to take much longer given the prevailing volatile market conditions as a result of the fallout of the euro zone sovereign debt crisis and the downgrading of the US credit rating by Moody's Investors Service.
With stock markets the world over recording huge losses over the last week and the volatility in the markets set to continue due to the euro zone sovereign debt crisis, concerns over the down grading of the US credit rating and the weak US and EU growth figures, investors are pondering which asset class to seek refuge in. Do they place safe by moving their funds into cash or commodities such as gold, or do they stay put in bonds and equities, or go for investments in “bricks and mortar” property investments?
One of the important issues on the agenda of the second annual meeting of the Aman Union, the organization of investment and export credit agencies in the Arab and
Islamic financial institutions in general are playing a “wait-and-see” game regarding Egypt, one of the laboratories of the contemporary Islamic finance movement and currently in political and economic transition with elections - both parliamentary and presidential - due later this year.
Another sign that the mainstream banks in South Africa are taking Islamic finance as a serious niche market business is the acquisition last week of the local Islamic insurance company, Takafol SA, by Absa, one of the republic's largest banking groups.
In a deal which could have implications for the reach of Takaful (Islamic insurance) beyond the borders of South Africa to southern, central, West and East Africa, Absa Insurance Company Limited (AIC), a wholly-owned subsidiary of Absa Financial Services Limited (AFS), bought the book of business of Takafol South Africa (Pty) Limited (Takafol SA), which is a subsidiary of the Hannover Reinsurance Group, a major global reinsurer, and which was established in 2003.
The Islamic finance industry's newest market, Oman, may be seeing a flurry of activity with new authorizations in Islamic advisory and Takaful following the recent approvals for the establishment of two Islamic banks, Bank Nizwa and Al-Izz International Bank. But to what extent these developments will help entrench Islamic finance as an important emerging component of Oman's financial services sector must remain a moot point.
International credit rating agency, Standard and Poor’s (S&P) assertion in a report published last week that Turkey’s participation (Islamic banks) “could continue their recent strong growth if they can cultivate stronger ties with their international owners and create a sustainable brand image,” underpins an Islamic finance market which is as old as the one in Malaysia and others in the Gulf Cooperation Council (GCC) countries.
If ever there is an opportunity for the Islamic finance industry to stand up and be counted and to be creative to boot, it is now in Libya’s hour of need. As the National Transitional Council (TNC) consolidates its position as the legitimate interim government of Libya recognized by the United Nations and the Organization of Islamic Cooperation (OIC), albeit a potential final showdown with the diehard remnants of pro-Qaddafi forces in Sirte may still be on the cards, the business and reconstruction opportunities in various parts of the country and sectors of the economy beckoning are sizable.
From being off the Islamic banking radar earlier this year, Oman has now approved Islamic banking licenses for two banks, with a few more on the cards especially to one or two Islamic banking majors in the Gulf Cooperation Council (GCC) countries.
The new president and chief executive officer of the International Center for Education in Islamic Finance (INCEIF), the Islamic finance education arm of Bank Negara Malaysia (BNM), Daud Vicary Abdullah has called for a much closer alignment between the global Islamic finance industry and the providers of human capital development.
City-based international law firm Norton Rose LLP published a paper on “Protections against unauthorized use of Shariah-compliant financial methods and structures” in July 2011 which raises several issues relating to copyright and intellectual property especially with regards to the Shariah structures.
With four months to go for the emirate’s conventional banks which have opened Islamic banking windows (IBWs) to close them down by Dec. 31, 2011 as per the directive issued in January this year by the Central Bank of Qatar (CBQ), the first such window, Al-Yusr of International Bank of Qatar, has been acquired by the local Barwa Bank, one of the rising stars of the Islamic banking sector there.
The death in Kuala Lumpur recently of Dato' Mohd Razif bin Abd Kadir, deputy governor of Bank Negara Malaysia, leaves a major vacuum not only in his family structure and at the Malaysian central bank, but also in the Malaysian financial services industry, especially the Islamic banking, finance and Takaful sector.
The Securities Appellate Tribunal of the Securities and Exchange Board of India (SEBI), the securities regulator, sitting in Mumbai has dismissed six appeals by Parsoli Corporation Limited and its two principal promoters Zafar Sareshwala and his brother Uves Sareshwala against a ruling by SEBI that Parsoli and its promoters/directors violated several provisions of the regulations and perpetrated "fraud of the worst kind on the shareholders of this company who were deprived of their shares and when caught, the directors compensated the shareholders by crediting shares in their demat accounts through off market transactions."
The successful closure of the RM750 million ($254 million) Sukuk Wakala bi Istithmar issued by Kuwait-based Gulf Investment Corporation (GIC) under its existing 20-year RM3.5 billion ($1.18 billion) medium term notes program is an important manifestation of the growing cross-border sukuk origination which is vital for the development of the global sukuk market, be it in local currency or an international issuance.
The execution last week "of the GCC's first ever Islamic equivalent of the conventional repo (repurchase contract) product" is potentially an important development in the Islamic finance industry especially for short-term liquidity management and bank reserve management by central banks. The National Bank of Abu Dhabi (NBAD) and Abu Dhabi Islamic Bank (ADIB) claim to have completed the first Shariah-compliant equivalent of a conventional repo based on a collateralized Murabaha transaction.
In the high court in London earlier this year a Muslim businessman brought a case against a fellow Muslim businessman concerning a dispute over the arbitration process relating to a contract between the two parties. The one businessman objected to his counterpart appointing a non-Muslim arbitrator stressing that under Islamic law the arbitrator must be Muslim.
In perhaps one of her more potentially important speeches in recent times, Zeti Akhtar Aziz, governor of Bank Negara Malaysia, the central bank, stressed that the increasing internationalization of Islamic finance and the burgeoning trade and economic linkages between the emerging countries present an important opportunity for the industry to make a meaningful and enhanced contribution toward economic growth and prosperity of these countries.
Student accommodation as a commercial property asset class is making a comeback in Shariah-compliant financing whether through individual transactions or through a dedicated property fund. While student accommodation is big business in conventional real estate financing and private equity deals especially in the major metropolitan university towns and cities, it has been markedly limited in the Islamic finance space despite the fact that its is an ideal asset class to finance or even bundle for securitization.
One of the positive outcomes of the 36th annual board of governors meeting held in Jeddah last month was the approval by the Board of Directors of the Islamic Corporation for the Insurance of Export Credit and Investment (ICIEC), the standalone export credit and political risk insurance agency of the IDB Group, of the corporation's capital from the current $240 million to $640 million.
Delegates from several emerging countries participated in the 6th Annual Islamic Markets Program (IMP) held at the end of June 2011 in Kuala Lumpur as part of the Malaysian government's initiatives to promote and widen the skills set of Islamic Capital Market (ICM) regulators and practitioners especially in emerging capital markets.
Behind the introduction this month of the revised “Islamic securities guidelines (sukuk guidelines) in conjunction with revised trust deeds guidelines announced by the Securities Commission of Malaysia (SC), the securities regulator, and which become effective on Aug. 12, 2011, is the triple ambitions of enhancing the Malaysian regulatory framework for fundraising and product regulation in the private debt securities and sukuk markets; enhancing the efficiency and competitiveness of the Malaysian sukuk market; and to promote greater connectivity between the Middle East and Asian Islamic capital market sectors.
It seems that the influential governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, is winning the “hearts and minds” debate over the introduction of interest-free (Islamic) banking into Africa's most populous yet highly sectarian nation. Following the introduction of new guidelines for non-interest banking by the CBN on 21 June 2011; the issuance of a license to Jaiz International Bank to launch the country's first interest-free bank subject to fulfilling the bank authorization requirements within six months; and the revelation that the Nigerian Treasury's Debt Management Office is working on the feasibility of issuing the country's debut sovereign sukuk within the next year or so, the CBN last week awarded Stanbic IBTC Bank a license to set up an interest-free subsidiary subject to complying with the approval terms within the six months.
Behind the resolutions, the statements and the rhetoric of the Board of Governors of the Islamic Development Bank (IDB) at the recent 36th Annual Meeting which was held in Jeddah on June 29-30, were some commendable suggestions from member countries aimed at speeding up the efficiency and effectiveness of the bank.
Commercial and credit risk insurance is part and parcel of most financial transactions, although some companies doing cash business in some emerging countries including the Middle East are known to ignore any kind of insurance to cover any potential losses as a result of non-performance of the provisions of the transaction.
Every Muslim country especially the populous ones such as Turkey, Iran, Indonesia, Pakistan, Bangladesh and Egypt should have one. But of the 56 member countries of the Islamic Development Bank (IDB), only one has and another is in the process of establishing one. The institution in question is a non-banking savings institution for would-be Haj pilgrims such as the one pioneered by Malaysia in the 1960s, Lembaga Tabung Haji (The Malaysian Pilgrims Management Fund) which today has assets in excess of RM10 billion with equity stakes in Islamic banks, plantations and technology companies.
LONDON: Delegates from more than 60 countries are converging on Jeddah over the next few days for the 36th annual meeting of the board of governors of the Islamic Development Bank (IDB) Group, which takes place on June 29-30.
LONDON: The global Islamic capital market is once again focused on Malaysia with the recent launch by Bank Negara Malaysia, the central bank, of its new Islamic monetary management instrument, the Bank Negara Monetary Notes-Istithmar (BNMN-Istithmar).
LONDON: Zarinah Anwar, chairman of the Securities Commission of Malaysia, the securities and capital market regulator, has called on Middle Eastern and Asian countries to spearhead the further expansion of Islamic finance, which in the process would also deepen business and investment linkages between the two regions where the phenomenon is already being practiced on a significant scale.
LONDON: One has to hand it to Adnan Al-Musallam, chairman of The Investment Dar (TID), the Kuwait-based Islamic investment company, which owes its creditors over $3.5 billion. Over the last two years, he has fought off any attempt from some creditors to put TID under administration or declare it bankrupt.
THIRUVANANTHAPURAM, India: Kerala, the first Indian state to start an Islamic finance company, is to host a national seminar here on interest-free institutional mechanism for banking, finance and insurance on July 4.
LONDON: It is not very often that the British Crown has recognized services rendered in the UK Islamic finance industry. The fact that Richard Thomas, CEO of Gatehouse Bank, was awarded the OBE (Order of the British Empire) in the recent Birthday Honours list of Queen Elizabeth II on behalf of the UK Government, in recognition for civic excellence and the contribution that Thomas has made to the UK Islamic financial services industry, shows how far the industry has come. In fact the OBE bestowed on Thomas becomes the first UK royal award for civic excellence in Islamic finance.
JEDDAH: The 10th Islamic Finance Access Program (IFAP) on Islamic trade finance (ITF) is scheduled here on July 6.
The latest list of Shariah advisers serving the local Islamic capital market (ICM) and registered by the Securities Commission of Malaysia (SC) confirms that five such individual foreign advisers are registered with the commission.
Any euphoria about Egypt becoming the latest haven for sukuk origination should be immediately tempered with the reality that Egypt is a country in transition with elections — both parliamentary and presidential — due later this year and that the process of adopting sukuk and tax neutrality legislation will be a drawn out process in a country that hitherto was notorious for its lethargic top down bureaucracy.
RIYADH: Saudi International Petrochemical Co (Sipchem) has been given regulatory approval to issue an Islamic bond, or sukuk, it said.
It has almost become a ritual that there has to be some sort of announcement either by the government, regulator or a financial institution at international conferences on Islamic finance.
Youths in Egypt, Tunisia and Morocco will have to wait a little bit longer before they can benefit from employment generation programs announced by the Islamic Development Bank (IDB). In April 2011, the IDB allocated $250 million to finance employment opportunities for youth through the establishment of small and medium projects in a number of Arab countries that have recently experienced change and are undergoing political and economic.
Oman has finally succumbed to the demand dynamics of Islamic banking, oft quoted even by central bankers and the World Bank Group, as the fastest growing component of the global financial system.
London and Luxembourg are engaged in a friendly “battle of the listings domicile” especially for sukuk and Islamic investment funds, and its seems that the London Stock Exchange (LSE) currently has the upper hand on its counterpart in the Duchy, Luxembourg Stock Exchange.
The Islamic finance sector in the UK has received a major structural boost following the integration last week of the UK Islamic Finance Secretariat (UKIFS) into TheCityUK, the independent body promoting UK-wide financial and related professional services. UKIFS, which was established in March 2010, is the leading cross-sectoral body assisting with the promotion and development of Islamic Finance, both domestically and to represent the UK industry internationally.
As the $3.5 billion Islamic Trust Certificates Program of the Islamic Development Bank (IDB) nears completion, the multilateral development bank (MDB) of the Muslim world, is faced with the dilemma of introducing a new program or increasing the ceiling of the existing one or deciding on other ways to raise funds for its future resource mobilization purposes.
Emerging markets fund guru, Mark Mobius, executive chairman, Templeton Emerging Markets Group, put the business and investment case for emerging markets, especially in Southeast Asia, China and India, and predicted that the Islamic finance industry has a growing role to play and is set to continue on its current growth path.
Professor Rifaat Abdel Karim is the inaugural secretary general of the Kuala Lumpur-based Islamic Financial Services Board (IFSB), the multilateral prudential and supervisory standard setting organization for the global Islamic financial services industry. He was appointed in November 2002 and the board officially started operations in March 2003. During his watch, the organization increased from its nine founding members to 195 to date, including 53 regulatory authorities and central banks from 41 jurisdictions. During that time the IFSB has also published 14 standards relating to various products governance issues. Professor Rifaat resigned last year and his tenure came to an end in April 2011, making way for a new Secretary General Jaseem Ahmed to take over on May 1, 2011. In this second installment of a two-part in-depth interview, Rifaat discusses with Arab News the challenges that may lie ahead for the organization; how the Islamic finance industry can engage more with policy makers; and the specific issues that face the industry going forward.
The Jeddah-based Islamic Development Bank (IDB) Group) is boosting its ties with Indonesia, the world's most populous Muslim country, under its Member Country Partnership Strategy (MCPS), a new initiative launched by the IDB in 2010 to identify, target, allocate, implement and evaluate its financing more efficiently in member countries. Thus far, already $3.5 billion have been allocated under this program to Indonesia for 2011-2014.
Perhaps it is not surprising that Luxembourg has put a dampener on any speculation that it may go to the international market to raise funds through a debut Sukuk issuance.
The Islamic Financial Services Board (IFSB), the prudential and supervisory standard-setting organization for the global Islamic financial industry, embarked on a new phase of its development which may lead to a review of its mandate to facilitate a wider reach including those countries and organizations that are not currently members of the board.
The talk is big, but are potential sukuk originators walking the walk? Depending on who you speak to, the picture is mixed, marked on the other hand by the “irrational” exuberance and ambition of potential issuers, many of whom do not get near to an offering, and on the other hand those who are skeptical and indifferent based on an erroneous belief that sukuk origination is always more expensive than conventional bonds and is further complicated by the Shariah compliance requirement.
Zeti Akhtar Aziz, governor of Bank Negara Malaysia, has called on greater cooperation and shared responsibility among regulators to realize the full potential of and to meet the growing challenges of the Islamic finance industry going forward. Speaking to delegates at the 8th Islamic Financial Services Board (IFSB) summit in Luxembourg last Thursday, the Malaysian central bank governor warned that "as the international integration of Islamic finance intensifies, cross border financial flows and its associated challenges will also increase.
Professor Rifaat Abdel Karim is the inaugural secretary general of the Kuala Lumpur-based Islamic Financial Services Board (IFSB), the multilateral prudential and supervisory standard setting organization for the global Islamic financial services industry. He was appointed in November 2002 and the board officially started operations in March 2003. During his watch, the organization increased from its nine founding members to 195 to date, including 53 regulatory authorities and central banks from 41 jurisdictions. During that time the IFSB has also published 14 standards relating to various products governance issues. Rifaat resigned last year and his tenure came to an end in April 2011, making way for a new secretary general. In the first installment of a two-part in-depth and unique interview, Rifaat discusses with Arab News the circumstances of the establishment of the IFSB; the major role that the IMF (International Monetary Fund), the Basle Committee and the Asian Development Bank played in its early years and continues to play today; and the political battle that had to be resolved to decide where the new organization would be located.
Jaseem Ahmed officially took over at the beginning of this month as the new secretary general of the Kuala Lumpur-based Islamic Financial Services Board (IFSB), the prudential and supervisory standard-setting organization for the global Islamic financial industry. He succeeds a prominent predecessor, Professor Rifaat Abdel Karim, who has been at the helm of the board for the last 8 years since it started operations in March 2003.
Human capital development and education and training for the Islamic banking and finance industry received a major boost with the establishment in April 2011 of the Association for Islamic Finance Advancement (AIFA) and a number of other initiatives some aimed at incentivizing the retention of existing qualified staff.
The Malaysian Islamic banking system (MIBS) achieved an encouraging thumbs up in 2010 underlining both the resilience of the industry and its sustained recovery.
The UK Treasury is fast-tracking a number of laws in the Finance Bill 2011 to plug several tax avoidance loopholes including those related to high-end stamp duty land tax (SDLT) in commercial property transactions — both conventional and alternative (Islamic) real estate transactions.
The issuance by Al-Rajhi Cement Jordan of its debut Sukuk Al-Ijarah in late April 2011 opens up yet another new market for sukuk origination in the Middle East and North Africa (MENA) countries.
Preliminary data released by Bank Negara Malaysia, the central bank, confirm that Malaysia's Takaful market is making similarly impressive growth progress as the Islamic banking and capital market sectors. While the Islamic banking market share of the total banking market has reached over 22 percent in terms of deposits, assets and financing, and the size of the Islamic capital market surpassed the 1 trillion ringgit mark at the end of 2010, the Takaful market is relatively much smaller compared to the conventional insurance market and hence its base is much lower.
This year’s 8th annual summit of the Islamic Financial Services Board (IFSB), scheduled to be held at the New Conference Centre Kirchberg in Luxembourg on May 10-13, is already making an impact.
The summit, hosted by the Banque Centrale de Luxembourg, is attracting particular interest from the European Union in addition to the traditional markets in the Middle East and Asia.
Another sign that Asia is leading the revolution in the development of an Islamic Capital Market (ICM) is the latest encouraging data to emerge from Malaysia’s Securities Commission (SC), the countries securities regulator. The 2010 SC Annual Report, which was released in March 2011, confirms that the size of the ICM in Malaysia exceeded RM1.07 trillion at the end of 2010, thus breaking the RM1 trillion barrier for the first time. At the same time the ICM recorded an impressive growth of 15.2 percent in fiscal year 2010. In fact, the ICM is now growing at a rate equal if not faster than the conventional capital market.
Malaysian Prime Minister Mohd Najib Abdul Razak launched the country's Second Capital Market Master Plan (CMP2) in the presence of Zarinah Anwar, chairman of the Securities Commission Malaysia (SC), the securities regulator, appropriately in front of a packed international audience at the InvestMalaysia Conference which was held in Kuala Lumpur last week.
The Turkish participation (Islamic) banking sector may not be as savvy or prone to spin and hype as its counterparts in the Middle East and elsewhere, but it continues to thrive. Perhaps more importantly, judging by the recent innovations in products and transactions, the participation banking sector in Turkey is also one of the most competitive in the global Islamic finance landscape.
Amana Investments Ltd. has been the torchbearer of Islamic banking in Sri Lanka for almost the last two decades. In that time the parent company also established a Takaful (Islamic insurance) subsidiary, Amana Takaful, in a joint venture with Syarikat Takaful Malaysia and Amana Capital.
Takaful (Islamic mutual insurance), the Cinderella of the Islamic finance industry, received potentially a major boost with the entry at the end of January 2011 of US insurance giant AIG (American Insurance Group) into the Malaysian market through a RM100-million joint venture, AIA AFG Takaful Berhad, between its flagship Asian entity, American International Assurance Berhad (70 percent equity) and Alliance Bank Malaysia Berhad (30 percent equity), a member of the Alliance Financial Group Berhad of Malaysia.
ABU DHABI: National Bank of Abu Dhabi (NBAD) will launch a Sharia-compliant repo product in March to encourage secondary market trading and is in talks with two unnamed counterparties for the same, an official said.
The issuance by the Qatar Central Bank (QCB) recently of a directive requiring the country’s conventional banks which have opened Islamic banking windows (IBWs) to close them down by the end of 2011 may result in a spate of operational complexities in the implementation of the directive.
The dominant market position of Jordan Islamic Bank (one of the unassuming success stories of Islamic finance) is likely to remain uncontested for the foreseeable future, enabling the bank to sustain its business expansion. This was the conclusion made recently by Cyprus-based Capital Intelligence, the credit-rating agency that specializes in emerging markets.
ABU DHABI: Gatehouse Bank, a London-based Shariah compliant investment bank, plans to bring a $96.77 million Islamic bond to market by the end of the first quarter, its chief executive said. Richard Thomas, speaking on the sidelines of an Islamic forum in Abu Dhabi, said the bank would also arrange a 25-million pound ($40 million) syndicated lease financing this year.
Yemen is the latest country to announce that it may raise much-needed financing from the financial markets through a debut sovereign sukuk issuance sometime in the first half of 2011. Yemeni officials including Finance Minister Nouman Al-Suhaibi and Governor of the Central Bank of Yemen Mohammed Awad bin Hammam have over the last few weeks confirmed that the government is actively considering issuing a debut sukuk of up to $500 million during 2011 but only at the right pricing and timing.
Islamic financial institutions (IFIs) that are authorized by Bank Negara Malaysia (BNM), the central bank, and the Securities Commission Malaysia, the securities regulator, and have been operating in the country have six months to comply with all requirements of the new Shariah governance framework (SGF) for Islamic financial institutions which was introduced by Malaysia late last year and which became effective on Jan. 1.
JEDDAH: French academics have shown their keenness to make use of Saudi expertise and experience in Islamic banking and finance, said Saudi Ambassador to Paris, Muhammad bin Ismail Al-Asheikh.
The total Malaysian Islamic capital market (ICM) is projected to reach almost three trillion ringgit, RM2.88 trillion to be precise, in the year 2020, with the sukuk market set to break the one trillion-ringgit barrier to account for RM1.33 trillion worth of issuances and the market capitalization of Shariah-compliant companies accounting for RM1.55 trillion.
Cape Town-based Oasis Group Holdings is the pioneer of Shariah-compliant asset management, retirement and investment fund products - both equity and property funds and REITs - in South Africa since it launched its first Islamic fund in August 1998, the Oasis Crescent Global Equity Fund. Over the last few years, the group has ventured abroad and now aims to build the first global Shariah-investment fund brand, complete with a global distribution capability and a global asset management capacity. By end June 2011, the Oasis family of Shariah-compliant funds under its “Crescent” label, totaled 19 funds comprising equity based mutual funds, retirement funds, property funds and REITs (real estate investment trusts).
South African asset management company, the Oasis Group, a leading provider of Islamic and socially responsible investment products, is aggressively expanding its overseas operations and is set to open an office in London later this year as part of its expansion strategy.
It is as if Saudi corporates are queuing up to heed the advice of Muhammed Al-Jasser, governor of the Saudi Arabian Monetary Agency (SAMA) on the need for greater sukuk origination in the Kingdom given in a lecture at Oxford University earlier this year.
RIYADH: SABB Takaful Company, a Saudi joint stock company and an associate of The Saudi British Bank (SABB) and its global partner HSBC Group, hosted at its office in Riyadh David Fried, group head of insurance, HSBC Holdings, along with Bruce Howe, CEO, HSBC Insurance, UK, Europe and Middle East. The visit to SABB Takaful is part of a regional tour by the HSBC Insurance executives to meet with government and regulatory officials and to visit major HSBC Insurance entities and distributors in Saudi Arabia and UAE to review business performance, future plans and strategies.
JEDDAH: The Islamic Corporation for the Development of the Private Sector (ICD), a multilateral organization affiliated with the Islamic Development Bank (IDB) Group, is currently engaged in tackling issues related to the financing of small and medium enterprises (SMEs), and projects providing food security and housing among member countries.
Ask Zeti Akhtar Aziz, governor of Bank Negara Malaysia (BNM), the central bank, what her hobby is and the chances that she will say “central banking” are very high.
There is growing optimism about the immediate prospects for the Islamic finance industry starting in 2011.
Japan, one of the world’s top three economies, has included tax reforms and regulatory measures for Islamic finance, as part of the country’s financial strategy, which is one of seven key components of the government’s “new growth strategy — blueprint for revitalizing Japan,” which was approved by the Japanese Cabinet last June and recently published.
Following the visit of President Rustam Minnikhanov of the Russian republic of Tatarstan to Malaysia in December and the signing of a memorandum of understanding (MoU) in Kuala Lumpur between the Tatarstan government, the local IFC Linova, Malaysia’s Amanah Raya Berhad Group and Kuwait Finance House Malaysia (KFH Malaysia) whereby the parties would cooperate in facilitating the issuance of the debut sovereign sukuk of Tatarstan, work on the feasibility study on the sukuk origination is set to start this month.
The signing last week in Jeddah of a memorandum of understanding (MoU) between the Islamic Development Bank (IDB) and the African Development Bank (AfDB) to cooperate in co-investment in projects in member countries mutual to both multilateral development banks (MDBs) is long overdue.
Following the successful closure in October by Qatar Islamic Bank (QIB), the largest Islamic bank in Qatar, of its debut $750 million fixed-rate Wakala Sukuk issued on its behalf through a special purpose vehicle (SPV), QIB Sukuk Funding Limited, more Qatari corporates are coming to the market to raise funds through the issuance of Shariah-compliant commercial papers.
THE annual pilgrimage to Makkah in Saudi Arabia takes place this week when up to three million Muslims from all over the world converge on the holy places in Makkah and Madinah and its satellite towns to perform Haj, which is one of the five pillars of Islam.
WITH the Saudi mortgage law expected to be passed imminently, several banks and companies have been adopting strategies to leverage the huge opportunities in the Saudi real estate development, financing and affordable housing sectors.
The announcement by the Islamic Development Bank (IDB) and the Islamic Financial Services Board (IFSB) last Thursday at the side of the International Monetary Fund (IMF)-World Bank Group annual meetings in Washington that a Memorandum of Participation has been signed for the establishment of the International Islamic Liquidity Management Corporation (IILM) has left the Islamic finance industry with abated breath. The lack of a truly global and well-oiled liquidity management scheme has been the bane of the industry, with no government or supranational taking on the task until now.
The South African government’s recent confirmation that it is in the process of introducing tax neutrality laws for Mudaraba (trust financing), Murabaha (cost-plus financing) and Diminishing Musharaka (diminishing shared ownership) contracts is a long overdue recognition of the potential Islamic finance has for the country and the region. Financial services industry sources stress that the proposed tax neutrality measures are just the start and the wider objective is to introduce a comprehensive regulatory and legal framework to facilitate Islamic finance in the country both for financial inclusion and market liberalization and development reasons.
The Malaysian sukuk market continues its proactiveness with the latest two domestic issuances going to the market. Malaysian issuers in recent months have issued international currencies in US dollar and Singapore dollar, but the bulk of the business is done in local currency ringgit issuances. Malaysian entities such as Celcom Axiata Bhd and Padiberas Nasional Berhad (BERNAS), the national rice paddy investment partner, have recently launched two sukuk.
IN a move to position and strengthen its existing legal framework as ‘the Laws of Choice’ for Islamic financial transactions, Bank Negara Malaysia, the central bank, last week established a Law Harmonization Committee (LHC) comprising members from among key government stakeholders, including the Attorney General's Chambers as well as industry players and experienced Islamic finance legal practitioners.
LONDON: One of the unintended consequences of the global financial crisis is the increasing awareness of risk and how to manage risk in business, trade and investment.
The signing in Alkhobar of a strategic cooperation and alliance agreement between Saudi Arabia's Mohammed Hamad Al-Soaib Law Firm and the Luxembourg-based Lux Global Trust Services and Theisen Advocates recently is set to increase the use of the Duchy as a trust and tax domicile for Saudi investment products; investment vehicles such as special purpose vehicles (SPVs) used in the issuance of sukuk for instance; and the registration of investment funds, especially for UCITs (Undertakings for Collective Investment Trusts) of which Luxembourg is the world leader.
In the space of a mere five months since its first listing in August 2009, Bursa Malaysia, the national stock exchange, based in Kuala Lumpur, has emerged as the top listings exchange in the world for sukuk (Islamic bonds). By the end of December 2009, the value of sukuk program listings totaled $17.6 billion, comprising a total of 12 sukuk issuances.
In the last three months, the sukuk market in the Gulf Cooperation Council (GCC) countries has shown a remarkable turnaround from the difficult days of early 2009. The GCC market has effectively been playing catch up to developments in the sukuk market in Asia during 2009, where Singapore, Indonesia, Malaysia and Pakistan have led the sector into recovery with a string of issuances starting in February 2009, largely government local currency sukuk and a number of sovereign international sukuk.
Whether it is at the Islamic Finance Summit held at the Cercle de l’Union Interalliée in Paris, France, or a lively open fatwa session at the Islamic Retail Banking Conference (IRBC) 2009 held in Dubai or the 1st Euro-Arab Real Estate Conference held in Barcelona, Spain, all held over the last two or three months, it is certain that a “new kid on the block” will be a key participant.
The imminent launch in early 2010 of the Shariah-compliant Structured Trade Finance Fund by Gatehouse Bank PLC, the latest wholesale Islamic bank authorized by the UK’s Financial Services Authority (FSA), and DDCAP Limited, the London-based wholesale Islamic market intermediary company, will see a welcome return to a classical bread-and-butter asset class and financing activity, which the Islamic finance industry seems to have neglected over the last few years.
LONDON: Another sign that the real estate market in the UK is bouncing back as investors are increasingly targeting bespoke and added value opportunities in traditional asset classes including real estate, albeit with selective niche opportunities, is the launching last week of the Peterborough Garden Park shopping complex development, following a 6.8 million pounds mezzanine financing by the Bank of London and The Middle East plc (BLME), the wholesale Shariah-compliant bank authorized by the Financial Services Authority (FSA) in the UK.
Bank Negara Malaysia (BNM), the central bank, is pressing ahead with developing a series of Shariah parameters that would provide a standard guidance on applying the respective Shariah contracts in Islamic finance.
Corporate social responsibility (CSR) and Islamic financial institutions should have an obvious fit given the faith-based ethos of Islamic finance, which also gives prominence not only to wealth creation and economic development but also to the promotion of social justice and concepts based on hard work, thrift and low or no indebtedness.
The launch of Europe’s first dedicated Islamic Finance and business Center at a mainstream British university, Aston Business School, which is part of Aston University in Birmingham, underlines the growing Islamic finance education industry in and out of the UK.
Maxim Osintsev is a Russian banker with a difference. He is a fluent Arabic speaker and has a passion for Islamic finance, which he says comes from the heart.
LONDON: Of the CIS countries, Kazakhstan is emerging as the most proactive and advanced Islamic finance market. According to foreign Islamic bankers recently visiting Astana, the Kazakh capital, there is very strong interest in Kazakhstan in developing Islamic finance.
JEDDAH: A leading economist has urged Muslims living in non-Muslim countries to open interest-free accounts in their banks in order to encourage the regulators and policy makers to license Islamic banks.
LONDON: Following the recent circular from the Luxembourg tax authorities describing the major principles and contracts of Islamic finance and their respective tax treatment, most financial market players have welcomed the measures.
LONDON: The launch of Thomson Reuters's supposedly "next generation Islamic Finance Gateway to guide the emerging industry to the next stage of growth and development" comes at a time when the industry is taking stock in the aftermath of the worst global financial crisis since the 1930s.
The question of late payments, defaults and compensation is potentially just as problematic for Islamic banking and finance as it is for the conventional financial sector.
With the global sukuk market largely back on track with Malaysia successfully closing its second sovereign issuance of $1.25 billion in June 2010, Indonesia indicating that it may go to the market with its second sovereign issuance and GE Capital confirming that it too will raise funds through a second sukuk, market education and knowledge, especially of Islamic Capital Markets (ICM), becomes a competitive advantage.
The perceived sustainability and attractiveness of Islamic finance as an alternative financial management model in a post global financial crisis continues to flourish in new regions and countries trying to change banking regulations and laws to facilitate the introduction of such institutions and products in their respective jurisdictions.
Malaysia has introduced several measures to boost the development of human capital in the Islamic finance industry under the Malaysia International Islamic Finance (MIFC) initiative. Developing the next generation of Islamic finance executives and experts remains a major priority of the government and the Bank Negara Malaysia, the central bank. Malaysian Prime Minister Mohd Najib bin Abdul Razak, in his capacity as the minister of finance, accorded the “Project of National Interest” (Projek Berkepentingan Negara) status to INCEIF University in July 2010 in recognition of its role in the development of the human capital for Malaysia’s growing Islamic finance industry.
Since the global financial crisis started to unfold in 2008, there have been several reports suggesting that Islamic banks have been less affected by the crisis because they are not allowed for ethical reasons to invest in the pernicious derivatives such as CDOs (credit default obligations) that precipitated the worst crisis the world has seen since the Great Depression in the 1930s.
THE best Islamic Finance principle to base the much-awaited Saudi mortgage law should be sukuk-based with a Shariah-compliant set of guidelines, Giambattista Atzeni, vice president and MENA business manager for corporate trust and a member of the steering committee of the Gulf Bond and Sukuk Association at BNY Mellon Corporate Trust in Dubai told Arab News.
THE Malaysian government’s call on the member countries of the Islamic Development Bank (IDB) to consider establishing “the world’s first supra-sovereign wealth fund” to invest in Muslim economies on the same returns expectations as for the SWF industry in general, merits serious discussion. The precedent involving the efficacy of intra-Arab funds however does not augur well for a Muslim supra-SWF.
The comments last week of Adnan Al-Musallam, chairman of beleagured Kuwaiti Islamic investment company, The Investment Dar (TID), following an extraordinary shareholders meeting that "This company is not up for liquidation. If it were, we would have liquidated it a long time ago," should give some hope to both shareholders and creditors of the company.
The accession of Al-Rajhi Investment and Banking Corporation Malaysia Berhad, the wholly-owned Islamic bank of Saudi Arabia's Al-Rajhi Bank in Malaysia, as a commodity trading participant (CTP) with Bursa Malaysia Islamic Services (BMIS) trading on its Bursa Suq Al-Sila' commodity Murabaha trading platform, could turn out to be a significant boost, not only for the platform but also for the Tawarruq contract.
THE approval by the shareholders of Islamic Bank of Britain (IBB) at its general meeting last week of a £20 million capital injection from founding shareholder Qatar International Islamic Bank (QIIB) gives the UK’s only dedicated Islamic commercial bank some much-needed breathing space.
DUBAI, Sept 30 : It’s not unusual to hear people ask why Islamic finance does not embrace women.
Given the global finance industry is dominated by men isn’t it even more difficult for Muslim women to make their mark on the $1 trillion Islamic finance industry?
LONDON: In a clear statement of intent, the Australian government has launched a series of initiatives that when completed and hopefully adopted will make the country one of the most proactive Islamic finance markets in the Asia-Pacific Region.
Because of market developments and increasing competition which has led to product innovation and diversity, the Prudential Financial Policy Department of Bank Negara Malaysia has reviewed the regulatory framework for insurance and Takaful products "to further enhance consumer protection while according greater flexibility for insurers and Takaful operators to respond to changing market conditions, both in managing risks and enhancing their competitiveness".
BANK Negara Malaysia (BNM), the central bank, has given two conditional licenses to separate parties to establish mega Islamic banks in the country. BNM Gov. Zeti Akhtar Aziz confirmed that one of the conditional licenses is likely to be converted into a full license by the end of 2010, with the second one to follow by the end of the first half in 2011.
Straight from being named with six others as the “The World’s Best Central Bankers in 2010” by New York-based Global Finance magazine in its latest issue, Zeti Akhtar Aziz, governor of Bank Negara Malaysia (BNM), the central bank, not surprisingly was in great demand as a keynote speaker at several of the important side meetings at the 2010 IMF-World Bank annual meetings which was held in Washington last week.
