The World’s Leading Islamic Finance News Provider www.islamicfinancenews.com Islamic funds make up a tiny proportion of the Islamic finance industry and an even smaller part of the total funds sector: accounting for around 2% of global Islamic assets and just 0.1% of total global funds. Yet despite their small base Islamic funds continue to grow steadily, consolidating their position and quietly innovating into a stable position within the overall market. This week, we take a look at how Islamic funds performed in 2013, what we can expect for the coming year – and the perennial question of how the industry can differentiate itself against its conventional competitors? According to data from Eurekahedge, Islamic fund returns were up 9.98% overall last year, compared to 7.47% in 2012 and a negative return of 3.65% in 2011; suggesting a return to steady growth. Last year we saw the top 10 Islamic funds all return above 40%, with the leading NBAD UAE Islamic Al Nae’em fund topping the chart at 73.46% (see Table 1). Performance was dominated by Saudi Arabia and Pakistan, which between them accounted for nine of the top 10 funds of 2013, while equity funds also surged. Despite a slightly depressed market last year the sector has seen strong growth, and leading industry players look to 2014 with optimism. “Islamic funds have done very well over the past year,” confirms Mohammad Shoaib, CEO of leading Pakistan-based fund manager Al Meezan Investment Management. “Volatility has come down and performance has gone up: so growth has stabilized and the outlook is generally positive. For 2014 however, tapering in the US will have an impact on the flows to emerging markets and that will be a key factor in determining trends this year.” New horizons New markets are also emerging in the sector, which is driving both AUM growth and investor interest. Ishrat Rauff, CEO of Sri Lankan asset management firm Adl Capital, explained to Islamic Finance news that although in general Islamic funds do oſten follow conventional trends, this year they are also looking for new investments. “From our perspective, fund managers are looking at new geographies. They typically look at Malaysia and Singapore, but last year there was also interest in Turkey and Indonesia. It is interesting that even smaller non-traditional markets such as our own (Sri Lanka) have witnessed some interest.” MENA has outperformed the market, and we are looking at expanding our Middle East portfolio.” This is borne out by Eurekahedge results for 2013, which show returns from the Middle East more than doubling to 16.56% from 7.19% the year before. In comparison, Asia Pacific returns declined slightly to 7.28% from 8.3% in 2012. “Frontier markets are definitely the new place to be,” confirms Monem Salam, the president of Saturna in Malaysia: “Although they are of course more risky.” 2013 saw a clear outflow from emerging markets into frontier market funds, and market players expect that this trend could continue in 2014. Islamic fund management: An evolving market Powered by: IdealRatings ® 26 th February 2014 (All Cap) 1,036.83 950 975 1000 1025 1050 M S S F T W T 1,036.53 0.02% Volume 11 Issue 8 IFN Rapids .........................................................2 Islamic Finance news .........................................6 Shariah Pronouncement .................................16 IFN Reports: Islamic Finance news honors the best in the industry; SECP: Treading the line between regulation and development; Tenaga Nasional’s 20-year multi-tranche Sukuk; India endeavors to drive forward its Islamic finance ambitions; IDB: A flashback; Structured community funding for Singapore; Location, location, location: Does London measure up as a base for Islamic banks? .......................................................... 17 Special Report: Malaysia embarks on issuance of 11 Shariah standards .............. 26 Impressive turnaround for Indonesia ............ 27 Case Study: MEXIM: World’s first US dollar- denominated Sukuk to be issued by an export- import bank ........................................................29 Country Focus: Afghanistan IFN Analysis: Forward motion for Islamic finance in Afghanistan?.............................. 24 Sector Focus: Syndicated Islamic Finance IFN Analysis: Syndicated Islamic finance: More players and more opportunities?..............25 Features: Islamic syndicated finance in Egypt: A flourishing industry in spite of the legislative vacuum ............................. 32 Features: Trends in Islamic syndication.... 33 IFN Country Correspondents: Hong Kong; Egypt ................................... 30 Interview: An exclusive interview with Shuaib Ahmed, Nigeria’s ambassador to Qatar ............................................................ 35 Deal Tracker .....................................................37 REDmoney Indexes ........................................38 Eurekahedge data ...........................................40 Performance League Tables...........................42 Events Diary.....................................................46 Company Index ...............................................47 Subscription Form ...........................................47 RED continued on page 3 Follow us on
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T h e Wo r l d ’ s L e a d i n g I s l a m i c F i n a n c e N e ws P rov i d e r
www.islamicfi nancenews.com
Islamic funds make up a tiny proportion of the Islamic fi nance industry and an even smaller part of the total funds sector: accounting for around 2% of global Islamic assets and just 0.1% of total global funds. Yet despite their small base Islamic funds continue to grow steadily, consolidating their position and quietly innovating into a stable position within the overall market. This week, we take a look at how Islamic funds performed in 2013, what we can expect for the coming year – and the perennial question of how the industry can diff erentiate itself against its conventional competitors?
According to data from Eurekahedge, Islamic fund returns were up 9.98% overall last year, compared to 7.47% in 2012 and a negative return of 3.65% in 2011; suggesting a return to steady growth.
Last year we saw the top 10 Islamic funds all return above 40%, with the leading NBAD UAE Islamic Al Nae’em fund topping the chart at 73.46% (see Table 1). Performance was dominated by Saudi Arabia and Pakistan, which between them accounted for nine of the top 10 funds of 2013, while equity funds also surged. Despite a slightly depressed market last year the sector has seen strong growth, and leading industry players look to 2014 with optimism.
“Islamic funds have done very well over the past year,” confi rms Mohammad Shoaib, CEO of leading Pakistan-based fund manager Al Meezan Investment Management. “Volatility has come down and performance has gone up: so growth has stabilized and the outlook
is generally positive. For 2014 however, tapering in the US will have an impact on the fl ows to emerging markets and that will be a key factor in determining trends this year.”
New horizonsNew markets are also emerging in the sector, which is driving both AUM growth and investor interest. Ishrat Rauff , CEO of Sri Lankan asset management fi rm Adl Capital, explained to Islamic Finance news that although in general Islamic funds do oft en follow conventional trends, this year they are also looking for new investments. “From our perspective, fund managers are looking at new geographies. They typically look at Malaysia and Singapore, but last year there was also interest in Turkey and Indonesia. It is interesting that even smaller non-traditional markets such as our own (Sri Lanka) have witnessed some interest.” MENA has outperformed the market, and we are looking at expanding our Middle East portfolio.”
This is borne out by Eurekahedge results for 2013, which show returns from the Middle East more than doubling to 16.56% from 7.19% the year before. In comparison, Asia Pacifi c returns declined slightly to 7.28% from 8.3% in 2012. “Frontier
markets are defi nitely the new place to be,” confi rms Monem Salam, the president of Saturna in Malaysia: “Although they are of course more risky.”
2013 saw a clear outfl ow from emerging markets into frontier
market funds, and market players expect that this trend could continue in 2014.
Islamic fund management: An evolving market
Powered by: IdealRatings®
26th February 2014
(All Cap)
1,036.83
950
975
1000
1025
1050
MSSFTWT
1,036.53
0.02%
Volume 11 Issue 8IFN Rapids .........................................................2Islamic Finance news .........................................6Shariah Pronouncement .................................16IFN Reports: Islamic Finance news honors the best in the industry; SECP: Treading the line between regulation and development; Tenaga Nasional’s 20-year multi-tranche Sukuk; India endeavors to drive forward its Islamic finance ambitions; IDB: A flashback; Structured community funding for Singapore; Location, location, location: Does London measure up as a base for Islamic banks? .......................................................... 17 Special Report: Malaysia embarks on issuance of 11 Shariah standards .............. 26Impressive turnaround for Indonesia ............ 27Case Study: MEXIM: World’s fi rst US dollar-denominated Sukuk to be issued by an export-import bank ........................................................29
Country Focus: AfghanistanIFN Analysis: Forward motion for Islamic fi nance in Afghanistan?.............................. 24
Sector Focus: Syndicated Islamic FinanceIFN Analysis: Syndicated Islamic fi nance: More players and more opportunities? ..............25Features: Islamic syndicated finance in Egypt: A flourishing industry in spite of the legislative vacuum ............................. 32Features: Trends in Islamic syndication.... 33
IFN Country Correspondents: Hong Kong; Egypt ................................... 30Interview: An exclusive interview with Shuaib Ahmed, Nigeria’s ambassador to Qatar ............................................................ 35Deal Tracker .....................................................37REDmoney Indexes ........................................38Eurekahedge data ...........................................40Performance League Tables ...........................42Events Diary.....................................................46Company Index ...............................................47Subscription Form ...........................................47
Disclaimer: Islamic Finance news invites leading practitioners and academics to contribute short reports each week. Whilst we have used our best endeavors and eff orts to ensure the accuracy of the contents we do not hold out or represent that the respective opinions are accurate and therefore shall not be held responsible for any inaccuracies. Contents and copyright remain with REDmoney.
DEALSIILM to issue another US$490 million short-term Sukuk
Profi t payment on Nu Sentral’s US$181.81 million Islamic facility due
Malaysian sovereign wealth fund plans to fund relocation of defense units via privately-place Sukuk worth up to US$727.24 million
Roadshows for potential IDB dollar Sukuk commenced on the 23rd February in the Middle East and Asia
Sentral 384 sets the 3rd March as due date for profi t payment on Islamic facility
Malaysian government to issue US$1.21 billion Sukuk under the Housing Loan Fund Act 1971
RHB Islamic receives approval by Securities Commission for subordinated Sukuk Murabahah program
National Commercial Bank concludes US$1.33 billion Sukuk at 110bps over six-month SAIBOR
Semi-annual profi t payment on Nu Sentral’s US$181.81 million Islamic medium-term notes program due and payable this week
DanaInfra may tap exchange-listed Sukuk market this year with two Islamic issuances
Central Bank of Bahrain’s monthly Sukuk Salam issuance oversubscribed by 325%
State of Selangor decides to drop Sukuk plans as it has suffi cient reserves to fund infrastructure development
Singapore-listed Bumitama Agri may tap into the Malaysian market in the next few weeks with a US$152.56 million Sukuk
Partial principal redemption on Ample Zone’s Class C primary Sukuk Ijarah worth US$45.65 million will be payable on 27th February
NEWSIslamic banking assets in Egypt expected to continue upward trend this year to reach US$18.34 billion, according to news report
Police issues Canada-wide arrest warrant for head of Islamic fi nance company over fraud charges
Azzad Asset Management to address Islamic fi nance at Johns Hopkins University
Indian government considers introducing Hajj fund and Islamic fi nance regulatory body, according to news reports
Islamic fi nance growth in Malaysia to remain stable according to CIMB Islamic Bank CEO
Bank Islam projects 10% contraction of assets and fi nancing performance this year on the back of new measures by the central bank to curb rising household debts
Thai banks have ample liquidity to cushion adverse eff ects of ongoing protest against government’s subsidy program, says Moody’s
Large Malaysian IPOs on the horizon according to JP Morgan Chase CEO
Al-Amanah Islamic Investment Bank of the Philippines launches Hajj savings plan
Asian Finance Bank to leverage on Middle East connection to grow fi nancing portfolio to US$758.34 million this year
Bursa Malaysia and Tadawul sign MoU to foster closer fi nancial and economic ties
between Malaysia and Saudi Arabia
More global Islamic fi nance support for green initiatives needed according to Green Tech Malaysia CEO
Economic slowdown will not aff ect stable outlook on Indonesian banking industry, says Moody’s
Focus should now turn to the underdeveloped areas of Islamic fi nance including Waqf according to IBFIM
State Bank of Pakistan introduces fi ve-year strategic plan for the Islamic banking industry
ASSET MANAGEMENTEFG Hermes sets sights on 25% increase in asset under management in Egypt
Saturna targeting fi ve-fold growth for its new ASEAN Equity Fund this year
TAKAFULMalaysia calls for improvements in the eff ectiveness of Family Takaful framework
Doha Insurance receives shareholder approval for US$119.83 million capital increase
Labuan Financial Services Authority issues Guidelines on Investment Management for Labuan Insurance and Takaful Business
Prudential BSN Takaful supports needy students and charitable homes via Zakat and charity funds
Securities and Exchange Commission of Pakistan revises list of auditors for Takaful operators, includes an additional four fi rms
Prudential BSN Takaful reviews and smartphone applications dedicated to both distributors and consumers
Central bank of Brunei currently reviewing new Takaful guidelines slated to be enforced by June
Etiqa Insurance & Takaful engages Malaysian Medical Association over boycott call
New 2014 rules by Securities and Exchange Commission of Pakistan dictate that micro-insurance may be used interchangeably with micro-Takaful
RATINGSMoody’s elevates rating on Emaar Sukuk to ‘(P)Ba1’ with a stable outlook
AM Best withdraws ratings on Al Fajer Retakaful Insurance Company following successful transfer of reinsurance portfolio to subsidiary
Fitch confi rms Abu Dhabi’s country ceiling at ‘AA+’ with stable outlook
Public fi nances continue to pose a problem for Egypt according to Fitch
MOVESAbu Dhabi Global Market hires former Dubai Financial Services Authority chief operating offi cer as executive adviser and program leader
Arab Banking Corporation announces impending move of Standard Chartered Singapore CEO Ray Ferguson
Qatar Islamic Bank re-elects chairman and vice-chairman, names new board members
“Valuations are relatively att ractive in many of the frontier markets,” confi rms Shoaib. “The UAE is doing very well and will continue to perform: but markets in Africa such as Nigeria and Kenya also have potential. In Asia, Vietnam is a key growth market and so is Pakistan.”
And despite its current political and economic turmoil, Pakistan remained one of the top performers of last year. Four of the top 10 Islamic funds of 2013 were domiciled in Pakistan and cheap valuations combined with increasing confi dence from local investors based on expectations of economic reform and upcoming privatization are likely to drive this forward. “We have seen substantial foreign institutional infl ows as well as interest from local institutional investors,” confi rms Shoaib. “But in Al Meezan funds, we have also seen increasing interest from retail investors – with growth of about 20% from new retail investors coming into the funds in 2013.”
Equity focusAnother major trend in the Islamic fund space has been the swing into equities from fi xed income (see Table 2), which saw Islamic equity fund returns soar up to 16.25% last year from 10.49% in 2012, compared to fi xed income fund returns which fell from 4.32% to 1.8%. “Although Islamic funds have traditionally had a Sukuk focus, they seem to be expanding outwards this year into new asset classes,” says Ishrat.
As the equity markets recover, investors are becoming bolder and seeking new frontiers. “Islamic funds are looking at markets with a slightly higher risk profi le in order to improve yields, since yields on funds have come down funds, even in the traditional markets,” explains Ishrat.
Interest rates have stabilized and thus a lot of the valuation gains that were recorded by fi xed income and Sukuk funds previously will no longer be available. And as Sukuk yields remain low, the Fed continues to tighten and dividend stocks provide income returns, this trend is likely to continue. “As far as Sukuk funds are concerned, I expect
a slowdown with money fl owing from fi xed income funds and into equity,” agrees Shoaib. “With the stability in the interest rate environment, the return on equity funds more than justifi es the risk premium.”
However, this may not necessarily be of competitive benefi t to Islamic funds which despite the upswing in equity may continue to underperform the conventional due to their lack of exposure to the fi nancial sector, which always performs well in a stock market rally.
Innovative asset classesAn alternative approach could be to seek
higher returns by entering new and underserved asset classes. Mohd Naim Mohd Azad Din, the head of asset management at Saudi-based Sidra Capital, told Islamic Finance news that, for example: “SME trade fi nance is an interesting asset
class that could off er substantial alpha to investors." It also
off ers the advantage that SME trade fi nancing continues to be underserved by
the mainstream banks, and the capital to fund them is becoming more and more expensive. The pioneering Sidra – Ancile Global Structured Trade Finance Investment fund recently celebrated its fi rst year anniversary and since its launch several similar funds have also been launched by alternative asset managers globally with much larger capital being committ ed to the strategy. Following the success of its fi rst fund, therefore, Sidra Capital plans to roll out a second trade fi nance fund, while there are also rumors of new Islamic trade fi nance and SME funds being launched in the UK.
Size mattersHowever, a unavoidable issue in the Islamic fund space will always be the question of size. A few years ago S&P released a report suggesting a minimum fund size of US$100 million, below which it was diffi cult to be commercially viable. While this may be applicable in the conventional market, however, perhaps the Islamic space has diff erent requirements?
It is undoubtedly true that diff erent markets have diff erent cost structures
continued on page 4
Islamic fund management: An evolving marketContinued from page 1
Table 1: Top 10 Islamic funds by key performance statistics
Fund Rank Fund manager Fund domicile 2013 return (%)
and the cost of doing business varies by region, so of course economies of scale depend to a great extent on which market you are operating in. In predominantly Muslim countries such as Indonesia, Pakistan and even Malaysia the cost of labor is cheaper and costs are correspondingly lower. “I would say in these markets perhaps closer to US$50 million would make a fund viable,” suggests Shoaib.
However, it also depends on the size of the fund management fi rm. Al Meezan funds range from US$20-200 million, but overall the house manages over US$500 million in AUM making it profi table on a scale basis regardless of individual fund size. At the same time, a lot of the fund management companies may have bigger conventional funds and smaller Islamic funds, so overall they still might be profi table. For smaller managers, it can be more of a challenge. “Last year the equity market took a bit of a beating. Therefore people were wary and more keen on debt. Speaking to fund managers, they are still fi nding it diffi cult to raise critical mass for equity funds,” says Ishrat.
Many Islamic funds also start from a small base, meaning that they take a few years to become profi table. But eventually, it will become a question of either size or fees. “The Islamic fi nance industry to date has been hampered by small funds starting from US$5-10 million – which are simply too small,” agrees David Testa, CEO of Armila Capital.
The question is: how are they making money? What kind of fees are they charging?
Pricing formatsThe issue of pricing is in fact crucial, and oft en overlooked. “Many of the strongest investors are actually going for individual transactions rather than fund structures in the real estate space at the moment,” says Testa. This is partly due to the sector itself and partly down to the aft er-eff ects of the fi nancial crisis, but a contributing factor is also cost. “A lot of investors felt management fees were too high, so they had a preference to avoid large-scale funds.”
This has had a knock-
on eff ect on fund performance, and has limited growth of AUM. As a result, funds are beginning to introduce new and innovative pricing structures for Islamic funds which not only att ract investors but also off er a potentially more transparent and Shariah compliant method of investing.
“At Al Meezan our strategy has been to have the minimum exit and entry loads for investors – trying to bring in the investors and let them see the performance,” explains Shoaib. “Once
they are convinced of the performance then we can have more more revenue per customer through repeat sales. That has been successful for us because we have been able to penetrate not only institutional but also retail
investors.”
Saturna Capital recently introduced a new ASEAN
Equity Fund in Malaysia which has an equally innovative fee structure. The open-ended institutional wholesale fund targets high net worth individuals and launched this year with RM10 million (US$3.04 million), which it expects to increase to RM50 million (US$15.2 million) by the end of 2014. The fund has a number of unique features designed to make it friendly to both unitholders and fund managers, including no upfront sales charge and no withdrawal penalty. Unusually for an equity institutional fund, it also has daily liquidity with daily NAV: and instead of a management fee the fund manager accrues 10% of any daily gain – which it pays back if there is any subsequent loss. At the end of the year, if the returns are positive the manager keeps the 10% and if negative, rebalances to zero. “I think this type of structure is more Islamic,” suggests Monem. “It is more transparent, and more in line with the Mudarabah model,"
Competitive differentiationFee structures such as these are one of the key ways in which Islamic funds could diff erentiate themselves from conventional funds – a vital element in growing the sector.
“There are two ways to be profi table,” explains Monem. “You either milk a lean cow or you try and fatt en it up fi rst.” In other words, growing AUM by reducing fees enables a fund to become more competitive, even in the conventional space: "A fund with larger AUM because of low fees will always be more competitive than trying to squeeze your unitholders from a small fund size.”
Islamic fund management: An evolving marketContinued from page 3
There are two ways to be
profitable. You either milk a lean cow or you try and fatten it up first
“It is a chicken and egg situation,” agrees Shoaib. “Most Islamic fund houses are unable to increase their penetration because of their limited distribution networks. And if the size does not grow, they cannot expand their distribution network and this limits their options.”
The issue of diff erentiation is a perennial problem in the fund space – how can you att ract investors away from conventional funds into the Islamic space, which is oft en more restricted and more expensive? Naim explains that: “In general, the performance comparison of an Islamic fund against its conventional nemesis might not be appropriately att ributed to their respective structure if the underlying asset classes and strategies are similar. Simply being an Islamically-structured fund would not necessarily enhance the fund’s return compared to conventional funds.” However, the outlook for Islamic funds look bright as more assets are being allocated toward Shariah compliant funds, especially from the GCC, as more AUM accumulates. “This would mean more opportunities for asset managers to increase their respective AUM and cater to the growing demand by off ering a variety of Islamic funds.”
SustainabilityHowever, the real issue is one of sustainability – competitive advantage over the long-run will have to come from other areas besides return. “Returns go up and down – you won’t be number one forever. If you can come up with a more sustainable model, this will grow your AUM over time,” agrees Monem. “Diff erentiation is a key pull factor.”
One driver could be bett er education – not from a sales perspective about specifi c funds, but on a broader scale about the real diff erences between a conventional and an Islamic fund. However, to do this we need real diff erences in the funds themselves – and right now, perhaps there are not as many as we could wish for.
“Over the years we have seen that the majority of people in these funds are in them for the returns. If the returns go they will go as well,” points out Monem. So what can Islamic funds off er investors that is bett er or diff erent to conventional funds? Shariah compliance
is a pull but not necessarily a deciding factor. However, Islamic traits could be identifi ed and focused on – such as full disclosure, lower fee structures and greater transparency. These are Shariah compliant but also competitive, and add up to make a bett er overall product that is also Islamic.
The problem is that currently there are limited investible products available to Islamic managers compared to conventional funds, and there is still not a wide universe of products available. However, with bett er distribution and more standardization from bodies like AAOIFI, growth fi nally seems to be taking place.
Institutional focusWhat is needed now, is a sector-changing movement from institutional investors to bring about a real economy of scale in the industry. Almost every market player Islamic Finance news has spoken to identifi es this as the key factor that will kickstart the industry.
“In the Islamic asset management industry, the focus continues to be on high net worth individuals rather than institutions,” explains Testa. Although there are exceptions, such as the Malaysian investment institutons like Khazanah and EPF, the GCC is far behind in terms of institutional interest – and a boost from them could make a huge change to the Islamic fund space.
So why don’t big instititutions invest
in Islamic funds? Partly, this could be because, particularly in the case of Middle East institutions and sovereign wealth funds, they have a long history of conventional investing which has stood them in good stead, and see litt le incentive to change.
“Part of it is that Islamic institutions must loosen their criteria to allow investment in funds. But at the same time, fund management companies have to lower their fees to att ract institutional clients. If you can drive fund fees lower and make them more competitive relative to individual mandates, institutions would be able to justify investment in funds and we might see more Islamic institutions investing in funds.”
Market growthThe Islamic funds industry is doing an exceptional job of developing, innovating and progressing forward in a niche market and against strong competition. And this year we are likely to see AUM grow based on a market rally and improvement in equity returns, along with new funds entering the market and new structures rolled out which will make it increasingly easier, cheaper and bett er value to invest Islamically.
But as many have pointed out, competitive diff erentiation is key - and this needs to come from outside the performance arena, founded in the Shariah itself. — LM
Islamic fund management: An evolving marketContinued from page 4
DEALSIILM Sukuk program continuesMALAYSIA: The Islamic Liquidity Management Corporation (IILM) was due to issue a US$490 million Sukuk on the 25th February following an US$860 million Sukuk sale last month. The three-month paper is rated ‘A-1’ by S&P and will mature on the 29th May.
Nu Sentral to disburse profitMALAYSIA: The semi-annual profi t payment on Nu Sentral’s RM600 million (US$181.81 million) Islamic medium-term notes program is due and payable on the 26th February.
1MDB plans another SukukMALAYSIA: Sovereign wealth fund 1Malaysia Development (1MDB) plans to sell a privately-placed unrated Sukuk to fund the relocation of eight defense units from land marked for government development project Bandar Malaysia. The RM2.4 billion (US$727.24 million) issue will carry tenors of one to 10 years and is being advised by AmInvestment Bank.
IDB picks bankMALAYSIA: The IDB has selected CIMB, Commerzbank, First Gulf Bank, HSBC, Natixis, National Bank of Abu Dhabi and Standard Chartered to arrange meetings with fi xed income investors for a potential dollar-denominated Sukuk, subject to market conditions. The roadshows will begin on the 23rd February in the Middle East and Asia.
Sentral 384 payment dueMALAYSIA: Sentral 384, formerly known as Promising Quality, will have the semi-annual profi t payment on its RM200 million (US$60.67 million) Islamic medium-term notes program due and payable on the 3rd March.
Malaysian mortgage SukukMALAYSIA: Under the Housing Loan Fund Act 1971, the government of Malaysia was due to issue Sukuk Perumahan Kerajaan on the 21st February to restructure the fi nancing of existing housing loans and to extend new mortgages to government servants. The commodity Murabahah facility is for the amount of RM4 billion (US$1.21 billion),
which will be auctioned equally via principal dealers and through private placement. The 10-year debt will mature on the 21st February 2024.
RHB Islamic gets nodMALAYSIA: RHB Islamic’s proposed RM1 billion (US$304.31 million) subordinated Sukuk Murabahah program has been approved by the Securities Commission. Proceeds from the sale will be used for the bank’s working capital and general banking purposes.
NCB prices SukukSAUDI ARABIA: National Commercial Bank (NCB) has reportedly concluded a Sukuk program worth SAR5 billion (US$1.33 billion) which was priced at 110bps over six-month SAIBOR. The program was initially sized at SAR4 billion (US$1.07 billion) but was reportedly raised following strong investor demand.
Nu Sentral dueMALAYSIA: The semi-annual profi t payment on Nu Sentral’s RM600 million (US$181.81 million) Islamic medium-term notes program is due and payable on the 28th February.
DanaInfra ETBS Sukuk?MALAYSIA: DanaInfra Nasional may issue and list as many as two Sukuk programs on the stock exchange this year, reported Reuters. The facilities are expected to be worth RM100 million (US$30.33 million) each. The fi rm is the only entity thus far to have issued Sukuk on the bourse’s Exchange Traded Bonds and Sukuk (ETBS) platform.
CBB oversubscribed by 325%BAHRAIN: The Central Bank of Bahrain (CBB)’s monthly Sukuk Salam issuances worth BHD36 million (US$94.45 million) have been oversubscribed by 325%. The 91-day papers, which carry an expected return of 80bps, will mature on the 28th May 2014.
Selangor drops Sukuk planMALAYSIA: The Malaysian state of Selangor has dropped its plan of issuing Sukuk worth up to RM1 billion (US$304.31 million) as the chief minister has said that there are suffi cient reserves in the state’s exchequer. The proposed Sukuk program was intended to fi nance major infrastructure projects in the state.
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Bumitama Agri RM 152.56 million 25th February 2014
DanaInfra Nasional RM 60.86 million 24th February 2014
IDB TBA TBA 19th February 2014
1Malaysia Development RM 730.34 million 19th February 2014
TSH Sukuk Ijarah RM 6.08 million 18th February 2014
Bumitama AgriMALAYSIA: Singapore-listed oil palm producer Bumitama Agri may issue a fi ve-year Sukuk worth RM500 million (US$152.56 million) in early March. Drawing from the RM2 billion (RM608.62 million) program it established last month, proceeds will go towards capital expenditure, investment and debt restructuring. Maybank Investment and
United Overseas Bank are the advisers to the program.
Ample Zone payableMALAYSIA: The partial principal redemption of Ample Zone’s Class C primary Sukuk Ijarah worth RM150 million (US$45.65 million) will be payable on the 27th February.
continued
Malaysia calls for improvements in the effectiveness of Family Takaful frameworkMALAYSIA: In a recent public consultation conducted by Bank Negara Malaysia (BNM) on the proposed concept paper on life insurance and Family Takaful framework, feedback received by the country’s central bank called for bett erments in key areas such as fl exibility in operational structure of life insurers and Family Takaful business including intermediaries’ remuneration, as well as improvements in the eff ectiveness of multifaceted delivery channels.
In terms of market conduct, responses were received on the proposed balanced scorecard framework to improve the professionalism of intermediaries, as well as the establishment of an online product aggregator to facilitate comparison of pure protection products and enhanced disclosure requirements to facilitate consumers in making informed decisions.
The initial public consultation was carried out over a period of two months, with approximately 254 respondents submitt ing their feedback online and via lett ers to the central bank.
According to BNM’s observations, the consultation participants included members of the public, individual intermediaries, consumer associations and industry associations of life insurers, Takaful operators, agency force and fi nancial advisers.
The concept paper outlines a proposal to support the long-term development of the life insurance and Family Takaful industry in Malaysia which encompasses areas including provision of operational fl exibility, diversifi cation in delivery channels and strengthening market conduct. According to a press statement, all feedback is currently being taken into consideration.
Further engagements with stakeholders will be undertaken in the course of fi nalizing the overall framework in order to ensure that the life insurance and Takaful industry continues to enhance its value proposition and remain relevant to prevailing market environment.
AFRICAEgyptian Islamic banking on upward trendEGYPT: Islamic banking assets are anticipated to increase this year to approximately EGP128 billion (US$18.34 billion), according to the governor of Faisal Islamic Bank of Egypt, Abdel Hamid Abu Mousa. Islamic banking assets were valued at EGP114 billion (US$16.33 billion) last year, marking an 11% growth from 2012, according to fi gures from the Egyptian Islamic Finance Association.
AMERICASArrest warrant issued for Islamic financierCANADA: The Royal Canadian Mounted Police’s Greater Toronto Financial Crime Unit has announced that Omar Kalair, the head of two registered fi rms UM Financial and UM Capital, which provided Islamic fi nancing, is facing criminal charges. The charges include the theft of over CA$5,000 (US$4,555.89); fraud of over CA$5,000; laundering proceeds of crime; three charges under the Bankruptcy and Insolvency Act of fraudulent disposition of bankruptcy property; failure to comply; and failure to answer truthfully.
Omar went missing aft er allegedly appropriating CA$4.3 million (US$3.92
million) in Islamic mortgage payments. Omar’s religious adviser Yusuf Panchbaya is also faced with the same charges and appeared in court on the 21st February. A Canada-wide warrant for arrest has been issued for Omar.
Islamic finance preview for US universityUS: Islamic Finance news US correspondent Joshua Brockwell spoke at a panel on Islamic fi nance and socially responsible investing at Johns Hopkins University’s School of Advanced International Studies on the 25th February. Brockwell spoke in his capacity as investment communications director of Azzad Asset Management.
ASIAIndia makes key plansINDIA: The Indian government is reportedly looking to establish an entity to regulate and promote Islamic fi nance before issuing full Islamic banking licenses as well as introduce a Hajj fund according to Indian minister for minority aff airs Rahman Khan.
Positive growth in Malaysia through to 2020MALAYSIA: Despite the uncertainties of the global and local economy, including the weakening of the ringgit, domestic Islamic fi nance growth is expected to
be stable according to Badlisyah Abdul Ghani, CEO and executive director of CIMB Islamic Bank. Badlisyah said that he believes that Islamic fi nance in Malaysia will continue to grow positively until 2020 and beyond.
New measures affects Bank IslamMALAYSIA: Bank Islam expects a 10% decline in assets and fi nancing performance this year due to new terms and conditions imposed by the central bank on loans in a bid to curb rising household debts, said managing director Zukri Samat. The bank plans to expand its branch network to 141 by the end of this year with an eye of launching nine more branches in 2015.
Thai banks will persevereTHAILAND: Moody’s Investor Services has affi rmed its belief that Thai banks will not be systemically aff ected by the temporary outfl ows caused by depositors withdrawing a total of THB30 billion (US$919.94 million) from the Government Savings Bank, in protest of the bank’s support of Thailand’s politically controversial rice-buying program. The ratings agency is of the opinion that local banks have suffi cient liquidity to manage the temporary outfl ows and that such deposit withdrawals are not prompted by a lack of confi dence in the soundness of the fi nancial institutions.
Moody’s however opined that the spectre of future politically motivated
actions targeting banks is credit negative for the banking sector, especially for state-owned banks and policy banks — main vehicles for Thailand’s subsidy programs.
More IPOs than 2013MALAYSIA: Some of the IPOs to be fl oated on the Malaysian stock exchange in 2014 will be bigger than the Felda Global Ventures Holdings in terms of size, according to Steve R Clayton CEO of JPMorgan Chase. The company debuted on the stock exchange in 2012 and raised RM9.93 billion (US$3.02 billion). Clayton hinted that JPMorgan Chase will be advising in some of the corporation and government-linked company IPOs to take place in the second half of this year.
1MDB, which is planning to privately issue a RM2.4 billion (US$727.24 million), is reportedly planning an IPO this year; as is Malkoff Corp, which also issued a Sukuk last year.
AIIBP launches Hajj savings schemePHILIPPINES: Al-Amanah Islamic Investment Bank of the Philippines (AIIBP) has introduced a savings plan dedicated to fi nancially prepare clients for future Hajj.
AFB looking to the Middle EastMALAYSIA: Shariah compliant Asian Finance Bank (AFB) is looking to leverage its Middle East-Malaysia
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Bursa Malaysia and Tadawul sign MoU to foster closer financial and economic ties between Malaysia and Saudi ArabiaGLOBAL: Bursa Malaysia, the Malaysian stock exchange, and Tadawul, the stock exchange of Saudi Arabia, have signed an MoU to formalize cooperation between the two bourses regarding the development of capital market cross border activities.
Signed by Tajuddin Atan, CEO of Bursa Malaysia and Adel Saleh Al Ghamdi, CEO of the Saudi Stock Exchange, the MoU will kickstart a series of collaborative discussions aimed at strengthening the fi nancial and economic links between Malaysia and Saudi Arabia, two important centers within the Islamic fi nancial industry. The aims of the MoU are manifold: including facilitating cross-border development of the Islamic fi nancial markets, to promote the sharing of knowledge and expertise between the exchanges, to provide opportunities for human capital development and the exploration of further opportunities.
Saudi Arabia and Malaysia make up a signifi cant portion of the Islamic fi nance industry: with Saudi Arabia capturing 18% of the global Islamic banking assets and Malaysia following closely with 13%. The exchanges have hailed the signing of the MoU as a “major step towards consolidation in the Islamic fi nance world” and expect the collaboration to provide greater internationalization of the Islamic market and the integration of both markets.
connection to boost its fi nancing assets to RM2.5 billion (US$758.34 million) this year, up from RM1.7 billion (US$515.67 million) in 2013. The bank is targeting a 60% contribution from domestic sources while the remaining 40% is expected to come from its joint ventures with Middle Eastern fi rms.
Islamic finance support for green projectsMALAYSIA: More Islamic fi nancing for green initiatives is expected in 2014, according to Ahmad Hadri Haris, CEO of Green Tech Malaysia. The Islamic fi nance sector currently contributes almost 20% or RM300 million (US$91.12 million) of the RM1.5 billion (US$455.58 million) fi nancing for 120 projects approved by the Malaysian Green Technology Financing Scheme.
Indonesia remains stableINDONESIA: Despite a predicted decline in GDP growth to 5.4% this year from 5.8% in 2013, which will exert pressure on asset quality, the Indonesian banking system remains stable as Moody’s expect banks to continue reporting sound fi nancial fundamentals including high profi tability and capital levels.
New areas of Islamic finance focusMALAYSIA: Malaysia should expand on underdeveloped areas within Islamic banking and fi nance to achieve a solid and overall implementation according to M Najib Shaharuddin, the chief operations offi cer at the Islamic Banking and Finance Institute Malaysia (IBFIM). Najib has said that the focus should be on areas that aren’t yet covered by Bank Negara Malaysia or the Securities Commission. IBFIM is developing programs in the areas of entrepreneurship, microfi nance and Waqf.
Credit positive for RHB and AmIslamicMALAYSIA: Moody’s has affi rmed that RHB Islamic’s proposed RM1 billion (US$304.31 million (Tier 2 Sukuk issuance and AmIslamic’s announced RM3 billion (US$912.94 million) off erings are credit positive as the point of non-viability Sukuk programs are to facilitate access to capital, support
growth and strengthen loss-absorption capability while meeting with Basel III requirements. The ratings agency also projected that RHB Islamic’s total capital adequacy ratio will be improved to approximately 22% through the issuance while AmIslamic will boost its capital adequacy ratio to around 19% — although it may not issue the entire RM3 billion amount due to its already sound capitalization.
SBP introduces five-year strategic planPAKISTAN: The State Bank of Pakistan (SBP) has launched a fi ve-year (2014-18) strategic plan for the Pakistani Islamic banking industry covering the areas of enabling policy environment, Shariah governance and compliance, awareness and capacity building, and market development. The framework is the result of discussions with industry players, Shariah advisers, SBP Shariah board members, academicians, the Securities and Exchange Commission of Pakistan and the Institute of Chartered Accountants of Pakistan.
Treedom hires SRBHONG KONG: Bahrain-based Shariyah Review Bureau (SRB) has been appointed by luxury aromatic Oud oil manufacturer and supplier Treedom Hong Kong to review, certify and oversee the Shariah compliance of its Impact Saving Plan. The scheme will deliver portfolio construction of Agarwood oil distillation in a structure that off ers liquidity and investment returns.
EUROPEUK Sukuk well underwayUK: The UK government is close to issuing its debut sovereign Sukuk and is looking to come to market by mid-2014, confi rmed UK senior minister of state for foreign and commonwealth offi ce Baroness Warsi to IDB president Dr Ahmad Mohamed Ali during her visit to IDB Jeddah headquarters. Legal fi rm Linklaters is acting as advisor to the GBP200 million (US$333.31 million) issuance.
Baroness Warsi and Dr Ahmed reaffi rmed their commitment to strengthening IDB-UK relationship in the area of development assistance,
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Success of Islamic finance in North Africa hinges on economic added valueGLOBAL: In a research report released by S&P yesterday, it was indicated that the Shariah compliant fi nance industry possesses the potential to develop in North Africa. The report, entitled ‘Islamic Finance Could Make Inroads Into North Africa’, observed that due to the large current account defi cits and declining conventional fi nancing sources, sovereigns in Arab Spring countries have taken steps to implement policies to support the development of Islamic fi nance.
In an exclusive interview with Islamic Finance news, S&P’s credit analyst, Mohamed Damak, elaborated further on the prospects of the North African region. “Today, Islamic fi nance represents less than 1% of the banking system assets in these countries and collectively, North Africa represents less than 1% of the global Islamic fi nance (with global industry assets estimated at US$1.4 trillion),” he said.
There is an increase in public awareness and a change in perception towards Islamic fi nance. Countries in which S&P rates banks such as Egypt Tunisia and Morocco, have all demonstrated positive developments: Tunisia plans to issue Sukuk to att ract new class of investors; Egypt implemented new regulatory frameworks for Sukuk issuance; and Morocco is laying the legal foundation for Islamic banks.
“The degree of the success of the Tunisian Sukuk will not only be determinant for other issuances out of the country itself but also at regional level. If Sukuk proves to create access to a new class of investors, we think that other issuers in the country might follow suit,” said Damak. S&P is of the view that Islamic instruments are a good fi t to fi nance these projects, as well as assist in diversifying investor bases and tap additional pools of resources.
According to the report, the success and growth of Islamic banks in the region is contingent upon the capability to demonstrate their economic added value. Damak opined: “Price competition is stiff in North Africa and off ering these products at a higher margin, may put a serious brake to the development on Islamic fi nance in North Africa.”
particularly in volatile circumstances such as those in Palestine and Somalia, as well as empowering women economically via the Arab Women Enterprise Fund.
GLOBALGlobal reach for UK Islamic institutionsGLOBAL: The UK’s 25 Islamic fi nance banking institutions can provide services to those international Islamic banks that don’t want to have to establish themselves in London, according to Fiona Woolf, Lord Mayor of London. Woolf asserted that Dubai and Kuala Lumpur are centers that are closer to those interested in Islamic fi nance products but that London is working on developing closer Islamic fi nance ties between the UAE and the UK.
Libya seeks aid in Islamic finance developmentGLOBAL: Malaysia’s experience in Islamic fi nance could aid Libya in its impending transition to Shariah compliant fi nance by its 2015 target, according to Dr Anwar AY Elfeitori, Libyan ambassador to Malaysia. Malaysia-based INCEIF signed an MoU with the Central Bank of Libya in May 2013 agreeing to provide technical support and training to the bank.
JPMorgan cuts ties with Al Rajhi BankGLOBAL: JPMorgan Chase & Co ended its correspondent banking client relationship with Al Rajhi Bank
on the 31st December 2013 according to a report by Bloomberg. JPMorgan dropped Al Rajhi Bank in accordance with its push to improve risk controls. This follows the discontinuation of the Emirates NBD correspondent banking client relationship reported on the 11th February.
JPMorgan said that it halted the service to approximately 500 foreign lenders last year due to pressure from regulators to verify that transactions are used for legitimate business.
Rising confidence in MENAGLOBAL: The MENA region in 2013 saw an improved confi dence in the regional economy (highest in two years), leading to a spark in private equity and sovereign wealth fund (SWF) investment, according to EY. Deals involving private equity investors stood at 66 out of 442 deals, valued at approximately US$4 billion, while SWFs (involved in 19 deals) accounted for US$14.5 billion-worth of transactions, making them the sole largest buyer constituency in MENA at 29% of overall deal values. MENA also saw a 13% year-on-year rise in mergers and acquisitions last year at US$50.7 billion.
IDB ratifies financingGLOBAL: The IDB has signed an MoU with Fars province’s Water & Wastewater Company whereby the bank will provide EUR144 million (US$197.61 million) to Fars province to carry out water and wastewater projects expected to benefi t some 395,000 people. The IDB also agreed to channel US$59 million to the road construction project in northwestern Burkina Faso.
IOSCO findingsGLOBAL: Responding to a query by Islamic Finance news during the International Organization of Securities Commissions (IOSCO) Board meeting press conference, Ranjit Ajit Singh, the chairman of Securities Commission Malaysia and vice-chairman of the IOSCO Board, said: “IOSCO has had Islamic fi nance in its foresight in this area in terms of its work, at a global level. When we did the capacity building survey, the results of which was discussed at the board level, one of the most important fi ndings that came through in terms of where members in the African and Middle East region want capacity building assistance on is actually
in Islamic fi nance. So we will provide assistance and we will help to develop the Islamic fi nance markets.”
Over 100 IOSCO representatives from 30 jurisdictions met in Kuala Lumpur, Malaysia last week to discuss global issues aff ecting capital markets. At least 95% of the world’s capital markets worth an estimated US$127 trillion are regulated by IOSCO members.
Narrowing cost gapGLOBAL: The cost gap between Gulf-based Islamic banks rated by S&P and conventional banks reportedly shrank to as litt le as 30bps in the fi rst half of 2013; against 110bps four years earlier, according to an S&P study conducted using fi nancial data from 2007-13. S&P stressed that the methodology is not without fl aws as there are potential macroeconomic factors that may infl uence the fi gures.
The drop in extra product costs could be att ributed to increasing economies of scale and enhanced familiarity of Islamic fi nancial contracts and transactions, leading to lower product developmental costs.
Islamic finance for sportGLOBAL: Al Hilal Bank has announced the signing of a memorandum of cooperation (MoC) with the UAE Wrestling, Judo & Kick Boxing Federation. The Abu Dhabi-based bank has pledged to fi nancially support one tournament or event held by the federation within a year. In return the federation will off er free membership and a 50% discount on federation uniforms to UAE nationals enrolled under the bank’s ‘Seghaar’ account, aimed at young people and a 50% discount on membership to non-UAE nationals. The federation will also off er free classes and demonstrations, during special events organized or supported by Al Hilal Bank.
IFAAS to aid with leadership programGLOBAL: The Islamic Finance Advisory & Assurance Services (IFAAS) has become a networking partner of the Madinah Institute of Leadership & Entrepreneurship. The two entities will cooperate for the sixth iteration of the institute’s program for advanced leadership and management to be held in Saudi Arabia in April.
KFH sponsors students overseasGLOBAL: Shariah compliant Kuwait Finance House has sponsored the National Union of Kuwait Students’ (NUKS) UK and Ireland branch for a full year as part of its social responsibility program. The sponsorship covers the NUKS annual conference, the freshman forum, annual graduation and top students ceremony.
Leeds United sale a highlight for GFHGLOBAL: Shariah compliant Gulf Finance House (GFH) has named the sale of Leeds United Football Club to Eleonora Sport as a highlight within its full-year accounts. GFH has stated that the sale of a 75% stake in the club will support value creation at Leeds United to ensure strong future returns on the bank’s investment.
Growth for the GCC in 2014GLOBAL: Following growth of the GCC banking sector in 2013, the trend is predicted to continue with major projects across the region driving real GDP growth to 4.6% in 2014 according to a report by Qatar National Bank.
ICD focuses on human capital developmentGLOBAL: The Islamic Corporation for the Development of the Private Sector (ICD) has completed the fi rst cohort of its Islamic Finance Talent Development Program; a training scheme that includes three eight-month assignments in an IDB Group sub-business and an in-house global training curriculum over a two-year period.
Islamic forum to be held in LuxembourgGLOBAL: The Bahrain-based General Council for Islamic Banks and Financial Institutions (CIBAFI) has confi rmed that the second international forum for Islamic banks and fi nancial institutions will be held in Luxembourg on the 3rd and 4th April 2014. The theme of the forum will be ‘Islamic fi nance in Europe: How to learn from previous experiences’, and topics will include success stories in Islamic fi nance including the Gulf, Jordan, the Maghreb and Europe, existing Islamic fi nance infrastructure institutions and Takaful.
Italian bankers open to Islamic financeGLOBAL: Bankers and academics have instigated a campaign to establish Islamic fi nance in Italy, a target which may benefi t from the growing economic trade between Italy and the Gulf countries. Islamic funds and Islamic institutional investors are showing keen interest in investing in Italy according to Enrico Giustiniani, an analyst at Banca Finnat Euramerica. Fondazione Istud, a Milan-based business school, plans to establish an Islamic fi nance position this year intended as a venue for industry research and to develop proposals aimed at Italian decision makers.
MIDDLE EASTApril deadline for bank registrationOMAN: A KPMG seminar on US foreign account tax compliance (FATCA) was held in Oman recently. Under FATCA rules foreign fi nancial institutions need to register on the US Internal Revenue Service website by the 25th April to avoid a 30% withholding tax imposed by US authorities.
Bank signs on as financial consultantSAUDI ARABIA: Saudi-Kuwaiti Finance House, owned by Shariah compliant Kuwait Finance House, has signed a fi nancial consultation agreement with factory owner Al-Omran Company to aid the company in its fi nancial restructuring.
Innovative Shariah compliant bankingUAE: Shariah compliant Al Hilal Bank has announced it will allow customers to withdraw cash from ATMs using their Emirates ID card as one of the outcomes of the strategic partnership between the bank and Emirates Identity Authority. Al Hilal Bank will be the fi rst to off er the service, which will be available to customers within the year.
World Halal Food ExhibitionUAE: The inaugural Gulfood Halal World Food exhibition will be held in Dubai in March, with over 450 Halal manufacturers, processors and distributors from more than 50 countries att ending. According to a report by
Thomson Reuters the global Halal market has an estimated annual value of US$1 trillion.
In 2013 Dubai announced its plans to become an Islamic economic hub with the Halal industry as one of its focus areas.
Oman stable since 2007OMAN: Stable macroeconomic conditions have been highlighted by Moody’s as the reason for its stable outlook on Oman’s banking system as they are expected to support low levels of non-performing loans and healthy levels of capitalization and earnings. The stable outlook is also att ributed to a stable deposit funding base and strong liquidity cushions which will off set potential shocks from unanticipated oil price drops and risks from high borrower concentrations, a lack of transparency in the industry and exposures to the real estate sector. Oman’s GDP is projected to grow by 4.3% this year.
Oman sets a good exampleOMAN: Oman’s developing Islamic fi nance sector was a key point in a speech by Baroness Warsi, UK senior minister of state and minister of state for faith and communities. Warsi made a two-day visit to Oman and commended the country for being a good example of inter and intra-faith tolerance.
Debt to be rolled overUAE: Dubai has come to an agreement with the Central Bank of the UAE regarding the rollover of US$10 billion in debt extended by the bank fi ve years ago and due to mature next year, according to Reuters. The terms of the new agreement are reportedly bett er than the original bonds which carried a 4% coupon. As much as US$10 billion of fi ve-year bonds and Sukuk purchased from Dubai by National Bank of Abu Dhabi and Al Hilal Bank will be due in November, with many expecting this debt to also be rolled over.
Waqf Fund collaborates with universityBAHRAIN: The Waqf Fund, a Bahrain-based fund to support Islamic fi nance training, education and research, has agreed to provide fi nancial support to the four-year bachelor degree course in Shariah for Banking & Finance program off ered by the University of Bahrain.
FIFA fever packagesQATAR: Mashreq Bank has launched a limited edition FIFA World Cup Mashreq Visa card ahead of the World Cup. Along with that, a new rewards program, known as the Salaam Goals, will be off ered; allowing cardholders to redeem 2014 FIFA World Cup merchandises, travel packages or retail purchases.
Saudi Hollandi holds EGMSAUDI ARABIA: Saudi Hollandi Bank will hold an extraordinary general assembly meeting on the 17th March to vote on issues of board member remuneration, appointment of external auditors, the issuance of bonds and ratifi cation of last year’s fi nancial statements, among other things.
Saudia procures financingSAUDI ARABIA: A consortium of local and international banks led by Saudi Arabia’s Samba Financial Group has provided Saudi Arabian Airlines (Saudia) with a fi nancing worth SAR7 billion (US$1.87 billion), to fund 17 new aircraft deliveries and the carrier’s expansion plans.
Ticket discounts and lounge access for BMI Bank customersBAHRAIN: BMI Bank, which recently agreed a merger with Shariah compliant Al Salam Bank, has signed strategic agreement with Gulf Air, in order to off er BMI Bank customers preferential rates on Gulf Air tickets and discounted lounge access. Payment must be made using a BMI Bank credit or debit card. Discounts are available on both economy and business class fl ights.
Emiratization program continuesUAE: Following participation in the National Career Exhibition, Sharjah Islamic Bank has confi rmed the hire of 50 new UAE national graduates. The bank has so far employed 67 UAE nationals under the Emiratization program and aims to maintain an Emiratization rate of 40%.
UAE business tax a possibility UAE: Sheikh Hamdan Rashid Al Maktoum, the deputy ruler of Dubai and minister of fi nance, has confi rmed that the UAE has no immediate plans
to introduce tax for individuals but the ministry has conducted studies on the economic eff ects of levying taxes on companies, according to local reports. The UAE government is also considering the introduction of fees for new services at federal ministries and bodies and the imposition of taxes on harmful products such as tobacco as well as studying the impact of imposing a fee on remitt ances sent abroad.
New CEO on Islamic bankingUAE: Shayne Nelson, group CEO of UAE-based Emirates NDB, believes there is much potential for Islamic banking in the Middle East especially in Saudi Arabia and other Gulf markets. In a recent interview with local press Nelson predicted that banks in the UAE will move towards the debt capital market and the Sukuk market in order to reduce exposure to government and government-related entities.
Record-low yields for SukukUAE: Investors should buy Sukuk from DP World and Jebel Ali Free Zone Authority FZE at the current record-low yield before the credit ratings improve, according to JPMorgan Chase & Co. Due in July 2016, the yield on the DP World’s US$1.5 billion Sukuk slid 61bps to 2.6% this week, its lowest level since the Sukuk sold in 2007. The yield on The Jebel Ali Free Zone Authority Sukuk, which matures in 2018, fell by 32bps. DP World is rated the lowest investment grade by Moody’s Investors Service and Fitch Ratings while business-park operator Jafza has a junk rating, but JPMorgan believes that both ratings could be upgraded in 2014.
Kingdom Holdings approves dividend SAUDI ARABIA: Kingdom Holding, which last year formed an internal Shariah board to advise on its Shariah compliant fundraising activities, has said the company will pay a fourth quarter dividend of SAR0.125 (US$0.03) per share. The payout will bring the company’s total dividend payout for 2013 to SAR655.9 million (US$174.87 million) or SAR0.5 (US$0.13) per share.
EI supports SMEsUAE: Emirates Islamic has launched a zero remitt ance fee campaign for company retail and business banking accounts in support of the international
expansion strategies of UAE-based SMEs. The campaign, which runs till the 31st March, applies to international transfers valued at AED50,000 (US$13,610.3) or more in foreign currency.
JIB-MEPS collaborationJORDAN: Jordan Islamic Bank (JIB) has signed an agreement with Middle East Payment Services (MEPS) allowing for all MasterCard cards issued by the Islamic bank to be managed and operated by MEPS.
Greater focus on corporate financing QATAR: Qatar International Islamic Bank plans to improve its presence in corporate fi nancing according to CEO Abdulbasit A Al Shaibei. The bank plans to focus on trade fi nance and has recently activated its trade fi nance department.
RESULTSKipcoKUWAIT: Kuwait Projects Co (Kipco), whose investment arm Kipco Asset Management launched a Shariah compliant fund in 2010, announced net profi ts of KWD14 million (US$49.57 million) for the fourth quarter of 2013, compared to KWD8 million (US$28.32 million) for the same period in 2012. Total profi t for 2013 was up by 27% to KWD40.1 million (US$141.99 million) compared to KWD31.6 million (US$111.89 million) for 2012.
The Kipco board has recommended a cash dividend of 20% and a stock dividend of 5%.
LMCBAHRAIN: The Bahrain-based Liquidity Management Center (LMC) announced a 7% return on share capital for 2013, with the LMC realizing a net profi t of US$3.58 million, a 16.62% gain compared to the US$3.07 million for 2012. Net profi t for the fourth quarter of 2013 was recorded as US$784,000, an increase on the US$454,000 for the same period in 2012.
Ahli United BankBAHRAIN: Ahli United Bank (AUB) posted a net profi t att ributable to its equity shareholders of US$579.4 million last year, a 72.6% jump from 2012.
Excluding the exceptional non-recurring gain of US$212.9 million on the sale of its 29.4% stake in Ahli Bank Qatar, operating net profi t for AUB stood at US$366.5 million, representing a 25.7% growth from the previous year.
Al Salam Bank BahrainBAHRAIN: Al Salam Bank Bahrain reported a net profi t of BHD12.37 million (US$32.65 million) in 2013, up from 2012’s BHD10.31 million (US$27.22 million). Total assets stood at BHD1.09 billion (US$2.87 billion).
Allied Cooperative Insurance GroupSAUDI ARABIA: Saudi-based Allied Cooperative Insurance Group announced pre-Zakat net profi t of SAR12.58 million (US$3.35 million) for 2013, an improvement on the loss of SAR23.22 million (US$6.18 million) in 2012.
Gulf Finance HouseBAHRAIN: Shariah compliant Gulf Finance House announced net profi ts of US$6.3 million, a dip from the US$10.3 million reported for 2012. Operating profi t for 2013 prior to provisions was logged at US$9.3 million, a drastic drop from US$20.43 for 2013. Results for the fi nal quarter of 2013 beat those for the same period in 2012, with a net profi t of US$5.2 million aft er provisions when compared with US$2.5 million for the previous year. The bank reduced operating costs by 20% from US$43.15 million in 2012 to US$34.6 million.
Al Baraka Banking GroupBAHRAIN: Al Baraka Banking Group posted a net att ributable year-on-year profi t of 9% to US$145 million for the full year of 2013, while the last quarter recorded a 23% growth to US$26 million. The Islamic bank is targeting to expand its current 479-branch network to 560 this year across Egypt, Jordan, Pakistan and Turkey.
KFH-TurkeyKUWAIT: Kuwait Finance House Turkey (KFH-Turkey) reported full year profi ts of TRY300 million (US$13.75 million) for 2013, while total assets accrued by 37% to TRY25.9 billion (US$11.87 billion).
Saudi Re for Cooperative Reinsurance CompanySAUDI ARABIA: Saudi Re for Cooperative Reinsurance Company registered a pre-Zakat net loss of SAR99.65 million (US$26.57 million) in 2013, against a profi t of SAR28.95 million (US$7.72 million) in the previous year. The loss was att ributed to a 225% increase in net claims and additional reserves as recommended by external actuary. Loss per share stood at SAR0.99 (US$0.26).
Burgan Bank KUWAIT: Despite positive nine-month fi gures, Kuwait-based Burgan Bank, which off ers Islamic products, announced a drop in net profi ts for the fourth quarter of 2013 and for the full year. The bank reported fi nal quarter net profi t of KWD2.52 million (US$8.9
million) compared to KWD9.22 million (US$32.65 million) for the same period in 2012. Full year net profi ts for 2013 were KWD20.1 million (US$71.17 million), 63.8% lower than the full year fi gures for 2012 according to fi gures calculated by Reuters. The bank reported a KWD10.3 million loss (US$36.47 million) in the third quarter.
Solidarity Takaful CoSAUDI ARABIA: Solidarity Takaful Co registered a pre-Zakat net loss of SAR83.9 million (US$22.37 million) in 2013 following a net loss of SAR28.64 million (US$7.64 million) in 2012. The loss is att ributed to the increase in claims and the provision of actuary technical reserves. Loss per share stood at SAR1.51 (US$0.40).
Al Rajhi Company for Cooperative InsuranceSAUDI ARABIA: Al Rajhi Company for Cooperative Insurance reported pre-Zakat net loss of SAR21.34 million (US$5.69 million) against a profi t of SAR785,000 (US$209,288) profi t in 2012. The loss has been att ributed to a 35.32% increase in net claims and a 25% increase in general and administration expenses.
Allianz Saudi Fransi Cooperative Insurance CompanySAUDI ARABIA: Allianz Saudi Fransi Cooperative Insurance Company announced pre-Zakat profi t of SAR12.81
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million (US$3.41 million), a 24.67% increase on 2012 results of SAR10.28 million (US$2.74 million). The increase is att ributed to the increase in the net writt en premiums by 14% and a decrease in general and administrative expenses by 3%. Earnings per share are reported at SAR0.64 (US$0.17).
RHB CapitalMALAYSIA: RHB Capital has reported net profi t for 2013 at RM1.83 billion (US$556.89 million). Islamic banking income increased by 20.6% to RM590.9 million (US$17.82 million), which was mainly att ributable to higher net funding income following a 15.1% increase in its fi nancing base to RM18.7 billion (US$5.69 billion) from 2012.
The bank’s pre-tax profi ts of RM2.5 billion (US$760.78 million) were up 3.6% on 2012 fi gures and total income increased by 23.2% to RM6 billion (US$1.83 billion).
United Gulf BankBAHRAIN: United Gulf Bank, which off ers Islamic fi nancial products, reported a net profi t of US$4.2 million for 2013, a drop from US$6.7 million the previous year. Total assets stood at US$1.26 billion, a slight increase from US$1.23 billion in 2012. The bank will not recommend any dividend for 2013.
ASSETMANAGEMENTHigh target for 2014EGYPT: EFG Hermes, which off ers Islamic products, aims to increase its assets under management in Egypt by 25% in 2014 according to Nabil Moussa, the head of asset management at EFG Hermes in Egypt. The investment bank currently manages US$3 billion in assets in the region, US$1.9 billion of which is under management in Egypt, with the rest in Dubai. The return on EFG’s equity funds in Egypt in 2013 was between 25-30% compared to 45% in 2012.
Saturna aims growthMALAYSIA: Islamic fund manager Saturna, the wholly-owned subsidiary of US-based Saturna Capital, is targeting a fi ve-fold growth for its ASEAN Equity Fund, to reach RM50 million (US$15.22 million) by the end of this year.
TAKAFULExpansion of capitalQATAR: Doha Insurance, which established Doha Takaful, has received shareholder approval for a QAR436.7 million (US$119.83 million) capital increase which will almost double the insurer’s capital to QAR500 million (US$137.20 million). The company’s shareholders will be off ered 24.26 million new shares at a price of QAR18 (US$4.93) per share and shareholders will be able to subscribe for nine new shares for every 10 shares currently owned.
Labuan FSA addresses Takaful businessMALAYSIA: Labuan Financial Services Authority (Labuan FSA) has issued new guidelines on investment management for Labuan insurance and Takaful business targeted at enhancing governance and promoting prudent investment practices by Labuan (re)insurers and (re)Takaful operators. The new guideline will come into eff ect on the 1st January 2015. Concurrently, Labuan FSA also issued the revised versions of the Guidelines on Fit and Proper Person Requirements (eff ective on the 1st January 2015), and Guidelines on the Establishment of Labuan Fund Managers (eff ective immediately).
PruBSN introduces digital applicationsMALAYSIA: Prudential BSN Takaful (PruBSN) has launched two diff erent digital applications: PruBSN Mobility and PruBSN Navigator. PruBSN Mobility is an automated tablet point of sales solution enabling agents and distributors to make complete sales submissions while cutt ing down time for customers to
RATINGSEmaar upgradedUAE: Moody’s has lift ed Emaar Sukuk’s provisional rating to ‘(P)Ba1’ from ‘(P)B1’ as well as the ‘B1’ rating of the Sukuk issued under this program to ‘Ba1’. The SPV’s parent company Emaar Properties’s corporate family rating has been upgraded to ‘Ba1’ from ‘Ba3’ while its probability of default rating has been elevated to ‘Ba1-PD’ from ‘Ba3-PD’. All ratings carry a stable outlook.
AM Best withdraws ratingKUWAIT: Following the successful transfer of its reinsurance portfolio to its UAE-based subsidiary Emirates Retakaful, Al Fajer Retakaful Insurance Company’s ‘B++’ fi nancial strength rating and ‘bbb+’ issuer credit rating have been withdrawn by AM Best.
Abu Dhabi receives ratings UAE: Abu Dhabi’s long-term foreign and local currency issuer default ratings (IDRs) have been affi rmed at ‘AA’, a rating that extends to the emirate’s senior unsecured foreign and local currency bonds, by Fitch. Short-term foreign currency IDR has been rated ‘F1+’ while the country ceiling, which applies to Ras Al Khaimah, has been confi rmed at ‘AA+’. All ratings have a stable outlook.
No change to Egypt ratingEGYPT: Public fi nances continue to be the main weakness in Egypt’s sovereign credit profi le, according to Fitch Ratings. This comes despite a slight improvement in the country’s budgetary performance in the fi rst half of the current fi scal year where the budget sector defi cit narrowed to 4.4% of forecast GDP from 5.2% at the same point in the previous year. Spending in the country has risen by 8% driven by public sector pay and interest payments, and spending growth is likely to continue until June, with Fitch forecasting 2014 defi cit at 11.8% of GDP.
Fitch predicts that without a reform in monetary policy, general government debt will remain at around 90% of GDP; and maintains the country’s ‘B-’ sovereign rating.
MOVESADGMUAE: Jan Bladen, the former chief operating offi cer of Dubai Financial Services Authority, has joined Abu Dhabi’s new fi nancial free zone, Abu Dhabi Global Market (ADGM), as executive adviser and program leader.
Arab Banking CorporationBAHRAIN: Ray Ferguson, currently CEO of Standard Chartered Singapore, will be joining Arab Banking Corporation (which operates ABC Islamic Banking) in the second quarter of 2014. Ferguson will take on the role of group chief banking offi cer.
Qatar Islamic BankQATAR: Sheikh Jassim Hamad and Abdullatif Abdulla Al Mahmoud have been re-elected as Qatar Islamic Bank’s chairman and vice-chairman respectively. The bank also appointed new board members for the period 2014-16 including Sheikh Jassim Hamad (representing Almirqab Capital), Abdulla Saeed Al Eidah (Brooq Trading Comp), Nasser Rashid S Al Kaabi (Al Sraiya Holding Group), Mohamed Issa Al Mohanadi, Mansour Al Muslah, Abdullatif Abdulla Al Mahmmoud (Dar Alsharq Group), Issa R Al Rabia Al Kuwari (Golden Ball Company), Sheikh Ali Ghanim Ali Abdullah Al Thani (Ali Bin Ghanem Al Thani’s Group) and Abdul Rahman Abdulla Abdul Ghani.
Hassan Hassan Almulla Aljefairi (Hassan bin Hassn Almulla TR) and Abdulla Ahmed M Taher were elected as deputy members.
fi ll out forms while PruBSN Navigation is a smartphone application providing information on the operator’s hospital network.
SECP revises listPAKISTAN: Securities and Exchange Commission of Pakistan (SECP) has issued a circular informing of its revision on the list of approved auditors for the (re)Takaful and (re)insurance industry under Section 48 (1) of the 2000 Insurance Ordinance. The revised list saw an additional four audit fi rms, bringing the total number of approved audit companies to 18.
PruBSN disburses Zakat and charity fundsMALAYSIA: Prudential BSN Takaful (PruBSN) has committ ed over RM600,000 (US$181,765) through its Zakat and Charity Endowment Funds towards sponsoring education for needy students and supporting rental payments of charitable homes.
New Takaful guidelines for BruneiBRUNEI: Guidelines to administrate the Takaful industry in Brunei are currently being reviewed by the central bank and consultants, and are slated for introduction the fi rst half of 2014. The new framework will regulate agents’ commission rates as well as their qualifi cation requirement. Brunei Insurance & Takaful Association will sign an inter-company agreement in a bid to encourage more prudent and vigilant practices among Takaful operators.
Etiqa responds to boycottMALAYSIA: In response to the nationwide boycott call by the Malaysian Medical Association (MMA)against Etiqa Insurance & Takaful, the insurance operator has said that it is engaging with the MMA to negotiate a solution. The boycott is also supported by the Medical Association and Medical Practitioners Coalition Association of Malaysia (MPCAM).
MMA, which called for the suspension of cashless services to all Etiqa panels, said that the operator has removed at least 200 general practitioners from its panel of clinics, who do not have a current account with Maybank, Etiqa’s parent company — a condition that was not in the original appointment lett er to the GPs and was only implemented on the 1st February. Other reasons for the boycott include delayed payments from Etiqa via a third party administrator.
SECP issues Takaful rulesPAKISTAN: Securities and Exchange Commission of Pakistan has introduced a slew of rules and guidelines applicable to all insurers in the business of micro-insurance/Takaful, including the Securities and Exchange Commission (micro-insurance) Rules 2014, Code of Consumer Protection and Code of Conduct for Micro-insurance Agents.
The new SECP micro-insurance rules narrate that the word micro-insurance may now be used interchangeably with micro-Takaful; Life micro-insurance with Family micro-Takaful; non-Life micro-insurance with General micro-Takaful; premium with contribution and insurer with operator.
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This Fatwa is brought to you exclusively by IFN in collaboration with Dar Al Sharia Legal & Financial Consultancy-Dubai. The Fatwa appearing in this space was obtained by Dar Al Sharia for issues faced by their clients and the documents stated in the Fatwa were developed at Dar Al Sharia. This Fatwa was compiled by Dr Muhiuddin Ghazi
www.daralsharia.com
SHARIAH PRONOUNCEMENT
Query:
A customer has approached an Islamic bank seeking a fi nancing facility in order to make a balance payment to the supplier for the goods it has already purchased, by providing 20% of the amount as a down-payment.
The customer is a trader, and has purchased the goods with the intention of selling them in the market.
A suitable Shariah structure is required in order to facilitate the customer.
Pronouncement:
Since the customer has already purchased the goods, it is not in order from a Shariah perspective to fi nance the transaction through Murabahah, which is commonly used for trade fi nance.
However, the bank may fi nance the same by purchasing an undivided share in the inventory owned by the customer and appointing it as bank’s agent to sell the same on behalf of the bank.
Purchase of undivided share in the inventory will create a Sharikat Al Melk relationship between the customer and the bank in regards to the inventory.
Before the execution of the transaction the following must be ensured:
a) The consignment (the subject matt er of Sharikat Al Melk) exists; and the bank management inspects the items and satisfi es itself of their quantity and valuation based on the lower of the current market price.
b) The customer submits a fi nancial feasibility study showing the expected profi t by selling the consignment in the market. This could be a short one page of statistics exhibiting the cost and the selling price of each item in the consignment.
c) The expected profi t should be fi nancially feasible for the bank viz a viz the other relationships and policy of the bank.d) An account should be opened in the bank for the Sharikat Al Melk, where the sale proceeds shall be deposited as a
guarantee.
The following steps should be adopted in order to achieve the purpose:
1. The bank will purchase the consignment from the customer by signing the purchase agreement and paying the purchase price (fi nance amount). Such purchase shall result in formation of Sharikat Al Melk (co-ownership) between the bank and the customer in the inventory with defi ned ratios and for an agreed period of time. Here the ratios shall be 80% for the bank and the rest for the customer.
2. Immediately thereaft er, the bank will appoint the customer as its agent to manage the bank’s share in the consignment i.e. to sell it to third party(ies), to collect the sale proceeds and to deposit the same in to the designated bank account. The bank will recover its investment (purchase price plus agreed profi t), and pay the balance to the customer. The bank shall also pay to the customer a fi xed and agreed fee for the agency services that the customer will off er to the bank. This could be any amount agreed by the bank with the customer.
3. If the customer is unable to sell the whole consignment in one go, the bank should be advised by the customer for each sale transaction and the sale proceeds shall be deposited in the designated account in the name of the customer maintained with the bank. This account shall be a non-checking account and will serve the purpose of an escrow account whereby the bank will control the movement of funds in the account.
4. In addition to the fee, the bank may grant the agent a certain incentive, which could be an amount over and above the profi t from the investment that is expected by the bank.
The following agreements will be needed to execute the above transaction:
Held at the Shangri La in Kuala Lumpur on the 19th February 2014, the IFN Awards ceremony for the 8th consecutive year honored the best of the best in the Islamic fi nance industry. Covering all the major Islamic fi nance markets globally, the prestigious event was att ended by more than 340 key industry practitioners, all of whom came to bask in the glory.
For the 2013 IFN Deals of the Year, 395 deals were submitt ed, in 32 categories, with the winners alone representing US$25 billion. IILM’s US$490 million Sukuk issuance won the Sukuk Deal of the Year and Deal of the Year. Professor Rifaat Ahmed Abdel Karim, CEO of the IILM, was present to collect the prestigious award on behalf of the issuer, and was joined on stage by Afaq Khan, CEO of Standard Chartered Saadiq; Leon Koay, the managing director, head of global markets and co-head of wholesale banking, Malaysia at Standard Chartered Bank; Mohamad Safri Shahul Hamid, the deputy CEO of CIMB Islamic; Arshad Mohd Ismail, the head of business development at Maybank Investment Bank; and Adrian Chee Meng Yang, a partner at Adnan, Sundra & Low, representing the arrangers and legal counsel.
Ahmad Zaini Othman, the president and CEO of MBSB and Mike Chan, the managing director and CEO of RHB Investment Bank, collected the award for the Structured Finance Deal of the Year. SP Setia claimed two award categories: Perpetual Deal of the Year for its RM609 million (US$184.49 million) Sukuk Musharakah and Musharakah Deal of the Year for its RM700 million (US$ 212.06 million) Sukuk Musharakah program, with Teow Leong Seng, SP Setia’s executive director and chief fi nancial offi cer, receiving the accolades.
The ceremony was also att ended by Samsudin Osman, the chairman of BIMB Holdings and Zamani Abdul Ghani, the chairman of Bank Islam Malaysia, who received the award for Equity Deal of the Year; and Rafael B Conception Jr, the executive director of Golden Agri-Resources, who collected the award for Indonesia Deal of the Year.
Our 2013 IFN Best Banks Poll witnessed a record-breaking 11,117 votes across 38 hotly contested categories, with CIMB Islamic succeeding in three categories including Best Islamic Bank in Malaysia, Singapore and Thailand.
The winners also included Naoki Nishida, the president and CEO of Bank of Tokyo-Mitsubishi UFJ (Malaysia), who collected the award for Best Islamic Bank in Japan; and WasimSaifi , the global head of Islamic banking and CEO of Standard Chartered Saadiq, who claimed the award for Best Islamic Private Bank.
The Islamic Investor Poll saw Malaysia claim seven of the 12 categories, with Zainal Izlan Zainal Abidin, the executive director of Securirties Commission and Islamic Capital Business Market Group, claiming the award for Best Fund Domicile of Choice; Maznah Mahbob, CEO of AmInvestment Management, winning Best Investor Relations by an Asset Management Company; and Angelia Chin-Sharpe, CEO of BNP Paribas Investment Management, collecting the Most Innovative Asset Management Company. The IFN Service Providers Poll winners included Malaysia’s KFH Research, with Baljeet Kaur Grewal, its managing director, receiving the award for Best Islamic Research Firm; and Etiqa Takaful for Best Takaful Provider, with its CEO, Ahmad RizlanAzman, collecting the award.
On the 24th February 2014, the IFN Awards Ceremony 2013 travelled to Dubai to continue its tribute to the industry. This year, the event took place at the Ritz Carlton in DIFC.
The UAE Deal of the Year was awarded to the Dubai Department of Finance for its US$750 million Sukuk issuance. The recipients for the deal included Pawan Kumar Gautam, the head of fund management for the government of Dubai; Abdulla Saeed Belyoahah, the director of the debt management unit
of the government of Dubai; Mushfi que Mahmoud, a senior counsel of Dar Al Sharia; Mohamed Abdulla Amer Al Nahdi, the deputy CEO of Dubai Islamic Bank; and Sheikh Alawi Ahmed, the executive director of debt capital markets at National Bank of Abu Dhabi.
Sub-Saharan Africa’s maiden Sukuk, issued by Nigeria’s Osun State, was named the Africa Deal of the Year: with Dr Wale Bolorunduro, the commissioner of fi nance for the government of Osun and Hajara Adeola, the managing director of Lotus Capital receiving the award.
IILM’s accolade for the Deal and Sukuk Deal of the Year saw Abdul Qadir Khanani, the global head of treasury at Abu Dhabi Islamic Bank as well as Mark Pritchard and Paul Voce, the executive directors at National Bank of Abu Dhabi, among the award receivers. Dr Markus Fischer, the group chief fi nancial offi cer and partner of Germany’s FWU Group, was present to collect the award for FWU Salam III Sukuk Wakalah Program, which won the Europe Deal of the Year.
Best Islamic Technology Provider was awarded to Path Solutions, and collecting the award was Mohammed Kateeb, the company’s group chairman and CEO. Representing AAOIFI to receive the award for Most Outstanding Standard-Sett ing Body was Dr Khaled Al Fakih, the secretary-general and CEO of AAOIFI.
Abu Dhabi Islamic Bank was one of the big winners for the awards ceremony, voted top in six categories: namely Best Islamic Asset Management Company in the Middle East, Best Islamic Investment Strategist of the Year, Best Islamic Bank in Egypt (with Nevine Loutfy, CEO and managing director of ADIB (Egypt) collecting the award), Best Islamic Bank in the UAE, Most Innovative Islamic Bank and Best Overall Islamic Bank. — NA
Islamic Finance news honors the best in the industry
In the six months to January 2014, the Securities and Exchange Commission of Pakistan (SECP) has issued multiple warning lett ers and orders to the CEOs and directors of undisclosed Takaful operators for failing to comply with the 1984 Companies Ordinance and 2000 Insurance Ordinance. Warnings have been issued on at least two separate occasions (once last July and most recently last month). While the move by the SECP may be perceived positively, as a commitment to enforcing rigorous standards to ensure that the Islamic insurance fraternity upholds international best practices, the regulator’s aggressive stance has not been without criticism nor backlash. Last June, several Takaful fi rms reportedly started a smear campaign against the SECP, in particular the commissioner of the insurance unit, following the regulator’s actions against the operators on alleged law violations.
“It’s very tricky with Pakistan — we are still an emerging market and we are not at that stage where we are that developed, so we try to keep a balance between regulations and development as too much regulation will stunt development,” said Bilal Rasul, SECP’s director of the enforcement department, to Islamic Finance news.
Just as with any deposit-taking institution, Takaful operators are monitored closely (and perhaps with even higher scrutiny) by the Pakistani regulator due to the high interaction they have with the public in terms of fi nancing and deposits. The latest round of warnings came as the SECP also made clear its intention to crack down on irregularities in fi nancial and accounting reporting.
“The reporting requirement [for Takaful operators] is quite stringent relative to the nascence of the industry,” explained Bilal. However, he maintained that the laws of Pakistan are not stricter that those practiced internationally and that just as in any other economy, the ecosystem is unique to its jurisdiction.
“When you have an undocumented economy [like Pakistan], it’s very hard to get people to come in and give full
disclosure, expose their income and leave them liable to taxes — people would rather not register or corporatize themselves [but prefer to] to stay off the radar to avoid taxes, reporting compliance, avoid SECP and the central bank,” elucidated Bilal.
In Pakistan, documentation and registration is however urgently needed for businesses to participate in and contribute to the economy. Currently the country has a miniscule tax base of less than 5%, lending to the assumption that most businesses in the republic are not formally registered with the authorities.
The Takaful business may be more in line with regulations due to the inherent nature of the operations giving rise to an enhanced level of transparency. However, Islamic insurance operators still face stiff competition in Pakistan from conventional operators, especially those who have established themselves before Takaful products were off ered in the South Asian nation.
Recognizing that Takaful players are left to navigate a highly competitive arena, the SECP, as affi rmed by Bilal, is striving to strike a balance between optimizing the effi ciency and enforcing regulations to assist this growing Islamic fi nancial component. — VT
SECP: Treading the line between regulation and development
While the move by
the SECP may be perceived positively as a commitment to enforcing rigorous standards, the regulator’s aggressive stance has not been without criticism nor backlash
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Malaysia’s largest electric utility company, Tenaga Nasional (TNB), on the 10th February 2014 successfully closed a Sukuk issuance worth RM3.65 billion (US$1.11 billion) through its subsidiary, TNB Manjung Five. The debentures were issued through an SPV, TNB Western Energy. Denominated in Malaysian ringgit, the Sukuk are governed by Malaysian law and have been assigned an ‘AAAIS’ rating by MARC.
Proceeds from the deal will be used for the fi nancing, design, engineering, procurement, construction, installation, testing and commissioning of a 1,000 MW ultra-supercritical coal-fi red power
plant in Perak, Malaysia. The project is slated to commence on the 17th October 2017. Investors that participated in the deal were solely Malaysian investors.
According to a termsheet provided by TNB to Islamic Finance news, the Sukuk is divided into 20 tranches with a maximum tenor of 20 years, at a coupon rate ranging between 5.06% to 5.8%. Structured based on two Islamic transaction principles — Ijarah and Wakalah — the program will carry out payments on a semi-annual basis.
This will reportedly be met by Ijarah rentals from TNB Manjung Five, the project company to TNB Western
Energy, following the completion of the project. The Ijarah rentals are said to be funded by cash fl ows derived from the sale of the capacity and electricity from the project to TNB under a 25-year take-or-pay power purchase agreement starting from the scheduled commencement of the plant operation.
BNP Paribas Malaysia and CIMB Investment Bank were the lead managers and principal advisors to the deal while Zaid Ibrahim & Co acted as the legal advisors for the issuer. — NA
Tenaga Nasional’s 20-year multi-tranche Sukuk
Rahman Khan, India’s minister of minority aff airs, recently revealed the country’s renewed plans for the introduction of Islamic fi nance in the country. According to Khan, India is looking to set up a body to “fi ne-tune” and promote Islamic fi nance before issuing licenses to start fully-fl edged banking operations such as Islamic banking windows, as well as introducing an institution similar to Lembaga Tabung Haji (LTH), Malaysia’s Hajj pilgrimage fund board.
In an interview with Islamic Finance news, Mustafa Motiwala, a senior partner at Mumbai-based Juris Corp who is working together with the Ministry of Minority Aff airs on the proposal to introduce Islamic banking in the country explained further. “Islamic fi nance is still doable in India without a change in law, under the current regulatory regime. With the right kind of structuring it can still be done. However, if the law is amended to permit Islamic banking window in banks and Islamic fi nance in the country, it would defi nitely expedite things.”
Mustafa further revealed that Juris Corp is currently draft ing a ‘white paper’ for the structuring of Islamic fi nance, which will be tabled to the ministry.
According to him, there is a large number of consumers in India (not just Muslims) who prefer Shariah compliant fi nancing over conventional. These
people would not park their savings in a bank account because it would generate interest. They would instead put their money in real estate or any avenue that is not in the fi nancial system.
To this end, the Ministry of Minority Aff airs is looking to establish the National Minority Development Corporation, an organization which will assist in creating a proper infrastructure where the savings of the minority community are channelled and utilized in a productive manner (income-generating assets), which would also be Shariah compliant.
Commenting on the establishment of an entity similar to LTH, Mustafa
highlighted that pilgrimage activities are currently subsidized by the government. It is now seeking to create a corporation that is self-sustaining and effi cient. “Most likely, in my opinion, this entity would be a government or a quasi-government trust. But that is yet to be decided,” said Mustafa. According to a Supreme Court judgement passed in 2012, the government was given a period of 10 years for the materialization of the said entity.
In terms of issuing Islamic banking licenses, Mustafa said: “There is a strong undercurrent from the government to introduce Islamic banking in the country. The prime minister has asked the Reserve Bank of India (RBI, the central bank) to look into the ways in which Islamic banking and fi nance can be introduced.”
Hopes for Islamic fi nance in India have been reignited since the appointment of Raghuram Govinda Rajan as the governor of RBI. In his previous capacity as a member of the country’s Planning Commission, Rajan submitt ed a report suggesting that the fi nancial sector could be improved by the introduction of interest-free banking in the country. It is believed that his appointment as governor should help to expedite the introduction of Islamic fi nance in India. — NA
India endeavors to drive forward its Islamic finance ambitions
Islamic finance is still doable
in India without a change in law, under the current regulatory regime with the right kind of structuring
The IDB, a triple ‘A’-rated multi-national organization, has played an instrumental and invaluable role in the development of the Islamic fi nance industry. Its contribution to the progress of Islamic fi nance in both member and non-member countries is undeniable — but where does the funding come from, and how far do the infl uential bank’s activities impact the overall Islamic capital markets? Islamic Finance news takes you on a whistle stop tour of the IDB’s most notable achievements and fund raising activities.
Established to foster the economic development and social progress of member countries and Muslim communities across the globe, the IDB
has provided numerous fi nancing facilities and agreements in pursuit of its goals. For the year 2013, based on our estimates,the bank has contributed approximately US$7.3 billion to its member and non-member countries.
The IDB’s pool of funding was initially procured from donations by its member countries. However in order to contribute more, the organization a decade ago decided to tap into the Islamic debt capital market by issuing a maiden Sukuk in 2003. Later, in 2005, it launched a US$1 billion medium-term note program which was upsized to US$3.5 billion in September 2010, and
IDB: A flashback
Table 1: First half of 2013MONTH COUNTRY AMOUNT PURPOSEJanuary Egypt US$388 million Energy, SME development, human development, food, healthcare,
education February Mauritania US$16 million Healthcare
Morocco US$296 million Power generation, drinking water projects, road infrastructureAlbania US$125 million InfrastructureSaudi Arabia US$120 million SADARA Petrochemical ProjectIndonesia US$100 million Sanitation projectUzbekistan US$36 million InfrastructureGambia US$20 million InfrastructureUganda US$20.7 million Education, social servicesSyria US$2 million Emergency reliefCongo, India, UK,US US$1.7 million (IDB Waqf Fund) Educational vocational and health projects in Muslim communities
March Morocco US$150 million Moroccan Phosphates Port ProjectApril Indonesia US$174 million Education
Iran, Uganda, Bangladesh US$319.6 million ElectricityMorocco US$80 million AgricultureMaldives US$15 million SanitationMozambique US$10 million HealthcareBotswana, Nepal, Thailand Fij i
US$750,000 (IDB Waqf Fund) Education
Benin US$472 million Energy, infrastructure, transport, agriculture.May Indonesia US$205 million Social development project
Uzbekistan US$170 million Upgrading airline capacityMauritania US$32 million Road projectKosovo US$20 million Road projectTanzania, Trinidad Tobago, USA
US$480,000 Educational projects
Guinea Bissau, Darfur (Sudan)
US$2 million Scholarship programs
Tajikistan US$10 million Irrigation, micro-enterprise development and technical AssistanceSenegal US$84.4 million Infrastructure, healthcare, socio-economic developmentUganda US$39.7 million Food security, infrastructureBurkina Faso US$14 million Agriculture productionGuinea US$12.2 million Sewerage improvementMozambique US$10 million Healthcare servicesSierra Leone US$20 million Agriculture productionGambia US$20 million Infrastructure road worksSudan US$260,000 Healthcare servicesAfghanistan US$200,000 IrrigationKosovo US$20 million Infrastructure, road worksUzbekistan US$270 million Airplane purchase, energy
June Tunisia US$1.2 billion Development projects 2013-15
Approximately 60% of the
bank’s portfolio comprise of energy, transportation, and water and sanitation projects
subsequently to US$6.5 billion in June 2012, and most recently to a further US$10 billion in December 2013. As of December 2013, the IDB has issued up to 15 series from the Sukuk program.
In addition to this, the IDB also auctioned a RM1 billion (US$304.31 million) Malaysian ringgit-denominated medium-term notes program in 2008 to fi nance local currency projects. Under the said program the IDB has thus far issued three tranches. The IDB’s Sukuk issuances consist of both public and private placements.
The bank’s Sukuk deals receive investor participation from Asia, the Middle East, North Africa, Europe and the Americas. Extensive involvement was recorded from real money accounts and offi cial institutions such as central banks and other supra-nationals.
In an announcement made recently, the organization is now looking to issue a US$10 billion Sukuk to be listed on the Dubai NASDAQ Exchange, and has selected CIMB, Commerzbank, First Gulf Bank, HSBC, Natixis, National Bank of Abu Dhabi and Standard
Chartered as arrangers for the deal. The IDB typically provides project fi nancing to diverse regions around the world. Approximately 60% of the bank’s portfolio comprise of energy, transportation, and water and sanitation projects. It has recently stepped up commitments in agriculture, education, health and other social services.
A detailed list of IDB’s contributions in the past year are listed in the tables provided. — NA
Table 2: Second half of 2013MONTH COUNTRY AMOUNT PURPOSEJuly Turkey US$220 million Renewable energy
Egypt US$200 million Damiett a West Power PlantMorocco US$140.2 million Water supply systemUganda US$120 million Road project, infrastructure road worksPakistan US$35 million EducationBurkina Faso US$19.8 million Water supply projectYemen US$15 million Rural development Mozambique US$8 million EnergyTogo US$7 million EnergyMali US$23.7 million Food securityJordan US$200,000 Rural development
August Mali US$23.7 million Agriculture productionPakistan US$227 million Polio eradication
September Tunisia US$200 million EnergyIran US$190 million Sanitation improvement projectEgypt US$109 million AgricultureBurkina Faso US$100 million Airport constructionLebanon US$72 million Education and healthcareSenegal US$30 million Floods Impact Mitigation ProjectCameroon US$24 million Healthcare servicesChad US$14 million EducationCote d’Ivoire US$170.6 million Socio economic development infrastructure development
October Uzbekistan US$15 million SME fi nancing via Hulk BankSenegal US$200 million Sukuk agreement (ICD)
November Turkey US$220 million Renewable energyDjibouti US$5 million HealthcareNiger US$29 million Food securityChad US$28 million Food securityBurkina Faso US$27.8 million Food securitySenegal US$25.5 million Food securityMauritania US$17 million Food securityGambia US$15 million Food securityFij i, Mauritius, Rwanda, Spain, Ukraine
US$1 million (IDB Waqf Fund) Education (Muslim Communities)
Guinea US$300 million Development assistanceDecember Saudi Arabia US$120 million Ma’aden Wa’ad Al Shamal Phosphate Project
Senegal US$79 million Sanitation ImprovementMali US$37 million Drinking water supply and infrastructure road designKyrgyzstan US$20.3 million Road Infrastructure road worksUzbekistan US$17.4 million HealthcareTogo US$9 million Rural developmentBosnia Herzegovina US$200,000(IDB Waqf Fund) Education Muslim (Communities)Guyana US$150,000(IDB Waqf Fund) Education Muslim (Communities)Thailand US$200,000(IDB Waqf Fund) Education Muslim (Communities)US US$200,000(IDB Waqf Fund) Education Muslim (Communities)Chad, Mali, Mozambique, Niger, Nigeria, Yemen
As of next month, the Singaporean market will be complemented by a new concept via Club Ethis Investment Network, which brands itself as a Shariah compliant private investment club. The club acts as a bridge connecting potential business investment opportunities to its members – more specifi cally, projects that are initiated at the grassroots level (pitched by members of the public and screened by the club) as well as more traditional aspects of the business spectrum including real estate and business expansion.
Ethis’ business model may bear resemblance to yet another concept that is gaining popularity: crowdfunding. And while inspired by it, Ethis however distinguishes itself from the crowfunding model as it does not source funds from the general public but instead from a selected pool of investors. In the words of Umar Munshi, the head of investor relations at Ethis, the new club off ers “structured community funding”.
The concept of crowdfunding is a simple one, involving potential investors coming together to channel funds (regardless of amount) towards a pitched project by any member of the public, to kickstart the idea into a viable commercial reality.
Last year, crowdsourcing research fi rm Massolution projected the value of funds raised from crowdfunding to reach US$5.1 billion by the end of 2013, almost double from the US$2.7 billion in 2012. This is an impressive fi gure considering that investor returns are generally not guaranteed (depending on the crowdfunding model implemented), and lends strength to the plausibility of the concept entering the mainstream funding arena. So could it hold real potential for the Muslim market as well?
“The Islamic fi nance industry is very top-heavy, with big banks and boutique fi rms at the top focusing on att racting high net worth individuals,” explained Umar, who is also the founding director of Singapore-based Amanah Asset Management, to Islamic Finance news. “There is hardly any support for SMEs and entrepreneurs.”
Besides the fact that crowdfunding is based largely on risk-sharing and investing in the real economy, perhaps the brightest signal for this grassroots funding model, as a natural complement to the tenets of Shariah compliant economics, is that social causes and startups are the biggest benefi ciaries of crowdfunding (see Figure 1).
Singapore may seem like an unlikely jurisdiction in which to launch a Halal
crowdfunding platform, considering how tiny its Islamic banking and fi nancial markets are in comparison to neighboring Malaysia and Indonesia, and given its relatively less sophisticated regulatory mechanism for Shariah compliant fi nance. However, according to Umar the soon-to-be-launched initiative has been met with an overwhelming response. “We have received interest from potential investors across Singapore, Indonesia and Malaysia. We even had to turn down interested project starters as they did not meet our criteria.”
The geographical diversity of Ethis’ pool of keen investors and aspiring entrepreneurs is a good indication of the prospects that Southeast Asia holds as a thriving region for crowdfunding. Coupled with rising internet and social media penetration within this part of the world, Halal crowdfunding could indeed be a promising proposition. — VT
Structured community funding for Singapore
The geographical
diversity of Ethis’ pool of keen investors and aspiring entrepreneurs is a good indication of the prospects that Southeast Asia holds as a thriving region for crowdfunding
As the news breaks that the UK Sukuk can be expected in September, the GCC has in the last few weeks received visits from Baroness Warsi, a supporter of the development of Islamic fi nance in the UK and Alderman Fiona Woolf, the Lord Mayor of London. As a non-Muslim country, the UK has an obvious need to build and maintain ties with Middle East in order to further its Islamic fi nance industry. However, in recent months leading Middle Eastern banks (including Noor Bank) have specifi cally disregarded London as they expand internationally outside of their core Gulf market. So do Middle Eastern banks really need a presence in London — and if not, why not?
Woolf has been quoted on her recent visit to Dubai as saying: “As far as Islamic fi nance is concerned you don’t have to come to London to do Islamic fi nance.” This is refl ected in the way that Islamic fi nance in the UK currently operates. The industry functions on two levels: with London acting as a fi nancial center through which international business from Islamic markets, including the Middle East and Malaysia, is transacted. On a diff erent level, the Islamic banks of the UK also conduct Islamic fi nance in a manner commensurate with their size, in various areas of focus.
The country’s largest Islamic bank is the Bank of London and Middle East (BLME). Nigel Denison, the executive director and head of wealth management and treasury at BLME , spoke to Islamic Finance news regarding the appeal of London as fi eld of operations for Islamic fi nance. “The choice to base a bank in London is dependent on the
business model of the bank and what they are trying to achieve.”London’s appeal to international Islamic fi nance institutions can be determined by where their fi nancial activity would fi t in the capital’s two-tier Islamic fi nance system. For institutions such as such as Noor Bank, which is primarily a retail bank, a base in London may not be an obvious or prudent choice. Figures from recent survey conducted by UK television station Channel 4 indicate that only 12.4% of London’s 8.17 million population is Muslim, making the market for retail banking in London fairly limited and currently occupied Britain’s only retail Islamic bank, the Islamic Bank of Britain. The bank was recently acquired by Qatar-based Masraf Al Rayan and is based in Birmingham with branches in London, Leicester and Manchester.
Woolf has highlighted 35 infrastructure projects in the UK that could benefi t from Islamic fi nancing and that could
appeal to the Middle East-based Islamic banks, for which the capital-based draw of London has merit. A number of banks already have a presence in the city, att racted by the London’s international standing as a hub for capital markets and investment opportunities for Islamic fi nance in the UK. These banks include the National Bank of Abu Dhabi, Qatar Islamic Bank and Abu Dhabi Islamic Bank. BLME has been based in London since 2007, although the bank last year chose to list on the NASDAQ Dubai rather than the London Stock Exchange for a number of reasons. Denison explained that the bank wanted to list on an exchange that BLME shareholders, the majority of which are based in Kuwait, were familiar with and to remain accessible to those shareholders given the geographical restrictions regarding stock listings. The bank also wished to be listed in a market where analysts were familiar with Islamic fi nance, clinching the case for Dubai.
London’s aim to become the global fi nancial hub for Islamic fi nance has only been strengthened by the steps taken by the UK government to create a welcoming and working environment, for both international and local members of the industry. The issuance of the UK Sukuk this year providing international Islamic banks with a sterling-denominated instrument is yet another gambit by the UK government to use London’s strengths to att ract international Islamic institutions and investors to the UK. Denison confi rms: “The commitment [on the part of the UK government and regulators] is clearly there, to bring more capital from Islamic countries into the UK fi nancial center.” — RS
The choice to base a bank in
London is dependent on the business model of the bank and what they are trying to achieve
Location, location, location: Does London measure up as a base for Islamic banks?
ASSET & LIABILITY MANAGEMENT21st – 23rd April 2014, Kuala Lumpur
Course Highlights:• Apply effective balance sheet management techniques• Explain market and liquidity risk measurement and management products• Develop funds transfer pricing methods• Apply capital management and economic capital measurement under the Basel Accord• Understand key aspects of ALM and risk management as applied to an Islamic banking
Legal and regulatoryAs an Islamic republic with a civil law tradition, Afghanistan has a hybrid legal system, based on both civil and Shariah law. Overseen by the Islamic banking division of Dar Afghanistan Bank (DAR), the country’s central bank, Islamic fi nance has featured as a key component in DAR’s fi ve-year strategy for Afghanistan’s monetary policy from 2009-14. Still waiting to be approved into usage are amendments to the Banking Law and the Anti-Money Laundering, Combating the Financing of Terrorism Law, which have been submitt ed by the Afghan parliament, and the fi nal draft of the Islamic Banking Law which has been submitt ed to the Supreme Council of DAB.
Banking and fi nanceIslamic banking is provided by six of Afghanistan’s 16 banks. In 2011,World Bank fi gures showed that Afghanistan had approximately one million bank accounts, representing less than 5% of the population, but by 2013 this had grown to over 3 million accounts representing up to 25% of the country’s adult population.
Despite talk of Sukuk issuance and sale of Shariah compliant long-term bills as early as 2011 and as recently as 2013, Afghanistan has yet to issue either, although DAR stated last year that it would issue Islamic treasury bills by early 2014. Takaful products are still non-existent in Afghanistan, but microfi nance and credit unions based on Islamic principles are successful in the country with the Microfi nance Investment Support Facility for Afghanistan established by DAR supporting the activities of the microfi nance sector. The World Council of Credit Unions (WCCU) has aided in establishing investment and fi nance cooperatives that have, according to WCCU fi gures, between 2002-12 accumulated US$4.5 million in savings shares and borrowed and repaid over US$74 million in funds dedicated to the development of small farms and businesses. The Afghan government has also introduced the use of Islamic fi nancial contracts to provide credit to farmers in areas where conventional banking has not met the demand for funding.
A report by the Special Inspector General for Afghanistan Reconstruction (SIGAR)
released in January has gained a swift rebutt al from DAR given its conclusion: that following the regulatory lapses discovered as a result of the collapse of Kabul Bank in 2010, the central bank’s capacity to regulate commercial banks remains weak. The report asserts that the Afghanistan banking sector remains fragile and has identifi ed weaknesses in areas of banking governance and operations, including personnel capacity, internal controls, accounting, credit analysis, and compliance with regulations in many of the country’s major banks. According to the report, the inability of DAB to carry out the proper oversight heightens the risk of another banking crisis. DAB has responded to the report, stating that SIGAR has not carried out a capacity evaluation of DAB’s supervisory abilities and that interaction with DAB’s offi cials was only to seek information regarding external technical assistance provided to DAB. Further, DAB states that the SIGAR report is based on 2011 and 2012 fi ndings of external examinations of Afghanistan banking sector carried out by KROLL, the World Bank and the Independent Joint Anti-Corruption Monitoring and Evaluation Committ ee (MEC), to which DAR has already responded.
The external examinations carried out by KROLL and the World Bank indicated there is no evidence to suggest that a banking crisis like that of Kabul Bank will occur again and that DAB had carried out its regulatory and supervisory duties eff ectively based on the laws and regulations of Afghanistan.
Foreign investmentThe Agricultural Development Fund (ADF), set up in 2010 through a $100 million grant from the US Agency for International Development (USAID), off ers both conventional credit and Islamic fi nancing, and according to ADF fi gures 70% of its loans totaling US$11 million by April 2012 were Shariah compliant loans. The ADF expects to have provided loans to 60,000 farmers across Afghanistan by the end of 2014. In 2012, Dr Ahmad Mohamed Ali, the IDB president, committ ed US$80 million over the following three years to socio-economic development in Afghanistan
and since its inception, the IDB Group has approved US$95 million to support development eff orts in Afghanistan covering projects in transportation, power generation and agriculture. Most recently the IDB stepped forward to act as the supervisor for a deal in conjunction with the World Bank to provide US$953 million for the CASA-1,000 electricity power import project, which will transmit 1,300 megawatt s of surplus electricity from Tajikistan and Kyrgyzstan through Afghanistan, and on to Pakistan, following the Asian Development Bank’s withdrawal from the project. The project is projected to commence this year.
ChallengesThe credibility, stability and ability of the central bank to eff ectively regulate the banking sector and the lack of a clear regulatory framework continue to hinder the development of Islamic fi nance in Afghanistan. The slow recovery of the country following its civil wars has been hindered by the resurgence of the Taliban and the resulting suspicion internationally regarding facilitation of money laundering and the fi nancing of terrorism. The lack of experienced Islamic fi nance personnel is also a concern to the industry.
OpportunitiesThe increase in the number of banked citizens in Afghanistan given its 99% Muslim population is a positive step, as would be the issuance of Shariah compliant treasury bills and the approval of the country’s Islamic banking laws, if they occur this year. The established microfi nance sector still has room for development and Islamic fi nance training is sector that could also be leveraged.
OutlookPositive progress for the Islamic fi nance sector in Afghanistan is largely dependent on the approval of the country’s Islamic banking regulations and greater transparency. Given the current call for consolidation in Islamic fi nance, providing the industry both in and outside Afghanistan with greater access would only benefi t the development of the country’s Islamic fi nance sector.
Forward motion for Islamic finance in Afghanistan?Despite the large Muslim population in Afghanistan, the country’s Islamic fi nance industry is not as robust nor as active as it could be. REBECCA SIMMONDS investigates the challenges facing Islamic fi nance in Afghanistan.
Regulatory landscapeThe regulatory landscape for syndicated Islamic fi nancing is recognized as being more straightforward than the regulations in place for Sukuk issuances. It is however, still more complex than the syndicated loan process experience in conventional fi nancing, given the individual Shariah compliance needs of each bank involved in any deal.
The adoption of Basel III has also led to the introduction of more stringent legislation that may aff ect the way in which fi nancial institutions approach syndicated fi nance. In Malaysia, the introduction of the Islamic Finance Services Act 2013 has placed a greater emphasis on Shariah compliance and as such, more extensive due diligence is being undertaken for syndicated fi nancing deals. At the end of 2013 Bahrain introduced banking regulations requiring the public disclosure of the risk profi le of, risk management and capital adequacy of fi nancial institutions as a step towards the incorporation of Basel III measures to its regulatory guidelines. The IFSB also published guidelines on capital adequacy for Islamic fi nancial institutions in December 2013.
Syndicated loans in 2013As seen with the Sukuk market in 2013, there was a dip in both the volume of syndicated Islamic fi nance deals and their total value last year. Islamic fi nance syndication loans totaled US$21.4 billion in 2013 down from US$26.8 billion in 2012, according to Islamic Finance Information Service fi gures.
The fi nancial sector was the most active within the syndicated Islamic loans market in both Europe, the Middle East and Africa (EMEA) and the Asia Pacifi c (APAC) regions according to Bloomberg, claiming 61.08% of EMEA and 23.49% in APAC. The top three mandated lead arrangers for Islamic fi nance loans in 2013 were HSBC, Abu Dhabi Islamic
Bank and Standard Chartered Bank with the top three deals according to Dealogic, and Noor Bank heading the Bloomberg League Table rankings for EMEA Islamic Syndicate Book Runner and EMEA Islamic Syndicate Mandated Arranger.
GCC leaderIssuing over US$7 billion-worth of fi nancing, the GCC led the market in 2013, with eight out of the top 10 deals of the year occurring within either Saudi Arabia or the UAE. The IFN Syndicated Islamic Finance Deal of the Year was awarded to Gulf Marine Services, a subsidiary of Gulf Capital, which secured a US$340 million loan arranged by 10 banks in June 2013. Advised by Abu Dhabi Islamic Bank, Gulf Marine Services secured the loan in order to re-profi le existing debt into a multi tranche facility, fund a US$80 million dividend, fi nance expansion and meet ongoing working capital needs.
Honorable mentions were given to the loans arranged by CityCenterDC, which secured the largest ever domestic Islamic real estate fi nancing for GCC investors, with a US$390 million deal arranged in May 2013 by JPMorgan Chase, and the deals secured by Astra Sedaya Finance and state-owned Saudi ARAMCO which signed a deal in June 2013 incorporating both syndicated fi nance and a US$2 billion Sukuk issuance.
Another top deal of the year was secured by Emirates Aluminium, which raised US$3.4 billion as part of a US$4 billion debt fi nancing package with US$475 million issued by Islamic fi nanciers; the total deal involving 22 banks. The Investment Corporation of Dubai also agreed a US$2.55 billion equivalent dual currency syndication deal facilitated by Dubai Islamic Bank.
Most recently the Saudi-based Al Bayan Group Holding Company signed its fi rst
syndicated Islamic loan agreement for the amount of US$70 million with ABC Islamic Bank acting as mandated lead arranger and bookrunner. AK BARS Bank, followed its 2011 US$60 million Murabahah deal with a US$100 million Murabahah syndication facilitated by 11 banks in December last year, which Islamic Finance news reported on exclusively (see A new frontier: Former Soviet Union forges ahead with Islamic fi nance, Volume 11, Issue 04). According to reports the International Bank of Azerbaij an recently indicated an interest in forming an Islamic banking business and using syndicated Islamic fi nance to fund this, following the signing of a US$130 million syndicated Islamic loan last year.
Challenges and opportunitiesWith the adoption of Basel III due to roll out between now and 2015, Islamic fi nancial institutions will be required to maintain even higher levels of liquidity which could aff ect the number of banks needed for a syndicated loan and the resulting terms off ered by banks for those loans. The market for syndicated Islamic fi nance slowed in 2013 following the slump in the Sukuk market, but as the UAE and Qatar gear up for increased infrastructure spending between now and 2022, the syndicated fi nance market is expected to pick up pace, with the GCC predicted to be the most active syndicated loan market again this year.
OutlookThe outlook for syndicated Islamic fi nance is positive with opportunities rampant in the GCC in particular. Whilst the top banks for syndicated Islamic loans in 2013 were those from Asia and the Middle East,with the continuing recovery in the developed world and western banks once again looking for new opportunities, the syndicated Islamic fi nance market looks set to grow.
Syndicated Islamic finance: More players and more opportunities?Syndicated Islamic fi nancing has developed over the years to create a niche market providing far more than just bridging fi nance. In many ways less complicated than the structuring of Sukuk or other products, syndicated Islamic fi nance has become an accessible and att ractive option for short-term fi nancing. REBECCA SIMMONDS considers the syndicated Islamic fi nance activity of 2013.
The new guidelines include Shariah standards on Musharakah, Mudarabah, Murabahah, Istisnah, Wadiah, Hibah, Kafalah, Wakalah, Waad, Tawarruq and Bai` Al `Inah. The Shariah standard on Murabahah was the earliest standard issued by Bank Negara Malaysia (BNM), previously known as a Shariah parameter. Recently, BNM also released a series of Exposure Draft s (EDs) of Shariah requirements and optional practices which cover Wadiyah, Hibah, Kafalah, Wakalah, Waad, Tawarruq and Bai` Al `Inah. In addition to this, a Concept Paper (CP) on Shariah requirements, optional practices and operational requirements of Mudarabah and Musharakah has also been issued.
This initiative marks an important milestone as part of BNM’s continuous endeavor to enforce and strengthen Shariah compliance culture among Islamic fi nancial institutions and to enhance the Shariah and regulatory framework in Malaysia. The main objective of the issuance of Shariah
standards is to facilitate Islamic fi nancial institutions to develop their products in accordance with the tenets of Shariah and to enhance harmonization among Islamic fi nancial institutions in Malaysia with respect to Shariah-related matt ers.
The 11 Shariah standards consist of two sections. The fi rst section underlines the Shariah features and requirements of contracts applicable for Islamic fi nancial institutions. The second section presents the operational requirements which cover sound banking practices, expectation of robust governance and documentation, fair market practices and eff ective risk management. The operational requirements aim to complement the Shariah requirements and support their eff ective implementation. Furthermore, each paragraph in every Shariah standard consists of ‘S’ and ‘G’. The EDs explain that ‘S’ denotes: “A standard, requirement or specifi cation that must be complied with. Failure to comply may result in one or more enforcement actions.”
Meanwhile, ‘G’ signifi es: “Guidance which may consist of such information, advice or recommendation intended to promote common understanding and sound industry practices which are encouraged to be adopted.”
Furthermore, each standard also provides specifi c clauses on the arrangement of the respective contract in the standard with other Shariah contracts or concept which opens wider opportunity for the Islamic fi nancial institutions to innovate with their product and services within the line of Shariah. The demarcation between ‘S’ and ‘G’ makes the BNM standard easily referred to by Islamic fi nancial institutions as it clearly diff erentiates between the clause that are mandatory and optional.
The 11 standards are published rulings of the Shariah Advisory Council (SAC) of BNM issued pursuant to sections 29 (1) and (2) of the Islamic Financial Services Act 2013 (IFSA) and sections 41 and 129(3) of the Development Financial Institutions
Act 2002 (DFIA). BNM requires that all of those standards should be referred and adhered to by all Islamic fi nancial institutions under its purview along with the related Shariah Advisory Council (SAC) published rulings and Shariah Governance Framework for Islamic fi nancial institutions. It is stated in the policy document that failure to comply with the standard, marked ‘S’, will result in legal enforcement. IFSA 2013 further detailed that the failure of an Islamic fi nancial institution to adhere to Shariah compliance requirements will subject it to criminal and civil penalties in the form of imprisonment of its executives and fi nancial penalties. Section 28(8) of the IFSA clearly states: “Any person who contravenes subsection (1) or (3) commits an off ence and shall, on conviction, be liable to imprisonment for a term not exceeding eight years or to a fi ne not exceeding RM25 million (US$7.57 million) or to both.”
Nevertheless, although BNM has clearly mentioned the consequences of failure to comply with standards from a regulatory requirement, the standard does not specify the Shariah implication of the respective contract or transaction should an Islamic fi nancial institution fails to comply with a specifi c clause in the standard; whether the contract should eventually become null and void or just make it voidable, which can be rectifi ed.
In addition to this, there are some other Shariah standards which in the authors’ view should be issued by BNM in the future. These include but are not limited to standards on Rahn (pawn-broking), securities contracts (Uqud Tauthiqat), and standards or parameters to determine delinquent insolvency (Musir) and non-delinquent insolvency (Mumatil).
M Mahbubi Ali is a researcher and Mariyam Hamziyya is an internship student at International Shariah Research Academy for Islamic Finance (ISRA). Mahbubi can be contacted at [email protected].
Malaysia embarks on issuance of 11 Shariah standardsBank Negara Malaysia, the central bank, has embarked on the issuance of 11 new Shariah standards and their operational requirements, featuring the most prevailing and applicable contracts and principles in Islamic banking and Takaful industry under BNM purview. M MAHBUBI ALI and MARIYAM HAMZIYYA take us through the new procedures.
Each standard also provides
specific clauses on the arrangement of the respective contract in the standard with other Shariah contracts which opens wider opportunity for Islamic financial institutions
The government has over the past six months taken specifi c steps to stabilize its economic and fi nancial pivots, in which it has been signifi cantly more successful than comparable Islamic fi nance economies such as Turkey or even Malaysia. As such, and despite the concerning trends of the past few months, the country is now seeing increased foreign investment and fund fl ows and bett er performance data — ironically, based on exactly the factors that drove it to take these steps in the fi rst place.
Current account deficitIn the second quarter of 2013 the current account defi cit topped a record US$10 billion, or 4.4% of GDP. In an att empt to reduce this defi cit the new central bank governor, Agus Martovardojo, launched the most aggressive growth-tightening plan in almost a decade. “We need to continue to slow down the economy until this target is achieved,” said Chatib Basri, the fi nance minister. “Then the next government has room for fostering faster growth.”
Protectionist policiesThis slowing growth stimulated a mass exodus of foreign funds — with July 2013 seeing negative trade fl ows for the fi rst time. In conjunction with the Federal Reserve tapering, concerns rose that capital would continue to fl ow out of the country, while several new pieces of protectionist legislation have not helped matt ers. A recent law enforcing the processing of mineral ores within Indonesia could result in the loss of up to US$5 billion annually in foreign exchange receipts, and has been highly unpopular with both international fi rms and banks. On the 11th February the nation’s fi rst trade bill was also passed, giving the government the ability to restrict imports and exports in order to protect local industry. “This law underlines Indonesia’s stance of not adopting a free market,” said the deputy trade minister Bayu Krisnamurthi. “The government has been given the right to intervene to protect its people.”
Diversification These moves have been primarily directed towards stabilizing and solidifying domestic demand in order to reduce over-reliance on foreign investment. This is also evident in its own strategy to reduce sovereign exposure to foreign investors, which owned 33% of total government debt as of the 20th February, according to data from the Debt Management Offi ce.
The fi nance ministry has recently begun to use its US$5.4 billion Hajj fund to purchase increasing quantities of sovereign Sukuk, in an att empt not only to reduce foreign exposure but to stimulate private investment into government Sukuk by injecting liquidity into the country’s Islamic fi nance market. “We rely on foreign bondholders and that makes us vulnerable,” said Basri. “Now we’re trying to diversify the source of funding away from global bonds.”
Equity performanceThe poor performance of 2013 also impacted the equity market in Indonesia, with a knock-on eff ect on the asset management space. Farouk Alwyni of Jakarta-based Alwyni Capital explained to Islamic Finance
news that: “The performance in 2013 was not very good due to the general decline of shares in the Indonesian stock exchange.” However, he suggests that things could improve this year, as more mutual fund companies enter into the Islamic retail market, att racting domestic clients with investments as low as IDR1 million (US$85). “The need to diversify more into domestic investors in general is needed… since it will create a more stable capital market investment environment, and reduce reliance on foreign funds.”
Widening the netFollowing government steps to stimulate the economy, growth has certainly improved. In August the central bank allowed the rupiah to fl oat, leading to a depreciation of around 20% — or about 14% in trade-weighted terms. This had the consequence of making Indonesian exports cheaper to buy and imports more expensive to purchase, thus reducing the current account defi cit to a reported US$4 billion (2% of GDP) by the end of 2013. In December the country also saw a trade surplus of around US$1.5 billion, the highest in two years, and at a G20 meeting in Australia this month Basri
Impressive turnaround for IndonesiaFollowing a worrying economic decline, falling rupiah and widening current account defi cit; Indonesia has taken urgent steps to diversify its investor base and att ract more domestic customers as well as opening up trade to foreign fi rms. Foreign fund fl ows into Indonesia turned negative for the fi rst time in July 2013, prompting the authorities to take serious action to boost trade and stabilize domestic investment. LAUREN MCAUGHTRY explores.
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predicted that GDP could continue to expand by 5.5-5.8% in 2014, continuing the 5.8% growth trajectory of last year.
And in conjunction with att empts to expand domestic demand, as economic data improves the country has also taken steps to counter the exodus of foreign funds, including off ering incentives to foreign fi rms to reinvest earnings in Indonesia rather than sending them back out of the country. In December the government announced that it would increase the caps on foreign investment via an amendment to its ‘negative investment list’ of restricted areas for foreign investors. Under the new rules, the maximum foreign investment in pharmaceutical companies has been increased to 85% from 75%, in advertising to 51% from
49% and in public-private partnerships for power plant projects to 100% from 95%. However, proposals to let foreign investors fully own and operate airports and ports were dropped.
Market turnaroundThe country’s strong economic fundamentals and robust government measures have boosted its performance this year and the trend looks to be turning already. The stock market has recovered well, and the Jakarta Composite Exchange is up 8.65% year-to-date, hitt ing 4,664.29 on the 24th February — its highest point since September and a recovery of 18% from its low point in August 2013. Foreign funds have surged back into the market this year, reportedly buying IDR8.4 trillion (US$718.2 million)
more than they sold on the Indonesian Stock Exchange as of the 20th February.
Islamic performance has followed this trend, and as at the 21st February the Jakarta Islamic Index was up by 5.17% since the beginning of 2014, and up by 11.36% since August 2013, making a good recovery following a poor third quarter performance that saw volumes decline by almost 25% as investors left the market. “We can expect 2014 to recover some of the losses from last year,” confi rmed Farouk.
While no one can know what the future holds, it looks as if the swift action and fi rm stance taken by Indonesia to counter its economic concerns could act as an impressive example for other emerging Islamic economies.
Making its mark in history, the Export-Import Bank of Malaysia (MEXIM), successfully auctioned a US$300 million Sukuk Wakalah on the 10th February. Issued via an SPV, the debentures hold a tenor of fi ve years, due to mature on the 19th February 2019. Proceeds from the Sukuk issuance will be utilized for Shariah compliant banking and fi nancing activities as well as for other Shariah compliant corporate purposes.
In an exclusive interview with Islamic Finance news, Adissadikin Ali, the president and CEO of MEXIM, explained the workings of its inaugural US-denominated Sukuk issuance. Highlighting the distinct features of the deal, Adissadikin pointed out: “This is the fi rst US dollar-denominated Sukuk issued by an export-import bank, globally. It was oversubscribed by 11 times. The strong investor participation led to the tightening of its fi nal pricing by 25bps from the initial pricing estimation.” The Sukuk was issued at 140bps from an initial price guidance of 165bps over US Treasuries, reaping an ‘all-in’ yield of 2.87% per year.
The certifi cates are issued under the principle of Wakalah. In this instance, the Sukuk trustee, acting on behalf of the Sukukholders, appoints a Wakeel to invest in Sukuk proceeds and manage the Wakalah portfolio that consists of both tangible and non-tangible assets. Commenting on the structure, Adissadikin said: “This is an optimal and fl exible structure considering the business model of MEXIM and is widely accepted
by investors within the international capital market.”
The main challenge faced during the process of the issuance was the widespread eff ect of the US Federal Reserve’s tapering program. “Market conditions were volatile on renewed concerns on emerging markets as the US Federal Reserve decided to taper in its December meeting. Subsequent to the 7th February 2014 (non-farm payroll data being a non-event), MEXIM announced a fi ve-year benchmark size transaction. With an ideal market back-drop and the lack of any competing supply, the deal
att racted phenomenal investor response,” he explained. With an oversubscription of 11 times, the Sukuk bid att racted US$3.2 billion from 185 investors for a capped deal of US$300 million. Investors comprised of asset managers (42%); banks (30%); central banks/sovereign wealth funds (16%); insurance and pension funds (10%); others (2%). In terms of geographical distribution it was well spread globally: Asia, excluding Malaysia (50%); Malaysia (15%); Middle East (19%); Europe (16%). The Sukuk are set to be listed on the Labuan International Financial Exchange and the Singapore Exchange. — NA
MEXIM: World’s first US dollar-denominated Sukuk to be issued by an export-import bank
Five year Reg S off ering of multicurrency Sukuk issuance
program US$300 million
10th February 2014
Issuer Exim Sukuk Malaysia
Obligor Export-Import Bank of Malaysia
Purpose of issuance
Proceeds from the Sukuk will be used for Shariah compliant banking and fi nancing activities as well as for other Shariah compliant corporate purposes.
Trustee EXIM Sukuk Malaysia
Tenor Five years
Coupon rate / return
2.87%
Payment Bullet
Currency US dollars
Maturity date 19th February 2019
Lead manager(s) BNP Paribas, CIMB, HSBC, Maybank
Principal advisor(s)
BNP Paribas Malaysia, CIMB Investment Bank, HSBC Amanah Malaysia and Maybank Investment Bank
back-drop and the lack of any competing supply, the deal attracted phenomenal investor response
Legal advisor(s)/Counsel
Cliff ord Chance (issuer international counsel)Linklaters (arrangers international counsel)Wong & Partners (issuer domestic counsel)Zaid Ibrahim & Co (arrangers domestic counsel)
Listing SGX-ST and LFX
Underlying assets
A portfolio of Ijarah contracts, qualifying Sukuk and commodity Murabahah investment.
Rating A3/A- (Moody’s / Fitch)
Shariah advisor(s)
The Shariah Supervisory Committ ee of BNP Paribas, CIMB Islamic Bank, HSBC Amanah Malaysia and Maybank Islamic
Structure Wakalah
Tradability Yes. Eligible tangible assets in the Wakalah portfolio shall be equal to no less than 33% of the value of the Wakalah venture.
Investor breakdown
By geography: Asia ex-Malaysia 50%, Malaysia 15%, Middle-East 19% and Europe 16%By investor type: Asset managers 42%, banks/PBs 30%, central banks / SWFs 16%, insurance / pension 10% and others 2%
Face value/minimum investment
US$200,000 and integral multiples of US$1,000 in excess thereof
IFN Country CorrespondentsBAHRAIN: Dr Hatim El-Tahirdirector of Islamic Finance Knowledge Center, Deloitt e & Touche BANGLADESH: Md Shamsuzzamanexecutive vice president, Islami Bank BangladeshBELGIUM: Prof Laurent MarliereCEO, ISFIN BERMUDA: Belaid A Jheengoordirector of asset management, PwC BRUNEI: James Chiew Siew Huasenior partner, Abrahams Davidson & Co CANADA: Jeff rey S Grahampartner, Borden Ladner Gervais EGYPT: Dr Walid Hegazymanaging partner, Hegazy & AssociatesFRANCE: Kader Merbouhco head of the executive master of the Islamic fi nance, Paris-Dauphine UniversityHONG KONG & CHINA: Anthony Chanfounder, New Line Capital Investment LimitedINDIA: H Jayeshfounder partner, Juris CorpINDONESIA: Farouk A AlwyniCEO of Alwyni International Capital and the chairman of Centre for Islamic Studies in Finance Economics and Development IRAN: Majid PirehIslamic fi nance expert, Securities & Exchange Organization of Iran IRAQ: Khaled Saqqafpartner and head of Jordan & Iraq offi ces, Al Tamimi & Co JAPAN: Serdar A Basarapresident, Japan Islamic Finance JORDAN: Khaled Saqqafpartner, Al Tamimi & CoKOREA: Yong-Jae Changpartner, Lee & KoKUWAIT: Alex Salehpartner, Al Tamimi & CoLEBANON: Johnny El Hachempartner – corporate, Bin Shabib & Associates LUXEMBOURG: Said Qacemesenior manager of Advisory & Consulting, Deloitt e Tax & Consulting MALDIVES: Aishath Muneezadeputy minister, Ministry of Islamic Aff airs, MaldivesMALTA: Reuben Butt igiegpresident, Malta Institute of ManagementMAURITIUS: Sameer K Tegallyassociate, Conyers Dill & PearmanMOROCCO: Ahmed Tahiri Joutisenior consultant, Al Maali Islamic Finance Training and ConsultancyNEW ZEALAND: Dr Mustafa Faroukcounsel member for Islamic fi nancial institutions, The Federation of Islamic Associations of New Zealand (FIANZ)NIGERIA: Auwalu AdoShariah auditor, Jaiz BankOMAN: Riza Ismailsenior associate, Trowers & HamlinsPAKISTAN: Muhammad Shoaib Ibrahimmanaging director & CEO, First Habib ModarabaPHILIPPINES: Rafael A Moralesmanaging partner, SyCip Salazar Hernandez & GatmaitanQATAR:Amjad Hussain partner, K&L GatesRUSSIA: Roustam Vakhitovmanaging partner, International Tax AssociatesSAUDI ARABIA: Nabil Issapartner, King & SpaldingSENEGAL: Abdoulaye MbowIslamic fi nance advisor, Africa Islamic Finance Corporation SOUTH AFRICA: Amman MuhammadCEO, First National Bank-Islamic FinanceSINGAPORE: Yeo Wicopartner, Allen & GledhillSRI LANKA: Roshan Madewaladirector/CEO, Research Intelligence UnitSWITZERLAND: Khadra Abdullahiassociate, Investment banking, Faisal Private BankSYRIA: Gabriel Oussi,general manager, Oussi Law FirmTANZANIA: Khalfan Abdullahihead of product development and Shariah compliance, Amana BankTHAILAND: Shah Fahadvice-president and head of strategic marketing and product development, Islamic Bank of ThailandTURKEY: Ali Ceylanpartner, Baspinar & PartnersUK: Roshan MadewalaCEO and director, Research Intelligence Unit UAE: Moinuddin MalimCEO, Mashreq Al IslamiUS: Joshua Brockwellinvestment communications director, Azzad Asset ManagementYEMEN: Moneer Saifhead of Islamic banking, CAC BankIFN Correspondents are experts in their respective fi elds and are selected by Islamic Finance news to contribute designated short country reports. For more information about becoming an IFN Correspondent please contact [email protected]
HONG KONG
By Anthony Chan
The Hong Kong Legislative Council in January this year proposed interesting statutory amendments to enable the Hong Kong government to raise funds under the Government Bond Program via the issuance of Sukuk. These aim to show to the markets that Hong Kong’s legal, regulatory and taxation frameworks are suffi cient to accommodate Sukuk issuance, thereby encouraging other potential Sukuk issuers to come and raise funds in Hong Kong.
These statutory amendments should make compulsory reading for investors in the Islamic fi nance market as well as conventional fi xed-income investors who regularly invest in Islamic bonds and banks operating in Hong Kong’s well regulated fi nancial circles subject to tougher capital requirements under Basel III. The new regulatory regime raises particular diffi culties for Islamic banks because they cannot accumulate the required high-quality equity through conventional government bonds that don't comply with Islamic law.
That being said, the new changes are a good opportunity for Hong Kong to diversify the types of fi nancial products and services available in the territory and helps to position Hong Kong among its many competitors as a global center for the US$1.3 trillion Islamic fi nance market. In July 2013, taxation-related statutory provisions already provided tax and stamp duty relief for transactions pertaining to Sukuk. Since Sukuk cannot involve the payment or receipt of interest, they have more complex product structures than conventional bonds (oft en using special purpose vehicles and multiple asset transfers) and the issuance of Sukuk may cause additional profi ts or property tax exposures, or stamp duty charges.
The government also has a plan to introduce the Loans (Amendment) Bill to amend the Loans Ordinance in the fi rst quarter of 2014 because the types of Islamic fi nance structures that the government would be entering into may not be permitt ed under the Loans Ordinance. Simultaneously, the Hong Kong Monetary Authority, as the government's representative under the Government Bond Program, is examining practical issues in order to formulate a possible Sukuk issuance plan for implementation upon enactment of the Bill, having regard for market circumstances.
Anthony Chan is the CEO of New Line Capital Investment. He can be contacted at [email protected].
Strengthening Islamic capital markets via legislation
The new changes are
a good opportunity for Hong Kong to diversify the types of financial products and services available and helps to position Hong Kong as a global center for the Islamic finance market
The Egyptian Islamic fi nance market witnessed an unexpected growth in spite of the unstable political and security national situation. In a recent press release, the Egyptian Islamic Finance Association (EIFA) confi rmed that the value of the Islamic fi nance market increased to EGP77 billion (US$11.03 billion) in September 2013, compared to EGP71 billion (US$10.17 billion) in September 2014.
Although no announcements have yet been made regarding any upcoming Islamic fi nance transactions of signifi cance, it is expected that with this growth and the increased interest of conventional banks in the industry that the Islamic fi nance market will grow even further in the coming years, provided that the upcoming ruling regime does not legally intervene in a detrimental manner.
In addition to the market growth, the fi rst Shariah compliant index on the Egyptian stock exchange has been developed and release by the EIFA. The Shariah compliant index is based on Shariah standard No. 21 of AAOIFI in connection with stock exchange transactions. The index takes into consideration a number of factors to ensure the stocks’ Shariah compliance: such as the activity of the issuing company, the percentage of non-Shariah compliant income of the company and the size of the amounts
deposited at an interest rate compared to the assets’ net value or the average market value of the totality of the company’s stocks during the fi scal year, whichever is higher.
Furthermore, and despite the Egyptian government’ decision to abrogate the Sukuk Law No. 10 of 2013, it has been decided to integrate a Sukuk-specifi c chapter into the Capital Market Law No. 95 of 1992. While such abrogation was fi rst interpreted as a sign of political hostility towards the development of a Sukuk market, it seems that the Egyptian government intends to at least partially regulate the said market to att ract GCC-based investors, particularly with countries which are currently on good terms with Egypt, such as Saudi Arabia and the UAE.
The absence of an Islamic fi nance-specifi c legal framework is still considered to be the most signifi cant hurdle on the path towards the transformation of Egypt into a regional Islamic fi nance hub. Rejuvenation of the Egyptian economy through the sett ing of a legal framework for the Islamic fi nance market should be one of the most preferable and easiest-to-implement options at the moment, taking into consideration that the country has huge potential and is not lacking in relevant expertise.
Dr Walid Hegazy is the managing partner of law fi rm Hegazy & Associates in association with Crowell & Moring. He can be contacted at [email protected].
Steady growth of the Egyptian Islamic finance market in the absence of legal framework
IFN Sector CorrespondentsASSET MANAGEMENT Sean Daykin, head of investment funds, Emirates NBD Asset Management CROSS-BORDER FINANCING:Fara Mohammad, senior lawyer and consultant in Islamic fi nanceDEBT CAPITAL MARKETS: Muhammad Shoaib Ibrahim, managing director & CEO, First Habib ModarabaDERIVATIVESISDA
LAW (MIDDLE EAST) Bishr Shiblaq, head of Dubai offi ce, Arendt & Medernach
LEASING: Professor Dr Shahinaz Rashad, chairperson & CEO, Egyptian Leasing AssociationMERGERS & ACQUISITIONS Jamal Hij res, CEO, Cappinova Investment Bank
MICROFINANCE (ASIA):Dr Mahmood Ahmed, executive vice president and director training, Islami Bank Training and Research AcademyMICROFINANCE (AFRICA): Mansour Ndiaye, director of microfi nance, Assistance and Consulting for DevelopmentPRIVATE BANKING & WEALTH MANAGEMENTKhadra Abdullahi, associate, investment banking, Faisal Private BankPRIVATE EQUITY & VENTURE CAPITAL: Arshad Ahmed, partner, Elixir CapitalREAL ESTATE (EUROPE) Philip Churchill, founder partner, 90 North Real Estate PartnersREAL ESTATE (MIDDLE EAST): Yahya Abdulla, head of capital markets — Middle East, Cushman & Wakefi eldREGULATORY ISSUES (ASIA)Intan Syah Ichsan , chief operating offi cer, Samuel Aset ManajemenREGULATORY ISSUES (MIDDLE EAST): Mohammad Abdullah Malik Dewaya, head of Shariah compliance and audit, Maisarah Islamic Banking ServicesRETAIL BANKING: Ris Rizqullah, lecturer, Trisakti UniversityRISK MANAGEMENT: Hylmun Izhar, economist, Islamic Research and Training Institute, Islamic Development Bank CountrySECURITIES & SECURITIZATION: Nidhi Bothra, executive vice president, Vinod Kothari ConsultantsSTOCK BROKING & TRADING: Athif Shukri, research analyst, Adl CapitalSUKUK Marco Mauri, senior director of asset management, Alkhair Capital Saudi Arabia TAKAFUL (UAE)Rima Mrad, Partner, Bin Shabib & AssociatesTAKAFUL & RE-TAKAFUL: Dr Sutan Emir Hidayat, senior lecturer, University College of BahrainTREASURY PRODUCTS: Nafi th ALHersh Nazzal, certifi ed fi nancial & investment advisorIFN Correspondents are experts in their respective fi elds and are selected by Islamic Finance news to contribute designated short sector reports. For more information about becoming an IFN Correspondent, please contact [email protected]
13th - 15th April 2014, Dubai
Course Highlights:• Fully updated with the salient features of the principles prescribed in the new standards
• Understanding the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) and its standards
• Compare and contrast IFRS and AAOIFI accounting for different Islamic financial products
• Analysis of accounting treatments for the core Islamic financial products: Murabahah, Ijarah, Mudarabah,
Musharakah, Salam, Istisnah
• Accounting issues related to Takaful, Sukuk, Shariah compliant hedging instruments
The forms of Shariah compliant syndicated fi nancing in Egypt are diverse, and with the increase of fi nancial institutional experience in this fi eld, contractual structures have become increasingly innovative, reaching a high level of sophistication. The true beginning of the innovation in new Shariah compliant fi nancing schemes took place in 2013, with the introduction of syndicated Ijarah and syndicated Istisnah-Ijarah structures.
The new structures have proven themselves an att ractive option for investors, as evidenced by a number of high-worth deals that took place last year. Among these major transactions, characterized by their innovative structures, were the following:
1) Syndicated Ijarah: Among the fi rst syndicated Ijarah transactions in the country was the deal entered into in May 2013 between Abu Dhabi Islamic Bank (ADIB), as lead arranger, with Maridive & Oil Services, in an agreement valued at US$150 million. The list of syndicated fi nanciers included some of the largest banks in Egypt such as the Arab African International Bank, Banque du Caire and the Arab International Bank.
2) Syndicated Istisnah-Ijarah: Two major transactions took place in 2013. The fi rst was the fi nancing of the Egyptian Steel Group, with a value that exceeded EGP1 billion (US$143.27 million), by a syndicate of fi nanciers: the list of which included the Bank of Egypt, Bank Audi Egypt, and the Egyptian Arab Land Bank, for the construction of an Egyptian steel factory in the governorate of Beni Suef. The second was the syndicated Istisnah-Ijarah transaction, valued at EGP1.5 billion (US$214.91 million), between Al-Nouran Sugar Company
and a syndicated group that included Banque Misr, Audi and ADIB, for the fi nancing of construction of a new sugar manufacturing plant in the governorate of Al-Sharqeya.
As can be seen from the above, conventional banks such as Banque Misr have become heavily involved in the fi eld in spite of their relatively limited Islamic fi nance knowledge and capabilities. This limited experience is, however, compensated for by the conventional banks’ signifi cant fi nancial and investment capacities compared to Shariah compliant banks, which in the end complements the Shariah compliant syndicated fi nancing deals in which the Islamic fi nancial institutions oft en play the role of lead arranger.
This involvement by conventional banks, while a major factor in boosting and fl ourishing the Islamic fi nance market as a whole, can sometimes have a negative impact on the degree of compliance with Shariah.
The conventional banks’ lack of familiarity with Islamic law may in some cases become a hurdle to the full compliance of the transaction to Shariah, since conventional banks usually do not fully comprehend the reasoning behind the impossibility of insertion of conventional terms and conditions into the transaction documentation due to their confl ict with Shariah. In such a scenario, intensive negotiation between conventional and Shariah compliant fi nanciers is detrimental to the success of the transaction.
However, it is expected that with the development and increase of conventional banks’ Islamic fi nance knowledge and experience, they will occupy a leading role in Shariah compliant syndicated fi nancing in the
coming years. This is evidenced by the Egyptian Steel Group transaction as mentioned above, in which the syndicated fi nancing group was exclusively limited to conventional banks.
It is noteworthy that this increase in Shariah compliant syndicated fi nancing has occurred despite the absence of legislation in the fi eld of Islamic fi nance and despite the absence of governmental support. The Islamic fi nance industry in general has not yet been regulated in Egypt, although Shariah compliant banks and corporations function regularly. This legislative vacuum has delayed the transformation of Egypt into a regional Islamic fi nancial hub, capable of competing with the GCC countries, which have taken the leading role in the fi eld.
The public perception of Islamic fi nance in general has not been very good since the failed experiment of Shariah investment funds in the 1980s. Furthermore, the confusion between Islamic fi nance as an investment market and the political ambitions of political Islam groups has contributed to the unwillingness of the government to develop the Islamic fi nance market, despite its signifi cant potential.
The fl ourishing of the syndicated Islamic fi nance market and the innovation of new fi nancing schemes is a good indicator that the Islamic fi nance market has managed to a certain extent to overcome the absence of a legal framework and the lack of public and governmental support. However, offi cial involvement is essential to take this market to the next level.
Hussein M Azmy is an associate at Hegazy & Associates in association with Crowell & Moring in Cairo. He can be contacted at [email protected].
Islamic syndicated finance in Egypt: A flourishing industry in spite of the legislative vacuum Despite the diffi cult national situation at both an economic and political level, there has been a surge in the frequency of Shariah compliant syndicated fi nancing in Egypt, as it becomes one of the most common tools for the fi nancing of import projects. With the increasing participation of conventional Egyptian fi nancial institutions in this fi eld, HUSSEIN M AZMY discusses the potential for Shariah compliant syndicated fi nance to fl ourish in Egypt’s Islamic fi nance market.
Specifi cally, there has been a real evolution in commodity Murabahah fi nancings in terms of the size of transactions, the number and depth of participants and the move away from plain vanilla transactions to intricate and multi-faceted instruments. Commodity Murabahah and other types of fi nancing tools are oft en overshadowed by the widely publicized and popular Sukuk asset class. But with fi nancial institutions still utilizing commodity Murabahah as the key method of fi nancing, these instruments are standing strong.
Wider spread of participants and dual tranchesRecent commodity Murabahah fi nancings have att racted a range of Islamic fi nancial institutions along with conventional banks not only from the GCC but from a wide number of jurisdictions. This was witnessed recently when King & Spalding advised the mandated lead arrangers (Citibank, Emirates NBD Capital and Commerzbank Aktiengesellschaft ) on a US$100 million commodity Murabahah facility for AK BARS Bank (ABB) in Russia (see cover story ‘’A new frontier: Former Soviet Union forges ahead with Islamic fi nance’, Vol 11 Issue 4).
The transaction was well received, generating widespread interest resulting in a syndicate of 11 fi nancial institutions participating in total. Investors included Citibank, Commerzbank Aktiengesellschaft , Emirates NBD, Amsterdam Trade Bank, Credit Europe Bank, the Islamic Corporation for the Development of the Private Sector, London Forfaiting Company, AKA Ausfuhrkredit, Banque de Commerce et de Placemement, JPMorgan and Ziraat Bankasi. In comparison, in the 2011 the debut ABB commodity Murabahah fi nancing att racted fi ve participants.
The ABB transaction is not the only Murabahah fi nancing to see a shift in participants. In the US$500 million Murabahah facility to Turkiye Finans, 20 banks participated in the syndication with 14 out of the 20 participants being outside
the GCC (including Austria, France, the UK, Turkey, Brunei and Albania). We have also seen the use of dual tranches to att ract a broad range of participants with both fi nancings for Turkiye Finans and Kuveyt Türk consisting of tranches in euros and US dollars, along with larger facility amounts.
Whilst the market is predominately dominated by banks in the GCC and Asia, 2014 may see new entrants into the market, with ABB leading the way in Russia, Turkey leading the way for Europe and African countries also looking to make headway.
Current Shariah discourse However with this growth there has been a recent increase in discourse regarding Tawarruq as a fi nancing instrument and its place within Islamic fi nance, which continues to tarnish the use of Murabahah instruments.
We have seen a number of scholars objecting to documentation where the transaction anticipates having the bank acting as agent of the borrower to purchase commodities and then on-sell the commodities for and on behalf of the borrower. In the most recent transactions we have seen, scholars have insisted that the entity, or in some instances a related entity, does not act as on-sale agent in addition to acting as the agent purchasing the commodities in the fi rst leg of the transaction.
In the ABB transaction, scholars of various Islamic fi nance institutions sought to ensure that the underlying essence of a commodity Murabahah transaction (the economics) was clear and that there was no ambiguity as to the various roles. Accordingly, the on-sale entity was not the same entity that purchased the commodities.
Generally, there has been a growing trend by the industry to separate the on-sale agency mechanics from the commodity Murabahah documentation to address these issues. Various solutions off ered by scholars include:
1. The insertion of wording ensuring that there is clear distinction between the bank acting as agent of the borrower and then when on-selling acting as a ‘messenger’ of the borrower; or
2. As with the ABB deal, ensuring that the on-sale agent is a third party, with some scholars comfortable with a related entity of the bank acting as on-sale agent (so long as they are separate legal entities) and others insisting that the entity is not a 100% subsidiary of the bank.
Bai’ Bithamin AjilTawarruq in recent years has not received wide acceptance predominately for the reason that some scholars view the fi nancing instrument as borrowing money on the basis of Riba and without creating any real economic activity. The fact that
Trends in Islamic syndication The global Islamic fi nance industry is estimated to be in the range of US$1-1.5 trillion and according to S&P, the industry is set to double in size by 2015. In tandem with such growth generally, Islamic fi nance structures have also been evolving and becoming more sophisticated. LIDIA KAMLEH explores the developing trends in Islamic syndication which are driving the capital markets forward.
continued...
Whilst the market is
predominately dominated by banks in the GCC and Asia, 2014 may see new entrants into the market, with ABB leading the way in Russia, Turkey leading the way for Europe and African countries also looking to make headway
Tawarruq is seen to be comparable to debt instruments fuels the criticisms. Despite the debate on the permissibility of some forms of Tawarruq, a signifi cant number of Islamic fi nancial institutions continue
to undertake large volumes of Tawarruq transactions.
The issues with Tawarruq are well publicized and even with the economics of the transactions made clearer by participants to ensure the transactions comply with the principles of Shariah, there is a growing trend among Saudi Arabian fi nancers against using Tawarruq. Instead, we have seen a number of key fi nancial institutions (among them Samba and Alimna Bank) in Saudi Arabia utilizing Bai’ Bithamin Ajil (BBA).In addition to Saudi Arabia, Malaysia has been a key supporter of BBA instruments with the central bank, Bank Negara Malaysia, reporting that it was the major contract endorsed by Islamic banks in Malaysia.
BBA is an instrument in which payment is made by installments sometime aft er the delivery of goods. It is similar to Tawarruq in that the bank undertakes to purchase the assets required for resale to the borrower at a higher price (which is agreed between the parties). The main diff erence between Tawarruq and BBA is that the asset sold to the customer is at an agreed enhanced price and that the
seller is not required to disclose the profi t margin in the selling price.
Consequently, this means that rollover mechanics typically seen in Tawarruq to factor in variations for the calculation of profi t margins are not feasible and any uplift has to be determined from the on-set of the transaction. To illustrate, the bank will purchase the asset and will subsequently sell it to the borrower at an agreed price of X (an amount which includes the cost price of the asset and any uplift ) where such sum will be paid over Y number of years.
What the past has shown, and what the current transactions highlight, is that there continues to be a real globalization of Islamic fi nance, which is demonstrated by the diversity of fi nanciers participating in commodity Murabahah fi nancings; and that, despite the issues surrounding Tawarruq, workable alternatives are available and already being utilized by Islamic fi nanciers.
Lidia Kamleh is a senior associate at King & Spalding. She can be contacted at [email protected].
Continued
The main difference
between Tawarruq and BBA is that the asset sold to the customer is at an agreed enhanced price and that the seller is not required to disclose the profit margin in the selling price
IFN Correspondent: Congratulations on your 2013 appointment as Nigeria’s fi rst ambassador to Qatar. Could you tell our readers briefl y about your background?
Shuaib Ahmed: I’m a chartered accountant by profession. I have a Master’s Degree in Business Administration and I’m an alumnus of the Kennedy School of Government, Harvard University. I began my working career with Akintola Williams & Co Chartered Accountants in 1986 in Nigeria. Around 15 years ago together with a couple of friends, we formed an accountancy and audit practice called Ahmed Zakari & Co which today is one the biggest indigenous auditing and accountancy practices in Nigeria.
I had a brief stint in the public sector with the Bauchi State Government in Nigeria. I was the commissioner for budget and economic planning for the State for about seven years, between 1999-2006; and was appointed secretary to the State Government in December 2006. In August 2012 the president of the Federal Republic of Nigeria nominated me to be Nigeria’s fi rst resident ambassador to the State of Qatar. I resumed duties in April 2013 in Doha, which is what I’ve been doing from that time until today.
As mentioned, I was a party to the sett ing up of Jaiz Bank and this was the very fi rst Shariah compliant bank in Nigeria.
First we set up a company called Jaiz International which we wanted to use as the umbrella for establishing Islamic fi nancial institutions, whether Islamic banks or Takaful or asset management companies, as the case may be. We brought people together like Alhaji Umaru Abdul Mutallab, who is the current chairman of Jaiz Bank; we also made him the chairman of Jaiz International, and a couple of other reputable persons. I was on the board of Jaiz International and it was then that we started bringing together investors in the mission of applying for a license for Jaiz Bank.
IFN Correspondent: So Jaiz Bank is in fully-fl edged operations now — what is its current status?
Shuaib Ahmed: Jaiz is now fully in operation. They started fi rst with I think with three branches, but towards the end of last year I think they added seven more branches and they’re working towards gett ing a national license up from their current regional license so that they can operate in the 36 States of the Federal Republic of Nigeria.
FN Correspondent: From the standpoint of demographics could you discuss the opportunities for Islamic fi nance in light of some of the more signifi cant challenges such as the current state of an under-developed infrastructure?
Shuaib Ahmed: We have the largest population in Africa at over 170 million currently and almost 90 million of that are Muslims. We have a very high population growth rate of almost 2.4% per annum. So it’s been projected that by 2050 we’ll have a population of about 287 million people and we’ll probably
be the sixth-largest country in the world. So in terms of population and demand for Islamic fi nancial services Nigeria has what it takes — we have the demand for those types of services. One of the challenges that the Nigerian economy is facing right now is that of infrastructure defi cit. It’s been projected that the infrastructure defi cit is in the region of almost US$320 billion and this cuts across all sectors of the economy.
IFN Correspondent: Are you aware of plans for other states in Nigeria to follow this trend with sovereign or quasi-sovereign Sukuk issuance?
Shuaib Ahmed: The Nigerian government has been trying to see to it that the Nigerian capital market is made internationally competitive further deepened with a variety of equity and debt products and they’ve identifi ed Sukuk as one of the instruments needed to do that. The committ ee is also trying to encourage other state governments to follow suit, and I believe that Lagos State is considering the possibility and so also is Ogun State. Northern states like Kano are also looking at the possibilities.
The committ ee is also encouraging some corporate players to explore the possibility of issuing Sukuk. So I believe hopefully during 2014 we should see more Sukuk issuances being made by either the sovereign itself or quasi-sovereign or sovereign related entities. Corporate institutions might also come up with some Sukuk issues in 2014.
IFN Correspondent: Politics aside, what advice can you off er other African jurisdictions, especially those vying to become centers of Islamic fi nance, towards enhancing their regulatory frameworks in support of the industry?
An exclusive interview with Shuaib Ahmed, Nigeria’s ambassador to Qatar Nigeria has taken a number of steps to position itself as a frontrunner to become the Islamic fi nance hub for Africa, joining the ranks of Tunisia, Morocca, Kenya and South Africa in pushing forward legislation for Islamic fi nance and Takaful, and becoming one of the few African nations to issue Sukuk with the launch of the Osun State Sukuk last year. IFN Correspondent DAWUD ABDUS-SABOOR held an exclusive interview this month with SHUAIB ADAMU AHMED, the Nigerian ambassador to Qatar, to discuss his opinions on the nation’s Islamic fi nance ambitions.
By 2050 we’ll have a
population of about 287 million people and we’ll probably be the sixth-largest country in the world
Shuaib Ahmed: First of all, I must stress that it’s very, very important before Islamic fi nancial institutions come on stream that the regulatory framework is put in place. It’s very, very important for both the investors as well as the customers to know what are the rules, what are the guiding principles.
Secondly, it’s also important to look around and learn from the experiences of other countries. It’s pointless trying to reinvent the wheel! There are countries that have gone very far in terms of Islamic fi nance practices — Malaysia, for example, and even in the non-Muslim societies such as the UK. The UAE is another example where they’ve put a regulatory framework in place.
Another important thing is for those jurisdictions to try and bring all the stakeholders to the table. Not just the central bank going to one side and quietly coming up with the framework then just releasing it to the system. It’s important for them to bring to the table both conventional bankers, Shariah scholars, customers, other regulatory agencies like the Securities and Exchange Commission etc.
IFN Correspondent: What initiatives would you suggest to improve the level of awareness?
Shuaib Ahmed: There is a need for mass awareness for members of the public, both on the benefi ts of the institutions that are coming on board and the products they are bringing to the market. It has to be a collective
eff ort. It’s not something that should be left to one entity or one institution to do. The regulatory authorities have a role to play in educating the public and other players in the industry. The scholars (both in the mosques and in the schools) have a role to play.
I think also that the professional fi rms have a role to play and also players in the industry like Jaiz Bank. The more they educate the public, the more the awareness is made and the more they get customers — both in terms of deposits and lending. So I think it’s crucial for them to embark on such mass awareness campaigns. In the case of Nigeria, all of these things are taking place. The players are engaged heavily in mass enlightenment; the regulatory authorities are always organizing conferences and seminars to educate the public. The bott om line is that it’s a collective eff ort and everybody has a role to play.
IFN Correspondent: How do you approach the problem of the gap in skills?
Shuaib Ahmed: This is one of the biggest challenges that the Islamic fi nance industry in Nigeria is facing, and like you’ve mentioned it is virtually global. Islamic fi nance is relatively new so there is a shortage of qualifi ed personnel. It would be easy for us to merely impose minimum qualifi cation standards for employees of these Islamic fi nance institutions, but I don’t subscribe to this in the short-run. In the long-run I do, but I feel strongly that there’s a need for more Islamic fi nancial institutions to come on-stream, so we need to do with whatever is available in terms of staff and as much as possible continuously train these staff .
Jaiz Bank has as its technical partner the Islamic Bank Bangladesh (IBBL). The CEO of Jaiz Bank is from IBBL. His other supporting staff , like the executive directors, are Nigerians. This allows them to learn over a few years the ‘nitt y-gritt y’ of the practical implementation of Islamic fi nance before they can then take over the role of CEO etc, as the case may be.
IFN Correspondent: What do you see as the future of Islamic fi nance in Nigeria?
Shuaib Ahmed: The future of Islamic fi nance in Nigeria is extremely bright. As we said earlier, the prospects and potential are there. We have a huge population which growing by the year, which means that the demand side has been taken care of.
Secondly, the infrastructure defi cit that we spoke of earlier shows that there is a huge fi nancing need — by the sovereign, quasi-sovereign, and by the corporate institutions — there is a huge demand for funds to fi nance all of these needs. So I believe Sukuk, for example, has tremendous potential.
And then there are certain policies that the government has adopted that have further opened up the opportunities for Islamic fi nance in Nigeria. For example, the federal government recently introduced compulsory employee insurance, as well as reforms in the fi nancial system such as pension reforms.
With these taking shape, the pension fund administrators have huge amounts of money in their hands — at last count they had about NGN3 trillion (US$18 billion) in pension funds and they are looking for investment opportunities. Because pensions are long-term they’re looking for long-term investment areas to put this money to work. So Islamic fi nance instruments like Sukuk are defi nitely something that will be a welcome idea for them.
And of course globally, Islamic fi nance is just growing by the day, by the hour. So Nigeria cannot be an exception — it’s bound to happen. The opportunities are there for the taking because people are becoming more and more aware of the benefi ts of Islamic fi nance, both Muslims and non-Muslims. They are literally asking for these Islamic fi nance products. The potential is huge, the opportunities are there and I don’t have any doubt that Nigeria will become the hub of Islamic fi nance in Africa.
Dawud Abdus-Saboor is a co-founder and director of Takaful Outsource, a boutique professional consultancy serving the global Takaful industry, registered in the UK and the Netherlands. He can be reached at [email protected]
Continued
The potential is huge, the
opportunities are there and I don’t have any doubt that Nigeria will become the hub of Islamic finance in Africa
DanaInfra Nasional RM200 million 24th February 2014
IDB TBA 19th February 2014
1Malaysia Development RM2.4 billion 19th February 2014
TSH Sukuk Ijarah RM20 million 18th February 2014
AmIslamic Bank RM3 billion 13th February 2014
Kiler GYO US$100 million 13th February 2014
Government of Tunisia TND700 million 7th February 2014
Government of Indonesia IDR1.57 trillion 6th February 2014
Flydubai TBA 4th February 2014
BNM Sukuk RM1 billion 28th January 2014
Citra Marga Nusaphala Persada IDR1.75 trillion 23rd January 2014
Bumitama Agri RM2 billion 22nd January 2014
Karachi Electric Supply PKR6 billion 13th January 2014
Albaraka Turk Katilim Bankasi US$300-400 million 10th January 2014
IJ M Corp RM3 billion 10th January 2014
Government of Saudi Arabia TBA 8th January 2014
Government of Luxembourg EUR200 million 7th January 2014
Government of Oman OMR200 million 6th January 2014
Vallianz Capital US$500 million 26th December 2013
Bank Asya US$500 million 23rd December 2013
Ahmad Zaki Resources RM1 billion 19th December 2013
Bank Rakyat RM9 billion 10th December 2014
BIMB Holdings RM1.7 billion 10th December 2014
State Bank of Pakistan PKR50 billion 9th December 2013
SP Setia RM700 million 6th December 2013
Central Bank of Qatar QAR1 billion 6th December 2013
Kuwait Airways TBA 4th December 2013
Hong Kong Government TBA 28th November 2013
Binariang GSM RM6 billion 28th November 2013
Perusahaan Listrik Negara IDR2 trillion 27th November 2013
South African Government TBA 26th November 2013
Mudajaya Group RM1 billion 19th November 2013
Emirates US$4.5 billion 18th November 2013
Federal Government of Nigeria TBA 13th November 2013
KPJ Healthcare RM1 billion 7th November 2013
Asian Development Bank TBA 6th November 2013
Jordanian Government TBA 30th October 2013
UK Treasury GBP200 million 29th October 2013
Malaysia Building Society RM3 billion 29th October 2013
Jana Kapital RM4 billion 29th October 2013
Tunisian Government TND1 billion 29th October 2013
Moroccan Government TBA 25th October 2013
National Enforcement and Registration System RM595 million 25th October 2013
Turk Telekomunikasyon US$1 billion 25th October 2013
National Commercial Bank SAR4 billion 11th October 2013
Islamic Development Bank US$10 billion 7th October 2013
ACWA Power International US$800 million 4th October 2013
Government of Yemen YER50 billion 30th September 2013www.REDmoneyTraining.com
MARCHMIFT: Structuring Sukuk and Islamic Capital Markets Products 9-11 March, MUSCATMIFT: Structuring and Shariah Issues for Sukuk and Islamic Capital Markets10-11 March, KUALA LUMPURMIFT: Islamic Treasury Principles, Products and Operations13-14 March, KUALA LUMPURMIFT: Structuring Sukuk and Islamic Capital Markets Products 16-18 March, DUBAIMIFT: Shariah Governance, Corporate Governance and IFSA 201319-20 March, KUALA LUMPURAPRILMIFT: Shariah Audit for Islamic Retail and Commercial Banking Products10-11 April, KUALA LUMPURMIFT: Accounting and Reporting for Islamic Financial Products13-15 April, DUBAIMIFT: Shariah and Legal Issues in Sukuk Structuring and Documentation13-15 April, DUBAIIFT: Structuring Islamic Trade Finance Solutions15-17 April, RIYADHMIFT: Business and Operational Strategies for Islamic Financial Institutions15-17 April, KUALA LUMPURMIFT: Islamic Trade Finance28-29 April, KUALA LUMPURRMT: Asset and Liability Management21-23 April, KUALA LUMPURIFT: Structuring Islamic Trade Finance Solutions28-30 April, ISTANBULMAYIFT: Advanced Sukuk and Islamic Securitization4-6 May, RIYADHMIFT: Risk Management Framework and Principles for Islamic Finance8-9 May, KUALA LUMPURMIFT: Shariah Audit and Compliance for Islamic Banking21-22 May, DUBAI
REDmoney Global Shariah Index Series (All Cap) 6 Months REDmoney Global Shariah Index Series (Large Cap) 6 Months
REDmoney Global Shariah Index Series (Medium Cap) 6 Months REDmoney Global Shariah Index Series (Small Cap) 6 Months
Utilities2%Telecomunication Services
2%
Technology14%
Basis Materials15%
Non-CyclicalConsumer Goods Services
7%
Energy8%
Financials4%
Healthcare11%
Industrials22%
Consumer Goods Services15%
REDmoney Global Shariah
Equities are considered eligible for inclusion into the REDmoney Global Shariah Index Series only if they pass a series of market related guidelines related to minimum market capitalization and liquidity as well as country restrictions.
Once the index eligible universe is determined the underlying constituents are screened using a set of business and fi nancial Shariah guidelines.
The REDmoney Global Shariah Index Series powered by IdealRatings consists of a rich subset of global listed equities that adhere to clearly defi ned and transparent Shariah guidelines defi ned by Shariyah Review Bureau in Jeddah, Saudi Arabia.
The REDmoney Shariah Indexes provides Islamic investors with an accurate and Shariah-specifi c equity performance benchmark with optimized compliance credibility due to the intensive research conducted to ensure that index constituents do not confl ict with the defi ned Shariah requirements.
IdealRatings™ is the leading provider of Shariah investment decision support tools to investors globally, including asset managers, brokers, index providers, and banks to empower them to develop, manage and monitor Shariah investment products and Shariah compliant funds. IdealRatings is headquartered in San Francisco, California. For more information about IdealRatings visit: www.idealratings.com
REDmoney Asia ex. Japan REDmoney Europe REDmoney GCC
REDmoney Global REDmoney MENA REDmoney US
550
710
870
1030
1190
1350
FebJanDecNovOctSep 450
600
750
900
1050
1200
FebJanDecNovOctSep
REDmoney Asia ex. Japan REDmoney Europe REDmoney GCC
REDmoney Global REDmoney MENA REDmoney US
500
830
1160
1490
1820
2150
FebJanDecNovOctSep
REDmoney Asia ex. Japan REDmoney Europe REDmoney GCC
REDmoney Global REDmoney MENA REDmoney US
500
790
1080
1370
1660
1950
FebJanDecNovOctSep
REDmoney Asia ex. Japan REDmoney Europe REDmoney GCC
Comprehensive data from Eurekahedge will now feature the overall top 10 global and regional funds based on a specifi c duration (yield to date, annualized returns, monthly returns), Sharpe ratio as well as delve into specifi c asset classes in the global arena – equity, fi xed income, money market, commodity, global investing (which would focus on funds investing with global mandate instead of a specifi c country or geographical region), fund of funds, real estate as well as the Sortino ratio. Each table covering the duration, region, asset class and ratio will be featured on a fi ve-week rotational basis.
Eurekahedge Asia Pacifi c Islamic Fund Index
Top 10 Monthly Returns for Developed Markets Fund
Fund Fund Manager Performance Measure Fund Domicile
1 DWS Noor Precious Metals Securities - Class A DWS Noor Islamic Funds 8.09 Ireland
2 AmPrecious Metals AmInvestment Management 7.76 Malaysia
3 ETFS Physical Gold ETFS Metal Securities 3.82 Jersey
4 ETFS Physical Platinum ETFS Metal Securities 1.80 Jersey
5 Oasis Crescent Balanced High Equity Fund of Funds Oasis Crescent Management Company 1.65 South Africa
6 ETFS Physical PM Basket ETFS Metal Securities 1.50 Jersey
7 Oasis Crescent Balanced Stable Fund of Funds Oasis Crescent Management Company 1.37 South Africa
8 Al Dar Fund of Funds ADAM 1.34 Kuwait
9 Global Equity - Musharaka Riyad Bank 0.80 Saudi Arabia
10 AlAhli Healthcare Trading Equity The National Commercial Bank 0.46 Saudi Arabia
Eurekahedge Islamic Fund Index (0.89)
Top 10 Monthly Returns for Emerging Markets Fund
Fund Fund Manager Performance Measure Fund Domicile
1 UBL Shariah Stock UBL Fund Managers 6.39 Pakistan
2 Meezan Tahaff uz Pension - Equity Sub Al Meezan Investment Management 5.77 Pakistan
9 Apex Dana Al Kanz Apex Investment Services 0.65 Malaysia
10 TA Islamic CashPlus TA Investment Management 0.64 Malaysia
Eurekahedge Islamic Fund Index (0.97)
Top 5 Islamic Commodity Funds by 3 Month Returns
Fund Fund Manager Performance Measure Fund Domicile
1 AmPrecious Metals AmInvestment Management -2.93 Malaysia
2 ETFS Physical Platinum ETFS Metal Securities -4.81 Jersey
3 ETFS Physical Palladium ETFS Metal Securities -4.83 Jersey
4 ETFS Physical Gold ETFS Metal Securities -5.61 Jersey
5 ETFS Physical PM Basket ETFS Metal Securities -7.23 Jersey
Eurekahedge Islamic Fund Index (6.77)
Based on 88.89% of funds which have reported January 2014 returns as at the 24th February 2014
Based on funds which have reported January 2014 returns as at the 24th February 2014
Contact EurekahedgeTo list your fund or update your fund information: [email protected] further details on Eurekahedge: [email protected] Tel: +65 6212 0900
DisclaimerCopyright Eurekahedge 2007, All Rights Reserved. You, the user, may freely use the data for internal purposes and may reproduce the index data provided that reference to Eurekahedge is provided in your dissemination and/or reproduction. The information is provided on an “as is” basis and you assume and will bear all risk or associated costs in its use, and neither Islamic Finance news, Eurekahedge nor its affi liates provide any express or implied warranty or representations as to originality, accuracy, completeness, timeliness, non-infringement, merchantability and fi tness for any purpose.
Eurekahedge Islamic Fund Money Market Index over the last 5 years Eurekahedge Islamic Fund Money Market Index over the last 1 year
Top 30 Issuers of Global Sukuk 12 MonthsIssuer Nationality Instrument Market US$ (mln) Iss Managers
1 General Authority for Civil Aviation
Saudi Arabia
Sukuk Domestic market public issue
4,056 11.0 Saudi National Commercial Bank, HSBC
2 Saudi Electricity Global SUKUK Company 2
Saudi Arabia
Sukuk Euro market public issue
2,000 5.4 Deutsche Bank, HSBC
3 Sadara Chemical Saudi Arabia
Sukuk Musharakah
Domestic market public issue
2,000 5.4 Deutsche Bank, Riyad Bank, Al-Bilad Bank, Alinma Bank
4 Malakoff Malaysia Sukuk Domestic market public issue
1,521 4.1 Maybank, CIMB Group
5 Perusahaan Penerbit SBSN Indonesia III
Indonesia Sukuk Euro market public issue
1,500 4.1 Standard Chartered Bank, Deutsche Bank, Citigroup
6 Cagamas Malaysia Sukuk Murabahah
Domestic market public issue
1,396 3.8 RHB Capital, CIMB Group, Maybank, AmInvestment Bank
7 Republic of Turkey Turkey Sukuk Euro market public issue
1,250 3.4 Standard Chartered Bank, HSBC, QInvest
7 Ooredoo Tamweel Qatar Sukuk Euro market public issue
1,250 3.4 Deutsche Bank, HSBC, DBS, Qatar National Bank, QInvest
9 TNB Western Energy
Malaysia Sukuk Ijarah and Wakalah
Domestic market public issue
1,109 3.0 CIMB Group
10 IDB Trust Services Saudi Arabia
Sukuk Wakalah
Euro market public issue
1,000 2.7 Standard Chartered Bank, National Consumer Cooperative Bank, RBS, National Bank of Abu Dhabi, Natixis, CIMB Group, Credit Agricole, Barwa Bank
10 Dubai Electricity & Water Authority
UAE Sukuk Ijarah Euro market public issue
1,000 2.7 Standard Chartered Bank, RBS, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD
10 DIB Tier 1 Sukuk UAE Sukuk Euro market public issue
1,000 2.7 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Dubai Islamic Bank, Emirates NBD
13 Medjool UAE Sukuk Wakalah
Euro market public issue
993 2.7 Standard Chartered Bank, Abu Dhabi Commercial Bank, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD
14 DanaInfra Nasional Malaysia Sukuk Murabahah
Domestic market public issue
820 2.2 RHB Capital, Maybank, CIMB Group, Affi n Investment Bank, AmInvestment Bank
15 Sukuk Funding (No 3)
UAE Sukuk Musatahah
Euro market public issue
750 2.0 Standard Chartered Bank, Goldman Sachs, National Bank of Abu Dhabi, First Gulf Bank, Dubai Islamic Bank
16 Dar Al-Arkan International Sukuk
Saudi Arabia
Sukuk Wakalah
Euro market public issue
746 2.0 Goldman Sachs, Deutsche Bank, Masraf Al Rayan, Emirates NBD, QInvest, Bank Alkhair, Bank of America Merrill Lynch
17 Konsortium Lebuhraya Utara-Timur (KL)
Malaysia Sukuk Musharakah
Domestic market public issue
718 1.9 CIMB Group
18 Power & Water Utility Co for Jubail & Yabbu - Marafi q
Saudi Arabia
Sukuk Domestic market private placement
667 1.8 HSBC
19 Syarikat Prasarana Negara
Malaysia Sukuk Ijarah Domestic market public issue
623 1.7 HSBC, RHB Capital, CIMB Group, AmInvestment Bank
20 Kapar Energy Ventures
Malaysia Sukuk Ijarah Domestic market public issue
581 1.6 AmInvestment Bank
21 TNB Northern Energy
Malaysia Sukuk Ijarah and Wakalah
Domestic market public issue
543 1.5 HSBC, KAF Investment Bank
22 Khazanah Nasional Malaysia Sukuk Musharakah
Domestic market private placement
527 1.4 CIMB Group, AmInvestment Bank, HSBC, Maybank
23 Turkiye Finans Katilim Bankasi
Turkey Sukuk Euro market public issue
500 1.4 Saudi National Commercial Bank, HSBC, Citigroup, Noor Bank
23 SIB Sukuk Co III UAE Sukuk Euro market public issue
500 1.4 Standard Chartered Bank, HSBC, Kuwait Finance House, Al Hilal Bank
23 Government of Ras Al Khaimah
UAE Sukuk Euro market public issue
500 1.4 Mashreqbank, Standard Chartered Bank, National Bank of Abu Dhabi, Citigroup, Al Hilal Bank
23 Al Hilal Bank UAE Sukuk Mudarabah / Wakalah
Euro market public issue
500 1.4 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Citigroup, Al Hilal Bank
27 Pengurusan Air SPV Malaysia Sukuk Ijarah Domestic market private placement
473 1.3 CIMB Group, RHB Capital, Bank Islam Malaysia, AmInvestment Bank
28 Almarai Saudi Arabia
Sukuk Domestic market private placement
453 1.2 Banque Saudi Fransi, Standard Chartered Bank, BNP Paribas, HSBC
Top Islamic Finance Related Loans Mandated Lead Arrangers Ranking 12 Months
Mandated Lead Arranger US$ (mln) No %1 Abu Dhabi Islamic Bank 725 7 7.1
2 Standard Chartered Bank 611 5 5.9
3 HSBC 567 3 5.5
4 Abu Dhabi Commercial Bank 525 3 5.1
5 Emirates NBD 511 4 5.0
6 National Bank of Abu Dhabi 466 4 4.5
7 Citigroup 411 2 4.0
8 Arab Petroleum Investments 408 3 4.0
9 First Gulf Bank 363 4 3.5
10 Dubai Islamic Bank 348 2 3.4
11 Samba Capital 341 3 3.3
12 Credit Agricole 332 2 3.2
13 Sumitomo Mitsui Financial Group 328 2 3.2
14 Saudi National Commercial Bank 324 3 3.2
15 Islamic Development Bank 258 3 2.5
16 Noor Bank 246 4 2.4
17 Riyad Bank 236 2 2.3
17 National Bank of Kuwait 236 2 2.3
19 Barwa Bank 189 3 1.8
20 Al Hilal Bank 186 2 1.8
21 Union National Bank 172 1 1.7
21 SG Corporate & Investment Banking 172 1 1.7
21 Mitsubishi UFJ Financial Group 172 1 1.7
21 Export Development Canada 172 1 1.7
21 BNP Paribas 172 1 1.7
21 Al Khalij i Commercial Bank 172 1 1.7
27 Deutsche Bank 160 1 1.6
28 Gulf International Bank 156 1 1.5
28 Arab Bank 156 1 1.5
30 United Arab Bank 146 2 1.4
Top Islamic Finance Related Loans Mandated Lead Arrangers12 Months
Bookrunner US$ (mln) No %1 Emirates NBD 568 3 18.2
2 HSBC 419 1 13.4
2 Citigroup 419 1 13.4
2 Abu Dhabi Commercial Bank 419 1 13.4
5 Noor Bank 299 3 9.6
6 Abu Dhabi Islamic Bank 224 2 7.2
7 Standard Chartered Bank 149 2 4.8
7 Barwa Bank 149 2 4.8
7 Arab Banking Corporation 149 2 4.8
10 National Bank of Abu Dhabi 64 1 2.0
Top Islamic Finance Related Loans by Country 12 Months
Nationality US$ (mln) No %1 UAE 6,501 8 63.2
2 Saudi Arabia 2,587 4 25.2
3 Turkey 809 2 7.9
4 Qatar 271 1 2.6
5 Malaysia 116 2 1.1
Are your deals listed here?If you feel that the information within these tables is inaccurate, you may contact the following directly: Mandy Leung (Media Relations) Email: [email protected] Tel: +852 2804 1223
Top Islamic Finance Related Loans by Sector 12 Months
0US$ bln 1 32 654
Oil & Gas
Chemicals
Transportation
Metal & Steel
Finance
Global Islamic Loans - Years to Maturity (YTD Comparison)
0% 20% 40% 60% 80% 100%2007200820092010
201120122013
0-3yrs 3-5yrs 5-7yrs 7-10yrs 10+yrs
Top Islamic Finance Related Loans Deal List 12 Months
DISCLAIMERAll rights reserved. No part of this publication may be reproduced, duplicated or copied by any means without the prior consent of the holder of the copyright, requests for which should be addressed to the publisher. While every care is taken in the preparation of this publication, no responsibility can be accepted for any errors, however caused.
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COMPANY INDEX
1Malaysia Development (1MDB) 6,8AAOIFI 5,17,31ABC Islamic Banking 15Abu Dhabi Global Market 15Abu Dhabi Islamic Bank 17,24,25,32Abu Dhabi National Bank (Egypt) 17Adl Capital 1Adnan, Sundra & Low 17Ahli Bank (Qatar) 13Ahli United Bank 12Ahmed Zakari & Co 35AIIBP 8AKA Ausfuhrkredit 33AKBARS Bank 33Akin Tola Williams & Co 35Al Baraka Banking Group 13Al Bayan Group Holding Company 25Al Fajer Retakaful Insurance Company 14Al Hilal Bank 10,11Al Meezan Group 1Al Meezan Investment Management 1Al Rajhi Company for Cooperative Insurance 13Al Salam Bank Bahrain 12,13Alimna Bank 34Allianz Saudi Fransi Cooperative Insurance Co 13Allied Cooperative Insurance Group 13Al-Nouran Sugar Company 32Al-Omran Company 11Alwyni Capital 27AmInvestment Management 17AmIslamic 9Ample Zone 7Amsterdam Trade Bank 33Arab African International Bank 32Arab Banking Corporation 15Arab International Bank 32Armila Capital 4Asian Finance Bank 8Astra Sedaya Finance 25Atlas Asset Management 3Azzad Asset Management 7Bank Audi Egypt 32Bank Islam 8Bank Islam Malaysia 17Bank Negara Malaysia 7Bank of Egypt 32Bank of London and Middle East 23Bank of Tokyo-Mitsubishi UFJ (Malaysia) 17Banque de Commerce et de Placemement 33Banque du Caire 32Banque Misr 32Banque Saudi Fransi 3BIMB Holdings 17BMI Bank 12BNP Paribas Investment Management 17BNP Paribas Malaysia 19,26,29Brunei Insurance & Takaful Association 15Bumitama Agri 7Burgan Bank 13Bursa Malaysia 8Central Bank of Bahrain 6Central Bank of Indonesia 27Central Bank of Libya 10Central Bank of the UAE 11CIBAFI 11CIMB 6,21CIMB Investment Bank 8CIMB Islamic 17CIMB Islamic Bank 29Citibank 33CityCentreDC 25Club Ethis Investment Network 22Commerzbank 6,21,33Credit Europe Bank 33Crowell & Moring 32DanaInfra Nasional 6Dar Afghanistan Bank 24Dar Al Sharia Legal & Financial Consultancy 16Dealogic 25Doha Insurance 14
Doha Takaful 14DP World 12Dubai Financial Services Authority 15Dubai Islamic Bank 17,25Dubai NASDAQ Exchange 21,23EFG Hermes 14Egyptian Arab Land Bank 32Egyptian Islamic Finance Association 7,31Egyptian Steel Group 32Eleonora Sport 11Emaar Sukuk 14Emirates Islamic 12Emirates NBD 12,33Emirates NBD Capital 33EPF 5Etiqa Insurance & Takaful 15Etiqa Takaful 17Eurekahedge 1Exim Sukuk Malaysia 29Export-Import Bank of Malaysia 29EY 10Faisal Islamic Bank of Egypt 7Felda Global Ventures Holdings 8First Gulf Bank 6,21Fitch 29FWU Group 17Golden Agri-Resources 17Government Savings Bank 8GreenTech Malaysia 9Gulf Air 12Gulf Capital 25Gulf Finance House 11,13Gulf Marine Services 25Harvard University 35Hegazy & Associates 31,32Hong Kong Monetary Authority 30HSBC 21,25HSBC Amanah Malaysia 29IBFIM 9ICD 11,33IDB 6,9,10,11,20,21,24IDB Group 24IFAAS 10IFSB 25IILM 6,17INCEIF 10Indonesian Stock Exchange 28Institute of Chartered Accountants of Pakistan 9Investment Corporation of Dubai 25IOSCO 10Islamic Bank Bangladesh 36ISRA 26Jadwa Investment 3Jaiz Bank 35,36Jakarta Islamic Index 28Jarkata Composite Exchange 28Jebel Ali Free Zone Authority FZE 12Johns Hopkins University 7Jordan Islamic Bank 12JPMorgan Chase 8,10,12,25,33JS Investments 3Juris Corp 19KFH Research 17Khazanah Nasional 5King & Spalding 33,34Kingdom Holding 12KPMG 11Kroll 24Kuwait Finance House 11Kuwait Finance House Turkey 13Kuwait Projects Co 12Labuan Financial Services Authority 14Leeds United Football Club 11Lembaga Tabung Haji 19Linklaters 9,29Liquidity Management Center 12London Forfaiting Company 33London Stock Exchange 23Lotus Capital 17Malaysian Medical Association 15
Malkoff Corp 8Maridive & Oil Services 32Mashreq Bank 12Masraf Al Rayan 23Maybank 29Maybank Investment 7,29Maybank Investment Bank 17Maybank Islamic 29MBSB 17Moody’s 8,9,29MPCAM 15National Bank of Abu Dhabi 3,6,17,21,23National Commercial Bank 6National Union of Kuwait Students 11Natixis 6,21New Line Capital Investment 30Noor Bank 23Nu Sentral 6Path Solutions 17Prudential BSN Takaful 14,15Qatar International Islamic Bank 12Qatar Islamic Bank 15,23Qatar National Bank 11Reserve Bank of India 19RHB Capital 14RHB Investment Bank 17RHB Islamic 6,9S&P 9,10SABB 3Samba Financial Group 12,34Saturna Capital 1,14Saudi ARAMCO 25Saudi Hollandi Bank 12Saudi Re for Cooperative Reinsurance Company 13Saudi-Kuwaiti Finance House 11Securities and Exchange Commission (Pakistan) 9,15,18Securities Commission (Malaysia) 6,17Sentral 384 6Shariyah Review Bureau 9Sharjah Islamic Bank 12Sidra Capital 3Solidarity Takaful Co 13SP Setia 17Standard Chartered 6,21,25Standard Chartered Bank 17Standard Chartered Saadiq 17Standard Chartered Singapore 15State Bank of Pakistan 9Tadawul 8Takaful Outsource 36Tenaga Nasional 19TNB Manjung Five 19TNB Western Energy 19Turkiye Finans 33UAE Wrestling, Judo & Kick Boxing Federation 10UBL Fund Managers 3UM Capital 7UM Financial 7United Gulf Bank 14United Overseas Bank 7University of Bahrain 11US Federal Reserve 27,29Waqf Fund 11Wong & Partners 29World Bank 24World Council of Credit Unions 24Zaid Ibrahim & Co 19,29Ziraat Bankasi 33
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