Islamic banking on the rise

The international financial crisis of 2008 constituted a historic chance for the Islamic financial sector to prove its worth and success in facing crises. It also proved to be a safe haven for capital, as well as Arab, Islamic and non-Islamic investments. The crisis encouraged individuals, companies, governments and large financial institutions to shift to Islamic banking.

The last financial crisis, its consequent dangerous repercussions on the international financial system and the impact it had on various financial institutions in the region, showed the sound principles of the Islamic financial industry. The latter has various aspects that contribute to security and safety and limit the risks, such as credibility, transparency, evidence, facilitation, cooperation, integration and solidarity. Sharia prohibits economic and financial transactions that are based on gambling, monopoly, exploitation and greed.

Among the main principles of the Islamic economic and financial system are the sharing of gains and losses, and the real circulation of money and assets. Sharia prohibits financial derivatives that are based on fake trade deals dominated by ignorance. These principles produced trust in the Islamic financial system, increased demand on its services and products as shown by the Islamic banking industry's growth rates, such that many banks and Arab financial institutions adopted this system.

The Ernst & Young financial consultancy announced that Islamic banking assets had increased by 17.6% annually during the period extending from 2009 to 2013. It said that these assets would grow by an average of 19.7% annually until 2018. This showed that Islamic banking shifted from closed to global activity, and showed the accuracy of what we expected at the beginning of the international crisis.

In the Gulf banking markets, a number of major Arab banks in Saudi Arabia, Kuwait, the United Arab Emirates and Oman are increasingly moving toward adopting the Islamic banking model. This is also the case for a number of Arab countries such as Tunisia, Libya and Morocco, which issued special legislation regarding Islamic banking, not to mention Turkey, which has been encouraging the establishment of Islamic banks for years, and had finally founded the Agricultural Bank based on the Islamic system.

Therefore, Sharia-compliant banking assets in international banks grew to reach $1.7 trillion at the end of 2013. Estimates show that they will exceed $2 trillion by 2014. Furthermore, Islamic banking assets in the Gulf Cooperation Council (GCC) increased from $452 billion in 2012 to $525 billion at the end of 2013. Saudi Arabia topped the list with Islamic banking assets amounting to $260 billion, followed by the UAE with $90 billion and Qatar with $60 billion. The six GCC countries comprise 13 Islamic banks, which are among the world’s 15 largest banks, with a capital of more than a billion dollars each.

Malaysian and British markets rose as active markets in terms of bonds issuance and the embracing of Islamic banks. Between 2002 and 2012, annual bond issuance increased by an average of 35%, from $4 billion to $83 billion. Malaysia is at the top of the list of Islamic countries in this area, while Britain became the first Western country to issue sovereign Islamic bonds worth 200 million pounds [$320 million], through which it succeeded in attracting investors from around the world. The said investors pumped in around 2.3 billion pounds [$3.6 billion].

Global financial institutions, such as the French Societe Generale, the Bank of Tokyo-Mitsubishi UFJ and Goldman Sachs, also issued Islamic bonds. Other countries also expressed interest in issuing Islamic bonds, such as Luxembourg, Russia, Australia, the Philippines and South Korea. During the meetings of the International Monetary Fund and the World Bank in New York in mid-October, a part of the agenda items and meetings were dedicated to discuss Islamic banking and the Islamic economy, and how to take advantage of it to protect the global economy and develop global models of development.

(Al Monitor / 30 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

WIEF Dubai: Islamic finance adds up across the world

Over three days of speeches, debate, policymaking, and plain old marketing one theme emerged as dominant from the 10th World Islamic Economic Forum in Dubai: Islamic finance has gone global, both as a concept and as a hard business reality.

After two years on the road — last year in London and 2014 in Dubai — the annual forum is set to return to its home base, Kuala Lumpur in Malaysia, next year.

But in the meantime, it will hold warm-up sessions in South Korea, Spain and Japan, all countries with small Muslim populations.

The World Bank recently had a session devoted to Islamic finance; the list of sovereign sukuk issuers recently includes countries well outside the traditional Muslim world, such as Luxembourg, South Africa and the UK.

The Dubai forum heard of Islamic financing schemes in Afghanistan and Tartarstan (an autonomous part of Russia); President Nazarbayev of Kazakhstan won the award of Islamic financial leader of 2014; there was talk of Brazil or Australia as the next sovereign sukuk issuer.

There was general agreement that Islamic finance, specifically, was the driver behind the worldwide growth of the Islamic economy. “We have learnt that Islamic finance provides fuel for the real economy,” said Abdulla Al Awar, chief executive of the Dubai Islamic Economy Development Centre, which aims to make the emirate the capital of the Islamic business within the next two years.

Although the forum addressed all the aspects of the Islamic economy — the halal food industry, tourism, fashion, education and others — there is no doubt that finance is at the heart of it. Of the US$6.7 trillion total estimated value of the Islamic economy worldwide, more than $4 trillion is in the financial sector.

Khalid Howladar, head of Islamic finance at ratings agency Moody’s Investor Services, said: “I could never have said this five years ago, but I think we are seeing a sea change in thinking about Islamic finance. This is where Islam meets capitalism, and where Islamic finance truly becomes a global concept.”

But the three-way tug in the global Islamic financial industry was still very much in evidence as the forum closed in Dubai. Figures from the organisers showed that the top attenders among the 3,200-strong gathering were from Malaysia, with 430 participants; followed by London with 201 and the UAE (on home ground) with 176.

Other notably large delegations came from India and Bangladesh.

These figures, however, raise the question: where were the other great powers of the Islamic economic world? Saudi Arabia and Iran, big regional powers in terms of economies and populations, were barely represented at the Dubai forum. Other GCC countries, notably Oman, had a slightly higher presence, but were still apparently publicity-shy at the biggest Islamic economy show in the world.

Some experts thought this reflected a lack of certainty in the Islamic financial world about how to take the project to the next stage. Ashruff Jamall, global Islamic finance leader at international accounting firm PWC, said there needed to be some “sustainable follow-through” on the good intentions and ideas expressed at the forum.

“There has to be lots more specialist training in Islamic finance, and there needs to be standardisation of Shariah boards in the GCC region. In Malaysia, it is centralised, but in the UAE, it is different for each bank.”

The urge to consolidate and unify was another of the themes of the forum. Mohammed Al Gergawi, UAE Minister for Cabinet Affairs, called for common halal food standards between Malaysia and the Emirates, while Hamad Buamim, chief executive of the Dubai Chamber of Commerce and Industry, urged the UAE financial industry to set up a standardised Sharia-compliance system.

Why had this not already happened, given standardisation has been a key feature behind Malaysia’s dominance of the global sukuk business? There were suggestions that the blame lay with the current system of disparate Sharia boards chosen from the relatively small number of scholars qualified to issue fatwas, who had a vested interest in maintaining their monopoly.

If this is the case, there was no shortage of new ideas at the forum to keep Islamic finance a dynamic force. Alberto Brugnoni, who runs an Islamic financial consultancy, advocated “Islamic crowdfunding”, which he called “umma funding”, to help finance small-to-medium enterprises along Islamic lines.

Several speakers suggested the notion of some form of Islamic equity, shares which adhered to Sharia principles and which would be less risk-prone and more socially responsible than conventional and Islamic debt financing.

Mr Howladar said: “There is no point in Islamic finance simply replicating conventional financial instruments. It is different and should create its own value adhering to Sharia principles and ethics.”

There was also a job or marketing to be done. Mr Jamall of PWC identified a “perception gap” between potential Muslim banking customers and the banks offering them services. “The banks need to be stronger in their messaging to customers that they are acting according to Sharia principles,” he said.

Mr Buamim summed up the message to the world from the Dubai forum: “A modern image of Islam needs to be projected, a kind of liberal but dynamic Islam the world is not fully familiar with yet.

(The National Business / 30 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia Oil-Rig Sukuk Clouded by Crude Slump

Malaysia’s biggest oil-rig builder faces a double-whammy of collapsing crude prices and rising local borrowing costs as it plans to sell a debut sukuk.

Malaysia Marine and Heavy Engineering Holdings Bhd. has set up a 1 billion ringgit ($306 million) Islamic bond program to fund upgrading works at one of its facilities, according to an Oct. 14 statement from Malaysian Rating Corp. The company, which is indirectly owned by state-oil firm Petroliam Nasional Bhd., is tapping the market as the central bank considers whether to add to its first interest-rate increase since 2011.

A 24 percent slump in crude prices from this year’s peak threatens to crimp earnings from oil and gas services in Malaysia, which Prime Minister Najib Razak has earmarked as a hub for the region’s energy industry. Shariah-compliant debt sales have climbed 65 percent in 2014 to 50.3 billion ringgit from a year earlier and have already surpassed 2013’s total, data compiled by Bloomberg show.

“Rig builders such as MMHE will see their profits falling as oil majors are unlikely to continue pumping given current crude prices,” Lam Chee Mun, a Kuala Lumpur-based fund manager at TA Investment Management Bhd., which oversees about 680 million ringgit, said in an Oct. 27 phone interview. “Companies will have to pay more because borrowing costs are rising.”

Rising Yields

MMHE is 66.5 (MMHE) percent-owned by the nation’s shipping company MISC, which in turn is 62.7 percent controlled by Petronas. The sukuk was given a preliminary AA- rating by Malaysian Rating, the fourth-highest investment grade, according to the statement. No details on the debt’s maturity or timing were provided.

Analysts are forecasting a drop in the company’s net profit to 170.5 million ringgit this year, from 236.4 million ringgit in 2013, according to the median estimate in a Bloomberg survey. Crude was at $81.72 a barrel today, compared with the year’s high of $107.26 in June, data compiled by Bloomberg show.

TA Investment’s Lam said MMHE may have to pay a yield premium of one percentage point more than Malaysia’s sovereign securities for its sukuk assuming it’s a five-year maturity.

Yields on the government’s Shariah-compliant debt have climbed since the central bank raised its benchmark interest rate to 3.25 percent from 3 percent in July. The swaps market is pricing in another increase ahead of the next meeting on Nov. 6, with one-year contracts at 3.75 percent.

The yield on the two-year sovereign sukuk was last at 3.49 percent, up from 2014’s low of 3.24 percent in February, while five-year debt yielded 3.81 percent from 3.77 percent in May, Bank Negara Malaysia indexes show.

‘Ultimate Parent’

James Lau, an investment director at Pheim Asset Management Asia Sdn., said MMHE will have to compensate investors for the risk from declining oil prices, the company’s slowing growth and rising borrowing costs.

“Investors will demand a premium,” Lau, who oversees $300 million in Kuala Lumpur, said in an Oct. 27 phone interview. “While investors can take comfort in Petronas being the ultimate parent, it wouldn’t be prudent to rely on that support as they are different entities.”

The Bloomberg-AIBIM Bursa Malaysia Corporate Sukuk Index, a benchmark that tracks the most-traded local-currency notes, gained 2.3 percent this year to an all-time high of 107.51 after rising 2.8 percent in 2013.

Prime Minister Najib is seeking to boost the nation’s oil and gas industry as part of his $444 billion 10-year economic transformation program geared to achieving developed-nation status by the end of the decade.

Order Book

MMHE has a market capitalization of 3.7 billion ringgit, data compiled by Bloomberg show. The company operates the largest fabrication yard in Malaysia with an annual offshore construction capacity of 129,700 metric tons, according to the statement from Malaysian Rating. It had an order book of 1.8 billion ringgit as of June, down from 2.6 billion ringgit at the end of 2013, the assessor said.

A joint venture started in July 2011 with Paris-based Technip SA has been awarded two contracts from Sabah Shell Petroleum Company Ltd. and Petronas Carigali, according to a Sept. 24 e-mailed joint statement.

“As long as the oil and gas industry continues to thrive, more companies are expected to tap the ringgit market,” Mohd. Effendi Abdullah, head of Islamic markets at Kuala Lumpur-based AmInvestment Bank Bhd., said in an Oct. 27 phone interview. “This is because the oil and gas industry, like infrastructure, has underlying economic activities that fit well with Shariah financing.”

(Bloomberg / 29 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Why Islamic finance is the wave of the future

Dubai: Islamic finance will become a norm rather than an alternative — as it currently is — in the near future, driving the growth of small and medium enterprises (SMEs) and Islamic trade, said leading Islamic banking professionals at the 10th World Islamic Economic Forum (WIEF) in Dubai on Wednesday

The opening session on the second day highlighted the importance of developing a standardised documentation process to facilitate the growth of Islamic trade finance.

In his keynote address, Hussain Al Qemzi, Board Member of the Dubai Islamic Economy Development Centre and CEO of Noor Islamic, said that SMEs play a large role in driving Islamic trade finance, adding that more advanced supply chain optimisation measures are needed to promote their growth.

At the panel discussion, Dr Adnan Chilwan, Chief Executive Officer of Dubai Islamic Bank, said that the potential for promoting Islamic finance among the Organisation of Islamic Cooperation (OIC) countries is tremendous and that Islamic finance and Islamic trade go hand in hand. “Islamic banking will not be an alternative but the norm of banking in the near future,” he added.

Muzaffar Hisham, Chief Executive Officer of Maybank Islamic Berhad, Malayasia, said that regulatory frameworks have a strong role to play in promoting Islamic finance, citing the strong growth in business between Malaysia, Indonesia and Singapore, following the introduction of governmental policies to promote trade. “The hurdles between policymakers must be cleared to boost Islamic trade finance,” he noted.

Arif Usman, General Manager, Global Head of Wholesale Banking, Abu Dhabi Islamic Bank, said that securing funding for start-up SMEs is a challenge, while Toby O’Connor, Chief Executive Officer, The Islamic Bank of Asia in Singapore, said that along with financial support, SMEs also need human support through adequate advisory services. Dr Chilwan pointed out that venture capital funding is practically lacking today for SMEs, despite the great emphasis that the region places on promoting the sector.

Clear cut policies for liquidity transfer among OIC countries and the emerging role of Islamic finance in Sub-Saharan and East African nations were also highlighted at the panel discussion, which concluded on the note of optimism that Islamic finance is growing in the right direction and will claim its share in global trade finance.

(Gulfnews.Com / 29 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic banking and capital markets to develop hand in hand

Dubai: As Dubai aspires to become the global hub for Islamic economy, Islamic banking and Islamic capital markets are expected to grow simultaneously, said Adnan Chilwan, CEO of Dubai Islamic Bank.

Clearly Islamic capital markets are relatively new phenomena. Earlier it was much simpler that if someone needed finance they would go to a bank and the bank would leverage its balance sheet and give a loan. Then it started becoming a little more sophisticated by many banks joining in together to do a syndicated deals. Then a stage came where banks started to participate in cross border deals.

Conventional debt markets are relatively old compared to Islamic bond markets. Over the last decade a number of corporates and sovereigns have started raising funds in the bond markets.

“Corporates around the world have realised that bank funding is available, while the availability of funding from capital markets is function of a number of factors such as global macro economic policies, geopolitical situations and such other events and that market may not be available infinitely. So purely from an opportunistic point of view, issuers are using both these markets depending on the prevailing market conditions,”

Over the last few years a number of sovereigns and corporates have started to lean towards Islamic capital markets. This is happening not because it is cheaper or because it is more secure but for the simple reason that it is a larger investor base. When a company decides to tap convectional capital market it automatically excludes a huge group of investors, but on the contrary if they go for a sukuk issue it is bringing into the fold both conventional and Islamic investors — naturally expanding the investor base.

There is a large pool of Islamic liquidity available. A larger liquidity pool generates larger demand which means the potential to drive price increases. The global financial crisis taught everyone a lot of things. People have now started looking at this industry as more resilient because there are clearly defined underling assets. They are carved out to support the bonds and it gives natural stability to this asset class and there is a secondary market which is performing well. With all these factors put together now people are keen to tap the Islamic capital markets.

Supply shortage

The industry is relatively nascent and also Islamic capital markets is now gaining popularity it is also a function of how liquid the secondary markets are performing. For an issuer to issue an Islamic paper also depend on demand. Of course, on the supply side, the major concern for corporates is the availability of Sharia compliant assets that can be ring-fenced. Islamic finance is asset backed and asset based.

“Supply is also a function of demand in the market. Nobody wants their issue to be under performing. When the issue is trading at a premium it simply means that there is demand for that paper in the secondary market,” said Chilwan. Additionally, he believes that as the market matures issuers should strive for better corporate governance and better disclosure standards.

The MSCI upgrade of UAE and Qatar markets to emerging markets this year is expected to increase asset allocation foreign institutional investors in these markets. “When a country is in the MSCI basket, the issues from that countries are also looked at very positively. So it is not just the equity markets, but the bond markets also benefit from this positive market vibes. Of course, ratings that comes along with issuances are also helping international investors to gain confidence in companies and markets,” said Chilwan.

(Gulf News.Com / 27 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Sultan Nazrin: Strive to make Islamic finance dynamic

DUBAI: Muslim countries must strive to make Islamic finance and the ecosystem in which it operates as dynamic and information-rich as possible, said Sultan of Perak, Sultan Nazrin Shah.

He said that in order to do so, there must be considerable investment in human capital particularly research, education and training.

These, he said, include financial institutions, the investment community and importantly, those responsible for Islamic jurisprudence and policy makers.

Sultan Nazrin noted that Islamic finance is fast becoming mainstream global finance, citing that the United Kingdom became the first sovereign issuer of sukuk outside the Islamic world followed by Hong Kong and South Africa.

“These sovereign issues mark a milestone and a coming of age of sorts for Islamic finance and asset management,” he said.

The Sultan of Perak, who is the Royal patron for Malaysia’s Islamic Finance Initiative was speaking at the Islamic Forum Dubai 2014 The Franklin Templeton Investments.

Sultan Nazrin made a special mention on Dubai and Malaysia, which he described as being major players in the Islamic finance sector.

He said efforts must continue to ensure the soundness and integrity of Islamic assets, where they have to be true not just to good investment principles but also the ethical values enshrined in the teachings of Islam.

“The ultimate objective of Islamic investment is to achieve al falah or success, happiness and well-being in this world and the hereafter through efficiency and effectiveness but also with fair dealing and economic justice,” he added.

Sultan Nazrin said a large proportion of Islamic investment today takes place on a cross-border basis where in terms of forging inter-connectivity, the effects of Islamic finance are global and should be recognised as such.

Training the much-needed capital, industry talent, regulatory bodies and business networks would draw people of all races and creeds closer together and not just Muslims, he added.

“With earlier provisos that Islamic financing and asset management need to be managed progressively and sustainably, this increasing closeness cannot but have positive effects in promoting greater mutual understanding and acceptance of Islamic finance by all,” said Sultan Nazrin.

He said Asia, particularly East and South-East Asia were the regions likely to take Islamic finance and investing to the next level as economic growth and wealth creation in this part of the world is expected to continue, albeit at possibly more suitable rates.

(The Star Online . 28 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Tunisia Plans $500 Million Sukuk Sale by End of November

Tunisia, where citizens started voting for a new parliament, plans to raise $500 million from the sale of sukuk by the end of next month, according to Finance Minister Hakim Ben Hammouda.

Citigroup Inc., Natixis SA, Standard Chartered Plc and Qatar-based QInvest “expressed their willingness to cooperate” and consultations are ongoing, Hammouda said in an interview in Tunis on Oct. 24. Former Finance Minister Elyes Fakhfakh in July 2013 said the nation would raise as much as $700 million from the sale of Islamic bonds, the same month it approved a sukuk law.

“The issuance of sukuk took a long time because of the complexity of this process and lack of experience in this field,” Hammouda said. “But in the end our government decided to have this challenge and to issue sukuk by the end of November.”

Tunisia may follow the U.K. and Hong Kong in selling debut Islamic bonds this year as governments globally seek to attract Shariah-compliant investors. The sovereign sukuk market is expected to reach $30 billion this year, Moody’s Investors Service said last month. Global sukuk sales climbed 13 percent so far this year to $37.8 billion from the same period last year, data compiled by Bloomberg show.

Tunisians cast ballots for a new parliament today, marking a milestone in the North African nation’s transition to democracy following the ouster of President Zine El Abidine Ben Ali more than three years ago. Results are expected Oct. 29, according to the election commission, and presidential elections are scheduled for next month.

The Islamist Ennahda movement won the first free election in 2011 after Ben Ali’s ouster with 37 percent of the vote. It stepped aside earlier this year after a political crisis triggered by the assassination of two secular leaders by Islamist militants.

(Bloomberg / 26 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic finance outlook 'bright'

MANAMA: The GCC Islamic finance industry is expected to maintain its rapid growth over the coming years despite mixed results across sectors this year, according to Standard & Poor's Ratings Services (S&P).

The industry's expansion is expected to be driven by the GCC's robust economic prospects, continued infrastructure needs and rising issuance from governments and government-related entities.

"We remain upbeat on the outlook for the GCC Islamic finance industry, but we have seen mixed fortunes across sectors this year and a broad spectrum of structural issues continuing to pose challenges," Standard & Poor's Middle East managing director and regional head Stuart Anderson said.

Despite growth, the industry remains a demand-driven market, with limited supply.

The expansion and enhancement of existing Islamic finance centres in the GCC and a more transparent regulatory environment are critical to accelerate growth.

The sukuk sector has registered healthy volumes this year with $20.3 billion worth of issuances in the GCC as of October 5, 27.3 per cent higher than the same period last year.

The fall in the issuance of corporate and infrastructure sukuk by almost a third compared to the same period last year was more than compensated by higher issuance from governments and financial institutions.

S&P believes sukuk issuance this year is on course for a 5pc growth from last year.

Refinancing needs from maturing sukuk and the good economic prospects for the GCC underpin our expectations.

Meanwhile, GCC Islamic banks have continued to increase their market share in the region.

Although S&P expects the growth of Islamic banks to gradually converge with that of their conventional peers over the next decade, the market share of Islamic banks will continue to rise in the next few years.

S&P expects total GCC banking assets - both conventional and Islamic - to rise to $2 trillion by next year's end from $1.7trn at last year's end.

The GCC banking credit stock is also expected to climb by around 10 this year and next year.

"Islamic banking growth is being driven by strong economic growth, recovering corporate asset quality cycle and ample financing opportunities.

"We believe Islamic banks will continue growing visibly faster than their peers, particularly in countries that have the highest domestic credit growth prospects," said Mr Anderson.

In contrast to the Islamic banking sector, the takaful sector in the GCC underperformed their conventional peers.

Continued resistance to the concept of insurance has left the market dominated by compulsory lines of business and weakened by fierce price competition.

S&P estimates the GCC takaful sector to generate just over 10pc of total market premiums. The sector is dominated by medical and motor insurance while the provision of life savings products, the mainstay of mature markets, is still undeveloped in the region.

(Gulf Daily News / 27 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic banking UK: Islamic Bank of Britain re-branded to Al Rayan Bank as number of non-Muslim investors grows

The Islamic Bank of Britain has unveiled plans to change its name to Al Rayan Bank, as it aims to increase its presence in London and acquire a wider range of customers.

 

It will also update its logo and all other aspects of its brand identity across its website and UK branches. As long as shareholders approve, the new identity will be introduced in December this year. 

 

The IBB, which was set up in 2004, remains the UK's only sharia-compliant retail bank and has developed the largest range of related retail financial products in the UK. Earlier this year, it was acquired by Masraf Al Rayan (MAR) – the fifth largest Islamic bank in the world and the second largest in Qatar. 

 

As it enters its second decade of existence, the bank hopes to see through ambitious expansion plans, particularly in London where its commercial and GCC operations will be based. It has £100m of capital investment from its new parent company.

 

It will focus on corporate and real estate finance, and hopes to continue attracting a wide range of customers. The bank estimates that nearly 83 per cent of customers who opened a deposit account the bank between January 2013 and August 2014 were non-Muslim. 

 

Sultan Choudhury, CEO of IBB said, “IBB has pioneered British retail Islamic banking over the last 10 years, achieving global recognition for its outstanding successes.  The change to Al Rayan Bank represents the latest chapter in the Bank’s history, in which it will expand its retail and commercial product offering to a wider audience, with the backing of a strong and successful parent.”

 

The Bank will continue to operate as a UK regulated bank, and customers’ deposits will remain protected by the Financial Services Compensation Scheme.

(City A.M / 23 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Morrocan bank ‘planning Islamic finance subsidiary with Gulf partner’

Brahim Benjelloun-Touimi said in an interview with Reuters that the proposed subsidiary “will take our partner’s name”, but he declined to reveal the identity of the financial institution.

Benjelloun-Touimi said he would give details after a bill to regulate Islamic banks and sukuk issues has been approved by Morocco’s parliament, which is expected before the end of this year. BMCE’s move would then need to be endorsed by Morocco’s central bank.

According to the Arab international newspaper Asharq Al-Awsat, Morocco’s lower house of parliament backed the bill last June. The paper said currently only the country’s leading bank, Attijariwafa, which is part-owned by Moroccan King Mohammed VI’s investment company Societe Nationale d’Investissement, has an Islamic banking subsidiary in the kingdom.

Morocco’s minister for general affairs and governance Najib Boulif said earlier this year that the Islamic finance bill was designed to allow “a gradual introduction of Islamic banks to preserve the competitiveness of existing, conventional, banks”.

Boulif said: “Local banks will be allowed to take at least 51% of the capital and as much as 49% will go to foreign Islamic lenders. There is a very strong demand from abroad for such a project.”

“We thought it is best to start with one Islamic finance institution as we wish to assess closely the experience to ensure its success,” Boulif said. “If it proves to be a success within six months, then nothing should stop us from authorising more Islamic lenders.”

A report published last February by international ratings agency Standard and Poor’s said Islamic finance could be a “good fit” for infrastructure and project finance in North Africa, because banks lack the long-term funding that these projects require. “After tremendous global success over the past decade, with total assets estimated at about $1.4 trillion, Islamic finance could make inroads in North Africa,” the report said.

Islamic finance expert Amir Ahmad of Pinsent Masons, the law firm behind Out-Law.com, said at the time that the report “sets out the natural course of development of Islamic finance in the rest of the Islamic world”. “The demand for infrastructure in North Africa could be the ideal catalyst for this development and North Africa is likely to be an attractive market.

(Out-Law.Com / 23 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Saudi Arabia's Advanced Petrochemical plans sukuk investor meetings

Saudi Arabia's Advanced Petrochemical Co. will begin meeting investors from Sunday ahead of a potential sale of a sukuk denominated in riyals, it said on Wednesday.

The pricing, tenor and size of the Islamic bond to be offered will be determined based on market conditions, Advanced said in a statement published on the kingdom's bourse.

Funds raised from the issue, to be arranged by HSBC Saudi Arabia and the investment banking arm of Riyad Bank , would be used for general business purposes, it added.

Should Advanced complete an issue, it would be a debut sukuk transaction from the petrochemicals firm.

In the past, Advanced has relied on bank loans, including Islamic equivalents, to fund itself; last year it raised 200 million riyals ($53.3 million) through a two-year murabaha, a common Islamic financing contract, for a housing project.

However, like many companies in the kingdom, it is turning to the debt capital markets to take advantage of high liquidity in the Saudi investor market which has made finance cheap, while the authorities have been encouraging firms to issue sukuk to diversify funding away from bank loans and develop the local debt market.

The company said on Sept. 4 it planned to invest in a project worth around $1 billion to produce propylene in South Korea. The joint venture with South Korea's SK Gas is due to start in the first half of 2016.

(Reuters / 22 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Pakistan central bank to phase in new Islamic finance rules

Pakistan's central bank will phase in new capital adequacy rules for Islamic banking subsidiaries and trade sharia-compliant government debt in the open market, addressing a lack of liquidity management tools in the sector.

The initiatives are part of an ambitious five-year plan by the regulator to promote Islamic finance through an array of proposed legislative changes, product incentives and instructions to market participants.

In April, the central bank said it was working on such tools as part of efforts to ensure a level playing field for Islamic banks in the majority-Muslim nation.

The central bank has revised the minimum paid-up capital requirement for Islamic bank subsidiaries to 6 billion rupees ($58.4 million), giving them a five-year period to raise it. The minimum paid-up capital requirement required for all other banks is 10 billion rupees.

The move would encourage conventional banks to establish subsidiaries rather than operate Islamic windows, a practice that allows lenders to offer Islamic financial services provided client money is segregated from the rest of the bank.

In a separate circular, the central bank said it would trade government-issued Islamic bonds (sukuk) with Islamic banks on a competitive basis, serving as a money market instrument and a monetary policy tool.

(Reuters / 20 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

U.K. Dream of Becoming Islamic Hub Needs Corporate Assist

The U.K.’s ambition to become a global hub for Islamic finance, bolstered by a debut sovereign sukuk in June, needs corporate borrowers to take the baton.

There’s never been a publicly sold Islamic bond from a corporate in the country, according to data compiled by Bloomberg. The closest it has come was a $500 million issue by the Middle Eastern unit of London-based HSBC Holdings Plc in 2011. International Innovative Technologies Ltd., a clean energy company in Gateshead, privately placed the U.K.’s first corporate sukuk in 2010.

London is attempting to marry its status as one of the world’s financial hubs with an industry that’s poised to almost double in the four years through 2018 to be worth about $3.4 trillion, according to Ernst & Young LLP estimates. Even after the city’s former Lord Mayor, Roger Gifford, said Islamic finance should be as British as fish and chips, the U.K.’s debt office said in August it doesn’t have any current plans to sell further sukuk.

“We’re really looking for corporates to issue sukuk, to create a benchmark,” Farmida Bi, a London-based partner at law firm Norton Rose Fulbright, which advised Goldman Sachs Group Inc. on its debut sukuk sale, said by phone Oct. 9. The U.K.’s sukuk “was never just about fundraising for the government,” she said. “There’s definitely a desire to build the industry beyond the sukuk, to provide a framework.”

Corporate Catalyst

The U.K. sold Shariah-compliant notes maturing in July 2019 at a profit rate of 2.036 percent, receiving orders worth more than 10 times the 200 million pounds ($322 million) raised. The debt yielded 1.47 percent at 9:35 a.m. in London. The average rate of sukuk in the Middle East is 4.1 percent as of Oct. 17, according to JPMorgan Chase & Co. indexes.

“The demand seen for the U.K. sukuk should act as a catalyst for further issuances from the government or from U.K. corporates looking to access the liquidity in the Islamic market,” Humphrey Percy, London-based chief executive officer of the Bank of London and The Middle East, said by e-mail on Oct. 9. BLME is the largest Islamic bank in Europe, according to its website. “We welcome more participants here to further develop the market and increase its depth.”

The government will review its sukuk sale and consider how it can further develop its strategy for Islamic finance, Sarah Ellis, spokeswoman for the debt office, said in August. The office last week directed a request for comment to the Treasury, who didn’t respond to e-mailed questions.

‘Western Center’

A lack of issuance may not hold back the industry. The U.K. has six Shariah-compliant lenders, more than any European country, according to London-based Wayne Evans, a senior adviser of international strategy at TheCityUK, an independent company promoting financial services in the U.K.

The government last year set up an Islamic finance task force to cement London’s position as the leading “Western” center for Islamic finance, and TheCityUK was invited to be one of the practioner representatives, Evans said.

“Arguably, London already has this status,” Evans said by e-mail Oct. 16. Two London-based banks are among “the leading arrangers of global sukuk, around 25 law firms in the U.K. are supplying services in Islamic finance, and advisory services are provided by the largest four professional services companies,” he said.

Global Islamic bond sales jumped 16 percent so far this year to $37.2 billion, according to data compiled by Bloomberg. The U.K. was the first non-Muslim government to sell sovereign sukuk, and was followed by Hong Kong, South Africa and Luxembourg.

“There is energy, drive and focus on promoting Islamic finance across the economy,” Norton Rose’s Farmida Bi said. The government is “trying to make it clear to corporates that Islamic finance is a source of financing that they can tap into, it’s available,” she said.

(Bloomberg / 20 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia: Muslim world needs to develop revolutionary method in Islamic finance

KUALA LUMPUR: The Muslim world needs to develop a revolutionary method in Islamic finance to allow entrepreneurs and financiers to leverage each other to contribute to the nation’s economic growth sustainability, Datuk Seri Najib Tun Razak said.

The prime minister said Islamic countries had made remarkable progress and became a significant group in the global economy as the total gross domestic products of the Organisation of Islamic Cooperation (OIC) countries had grown to US$9.4 trillion in 2012 from US$7.5 trillion.

The numbers showed that the Muslim world has limitless potential, he said in a keynote address at the Association of National Development Finance Institutions in Member Countries of the Islamic Development Bank (ADFIMI) – SME Bank International Forum 2014 here yesterday.

“The Muslim world through organisations, such as ADFIMI, must continue to emphasise that Islamic nations are peaceful sovereigns and a source of prosperity for the world.

“Our potential is enormous if we are organised and get our act together,” he said.

The prime minister said as an Islamic finance pioneer, Malaysia could and must play an influential role in ensuring the sector’s future development.

“Ten years ago, Malaysia issued the world’s sovereign sukuk.

Today, Islamic finance is a US$1.2 trillion market; this is expected to rise to US$2.6 trillion by 2017.

Islamic finance is now growing at 50 per cent faster than conventional banking,” he said.

Hence, Najib called on small medium enterprises (SMEs) to make greater inroads in Islamic finance as one of the fastest growing sectors in a crowded financial marketplace.

Najib drove home the point that there were some issues that needed to be rectified by the industry, such as regulatory hurdles, lack of consumer education and the need for more business-friendly policies.

In Malaysian context, he said, the government aimed to increase the SME macroeconomic contribution to 41 per cent of the GDP, 62 per cent of employment and 25 per cent of exports by 2020.

“This is a tall order, but I believe this is achievable and attainable,” he said

.

Najib noted that RM12 billion was spent for 157 SME development programmes last year that supported nearly 890,000 projects across all economic sectors.

He said that this year the spending rose to RM13 billion and almost half of the funds came from the private sector.

Present were Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz, Khazanah Nasional Bhd Deputy Chairman Tan Sri Nor Mohamed Yakcop, SME Bank Group Managing Director Datuk Mohd Radzif Mohd Yunus, and ADFIMI Chairman Mehmet Emin Ozcan.

(Borneo Post Online / 22 October 2014)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com