Pakistan: SBP to set up centers of excellence in Islamic finance at 3 institutions

The State Bank of Pakistan (SBP) held a signing ceremony for Financial Innovation Challenge Fund (FICF) on promoting excellence in Islamic finance in Pakistan under its financial inclusion programme funded by the UK’s for International Development (DFID) funded. The signing ceremony marks the beginning of the implementation phase of the FICF innovative Islamic finance education and research projects in partnership with leading higher education institutions which was earlier launched by Finance Minister Ishaq Dar on January 9, 2015.

SBP Deputy Governor Saeed Ahmad, who is also the FICF advisory committee chairman, hosted and witnessed the signing ceremony. The chairman congratulated the successful institutions for proposing projects which will build platforms for Islamic finance education and research in Pakistan. He shared that the committee held a series of long meetings to select the best projects from the long list of proposals received under the challenge round. The decision was based on well-defined uniform evaluation criteria including uniqueness of the proposed innovations, sustainability of the ideas and potential for financial inclusion to establish value for money.

Saeed Ahmad, while sharing his enthusiasm and hope, urged the successful institutions to implement their projects over the next 12 months to ensure timely completion to further build Islamic finance education research infrastructure in Pakistan. He hoped that the centers of excellence would meet the growing human resource and knowledge gaps through quality and value-added services and knowledge products.

At the ceremony, three projects were signed with Institute of Business Administration (IBA), Lahore University of Management Sciences (LUMS) and Institute of Management Sciences (IM Sciences).

The FICF is a component of the larger financial inclusion programme (FIP) being implemented by the SBP under the funding assistance of UK aid to spur innovative financial inclusion in Pakistan. The first and second round of the fund was held on financially inclusive government to person (G2P) payments and promoting rural and agricultural finance accordingly.

(Pakistan Today / 31 July 2015)

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Malaysia sukuk sale lures weakest demand in 2015 on 1MDB concern

KUALA LUMPUR (July 30): Malaysia attracted the weakest demand at a sovereign sukuk auction in almost eight months amid concern it will need to bail out a state-owned investment company.

The Treasury sold 3.5 billion ringgit ($916 million) of Shariah-compliant bonds due October 2025 to yield 4.105 percent on Thursday, according to data published on the central bank’s website. The bid-to-cover ratio of 1.85 was the lowest since Dec. 5, data compiled by Bloomberg show.

Prime Minister Najib Razak removed his deputy Tuesday as he seeks to head off a public rift within his cabinet over his handling of financial probes into debt-ridden 1Malaysia Development Bhd. The state-owned entity’s borrowings totaled 41.9 billion ringgit ($11 billion) at the end of March 2014.

“There is less interest because people are unsure of the contingent liabilities from 1MDB,” said Nizam Idris, the Singapore-based head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. “The domestic political uncertainty also has a part to play.”

The yield on the existing 3.99 percent Islamic government bonds due October 2025 declined three basis points to 4.1 percent as of 2:18 p.m. in Kuala Lumpur Thursday, according to Bursa Malaysia prices.

The ringgit weakened 0.1 percent to 3.8150 a dollar, prices from local banks compiled by Bloomberg show. That took its decline in 2015 to 8.3 percent, the worst performance in Asia.

(The Edge Markets / 30 July 2015)

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South Africa proposes extending sukuk to corporate issuers

South Africa's Treasury has proposed extending tax reforms to facilitate the issuance of sukuk, or Islamic bonds, by listed companies after the government did a $500 million debut deal last September.

Sukuk transactions in Africa have been few and infrequent but this is gradually changing as governments see an opportunity to tap cash-rich Islamic investors from the Gulf and Southeast Asia.

Senegal issued sukuk for the first time in June last year while Niger, Nigeria and Ivory Coast are planning debut deals.

South Africa introduced tax amendments in 2011 to allow the government to issue sukuk and this was extended to public entities in April this year. The proposed changes will come into effect in January 2016.

"It has always been the government's intention to ensure that these financing arrangements are accessible to other entities as well as an additional source to raise capital," the Treasury said in the draft of the legislation.

Taxation is often problematic for sukuk because of their asset-backed nature, which means multiple asset transfers may be required for a transaction to take place, creating a heavy tax burden for issuers unless special legislation is in place.

Firms such as South African National Roads Agency Ltd (Sanral) and power utility Eskom have been considering following the government's sukuk deal, which attracted an order book of $2.2 billion.

Sanral has studied sukuk for years but has faced some challenges relating to the transfer of assets and its tax status, the company told Reuters in May.

Both Sanral and Eskom have said they would only sell sukuk if this was cost-effective versus other funding sources.

(Reuters / 28 July 2015)

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WHAT DODD-FRANK CAN LEARN FROM ISLAMIC FINANCE

Five years ago this month, Congress took a step toward reining in elements of a troubled financial system when it passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The move was touted as an end to the laissez-faire principles embodied in the repeal of Glass-Steagall, which had previously protected against many of the excesses the banking industry is now notorious for.

A Pew poll from earlier this year found that 63% of Americans said the US economic system is no more secure today than it was before the 2008 economic crisis. One explanation for this may have to do with inadequacies in the legislation. How can we continue to make things better? One answer can be found in the principles of Islamic finance.

Almost everyone remembers that high-risk loans, speculation, and leverage fueled the run-up to the Financial Crisis. As the financial sector began to collapse in mid-September 2008, the aggregate default and the trading of mortgage-backed securities (MBS) was a major liability. Banks bought and sold MBS products of all types, keeping some on their books but shifting most of the credit risk to bank trading partners. Although Dodd-Frank provides for securitizing banks to retain an economic interest in the credit risk of any asset transferred, sold, or conveyed to a third party, the amount is less than 10% and exemptions to this rule abound. Islamic finance expressly prohibits the buying and selling of debt and elevates lending (without interest) to be a charitable activity, incentivizing instead risk-taking ventures in partnership with customers in order to produce a tangible impact in communities.

At its core, the credit and housing market crisis was caused by a banking industry that issued loans at excessive interest rates to home buyers who ultimately defaulted. Families with adjustable-rate mortgages were left vulnerable to fluctuating interest rates. These unsound banking practices are still condoned by Dodd-Frank in various forms.

Islamic finance, which recognizes the consequences of charging a gain without sharing the risk, prohibits these practices due to the inherent inequity this arrangement causes between the parties. According to Islamic finance, riba, which is usually translated as “interest,” “usury,” or both, is considered a tool of oppression, as it exploits the needy by unjustly taking their money and enabling those who receive it to -illicitly hoard wealth. Over time, the effects of riba take a toll on society, limiting upward mobility and creating an entrenched financial elite.

The principles of Islamic finance are steered by the need for justice and fairness in financial arrangements. Dodd-Frank was an attempt to move us closer to correcting the excesses of a banking sector still desperately in need of structure, or at the very least a conscience. There’s something to be said for the stability brought by a system centered on justice. Until we have a banking system that more fully participates in a partnership with customers—instead of treating them like nameless, faceless numbers on a spreadsheet—we distance ourselves from the ideals of a just society.

Finally, one of the biggest reasons we still sit on the precipice of crisis five years after Dodd-Frank is that many of its components still need to be written. Doubtless, this has created an environment of uncertainty and timidity in the banking industry. Politicians talk about making lasting reforms but have yet to follow through. This regulatory limbo cannot abide.

Talk is cheap. Dodd-Frank can be better, and the principles of Islamic finance can help.

About the author

Joshua Brockwell is the Director of Investment Communications at Azzad Asset Management. Azzad Asset Management is investment advisor to the Azzad Funds, halal mutual funds that follow investing criteria outlined by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Azzad is renowned both for its advocacy of the Seven Tenets of Halal Investing and as sponsor of the first Shariah-compliant, socially responsible fixed-income mutual fund in the United States, the Azzad Wise Capital Fund.

(Oil And Gas Financial Journal / 27 July 2015)

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Female banker takes on Islamic industry

DUBAI: Samina Akram left her job at Merrill Lynch International Bank eight years ago to start her own consultancy in Londonspecializing in Shariah-compliant finance. Now she’s seeking to empower women in male-dominated Islamic banking.

What started as an informal ladies lunch club with other women in the industry will this week become the first global Women in Islamic & Ethical Finance Forum, a conference for more than 200 people at KPMG LLP’s Canary Wharf offices in London. Shariah-compliant finance forbids interest and typically relies on deals in which the buyer and the seller share risk as well as profit.

Akram, 36, who set up Samak Consultants LLP, is seeking to support women in an industry where they face more obstacles than in conventional banking because of religious conservatism, restrictions on mixed-gender working environments and stereotypes about women in Islamic finance.

In the six-nation Gulf Cooperation Council a shift may already be underway, as the banks aim to draw more female clients and recognize they need more female bankers to do so, according to PricewaterhouseCoopers LLC. Women’s net worth in the GCC may grow as much as 15 percent to about $258 billion in the 10 years through 2023, according to Kuwait Financial Center, an asset manager and investment bank.

“There is opportunity, absolutely,” Ashruff Jamall, the Dubai-based head of the Islamic finance division at PwC, said on July 21. “It’s a question of priorities. Islamic banks are now beginning to focus on the women’s segment. Developing female leadership also serves as a catalyst in attracting women as customers.”

Having started at Merrill Lynch in an administrative role, Akram rose to run the lender’s Islamic finance wealth management business. She left the bank in April 2009 as investment banks were shifting focus to outside Islamic finance consultants rather than in-house experts.

“I was an outsider with no direct industry experience and being a woman certainly did not help,” Akram said this month. “My personal struggle in the industry made me realize the obstacles women face and what needs to be done to overcome them. This is where the Women in Islamic Finance idea came from.”

Unemployment among women is five times higher than for men in the GCC, and women hold less than 1 percent of top executive positions, among the lowest figures worldwide, according to a report by McKinsey Middle East last year.

In more conservatives countries, such as Saudi Arabia, there are religious and social constraints that for example forbid the mixing of genders in the work environment. While women in the kingdom make up the majority of university students, they account for just 21 percent of the workforce, most of them employed in education and health care, according to Emad Mostaque, a London-based strategist at emerging-markets consultancy company Ecstrat Ltd.

In other parts of the world with large Muslim populations, women have made more progress in Islamic banking. Two of Malaysia’s 16 Islamic lenders are run by women and three of the 11-member central bank Shariah Advisory Board are female.

In the GCC, Abu Dhabi Islamic Bank PJSC, the UAE’s second-biggest Shariah-compliant lender, has unveiled a yearlong initiative to mentor about 40 female bankers who have spent at least four years at the bank and prepare them for more challenging leadership roles.

Shakeeb Saqlain, the CEO of IslamicBanker.com, a U.K.-based online training and networking platform specializing in Shariah banking, said the lack of women in leadership roles at banks has been a miscalculated strategy.

Financial institutions “must do more to offer Islamic financial solutions to this growing female segment, who desperately welcome the idea of investing in Shariah-compliant or ethical financial products,” Akram said.

(The Daily Star Lebanon / 28 July 2015)

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RAM Ratings reaffirms MRCB Southern Link’s Senior and Junior Sukuk ratings

“The negative outlook on both ratings signals the potential for further deterioration in the ratings as a result of a weaker cashflow position should there be any delay in its refinancing exercise. The differential between the ratings of the Senior and Junior Sukuk reflects the Junior Sukuk’s subordinated status from a legal perspective.

“MRCB Southern Link is a funding conduit for the 8.62-km Eastern Dispersal Link (EDL) in Johor Bahru.

“The reaffirmation of the ratings is premised on the inroads that the Company has made with a debt-refinancing exercise. If the Company fails to complete the refinancing exercise by end-2015, a default on the Junior Sukuk is expected at end-December 2016, and a default on the Senior Sukuk at end-June 2019. As such, the ratings of the sukuk will face downward pressure if the refinancing exercise is not concluded by the end of the year. Elsewhere, as an interim measure to stave off a liquidity crunch, the Company procured bank guarantees (BG) amounting to MYR 90 million on 27 January 2015 to substitute the cash reserves in its finance service reserve accounts (FSRAs). As such, the Company was able to utilise these cash reserves for ongoing debt repayment as well as to support working-capital requirements.

“Since the commencement of tolling on the EDL on 1 August 2014, the Expressway’s monthly traffic volume has been volatile owing to toll-rate hikes on the JB-Singapore Causeway and the higher Vehicle Entry Permit fee imposed by the Singapore government. Compared to the last 5 months of 2014, the annualised average daily traffic (ADT) on the EDL had declined 1.7 per cent in the first 5 months of 2015. We anticipate a minor contraction in the volume of traffic on the EDL for 2015. Thereafter, we expect ADT growth to recover to between 2 per cent and 3 per cent per annum in 2016 and 2017, respectively. Elsewhere, the VEP fee planned by the Government, which has yet to be formalised, may negatively impact traffic volume on the EDL.

“Given the initial underperformance of traffic on the EDL in 2014 subsequent to the imposition of toll charges and our expectations of future traffic, the Company is envisaged to face liquidity stress. MRCB Southern Link will have to draw down the Junior Sukuk Special Reserve Account BG (of MYR 20.43 million) by end-2015 to provide the Company with temporary liquidity respite.”

(C P I Financial / 26 July 2015)

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Margin, scale issues to hit smaller Islamic insurance players

Dubai: The enhanced regulatory environment across GCC is expected to result in a surge in costs associated with the implementation of the regulations impacting the profitability of takaful players hard, especially the smaller players.

Implementing the existing regulatory developments will raise costs because of the need to hire expertise, combined with the administrative costs related to meeting the requirements for listed companies.

“We consider that introducing measures to align local regulations may mitigate some of the costs related to adopting the various regulatory requirements and would encourage insurers to focus on capital management and improve pricing discipline,” Ali Karakuyu, an analyst at Standard & Poor’s, said.

According to S&P profitable insurance companies in the GCC region (mostly large, conventional insurers) tend to rely on group medical business or policies that provide significant commission income from reinsurers. Only a few major local insurers can access this profitable commercial business; the smaller players, including the takaful companies, do not have a track record of servicing such contracts and lack the capacity to do so.

This leaves all the small players in the region, including takaful companies, reliant on retail business — mostly motor — sourced from agents charging high commissions.

“We consider that few companies will be able to build a credible business or financial profile from retail business alone, without a cost-effective distribution channel. Furthermore, we find that smaller insurers’ competitive and capital positions are more susceptible to one-off failures,” Karakuyu said.

Analysts say expense ratios of takaful players could rise even higher when additional fees charged by shareholders to manage the policyholder fund (wakala fees) are added. Shareholders at some companies are charging between 15 to 20 per cent of the gross premium (known as gross contributions).

Compared with more-developed markets, the GCC region’s insurers have high tolerance for high-risk assets. The new regulations include limits on the use of such assets, which could mean lower, but more stable investment returns for some players. In Kuwait, insurers must now hold a higher ratio of liquid assets, sufficient to cover their technical liabilities. Although the UAE still permits significant holdings in equity and real estate, which are considered as high-risk assets, liquid assets must cover gross technical reserves. In a market that makes heavy use of reinsurance, liquid asset coverage is considered a prudent measure.

Analysts say in the context of rising costs and competitive pressures, key shareholders may reconsider their long-term commitment to the takaful sector. Some of them entered the industry to maximise the returns on their real estate and equity holdings. In effect, in many cases board members consider underwriting performance secondary to investment performance. Weak technical profitability was not seen as a key threat to the capital base.

“While core shareholders have not yet indicated that they are considering selling their stakes, we see increasing evidence that they are less willing to inject more capital to help takaful providers meet the enhanced regulatory requirements, given their generally marginal results,” Karakuyu said.

“Family ownership of takaful providers remains one of the main obstacles to mergers and acquisitions. High market valuations, relative to book value, also reduce the incentive to merge, especially in Saudi Arabia.

(Gulf News Banking / 26 July 2015)

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Malaysia: Maybank Ageas aims equal contribution from takaful, general insurance

KUALA LUMPUR: Maybank Ageas Holdings Bhd, the parent company of Etiqa Insurance Bhd and Etiqa Takaful Bhd, aims to equalise the contribution from its general insurance business and that of life insurance and family takaful for the financial year ending Dec 31, 2015. 

The target would be supported by the company's new distribution channels and and plans to be more aggressive on the fire thrust of its general insurance business, said Chief Executive Officer Kamaludin Ahmad.

"We want to have a good growth in fire insurance. In addition, we are going to sell term takaful cover which is suitable for the younger generation, as well as, provide house owner insurance on our online channel.

"The challenge we are facing now is in the motor insurance sector. It has always been a challenge in the market. We will probably break even in the motor insurance," he told Bernama.

For its life insurance and family takaful, Kamaludin said Maybank Ageas has been consistent in upgrading products for medical care and was proactive in its claims servicing. 

Maybank Ageas recorded a premium of about RM5 billion last year, of which RM2.55 billion came from life and family insurance and the remaining RM2.45 billion came from general insurance. 

With its plans this year, Kamaludin said Maybank Ageas aimed to increase the number of policyholders by 50,000 new customers and at least 70,000 policies from its existing customers. 

To date, it has 3.9 million policyholders owning a cumulative 5.8 million policies. 

On overall performance, Kamaludin said the Maybank's insurance and takaful arm aimed to increase total premium by at least 10 per cent in the current financial year, driven by its life insurance, takaful business, as well as, contributions from its Singapore subsidiary. 

As at end-June 2015, Etiqa Insurance Pte Ltd's life insurance annual premium equivalent stood at SG$22.8 million (SG$1=RM2.80) against a full year target of SG$60 million. 

For general insurance, the year-to-date gross written premium is at SG$26.8 million against a full year target of SG$59.1 million.

(The Star Online / 23 July 2015)

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Malaysia: RM38bil in sukuk planned for this year

PETALING JAYA: Malaysia has more than RM38bil of sukuk issuances in the pipeline dominated by the private sector.

Data recently compiled and updated by Reuters showed that Tenaga Nasional Bhd has hired three banks to help raise up to RM9.5bil through a sukuk issue.

It is raising the amount to develop a greenfield power plant it has taken over from debt-laden state fund 1Malaysia Development Bhd.

Another notable corporate issuer was SapuraKencana Petroleum Bhd.

It said said in mid-June that it planned to raise up to RM7bil with a multi-currency sukuk programme.

Meanwhile, the country’s second largest lender, CIMB Group Holdings Bhd wants to launch a new RM6bil conventional and Islamic bond programme, a regulatory filing by RAM Ratings said in late April.

Telekom Malaysia Bhd had readied in late April a RM2.8bil, multi-currency sukuk programme. Another prominent issuer was Axis REIT.

It said in early April that it had expanded its sukuk programme to RM3bil from RM300mil.It had extended the tenure to perpetual from 15 years.

Reuters news report yesterday said the Thomson Reuters Global Sukuk Index was at 118.01254 points, up from 117.85307 at the end of last month and 115.79726 at the end of last year.

(The Star Online / 22 July 2015)

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Islamic Finance System In Turkey

The Islamic finance system has arisen due to various religious and economical reasons and, in general, it is a system where any and all kinds of financial activities and transactions are applied within the scope of Islamic rules. This market is established based on applying the principles and rules brought in by Islam to the financial transactions. Considered as an alternative field to the modern finance understanding, the Islamic finance quickly develops as an alternative field in the global finance markets in the light of the developments during the recent years. The framework of an Islamic financial system is being established in line with various rules and laws which the Islamic communities are subjected to in terms of economical, social, political and cultural aspects.

The basic difference of Islamic finance and traditional finance is that the "interest", located in the center of the traditional financial transactions, is prohibited in the Islamic finance. If the money paid for the debt instrument is different than its nominal value, then the difference between them is described as interest. The Islamic religion considers this difference as an unfair increase, therefore prohibits the trading of any debt instrument for a value other than its nominal value. With the interest prohibition in question, it's aimed to prevent any unfair capital increase at a loss of someone else. In addition to this, only partnering for profit without taking any risk and without partnering to loss is also a prohibited transaction in the Islamic world. Debt instruments issued without taking the abovementioned into account are not accepted as an Islamic debt instrument.

For the Islamic law, the provisions of the agreement should be definite for the legal transactions and particularly for the agreements putting both parties under an obligation. In other words, the subject matter of the agreement should be known and definite. Particularly the agreements with substantial uncertainties are not considered as suitable for sharia.

According to the Islamic rules, the activities based on making a gain from the loss of someone else such asgambling, betting and games of chance are also prohibited.

Within this scope, the financing methods developed by the Islamic financial institutions can be categorized in general as Mudaraba (labor capital partnership), Musharaka (profit-loss partnership), Murabaha (cost plus profit margin sales), Ijara (lease financing), Quard-Hasan (interest-free loan), Istisna'a (order based procurement) and Sukuk.

As one of these financing methods, Sukuk is an important financial instrument suitable to the interest-freebanking principles developed for increasing the financing in the international capital markets. The basic rule in Sukuk is that it has to be based on an asset different than the traditional debt instrument bonds. In the simplest term, Sukuk shows owning an asset or benefiting from that asset. According to this system, the main company assigns the properties subject to the Sukuk transaction to a company established for a special purpose, and this company securitizes and sells these assets to the investors. In the Sukuk system, the receivables are securitized based on the asset. As a result, it allows the buyer to get a share from the revenues obtained from the assets, in addition to the proceeds arising from the sales of the assets. Sukuk has become a global investment instrument and also defined as "interest-free bond". The Turkey version of Sukuk has entered to our legislation as lease certificates as a similar instrument and is regulated in the "Communiqué on Lease Certificates" no. III-61.1 (Communiqué) of the Capital Markets Board of Turkey. Lease certificate means thesecurity which is issued by the asset leasing company in order to provide financing to any kind of asset and right and allowing the lease certificate holders to be entitled for the revenues obtained from this asset or right, in the rate of their shares.

Carried out within the scope of the abovementioned rules and principles, the operation of the Islamic financial services and products vary from country to country, and recorded a significant improvement during the recent years. Examining and considering the other examples in the world, the Islamic financial system appears as an effective system in the fund transfer process as an alternative financial brokerage.

(Mondaq News Alerts / 22 July 2015)

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Malaysia: West Coast’s proposed RM1b sukuk rated AAA by RAM

KUALA LUMPUR, July 21 — RAM Ratings has assigned “AAA(bg/fg)/Stable” rating to the proposed guaranteed RM1 billion Sukuk Murabahah Programme to be issued by West Coast Expressway Sdn Bhd (West Coast).

The rating reflects irrevocable and unconditional Kafalah from AAA-rated Bank Pembangunan Malaysia Bhd and Danajamin Nasional Bhd, which enhance the sukuk’s ratings beyond West Coast’s stand-alone credit strength.

The proposed sukuk, a syndicated term-loan facility, a government support loan and shareholders’ equity, will fund the West Coast Expressway, said the rating agency in a statement here today.

The 316-km highway, from Banting, Selangor, to Changkat Jering in Taiping, will be the second longest inter-state tolled expressway after the North-South Expressway.

It is budgeted for completion within five years at a cost of RM5 billion.

(Malay Mail Online / 21 July 2015)

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Tecom Investments and Amlak Finance launch off-plan Islamic financing

Dubai: Tecom Investments said on Tuesday it has signed an agreement with Amlak Finance, the UAE’s first specialised real estate finance provider, to offer Sharia-compliant financing options via its Amlak Tatweer programme to all purchasers of freehold Villa Lantana homes, including non-resident and self-employed buyers.

Amlak will offer financing of up to 50 per cent of the property value prior to project handover, with the option to re-finance up to 75 per cent upon completion for tenures of up to 25 years at highly competitive rates, enabling more investors and end-users to become part of the Villa Lantana community, Tecom Investments said in a statement.

The new Villa Lantana development of 440 freehold family villas represents an astute investment opportunity, in part due to its key location in Dubai’s Al Barsha growth corridor in addition to the established reputation of its master developer, Tecom Investments.

The contemporary Villa Lantana community also features a well-planned, beautifully landscaped family neighbourhood. Buyers can choose between 17 different villa designs, 11 floor plans and a range of 3, 4 and 5 bedroom detached and semi-attached family homes. Villas span in square footage from 2,453-square-feet of Built Up Area (BUA), up to 
6,082-square-feet BUA.

(Gulf News Markets / 21 July 2015)

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Investments help to lift Sharjah Islamic Bank profit

Sharjah Islamic Bank said its net profit for the first half increased 1.2 per cent, boosted in part by a jump in the value of its investments.

Net income rose to Dh204.6 million in the first six months of the year compared to Dh202.1m in the corresponding period last year.

The value of its investments jumped 42 per cent to reach Dh2.2 billion compared to Dh1.6bn in the same period last year.

The bank’s deposits rose 7 per cent to Dh27.8bn at the end of the second quarter compared to Dh26bn at the end of the second quarter last year.

The lender did not provide a breakdown of its profit for the second quarter.

Separately, Invest Bank, another Sharjah-based lender, said its second quarter net income decreased less than 1 per cent as gains in fees and commissions were weighed down by losses in the value of its investments.

Net income fell to Dh97.4m from Dh98.2m in the same period last year, the bank said. Net fees and commission income rose 33 per cent to Dh46.7m from Dh35.1m, but net income from investment securities at fair value fell to Dh6.9m from Dh23.5m in the corresponding period last year.

The report did not say which securities the bank invests in, but many lenders in the UAE have exposure to the local stock market which has been volatile amid the collapse in the price of oil.

The price of crude, to which the fortunes of the UAE economy is tied, has dropped 1.3 per cent this year. Last year the price of crude shaved 48 per cent of its value.

Like most UAE lenders, Invest Bank is making more money from fees and commissions. That is because amid a spate of low interest rates, the returns banks have been making from giving out loans have been dwindling, forcing them to offer customers more services from asset management to trade finance.

(The National Business / 20 July 2015)

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Islamic Finance to fund Sustainable Development Goals

As part of its commitment to the SDGs, the Islamic Development Bank has announced it will increase its funding of SDG related activities through its ten year strategy framework, from $80 billion recorded during the MDGs, to $150 billion over the next 15 years (2016-2030).

Dr Savas Alpay, said the SDGs, which contain 17 goals and 169 targets, and are expected to replace the Millennium Development Goals (MDGs), could address major global challenges and promote financial inclusion especially to the under-privileged segment of the society. 

He called on world leaders to move faster, take strong and decisive actions in order to fulfill the commitments made by governments and international agencies for the implementation of the SDGs. 

 “Islamic finance has footprint in Asia and Middle East, is ripe for growth in South America and Europe and has future markets in North America, Central Asia and Australia. 

Its global assets have grown considerably and are estimated to have reached US$1.8 trillion by 2014 with compounded annual growth rate of about 15-20 percent,” the Chief Economist stated.  

 Dr Savas Alpay said IDB is a pioneer in initiating innovative means of Islamic finance, and the instruments applied in this mode of financing have the potential to address key targets of the SDGs such as food security, provision of shelter, building infrastructure, providing sustainable energy and ensuring financial inclusion. 

He added that Islamic financial instruments like Sukuk (Islamic capital market instruments), could be utilized as an effective non-traditional means of mobilizing resources for the implementation of the SDGs. Dr Alpay told delegates at the conference that  IDB has used such instruments in funding a number of short term and long term development activities. 

Dr Sami Alsuwailim of the IDB explained the concept of Islamic finance as a participatory system of financing whose core principles are accepted globally irrespective of faith or nationality.  

Dr. Mahmoud Mohieldin of the World Bank, said there are several advantages provided by Islamic financial services, and that is why the World Bank is paying significant attention to them. 

He stressed that during the financial crisis, the World Bank noticed that Islamic financial institutions developed some resilience, and because of the provisions of Islamic law that prohibit certain types of transactions like gambling and speculation, Islamic finance is linked with the real economy and prevents institutions from accumulating debt beyond reason. 

(East African Business Week / 19 July 2015)

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

Demand grows for Islamic finance body IILM sukuk

Demand for Islamic bonds issued by the International Islamic Liquidity Management Corp (IILM) is growing, signaling widening popularity for a programme designed as a cross-border tool for Islamic banks to manage their liquidity needs.

The Kuala Lumpur-based body is a likely beneficiary of a decision by Malaysia’s central bank to wind down its own sales of sukuk, which could in turn spur the IILM to expand its $3 billion issuance programme.

A boost in demand could help widen the membership base of the IILM and encourage regulators across Asia and the Middle East to approve the use of IILM sukuk by their Islamic banks.

On Wednesday, the IILM sold $860 million worth of three-month sukuk attracting $1.7 billion in bids, bringing the total amount of IILM sukuk outstanding to $2.7 billion, according to regulatory filings.

This is above bids received for previous auctions for IILM sukuk of similar size and tenor: Auctions in April of this year and in July of last year drew $1.1 billion worth of bids each.

Demand has also increased for six-month tenors of IILM sukuk. A $500 million deal in May attracted $1.1 billion in bids, compared with a $400 million auction in August that attracted $652 million in bids.

The IILM, a consortium of central banks from Asia, the Middle East and Africa, began issuing sukuk in August of 2013 under an issuance programme which permits maturities of up to one year.

Since then, the IILM has sought to widen its membership although it has yet to attract any new shareholders, while in October it added Qatar’s Barwa Bank as its tenth primary dealer to handle its sukuk programme.

(Business Day / 15 July 2015)

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

New legislation on Islamic banking pushed

THE National Commission on Muslim Filipinos (NCMF), the lead government agency tasked to spearhead the Philippine Halal industry, in partnership with Bangko Sentral ng Pilipinas (BSP), is now pushing for a new legislation on Islamic banking.

Secretary Yasmin Busran-Lao of NCMF told reporters Wednesday at the sidelines of the opening ceremony of the first Mindanao Halal Festival that they are now furnishing the draft of a bigger legal framework for Islamic banking.

"Our legal framework in the country on Islamic banking is not that friendly and embracing. At present, we are closely working with BSP to address that," she said, adding that banking andfinancing is still covered by Halal, which is not limited to food and products only.

She said that part of the plan is the conversion of Al Ahmana bank in the Philippines to a fully Shari'ah compliant bank.

"While we are working on the bigger Islamic banking legal framework, we revisited the Al Ahmana bank chapter and we thought of the transformation of the bank to a fully Islamic bank," she said.

"I hope that the business sector will be able to see an opportunity in this and support our move to transform Al Ahmana bank and introduce a more open and accessible Islamic banking to the public, not just for the Muslim community alone," she said, adding that in MayBank Malaysia, a fully Islamic bank, 80 percent of its client are non-Muslims.

Lao also mentioned that with the country's pluralistic legal system, there is a need to also have a pluralistic economic system.

European countries like United Kingdom and Germany are dominated by Islamic way of banking.

Meanwhile, NCMF reported that the global Halal trade is estimated to be worth US$150 billion annually. Southeast Asia and Middle East are considered to be the two strongest markets for Halal products with more than 400 million consumers. 

(Sun Star / 15 July 2015)

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

Tanzania: NBC Expands Islamic Banking Products in Zanzibar

Zanzibar residents have something to celebrate following the introduction of more than 10 Islamic banking products that fit to businessmen, government employees and other people.

Speaking during an Iftar organized by the National Bank of Commerce (NBC) to its customers during Holy Month of Ramadhan at the weekend in Zanzibar, NBC Bank Head of Islamic Banking, Mr Nassir Masoud said people in the Isles have reasons to celebrate.

He said the establishment of Islamic banking inside the NBC as a product have made them to adhere to their Islamic creed based on the Quran.

He said NBC established Islamic banking product at NBC five years ago and encouraged a number of new customers in the Isles who were seeking to have and purchase new Islamic products offered by the bank.

"NBC will continue to offer most and affordable Islamic banking products in Zanzibar in order to make sure that we meet customer satisfactions and to boost the growing financial market in the country", he said.

He underscored that NBC has taken into consideration all of its customers such as employees, small and other medium business people by also introducing Islamic Affluent Current Account.

(All Africa / 13 July 2015)

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