Indonesia sharpens centralised Islamic Finance oversight

Indonesia's capital market regulator has signed an agreement with the country's national sharia board to strengthen oversight of the Islamic finance industry, supporting a centralised approach being favoured elsewhere around the globe.

A country-level approach to regulating sharia-compliant financial services was pioneered by Malaysia in 1997 and is gaining traction elsewhere as authorities try to standardise industry practices and improve consumer perceptions.

The agreement would support efforts by Indonesia's financial services authority, Otoritas Jasa Keuangan (OJK), to formulate rules governing Islamic financial services, said OJK chairman Muliaman Hadad.

This would help create new sharia-compliant products, develop a wider pool of sharia scholars, and support education and awareness efforts in the industry, he added.

Indonesia's national sharia board has traditionally focused on broader religious matters, although it has issued 95 rulings relating to Islamic finance services, 14 of those related to the capital market.

But authorities want to encourage a wider product range to help Islamic banks grab a bigger share of the market, as the sector plays catch-up to more mature markets in Malaysia and the Middle East.

Indonesia has the world's biggest Muslim population but its Islamic finance market lags well behind that of Malaysia. Indonesia's Islamic banks held 4.9 percent of total banking assets in the country last year compared with more than 20 percent for their Malaysian counterparts.

CENTRALISED

A centralised model to supervising Islamic finance is increasingly being adopted across the global industry, although it remains a rarity in the Gulf region.

Previously, many countries left sharia boards in individual Islamic banks and financial firms to decide whether their products and activities obeyed religious principles.

This approach has been criticised for inviting potential conflicts of interest, and for producing conflicting rulings that confused investors.

Last month, Oman's central bank set up a five-member sharia board to help oversee the sultanate's Islamic banking industry, while Pakistan's securities commission established a nine-member sharia board in May of last year.

Morocco and Nigeria have made similar moves, while the United Arab Emirates plans to develop an independent authority which will be backed by specific legislation.

Authorities in Indonesia want to reshape the country's Islamic finance industry by encouraging consolidation and building a new regulatory system. Regulators are finalising a five-year roadmap to be presented this month to industry players, who have repeatedly called for clearer laws. (Editing by Kim Coghill)

Source: http://af.reuters.com/article/nigeriaNews/idAFL6N0T402Y20141114?sp=true

UK to develop tools to boost liquidity in Islamic Banking

(MENAFN - The Arabian Post) The scope of Britain's Islamic finance market is widening with several initiatives from the government and private sector, although the country is about to lose one of its six full-fledged Islamic banks.

In June, Britain became the first Western country to sell sovereign sukuk (Islamic bonds), helping boost its industry credentials as competition intensifies among global financial centres for a slice of Islamic business.

Britain has 22 firms that offer sharia-compliant financial products and they held an estimated 19 billion in assets last year, according to a report by lobby group TheCityUK. These include six full-fledged Islamic banks such as Bank of London and the Middle East BLME.DI, European Islamic Investment Bank (EIIB.L), Gatehouse Bank and the Islamic Bank of Britain (IBB).

Last week a government official said the central bank would look into developing a liquidity management tool for use by Islamic banks, while Britain's export credit agency expects to guarantee sukuk for the first time next year, an issue by a customer of European plane maker Airbus (AIR.PA).

In May, the Bank of England widened the types of sharia-compliant debt instruments that Islamic banks can use in their liquidity buffers, under a policy statement known as PS4/14.

Islamic banking accounts for only a tiny fraction less than 1 percent of the British banking sector, far below the share of roughly a quarter seen in the Gulf.

But taken together, the new official initiatives seem likely to create a more benign environment for Islamic finance, allowing banks to operate more flexibly and efficiently, and therefore more cheaply. Depending on how quickly it moves ahead, the plan for the liquidity management tool could conceivably put Britain ahead of some Gulf countries in providing options in this area.

"PS4/14 is a strong enabler"this is very powerful for us," Sultan Choudhury, chief executive of Birmingham-based IBB, said on the sidelines of an industry conference in Dubai.

The new rules allow Islamic banks to hold a variety of instruments, ranging from sukuk issued by the Qatari government to those issued by Saudi Arabian firms, Choudhury said.

The IBB, a unit of Qatar's Masraf Al Rayan MARK.QA, is now moving into the wholesale business and plans to change its name to Al Rayan Bank in December, subject to regulatory approval, as it looks to appeal to a wider customer base.

Despite this, London-based European Islamic Investment Bank is now in discussions with regulators to relinquish its banking licence, the lender said in a regulatory filing.

Under a 2012-2016 strategy, EIIB is exiting legacy private equity investments, seeking more stable income from its asset management and advisory services.

Dropping its deposit-taking licence would remove cumbersome capital and reporting requirements. In July, EIIB failed to secure regulatory approval to appoint a chief financial officer.

Other banks are also adjusting their strategies. London-based Gatehouse Bank aims to generate more deals outside the domestic property market, its recently appointed chief executive told Reuters in August.

Bank of London and The Middle East, Britain's largest Islamic bank, is developing private banking services with Malaysia's Bank Muamalat.

Non-banks are also spotting opportunities, such as asset management firm London Central Portfolio (LCP), which has launched two sharia-compliant property funds since December.

"We have every intention of rolling this out across all future funds," said Naomi Heaton, chief executive of LCP. "With the Islamic finance industry growing rapidly and far quicker than the conventional fund sector, we wish to continue to capitalise on this market."

Last week, London's Battersea Power Station project announced it had secured a 467 million pound (754 million) Islamic syndicated loan, one of the largest Islamic transactions ever conducted in the country.-Reuters

Source: http://www.menafn.com/1094006978/UK-to-develop-tools-to-boost-liquidity-in-Islamic-banking

PH eyes Islamic bank to develop Mindanao

The Philippines is turning to Islamic finance to rejuvenate Bangsamoro, a Muslim-majority region whose economy has been stifled by decades of civil war.

The Bangko Sentral has set up a task force with the World Bank and the country’s only Shariah-compliant lender to develop the industry, Governor Amando Tetangco said Oct. 29 in Manila. Bangsamoro is an autonomous region set to be created on the southern island of Mindanao after President Benigno Aquino signed a peace agreement with Muslim rebels.

The Philippines said in July it planned to sell sovereign sukuk by mid-2016, following the UK and Hong Kong in creating a local benchmark for a global industry whose assets are forecast by the Malaysia International Islamic Finance Centre to more than triple to $6.5 trillion by 2020. The Bangsamoro Development Agency says it needs P110 billion ($2.4 billion) to rebuild a region that has a poverty rate more than double the national average.

“The Islamic banking industry may be a catalyst for the economic growth of the people of the Bangsamoro region,” Megat Hizaini Hassan, head of the Islamic finance practice at law firm Lee Hishammuddin Allen & Gledhill in Kuala Lumpur, said in an interview.

“It may also be useful for the regulators in the Philippines to consider Islamic finance not just for Mindanao, but rather as a means of bringing in foreign investment,” he said.

The Philippines, which considered a law to support Islamic finance as far back as 1973, may amend the charter of Al-Amanah Islamic Investment Bank of the Philippines to allow other Shariah-compliant lenders, the central bank’s Tetangco said.

“The idea is to allow Islamic banks to co-exist with conventional banks and have a level playing field,” he said. “We’re working as fast as we can,” he said, adding that the measures would require congressional approval.

The Bangsamoro government is also waiting on legislative approval to be formally established after President Aquino submitted a bill to this effect on Sept. 10.

The Philippines signed a peace deal with the Moro Islamic Liberation Front in March to end a four-decade insurgency in Mindanao, home to most of the country’s 5 million Muslims. The pact also seeks to unlock investment in the mineral-rich south.

Bangsamoro supercedes the failed Autonomous Region in Muslim Mindanao, an entity created in 1989 during a previous attempt at peace. Some 49 percent of people in that area lived on less than $1.20 a day in 2012, compared with the national average of 20 percent. Aquino attended a two-day forum that ends today in Mindanao’s Davao City aimed at seeking international aid and investment for Bangsamoro.

“There is a dire need for financial services to support economic development in the Mindanao area,” Idiosa Ursolino, senior vice president at Al-Amanah Islamic Investment Bank in Manila, said in a Nov. 4 e-mail interview. “That could be made possible by a culturally-friendly business environment like the Shariah-compliant business opportunities.”

Source: http://manilastandardtoday.com/2014/11/06/ph-eyes-islamic-bank-to-develop-mindanao/

Britain's Islamic Finance Market widens with Govt, Private Moves

The scope of Britain's Islamic finance market is widening with several initiatives from the government and private sector, although the country is about to lose one of its six full-fledged Islamic banks.

In June, Britain became the first Western country to sell sovereign sukuk (Islamic bonds), helping boost its industry credentials as competition intensifies among global financial centres for a slice of Islamic business.

Britain has 22 firms that offer sharia-compliant financial products and they held an estimated $19 billion in assets last year, according to a report by lobby group The City UK. These include six full-fledged Islamic banks such as Bank of London and the Middle East, European Islamic Investment Bank , Gatehouse Bank and the Islamic Bank of Britain (IBB).

Last week a government official said the central bank would look into developing a liquidity management tool for use by Islamic banks, while Britain's export credit agency expects to guarantee sukuk for the first time next year, an issue by a customer of European plane maker Airbus.

In May, the Bank of England widened the types of sharia-compliant debt instruments that Islamic banks can use in their liquidity buffers, under a policy statement known as PS4/14.

Islamic banking accounts for only a tiny fraction - less than 1 percent - of the British banking sector, far below the share of roughly a quarter seen in the Gulf.

But taken together, the new official initiatives seem likely to create a more benign environment for Islamic finance, allowing banks to operate more flexibly and efficiently, and therefore more cheaply. Depending on how quickly it moves ahead, the plan for the liquidity management tool could conceivably put Britain ahead of some Gulf countries in providing options in this area.

"PS4/14 is a strong enabler...this is very powerful for us," Sultan Choudhury, chief executive of Birmingham-based IBB, said on the sidelines of an industry conference in Dubai.

The new rules allow Islamic banks to hold a variety of instruments, ranging from sukuk issued by the Qatari government to those issued by Saudi Arabian firms, Choudhury said.

The IBB, a unit of Qatar's Masraf Al Rayan, is now moving into the wholesale business and plans to change its name to Al Rayan Bank in December, subject to regulatory approval, as it looks to appeal to a wider customer base.

ALTERNATIVES

Despite this, London-based European Islamic Investment Bank is now in discussions with regulators to relinquish its banking licence, the lender said in a regulatory filing.

Under a 2012-2016 strategy, EIIB is exiting legacy private equity investments, seeking more stable income from its asset management and advisory services.

Dropping its deposit-taking licence would remove cumbersome capital and reporting requirements. In July, EIIB failed to secure regulatory approval to appoint a chief financial officer.

Other banks are also adjusting their strategies. London-based Gatehouse Bank aims to generate more deals outside the domestic property market, its recently appointed chief executive told Reuters in August.

Bank of London and The Middle East, Britain's largest Islamic bank, is developing private banking services with Malaysia's Bank Muamalat.

Non-banks are also spotting opportunities, such as asset management firm London Central Portfolio (LCP), which has launched two sharia-compliant property funds since December.

"We have every intention of rolling this out across all future funds," said Naomi Heaton, chief executive of LCP. "With the Islamic finance industry growing rapidly and far quicker than the conventional fund sector, we wish to continue to capitalise on this market."

Last week, London's Battersea Power Station project announced it had secured a 467 million pound ($754 million) Islamic syndicated loan, one of the largest Islamic transactions ever conducted in the country. (Editing by Andrew Torchia)

Source: http://www.reuters.com/article/2014/11/02/britain-islam-banks-idUSL6N0SA05F20141102