National Bank of Fujairah offers sharia-compliant financial solutions in UAE

The new Islamic unit will initially offer retail banking products to customers, with plans to expand the offerings for companies and businesses in the region.

NBF retail banking head Sharif Mohd. Rafei said: "Over the years, we have been witnessing a growing demand for Islamic banking products as we broadened our personal banking footprint beyond our traditional home base of Fujairah.

"With NBF Islamic, we will not only be able to better serve the needs of our customers, but further establish our growing reputation as a well-respected local bank fully committed to preserving the values of the community."

To operate the new unit as per the principles of Islamic law, NBF Islamic will be helped by the Shariah Supervisory Board of Amanie Advisors.

According to a report from Ernst and Young, the Islamic banking assets in the UAE increased from $83bn in 2012 to $95bn in 2013, reported Gulf Business.

NBF CEO Vince Cook said: "We are pleased to contribute to the UAE's aspirations to becoming a hub for Islamic finance. Expanding our suite of client-centric solutions is crucial to the success of our customers and the bank, and we are confident that NBF Islamic will further establish our position as a reliable and trusted banking partner in the UAE."

Source: http://retailbanking.banking-business-review.com/news/national-bank-of-fujairah-offers-sharia-compliant-financial-solutions-in-uae-031014-4392007

Shariah Gets Hotter as Kazakhs Revive Islamic Bank Plan

Kazakhstan is reviving plans to develop Islamic finance, joining nations from South Africa to the U.K. in targeting an industry that’s forecast to reach $3.4 trillion during the next four years.

The majority Muslim central Asian nation is “fine-tuning” legislation for Shariah-compliant banking, central bank Chairman Kairat Kelimbetov said at an Islamic finance conference in Almaty last week. Some lenders are seeking to convert into Islamic banks, he said.

Borrowing costs for sellers of Islamic securities have tumbled this year as investors snap up debt from first-time issuers including Britain. South Africa, Luxembourg and Goldman Sachs Group Inc. are also preparing sales. The drive by Kazakhstan comes two years after its debut sukuk, which was denominated in Malaysian ringgit.

“The sovereign sukuk may not be quite ready, but there are other financial institutions who may be looking at issuing sukuk,” Rizwan Kanji, a Dubai-based partner at King & Spalding LLP law firm, said Sept. 9 in an e-mail following his first visit to Kazakhstan. They may use structures that appeal to Gulf Cooperation Council investors, he said.

Global Capital

The Islamic finance industry is expected to double in the five years through 2018, according to Ernst & Young LLP. The U.K., which is vying to establish itself as a global hub for Shariah-compliant financing along with Dubai and Kuala Lumpur, received orders for more than 10 times the 200 million pounds ($322 million) it raised in its inaugural sale in June.

The debt will contribute to a 30 percent surge in global sovereign Islamic bond issues to $30 billion this year as investors clamor to take advantage of lower yields, according to Moody’s Investors Service.

Average sukuk yields worldwide declined 65 basis points in 2014 to 2.77 percent on Sept. 9, Deutsche Bank AG indexes show. That compares with a 30 basis-point drop to 4.77 percent in average yields for the Bloomberg Emerging-Market Sovereign Bond Index.

The U.K. was the first non-Muslim government to sell a sovereign sukuk. The issue’s success has tempted other nations to tap Islamic capital markets, according to Sheikh Bilal Khan, a co-chairman of Dome Advisory Ltd.

Following Suit

“There’s no doubt that the U.K. sovereign sukuk has encouraged many countries to follow suit,” Khan said by e-mail last week. “Kazakhstan and Kyrgyzstan are looking to become Islamic finance hubs of” the region, he said.

Kazakhstan first explored sukuk as early as 2010, when the government said it sought to make Almaty an Islamic finance hub for Central Asia. Abu Dhabi’s Al Hilal Bank opened a branch in Kazakhstan that year, and remains the only Islamic lender in the oil-rich nation.

“We look forward to additional players coming into the market,” Prasad Abraham, chief executive officer of Al Hilal Islamic Bank JSC of Kazakhstan, said in an interview with Bloomberg Television Sept. 2. The bank plans to double its assets to $300 million over the next three years, he said.

Legislative Hurdles

Al Hilal Islamic experienced difficulties in generating business after setting up in Central Asia’s biggest energy producer because of a lack of understanding of Shariah-compliant products by customers, Chief Financial Officer Aidyn Tairov said in 2012.

Kazakhstan will face legislative hurdles as it seeks to promote the industry and the nation is experiencing the early stages of development, Central Bank chairman Kelimbetov said last week.

“We have a roadmap for development of Islamic finance until 2020, adopted by the government,” Kelimbetov said. “We have a number of Kazakh banks seeking to convert to Islamic banks.”

The economy of Kazakhstan, which has the third-lowest investment-grade credit rating at Standard & Poor’s, grew 5.95 percent last year from 5 percent in 2012, data compiled by Bloomberg show. Gross domestic product will slow to 4.7 percent this year before accelerating to 5.8 percent in 2015, according to a Bloomberg survey of 12 economists conducted in late June.

“There’s a bit more of a systematic approach now, rather than rushing in to issue a sukuk,” Kanji said of the latest drive from senior government officials to develop Islamic finance. “It makes sense for them to look at the Middle East, attract funding and establish a track record.”

Kazakhstan Islamic bank eyes regional expansion

Kazakhstan's Al Hilal Islamic Bank, the only Sharia-compliant lender in the country, may expand into neighbouring countries as legislative efforts to develop Islamic finance gather pace across the region, its chief executive said.

Fresh Islamic finance legislation is being developed in Azerbaijan, Kyrgyzstan and Tajikistan, creating a more welcoming framework for the industry in countries which have secular regulatory regimes.

Legislation is also being redrawn in Kazakhstan, the first former Soviet country to introduce Islamic finance rules in 2009; the initial set of rules failed to spur much activity.

Almaty-based Al Hilal, whose parent is wholly owned by the Abu Dhabi government, is considering increasing its geographical presence as part of its 2015 business plan, chief executive Prasad Abraham said on the sidelines of an industry conference.

"Our medium-term strategy is to test the effectiveness of the Kazakhstan model, and then use that as a base for further expansion to other regions of the CIS (Commonwealth of Independent States) as appropriate.

"An important precondition for any expansion is the existence of a proper legislative framework for Islamic finance in the respective countries."

A draft amendment, currently awaiting discussion in Kazakhstan's parliament, would provide the bank with a clearer framework that could translate into better commercial opportunities, Abraham said.

This could spur new entrants into the sector, such as Zaman Bank, a local bank which is working to convert itself into the country's second Islamic bank. It has not given a time frame for that plan.

In addition to Zaman, the regulator has now received an application to operate another fully-fledged Islamic bank, Abraham said without elaborating.

Launched in 2010, Al Hilal is on target to see asset growth of 70 per cent this year, with similar growth expected for 2015, he said, adding this was partly because growth was from a low base; it is expected to slow as the bank gains size. The bank posted a 46pc increase in assets in 2013, reaching 16.7 billion tenge ($92 million), financial statements showed. Its business is focused on government and large corporate clients, and after conducting a feasibility study earlier this year it has decided to wait for legal issues to be resolved before offering retail banking services. Islamic banks in Kazakhstan are categorised on a par with other commercial banks, known as Tier 2 banks, but current law does not extend to them all the tax privileges that conventional banks have.