Islamic banking to grow despite uncertainty

Dubai: In a joint press conference with the World Islamic Banking Conference (WIBC), Ernst & Young highlighted part of its World Islamic Banking Competitiveness Report 2015-2016 on Sunday in Manama.

“The growth of the Islamic banking industry in the GCC, specifically in Saudi Arabia, in the past few years can be attributed to the increased public sector spending on the back of oil revenues. It will be interesting to see how banks are affected as governments draw their reserves from the banking sector to narrow the gap on budget deficits due to the drop in the global oil price,” said Muzammil Kasbati, Director, Global Islamic Banking Centre at EY.

According to the statement, the GCC Islamic banking profit pool crossed $12 billion (Dh44 billion) for the first time in 2014, with expectations that the sector will continue to grow amid regional economic uncertainty.

“Nine core markets are currently the growth engines for the global Islamic finance industry,” the statement said.

The EY’s report identified a group of 40 banks across these nine core markets that it said are “systemically important” to the future progress of the industry. According to the report, out of the 40 banks, over 50 per cent have an equity base of $1 billion or more.

According to EY, the UAE’s Islamic banking sector in particular has been gaining momentum backed by its innovation and growing digital footprint, thus putting it on par with Malaysia in terms of global market share.

(Gulf News Banking / 02 November 2015)

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Islamic finance to grow in the Gulf despite uncertainty in oil market

Muscat: Islamic banking profit pool in the Gulf Cooperation Council (GCC) region crossed $12 billion for the first time in 2014, with expectations that the sector will continue to grow amid regional economic uncertainty, says a report.

Key strategic imperatives for the Islamic finance industry were discussed at a press conference held by the World Islamic Banking Conference (WIBC) and EY in Bahrain on November 1.

Held one month ahead of the 22nd Annual WIBC, the press conference was an opportunity for EY to highlight key strategic insights from the much-awaited EY World Islamic Banking Competitiveness Report 2015-2016, which will be launched at WIBC 2015 on December 2.

Speaking at the press conference, Nazim, partner - global Islamic finance leader at EY, said that the key findings of the report provide some groundbreaking revelations which will help shape the future of Islamic banks.

“Innovations in technology and digitalisation call for transformation of customers’ banking experience across channels and all touch points and this transformation can help banks anticipate the changing needs of customer,” he noted.

According to the report, there are expectations that the sector will continue to grow amid regional economic uncertainty.

Nine core markets are currently the growth engines for the global Islamic finance industry. The report identifies a group of 40 banks across these nine core markets that are systemically important to the future progress of the industry. Out of the 40 banks, over 50 per cent have an equity base of $1 billion or more.

“The growth of the Islamic banking industry in the Gulf Cooperation Council (GCC), specifically in Saudi Arabia, in the past few years can be attributed to the increased public sector spending on the back of oil revenues. It will be interesting to see how banks are affected as governments draw their reserves from the banking sector to narrow the gap on budget deficits due to the drop in the global oil price,” said Muzammil Kasbati, director, global Islamic banking center, at EY.

The UAE’s Islamic banking sector in particular has been gaining momentum backed by its innovation and growing digital footprint, thus putting it on par with Malaysia in terms of global market share. WIBC 2015 is a three-day gathering of the industry’s leaders taking place on December 1, 2 and 3 in Manama.

(Times Of Oman / 01 November 2015)

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DIB, Metito sign Dh240m Islamic finance deal

Dubai: Dubai Islamic Bank (DIB) and Metito, the leading provider of intelligent water management solutions in emerging markets, have signed a 10-year Islamic financing agreement for Dh240 million.

This is Metito’s first Islamic finance agreement and DIB’s debut partnership with a private company working in the water and waste-water industry.

The transaction is another step in expanding Islamic finance into sectors and institutions previously catered to by conventional banking.

“In our view, primary infrastructure development projects are the cornerstone of sustainable growth, a key element of the strategy of the country. DIB has always played a pivotal role in leading and facilitating such transactions and is linked to many landmark deals with some of the top corporates across the UAE and beyond,” Dr. Adnan Chilwan, Group CEO of Dubai Islamic Bank.

“Metito’s business model and their long-term strategic vision, ties in well with DIB’s own growth plans,” he added.

The long-term attributes of Islamic finance make it ideally suited for the sustainable nature of the water sector, with many projects lasting decades and requiring on-going finance at competitive rates.

“The water sector is very cost intensive, and the term length of the projects generally can be prohibitive for many financers, but, by approaching the deal with an innovative and solution-focused mindset, DIB turned this challenge into an opportunity,” said Mutaz Ghandour, chairman and CEO of Metito.

(Gulf News Banking / 28 October 2015)

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Islamic banking, solution to Nigeria’s economic woes

Muhammadu Sanusi II, the Emir of Kano, has urged the federal government to introduce Islamic banking across the country.

He said it would be another way to the economy amid the effect of the decline in oil prices.

Speaking in Kano during a workshop on non-interest capital organised on Monday, Sanusi said huge potentials abound in Islamic banking.

Pointing out that Britain, South Africa, Cote D’voire had adopted Islamic banking, he wondered why Nigeria had not taken advantage of the benefits in the system.

He commended the Osun state government for adopting non-interest free capital market, urging Kano to take the same step.

Sanusi thanked the Securities and Exchange Commission (SEC) for organising a sensitisation programme on Islamic banking, saying the timing was accurate.

Kano State Governor, Abdullahi Ganduje, emphasised the importance of an interest-free capital market in a place like Kano, an economic hub.

(Daily Post / 21 October 2015)

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Malaysia aims to boost Islamic finance with new initiatives in budget

Malaysia is hoping new incentives for "ethical" Islamic bonds and home loans will strengthen the country's sharia-compliant investment market and lure more private players to one of the world's largest Islamic financial sectors.

The government announced the new incentives in the 2016 budget which was delivered in parliament on Friday, as Prime Minister Najib Razak doled out populist incentives to shore up support.

The government originally introduced the concept of "ethical" sukuk to finance "sustainable and responsible investment" (SRI) in projects such as wind and solar power generation or affordable housing, in 2013.

Sovereign wealth fund Khazanah [KHAZA.UL] sold 100 million ringgit ($23.7 million) of SRI sukuk in May this year but so far there have been no other issues in the ethical sukuk market.

In Friday's budget, Najib said Malaysia would cut taxes on issuance costs of SRI sukuk, and also that sharia-compliant loan instruments would be given a 20 percent stamp duty exemption when they were used to finance home purchases.

Other initiatives for the Islamic finance sector will be announced later, Najib said without elaborating.

Malaysia, with a mostly Muslim population, has been at the forefront of innovation in Islamic finance but has largely relied on state-linked firms to launch new products, while participation from corporations has been sporadic.

Last year, $74.9 billion worth of sukuk were issued from Malaysia but only $13.5 billion came from corporate issuers, according to data from Zawya, a Thomson Reuters company.

Attracting private sector firms has become more important this year because the central bank has shifted away from selling its own sukuk, causing total global issuance to drop by about 40 percent.

Also, low oil and commodity prices mean Malaysia may be in for years of slower growth, making it harder for Islamic banks and insurers, which remain smaller than their conventional competitors, to invest in developing products and expertise to narrow the gap.

(Reuters / 25 October 2015)

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FNB targets Islamic banking on continent

FIRST National Bank (FNB) says it is looking to expand its Islamic banking offering to Zambia and Tanzania before the end of its financial year in June next year.

FNB, which has been on an expansion phase in select countries in the rest of Africa, is looking to use the Islamic banking offering to capture clients, especially in those countries that have big Muslim communities.

"The two countries that we are focused on are Zambia and Tanzania," Amman Muhammad, the CEO of FNB Islamic Banking, said on Monday.

"We are hoping by the next financial year, we will be active there." Mr Muhammad said about half of the 1.1-billion people in Africa were Muslim.

He said that in sub-Saharan Africa there were about 280-million Muslim people and the FirstRand group had a presence in countries that had about 200-million Muslims.

The bank already offers Islamic banking in Botswana.

As governments look to raise Islamic bonds, known as Sukuks, FirstRand is looking to position itself through its franchise, Rand Merchant Bank.

Last year, SA sold its first Islamic bond and raised $500m with the debt carrying a coupon as low as 3.9% over a five-year period.

Mr Muhammad said there was now demand for Islamic banking.

Islamic banking does not invest depositors’ money in what is considered "sin stocks" involved in activities Muslims frown upon.

Absa, the other company which offers Islamic banking in SA, said that as part of Barclays Africa group, it had the opportunity to team up with Barclays Bank Kenya and NBC in Tanzania to enhance their Islamic banking offering.

(Business Day Live / 20 October 2015)

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Malaysia poised to become global hub for Islamic finance, says central bank governor

Malaysia is on course to becoming a global centre for Islamic finance, in tandem with the industry's projected consistent growth, according to the chief of Malaysia's central bank.

"It (the industry) is set to grow. Its international dimension will continue to increase because we are becoming an international hub for Islamic finance," Tan Sri Zeti Akhtar Aziz, governor, Bank Negara Malaysia, told reporters in Kuala Lumpur on Saturday.

She was speaking to them after the convocation at the International Centre For Education In Islamic Finance (INCEIF) at the Malaysian capital after presenting certificates to graduates, reports the malaymailonline.com.

The INCEIF was established in 2005 by Bank Negara Malaysia, as part of its initiatives to create a talent pool, under the Malaysia International Islamic Finance Centre (MIFC). Tan Sri Dr. Zeti Akhtar Aziz is the chairman and chancellor of the INCEIF.

The global profile of the student community at the INCIEF will provide the much-needed talent to drive global Islamic finance, an industry whose assets were valued at about $2.1 trillion in 2014, according to the MIFC.

Students from Germany, Pakistan, Somalia, Yemen, Indonesia, Brazil and the US comprised about 45% of the graduates who passed out, the rest being Malaysians.

"This would be a tremendous boost for the industry that has always complained that they don't have enough talent. That's why we established Inceif. This is an investment by Bank Negara. It achieved everything that we wanted in developing talent and in carrying out reserach," Tan Sri Dr. Zeti Akhtar Aziz said.

The INCEIF is increasingly being seen as providing leadership to Islamic finance industry in many ways, be it independent reporting, making laws, developing human resources or governance, according to its president and CEO Daud Vicary Abdullah.

"Malaysia is probably twice as far ahead as the next competitor in terms of its infrastructure to grow and support Islamic finance," he said.

In all, 248 graduates from 40 countries were awarded scrolls during the convocation.

According to a MIFC report, the industry's assets are expected to reach $2.4 trillion by the end of this year, having grown at a compounded annual growth rate of 17.3% between 2009 and 2014.

The INCEIF offers three post-graduate programmes in Islamic finance – Masters in Islamic Finance Practice (MIFP), Master of Science in Islamic Finance (MSc) and PhD in Islamic Finance.

(International Business Times / 24 October 2015)

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