EiD Greetings from AlHuda Centre of Islamic Banking & Economics

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

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