Indonesia: BI urges Islamic finance industry to enhance human capital

Bank Indonesia ( BI ) has urged Islamic financial institutions to enhance their human capital in order to improve competitiveness and sustain the industry’s rapid growth.

"If we want to see the Islamic financial sector on par with its conventional counterpart, it is relevant to improve the human capital," BI deputy governor Hendar told a seminar on human capital development held at BI’s offices in Jakarta on Friday.

Hendar added that Islamic financial institutions had achieved significant growth, surpassing the growth of conventional financial institutions even during the global economic crisis.

Despite this achievement, the industry was still facing a low quality of human capital, resulting in relatively low operational efficiency and poor product knowledge, he said.

"We should pay more attention to the low quality of human resources. This unfortunate phenomenon has affected many countries, including Indonesia," he said.

To enhance human capital, industry players needed to address crucial factors. Universities needed to provide teaching materials that combined Islamic and regular education with technology-based development and needed to build strong cooperation with global institutions.

Meanwhile, Ali Ghufron Mukti, director general for science, technology and higher education at the Research and Technology and Higher Education Ministry, added that to achieve global competitiveness, industry players needed to improve technological readiness, innovation and higher education.

"In the era of ASEAN Economic Community, human resources, undoubtedly, play an important role to enhance the competitiveness of the country. Hence, the ministry encourages individuals and organizations to conceptualize and make strategies to enhance human capital," he said, adding that vocational education was necessary beside academic education.

He said priority sectors to focus on were energy and renewable energy, health care, transportation, defense and maritime industries.

(The Jakarta Post / 13 May 2016)

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

Global Islamic finance industry assets over $2 trillion in 2014

Total assets under management in the global Islamic finance industry was in excess of $2 trillion (about N394 trillion) by the end of 2014, the director-general, Securities and Exchange Commission, SEC, Mounir Gwarzo, has disclosed.

Mr. Gwarzo said the industry growth had continued to flourish with the globalSukuk market recording remarkable expansion after the 2008 global financial crisis.

Sukuk is an Islamic finance certificate – similar to a bond in Western finance – that complies with Islamic law, Shariah.

The director, who spoke at the second Regional Roundtable on Non-Interest Capital Market in Sokoto on Monday, said annual issuances from Sukukinvestment had grown from $15 billion in 2008 to almost $120 billion in 2014.

Mr. Gwarzo said the focus of the roundtable was on Sukuk – one of the most important components of the Islamic financial system.

He said while most people identify capital markets as an important source of medium-to-long term capital, few realise the amazing potential of capital markets to serve as a catalyst for financial inclusion.

“SEC is determined to unlock this potential of the Nigerian Capital Market.

He said in particular, SEC was aware of the need to deepen the non-interest capital market space to enable millions of Nigerians and people of the Islamic faith to invest savings ethically.

“Investors worldwide are increasingly allocating their resources into Islamic finance products,” Mr. Gwarzo said.

The DG said last year was widely considered a landmark year for Islamic finance, especially with debut Sukuk issuances by countries such as the United Kingdom, Hong Kong, Senegal, South Africa and Luxemburg.

He said the year also witnessed continued strong interest from key markets of Malaysia, Saudi Arabia, the United Arab Emirates (UAE) and emerging markets like Turkey and Indonesia.

Mr. Gwarzo added that the Sukuk market was emerging on a global scale as a viable alternative source of funding.

In Nigeria, the SEC boss said the commission implemented a number of reforms aimed at deepening the non-interest capital market.

For example, he said, the commission focused on the regulatory framework, reviewing the rules on Islamic Fund Management and introducing new rules on Sukuk issuance.

These two legal frameworks, Mr. Gwarzo pointed out, have encouraged Islamic products innovation with the registration of five ethical/Shariah compliant funds and the over-subscription of Nigeria’s first ever sub-national Ijara Sukuk by the Osun State government in 2013.

He said SEC was also considering modalities for setting up a Sharia Advisory Council as a body of experts to advise SEC and the market on non-interest product and their applications.

Mr. Gwarzo said the state governments could leverage on the Sukuk market to raise funds for developmental projects.

Going forward, he said, the focus of the SEC would be on massive public enlightenment and also stronger capacity building initiatives, adding that was what informed the idea of hosting regional events as the Roundtable

He said the commission was working with the Debt Management Office, DMO to ensure Nigeria issued her first sovereignSukuk that would provide the needed benchmark for other categories of issuers.

“We are hopeful there will be a significant progress on this front before the end of 2016,” he said.

(Premium Times / 14 March 2016)

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

AAOIFI and IASB held outreach meeting with international Islamic finance industry

During the outreach meeting, AAOIFI and IASB, the body that develops and issues International Financial Reporting Standards (IFRS), exhanged views with the international Islamic finance industry on issues relating to application of international accounting standards for Islamic finance. The meeting also discussed issued that Islamic financial institutions might need to address in applying IFRS 9Financial Instrument for their financial reporting, if they are required to adopt the same. IFRS 9 is a standard issued by IASB that deals with, amongst others, classification and measurement of financial assets.

The outreach meeting was attended by over 50 participants, comprising senior representatives of AAOIFI, IASB, central banks and regulatory authorities, national accounting standards boards from a number of countries including Saudi Arabia, United Arab Emirates, Indonesia, Malaysia, and Turkey, in addition to financial experts from Islamic financial institutions, accounting and auditing firms, academics and other Islamic finance industry stakeholders from over 15 countries across the major Islamic finance markets.

Dr. Hamed Hassan Merah, Secretary General of AAOIFI, said "the meeting was extremely helpful in strenghthening cooperation between AAOIFI and the IASB towards better understanding of issues relating to accounting standards for the Islamic finance industry. It also reflected the increasing global role of AAOIFI in all areas pertaining to Islamic finance".

In addition to its role in developing standards for the international Islamic finance industry, AAOIFI is also a member of the IASB's Consultative Group on Shariah-Compliant Instruments and Transactions.

(Zawya / 12 April 2015)

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

Morocco Weighs Pursuing $1.7 Trillion Islamic Finance Industry

Morocco plans this year to allow Islamic banking for the first time as the only North African nation with an investment-grade rating at Standard & Poor’s seeks to tap the $1.7 trillion industry.

The country’s cabinet approved a draft Islamic finance bill on Jan. 16, according to Abdeslam Ballaji, a lawmaker who worked on the proposed legislation and a member of the ruling party. The draft, which also regulates Islamic banks and allows for sukuk sales, is pending parliamentary approval and may be enacted within five months, he said last week.

Demand for financing that complies with Islam’s ban on interest is accelerating worldwide, with assets expected to climb to $3.4 trillion by 2018 from about $1.7 trillion last year, according to Ernst & Young LLP. More than 95 percent of Morocco’s population of 34 million back the introduction of banking that adheres to Shariah, according to Said Amaghdir, secretary general of the Moroccan Association of Participative Financiers, an Islamic finance business association.

“Given the choice, Muslim retail customers on the street generally prefer to bank Islamically, even if there are higher costs,” Khalid Howladar, a senior-credit officer at Moody’s Investors Service, said by phone from Dubai yesterday. “Islamic banks historically have tended to grow at twice the rate of conventional banks in Muslim countries, and as such they tend to take a market share from the conventional system.”

Billions Required

The Moroccan Association of Participative Financiers estimates total investment in Shariah-compliant products to reach $7 billion by 2018, provided the law comes into effect by the middle of the year, Amaghdir said by phone yesterday.

“Plans to expand solar and wind energy, tourism and industrial parks will require billions, and the Gulf Cooperation Council will be keener on putting money here when the law is enacted,” he said. The six-nation GCC, which includes Saudi Arabia and the United Arab Emirates, is predominantly Muslim.

Banks may also sell short-term sukuk to fund Islamic subsidiaries, Amaghdir said.

Morocco’s central bank allowed lenders and insurers to sell three Islamic products in 2007 to help develop the nation’s financial industry. The country is “almost” ready to sell its first sukuk, Prime Minister Abdelilah Benkirane said in October.

Regional Competition

“We can’t afford to drag our feet any longer because regional competition for the Islamic finance pool is heating up, not just from our Muslim neighbors,” Ballaji, the lawmaker, said in a phone interview Jan. 20.

The U.K. plans to sell debut Islamic bonds this year as Prime Minister David Cameron seeks to revive a blueprint that’s been stalled since at least 2007. The Hong Kong government this month gazetted legislation to allow the sale of Shariah-compliant notes.

Moroccans may be misinformed about the benefits of Islamic banking, Ismail Douiri, co-chief executive officer of Casablanca-based Attijariwafa Bank, said in May.

“Islamic finance is often portrayed as low-cost type of finance,” Douiri said. “Islamic finance is not charity. One should not expect financing costs to decline.”

Shariah-compliant products are typically more expensive when they’re first introduced, Howladar of Moody’s said.

“Islamic products tend to come at a premium, because the creation of the products requires substantive investment,” he said. “Orthodox customers are willing to pay more to bank Islamically. Eventually, in the face of competition, those costs fall and are comparable to conventional products.

(Bloomberg News / 22 Jan 2014)

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