5 Interactive Distance Learning Programs on Islamic Banking and Finance

Monday, January 31, 2011


MANAMA: Solidarity General Takaful company has won a top regional award at a ceremony held in Dubai. It was named Bahrain Insurer of the Year and for the second time running was named the best Takaful Insurer of the Year at the MENA Insurance Awards Ceremony.

Solidarity General Takaful is a subsidiary of one of the largest Takaful groups in the world, Solidarity Group Holding.

The MENA Insurance Awards are hosted by MENA Insurance Review magazine, an authoritative and highly-regarded business title that has become a key feature in the region's insurance event calendar.

The awards recognise Solidarity's commitment to its customers, as well as the company's innovation and quality in its product offering, its strong financial positioning in its core insurance business and its success in building a solid platform for further growth.

"We are delighted to have been named Bahrain Insurer of the Year and for the second consecutive year the best Takaful Insurer," said Solidarity chief executive Ashraf Bseisu.

"The awards serve to further reinforce our long-standing commitment and drive to better serve our clients, to whom we owe these awards in the first place," he said.

"The awards are a reflection of the high level of recognition that Solidarity has attained, amongst both its peers and its clients, as both a leading insurer in Bahrain and a leading Takaful insurer in the region," said Mr Bseisu.

"The fact that we have been singled out for these two prestigious industry awards is something we can all be justifiably proud of," he said.

"The awards are all the more significant because it is based in large part on our ability to demonstrate a strong commitment to our customers," said Mr Bseisu.

"This ability is a direct consequence of the devotion, dedication and world-class expertise of every member of the Solidarity team," he said.

Courtesy by: Gulf Daily News

Friday, January 28, 2011

Islamic banking, shariah compliance hallmark in business: Naved Khan

KARACHI - With the highly encouraging response world-wide in Islamic Banking, Faysal Bank has the history to be one of distinguished institutions having Sharia compliant banking and it has received tremendous response from the investors, depositors and businessmen taking interest in the specially designed “window on Islamic Banking” of the bank.

In an interview with Naved A. Khan, President and Chief Executive Officer of Faysal Bank with The Daily Mail, he explained the strategic growth and development of Islamic banking with Faysal Bank Ltd in Pakistan. Now the Faysal Bank with acquisition of RBS (Royal Bank of Scotland) its operations and financial strength has further improved.

Faysal Bank Limited and its key stake holders have history in Islamic Finance that leads to committed entry in Islamic Banking in Pakistan with its brand Faysal Barkat Islamic Banking. Barkat Islamic Banking will be one of the key areas of focused growth in the next 5 years for Faysal Bank Limited. We are fully engaged and committed in development of Islamic Banking in Pakistan with a dedicated division having its own product group and distribution set-up equipped with well trained human capital, supervised by Shariah Advisor and supported by Shariah Consultant to ensure Shariah Compliant business in line with vision and directives of State Bank of Pakistan.

Naved A. Khan, President of Faysal Bank said, Islamic Banking Business (IBB) has proven its potential globally as well as in Pakistan. There are huge growth opportunities in Pakistan. Over the past decade, Islamic banking has grown at double digit rate resulting in 6% share in the total banking industry. The following are the key drivers of growth:

Large Islamic Population: Pakistan comprises of over 95% Muslim population; hence the significance of having a foothold in such a huge target audience cannot be ignored. The large Muslim population and the strong faith towards religion will keep on fuelling Islamic banking growth in double digits. We could expect Islamic Banking business in Pakistan to capture 25 -30% market share in this decade.

Spiritual Attraction: Besides the economic factors, the emergence of Islamic finance is related to revival of Islam and desire of Muslims to live all aspects of their lives in accordance with the teachings of Islamic law or Shariah.

Government & Regulatory Support: Government and SBP have been supportive of the development of a strong Islamic financial sector alongside conventional banking system.

Increase in the distribution outlets of existing Islamic financial institutions and the entrance of conventional banks in this business is clear indication that Islamic Banking will keep on growing in line with SBP 2012 vision.

Faysal Bank has launched its Islamic banking in September 2009 with first branch in Karachi under the brand of Barkat Islamic Banking.

Total number of dedicated Islamic banking branches is 13 covering 6 cities across Pakistan. Acquisition of RBS has complemented growth of Islamic banking business at FBL. Within a short span of one year Barkat Islamic banking has captured a sizeable number of customers by offering major Islamic banking products and services. Faysal Bank has always been customer centric and has provided products and solutions which are tailor made to address its target market. Our focus and challenge has always been to exceed the expectations of our existing and potential customers consistently. Barkat Islamic Banking will continue this with further growth in distribution and product lines.

Conventional banking is in business for over 3 centuries. They have clear edge over systems, infrastructure, experienced human resource and vintage. Simultaneously, key challenges that Islamic Banking faces like Shariah interpretations, scarcity of Shariah experts, greater time required in product development and execution, short-term liquidity & risk management typical of an evolving industry.

However, Islamic banking institutions in Pakistan as well as in other parts of the world have introduced new and advanced Islamic products and structures which are at par with conventional banking business; whilst full fill the financial solutions of its customers. Sukuks on Ijarah and Diminishing Musharakah financial models are being used to replace TFCs and bonds and are receiving very good response from the market. Government of Pakistan has introduced billions of rupees of Sukkuks in recent months that have been oversubscribed.

Courtesy By: pakistan daily Mail

Thursday, January 27, 2011

HSBC in tie-up with Allianz Takaful

HSBC and Allianz Takaful, a major player in the Takaful insurance, have jointly announced a Bancassurance partnership to promote Islamic insurance products in Qatar.
Javed Akhtar, HSBC senior area sales manager said: “We developed this strategic partnership with a leading and established Takaful product provider in recognition of our customers’ need to have access to quality Takaful products. We are very confident that this tie-up will enable us to better serve the needs of our customers.”
Through qualified financial planning managers located in a network of branches around Qatar, the bank will promote and sell ‘family Takaful products’ comprising plans for protection, savings, investment and children’s education. The products are denominated in dollars and riyals and are available to both conventional and Islamic banking customers.
Commenting on the partnership, Abdulrahman Khalil Tolefat, Allianz Takaful chairman said: “HSBC is a global partner for Allianz and we are one of the bank’s preferred services providers. We are very proud to have formed this partnership here in Qatar and to be able to offer our products to HSBC and Amanah customers. HSBC customers will now get access to Allianz’ state-of-the-art Shariah-compliant products and services through HSBC relationship managers in their branches.”

Courtesy by: Gulf Time

Wednesday, January 26, 2011

Sharia-compliant Insurance company launched

A new Sharia compliant insurance company which will offer group mutual guarantee insurance services for individuals against losses or damages has been launched.

Takaful Insurance of Africa (TIA) will provide a platform for Kenyans to insure themselves under mutual guarantee whereby every participant will contribute a sum of money to a common fund.

Chief executive officer, Hassan Bashir said Takaful was a fully fledged insurance company that would ensure Kenyans put their money in a pool and bear the risks together.

"Takaful intends to introduce an innovative range of products and services that will cater for both the fortunate and less fortunate in the society through risk funds that shall be contributed by members and shall again be fully owned by the same members," said Bashir.

He said Takaful insurance followed Africa's business model based on Sharia principles and was meant to serve all Kenyans regardless of their religious background. The products will be availed in Islamic banks and other designated brokers across the country.

CIC insurance chief financial officer Peter Mwaura who attended the launch Wednesday said the relationship among members of TIA would be that of co-operation for mutual benefit.

"The individual members contribute to an organized and well managed fund whose core objective will be for the welfare of the entire group. Thus the relationship is one of establishing strength through togetherness," said Mwaura.

However, Mwaura recognized the greatest challenge for the company emerging from harmonization of the regulatory environment which will be needed for mitigation of financial risks ethically, a dimension that has never been there before.

Courtesy By: Kenya Broadcasting Corporation

Tuesday, January 25, 2011

Takaful International goes online

MANAMA: Bahrain-based Takaful International, the pioneering takaful company in the region, on Sunday embarked on a new journey by introducing first of its kind service in Bahrain called e-takaful.

Being the first takaful company to offer on-line services at its portal www.etakaful.bh will immediately benefit both individual and corporate clients.

Announcing the innovative step, Essam Al-Ansari, general manager, during a press conference held at Takaful House in Seef District, said the company would continue to lead the way in takaful segment.

“We are just days away to kick start company’s branch operations in Doha, thanks to the company’s leadership and vision of the management to reach out all potential markets in the GCC,” Al-Ansari said.

“Everything is put in place for Doha operations and we just awaiting the license to open the first-ever Takaful International’s branch outside Bahrain,” he added.

“We have noticed the markets need for technologically advanced services that provides an effective, safe and easy insurance service process,” said Al-Ansari, who was joined by A. Aziz Al-Othman, deputy general manager and Ali Ebrahim M. Noor, deputy general manager family Takaful, healthcare and Takaful centers.

“The company continues to innovate and improve all its insurance products and services in order to ease all procedures for customers and keep pace with the current era” he added.

Abdul Aziz Al-Othman, deputy general manager of the company, said that the clients can obtain quotations for various services such as car, travel, home, domestic and marine insurance and other insurance services.

“It is also possible to obtain the documents electronically for renewal of all policies; with the possibility of reporting of claims as well as customer suggestions are welcome. Further features allow review of policies and claims and for updating personal data,” he added.

In addition, the customers can retrieve policy quotes in few minutes, by filling the form of the insurance service, and paying the premium through a protected Web page; after completing the form all data will be sent and the policy will be delivered to the insured in no time by express mail service (private) in any place within Bahrain.

“The Kingdom of Bahrain is at the top of the ladder of in terms of Internet penetration in the Middle East and the study indicates that percentage of Internet users have exceeded 32 per cent which is around 435,000 users. We strive to continue to provide the best services to our customers and this website is developed to serve them promptly and effectively, in addition to saving time and effort,” he added.

“As a lot of salvage coming out in many areas of takaful services, the customers can also benefit from out e-bidding portal by using online services and get the information of bidding even through SMS,” added Ali Ebrahim Noor.

Takaful International Company founded in 1989 offers variety of insurance coverage which is in line with the foundations of the Shariah and meets the requirements of this age. The company has received BBB rating with a long-term stable outlook from the Standard & Poor’s.

Courtesy by: Arab News

PQFTL, HBL Islamic Banking sign accord

KARACHI: Pak-Qatar Family Takaful Ltd (PQFTL) and HBL Islamic Banking inked an accord to provide family (Life) Takaful coverage to HBL-Islamic Banking Al-Ziarat Account (Hajj and Umrah Savings Plan) holders. The contribution for Life Takaful coverage will be made by HBL. P Ahmed CEO PQFTL and Muhammad Aslam head of Islamic Banking HBL said HBL Al-Ziarat Account is a scheme where the plan holders could save for Hajj and Umrah to undertake the journey at the time of their choice. As an incentive HBL Al-Ziarat Account will have higher weightage than PLS account in addition to free life cover. In case of death of an account holder, PQFTL will pay the remaining contribution towards the scheme and the nominee of the plan holder will get lump sum amount to perform Hajj-e-Badal or Umrah in place of the deceased. HBL will initially offer this product from 19 stand-alone dedicated Islamic Banking branches and 206 Islamic Banking windows throughout Pakistan.

ourtesy by: Daily Times

Friday, January 21, 2011

BNP’s Dalmau Discusses Challenges in Islamic Product Innovation

Rafael Dalmau, head of Shariah- compliant portfolio management at BNP Paribas in Singapore, discusses product innovation in an e-mailed response to Bloomberg questions.

On the drive for new products:

“The Islamic banking and financial sectors continue to evolve and part of that growth path involves the need to create new products. It is not always a lack of investment alternatives that motivate institutions to offer structured products. Many times, it is simply the need to keep pace with the demands of a more sophisticated client. Many of the traditional and basic definitions of Islamic financial transactions can be viewed already as structured products under conventional rules.

On setting standards for derivatives:

“The need to achieve global standards is not as urgent as thought of a few years ago. That is not to say, that it would not be useful and practical. There are still many challenges ahead of us before we can standardize Islamic derivatives. We, the market, need to define what it really means to have a derivatives market and whether or not, these transactions comply both in letter and spirit with Shariah principles.

“All market participants need to make clear what are the objectives behind the creation of Islamic derivative transactions? Are they going to be used simply to leverage or speculate on other Islamic markets, or are they going to be used for purposes of risk management? They can be abused as we saw in the recent times in the conventional markets.”

On the role of Islamic scholars:

“The scholars are going to be, and should be, the main drivers in the evolution of the Islamic derivatives markets. If there is ever an Islamic derivatives market that may allow more efficient risk management, it is likely to help in the growth of the Islamic capital markets. We are still far away from that point.”

Courtesy by: Bloomberg

Thursday, January 20, 2011

Bourse charts rise and fall of Takaful shares

What a difference a day makes with the rise and fall of Takaful Emarat Insurance the story on the bourses this morning.

Shares of the insurance firm, listed in Dubai, declined by more than three per cent to 78 fils at 10:40amm this was a reverse on yesterday when Takaful gained 7.8 per cent.

"The price is good considering the past period," said Rami Awwad, operations manager at Al Awael Securities in Abu Dhabi. Shares have fallen by 12 per cent in the last 3 months. "The chances are it will recover, it is a well liked stock among local investors, but volumes are not as high as leading firms," he said.

EmiratesNBD, which has the second biggest weighting on its emirate's index, lost 2 per cent to Dh2.94 a share. Emaar Properties, dropped 0.2 per cent to Dh3.52.

The Dubai Financial Market General Index declined by 0.4 per cent to 1657.98.

In Abu Dhabi, losses were led by Abu Dhabi National Energy, also known as Taqa, which fell 2 per cent to Dh1.45. Property firms fell, after The National reported yesterday that rents in Abu Dhabi fell as much as 16 per cent in the last three months of last year. Aldar Properties lost 1.6 per cent to Dh2.41 a share. Sorouh Real Estate lost 1.7 per cent to Dh1.66 a share.

Crude climbed 1 per cent to $88.93 a barrel.

Elsewhere in the region, Kuwait's measure lost 0.3 per cent to 6939.60. Bahrain's measure remained unchanged at 1428.55. Oman's index and Qatar's index also remained flat at 6949.36 and 9019.71 respectively. The Saudi Tadawul All-share Index was unchanged at 6723.31.

Courtesy By: The National

Wednesday, January 19, 2011

Pakistan Funds Push for More Sukuk Sales to Invest Cash: Islamic Finance

Fund managers in Pakistan are urging the government to increase offerings of Islamic debt, saying a 13-fold rise in sukuk sales this year isn’t enough for them to invest inflows of cash.

The central bank plans to auction 45 billion rupees ($525 million) of three-year sukuk in the domestic market on March 1 and another 55 billion rupees in the three months ending June 30. The sales will take the total for the fiscal year to 189 billion rupees, compared with 14.4 billion rupees in the previous 12 months.

Pakistan’s Islamic banking assets climbed an average 30 percent annually in the past four years to 411 billion rupees as of June 2010, 6 percent of the financial industry’s total, according to a central bank estimate in October. Pakistan aims to double that share to 12 percent by 2012 and plans to issue two more Shariah banking licenses that will take the total to seven, the monetary authority said in October.

“The government has relied too much on the conventional debt market without realizing how much liquidity is in the Shariah-compliant industry,” Sajjad Anwar, who helps manage the equivalent of $187 million at NBP Fullerton Asset Management Ltd., a unit of the nation’s biggest lender National Bank of Pakistan, said in a Jan. 11 interview from Karachi. “Islamic funds and banks are just waiting.”

Banking Licenses

Pakistan needs to finance a budget deficit that may reach 6 percent of gross domestic product, or 1 trillion rupees this fiscal year, exceeding the government’s target of 4 percent, according to a report from the State Bank of Pakistan on Oct. 25. The shortfall was 6.3 percent last year, according to data on the Finance Ministry’s website.

The yield on the three-year debt will rise to 13.89 percent from 13.39 percent at the prior offering on Dec. 13 as the central bank may increase interest rates to temper inflation, said Karachi-based Abdullah Ahmed, treasurer at Meezan Bank Ltd., the nation’s biggest Shariah-compliant lender.

“In an environment when everyone is expecting a hike in interest rates, the demand for such paper will remain high,” Ahmed said in an interview on Jan. 12. “Islamic banks are desperate to deploy their funds.”

Inflation stayed above 15 percent for a fourth month in December after unprecedented floods in August destroyed roads and damaged crops worth $3.3 billion.

Inflation to Slow

“The inflation rate will start falling from next fiscal year to average 13 percent as the government aims to reduce borrowing and impose additional tax measures,” Mohammed Sohail, chief executive officer at Topline Securities Ltd., said in an interview yesterday from Karachi.

The State Bank of Pakistan increased its discount rate by half a percentage point to 14 percent on Nov. 29, the third policy tightening since July. The central bank has raised borrowing costs from a record low 7.5 percent in 2005. Policy makers will increase the rate by 50 basis points to 14.5 percent at the Jan. 29 meeting, according to Meezan Bank’s Ahmed, who said he will buy sukuk at the next auction.

Pakistan’s central bank uses the yield on its six-month non-Islamic treasury bills as a benchmark for pricing debt. The yield rose to 13.55 percent at a sale on Jan. 12, nine basis points more than the previous offering. The rate was 12.05 percent a year ago, Bloomberg data shows.

Global sales of sukuk, which pay asset returns to comply with the religion’s ban on interest, fell 15 percent to $17.1 billion in 2010, according to data compiled by Bloomberg. Issuance reached a record $31 billion in 2007.

Islamic Debt Returns

Shariah-compliant bonds returned 12.8 percent last year, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows. Debt in developing markets gained 12.2 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.

The difference between the average yield for emerging- market sukuk and the London interbank offered rate shrank eight basis points this month to 281, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Average yields dropped 13 basis points to 4.61 percent.

The yield on Malaysia’s 3.928 percent sukuk maturing in June 2015 rose two basis points to 2.8 percent today, according to prices from Royal Bank of Scotland Group. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s narrowed one basis point to 330 today, Bloomberg data show.

Government Debt Sale

The government sold 37.2 billion rupees of Islamic securities on Dec. 13 and got orders for 57.7 billion rupees. At the previous sale on Nov. 8, it raised 51.8 billion rupees after receiving offers of 64.7 billion rupees. Pakistan had local- currency debt of 5.35 trillion rupees outstanding, including 94 billion rupees of sukuk as of November 2010, according to the central bank’s website.

Pakistan is attracting investors even as the country battles an eight-year insurgency with militants in its border region with Afghanistan. The U.S., a major financial donor, is pushing President Asif Ali Zardari to intensify that crackdown. A policeman assassinated secular politician Salman Taseer on Jan. 4 for opposing an Islamic blasphemy law.

Albaraka Banking Group BSC, Bahrain’s biggest publicly traded Islamic lender, boosted its branch network to 90 after acquiring Pakistan’s Emirates Global Islamic Bank Ltd. in 2010. Meezan Bank, controlled by Kuwait’s Noor Financial Investment Co., plans to open 225 new outlets in the next four years.

The central bank predicts the economy will expand 2.5 percent this fiscal year, faster than last year’s 1.2 percent. The Karachi Stock Exchange KSE100 share index reached a 2 1/2- year high today. The gauge rallied 28 percent last year after soaring 60 percent in 2009.

“For Islamic banks, sukuk will remain attractive because the sovereign notes offer the least risk and high returns,” Pervez Said, chief executive officer of Dawood Islamic Bank, 35 percent owned by Bahrain’s Unicorn Investment Bank BSC., said in an interview yesterday from Karachi. “Political and security problems have always been associated with Pakistan. The issue is where do we invest?”

Courtesy by: Bloomberg

Tuesday, January 18, 2011

Bahrain receives key recognition to be member of IAIS

The Central Bank of Bahrain (CBB) is pleased to announce that the Kingdom of Bahrain has been selected to be a member of the Executive committee of the International Association of Insurance Supervisions -IAIS; a key recognition for CBB's regulatory initiatives in the area of insurance and takaful.
This announcement was made during the recent IAIS meeting and recognized Bahrain's efforts amongst 17 Mena different regulators in the formulation or enforcement of insurance standards as a regulator/supervisor.

This membership was granted to Bahrain for a period of two years and names the Kingdom of Bahrain as the representative for the Middle East & North Africa (MENA) region among the other members of the IAIS.

"We are delighted to receive this recognition on behalf of Bahrain, which is a demonstration of international recognition for the pioneering work being undertaken by the CBB in the area of insurance regulation," said Mr. AbdulRahman Al Baker - Executive Director of Financial Institutions Supervision at the CBB.

"The CBB is committed to the development and advancement of the conventional and Islamic insurance sector and to reinforce Bahrain's status as the leading centre for insurance in the MENA region," Mr. Al Baker added.

Recent initiatives by the CBB have included the development of the sales representative Insurance certificate, which enables the industry to develop their human resources and better facilitate the growth in specialized areas of insurance.

The CBB Insurance Rulebook also contains the region's first comprehensive regulatory framework specific to Islamic insurance and reinsurance (takaful and retakaful) companies.

International Association Insurance Supervisors (IAIS) Established in 1994, the IAIS represents insurance regulators and supervisors of some 190 jurisdictions in nearly 140 countries, constituting 97% of the world's insurance premiums. It also has more than 120 observers.

"The CBB is committed to maintaining its international reputation for sound yet market friendly regulation and supervision and we look forward to continuing to work with market players in providing an environment conducive to the growth and advancement of the financial services industry," said Mr. AbdulRahman Al Baker.

Courtesy by: Ame Info

Monday, January 17, 2011

U.K. Cancels Sukuk, Focus on Economic Growth: Islamic Finance

The U.K., Europe’s largest market for Shariah-compliant financial products and services, canceled what would have been the first sale of sovereign Islamic bonds by a Western federal government as issues fell 15 percent in 2010.

“The U.K. government has decided not to issue sovereign sukuk because it is judged not to provide value for money,” a spokesman for the U.K. Treasury in London, said in an e-mailed response to questions Jan. 13. “It will keep the situation under review.” The Treasury has been mulling the sale of Islamic bonds denominated in pounds since at least April 2007.

Growth in Europe’s Islamic financial hub has been hampered by slowing economic expansion and the government’s attempt to plug a budget deficit, according to Moody’s Investors Service. The German state of Saxony-Anhalt became the first European borrower to sell bonds adhering to Islamic law in August 2004 with 100 million euros ($134 million) of five-year sukuk, according to data compiled by Bloomberg.

“This will discourage other governments from selling sukuk,” John A. Sandwick, a Geneva-based Islamic wealth and asset management consultant who advises companies and governments in Asia, Europe and the Middle East, said in a telephone interview Jan. 13. “If the U.K. says that sukuk aren’t value for money, it’s likely other governments may reassess their positions, and the number of sovereign issuers new to Islamic finance may drop.”

‘Costs Outweigh’

Global sales of Shariah-compliant bonds, which are based on the exchange of asset flows rather than interest, dropped to $17.1 billion last year. Issuance reached a record $31 billion in 2007. Kazakhstan, the former Soviet republic that last sold international debt in 2000, delayed plans to offer sovereign Islamic bonds because the government doesn’t need the funds, Deputy Prime Minister Aset Issekeshev said at a conference in Abu Dhabi yesterday. Luxembourg may sell sukuk, central bank Governor Yves Mersch said in Bahrain in May.

The U.K. Treasury ordered a study in April 2007 into the possibility of issuing Islamic bonds. The government introduced tax concessions for the debt in its annual budget in 2007 and authorities extended tax breaks to Islamic mortgages in 2003. The Treasury last July reiterated the previous government’s 2008 position that a sovereign sukuk sale, which would provide a benchmark for issuance, didn’t offer “value for money.”

“The government recognizes the benefits of the product for the Islamic banking sector, but believes that the costs outweigh the benefits relative to the issuance of gilts,” the Treasury spokesman said.

Cheaper Borrowing

Britain is currently borrowing at a rate that is lower than the London interbank offered rate, or Libor, according to Bloomberg asset swap calculation. If investors swap the fixed- rate offered by 10-year gilts into a floating rate, the security yields 2.9 basis points below Libor, the data show.

The yield on Dubai’s 6.396 percent sukuk maturing in November 2014 dropped 2 basis points to 6.16 percent on Jan. 14, according to Bloomberg data. The extra yield investors demand to hold Dubai’s government debt rather than Malaysia’s narrowed eight basis points, or 0.08 percentage point, to 330 this month, the data show.

“The U.K.’s initial drive to issue sukuk was more politically and socially driven versus economic given the significant Muslim minorities in the country,” Khalid Howladar, a Dubai-based senior credit officer at Moody’s, said in an e- mailed response to questions Jan. 12. “Given recent stresses on the economy and government finances, such motives are now secondary to the need to raise funds efficiently.”

About 2.9 million people in the U.K. are Muslim, the Washington-based Pew Research Center’s Forum on Religion & Public Life said in a report this month. It has a total population of 62.3 million, according to 2010 estimates from the U.S. Census Bureau on Dec. 28.

Slowing Growth

U.K. economic growth slowed more than initially estimated in the third quarter. Gross domestic product rose 0.7 percent from the previous three months, the Office for National Statistics said Dec. 22 in London. That compares with an initial estimate of 0.8 percent and second-quarter growth of 1.1 percent. The Bank of England on Jan. 13 maintained emergency stimulus for the economy.

“The U.K. government is in retrenchment mode and is not looking to expand the sphere of its activities,” Frances Hudson, who helps oversee about $220 billion as head of global thematic strategy at Standard Life Investments in Edinburgh, said in an e-mailed response on Jan. 13.

Corporate Sales

European companies may still turn to the Middle East. The region has more than 400,000 millionaires, Cap Gemini SA and Bank of America Corp.’s Merrill Lynch unit said in a world wealth report last June. Their combined wealth grew 5.1 percent in 2009 to $1.5 trillion, the report said.

The Bank of London and The Middle East Plc, a Shariah- compliant bank, is in discussions with two U.K.-based companies to sell as much as 200 million pounds of Islamic bonds in the next six months, Nigel Denison, director and head of markets at the London-based bank, said in an interview in Manama, Bahrain Nov. 24.

“It’s disappointing that they’re not looking at it more actively because we feel it would provide value for money,” Denison said in a telephone interview from London Jan. 14. “The fact that it’s still under review is encouraging.”

Global Shariah-compliant bonds returned 12.8 percent last year, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows. Debt in emerging markets gained 12.2 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.

Gatehouse Bank Plc, a London-based Islamic investment bank, will help two companies sell as much as 200 million pounds of sukuk in the first quarter of this year, Chief Executive Officer Richard Thomas said in Manama Nov. 23. International Innovative Technologies Ltd., a clean energy company in Gateshead, sold a $10 million, four-year convertible sukuk in July, the country’s first corporate Islamic bond.

“A lot of dithering, dithering, dithering, then nothing,” Sandwick said. “The sukuk market would’ve been deeply enriched and rewarded with a U.K .sovereign or a government municipal issuance. It’s a sad day for everyone.”

Courtesy by: Bloomberg

Friday, January 14, 2011

Malaysia Insurers Hindered by Lack of Sukuk: Islamic Finance

The lack of long-term investment products is undermining growth in Malaysia’s Islamic insurance industry, spurring calls for more sukuk maturing beyond 10 years in the world’s biggest market for the debt.

The country’s 13.9 billion ringgit ($4.5 billion) of insurance assets that comply with Shariah law made up 9 percent of the 154 billion ringgit total as of July 2010, according to central bank data. Malaysia has 293.2 billion ringgit of outstanding Islamic bonds, with 41.5 billion ringgit maturing in 10 years and more, according to data compiled by Bloomberg.

Institutions offering services known as takaful need to match long-term liabilities and a greater availability of sukuk would help firms expand their range of insurance, according to Kuala Lumpur-based HSBC Amanah Takaful Malaysia) Sdn Bhd. The industry also lags behind banking in the United Arab Emirates, said Ahmed Aljanahi at Dubai-based Noor Takaful.

“We need long-term sukuk because we can’t be aggressive in equities or park most of our funds in deposit accounts or just short-term paper,” Hafidz Hamzah, who helps manage 12 million ringgit as head of investment at Kuala Lumpur-based Great Eastern Takaful Sdn. Bhd., which received its license last year, said in an interview Jan. 5. “That’s hampering returns and too much exposure to equities can be very volatile for our funds.”

New Licenses

Takaful is based on the Koranic principle of mutual assistance, whereby policy holders contribute a sum of money to a common pool managed by the company. The funds are used to pay for claims and any excess is returned to customers.

Malaysia’s Islamic insurance assets grew 20 percent in the first seven months of 2010 from a year earlier, according to central bank data. Bank Negara Malaysia issued four new Shariah- compliant life-insurance licenses last year, bringing the number of takaful firms to 12.

Global takaful contributions increased 29 percent to an estimated $5.3 billion in 2008 from a year earlier, according to a report published in April 2010 by Ernst & Young LLP. Takaful contributions in the six-nation Gulf Cooperation Council rose 31 percent to an estimated $3.7 billion the same year, the report said.

‘Chicken & Egg’

“It’s a chicken and egg situation, if you have more long- dated sukuk then there are more assets for takaful operators to invest in,” Rafe Haneef, managing director of global markets at HSBC Amanah, whose parent was the second-largest underwriter of Islamic bonds last year, said in an interview Jan. 5. “Growth in takaful and the sukuk industry will mutually enrich both sectors.”

Global sales of sukuk, which pay returns based on asset flows to comply with the religion’s ban on interest, fell 15 percent in 2010 to $17.1 billion, according to data compiled by Bloomberg. Issuance reached a record $31 billion in 2007.

Malaysia’s 10-year development plan will increase sales of longer-maturity debt as companies need to spread out their financing, according to RAM Rating Services Bhd., the biggest of the nation’s credit rating firms. The government has identified $444 billion of private-sector led projects including the building of an underground rail system, a nuclear power plant and the expansion of the road network.

“With more infrastructure projects, that’s going to accelerate the growth of long-term sukuk,” Zakariya Othman, head of Islamic finance at RAM Rating, said in an interview in Kuala Lumpur yesterday.

Returns Declined

Shariah-compliant bonds returned 12.8 percent last year, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows, compared with 19.8 percent the previous year. Debt in emerging markets gained 12.2 percent, from 29.8 percent in 2009, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.

The difference between the average yield for sukuk in developing nations and the London interbank offered rate widened two basis points to 292 since Dec. 31, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. The spread narrowed 178 basis points, or 1.78 percentage points, last year.

The yield on Malaysia’s 3.928 percent sukuk maturing in June 2015 declined three basis points to 2.87 percent yesterday, according to prices from Royal Bank of Scotland Group. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s widened two basis points to 336, Bloomberg data show.

Noor Takaful, the holding company of Noor Takaful General PJSC and Noor Takaful Family PJSC, in Dubai is talking with investment banks in the Persian Gulf to come up with new products for the Islamic insurance industry, Ahmed Aljanahi, the managing director, said in an interview Jan. 6.

“We are expecting the more well-established investment banks to come up with the right product for the medium to long- term to cater for the takaful industry worldwide, not just for the U.A.E.,” said Aljanahi. “That would take, I would say, four to five years.”

Malaysia Sukuk Sales

Sales of Islamic bonds from the GCC, which includes U.A.E. and Saudi Arabia, dropped 32 percent last year to $4.5 billion, Bloomberg data show. Issuance of ringgit-denominated sukuk in Malaysia fell 11 percent to 28.5 billion ringgit.

Takaful companies are seeking more investments in order to roll out products that provide longer-term coverage such as retirement plans, said Leonardo Zanolini, chief operating officer at HSBC Amanah Takaful Malaysia Sdn. Bhd., a joint venture between HSBC Insurance (Asia Pacific) Holdings Ltd., Jerneh Asia Bhd. and the Employees Provident Fund.

“As the market grows, you would expect the relevance of takaful operators participating in the sukuk market to grow because they need long-term assets to match their long-term liabilities,” Zanolini said Dec. 30 in a telephone interview.

Courtesy by:Bloomberg

Wednesday, January 12, 2011

In 2011, shall we see the emergence of Islamic Banking?

Recent reports have indicated that the central bank will soon move to regulate an Islamic commercial bank. What exactly is involved in Islamic banking?

Globally, the assets of Islamic banks have been expanding at double-digit rates for a decade and Islamic banking is increasingly becoming a visible alternative to conventional banks in Islamic countries and countries with many muslims.
Islamic banks serve muslim customers, but are not religious institutions. They are profit-maximising intermediaries between savers and investors and offer custodial and other traditional banking services. The constraints they face are, however, different and are based on Shariah law. There are four main features that differentiate Islamic banking from the conventional banks.

Prohibition against interest (Riba) is the major difference between Islamic and traditional banking. Islam prohibits Riba on the grounds that interest is a form of exploitation and is inconsistent with the notion of fairness. This implies that fixing in advance a positive return on a loan as a reward for the use of one’s money is not allowed.

Prohibition against games of chance (Maysir) and chance (gharar): Islamic banking bars speculation - increasing wealth by chance rather than productive effort. Maysir refers to avoidable uncertainty; for example, gambling at a casino. An example of gharar is undertaking a business venture without sufficient information.

Prohibition against forbidden (Haram) activities: Islamic banks may finance only permissible (Halal) activities. Banks are not supposed to lend to companies or individuals involved in activities deemed to harm society (for example, gambling) or prohibited under Islamic law (for example, financing construction of a plant to make alcoholic beverages).

Payment of some of the bank’s profits to benefit society (Zakat): Muslims believe in justice and equality in opportunity (not outcome). One way they do this is to redistribute income to provide a minimum standard of living for the poor. Zakat is one of the five tenets of Islam. Where Zakat is not collected by the state; Islamic banks donate directly to Islamic religious institutions.
In countries with significant muslim communities like Uganda, many large segments of muslims do not have access to adequate banking services-often because devout muslims are unwilling to put their savings into a traditional financial system that runs counter to their religious principles. Islamic banks seek to provide financial services in a way that is compatible with Islamic teaching, and if Islamic banks can tap that potential clientele, that could hasten economic development in these countries.

There is evidence of close correlation between financial sector development and growth. Countries whose financial systems offer a variety of services tend to grow faster. Banks, whether Islamic or traditional, play a fundamental economic role as financial intermediaries and as facilitators of payments.
The rise of Islamic banking has contributed to economic development in two main ways. One key benefit is increased financial intermediation. In Islamic countries and regions, large segments of the population do not use banks. The Islamic world, as a whole, has a lower level of financial development than other regions—in part because conventional banks do not satisfy the needs of devout Muslims.

Moreover, because Islamic banking requires borrowers and lenders to share the risk of failure, it provides a shock-absorbing mechanism that is essential in developing economies. A mechanism that allows the sharing of business risk in return for a stake in the profits encourages investment in such an uncertain environment and satisfies Islam’s core tenet of social justice. If Islamic banking can emerge, Muslim businesses stand to benefit.

Monday, January 10, 2011

Capital Standards Rating (CSR) assigns BB to Al Safat Takaful Company

Kuwait: Capital Standards Rating Co. (CSR) has assigned an Insurer Financial Strength Rating (IFSR) of 'BB' and a National rating of 'BBBkw' to Al Safat TakafulAl Safat TakafulAl Safat Takaful Insurance Company
Al Safat Takaful
Kuwait | Financial Services
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Company K.S.C. (closed). The outlook is stable. This is the first time that CSR rates Al Safat. The rating is based on the consolidated financial statements until June 2010.

The ratings reflect Al Safat's adequate capitalization, improving operating performance and relatively sufficient liquidity position. The company implements a conservative reserve accumulation strategy and relies heavily on reinsurance for its marine & aviation and general accident segments. Al Safat is expanding its insurance business and the company's underwriting performance indicators are improving. The company's rating is however constrained by its small market share of the Gross Premiums Written (GPW) and concentration in the Kuwaiti market. The investment in equities and unlisted funds further adds to the volatility of the company's financial profile. The outlook reflects CSR's view of the continued improvement in the company's insurance underwriting performance.

Al Safat Takaful Insurance CompanyAl Safat Takaful Insurance Company was established in 2005 according to Islamic Sharia and offers takaful insurance services in Kuwait. The company provides Islamic insurance in various segments such as marine & aviation, motor vehicles, fire and general accident, life and health. The major shareholders (not less than 10% stake) of the company are; Al Safat Group (28.9%), Al Ghanim Group (12.5%), Al Kharafi Group (10%), Commercial Bank of Kuwait (10%), Investors Group Holding (10%), Kuwait Finance & Investment Company (10%), and Commercial Real Estate Company (10%). This diverse group of prominent investors supports the company's insurance business.

Al Safat TakafulAl Safat TakafulAl Safat Takaful Insurance Company
Al Safat Takaful
Kuwait | Financial Services
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is aiming to improve its market position in the Kuwaiti market which is becoming increasingly competitive with the presence and entrance of takaful insurers. The company's started underwriting in 2005 and by the end of FY2007, the company's Gross Premiums Written (GPW) has increased to KWD 3.09 mn. In FY2008, the GPW increased to KWD 3.86 mn registering 19% YoY growth. As of 2008, the takaful market in Kuwait represents only 16.7% of the overall insurance industry and this percentage continues to increase along with an increase in new Takaful Insurance companies joining the market. This indicates an increasing competition in the Takaful market. In FY2009, the GPW witnessed a 31.4% decline which was mainly due to a significant decline (91.2%) in Marine & Aviation premiums.

Al Safat's underwriting quality measured by the loss ratio has not changed significantly over the last 3 years. The majority of the claims have been incurred by the motor vehicle segment, whichis in line with the insurance industry norms. The expense ratio significantly improved in 2009 mainly driven by the increase in Net Premiums. We expect any improvement in the expense ratio in the near future would largely be driven by the increase in premium written.

For Takaul companies, shareholders' account's revenue is solely driven by investment income. Such heavy reliance on investment income is not sustainable during economic downturns, as investment income tends to be highly volatile. However, relying on investment income on the shareholders' accounts is common in the takaful industry due to the fact that the sole purpose of the shareholders' account is to support policyholders and to protect the value of shareholders.

The principal methodology used in rating Al Safat TakafulAl Safat TakafulAl Safat Takaful Insurance Company
Al Safat Takaful
Kuwait | Financial Services
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Company is "Insurance Methodology", and it can be found at www.capstandards.com in the 'methodologies brief' sub-directory under the Rating tab.

In a continuous effort to benefit both local and regional issuers, CSR has developed rating scales that reflect issuers' scale and focus, whether global or regional. CSR developed a National Rating Scale along with its International Rating Scale to give maximum benefit for issuers when dealing with stakeholders (banks, investors, regulatory bodies, etc.). Small and regional issuers with only local and regional operations might be interested in knowing their creditworthiness when compared to their local peers only. While larger, internationally focused issuers would be more interested in knowing their position compared to global players. In all CSR's Ratings, an International Rating is assigned along with an equivalent National Rating.