New Islamic banking Rules Launched

ISLAMABAD: Pakistan's central bank has issued new rules for the operation of Islamic banking windows, aiming to strengthen their role in the world's second-most populous Muslim nation.

The new requirements come at a time when Pakistan is stepping up efforts to develop Islamic finance, prompting several banks to expand their operations in the sector.

Banks will have to obtain written approval from the State Bank of Pakistan before opening each Islamic window, as well as providing the regulator with additional details on staffing, training and marketing arrangements.

As of December, Pakistan's full-fledged Islamic banks had a combined network of 767 branches while conventional banks had 441 Islamic branches and 96 sub-branches, the central bank said.

The rules could help consumers better distinguish Islamic financial products from conventional ones, improving the industry's perception and overall uptake.

Regulators in Pakistan hope to expand the industry's branch network and bring Islamic banking's market share to 15 per cent of the system by 2018.

As of December, Islamic banks held assets worth 1 trillion rupees ($10 billion), a 21.1pc increase from a year earlier and representing 11.2pc of total banking assets.

Some conventional lenders are also opting to convert their operations into full-fledged Islamic banks.

Last week, the majority shareholder of Karachi-based Faysal Bank said it would convert the bank into a full-fledged Islamic unit in the next two to three years.

Last year, Summit Bank said it would convert itself into a full-fledged Islamic bank over a three- to five-year period. It opened its first Islamic banking branch earlier this month.

Sources: http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=373781

Islamic Banking reaching New Heights

2013 was a significant year for the growth and expansion of Islamic banking in Pakistan. From Bank of Punjabs entry into Shariah-compliant banking to Summit Banks announcement to turnaround its business model to a full-fledged Islamic bank, Islamic banking grabbed headlines all throughout 2013. 

Meezan Banks potential acquisition by a BVI-based group and MCBs potential acquisition of Burj Bank were some other stories that caught the eyes during the year. The Islamic banking bulletin recently released by the SBP also sheds light on some of the important milestones achieved during the year. 

With the addition of 207 branches in CY13, Islamic banking expanded its footprint in eighty seven districts across the country with industry-wide branch network standing at 1,304 branches. Besides, spreading its outreach in the existing districts, four new districts-Jamshoro and Umer Kot in Sindh, Buner in KPK and Baltistan in Gilgit-Baltistan-were taken into the folds of Shariah banking. 

The Islamic banking assets boasted a phenomenal year-on-year growth of 21.2 percent in CY13 whereby it touched a double digit market share of 11.2 percent in CY13 vis-à-vis 8.6 percent in CY12. 

The growth in Islamic assets primarily came on the back of Islamic financing that saw a year-on-year growth of 34 percent in CY13 to clock in at Rs330.2 billion. 

Conversely, owing to limited choice of equity instruments available to the Islamic banks and the non-issuance of GOP Ijara Sukuk over the last nine months, the investments of Islamic banks faltered in CY13. In terms of financing modes, Murabaha financing and diminishing musharaka take the lead, representing over 70 percent in the overall financing mix. 

Client-wise bifurcation shows that Islamic banking continued to be a conservative lender with 71.8 percent of its lending concentrated in corporate sector. The sectors supposed to be on priority--SME and agriculture --remained as step children with the representation of 5.1 percent and 0.1 percent, respectively, in total Shariah financing. Owing to its watchful lending stance biased towards lesser risky corporate clients, the asset quality of Islamic sector significantly kept improving in CY13 whereby it attained the infection ratio of 5.7 percent versus 7.6 percent in CY12. 

With a lot of conventional banks keen to expand their share in Islamic banking arena, the existing players need to distinguish themselves to retain and grow their clientele. The untapped segments such as agriculture and SME offer tremendous potential to those eager to build their unique selling proposition. 

Innovative product offering and better customer service besides spreading awareness will also go a long way in helping the counterparts to stay in limelight.


Sources: http://www.brecorder.com/br-research/44:miscellaneous/4243:islamic-banking-reaching-new-heights/

'More sukuk needed to maintain liquidity'

The seminar highlighted the importance of issuing sukuk in the Oman market. The instrument help diversify portfolio and investment opportunities in the form of new asset class. Bank Muscat plans to raise OMR500 million by way of Meethaq Sukuk Programme. - Supplied photo

Muscat: Tapping into reasonably good demand for Sharia-compliant products in the Sultanate, Shaikh Abdullah bin Salem Al Salmi, executive president of the Capital Market Authority (CMA), is optimistic that Oman will see the issuance of more sukuks. This follows the announcement by Bank Muscat to raise OMR500 million by way of Meethaq Sukuk Programme.

Speaking on the sidelines of a seminar on 'Developing a sustainable Islamic banking industry in Oman' here yesterday, he said, "Sukuk is needed not only for the capital market but also for the Islamic institutions to manage the liquidity. I feel it is equally important for the government and its various arms to roll out some sukuks. So, we are expecting more sukuk from the government as well as the private sector in the months ahead."

Sukuk is a certificate of undivided interest in the asset to be procured or constructed out of the amount pooled by the investors.

Thomson Reuters, the leading global news and information provider for the world's businesses and professionals, in partnership with Meethaq, the pioneer of Islamic banking in Oman from Bank Muscat, hosted a seminar on 'Developing a sustainable Islamic banking industry in Oman' yesterday at the bank's head office.

Sustained growth Shaikh Abdullah bin Salem Al Salmi presided at the high-profile seminar attended by policy makers, Sharia scholars and key representatives of the Islamic banking industry in Oman and the region, in the presence of Abdul Razak Ali Issa, chief executive officer of Bank Muscat .

Shaikh Abdullah bin Salem Al Salmi commented, "The seminar echoes the Islamic banking industry's consolidation phase in Oman focusing on investment opportunities and liquidity management tools to achieve sustained growth during the coming period."

Abdulhakeem Al Khayyat, managing director and chief executive of Kuwait Finance House, Bahrain, delivered the key-note address.

Sulaiman Al Harthy, group general manager (Islamic Banking), said, "Against the backdrop of the Islamic financial services industry gaining momentum in Oman, the seminar seeks to provide a strategic assessment focusing on innovative Islamic financial instruments and liquidity management products. The Islamic finance industry is growing very rapidly worldwide and this is a great opportunity for new Islamic banks as well as conventional banks to come together and create an environment which should make all of us proud, balanced with the Sharia law, Central Bank of Oman's guidelines, public demands and expectation and the rule of law as a whole."

Dr. Sayd Farook, global head (Islamic Capital Markets) of Thomson Reuters, said: "The seminar deals with a very important and timely assessment of the future of Islamic banking industry and how Islamic financial institutions in Oman can grow in an increasingly competitive environment."

Islamic banking future A session on the future of Islamic banking industry covered the strong demand for retail market potential in Islamic banking in Oman, exploring the options of full conversion to Islamic banking rather than opening dedicated windows, how Islamic banks can differentiate themselves and what customers are looking beyond Sharia-compliant in Oman.

In another session on capturing the opportunity with sukuk as a catalyst for foreign investment in Oman, the seminar highlighted how sukuk can offer local investors and financial institutions added portfolio diversification and investment opportunities in the form of new asset classes, whilst issuers can benefit from increased liquidity by tapping into the growing demand for Sharia-compliant investment products.

The session also addressed the investment sourcing potential which has not fully developed among corporates, while regulators are proactively trying to enhance the regulatory framework to support issuance. The session discussed regulatory aspects and ways to enhance issuance and attract market participants in order to build a vibrant market for Omani sukuk.

Another important discussion centred on developing indigenous and innovative solutions for liquidity management for Oman's Islamic finance industry. The session explored new liquidity management products to fill the yield curve and liquidity management issues faced by the Islamic banking industry.

Source:https://www.zawya.com/story/More_sukuk_needed_to_maintain_liquidity-ZAWYA20140324040701/

StanChart opens Islamic Banking in Kenya, Eyes Region By Bernardo Vizcaino

(Reuters) - Standard Chartered (STAN.L) has launched Islamic banking services in Kenya, the first foray of its "Saadiq" brand into Africa, and it will use Kenya as a test bed for expanding the brand across the continent, a bank executive told Reuters.

The move comes after Kenya proposed a separate regulatory framework for Islamic finance, part of a broader strategy designed to boost capital markets in east Africa's biggest economy.

"Our experience and success in this market will certainly determine our future strategy for the rest of Africa," said wasim Saifi, the bank's global head of Islamic consumer banking.

"I would expect the next two to three years to be focused on building the Kenya business before we evaluate other markets in east and West Africa."

Standard Chartered will offer its full range of Shariah-compliant products in a market currently served by two full-fledged Islamic banks and the Islamic windows of a handful of conventional banks.

The lender, which makes 90 percent of its profit in Asia, the Middle East and Africa, will use its existing 28-branch network in Kenya; selected locations in Nairobi and Mombasa will have dedicated Islamic windows, Saifi added.

Standard Chartered will roll out products covering current and savings accounts, mortgages and auto finance, as well as trade and term finance.

Islamic finance, which follows religious principles such as bans on interest payments, accounts for roughly 2 percent of total banking business in Kenya, where Muslims make up about 15 percent of the population of 40 million.

Standard Chartered, however, hopes to attract a broader client base.

"We are not looking to target market share from the 1.5 to 2 percent share that Islamic banking has today, but to target the 98 percent that currently is not with Islamic banking."

The development of a specific regulatory framework for the industry would provide a platform for growth; this has been observed in countries such as Malaysia and Pakistan, Saifi said.

"Similarly in Kenya, as the industry develops, we will expect to see the regulatory framework also expand and refine to enable this development."

Earlier this month, Standard Chartered said it expected income and profits to remain "challenged" in the first half of this year after the bank reported its first drop in annual profits for a decade.

Kenya is attracting interest from at least one other Islamic bank; Dubai Islamic Bank's DISB.DU chief executive told Reuters this month that it planned to expand operations into Kenya.

Source: http://uk.reuters.com/article/2014/03/19/UK-islamic-finance-Kenya-idUKBREA2I08020140319

Dubai Islamic Bank Eyes Kenya, Indonesia For Expansion

Dubai Islamic Bank plans to expand its operations into Indonesia, Kenya and other African countries as it emerges from a period of consolidation, the bank’s chief executive said.

The emirate’s largest sharia-compliant lender, which currently makes some 95 percent of its revenue within the United Arab Emirates, says it is entering a growth phase domestically and internationally.
“We are exploring opportunities in Indonesia, Kenya and surrounding countries in Africa, the Indian subcontinent and the GCC (Gulf Cooperation Council),” Adnan Chilwan said in an interview late on Wednesday. “We could acquire, set up a JV, establish a finance company or start a greenfield operation as long as we keep management control and operate under our brand.”
Like many other banks in the UAE, the sharia-compliant lender saw its profits nosedive after Dubai’s financial crisis erupted in 2009 and it was forced to set aside billions of dirhams (hundreds of millions of dollars) to cover bad loans.
The bank focused over the last few years on strengthening its balance sheet and reducing costs, and says it has now dealt with most of its bad loans. Last year DIB completed the takeover of Dubai-based mortgage lender Tamweel, in which it already held a majority stake, through a share swap.
DIB posted a 66 percent jump in fourth-quarter net profit to 518 million dirhams ($141 million), beating analysts’ forecasts, on the back of lower financing costs and impairment charges. Net profit for the full year increased 42 percent to 1.72 billion dirhams.
Chilwan, who was promoted to CEO in July last year, described Africa as virgin territory for Islamic finance. In Kenya, most estimates put the number of Muslims at only about 15 percent of the population of 40 million, but the financial regulator is preparing a ten-year capital markets development strategy that includes Islamic finance.
“Both consumer and wholesale opportunities are there, especially in the countries we are targeting and while the initial investments are not too intensive, the returns are extremely decent and more than acceptable in our line of work,” Chilwan said, without giving details of his plans for Africa.
He added, however, that entry into one country would ease expansion into other countries around the region.
“Given a five-year scenario, we expect a decent franchise spread across these countries with stable and solid yields across all sectors.”
However, Chilwan said the bank also expected strong growth in its domestic market, so the balance between local and international business would not change radically.
“We are pretty much skewed towards the domestic franchise with nearly 95 percent of the contribution coming from the UAE.
“With all the plans in place, we do not expect a dramatic change in the medium term, with international business perhaps getting at best 10 percent to 15 percent of the overall group numbers in about six to eight years.” The bank’s liquidity position is strong so “there appears to be no current requirement to enter capital markets at this time,” Chilwan added.

Source: http://www.dailytimes.com.pk/business/14-Mar-2014/dubai-islamic-bank-eyes-kenya-indonesia-for-expansion

Poverty in Muslim World is Rapidly Increasing: Zubair Mughal

Poverty can easily be driven away through Islamic Microfinance

Zubair Mughal, CEO, AlHuda CIBE is receiving the plaque of appreciate from H.E Dr. Mounir Tlili, Minister of Religious Affairs of Tunisia during Int’l Islamic Microfinance Symposium which was organized by Islamic Development Bank, Tunisian Association of Islamic Economics & GIZ

(Tunis) Half of global poverty reside in Muslim world while the Muslim population is 24% of the total global population, if the dangerously increasing poverty in the Muslim community is not controlled soon then it will be alarming. These concerns were addressed by Muhammad Zubair Mughal, Chief Executive Officer, AlHuda Centre of Islamic Banking and Economics while speaking at Islamic Microfinance Symposium that was held at Tunis – Tunisia which was organized by Tunis Association of Islamic Economics with association of Islamic Development Bank (IDB) and German Donor Agency GIZ. 

He mentioned the various causes of rapidly increasing poverty in the Muslim world i.e. lack of education, lack of employment political instability and so on. But on the other hand, the main hitch is unavailability of the proper financial products which are in line with the Muslim’s religious values and social norms. Micro financing is not utilized by Muslim population due to interest and thus is excluded from financial inclusion. On the other hand, Muslim world can be led out of the poverty by extending financial inclusion through Islamic microfinance. He said that the according to the statistical information of multilateral development agencies, 300 million people were graduated from Micro to SME level in past year, and the countries mentioned in the list are China, India, Brazil and Chili etc. but when we look at the enlisted countries we will come to know that then countries mentioned in the list are not Muslim and by this we will come to know that the poverty is decreasing in non Muslim countries and increasing in Muslim world. 

He further added that unfortunately, Islamic microfinance is not given the proper place in the poverty alleviation strategies of International development agencies (e.g World Bank, UNDP, IFC, USAID etc) in the way it should have been given. Islamic microfinance is just 1% of the total micro financing of the world that is just 1 Billion USD. He said that there is no religion of poverty but religion plays an important role in poverty alleviation. This is the reason; Islamic microfinance should be given a proper place in the modes of poverty alleviation through which both Muslims and non-Muslims can take benefit. He added that there are various non Muslim countries where Islamic micro fiancé has been used so effectively to alleviate poverty. 

Experts from 15 countries including Morocco, Kenya, Yemen and Pakistan had taken part in the symposium. A mutual declaration about the legal frame work of Islamic microfinance was given at the end of the event. 

Islamic Banking need to be promoted in SME sector

Saturday, March 08, 2014 - Karachi—The Union of Small and Medium Enterprises (UNISAME) has submitted recommendations for the serious consideration of the policy makers in the forthcoming budget and trade policies in order to stimulate the economy which can only be done by promoting the majority SME sector wholeheartedly and giving them a comfortable environment. The Union believes that SME promotion and development is no charity but it is the right of every SME and responsibility of the state to uplift the sector. The state must provide them equitably and make dedicated efforts to make doing business easy.

The SME sector includes traders, manufacturers, farmers and service providers. There are millions of SMEs all over Pakistan including many hospitals schools and consultants’ services. We were told 15 years ago that they were 3.2 millions SMEs but we are sure if you also include the SME farmers there would be almost 6 millions by now. We have created awareness about the importance of the sector and identified the impediments and have submitted recommendations every year for inclusion in the budget, trade policy, industrial policy and have urged the ministry of industries to revisit the SME policy made in 2007. We keep voicing the requirements of the sector all the time. The SME issues are poor law and order, loadsheding, poor infrastructure, lack of finance, information, transfer of technology, incentives and defective taxation system other than the corruption, non implementation of SME policy in right earnest. The union has submitted the following recommendations to SMEDA for onward submission to the concerned policy makers.

Law & Order: We have suggested the formation of SME Liaison Committee (SME-LC) on the pattern of the CPLC to arrange collective protection squads in industrial areas as the SMEs are threatened by gangsters and politically patronized miscreants. The SMEs need a strong committee to work as liaison between the police and the entrepreneurs and to exert pressure on the police to trace the culprits and prosecute them. The SME-LC chief must get the status of honorary first class magistrate to prevail on the police department and the relevant S.H.Os. 

Energy Crisis: We have suggested that alternate energy systems must be promoted and those SMEs willing to install alternate energy devices of solar, wind, Biomass be encouraged and the government needs to exempt the import of alternate energy systems on duty and leasing facilities must be provided on special affordable mark-up. Finance: This is a very important issue, as banks are demanding immovable property as collateral. The banks need to be educated on the subject of SME financing and taught risk management. The commercial banks need training and education on collateral management, warehouse financing, also financing on the basis of positive cash flows and the government must promote Islamic financing, leasing, hire purchase, commercial property leasing. The union has urged the government not to privatize the SME Bank but make it an SME Bank in the real sense.

The union has also urged the State Bank of Pakistan (SBP) to establish the SME Guarantee Insurance Company to insure SME financing and indemnify the banks against default by the borrowers. The SME needs venture capital and the system of venture capital needs to be promoted. The SMEs are looking forward to the establishment of the Exim bank as promised in the trade policy. Infrastructure: The infrastructure is poor and the SMEs are disabled due to poor infrastructure in the industrial areas. There is need for industrial estates and the need for government to allot land at concession for industrial estates. The leasing companies must adopt commercial property leasing to finance the SMEs to buy shops, workshops, warehouses and factories under commercial property leasing.

Technology Transfer: The SMEs need to import technology to manufacture quality goods and the government should facilitate collaboration with advanced countries to enable SMEs to manufacture goods with indigenous raw material and also import substitution goods in Pakistan.

Source: http://pakobserver.net/detailnews.asp?id=235662

Turkey has great potential for Islamic insurance, report says

Turkey has significant potential in the sector of Islamic insurance, as participation banks in Turkey held $39 billion in Islamic assets in 2012 and these are expected to grow to $121 billion by 2018, according to the Global Islamic Insurance Forecasts Report prepared by Ernst & Young (EY) for the period 2013-2014.

The report also stressed that Turkey's high potential for Islamic insurance is based upon its young population, along with ongoing regulatory reforms and a government that is willing to promote financial inclusion through participation banking.

However, as only four participation banks currently operate in Turkey, there is a major supply-side constraint, as well as limited legal infrastructure in the Islamic finance sector. In a press statement released on Feb. 28, EY Turkey Audit Partner Seda Hacıoğlu stressed that Turkey does not have a clause on Islamic insurance in its insurance law yet, adding that the lack of a developed Islamic capital market by world standards is the primary obstacle to the spread of Islamic insurance in Turkey.
Another factor negatively affecting Islamic insurance in Turkey is the problematic pricing of this insurance, which leads prices to remain relatively low in the sector. Hacıoğlu said that Islamic insurance is based on making profit at the end of a certain period, stressing that this factor constitutes a threat and weakness in the sector.

According to the EY report, global Islamic Insurance assets had reached $11 billion in 2012, a 16 percent increase compared with previous year. Islamic insurance is widespread in Arab countries, Malaysia, Indonesia and also Europe and the US. “It is estimated that currently over 200 Islamic insurance firms operate in 33 countries, while 51 percent of the participation was from Saudi Arabia, followed by the Asian region with 25 percent, in 2012,” Hacıoğlu stated.

Hacıoğlu predicts that as the variety of Islamic bonds starts to diversify, asset management in the Islamic insurance sector will also begin in Turkey, along with an increased trade volume and interaction with Arab countries.

Source: http://www.todayszaman.com/news-341612-turkey-has-great-potential-for-islamic-insurance-report-says.html

Dubai to launch Halal Index

Dubai: Dubai Exports is looking to issue an online Halal Index to list all UAE-based firms that are halal, Saeed Al Awadi, CEO of Dubai Exports, told Gulf News.

The index will be set up by Dubai Exports, an agency of the Department of Economic Development (DED), and will include relevant information about all the halal companies, banks, financial institutions, Islamic products and Islamic services in Dubai.

“This Index will boost the businesses of these firms by encouraging to enhance their local industries and products and by providing these businesses with new export opportunities across new markets,” Al Awadi said.

Halal companies, are firms engaged in the business of production, marketing and distribution of products that are Sharia compliant.

Al Awadi said that this comes in line with the government’s initiative to position Dubai as the world capital for Islamic economy in two years.

He added that this index will facilitate the growth of Dubai’s halal exports, which are expected to lead the region soon.

Dubai could emerge as the leader in the next phase of the evolution of Sharia-compliant sectors, including finance and insurance, Halal food and lifestyle, and travel.

“This index will be a good platform for all halal firms in the UAE to gain the opportunities for halal businesses and Islamic industries, which is now well established across geographies,” Al Awadi added.

With a clear vision of establishing itself as the centre of a global Islamic economy, Dubai looks likely to be the one with the biggest potential.

With Muslim consumer expenditure globally on food and lifestyle sectors around $1.62 trillion (Dh5.9 trillion) in 2012 and expected to reach $2.47 trillion by 2018, Al Awadi pointed to the need to boost this business sector by providing the right infrastructure and services.

Dubai Exports is looking to boost the emirate’s export by 20 per cent this year through the expansion to new markets, Al Awadi said.

“Dubai’s export long–term strategies to grow with the exports will continue to provide support required for our local companies to grow with their businesses and in turn the emirate’s Gross Domestic Production (GDP).

“The infrastructure and facilities already in place provide simple export process to our local companies wanting to enter new markets,” he said.

Source: http://gulfnews.com/business/general/dubai-to-launch-halal-index-1.1301675

Islamic finance has gained confidence in Maldives: Deputy Islamic Minister Dr. Muneeza

Islamic finance has gained confidence in the Maldives with increased awareness among the public of its role in eliminating Riba(interest), according to Deputy Islamic Minister Dr Aishath Muneeza.

Writing in the Islamic Finance News website, Dr Muneeza stated that Islamic finance has been “spreading like wildfire” since the introduction of Islamic banking and capital market services in 2011.

“Demand for Islamic finance is evident and has proved that there is inherent demand for Islamic finance as the Maldives is a country with a 100% Muslim population. It is hoped that in the upcoming years the Maldives can be used as a global case study to prove the success of Islamic finance,” she wrote.

Under Islamic Shariah, any risk-free or guaranteed rate of return on a loan or investment is considered riba, which is prohibited in Islam.

In her article, Dr Muneeza explained that the first form of Islamic finance introduced in the country was Takaful in 2003, which involves mutual protection of assets and property and joint risk-sharing.

Conventional insurance is also prohibited in Islam because of forbidden elements such as Riba.

Following the wider introduction of Islamic finance in 2011, Dr Muneeza observed that it is now “considered as an integral part in the development of nation”.

The previous year meanwhile saw the introduction of “new innovative Islamic finance instruments” by both the government and private corporations, she noted.

In 2013, the government signed the first sovereign private Sukuk – an asset-backed bond which is structured in accordance with Shariah for trade in the market – deal in addition to the central bank issuing the first Islamic treasury bill.

Moreover, she added, four pieces of regulation governing Sukuk, Islamic securities, Shariah advisors, and the capital market Shariah advisory council were introduced last year.

The government-owned Housing Development Corporation also issued the first corporate Sukuk while the first Islamic hire-purchase product was unveiled by a private company, she noted.

In addition, the government formed the Maldives Hajj Corporation – of which Dr Muneeza is the chairwoman – as a pilgrimage fund and issued Halal certificates for fish products.

The Maldives Transport and Contracting Company (MTCC) hired a Sukuk advisor for real estate projects commencing this year, she added.

“Furthermore, regulatory consents have been given to the Islamic banking window of Bank of Maldives and the Takaful window of Allied Insurance Maldives to start their operations. Some products of these companies have been given consent by the Maldives Monetary Authority,” she wrote.

The government also planned to form “a national-level technical committee to monitor and supervise sovereign Islamic finance issues,” she revealed.

“Definitely, 2013 is a super duper hit year for the growth of Islamic finance industry,” Dr Muneeza suggested.

Developments expected in 2014 meanwhile included the inauguration of “Islamic windows” by the Bank of Maldives and Allied Insurance. The government anticipated that “a large number of customers will switch from conventional banking to Islamic banking when this takes place.”

Islamic fund management would also be introduced this year while the government had plans to “introduce an Islamic finance centre that will not only provide offshore Islamic financial services, but this centre will act as the Islamic finance hub for the whole South Asia region.”

Source: http://minivannews.com/business/islamic-finance-has-gained-confidence-in-maldives-deputy-islamic-minister-dr-muneeza-79176

Seeking sukuk success

The FINANCIAL -- The market for Islamic bonds, known as sukuk, is growing. Last year, the British Prime Minister David Cameron said that he wanted the UK to be the first sovereign government outside the Islamic world to use sukuk, suggesting he believes it will be an increasingly important part of global finance.

It shows London’s efforts to compete in the Islamic finance business, which is led by the Arab Gulf states and Malaysia.

The rise of sukuk is driven by customers who want investment and savings products compliant with Islamic law and principles (shariah). Demand is strong in the Gulf Cooperation Council (GCC) member states and in economies such as Malaysia and Turkey. For those seeking finance, offering shariah-compliant debt gives access to the large pool of capital in oil-rich countries in the Middle East.

While Islamic principles are at least 1,400 years old, modern Islamic finance emerged after the oil price rise in the 1970s, which transferred wealth to the Gulf energy producers and led to the founding of large Islamic banks. The global market for Islamic financial services is estimated to have risen to USD1.46 trillion in 2012, with corporate banking and sukuk products developing fast.

Sukuk in Arabic is the plural of sakk, a certificate showing ownership of the asset. The Ottoman Empire is believed to have first issued a sukuk in 1775, when it borrowed money against future income on tobacco customs levies.

Islamic law prohibits the payment of interest. Instead, those who invest in sukuk – for example, to help fund the building of an Airport – gain a share in owning the asset and so are entitled to a share in the Airport ’s revenues. Once the sukuk is issued, it can be traded on local capital markets.

The need for large investment in infrastructure – roads, railways, ports and housing – offers opportunities, notably in Asia and emerging markets in general. Since Malaysia began issuing sukuk in 2000, the bonds have grown in importance, while they are also becoming popular in Saudi Arabia and the United Arab Emirates (UAE), particularly Dubai. Recent entrants to the market include Kazakhstan, Egypt and Turkey, which could become a big market because of its need for infrastructure.

Like all financial services, Islamic finance needs an appropriate supervisory framework and legislation is often the first step towards opening a new market. Financial institutions also need to ensure they have sufficient shariah expertise and advice to develop appropriate products.

Three factors are driving the market’s growth. First, it is becoming part of normal retail and corporate banking in core Islamic countries, such as Saudi Arabia where its share of the banking market has doubled in recent years to more than 50 per cent. The current market dynamics in the Gulf are favourable.

Second, its growth appeals to other markets, particularly in the Muslim world, where borrowers are attracted by the prospect of cross-border flows from the Gulf countries.

The third driver is innovation. Two years ago, the sukuk market was limited and bonds were mostly restricted to five years or less. Now there are longer-term offers, perpetual bonds, and “hybrid capital” issues allowing a mix of debt and equity.

Since 2008 Malaysia has led global sukuk issues, followed by Saudi Arabia and the UAE. Dubai aims to become the global “capital of the Islamic economy” and also to expand in takaful (Islamic insurance).

London is targeting cross-border flows, helped by its scale as a financial centre and its legal system which is recognised internationally. Sukuk issues on the London Stock Exchange have raised more than USD49 billion.

For some, using sukuk is a matter of principle, for others it is pragmatic: they will do so if the terms are better than a conventional bond. During the global downturn in 2008, sukuk issues hit a low. But they have recovered strongly, rising from USD19.5 billion in 2008 to USD42.8 billion in 2013. Issuance since 2008 is USD196.8 billion.

Looking forward, the Islamic economy is developing quickly. From finance to entertainment, to food, fashion and family travel, the growth of an economy that adheres to faith-based values is increasing in importance. Taken together, Islamic economies currently represent more than USD8 trillion in GDP with a large young population – 1.6 billion with an average age of 24 – growing at twice the rate of the global population. As consumption drives increased trade and economic links between these countries, and the Islamic economy grows, new opportunities will require financing.

Greater availability of sukuk gives more choice to companies and investors and allows issuers to offer products tailored to specific needs. This has underpinned the growth of the market both inside and outside its core countries.

Source: http://finchannel.com/Main_News/Banks/130052_Seeking_sukuk_success/

First Gulf Bank follows numerous institutions to find funding in Malaysia’s sukuk market

Abu Dhabi’s First Gulf Bank, the third-largest bank by assets in the UAE, will raise 3.5bn ringgit ($1.07bn) with Islamic bonds in Malaysia, according to a statement yesterday by credit rating agency RAM Ratings. 
The Islamic bond, or sukuk, programme will be issued by the bank’s funding unit, FGB Sukuk Company II Ltd RAM rated the program ‘AAA’ or Stable on the bank’s size and high likelihood of government support, as the Abu Dhabi ruling family owns 64% of the firm. 
First Gulf Bank follows numerous institutions to find funding in Malaysia’s sukuk market, the world’s largest. More than two-thirds of global sukuk issuance in the first half of 2013 took place in Malaysia, followed by Saudi Arabia and the UAE. 
“The ratings also incorporate the bank’s excellent profitability, robust capitalisation, expanding franchise and moderate asset quality,” said RAM. 
Funds from the programme will go toward expanding the bank’s day-to-day business. RAM did not indicate when the first issuance will take place.


Source: http://www.gulf-times.com/eco.-bus.%20news/256/details/383705/-first-gulf-bank-to-set-up-$1.07bn-sukuk-in-malaysia

قومی آگاہی مہم براے اسلامی بنکاری کا آغاز

Successful launch of Nationwide Road Show to promote Islamic Banking and Takaful

The awareness campaign has started from Peshawar, and will end in Karachi while passing through 30 different cities of Pakistan and organizing 100 events 

04-03-2014

(Peshawar) National awareness campaign “Road Show 2014” has started today  from Peshawar to promote the Islamic Banking and takaful, to trim down the rising criticism and objection on Islamic finance, thriving the Islamic Financial methods in Shariah perspective in the country to get rid of interest element by benefitting Islamic Banking and Finance. The awareness campaign named as “Khyber to Karachi” Road Show 2014 which will pass through 30 different cities of Pakistan from Khyber to Karachi, will conduct 100 free seminars and workshops especially in Chambers of Commerce and Industries, Trade Associations, Universities, Professional Institutes and Industrial Estates to equally benefit the businessmen, industrialists, professional experts and students.

Stating the objectives of nationwide awareness campaign “Road Show 2014”, the Organizer, Muhammad Zubair Mughal, Chief Executive Officer – AlHuda Center of Islamic Banking and Economics (CIBE) said that the prime objective of the Road Show is to enhance the awareness of Islamic Banking and Finance among the masses and to eradicate the objections that has been put on Islamic banking and finance through different propagandas. He said that the promotion of Islamic banking and finance is necessary for the economic development and prosperity where we can benefit the agriculturists, industrialists and the whole economy with Islamic financial services by strengthening our financial institutions and also the Sukuk (Islamic Bonds) can be strengthened and poverty can be alleviated through the Islamic microfinance.

He said that the rationality behind Islamic financial system can be observed in the recent global financial crisis where thousands of interest based financial institutions were ruined but no Islamic financial institute was adversely affected by such upheaval although there are more than 1500 Islamic financial institutions working with interest free modes such as Asset Based Financing under ethical practices around the globe and number of international financial institutions are transforming towards the Islamic Banking and Finance. He said that Alhamdulillah, today, we started the awareness campaign “Road Show 2014” from Peshawar followed by seminars in University of Peshawar, Agriculture University of Peshawar and Khyber Pakhtunkhwa Chamber of Commerce and Industry etc and this road show, passing through 30 different cities, will conclude after a long way of 3 months at Karachi. After the Road Show a comprehensive report on Islamic Banking in Pakistan will be published. 

Bahrain financial sector 'grows on GCC demand'

MANAMA: Growing demand for more sophisticated financial products and services helped drive growth in Bahrain's financial sector during last year, according to the Economic Development Board (EDB) and Central Bank of Bahrain (CBB), with the trend expected to continue into 2014.

Bahrain attracted a number of businesses, with the number of registered financial services firms swelling to 415 by the end of the year, making it one of the largest financial centres in the region.

Among the businesses that established in Bahrain in 2013 were Cigna, a global health insurance and health services provider which launched its regional third party administration company employing 50 people in Bahrain, Julius Baer, the leading Swiss private banking business, and Takaud, the first specialist savings and pensions provider in the Mena region.

"The six economies of the GCC are worth a combined $1.5 trillion and with ongoing investment in infrastructure and an expanding population, demand for financial services is growing," said Transportation Minister and EDB acting chief executive Kamal Ahmed.

"Bahrain offers a highly-skilled bilingual workforce, a tried and tested regulatory framework, low operating costs and excellent connectivity across the region, with particularly strong access to the region's largest economy, Saudi Arabia.

"This makes Bahrain an ideal location for financial firms that want to establish a sizeable long-term presence in the GCC and take advantage of these trends.

"We have seen a number of these firms establishing offices in Bahrain in 2013 and we are confident that this will carry on into 2014 as demand grows and we continue to implement reforms that will enhance our role as a regional financial hub."

Alongside strong growth last year, the kingdom also developed a number of reforms to ensure that the regulatory framework continues to meet the sector's needs and encourage long-term growth.

The CBB has brought in new directives on banking remunerations and fees, updated directives on banks' internal audit function in line with new Basel requirements and issued new rules that meant that all applications that are prepared in accordance with the Unified Standards issued by the GCC by Gulf issuers will be accepted in Bahrain, easing the integration of GCC securities markets.

The CBB also recently implemented new rules set to boost the takaful sector by addressing some issues around solvency, which have had the potential to hold back the rapidly expanding industry.

The takaful industry in Bahrain has experienced a remarkable growth in the last ten years - the industry grew by almost 22 per cent in 2012 - and by continuing to evolve the takaful model, the kingdom will remain a leading jurisdiction for the sector.

CBB Governor Rasheed Al Maraj said high quality regulatory standards lie at the heart of a successful financial sector and this is why Bahrain is determined to work at adapting and maintaining our framework in line with international standards.

"The Islamic finance sector is also particularly important to Bahrain, so the CBB's leadership in the development of Islamic finance will be maintained and enhanced through developing new initiatives and maintain an ongoing dialogue within the industry."

Education and human capital initiatives were also a major focus last year, and the CBB worked closely with a range of organisations including the Bahrain-based Waqf Fund and the Bahrain Institute of Banking and Finance (BIBF).

The Waqf Fund put in place its plan for a leadership training initiative being launched this year, to help develop the next generation of leaders in the Islamic Finance sector, whilst BIBF's Centre for Islamic Finance continued to expand its international footprint, and in July last year arranged a training event for 29 participants from 16 different countries.

Two independent reports from KPMG and Thomson Reuters also highlighted the core strengths of the financial services sector.

In December 2013, KPMG published a research report looking at the typical costs associated with operating a financial services firm in Bahrain, Dubai, and Qatar.

This included cost of operations, cost of set-up, and living costs, and the report concluded that overall, the total cost of doing business in Bahrain is almost half that of Dubai and Qatar. The ICD-Thomson Reuters Islamic Finance Development Indicator (IFDI), a numerical measure launched in December last year and representing the overall health and growth of the Islamic finance industry worldwide, highlighted Bahrain's developed Islamic finance sector, ranking first in the Mena region, with total assets worth $47 billion. Bahrain also had one of the most developed Islamic finance knowledge landscape, and performed well in terms of governance, with a comprehensive regulatory framework covering all aspects of the Islamic finance industry. All GCC countries made it into the top 15 worldwide, with Bahrain ranking first amongst them, demonstrating the overall strength of the Islamic finance sector in the region.

Source: http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=371666