Being caught off guard is not anyone’s cup of tea. Despite much contingency planning, nothing could prepare Japan for the devastation that wreaked the island nation last week. Hence, while paying much attention to detail should cover most ground in any crisis management plan, one can never be too sure. In the same vein, the reports we bring you this week show that proponents in the Islamic finance industry, while enthusiastic about industry growth and expansion prospects, remain cautious in their approach. Luxembourg is now recognized as one of the leading European centers for Islamic finance, a European leader in Sukuk listings and ranks first as a domicile for Shariah compliant investment funds. Accolades which were not incidental, but the result of meticulous planning by Luxembourg’s task force set up in 2008, to identify obstacles to the development of Islamic finance and suggest ways to promote its growth. A report by the Association of the Luxembourg Fund Industry gives a comprehensive rundown of the numerous factors already laid out to facilitate Islamic financial products. The Luxembourg perspective on bancatakaful and its benefits, brought to us in a report by FWU Group, outlines not only the prospects but also various reasons why a certain overriding hesitancy towards the adoption of Takaful exists. This guarded disposition is in fact evident throughout Europe, though most notably in France. A report by two doctoral candidates from Ecole Nationale Supérieure conclude that Islamic finance is welcome in Europe in so far as it is contained in the financial mar- ket in order to reap petrodollars and remains discreet in doing so. Any trace of religiosity is quite abhorred and needs to be dealt with del- icately. In the final analysis, the private sector is not against the idea of Islamic finance as long as ‘image risk’ remains at a minimum. Indonesia too comes under scrutiny. The good news is that industry players are well aware of the current inhibitions, listing unwelcom- ing laws and regulations by the government, a lack of clear industry standards, no proper guidelines on Islamic securities, the disap- pointing performance of Sukuk, unresolved tax issues and low public awareness. In fact, in the recent US$824 million government of Indonesia / Perusahaan Penerbit SBSN Indo- nesia Sukuk, featured in our Termsheet, saw selling agents personally carrying out market- ing activities to garner investors in almost all major cities in the country. The central bank, Bank Indonesia deserves a special mention – its efforts are outlined in a report by BNI Syariah – and its director of Islamic banking Mulya Siregar takes the spotlight in our Meet the Head. Law firm Azmi & Associates’ report gives the view on Islamic private equity and venture capital as having more basis on risk and profit and loss sharing than typical Islamic financial transactions. University of Reading’s Professor Dr Volker Nienhaus infers in his report that in replicating conventional products, the underlying contracts of Islamic finance adds to individual and systemic risk, on top of commercial risks already present in conventional finance. Our IFN reports this week cover the US’ and Turkey’s love- hate relationship with Islamic finance, and updates on Dubai World, Ithmaar Bank and RAM Rating Services. Vol 8 Issue 10 16 th March 2011 The World’s Global Islamic Finance News Provider In this issue IFN Rapid ..................................................... 2 Islamic Finance News ................................ 3 Takaful News ............................................... 8 Ratings News .............................................. 9 Moves ......................................................... 10 IFN Reports: Islamic banking pays off but still challenging ............................................. 11 Turkey’s participation market ............ 11 RAM has US$653 million of foreign issuer ratings in the pipeline ............. 12 Islamic finance in the US – A love-hate affair ....................................................... 12 Dubai’s road to recovery....................... 12 Articles: A Continental European View ................ 13 The Development of Islamic Finance in Luxembourg ............................................ 15 International Bancatakaful Opportunities: Luxembourg Perspective........................ 17 Islamic Private Equity and Venture Capital ...................................................... 19 The Islamic Finance Industry in Indonesia............................................. 21 Islamic Economics and Financial Sector Reforms .................................................. 23 Forum ......................................................... 25 Meet the Head .......................................... 26 Mulya Effendi Siregar, director of Islamic banking, Bank Indonesia Termsheet .................................................. 27 Indonesia Retail Sukuk US$824 million Deal Tracker .............................................. 28 Eurekahedge Funds Tables ..................... 29 REDmoney Indexes .................................. 30 S&P Shariah Indexes ............................... 31 Dow Jones Shariah Indexes .................... 32 Dealogic League Tables........................... 33 Thomson Reuters League Tables ........... 36 Events Diary............................................... 39 Company Index ......................................... 40 Subscription Form .................................... 40 Better safe than sorry Job Search For Islamic Finance Professionals To find out more about Barakat Jobs, logon to www.BarakatJobs.com today, and reach your potential.
Transcript
Being caught off guard is not anyone’s cup of tea. Despite much contingency planning, nothing could prepare Japan for the devastation that wreaked the island nation last week. Hence, while paying much attention to detail should cover most ground in any crisis management plan, one can never be too sure.
In the same vein, the reports we bring you this week show that proponents in the Islamic fi nance industry, while enthusiastic about industry growth and expansion prospects, remain cautious in their approach.
Luxembourg is now recognized as one of the leading European centers for Islamic fi nance, a European leader in Sukuk listings and ranks fi rst as a domicile for Shariah compliant investment funds. Accolades which were not incidental, but the result of meticulous planning by Luxembourg’s task force set up in 2008, to identify obstacles to the development of Islamic fi nance and suggest ways to promote its growth.
A report by the Association of the Luxembourg Fund Industry gives a comprehensive rundown of the numerous factors already laid out to facilitate Islamic fi nancial products. The Luxembourg perspective on bancatakaful and its benefi ts, brought to us in a report by FWU Group, outlines not only the prospects but also various reasons why a certain overriding hesitancy towards the adoption of Takaful exists.
This guarded disposition is in fact evident throughout Europe, though most notably in France. A report by two doctoral candidates from Ecole Nationale Supérieure conclude that Islamic fi nance is welcome in Europe in so far as it is contained in the fi nancial mar-
ket in order to reap petrodollars and remains discreet in doing so. Any trace of religiosity is quite abhorred and needs to be dealt with del-icately. In the fi nal analysis, the private sector is not against the idea of Islamic fi nance as long as ‘image risk’ remains at a minimum.
Indonesia too comes under scrutiny. The good news is that industry players are well aware of the current inhibitions, listing unwelcom-ing laws and regulations by the government, a lack of clear industry standards, no proper guidelines on Islamic securities, the disap-pointing performance of Sukuk, unresolved tax issues and low public awareness. In fact, in the recent US$824 million government of Indonesia / Perusahaan Penerbit SBSN Indo-nesia Sukuk, featured in our Termsheet, saw selling agents personally carrying out market-ing activities to garner investors in almost all major cities in the country.
The central bank, Bank Indonesia deserves a special mention – its efforts are outlined in a report by BNI Syariah – and its director of Islamic banking Mulya Siregar takes the spotlight in our Meet the Head.
Law fi rm Azmi & Associates’ report gives the view on Islamic private equity and venture capital as having more basis on risk and profi t and loss sharing than typical Islamic fi nancial transactions. University of Reading’s Professor Dr Volker Nienhaus infers in his report that in replicating conventional products, the underlying contracts of Islamic fi nance adds to individual and systemic risk, on top of commercial risks already present in conventional fi nance. Our IFN reports this week cover the US’ and Turkey’s love-hate relationship with Islamic fi nance, and updates on Dubai World, Ithmaar Bank and RAM Rating Services.
Vol 8 Issue 10 16th March 2011
T h e W o r l d ’ s G l o b a l I s l a m i c F i n a n c e N e w s P r o v i d e r
www.islamicfi nancenews.comA round-up of all this week’s news IFN RAPID
• • • Pharez Nigeria slams Islamic banking
as inauspicious
• Indonesia succeeds in meeting US$114 million Sukuk target
• Malaysian local banks may invite foreign partners for Islamic megabank licenses
• Emery Oleochemicals Group plans to raise US$158.3 million via Sukuk
• Malaysia’s Academic Medical Centre considers Sukuk to raise up to US$494 million
• Islamic Bank of Thailand to provide US$16.5 million fi nancing to Muslim garment industry
• BRI Syariah targets US$1 billion in fi nancing this year
• Bio-XCell fi nalizes US$82.2 million Commodity Murabahah facility
• Indonesia’s Islamic banks to contribute in government’s target of expanding assets by 55%
• Philippines in talks with the IDB on deploying Al-Amanah Islamic Investment Bank
• Syarikat Prasarana Negara to issue US$1.65 billion Sukuk in 2012
• CIMB Syariah to contribute 5% of CIMB Niaga’s total assets in Indonesia
• OCBC Al-Amin to chart high double digit growth for current fi nancial year
• Axis REIT Managers to list US$988 million REIT by end of June
• National Spot Exchange plans to launch Islamic products in India
• Kazakhstan to attract up to US$10 billion in Islamic fi nance in seven years
• Bank of London and The Middle East charts pre-tax profi t of US$8.1 million in 2010
• Kuveyt Türk Participation Bank to issue benchmark Sukuk by year-end
• AssetCo rejects a takeover by Arcapita
• HSBC Amanah and HSBC Securities Services unveil Shariah compliant global securities services
• Islamic fi nance industry must innovate products, says CEO of Amanie Business Solutions
• Sovereign bodies contribute to 77% of global Sukuk issuances, says Baitak Research
• Unicorn Investment Bank charts US$229.5 million net loss in 2010
• Investment Corporation of Dubai acquires National Bonds Corporation
• Dubai SME inks deal with Dubai International Financial Centre for SMEs
• Sukuk can solve local companies’ debt in Kuwait , says Liquidity Management House
• Emirates Islamic Bank offers fi nancing to SMEs
• Dubai World to ink fi nal agreement with creditors
• Arqaam Capital to help Indonesian banks fi nd Gulf investors
• Islamic fi nancing faces diffi culty in winning acceptance
• Kuwait International Bank provides US$90 million fi nancing for mall expansion
• Emirates NBD expects to increase net profi t by 45.3% this year
• National Bank of Abu Dhabi charts 22% hike in net profi t to US$1 billion
• Ithmaar Bank’s net loss of US$150.1 million in 2010
• Kuwait International Bank’s net profi t increased 303% in 2010
• Nakheel offers investors refunds for Palm Jebel Ali project
• Investment Corporation of Dubai seeks US$4 billion refi nancing
• First Gulf Bank to issue Sukuk in 2011
• Al Fardan Exchange inks deal with Abu Dhabi Islamic Bank to provide monthly payment facilities
• Masraf Al Rayan seeks shareholders’ consent to issue US$1 billion Islamic euro notes
• Low yields will encourage Abu Dhabi to issue sovereign Sukuk
• Bank AlJazira is planning to issue a Saudi riyal-denominated Sukuk
• Dubai Islamic Bank’s net profi t fell to US$219 million in 2010
• Al Ahli Bank of Kuwait records 36% hike in net profi t to US$191 million
• Qatar Islamic Bank plans to acquire 25% stake in Bank Asya
TAKAFUL• Indonesia’s Takaful assets increases
by 47.6% in 2010
• Amana Takaful announces rights issue to facilitate expansion strategy
• Labuan Financial Services Authority allows Takaful operators to select dual offi ces
• Takaful Indonesia seeks to reach US$12.5 million through bancassurance system
• Neova Sigorta plans to penetrate into Central Asia and Eastern Europe
• Takaful growth in Southeast Asia is weaker than expected
• Qatar General Insurance & Reinsurance Company charts net profi t of US$33 million in 2010
RATINGS• MARC withdraws ratings assigned
to Mulpha International’s US$24.6 million Murabahah notes
• AM Best Europe puts Arab Union Reinsurance Company under review
• Fitch downgrades Arab Banking Corporation’s long-term issuer default rating
• S&P affi rms and withdraws long- and short-term counterparty credit ratings of Dubai Islamic Bank
MOVES• Mufti Munib ur Rehman appointed
religious board member at the Securities and Exchange Commission of Pakistan
• Dr Zeti Akhtar Aziz’s contract as governor of Bank Negara Malaysia to be extended
• Legal fi rm Hogan Lovells appoints Robert Fugard and Simon Gwynne as partners for asset fi nance department
NEWS
Disclaimer: Islamic Finance news invites leading practitioners and academics to contribute short reports each week. Whilst we have used our best endeavors and efforts 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.
AFRICAIslamic banking insensitiveNIGERIA: The introduction of Islamic banking by the Central Bank of Nigeria (CBN) is inauspicious and insensitive because legislation for the industry has not been completed, said Eghes Eyieyien, CEO of consulting fi rm Pharez Nigera.
Eyieyien said the move brings serious implications for the Nigerian banking industry and the economy which warrant that the CBN immediately revisit the issue and withdraw the framework accordingly. He also said the central bank should develop the industry and enact laws which are not religion specifi c.
However, he added that Nigeria could create its own system of non-interest banking based on the principle of profi t and loss sharing without requiring Shariah compliance.
Nigeria is in the process of revamping its banking laws to provide for Islamic banking and the central bank has proposed a plan to establish the CBN Shariah Council.
ASIASukuk target accomplishedINDONESIA: The fi nance ministry has succeeded in meeting the IDR1 trillion (US$114 million) target via a Sukuk auction this week, said Dahlan Siamat, director of Islamic fi nance.
Proceeds from the Sukuk will be used to cover a state budget defi cit.
Two routes to Islamic megabank licencesMALAYSIA: Local banks can invite foreign partners for an Islamic megabank license and allow them to hold up to 70% equity in the megabank, said Mohd Razif Abdul Kadir, deputy governor of Bank Negara Malaysia (BNM), the central bank.
“The megabank can be from two sources, either through a new license or by transforming a domestic license into a megabank license,” said Mohd Razif.
BNM had been expected to convert two conditional megabank licenses it awarded to unnamed parties last year into full licenses
but this has yet to materialize.
The central bank is not in a hurry to issue the two licenses, as Malaysia currently has 17 Islamic banks, while the US$1 billion minimum capital requirement for the megabank could be a challenge for prospective investors due to the current market environment, said Mohd Razif.
He added that although there are two groups keen on the licenses, they are still looking for more partners.
Financing via SukukMALAYSIA: Emery Oleochemicals Group is planning to raise up to RM480 million (US$158.3 million) via Sukuk to fi nance the company’s three-year expansion plans, according to Kongkrapan Intarajang, its CEO.
Emery Oleochemicals is a 50-50 joint venture between Thailand-based PTT Chemical International and Sime Darby Plantation.
Sukuk for medical schoolMALAYSIA: The Academic Medical Centre (AMC) is planning to issue a Sukuk to raise between RM1.2 billion (US$395.5 million) and RM1.5 billion (US$494.4 million) over the next three years, said Dr Mohan Swami, its chairman.
The funds will be used to fi nance the establishment of Perdana University Graduate School and adjoining facilities, which is being set up via a tie-up with Johns Hopkins Medicine International and the Royal College of Surgeons in Ireland.
Swami said AMC is in talks with several local and foreign investment banks to issue a Sukuk or for a bridging loan. The banks include CIMB, RHB Bank, Malaysian Industrial Development Finance, a bank in Singapore and one in Bahrain.
Encouraging employmentTHAILAND: The Islamic Bank of Thailand is planning to provide fi nancing worth THB500 million (US$16.5 million) to the Muslim garment industry to stimulate employment in the country’s fi ve southern provinces.
The fi nancing is part of a fi ve-year Muslim clothing and garment industry development project designed to improve living standards in the provinces.
Retail sector focusINDONESIA: BRI Syariah is targeting to increase fi nancing to IDR9 trillion (US$1 billion) this year from IDR5.5 trillion (US$627 million) in 2010.
Ari Purwandono, the bank’s business director said retail sector fi nancing, including home fi nancing and Hajj funds, will account for 75% of its target.
Opting for Islamic fi nancingMALAYSIA: Biotechnology developer Bio-XCell is fi nalizing a RM250 million (US$82.2 million) Commodity Murabahah facility with a local bank to develop a park at Iskandar Malaysia, in the state of Johor.
The park will be developed over a span of six years, providing facilities to fi rms in the biotechnology industry.
Farming asset expansion INDONESIA: Islamic banks will contribute to the government’s target of expanding assets by 55% this year, by offering services to palm oil, cocoa and corn growers, said Bank Indonesia, the central bank.
By focusing on the rural areas, Islamic banks will reduce farmers’ dependence on illegal money lenders, known for their violent collection practices, according to Bogor Agricultural University.
Bank Muamalat Indonesia is seeking to boost fi nancing tenfold outside cities this year after opening 30 new branches in 2010. BCA Syariah is looking to add 15 outlets aimed at small businesses this year.
Islamic fi nanciers accounted for 1.8% of the INR91 trillion (US$10.4 billion) in fi nancing to the farming industry in 2010, according to the central bank.
Dialogue with the IDBPHILIPPINES: The Filipino government is in talks with the Islamic Development Bank (IDB) on ways to effectively deploy Al-Amanah Islamic Investment Bank, the country’s only Islamic bank.
Cesar Purisima, the fi nance secretary, is pushing for Islamic microfi nance in the Muslim majority state of Mindanao as a tool for poverty alleviation and social cohesion.
Infrastructure fi nancingMALAYSIA: Public transport operator Syarikat Prasarana Negara is planning to issue a RM5 billion (US$1.65 billion) Sukuk in 2012 to fi nance a RM7 billion (US$2.3 billion) light rail transit extension project.
Zulkifl i Mohd Yusoff, group director of project development, said the company earlier raised RM2 billion (US$658 million) through Sukuk for this project.
Vital contributorINDONESIA: CIMB Niaga is expecting subsidiary CIMB Syariah to contribute to 5% of its total assets, said Arwin Rasyid, president director of CIMB Niaga.
Arwin is optimistic that this target can be achieved as CIMB Niaga has adopted the world banking strategy where Islamic banking is offered with conventional products, and not separately.
Through this strategy, although CIMB Syariah only has 33 branches, its Islamic products are available in all CIMB Niaga’s branches, he added.
Further expansionMALAYSIA: OCBC Bank Malaysia is targeting between 10% and 15% bottom and top line growth for the fi nancial year ending the 31st December 2011, to be driven by the Islamic banking, business, and consumer segments.
Jeffrey Chew, director and CEO said the bank expects high double digit growth in Islamic banking this year, and is planning to increase the traction of Islamic subsidiary OCBC Al-Amin in the areas of personal fi nancing, mortgages and wealth management.
OCBC Al-Amin registered a 10% growth in revenue to RM158 million (US$51.7 million) for the previous fi nancial year.
The bank also plans to open fi ve OCBC Al-Amin branches and four conventional branches this year, with a forecast expenditure of at least RM100 million (US$32.8 million) to upgrade its banking and information technology system, open new branches and revamp existing ones.
World’s largest REITMALAYSIA: Axis-REIT Managers is planning to list the world’s largest Shariah real estate
investment trust valued at over RM3 billion (US$988 million) to meet the demand for new Islamic fi nance products.
The REIT is expected to be listed in the second quarter of this year and will manage 33 properties located in three Asian countries including Australia and Hong Kong.
Reports list the investment banking arm of CIMB Group as the principal advisor for the initial public offering and the involvement of Standard Chartered Bank.
Axis-REIT Managers have yet to confi rm the plans.
Leong Kit May, chief fi nancial offi cer of Axis-REIT declined to comment further when contacted by Islamic Finance news.
New Shariah productsINDIA: National Spot Exchange, based in Mumbai, is planning to market Islamic investment products in two weeks.
Huge demand from Muslim investors including Waqf boards, mosques, high net worth individuals and Shariah compliant products traders, is set to increase volume by 15% to 20%, said Anjani Sinha, CEO and managing director.
Additionally, SBI Mutual Fund and UTI Asset Management are looking to launch similar products in the coming months.
Major role for Islamic fi nanceKAZAKHSTAN: Kazakhstan plans to attract up to US$10 billion in Islamic fi nance in the next fi ve to seven years, said Arken Arystanov, chairman of the state-administered body that oversees the Regional Financial Center of Almaty.
Kazakhstan will also revisit a plan this year to issue a debut sovereign Sukuk worth US$500 million, and is currently drafting new fi nancial regulations to allow for the issuance before the year end, said Berik Sholpankulov, deputy fi nance minister.
EUROPEReturns to profi tUK: Bank of London and The Middle East has posted a pre-tax profi t of GBP5 million (US$8.1 million) in 2010, as compared to
a GBP18.9 million (US$30.5 million) loss in 2009, through a recovery strategy and prudent fi nancial investments.
Total operating income increased 34% to GBP40.4 million (US$65 million) spurred by revenue growth in the markets and corporate banking divisions with a robust performance from investment in the US Dollar Income Fund.
Net fee income rose 112% to GBP974,693 (US$1.6 billion). However, total assets dropped to GBP712 million (US$1.15 billion).
Takeover offer rejectedUK: Fire and rescue services provider AssetCo has rejected a takeover offer by Islamic investment fi rm Arcapita, in spite of support for the proposal by John Shannon, AssetCo’s CEO and largest shareholder.
According to AssetCo, the independent directors considered the approach to be opportunistic and against the interests of shareholders as the indicated price range included a lower offer than the current market price.
GLOBALIslamic securities servicesGLOBAL: HSBC Amanah and HSBC Securities Services have launched the HSBC Amanah Securities Services, a Shariah compliant global securities services for Islamic fund managers.
Innovation needed GLOBAL: Dr Mohd Daud Bakar, president and CEO of Amanie Business Solutions has called on the Islamic fi nance industry to
Another Sukuk soonTURKEY: Kuveyt Türk Participation Bank, a subsidiary of Kuwait Finance House, will issue a US$500 million benchmark Sukuk by year-end, following the success of the country’s fi rst Sukuk issuance, according to Mohammad Al-Omar, its chairman.
develop new asset classes, including Shariah compliant access to private equity, and real estate products that have the ability to invest in multiple global markets in one fund.
He also said the industry should roll-out investment fund platforms, improve on its Shariah screening methodologies, and develop innovative Sukuk structures.
US$6 billion Sukuk issuancesGLOBAL: Sukuk worth US$6 billion were issued last month, where 77% were issued by sovereign bodies, according to Baitak Research, a subsidiary of Kuwait Finance House.
MIDDLE EASTFirst net lossBAHRAIN: Unicorn Investment Bank has recorded an annual net loss for the fi rst time, of US$229.5 million for 2010, as compared to a profi t of US$2.2 million in 2009.
Total income reached US$2.3 million, down from US$96.5 million in 2009 due to the lack of fi nancial transactions, as a result of the kingdom’s challenging fi nancial environment.
Investment and other provisions hit US$53.9 million, while fair value write-downs reached US$118.6 million, due to a drop in the earnings multiples used for valuation within the private equity industry.
Full acquisitionUAE: The Investment Corporation of Dubai (ICD) has fully acquired National Bonds Corporation (NBC) following the purchase of a 50% stake in the Islamic savings scheme company.
The ICD has also appointed Khalifa Al Daboos NBC’s chairman and named Saif Sulaiman Mohamed Al Yarabi, Abdulla Saeed Majed Belyoahah, Ali Rashid Humaid Al Mazroei and Ghulam Moinuddin Malim as the company’s new board members.
Promoting growthUAE: Dubai SME has signed an MoU with the Dubai International Financial Centre (DIFC) to
promote small and medium sized enterprises (SMEs) in the UAE.
Abdul Basit Al Janahi, CEO of Dubai SME said the agreement will provide an incentive package for SMEs, give them access to the DIFC and develop partnerships for growth.
Needs legislationKUWAIT: Sukuk can play a major role in solving local companies’ debt crisis but the lack of legislation has hindered the issuance of the Islamic debt papers, said Abdulnaser Al Subaih, chairman of Liquidity Management House.
He said the absence of Sukuk laws in Kuwait also limits the options of companies who have held back from selling their debt and assets due to low prices or a lack of buyers.
However, he added that Kuwait has the suitable environment and fi nancial resources for Sukuk issuances and noted the government’s current efforts to introduce a law for Sukuk.
Financing for SMEsUAE: Emirates Islamic Bank is planning to offer fi nancing to small and medium sized enterprises (SMEs) in the next three months,
continued...
VISIT OUR WEBSITE: www.fleminggulf.com
Benefit from landmark case studies of leading regional projects on the challenges of funding and structuring projects in a dynamic environment
Understand the upcoming developments that will shape the regional Project Finance industry
Benchmark your financing strategies against projects par excellence from across the region
Discuss your ideas and concerns with industry thought leaders and experts from around the world
Evaluate the potential for alternative sources of finance, Public Private Partnerships & Islamic Finance
And much more…
Farouk Soussa, Citi Group Chief Economist, UAE
Dr. Said A. Al-Shaikh National Commercial Bank Chief Economist, KSA
Christophe Mariot, BNP Paribas Regional Head ECEP, Bahrain
Richard Palmer, Mubadala Development Company Advisor Structured Finance & Capital Markets
Bill Appleby, Citi Head of Infrastructure and Energy Finance, EMEA, UK
Frank Beckers, Deutsche Bank Managing Director, UAE
Ghazali Inam, Arab Bank Global Head Corporate Finance Bahrain
Ray Maurer, QNB Capital Managing Director, Qatar
Enrico Grino, QNB, Assistant General Manager, Head of Structured & Project Finance, Qatar
Peter Goodall, Crédit Agricole Corporate and Investment Bank Head of PF EMEA, France
Shamshad Akhtar, The World Bank, Regional Vice President Middle East and North Africa, US
Thomas C. Barrett, European Investment Bank, Director - New Products & Special Transactions Department Directorate for Lending Operations in Europe LuxembourgRajesh Ramanathan, APICORP Vice President – GCC Business Group Project & Trade Finance Department KSARajit Nanda ACWA Power Projects, CFO, UAEJames Finucane, Emirates Steel Project Manager, UAEJean-Marc Mangiavellano Natixis Dubai, Regional Head Project Finance, UAEDr. Manar M. Al-Moneef Saudi Arabian General Investment Authority, Director General Health Care & Life Sciences Sector, KSAAlexandra Boleslawski, Crédit Agricole Corporate and Investment Bank, Managing Director, Global Head of Power Structured Finance, FranceLaughlan Waterston SMBC Europe Limited, Head of Infrastructure & PPP, UKJean-Francois Croft, Export Development Canada, Chief Representative, Middle-East,UAEStefano Terranova, International Power Plc, Head of Project Finance Middle East and Africa
This event will be bring together the key decision makers stimulating the project finance market from the following verticals:Project sponsors and developers, Ministries & Regulatory Bodies, International and local financiers, Commercial & Investment Banks, Islamic Banks, Lawyers & Consultants, Asset & Fund Management Companies, Insurance Companies, Contractors & Project Management Company, Executives from Power generation & transmission, Oil & Gas, Transport, Desalination, Water supply and Waste water management, ECA & Multilateral agencies, Rating Agencies.
according to Faisal Aqil, general manager of retail banking.
Faisal added that the fi nancing products will include asset based fi nancing and working capital fi nance.
Optimistic growthUAE: Emirates NBD is expecting this year’s net profi t to increase 45.3% from AED3.4 billion (US$926 million) in 2010 when the bank’s results took a hit from major debt restructurings in the UAE, according to Rick Pudner, its CEO.
Pudner added that the bank will also step up its plans in Abu Dhabi and is considering securitizing additional parts of its retail fi nancing portfolio to raise medium-term funding this year.
Helping Indonesian banksUAE: Dubai based investment bank Arqaam Capital is open to helping Indonesian fi nanciers locate investors in the Gulf region after advising on the sale of a stake in Bank Kesawan to Qatar National Bank.
According to Tamer Nazih Makary, executive director of Arqaam, there is active interest from four to fi ve conventional banks and two to three Islamic banks in Indonesia which are looking to sell stakes to help raise money for growth.
He added that Arqaam will also look for buyers from Japan, South Korea and India as they are looking to invest in Indonesia.
Time to win acceptanceQATAR: Islamic fi nancing is struggling to win acceptance among borrowers in Qatar, due to the common sentiment that it is costlier than the conventional, according to Emad Mansour, CEO of Qatar First Investment Bank.
Emad said the higher cost was due to the limited number of Shariah fi nancing providers and it being a niche market.
Financing for mallKUWAIT: Kuwait International Bank has signed an agreement with Mabanee Company to provide a fi ve-year KWD25 million (US$90 million) fi nancing to fund the expansion of The Avenues Mall.
The expansion will cover an area of 100,000 meters square, offering more parking spaces.
Profi ts upUAE: National Bank of Abu Dhabi’s net profi t for 2010 increased by 22% to AED3.68 billion (US$1 billion).
Total assets climbed 7.4% to AED211.4 billion (US$57 billion), while deposits increased 6.5% to reach AED123.1 billion (US$33 billion).
Huge leap in profi tsKUWAIT: Kuwait International Bank’s net profi t increased 303% to KWD16.75 million (US$60 million) in 2010, as compared to a net loss of KWD8.2 million (US$30 million) in 2009, according to Sheikh Mohammed Jarrah Al-Sabah, its chairman.
Return on assets stood at 1.5%, while return on shareholder’s rights was 9% in 2010, as compared to a 5% loss in 2009.
continued...
Final deal soonUAE: Dubai World has secured 100% support from its creditors and will sign the fi nal agreement with them this week on its US$25 billion debt restructuring, said Sheikh Ahmed Saeed Al Maktoum, chairman of Dubai’s supreme fi scal committee and Dubai World.
Sheikh Ahmed added that Dubai World is not facing any pressure in selling its assets this year to pay off creditors, as it has a period of eight years to do so.
(See IFN Report on page 12)
Less impairment provisionsBAHRAIN: Ithmaar Bank posted a smaller net loss of US$150.1 million in 2010 compared to a net loss of US$247.4 million last year.
The bank, which reported its fi rst year results as an Islamic retail and commercial bank said full year impairment provisions fell to US$197.4 million last year from US$206.9 million in 2009.
Customer deposits reached KWD925 million (US$3.3 billion), while assets touched KWD1.14 billion (US$4.1 billion).
Debt refi nancingUAE: Investment Corporation of Dubai has requested banks to submit proposals on a new US$4 billion, fi ve-year refi nancing.
The fi nancing will be used to settle existing debt including a US$6 billion loan, split between US$3.75 billion conventional and US$2.25 billion Islamic.
The conventional creditors are Barclays Bank, Citigroup, HSBC, JP Morgan and The Royal Bank of Scotland, and the Islamic ones are Dubai Bank, Dubai Islamic Bank, Noor Islamic Bank and Standard Chartered Bank.
Payment facilities providerUAE: Al Fardan Exchange has signed an agreement with Abu Dhabi Islamic Bank to provide monthly payment facilities to the bank’s covered cardholders.
Under the deal, cardholders will be able to settle their payments at any of Al Fardan Exchange branches in the UAE.
Approval soughtQATAR: Masraf Al Rayan will seek shareholders’ approval to issue US$1 billion Islamic euro medium-term notes during its annual general meeting on the 28th March.
The Sukuk will be issued after obtaining the fi nancial authorities’ approval and the bank’s share capital is fully paid.
Encouraged to issue SukukUAE: Low yields are expected to encourage the Abu Dhabi government to issue sovereign Sukuk rather than conventional bonds, as it will be a cheaper alternative for them, according to Mark Watts, head of fi xed income at National Bank of Abu Dhabi.
Sukuk fundingSAUDI ARABIA: Bank AlJazira is planning to issue a riyal-denominated Sukuk to boost capital and fi nance expansion.
The bank did not reveal the size and date of the issuance, but said it will be issued based on the market situation and after meeting with investors in Jeddah, Riyadh and Dammam.
HSBC and JPMorgan Chase & Co are the arrangers for this Sukuk.
Sukuk in 2011UAE: First Gulf Bank is planning to issue a Sukuk this year, according to Andre Sayegh, its CEO.
Profi t slipsUAE: Dubai Islamic Bank posted a net profi t of AED806 million (US$219 million) in 2010, as compared to AED2.1 billion (US$572 million) in 2009.
Provisions stood at AED864 million (US$235 million). However, assets grew 7% to AED90.1 billion (US$25 billion).
Good progressKUWAIT: Al Ahli Bank of Kuwait’s net profi t increased by 36% to KWD53.2 million (US$191 million) in 2010.
Return on assets stood at 1.8%, while return on equity reached 13.3%.
Eyeing new territoryQATAR: Qatar Islamic Bank is planning to buy a 25% stake in Turkey based Bank Asya from six major shareholders.
continued...
Islamic Finance news is seeking experienced industry practitioners to come and join its growing team.
Do you have the ambition, drive and gall to join the world of media?
Editorial• Excellent written and spoken
English• Extensive experience in writing
and commenting on fi nancial markets / international business
• Ability to conduct senior level interviews
• A fl air for creative thinking and developing new ideas
• Excellent team management / staff motivational skills
• Powerful linguistic skills• Willingness to travel overseas• Th e ability to manage one’s time
effi ciently and to work under strict deadlines
Business Development• Excellent written and spoken
English• Dynamic, entrepreneurial, team
player - a ‘go-getter’• Ability to develop and manage
new projects• Th rive on achieving targets • Willing to travel extensively
Do you have what it takes? Would you like to work with a young, enthusiastic and very professional team?
If the answer is YES then submit your curriculum vitae to Andrew Morgan, Managing Director and Publisher at [email protected] or call on +603 2162 7801 now.
We’re Growing
Still restructuringUAE: Nakheel has confi rmed it is offering refunds to investors for its stalled Palm Jebel Ali development and buyers have been given the option of swapping their funds for available inventory or receiving a refund.
In January, Ali Rashid Lootah, chairman of Nakheel said the developer will issue a US$1.63 billion Sukuk in the fi rst quarter. Nakheel has to restructure debt worth US$10.9 billion after being hit by the Dubai real estate crash.
ASIAHigh growth for Takaful INDONESIA: Indonesia’s Takaful assets increased by 47.6% to IDR4.5 trillion (US$512 million) in 2010, while premiums for Takaful rose 35.7% to IDR3.2 trillion (US$361 million), according Isa Rachmatarwata, head of insurance bureau at the Indonesia Capital Market and Financial Institution Supervisory Agency.
Isa added Takaful made up 2% of the total IDR224.9 trillion (US$25 billion) insurance assets in the country.
Rights issue announcedSRI LANKA: Amana Takaful has announced a rights issue on a 1:1 basis at LKR1.50 (1.36 US cents) a share, subject to shareholders’ approval at the extraordinary general meeting scheduled for the 18th March 2011.
The rights issue will see Amana Takaful’s core capital rise to LKR1.25 billion (US$11.3 million), which will facilitate its expansion strategy and consolidate its position to meet changes in regulations on risk based capital and splitting of life and general business.
More choice nowMALAYSIA: The Labuan Financial Services Authority (Labuan FSA), the regulator of
Labuan International Business Financial Center (Labuan IBFC), has given the freedom to insurance and Takaful operators for dual management and operations offi ces across Malaysia.
The move is aimed at attracting more foreign insurance and Takaful fi rms to choose Labuan IBFC as their regional operations base. It is also an expansion of Labuan FSA’s initiative introduced in May 2009 to allow holding fi rms to establish their offi ces in Kuala Lumpur.
High sales targetINDONESIA: Takaful Indonesia is targeting IDR110 billion (US$12.5 million) in sales through the bancassurance system from its branches in the country, according to Ahmad Sehu Ibrahim, its vice president.
EUROPENew markets for NeovaTURKEY: Insurance fi rm Neova Sigorta, which also offers Takaful services, is planning to expand into Central Asia and Eastern Europe once it has strenghtened its position in Turkey, said Özgür Bülent Koç, its CEO.
Turkapital, an investment holding company established by Kuwait Finance House Group, holds 53% of Neova, while Kuveyt Türk Participation Bank owns 7%.
GLOBALSlow Takaful growth GLOBAL: Growth in Southeast Asia’s Takaful sector has not been as strong as expected with many consumers opting for regular policies, said Simon Machell, chief executive of Aviva (Asia).
He said the huge growth that Aviva expected a few years ago has not materialized.
Aviva sells Takaful in Malaysia, where it has a joint venture with CIMB Group, and in Indonesia, where it holds a 60% stake in Asuransi Winterthur Life Indonesia.
MIDDLE EASTProfi t slipsQATAR: Qatar General Insurance & Reinsurance Company posted a net profi t of QAR119.4 million (US$33 million) in 2010 compared to QAR136.2 million (US$37 million) in 2009.
Takaful gross written premiums increased to QAR78 million (US$21 million) compared with QAR54 million (US$14.7 million) in 2009, while total assets for general Takaful rose 49% to QAR105.7 million (US$29 million).
Entering its 6th year, the IFN 2011 Issuers & Investors Asia Forum, is recognized as the industry’s leading and largest annual event
Delegate numbers increase each year, as the industry develops and this event grows in stature. 1,811 attended in 2010 and we’re expecting an equally impressive audience in 2010
Each day will include Key Note presentations and round table discussions
Our unique format of almost entirely round table discussions ensure unbiased and educational debate
EYGPT: Standard & Poor’s Ratings Services (S&P) has affi rmed its ratings on Commercial International
Bank, National Bank of Egypt and National Société Générale Bank.
S&P has affi rmed its ‘BB/B’ long- and short-term counterparty credit ratings on Commercial International Bank and National Bank of Egypt.
The outlook on both banks is negative. The ratings on both banks were removed from CreditWatch, and placed with negative implications.
S&P has also affi rmed the unsolicited ‘BBpi’ (public information) rating on National Société Générale Bank.
The rating actions are based on all the banks’ strong fi nancial profi les.
ASIAGrade withdrawn
MALAYSIA: Malaysian Rating Corporation (MARC) has withdrawn the ‘MARC-1ID(bg’)/’AA-ID(bg)’ ratings assigned to Mulpha
International’s RM75 million (US$24.6 million) bank guaranteed Murabahah notes issuance facility, following the cancellation of the program.
With the cancellation, MARC’s rating coverage on Mulpha is now limited to RM25 million (US$8.2 million) Murabahah commercial papers/medium term notes facility, which carries the ratings of ‘MARC-1ID’/’AID’/stable.
MIDDLE EASTConcerns on sustainability
SYRIA: AM Best Europe has placed under review with negative implications the fi nancial strength ratings of ‘B’ (Fair) and issuer credit rating of “bb+” of Arab Union Reinsurance Company (AURe).
The ratings service said the action refl ects the impact of the Middle East’s recent political unrest on AURe’s operations and concerns regarding the sustainability of AURe’s business profi le.
The Libyan government also owns 50% of the company and has representation on its board which makes its viability uncertain, in addition to AURe’s exposure to Libya through its branch operations.
AM Best said the under review status would be resolved upon further clarity on the political situation and its impact on AURe.
Disappointing performanceBAHRAIN: Fitch Ratings has downgraded Arab Banking Corporation’s (ABC) long-term issuer default rating (IDR) to ‘BB’ from ‘BBB-’. The outlook is stable.
The move is based on the downgrade of Libya’s long-term IDR to ‘BB’ from ‘BBB’, as the Central Bank of Libya is ABC’s majority shareholder.
Temporary removalUAE: Fitch Ratings will withdraw the ratings of Dubai Electricity and Water Authority (DEWA) in the next two weeks, citing a lack of information for
the assesment of Dubai.
DEWA’s current ratings are long-term issuer default rating (IDR) at ‘BBB-’, short-term IDR at ‘F3’, senior unsecured rating at ‘BBB-’ and an AED3.2 billion (US$871 million) Sukuk rated at ‘BBB-’.
Poor showingIRAN: Capital Intelligence (CI) has affi rmed Bank Tejarat’s long-term and short-term foreign currency
ratings at ‘BB-’ and ‘B’ respectively with a stable outlook.
CI has also affi rmed the support rating at 3, due to government support, while the fi nancial strength rating of ‘B+’ is also affi rmed, based on poor asset quality, weak capital adequacy and diffi cult operating environment.
Mixed ratingsUAE: Standard & Poor’s Ratings Services has affi rmed and withdrawn ‘BBB-’/ ‘A-3’ long- and short-term counterparty credit ratings on Dubai Islamic
Bank. The outlook was negative.
The ratings and outlook are based on the economic environment in Dubai, which will continue to negatively affect the bank’s fi nancial profi le.
For more information, visit www.islamicfinancenews.com
SECURITIES AND EXCHANGE COMMISSION OF PAKISTANPAKISTAN: The government has appointed Mufti Munib ur Rehman as a member of the religious board for Islamic fi nancial institutions at the Securities and Exchange Commission of Pakistan.
BANK NEGARA MALAYSIAMALAYSIA: The government is expected to extend Dr Zeti Akhtar Aziz’s contract as governor of the central bank, Bank Negara Malaysia, following the expiry of her tenure on the 1st May.
HOGAN LOVELLSUK: Legal fi rm Hogan Lovells has appointed Robert Fugard and Simon Gwynne from Linklaters as partners for its asset fi nance
department in London, effective on the 1st
May.
Fugard is currently head of asset fi nance and co-head of transport and logistics sector. He focuses on aviation, shipping and Islamic fi nance.
Gwynne specializes in structured fi nancing involving aircraft, cable and telecoms equipment and rolling stock.
HSBC BANK MIDDLE EAST GLOBAL: HSBC Bank Middle East has appointed Abdulfattah Sharaf and Abdul Hakeem Mostafawi as board directors.
Presently Abdulfattah is the CEO of HSBC in the UAE, and Mostafawi is the HSBC CEO in Qatar.
ABU DHABI COMMERCIAL BANKUAE: Mufaddal Khumri, head of Islamic banking division at Abu Dhabi Commercial Bank is leaving on the 17th March to help National Bank of Ras Al-Khaimah establish an Islamic branch.
Register to secure your FREE seat now!
www.ifnroadshow.com
Free to attend, although all delegates will be screened before qualifying
Focusing on markets which are developing in the Islamic finance world
Particular focus on that market with international participation
Standard format ensuring everyone knows exactly what to expect from each event
Plenary sessions – no sales pitches
Short one-day events – senior individuals don’t have the time to attend lengthier events
Targeting between 125 and 250 for each event
Cooperation and participation from local regulators
Practitioner led, with some Shariah scholars providing the perfect mix
Conclusions will be delivered at the end of each event
Issuers and investors will be in attendance – not just the intermediaries
Bahrain’s Ithmaar Bank, which recently reported its fi rst full set of fi nancials as an Islamic retail and commercial bank, has improved its results but still faces challenging market conditions.
The bank completed its conversion into an Islamic bank from a conventional investment bank in April last year by fully integrating its Islamic subsidiary, Shamil Bank. The change was done to lower its risk profi le following losses from the Middle East real estate crisis. Ithmaar also appointed Mohammed Bucheerei as its new CEO to guide the bank’s transformation.
A year on, Ithmaar’s moves seem to be paying off. In 2010, it reduced its net loss to US$150.1 million from US$247.4 million in the previous year as net provisions for impairment decreased to US$197.4 million from US$206.9 million in 2009. In a statement accompanying its results, Prince Amr Mohammed Al Faisal, chairman of Ithmaar said a signifi cant portion of the impairment provisions were for its investment portfolios. The bank also posted a turnaround in net income to US$51.4 million in 2010 compared to a net loss of US$44 million a year earlier.
With signifi cant exposure to real estate losses in 2009, the bank has since set about repairing its balance sheet. Although it received a lukewarm response to its US$200 million rights issue in March last year, it did raise US$103 million and now has US$654 million in total equity. In 2009, it had seen 23% of its capital wiped out from 2008’s balance of US$924 million. Ithmaar also increased its total assets last year, to US$6.7 billion from US$6.1 billion in 2009.
Despite its improved fi nancial position, Ithmaar remains confronted with diffi cult credit and business conditions. However, Ithmaar is not alone. Other conventional and Islamic banks in Bahrain also had a tough time following the recent fi nancial crisis. Among them were Bahrain Islamic Bank, whose net loss widened to US$105.3 million in 2010 from US$51.5 million in 2009, while Al Salam Bank saw its net profi t halve to US$19.4 million over the same period. Al Salam also booked US$4 million in impairment provisions in 2010 compared to none in 2009.
In its latest report on the outlook for Bahrain’s banking system, Moody’s Investors Service (Moody’s) maintained its negative view of the sector due to continued weakness in Bahraini and regional real estate and its impact on the rest of the economy. Moody’s negative outlook for this sector assumes further deterioration in some aspects of Bahraini banks’ franchises and risk profi les. The rating agency’s primary focus will be on possible further increases in non-performing loans with banks’ signifi cant construction and real estate exposures being an area of particular concern.
In its 2011 outlook for the GCC and Middle East banks, Fitch Ratings (Fitch) also voiced its concern over Bahraini banks’ exposure to the real estate and construction sectors. It believes however overall non-performing loans have peaked and impairment charges are likely to remain stable or decline this year. Fitch reported that this would have a positive impact on banks’ profi tability.
In addition to the diffi cult business environment, Bahrain like some of its regional neighbors is experiencing unrest from protestors demand-ing political, social and economic reforms. Moody’s has placed Bah-rain’s sovereign ratings under review for possible downgrade, while Fitch and Standard & Poor’s Rating Services have both lowered its ratings on the country.
Turkey’s participation market
Turkey has stayed on the borderline of the mainstream Islamic capital market for some time. It entered the Sukuk market in August 2010 with Kuveyt Turk Participation Bank’s issuance of a three-year Sukuk worth US$100 million.
The Turkish Sukuk market is poised to develop, following the national assembly’s recent approval of the Finance Bill 2011 which contains tax neutrality measures for Sukuk Ijarah. The announcement was immediately followed by Kuwait Finance House’s plans to issue a US$500 million Sukuk by the year end via its Turkish unit.
Industry players have a positive outlook for the Sukuk market. Cenk Karacaoglu, vice president of fi nancial institutions at Bank Asya expects major Sukuk issuances probably before the end of 2011. In response to Islamic Finance news, Karacaoglu said he believes Sukuk structures based on Ijarah and Murabahah receivables would be popular in the Turkish capital markets.
Sovereign Sukuk, however, would depend on whether the current regime stays after elections in June this year. If they do, a sovereign Sukuk issuance may come as early as the end of 2011 or the fi rst quarter of next year, said Karacaoglu.
The Shariah compliant banking sector in Turkey accounted for 4% of total banking assets in 2010. The potential for growth is huge for the four existing participation banks in Turkey. According to Fahrettin Yahsi, chairman of the Participation Banks Association of Turkey, asset growth of the participation banks is expected to be approximately 55% in 2010.
This huge potential of participation banks is a major market for Sukuk. As Karacaoglu highlighted, the market for Sukuk exists mainly among participation banks and other local investors.
However, even with the huge potential, industry players are still taking a cautious approach as more clarifi cation on laws governing Sukuk are needed, especially on taxation measures in Turkey.
RAM has US$653 million of foreign issuer ratings in the pipeline
RAM Rating Services (RAM) could rate more than RM2 billion (US$653 million) worth of foreign bond issuances in Malaysia this year with most of the programs likely to be Sukuk, said Chong Kwee Siong, its deputy CEO.
Chong declined to give details of the debt papers to be rated but said historically each foreign issuance in Malaysia has an average size of at least RM1 billion (US$327 million).
However, he said the number of foreign issuances in Malaysia this year and whether they would be foreign-currency or ringgit-denominated, would depend on credit conditions.
RAM recently rated Gulf Investment Corporation’s RM3.5 billion (US$1.2 billion) Sukuk, giving it a long-term rating of ‘AAA’. The issuance was the fi rst by a GCC issuer in Malaysia.
Meanwhile, Chong said although it is not easy to project the value of local Sukuk issuances in Malaysia this year, the market is expected to make up at least 50% of corporate bond issuances, which RAM forecasts to be worth between RM55 billion (US$18 billion) and RM60 billion (US$19.6 billion).
“In the past, Sukuk issuances have also exceeded conventional issuances,” he added.
Chong said the growth of Malaysia’s Sukuk market is driven by government support via the Malaysia International Islamic Financial Centre and increasing global demand for Sukuk.
Malaysia’s Sukuk market has seen an increasing demand from foreign issuers, especially from the Middle East. Last year, in Malaysia the National Bank of Abu Dhabi issued a US$160 million Sukuk and Dubai has also proposed a sale of up to US$1.5 billion Sukuk this year.
Islamic fi nance in the US – A love-hate affair
Last week we saw two contrasting announcements from the US, summarizing the seesaw development and love-hate relationship between Islamic fi nance and the US legal system.
Recently, Atlanta based Shariah compliant fund manager MWM Ventures launched a technology fund to invest in early stage technology companies. In opposing news, the South Dakota state legislature said it is in the process of adopting several new bills that seek to limit the applicability of Shariah law by its courts in connection with valid fi nancial transactions.
The news from South Dakota has raised a few concerns and is a legal setback which comes at a time when experts had actually started building hope for the development of Islamic fi nance, following the Michigan ruling in January this year.
The Michigan District Court had dismissed a case fi led in March 2009 against the US government, alleging insurance group AIG’s Shariah compliant business promoted religious doctrine. Then last month, Kevin Parker, state senator from Brooklyn, introduced a bill to create an alternative Sukuk market in New York to attract a new class of international investors.
According to a legal expert in Washington, there is a marked difference between the US states on the matter of promoting Islamic fi nancial products. Former speaker of the House of Representatives, Newt Gingrich has been busy calling for a federal law to ensure Shariah laws and Islamic fi nance, are not recognized by any US court. The states of Oklahoma, Arizona and South Carolina have pursued bills to the same effect.
It is no wonder that the US market has stayed on the periphery of the global Islamic fi nance boom. With a Muslim population of 7 million people growing at 6% annually, fi nancial institutions in the country have been fl irting with the idea of Islamic fi nance, but this has not led to a major upswing in the industry. Although Muslims represent a small population segment, the high growth rate forms a lucrative, untapped segment in the US. Currently, there is a large gap between supply and demand of Islamic fi nancial products. Furthermore, the exploitation of the growth potential in the country has been stunted owing to these varying regulatory and legal challenges.
However, the very future of Islamic fi nance in the US is highly dependent on the development of its regulatory environment. As Kavilash Chawla, a US based senior Islamic fi nance expert and practitioner highlighted to Islamic Finance news, “The regulatory environment in the US needs to continue to progress and develop signifi cantly in order to become more conducive to Islamic fi nance.”
Despite this, Chawla feels that given the fallout of the global fi nancial crisis, and regulatory changes in the US, the current momentum towards creating an enabling regulatory environment in the US for Islamic fi nance is “minimal, at best”. He also added that for the sustained future of Islamic fi nance, the industry itself needs to develop a more robust value proposition and more dynamic products specifi c to US investors.
Dubai’s road to recovery
While Dubai may well be on the recovery path, with the UAE economy expected to post a growth of 3.6% in 2010, and claims from Dubai’s ruler, Sheikh Mohammed Rashid Al Maktoum that the emirate has recovered from the global economic crisis, caution still prevails.
Sheikh Ahmed Saeed Al Maktoum, chairman of Dubai’s supreme fi scal committee and Dubai World, conveyed positive news last week. He announced that Dubai World will sign the fi nal deal for its US$25 billion debt restructuring deal with its creditors this week. Dubai sent the world’s fi nancial industry reeling when the conglomerate announced in November 2009 that it sought a delay in repaying its debt, mainly linked to its property unit Nakheel.
Nakheel, the real estate arm of Dubai World, has also been battling with its fi nancial situation and last week announced the offer of refunds to investors for its stalled Palm Jebel Ali development project. The offer gives buyers the option of swapping their funds for available inventory or receiving a refund. The announcement follows plans for a US$1.63 billion Sukuk issuance by Nakheel in the fi rst quarter of 2011, as announced in January by its chairman, Ali Rashid Lootah.
The Sukuk is part of Nakheel’s own plans to restructure its US$10.5 billion debt. Under Nakheel’s restructuring plan, trade creditors were offered 40% what they owed in cash and the remaining 60% through a Sukuk with a 10% return. So far Nakheel has garnered an agreement from 95% of its creditors, the remaining 5% of whom are expected to agree by the end of March.
Meanwhile, Drydocks World (DDW), the ship repair unit of Dubai World in Singapore announced that it expects to fi nalize its restructuring of US$2.2 billion debt by the 30th April. Confusion recently arose over legal suits against DDW for non-payment of bills. Dubai World recently denied that it is being sued in Singapore, stating that it resolved payment issues with suppliers there in February.
With these recent developments, Dubai World and its subsidiaries are fi nally emerging out of the fi nancial turmoil. This rings positive for the emirate with bankers upbeat about the situation. Peter Sands, global group CEO of Standard Chartered Bank said economic prospects for Dubai and the UAE have improved signifi cantly.
The UK has been extensively covered in its leading role in Islamic fi nance in Europe, and to observe a different approach to implementing Islamic fi nancial services locally, the emerging pattern of Islamic fi nance in select continental European countries, France and Germany is valuable.
Both illustrate similarities to the British development of Islamic fi nance locally, and offer an insight into the emergence of Islamic fi nance in Europe in a unique local manner, quite different to the sector emergence in Britain. The core focus will be France which seems to follow a rather perplexing development pattern closely echoing its political and cultural specifi cities.
In this respect, it is interesting to note that in August 2010 France followed similar steps to the UK eight years ago. The UK abolished double stamp duty for Islamic mortgages in 2003. The state of Victoria, Australia did so seven years ago in 2004. France, through its recent set of fi scal instructions on Ijarah, Istisnah and Murabahah indicates that there are tangible steps to provide tax incentives, or at least no penalties, to transactions based on these Islamic contracts.
Based on the dynamics of the Islamic fi nance sector in the UK, plausible developmental stages for Europe indicate that the emergence of the sector in each country begins with the setting up of international non-European Islamic banks from Southeast Asia and the Middle East. Clearly this is not the chronological case in France or Germany.
But in the UK, this was closely followed by the development of Islamic windows or subsidiaries by conventional banks of UK origin in overseas markets, essentially in the Middle East and Southeast Asia, which sought to services to customers sensitive to Shariah compliant fi nance.
In Europe, these conventional fi nancial institutions, which include European conventional banks in addition to the pioneering British banks, are currently Islamic fi nance players in the fi nancial markets in London, and in the Islamic funds market in Luxembourg. The fi nal developmental stage of the emergence of Islamic fi nance as duly noted in the UK is the establishment of European fully fl edged Islamic fi nancial institutions, of local Islamic banks, a step which seems to be followed by Germany but not by France.
According to the British Financial Services Authority (FSA), there are records of Shariah compliant transactions in the London fi nancial market dating back to the 1980s. In the UK, Islamic retail banking offers date back to the 1990s through Middle Eastern and Southeast Asian banks. Conventional fi nancial institutions of British origin, including Citigroup, Barclays Bank, Standard Chartered Bank, HSBC and Lloyds TSB, have Islamic fi nancial products offered since the end of the 1980s.
Most remarkably in 2004, the FSA authorized the fi rst British fully fl edged retail Islamic bank, the Islamic Bank of Britain (IBB). This was closely followed by two fully fl edged Islamic investment banks, the European Islamic Investment Bank of Britain in 2006, and the Bank of London and the Middle East in 2007.
Germany is another European country where Islamic fi nance is maturing fast given the prevailing European context. In 2004, the fi rst EUR100 million (US$138.28 million) European Sukuk was issued by Saxony-Anhalt. Major German banks, such as Deutsche Bank, Dresdner Bank and West-LB, Commerzbank, offer Islamic fi nancial services through regional offi ces in the Middle East, Southeast Asia and London.
Since 2010, the German fi nancial authority, Bundesanstalt für Finanzdienstleistungaufsicht (BaFin), is allowing Kuveyt Türk Bank (KTB), to set up offi ce in Germany. KTB is opening in 2011 in Mannheim. The Meridio AG Bank set up the Global Islamic Meridio Multi Asset Fund, domiciled in Luxembourg. Various European monetary authorities have publicized welcoming Islamic fi nance locally.
Since the highly publicized 2007 address by France’s minister of the economy, Christine Lagarde, suggesting that France address and welcome the opportunities offered by Islamic fi nance — Kuwait Finance House, IBB and Qatar Islamic Bank have yet to hear back positively on their application to set up French regional offi ces since 2008.
Major French conventional banks like Société Générale, BNP Paribas and Crédit Agricole, offer Islamic fi nancial products outside of France. Lasting from 2008 to 2009 in Reunion Island, an Islamic fund was set up by Société Générale through its subsidiary Banque Française Commerciale Océan Indien.
In 2009, Crédit Agricole Asset Management (CAAM) set up CAAM Islamic in 2009, and its fi rst Islamic fund domiciled in Luxembourg, Amundi Islamic, was set up in August 2010 following the merger of Société Générale Asset Management and CAAM.
France’s August 2010 fi scal instructions for the Islamic commercial contracts Murabahah, Ijarah and Istisnah indicate a will for these to now be at par with other modes of fi nancing regarding tax issues.
In mid-2010, the BRED, a subsidiary of Banque Populaire et des Caisses d’Epargne (BPCE) offered a fi rst Islamic home fi nancing product underpinned by the Murabahah contract. One more fi scal instruction was issued, facilitating the issuance of Sukuk.
Additionally, key events organized by France to promote it as a key location for Islamic fi nance include a recent event at Dubai International Financial Centre, in Dubai in December 2010. The Paris Europlace event, ‘The Dubai-Paris Partnership: Facing a Multi-polar World’ featured key French private sector actors and institutional players, and sought to present Islamic fi nance opportunities in France to Middle Eastern investors. This indicates a clear will by France to reap the benefi ts of Islamic fi nance.
A recent development gives rise to numerous questions, namely as to how France is looking at developing Islamic fi nance. The Ministère du Logement (French ministry for housing), has authorized since January 2011 that clients have access to interest-free loans, closely equivalent to a Qard contract, for home fi nancing. This could possibly indicate that Islamic products in France have little chance to emerge at the
A Continental European ViewBy Bochra Kammarti and Anne-Sophie Gintzburger
retail banking level in the manner observed in the GCC and Malaysia (Musharakah Mutanaqisah, and such), and in particular for house fi nancing which was the area in which local Muslims were most vocal.
Following this move, it is reasonable to note that if Islamic fi nance emerges in France in a more tangible manner, the most likely area is through French conventional banks through interest free loans. They have Islamic fi nance expertise and experience developed through regional offi ces offering Islamic fi nancial services expertise in metropolitan France.
French conventional banks are all too aware of local cultural and political sensitivities and are in a position to successfully navigate within the context.
The most visible stumbling blocks to the development of Islamic fi nance in France are linked to a fear of Islam and to socio-cultural and political laicism. The law prohibiting wearing the burqa in France since September 2010 is a clear example of this.
It seems likely that in France, Islamic fi nance will be developed through conventional fi nancial institutions, and in a covert manner due to ‘image risk’, a risk local to France only, in associating their name to the word ‘Islamic’ on the French market. As doing so for these very banks is clearly not an issue outside the French market.
This indicates, just as the interest-free loan by the French ministry for housing, that it is likely that France will look at following the footsteps of Turkey in naming this mode of fi nancing ‘participative fi nance’, or the footsteps of Morocco which authorized Islamic products under the label of ‘ethical fi nance’.
France is probably not going to use the label ‘Islamic’ which would make local bankers, and potentially customers, cringe due to the
sensitive local context.
Islamic fi nance is today a reality for European markets. However, regional and sectarian inequalities subsist and are linked to the secular social and cultural European background, as well as a fear of Islam, and in particular of the term ‘Islam’.
Spain as well as Italy have both expressed interest for Islamic fi nance. It seems reasonable to express the view that Islamic fi nance is welcome in Europe as far as it is contained in the fi nancial market in order to reap petrodollars and that it remains discreet in doing so.
In fact, major European conventional banks offer Islamic fi nancial services overseas, in London and through Islamic funds in Luxembourg. This means that the private sector is not against the idea as long as ‘image risk’ remains minor.
The exceptional experience of the UK seems to be followed by other European countries. That could indicate that despite challenges, Islamic fi nance will develop in a way that leads to a parallel development of both conventional and Islamic markets in Europe, and in particular in the Anglo Saxon part of Europe, as has happened in parts of Southeast Asia and the GCC.
Anne-Sophie GintzburgerEmail: [email protected] is a doctoral candidate at the ENS (Ecole Nationale Supérieure).
Bochra KammartiEmail: [email protected] Kammarti is a doctoral candidate at the EHESS (Ecole des hautes études en sciences socials) and the ENS.
Luxembourg is now recognized as one of the leading European centers for Islamic fi nance. The country ranks fi rst in Europe as a domicile for Shariah compliant investment funds, with 40 in all, and its stock exchange is a European leader in Sukuk listings, totaling 16.
How has Luxembourg gone about positioning itself in Islamic fi nance? What are the main activities that have emerged here?
PioneersIslamic fi nance fi rst appeared in Luxembourg in 1978 with the arrival of Islamic Banking System International Holding, the fi rst Islamic fi nance institution in a western country.
Five years later, the fi rst Shariah compliant insurance company in Europe was established in Luxembourg, and in 2002 Luxembourg was the fi rst European stock exchange to list a Sukuk. But while these fi rst Islamic fi nance activities date back three decades, the pace has picked up sharply in the past few years, refl ecting the commitment of both the authorities and stakeholders in the fi nancial sector to developing these activities in Luxembourg.
The turning pointIn 2008, the government set up a task force to identify obstacles to the development of Islamic fi nance and suggest ways to promote its growth. This led to the research into assets eligible for Shariah compliant UCITS funds, the development of best practice guidelines for fi nancial services in this area and a review of the tax treatment of Shariah compliant vehicles, all conducted by a dedicated working group within Association of the Luxembourg Fund Industry (ALFI), the representative body of the fund industry.
The working group reported back favorably, noting that Luxembourg was able to offer a range of vehicles addressing the specifi c needs of both investors and promoters interested in Shariah compliant investment with a limited need for specifi c additional legislation. A number of initiatives followed:
1.Tax circularsLuxembourg tax law is based on an economic approach that can accommodate Islamic investments well. In January 2010, the Luxembourg tax administration published Circular LG-A no 55 on Islamic fi nance, addressing the Luxembourg tax treatment of Murabahah contracts and Sukuk transactions. In June 2010, a circular followed on the tax treatment of Murabahah and Ijarah contracts.
2. EducationA workforce with specialized skills is needed to attract Islamic fi nance business, and over the past two years both the Institut de Formation Bancaire Luxembourg (IFBL) — the banking industry’s training arm — and the Luxembourg School of Finance have launched training programs in this area. Private sector institutions have also introduced training initiatives.
3. Communication Having an adequate regulatory framework for Islamic fi nance business is one thing; but people must know about it. Representative bodies in the fi nancial sector — among them ALFI and Luxembourg for Finance
— have thus increased their presence in key countries by taking part in major industry events and organizing regular trade missions.
Last month, a mission led by the Crown Prince of Luxembourg and the minister of fi nance visited Abu Dhabi, Riyadh and Beirut. This autumn, a mission will travel to Kuala Lumpur.
The role of the central bankThe Central Bank of Luxembourg (BCL) has also become very active in Islamic fi nance. In 2009, it was the fi rst central bank in the European Union to join the IFSB (Islamic Financial Services Board), and in October 2010, it was a founding member of the IILM (International Islamic Liquidity Management Corporation).
Set up with 10 other central banks and two multilateral organizations, the IILM’s aim is to enhance the liquidity management of Islamic fi nance institutions and foster cross border investment fl ows. BCL is the only European central bank to have joined the initiative, and BCL’s governor Yves Mersch was appointed deputy chairperson for the fi rst year.
This year, the IFSB is organizing its 8th Summit from the 10th May until 13th May 2011 in Luxembourg, hosted by BCL.
These are just some of the initiatives the authorities have taken to strengthen Luxembourg’s position in the fi eld of Islamic fi nance. The private sector is also active, and most fi nancial industry stakeholders (auditors, law fi rms and custodian banks) have now set up dedicated Islamic fi nance teams.
Two activities that have emerged in this area are the listing of Sukuk and Shariah compliant investment funds.
Sukuk and Shariah compliant funds In 2002, the Luxembourg Stock Exchange was the fi rst in Europe to enter the Sukuk market. Sixteen have now been listed, with issuers from Malaysia, Pakistan, Saudi Arabia, the UAE and other countries.
Shariah compliant investment funds is another growth area and a natural development given Luxembourg’s strengths in conventional investment funds — over the past 20 years, the Grand Duchy has become Europe’s most popular domicile for UCITS funds and the leading centre for global fund distribution.
UCITS (Undertakings for Collective Investment in Transferable Securities) are funds introduced in 1985 through a European directive. Originally a retail product, they are now widely sold to the public as well as corporate and institutional investors. While domiciled in one European country, a Europe “distribution passport” makes it easy to sell them to investors from all other EU countries.
Over the years, UCITS has become a strong global brand and funds are now well accepted in many non-European jurisdictions. Luxembourg domiciled investment structures are distributed in more than 65 countries around the globe, with a particular focus on Europe, Asia, Latin America and the Middle East.
The Development of Islamic Finance in LuxembourgBy Pierre Oberlé
The Development of Islamic Finance in Luxembourg (continued)
A number of Shariah compliant funds have adopted the UCITS structure, which is well suited to the principles underlying Islamic fi nance: since UCITS funds are primarily for retail investors, the main concern is safety, and funds have rigorous investment policies that accommodate the prohibition of gharar (uncertainty).
UCITS funds are especially well adapted to Shariah compliant fund pro-moters looking to target retail or institutional investors around the world.
In parallel, Luxembourg has developed a strong track record in alternative investment products and bespoke investment structures such as hedge funds and funds of hedge funds, private equity vehicles and real estate funds. These can be set up under a variety of legal forms and are subject to rules set out in Part II of the 2002 Law on undertakings for collective investment and in the Law of the 13th February 2007 relating to specialized investment funds (SIF).
The introduction of SIFs three years ago paved the way for a new generation of alternative investment funds targeting an international, qualifi ed investor base. More than 1,000 SIF funds have already been launched since this option was created.
Such strong growth confi rms that the SIF framework is well adapted to the needs of sophisticated investors seeking closer supervision combined with fl exibility in terms of structure, investment policies and techniques. This structure is often used for Shariah compliant real estate and private equity funds.
While the choice of regime will depend upon the investment strategy
selected and the investor base targeted, most Shariah compliant funds launched in Luxembourg are structured either as UCITS or as SIF.
The list of fund promoters that have launched Shariah compliant vehicles in Luxembourg shows that big international names in conventional investment funds were quick to climb aboard. In most cases, they already had a traditional range domiciled in Luxembourg and simply added on a Shariah compliant fund.
More recently, smaller players from the Middle East have also started to set up funds in Luxembourg. They usually already operate funds in their home countries for domestic investors, but have diffi culties selling these in other countries. For them, Luxembourg’s international reach has defi nite appeal. This is a new trend, but is set to intensify in the coming months with a number of projects now in the pipeline.
In conclusion, Islamic fi nance in Luxembourg is still in its early days. But with a regulatory and tax framework in place and a strong commitment from both the authorities and the private sector to develop these activities, there will certainly be more developments in the near future.
Pierre OberléBusiness development managerAssociation of the Luxembourg Fund Industry (ALFI)Email: [email protected] Oberlé takes care of Islamic fi nance at ALFI and is the coordina-tor of the ALFI Islamic fi nance working group. He contributes to the development of Luxembourg as a place for Shariah compliant funds.
v v kR x v v w kG k ow yo y
o ow ox v o o www w oR x v o o yo o y
x 50 online issues
Guides & Supplements
xxThe tectonic plates have shifted, albeit metaphorically. Nations in the Middle East and North Africa are caught up in a whirlwind of revolution moving across the region, and the world waits to witness the full impact of the political crisis. If the domino theory has its way, the global economy will bear the brunt of this catastrophe even before it has completely healed from the wounds of the
However distasteful, this might be a good moment to pay heed to the adage that behind every crisis lies great opportunity. At least that is how NBD-Abu Dhabi Islamic Bank (Egypt) chooses to look at things in its report. The bank asserts that the best time
in post revolution Egypt, particularly in the light of the political will that comes with a new regime.
Not far from the political unrest lies Syria which has made incremental steps to
However, there are many opportunities for improvement in Syria as put forward in a report by The Scandinavia University, including injecting new blood into Islamic
While not immune to the recent political protests, both Yemen and Oman stand in good
are concerned. Although the development
Yemen has been a governmental priority for a while, the country now needs an Islamic
says a report by Tadhamon International
Islamic Bank. And in Oman, while not explicit in its laws for facilitating Islamic banking
of law precludes the need for separate
BankMuscat’s report.
Ever intertwined with the fate of the Middle East economies is the US, where opportunities for Shariah syndicated
institutions expand their knowledge and
opportunities to originate and participate in
One strategic approach which may help the US market is to concentrate on the high net worth individual market as suggested by ADCB Meethaq. Their report proposes that the HNW market be given top priority, so focus is kept on best of breed Islamic banking offerings. This will in turn ensure that quality service is the key strategy for growth.
In our IFN reports, Uganda, Nigeria and Ethiopia are steadily harnessing the potential
Sukuk are detailed; Korea is on the verge of a make or break decision on allowing Islamic
much touted megabank is considered.
In Meet the Head, we feature Najmul Hassan, CEO of Gulf African Bank, one of the banks poised to enter the Ugandan market this year, and Senai Desaru Expressway’s Islamic
ruo ni deliated si seton mret muidemTermsheet.
Vol 8 Issue 7 23rd February 2011
T h e W o r l d ’ s G l o b a l I s l a m i c F i n a n c e N e w s P r o v i d e r
A growing number of banks are embracing the potential of Shariah compliant insurance (Takaful) by establishing partnerships with Islamic insurance companies. Indeed, Takaful has gained momentum in the MENA region and Southeast Asia. Furthermore, there is a potential for an accelerated expansion of Takaful products and services in a number of secular or Muslim minority countries.
The industry has witnessed a gradual development of the distribution of Islamic insurance via the bank channel (bancatakaful). Sales of Takaful products through this channel have multiplied between insurers and banks, enhanced by the commitment of many countries to issue guidelines to allow for banks to transact bancassurance/bancatakaful business.
Legislation is also often adapted as regards to cross ownership of banks and insurance companies as well as holding company structures. The share of this distribution channel as a proportion of the total has strongly increased to almost double in the last few years like in Indonesia (doubled between 2005 and 2008) until reaching in some countries like Malaysia more than half of the market share or in Tunisia where “the regulator reported in 2009 that 40% of life insurance sales were produced by this method” and in Morocco where “more than 60% of new life and capitalization business is sold by bancassurance”.
This competitive distribution channel has had a considerable impact in the life insurance market as it enables easier access for the consumer to such life cycle products. It also represents a win-win model for banks and insurance companies: banks have access to customized protection and savings products, sales training by experienced professionals and it allows them to widen their range of products and services for the relevant consumer segments, hence contributing to an increase in their fee based income.
On the other hand, insurance providers benefi t from the reputation of well established banks thus gaining a wider visibility. Mirroring this increasing trend in the Takaful insurance segment is the successful partnerships and joint ventures established between global insurance brands and major banks such as HSBC and Allianz Takaful, Standard Chartered Bank and Prudential, Maybank and Etiqa, CIMB and Aviva.
The Islamic insurance industry is estimated to be growing at an annual rate of 20% compared with a growth rate of below 10% for conventional insurance. Nevertheless, the Ernst & Young Takaful report of 2010 revealed that global contributions grew by 29% in 2008, reaching US$5.3 billion.
The same report projected the growth of Takaful by end 2010 to US$8.9 billion and current unoffi cial fi gures note that the 2010 contributions exceeded the forecast. The alternative insurance model seems thus benefi ting of an increasing interest from mass affl uent and retail consumer segments globally.
In secular countries, however, the adoption of Takaful has been a much slower burn. Even if we have recently seen a number of encouraging
initiatives in Europe (namely the UK, France, Luxembourg and Germany), such as an increasing number of events on Islamic fi nance organized in European countries as well as several governments launching working groups focused on Shariah compliant fi nance and amending the legal framework to comply with Shariah principles; there remains a certain hesitancy to further develop and promote this alternative insurance industry.
The reasons explaining this hesitancy may range from conventional regulatory regimes to a lack of local Shariah compliant investment opportunities, a shortage of Shariah scholars, a dearth of staff with adequate knowledge and practical experience of Takaful and limited number of suitable distribution outlets.
Within the Eurozone, attention has focused on the opportunities for Islamic fi nancial services and a country that has shown its willingness to integrate Shariah compliant fi nance into its wide array of expertise. Luxembourg is indeed very well positioned to develop this industry within Europe and beyond.
The Grand Duchy is a vibrant market in retail investment funds, hedge funds, real estate companies, private equity and venture capital vehicles as well as structured products. Luxembourg investment vehicles are appealing for many institutional investors including sovereign wealth funds.
The specifi c legal framework of the country enabled the creation of regulated investment vehicles such as venture capital investment company (SICAR), Specialized Investment Fund (SIF) and family wealth management company (SPF). These legal structures are tailor made for institutional and high net worth investors.
Due to the European passport, Luxembourg has been able to position itself as the world hub for global distribution of retail funds with 75% of all cross border funds being domiciled in Luxembourg. Practically, Luxembourg domiciled investment funds compliant with the UCITS directive can be easily marketed across EU and are widely accepted around the world.
Furthermore, Luxembourg is already familiar with Islamic fi nance. Currently 38 Shariah compliant funds are domiciled in the country and a new tax circular is now covering the tax treatment of the Murabahah contracts and Sukuk transaction. Indeed, the Luxembourg Stock Exchange was the fi rst European stock exchange to enter the Islamic bonds market. The country started listing Sukuk in 2002 and now has some 16 Islamic bonds with a global value estimated at EUR5.5 billion (US$7.6 billion).
Additionally, the Banque Centrale du Luxembourg is the fi rst non-Islamic entity to become a member of the Malaysian based Islamic Financial Services Board and the government takes part in ALFI’s Working Group for Islamic Finance.
Besides the offering of Sukuk, the Grand Duchy’s fi nancial place is a
International Bancatakaful Opportunities: Luxembourg Perspective
leading cross border provider of insurance; offering the necessary infrastructure and service platform to welcome Takaful operators or to enable conventional insurers to sell Takaful to their customers via Islamic windows or subsidiaries. Luxembourg’s insurance market counts 97 insurance companies and represented EUR12 billion (US$16.7 billion) premiums in 2008. Eighty nine percent of the life sector’s activities were generated by cross border sales.
The country attracts indeed many international insurance brands and most of them offer Takaful products in targeted markets such as Malaysia and the GCC. A major favorable factor for Takaful to fl ourish in Luxembourg is the unit-linked life insurance.
Shariah compliant insurance products are similar to unit-linked products: Takaful allows customers to combine protection cover with return on Shariah compliant investments, notably in unit-linked policies tied to dedicated funds, an instrument that is increasingly used in wealth management. The specifi city of those investments is the ethical aspect.
Takaful companies cannot invest in funds from the alcohol industry as well as tobacco, weapons and gambling. This ethical and alternative system is close to the socially responsible investment, thus it appeals to both Muslim as well as non-Muslim customers. Shariah compliant funds thus seem to have emerged as a viable alternative to the conventional range of investments.
In addition, Luxembourg is contributing to the globalization of Islamic insurance thanks to its fl exible legislation, political and social stability, fi nancial competencies and its international platform as well as multicultural environment.
Luxembourg is the second largest investment fund centre in the world after the US, with almost approximately EUR2 trillion (US$2.7 trillion) of assets under management (AUM) in Luxembourg incorporated funds in 2010. This privileged position enabled the country to emerge as a leading center for the fast growing Shariah compliant investment market segment as well as a leading distribution center for Europe and the US.
Moreover, the investment funds industry can offer access to many distribution channels to permit Islamic investment funds to expand cross border into Europe, MENA and Asia. Funds supermarkets thus play an important role to enhance distribution as they are adequate infrastructures for the global connectivity in Islamic fi nance and as they reduce the high information search costs. In Luxembourg, there are three categories of funds platforms:
1. Luxembourg Financial Group’s platforms including Luxembourg Alternatives UCITS Platform – LAUP – and Luxembourg Financial Group InvAG TGV; 2. Bank’s platforms such as Deutsche Bank’s Luxembourg based
funds platform Al Miyar; 3. Asset managers’ platforms such as Internaxx Fund
Supermarket.
Globalization of Takaful as a viable alternative to conventional insurance is clearly on its way with the foundations being laid in Asia, Africa, Europe and North America for further growth in the market. Benefi ting from the competitive distribution edge of the bancatakaful
channel and cross border access to Shariah compliant investments; this industry is poised for growth.
Sohail JafferPartner, head of international business developmentFWU InternationalE-mail: [email protected] Jaffer is a partner and head of international business development for “white label” bancassurance and investment services within the FWU Group. Jaffer has successfully originated, negotiated and won several major bank distribution deals in the GCC region, Pakistan and Malaysia. He has written extensively on alternative investments and has edited several publications on hedge funds, multi-manager strategies as well as six books in the Islamic fi nance range including retail banking, asset management, Takaful, wealth management, investment banking and Sukuk.
International Bancatakaful Opportunities: Luxembourg Perspective (continued)
Opportunity…or Threat?
“By far the most signifi cant event of fi nance during the past decade…”
OR
“Financial weapons of mass destruction”
How do Islamic Finance and the Development of Derivative Instruments Fit Together?
What are the Key Shariah Issues?
Answers here:
Islamic Treasury Management & Derivatives22nd – 24th May, DUBAI
In Islam, money is not a commodity and cannot be traded for profi ts. It is just a medium of exchange and it stores value. Money therefore must be invested in projects and ventures for the generation of activities for the benefi t of mankind and in the process, for profi t.
This is precisely why Islamic fi nance praises and encourages the appli-cation of fi nance in the fi nancing of real economic activities. The returns should be earned by active involvement and participation in the busi-ness risks of investment and not the returns on lending or fi nancing.
Islamic banks would apply the same criteria in evaluating projects to invest in, namely the entrepreneur’s ability and the profi t potential of the project. This is the reason why Murabahah (cost plus fi nancing) as an Islamic transaction is considered less risky compared to Mudarabah (profi t sharing) and Musharakah (partnership). A true form of Islamic fi nancing or investment structure should have that element of sharing of profi t and loss.
Common Shariah based structures for Islamic private equity/venture capital
1. Mudarabah (profi t sharing)Mudarabah is one of the typical forms of Islamic private equity/venture capital (Islamic PE/VC). It is basically a contract made between two parties to fi nance a business venture. The parties are a Rab al maal (investor) who solely provides the capital and Mudarib (entrepreneur) who solely manages the project.
This is akin to a conventional PE/VC, where there exists a relationship between the capital provider and the entrepreneur. If the venture is profi table, the profi t will be distributed based on a pre-agreed ratio. In the event of a business loss, it should be borne solely by the capital provider, to the extent of the capital contribution while the entrepreneur will lose his time and effort.
The key to a Mudarabah structure is the fact that the entrepreneur cannot be placed at risk to bear losses, unless proven negligent.
2. MusharakahMusharakah is a partnership between two parties or more to fi nance a business venture whereby all parties contribute capital either in the form of cash or in kind. Profi ts are shared at a pre-agreed ratio while in the event of a loss, the loss shall be shared on the basis of capital contribution.
3. WakalahWakalah is basically a contract where a party (principal) authorizes the other party or parties (agent) to act on his behalf, based on the agreed terms and conditions. Pursuant to the Wakalah contract, it confers the
power and rights to the agent to act on behalf of the principal as long as the principal is alive.
Fundamental requirements for an Islamic PE/VC fundThere are two fundamental requirements for the establishment of an Islamic PE/VC fund, namely:
1. The appointment of a Shariah advisor to provide continuous guidance in ensuring that the investment contract and the instrument structure are in compliance with the Shariah at all times; and
2. The core activities of the investee companies must be Shariah
compliant. Effectively, this means that the underlying assets and investments of the fund must be permissible.
Non permitted Shariah activities include: (i) fi nancial services based on interest (riba); (ii) gaming/gambling (maysir); (iii) conventional insurance; (iv) manufacture or sale of non-halal products or related
products; (v) entertainment activities that are non-permissible according
to Shariah; (vi) manufacture of sale of tobacco based products or related
products; (vii) stockbroking or share trading in Shariah non-compliant
securities; and (viii) hotels and resorts with non-Shariah compliant activities.
Best practicesThere are some best practices which are highly encouraged to be adopted by Islamic PE/VC fund companies, inter alia:
1. The Shariah advisor shall act with due care, skill and diligence:(a) to ensure that all aspects of the Islamic venture capital such
as portfolio management, trade practices and operational matters comply with Shariah;
(b) to provide Shariah expertise and guidance on matters relating to documentation, structuring and investment principles;
(c) to review and scrutinize compliance report prepared by Shariah compliance offi cer or any investment transaction report; and
(d) to provide a written opinion and periodic report. 2. Annual written disclosure and declaration The Shariah advisor is expected, on an annual basis, to disclose and declare to the board of directors of the Islamic PE/VC fund company that the Islamic PE/VC fund company is managed according to Shariah principles.
3. Portfolio managementThe Shariah advisor is also expected to endorse any investment decision and to ensure that the activities of the investee companies remain Shariah compliant right to the point of full divestment.
Source: Guidelines and best practices on Islamic venture capital issued by the Securities Commission of Malaysia.
Islamic Private Equity and Venture CapitalBy Ahmad Lutfi Abdull Mutalip
“A true form of Islamic fi nancing or investment structure should have that element of sharing of profi t and loss”
Islamic Private Equity and Venture Capital (continued)
Specifi c considerations in Islamic VC/PE fund companies1. Structure The documentation, fi nancing and investment structure must
be Shariah compliant in that:(a) funds belonging to the Islamic PE/VC fund company must
be invested in a structure which is Shariah compliant. Activities of the Islamic PE/VC fund company are based on tangible assets and are not speculative in nature (gharar).
(b) the constitution of the Islamic PE/VC fund company stipulates a prohibition on non-Shariah compliant activities.
(c) the activities of the directors and offi cers of the Islamic PE/VC fund company must be acceptable in nature and that their activities are conducted in a Shariah compliant manner.
2. Underlying Assets The underlying assets and investments of the fund must be
Shariah compliant. The Islamic PE/VC fund company funds must not invest in non-Shariah compliant counters or securities. The assets must also be of good quality and the risk and reward associated with such investment have been fully appraised.
3. Islamic VC/PE fund documentation Legal documentation for the setting up of an Islamic PE/VC
fund company and fund management company shall take into account the earlier points, inter alia, the appointment and powers of the Shariah advisor, the provision stipulating that the fund be invested in line with criteria as specifi ed by the Shariah advisor, the provision specifying that the fund can only enter into transactions which are in compliance with Shariah principles and the provision for continuous audit to determine whether the assets are Shariah compliant.
4. Profi ts of fund There must be an express provision and understanding
between the parties involved that any profi t of the Islamic PE/
VC fund company shall be based on returns from investment of the fund, with no guaranteed profi t return and there should also be a provision for reinvestment of profi ts into the Islamic PE/VC fund company.
Challenges faced by Islamic PE and VCAs the market and market players are more familiar with the banking industry, plus the fact that typical Islamic fi nancing transactions lead to the creation of indebtedness (for instance sale and purchase, sale and lease back) compared to Islamic PE/VC the basis is profi t and loss sharing and the sharing of risks, emphasis has been given towards the banking industry.
Until the market and market players are familiar with and are willing to venture into risk sharing, Islamic PE/VC will only be applicable to certain target groups like start up companies.
The establishment of legal and regulatory framework, or the appropriate guidelines to regulate the Islamic PE/VC industry are equally important to enable the industry to gain momentum in a particular jurisdiction and lend certainty on issues arising out of Musharakah, Mudarabah or Wakalah contracts.
The governments also need to play their role in supporting and backing the Islamic PE/VC industry in terms of incentives, tax exemptions, and such, to enable the industry to make way into the mainstream economy.
The creation of appropriate business structure or investment structure to make the Islamic PE/VC products better understood and accepted by market players is another important criterion to enable the rapid growth of the industry.
Shortage of well trained and high caliber individuals, advisors and management teams with expertise in investment strategies, legal documentation and who at the same time understand and appreciate the Shariah requirements are also real challenges to the Islamic PE/VC industry.
Another challenge worth noting is for market players in the Islamic PE/VC industry to innovate and develop new investment structures given the changing investment climate and circumstances without compromising the requirement of the Shariah.
Ahmad Lutfi Abdull MutalipPartner, global fi nancial services and Islamic bankingAzmi & AssociatesEmail: [email protected] Lutfi Abdull Mutalip’s expertise ranges from Islamic banking and Islamic private debt securities, Islamic product development, mergers and acquisitions to Islamic venture capital and private equity.
“The creation of appropriate business structure or investment structure to make the Islamic PE/VC products better understood and accepted by market players is another important criterion to enable the rapid growth of the industry”
A comprehensive defi nition of Islamic banking and fi nance described by the State Bank of Pakistan goes as follows: “Islamic banking has been defi ned as banking in consonance with the ethos and value system of Islam and governed, in addition to the conventional good governance and risk management rules, by the principles laid down by Islamic Shariah.”
Islamic fi nance in more general terms is expected not to only avoid interest based transactions, but to also avoid unethical practices, and to participate actively in achieving the goals and objectives of an Islamic society.
The emergence in IndonesiaWith the regulation Act No 7/1992 elaborated in government decree No 72/1992 concerning bank applying share base principle, the Indonesian government has implicitly permitted Shariah banking operation. The Act No 10/1998 was then issued as an amendment.
Bank Muamalat was established in 1999 as the country’s fi rst Islamic bank. The industry grew by 85% in 2004 which triggered many conventional banks to open a Shariah window.
An overviewIndonesia is considered as the largest Muslim country in the world; 85% of its 240 million population is Muslim. This fact poses great opportunity for massive growth. In the past fi ve years, Indonesia experienced an encouraging average annual growth of 60% for the industry. In 2005, Indonesian Shariah banking recorded a profi t of US$23.8 million; a 47% increase from the previous year.
Through its central bank; Bank Indonesia (BI), the Indonesian government has initiated efforts to stimulate further growth. Various support schemes have commenced, legal support and law enforcement proposed and implemented, and policies issued. Flexibility in various commercial regulations and business conditions has been offered to foreign investors on stimulating the industry’s growth. However, despite various encouragement and offi cial support, the country’s Shariah banking industry remains in its infancy.
Although the industry’s outlook is promising in general, the accomplish-ments of the Indonesian Shariah banking industry still trails behind its neighbor Malaysia. In 2005, Malaysia recorded US$272 million in profi t, and by the end of 2006, Malaysia seized a 12% market share of its total national banking assets. By the end of 2006, Indonesia only seized a 1.4% market share of its total national banking assets. Furthermore, the industry showed rather slow growth by the end of 2009, seizing only 2.8% market share of its total national banking assets.
From the retail side, in 2009, the total number of nationwide Shariah banking accounts in Indonesia totals only 4.5 million. To compare, the total number of nationwide conventional banking accounts is estimated to be 100 million. This shows Shariah banking accounts hold a humble market share of less than 5%.
Shariah banking developmentThe Shariah banking industry in Indonesia has recorded an encouraging growth rate since its fi rst introduction in 1993. According
to BI, total Islamic banking assets grew by 35 times; from IDR1.79 trillion (US$204 million) in 2000 to IDR66.089 trillion (US$7.5 billion) at the end of 2009.
BI also reported that, in the past eight years, the industry’s average annual growth has been recorded at a rate of 53.32%. Between periods of 2008-2009, the industry’s assets grew by an average rate of 33.4% per year. This is well above a growth rate of 15% — 20% per year achieved by the Southeast Asian region’s Shariah banking industry within the same period.
Furthermore, in 2008 to 2009 there was a positive indication in the growth of the Shariah banking industry’s fi nancing provision; average annual growth of 22.8% was recorded. In its funds mobilization from public side, 37.7% average annual growth was achieved.
Over the past fi ve years, fi nancing to deposit ratio (FDR) of the industry reached 90%, implying that the industry has been actively supporting the real sector’s growth. From the profi tability side, Shariah banking recorded a high growth rate between the periods of 2008-2009 with its return on equity of 25.22% per year.
The Indonesian Shariah banking industry has experienced an aggressive expansion process, nationwide. Its total network has reached 1,140 offi ces and 1,802 Shariah services are now made available in 32 provinces. The operation is supported by a wider network of ‘joint ATM’ stands and various sophisticated technology which enables internet and banking mobile features.
ChallengesDespite the encouraging growth fi gures in the early years of Shariah banking in Indonesia, the industry is facing challenges which might have slowed down this growth.
According to BI, total assets of Shariah banks as of January 2010 were only around 2% of the total nationwide bank assets of IDR2.502 trillion (US$275.2 billion). BI claims that the industry seems to be struggling on meeting its target of growth, which is 5% share of the total assets.
Investors previously predicted a potential explosive growth in Indonesia based on the fact of a vast untapped banking potential and a large Muslims population. It was then expected that Southeast Asia’s largest economy would soon be the next huge growth market for the US$1 trillion industry.
Apparently, investors would have to be satisfi ed to settle with a slower rate of gains. This slow growth is assumed to be the result of the implementation of several unwelcoming laws and regulations by the government, also a lack of clear industry standards, for example, no proper guidelines on Islamic securities for instance.
The combined elements of a general upbeat economic outlook, high domestic interest rate, and the country’s fi rming currency have also appealed many foreign investors to the country’s assets. Unfortunately, Indonesia is facing disappointments in the case of Sukuk. Several Sukuk sales and government issuances have shown
The Islamic Finance Industry in IndonesiaBy Rizqullah
The Islamic Finance Industry in Indonesia (continued)
discouraging results. Mohamad Safri Shahul Hamid, the deputy chief executive at Malaysia’s MIDF Amanah Investment Bank, believes that the regulators need to be more aggressive and active in opening up the market, initiating discussions and encouraging the introduction of various new products, especially retail and Sukuk.
Tax issues were also considered as one major hurdle of the industry’s growth. The double taxation system applied in several Shariah transactions subjected the customers to pay additional tax. Although the government has recently revised its tax regulation, the new regulation is viewed as ‘not retroactive’; and banks are still involved in a dispute with the directorate general of taxation.
Public awareness is one of serious issues holding back its growth. The need to educate Indonesian Muslims on Shariah fi nance is considered crucial. The other challenge to overcome is the characteristic of the Indonesian Muslim, which is less inclined to adhere to Islamic principles in many aspects including fi nance. Many analysts in Indonesia agree that although 80% to 85% of Indonesia’s population is Muslim, a signifi cant portion of them practice a more moderate form of Islam compared to Malaysia.
The World Bank argues that the industry’s growth is impeded by the lack of regulation instruments to supervise and regulate the industry, which is also lacking in appropriate framework, and low public awareness and limited market coverage. From the operational side, the industry’s growth seems to be held back by ineffi ciencies of institutional structures to support effi cient operations, incapability to comply with international fi nancial standards, and harsh competition from conventional banks.
BI supportThe government through BI as the regulator is expected to facilitate the structures on various issues related to the Shariah banking industry, before the industry could be expected to leap for growth in the future. Only with the right support from regulators level, a more impressive growth can be achieved.
To strengthen the Shariah banking network, BI issued in 2009 the regulation on the conversion of conventional banks to Shariah banks; Regulation No 11/15/PBI/2009. The regulation came into force on the 29th April 2009, with the aim to stimulate the conversion of conventional banks to Shariah banks.
The regulators’ role in supporting the industry’s growth is vital. Mulya Siregar, then deputy director of BI, in his speech at a seminar on Islamic Banking in 2009 claims that, without the full support of government regulations, the growth would only be around 43%, while with the support, it could grow by a maximum of 81% for asset ownership.
Prospects for growthThe Shariah banking market is predicted to grow at a compound annual growth rate (CAGR) of around 52% from 2008 to 2010. The reasons behind this are the large Muslim population, current conditions of a relatively low penetration of Shariah banking, and the improvements in regulatory framework. As an effort to support the industry’s development, BI issued a blueprint aimed at strengthening the industry by 2015.
BI’s grand strategy to boost the industry’s growth will be focusing on three major actions; increasing the effi ciency of Islamic banking, integrating Islamic banking into the Islamic fi nancial industry, and conforming to global Islamic banking products.
BI believes that a recent revival of the Islamic religion in the country, supported with by its grand strategy, will popularize various Shariah banking products; eventually resulting in concrete growth in the future. Based on the rising popularity of Shariah banking within the country, BI predicts an increase in demand for Shariah fi nancing, which will offer a CAGR growth of more than 51% from 2008 to 2010.
Despite various challenges faced, the industry’s growth potential in the country has apparently attracted foreign banks. HSBC launched its Shariah window called HSBC Amanah, which is now operating in the country. Only recently, Malaysia entered the market in 2010 with CIMB Niaga Syariah. It is also predicted that in the near future there will be more foreign banks from Malaysia and Bahrain entering the market by establishing its Shariah branches in Indonesia. This fact implies there is a massive potential market for growth within the country.
Drs Rizqullah, MBAPresident directorBank BNI SyariahEmail: [email protected] Rizqullah has been involved in Islamic banking and economic activities since 2002. He was involved in several Islamic economic and banking organizations and is lecturing on Islamic economic and fi nance at several postgraduate programs with Trisakti University and Universitas Islam Negeri Jakarta.
Liquidity Management for Islamic Banking6th – 8th June
Stress Testing & Reverse StressTesting for Islamic Banks
The idea of a Muslim state on the territory of British India took shape in the 1930s and became reality in 1947. The search and quarrel for a distinct “Islamic” economic order started in the 1940s and continued even after the adoption of the constitution of the “Islamic Republic of Pakistan” in 1956, since the institutions of the new state were rather secular. Proponents of an Islamic order presented a concept that was considered to be a “third way” between materialistic capitalism and anti-religious communism.
The concept of an Islamic economic order (in some variations by different authors) was comprehensive and covered areas such as consumer behaviour, public fi nance, money and banking, social solidarity and Zakat and such.
Islamic economists wanted to give guidance for a systems reform, and the literature was more prescriptive than analytic. Models often had a utopian character, because they assumed the general adherence to high moral standards and altruistic and social welfare oriented values. In a world populated by ‘ideal Muslims’, honesty and trust prevail while principal agent or moral hazard problems do not exist.
In such a world, a fi nancial system based on profi t and loss sharing (PLS) could function smoothly and ensure a fair distribution of risks and rewards as well as overall fi nancial stability. For those who were searching for an alternative economic system – to be neither capitalist nor socialist but Islamic — the so-called “two-tier Mudarabah” model was the core of a genuine Islamic fi nancial order.
The basic model was later refi ned and formalized, but one crucial question was hardly ever addressed, namely how to get from the status quo to the ideal new world. Obviously most Muslims did not behave as assumed and secular ideas had taken root in Muslim societies. Islamic economics did not provide a theory of system transformation.
Most Islamic economists left this problem to the state, and they insisted that an Islamic economic order should be implemented in its totality and not only for specifi c sectors such as fi nance.
Against this background it is understandable that, on the one hand, Islamic economists had familiarized themselves with the activities of Islamic banks — established in the Arab world since the late 1970s — only lately and with a lot of scepticism.
On the other hand, the practitioners of Islamic banking did not care much about the models of Islamic economists and made (for many good reasons) extensive use of non-PLS modes of fi nancing. The conceptual reference group for Islamic bankers were not Islamic economists but experts in Islamic law (Shariah scholars) who had to ensure the Shariah compliance of products and procedures. Only few Shariah scholars had strong links to Islamic economists (or even were economists themselves).
In a slightly oversimplifi cation one may say —• that Islamic economists had argued in favour of a fundamentally
different fi nancial system (with different techniques and products and in support of entrepreneurial activities outside established circles),
• while Islamic bankers (or their shareholders) had no intention to change the fundamentals of the fi nancial system; they made only efforts to change the underlying contracts to create Shariah compliant functional equivalents for existing products of the established business community.
Islamic economists did not challenge the legal permissibility of the widely applied non-PLS modes of fi nancing, but they pointed out that a change of the legal form does not change the economic substance of the system — it does not bring forth a more just fi nancial system, and it does not broaden the entrepreneurial base to open new avenues for socio-economic development.
In spite of this critical attitude of Islamic economists, CEOs of Islamic banks as well as politicians and central bankers persistently refer to two of their propositions, namely —
• that Islamic banking links fi nance to the productive real economy and
• Islamic fi nance is based on the principle of risk sharing.
One does not have to dig deep to fi nd out that both propositions are claims rather than factual descriptions of Islamic fi nance today.
• To start with, in a fractional reserve system credit creation and leverage are always possible — and that implies the existence of fi nancial claims without an asset backing, such as a direct link to the real economy.
• Next, by far the largest portion of Islamic banks’ fi nancing is based on contracts with fi xed costs/returns (Murabahah, Ijarah) and factually very limited if any risk for the bank, while fi nancing based on partnership contracts (Musharakah, Mudarabah) is the very rare exception.
• Then, investment in bubble prone markets with speculative price movements (such as real estate in the past or commodities at present) does link fi nance to real assets — but not to productive activities in the real economy.
• Further, the combination of trade related contracts with unilateral promises (Waad) led to recent ‘innovations’ — approved as Shariah compliant by leading scholars that replicate complex conventional products used by conventional fi nancial institutions for speculative deals within the fi nancial sector (such as short selling of stocks or swaps of currencies or returns).
• Finally, in the ‘deposit business’ Mudarabah based investment accounts are conceptually exposed to a risk, but Islamic banks have created a ‘deposit illusion’ because they treat them like deposits: If actual investment returns fall short of expectations, banks use investment risk and profi t equalization reserves, reduce their profi t share, or transfer shareholders’ funds to ensure that the advertised ‘anticipated’ rates of return can be paid out.
Islamic Economics and Financial Sector Reforms By Professor Dr Volker Nienhaus
Islamic Economics and Financial Sector Reforms (continued)
The Islamic fi nance industry seemingly moves more towards conventional fi nance than towards the ideal of Islamic economists. By this, the Islamic sector replicates many of those products and techniques that are suspected to have caused or at least amplifi ed the recent fi nancial crisis. In addition to the commercial risks of conventional fi nance, the specifi c underlying contracts of Islamic fi nance add a further individual and systemic risk dimension.
Before the recent crisis, the readiness to think about fundamental fi nancial sector reforms was absent. But now, in academia and media as well as in politics and the business community, the search for and debate on systemic alternatives has reached an unprecedented intensity. The economic core of the PLS models of Islamic economics — fi nancing only the productive real economy and sharing risks between fi nanciers and entrepreneurs can serve as a guide for a systemic reform, at least for the Islamic fi nance industry.
• Suppose investment account holders realize and accept that they are no depositors but investors, that is, the nominal value of their funds is not guaranteed.
• Once the deposit illusion is gone, investment account holders will become risk sensitive and concerned about the use of their funds.
• For the modest returns they have received in the past — roughly equivalent to interest on conventional savings accounts or term deposits, they will hardly be ready to accept high risks. Leverage boosted returns on equity only, not investment account returns.
• Most probably investment account holders want to learn about the risk profi le of their investment and to make informed choices, what universal banking cannot provide.
But fi nancial holding companies which have wide ranges of separate mutual funds with different investment strategies and risk profi les (from very secure investments in sovereign Sukuk with low returns over diversifi ed portfolios of corporate and project fi nancings to venture capital funds with high risks and chances for high returns) could meet the demand of the risk aware savers.
• Instead of ‘depositing’ money with a bank, savers will then purchase certifi cates of investment funds that are traded on an exchange.
• The trading ensures the liquidity of the certifi cates, but it does not guarantee a nominal value (which depends on the performance of the underlying portfolio).
• In contrast to opaque banking practices, the saver will know in advance where his money is invested (in bubble prone markets, speculative commodity transactions, the short selling of stocks, sovereign Sukuk, manufacturing enterprises, and such), and he has knowingly accepted the associated risk.
For conventional fi nance, a replacement of bank deposits by mutual funds looks revolutionary, but for Islamic banking it would be not much more than the consistent application of the concept of Mudarabah based investment accounts and the adherence to Islamic fi nance principles.
• Banks would be reduced to so-called “narrow banks”: They accept and guarantee deposits only for transactional purposes and keep funds received from the public in cash or highly liquid central bank papers (= 100% reserve). There is a long tradition of “100% money” reform proposals in conventional economics (from Irving Fisher in the 1930s to “narrow banking” or “limited purpose banking” concepts today), and Islamic economists had also taken up these ideas in the past (but more under the perspective of monetary policy than banking system reform).
• Given the rather low returns for investment accounts, savers would not suffer a fi nancial loss but gain transparency and the freedom to choose. This would greatly enhance the effectiveness of market discipline in the fi nancial industry.
• Regulators may like such a system because it eliminates stability threats from liquidity squeezes and bank runs (due to over leveraging, maturity mismatches and write-offs on assets). Such problems will simply vanish because transaction deposits are backed by 100% reserves and investment certifi cates do not carry a guaranteed nominal value.
• Shareholders of fi nancial institutions who earned – at least in ‘good times’ – profi ts much above the productivity growth of the real economy, may not like the new system at fi rst sight. But once they realize that the high profi ts were mainly due to highly leveraged and risky fi nancial transactions and originate from a zero-sum game over time (unless the state bails out failing banks and transforms the game into a positive sum for the fi nancial actors and negative-sum for the public), Muslim shareholders may wonder how all this could be Shariah compliant in substance.
• Even if disappointed shareholders would withdraw capital from the fi nancial sector, this would not be a serious reform obstacle because narrow banks and mutual funds can be run with minimal capital. They do not need equity as a risk buffer in order to meet depositors’ claims.
Islamic economics persistently reminded the Islamic fi nance industry of core principles which were well received and often quoted in public but not implemented in practice.
A reform of the Islamic fi nancial sector in line with core principles of Islamic economics seems feasible and benefi cial, and the socio-economic impact could be tremendous. This makes it worthwhile to start an intensive debate on narrow banking in Islamic fi nance.
Professor Dr Volker NienhausVisiting professorICMA Centre, Henley Business School, University of ReadingEmail: [email protected] Dr Volker Nienhaus is also a visiting scholar at the University of Malaya under the Securities Commission Islamic Capital Market program and member of the Governing Council of the International Centre for Education in Islamic Finance in Kuala Lumpur. He has published numerous articles, essays and books on Islamic economics and fi nance since the 1980s.
Pakistan as the world’s second largest Muslim population has lagged in development of an Islamic banking hub. What may have been the reasons and what should the country do?
If you would like to air your views on the next Islamic Finance Forum Question, please email your response of between 50 and 300words to Christina Morgan, Forum Editor, at: [email protected] before Monday, 28th March 2011.
Next Forum Question
At a time where the European economies are still in distress, with the Eurozone’s GDP projectedat less than 1% for 2011, how can Islamic fi nance be an alternative source for revival?
The outlook for the European economies has improved in recent months and the European Commission is now predicting growth in the Eurozone of 1.6% for 2011. Germany is the best performer with solid export growth driving the economy forward by 2.4%, while the projection for France is 1.7%. The major weakness is in the smaller peripheral Eurozone members, notably Greece, Ireland and Portugal.
Although the overall growth fi gure of 1.6% looks modest in comparison to China and India, as it is from a much higher base and seems sustainable. The major threat to growth is higher oil prices as a result of the popular uprisings in the Middle East.
As Islamic fi nance plays a very limited role in Europe, and most of the activity is in the UK which is not a Eurozone member, it is unlikely to provide much of an alternative to conventional fi nance. European banks continue to be risk averse which has a small negative effect on growth, but investors from the Middle East may also now be more risk averse about investment in Europe, especially with the freezing of assets of the Gadaffi , Mubarak and Ben Ali families.
More signifi cantly, the assets of the Libyan sovereign wealth fund have also been blocked. Of course these asset holdings were not specifi cally Shariah compliant, but given the uncertainties in the Middle East, and particularly in Bahrain, which is an important centre for Islamic fi nance, investments in Europe are more likely to be liquidated than increased.
PROFESSOR RODNEY WILSON: Director of postgraduate studies, Durham University
There are two ways for Islamic fi nance to help revive the economy of Europe. Firstly, governments should look to do more sovereign Sukuk. This could be especially easy in Germany as they have experience with Saxony-Anholdt. Second is to pass laws that would allow for the opening of Islamic banks that cater to the European Muslim population. This Muslim population in Europe is said to be around 7%, and are mostly likely “unbanked”.
MONEM A SALAM: Director of Islamic investing and deputy portfolio manager, Saturna Capital
Poor economic growth discourages fi nancial intermediation, whether conventional or Islamic in nature. So to suggest that Islamic fi nance can help “cure” economic malaise could be misleading. In practice, regional governments need to support business and consumer confi dence so that the economic momentum begins to churn at an incrementally higher rate. This may be diffi cult because of the size of the European market,
along with the global backdrop.
Where Islamic banks can play a meaningful role is to use the current downturn as a forum in which to raise awareness and education about their competencies. This effort need not be a zero-sum game with the conventional institutions. Rather, Islamic banks can use the vacuum created by this environment to build a franchise for their products and services, many of which are misunderstood by the marketplace. Especially at the wholesale level, fi rms may be looking for fi nancing options in ways that they have not explored in the past.
We argue that one of the constraints on Islamic fi nance in general is the absence of a large hinterland. We see an opportunity in Europe for Shariah compliant institutions to be more forthright in their strategic planning, taking advantage of the current lull to develop new client segments.
Could you provide a brief journey of how you arrived where you are today?
I began my career with the Shariah banking research and regulation team of Bank Indonesia in April 1999 as a vice manager. The team was established with the Banking Act No 10/1998 which states that it is possible for a bank to operate based on Shariah principles. From a small team of 10 people, it then became the Shariah banking bureau in 2001. In 2002, I became the bureau’s head of Shariah research development and regulation team. Later in 2003, the bureau became the Sharia Banking Directorate. In 2006, the board of governors appointed me as the directorate’s head of Shariah banking research, development and regulation bureau. I have been the director of the directorate since June 2010.
What does your role involve?The directorate of Islamic banking is the banking regulator for the industry. This directorate also supports the monetary management directorate in preparing regulations for the Islamic money market. I am involved in developing the blueprint for the Islamic banking industry 2002 – 2015. With the government’s cooperation and other related parties, we help build the Islamic capital market, Islamic multifi nance and non-banking Islamic fi nancial institutions.
What is your greatest achievement to date?From two Shariah banks and one Islamic window, we now have 11 Islamic banks, 23 Islamic banking windows and 150 Islamic rural banks, with asset growth of 38% per year in the last fi ve years. Shariah banks have performed well with 96.4% fi nancing to deposit ratio and only 3.9% non-performing fi nancing in the last fi ve years. Further, the Islamic Banking Act and Sukuk Act of 2008 strengthen the legal operations of the Islamic banking industry and foster the development of the Sukuk market. Indonesia has some advantages such as the world’s biggest Muslim population, Islamic banking operations with no application of debatable Islamic contracts; and support from the government, Islamic scholars and public.
Which of your products / services deliver the best results?
Our products are in the form of banking regulation and supervision. We have issued various banking regulations such as risk management in Islamic banks, product developments, capital adequacy ratio, as well as including reference to the standards of the IFSB and AAOIFI.
Further, we have created the blueprint for the development of Islamic banking industry (2002-2015). Such programs have shown positive results.
What are the strengths of your business?The high growth of the country’s Islamic banking industry is based on the robust performance of Shariah banks, contributing to the development of the economy through fi nancing SMEs which dominates 95% of Islamic bank’s fi nancing. Islamic banks mostly fi nance the business, trading and construction sectors. The growth of Islamic banks’ branches, the offi ce channeling program which allows customers to deposit money in any conventional bank and, various Islamic products have illustrated the strength of this industry.
What are the factors contributing to the success of your company?
The central bank particularly the directorate of Shariah banking works with the National Sharia Board, Indonesian Accountant Association, government, parliament, market players, academic and all related parties to develop the Islamic banking industry. The stability of the Indonesian economy also allows the industry to grow.
What are the obstacles faced in running your business today?
The market share of the Islamic banking industry (3.3%) is still very small compared to conventional. The industry also faces obstacles such as — limited human resources, limitation in the Islamic fi nancial market instruments, lack of Islamic banks and government funds. However, such obstacles are being mitigated through the active involvement of the banking regulator, market players, academic and Islamic scholars.
Where do you see the Islamic fi nance industry in, say, the next fi ve years or so?
In the next fi ve years, the industry would have exceeded 5% market share. We have planned to achieve a double digit market share in 2015 to 2020. With the current performance of the Islamic banking industry, such a market share would correlate with bigger contribution of the industry to the economy. Moreover, the growing Islamic capital market especially the Sukuk market will play a signifi cant role. Currently, the volume of the Indonesian government Sukuk since 2008 is INR44.4 trillion (US$4.44 billion) out of US$134 billion globally and there will be more issuances in the next fi ve years.
Name one thing you would like to see change in the world of Islamic fi nance.
We realize that Islamic fi nance is developed based on Shariah legality and tries to mimic conventional fi nance with certain modifi cation to comply with Shariah principles. I hope Shariah fi nance develops based on Shariah economic substance that may harmonize the fi nancial and real sectors. Shariah fi nance should introduce products to support real sector development and create services and products which have a multiplier effect on the economy. In other words, Islamic fi nance should not contribute to the bubble economy. This requires a paradigm shift based on Shariah economic substance. I realize that it is not easy as customers are not ready. Therefore, we should do it step by step
Islamic Finance news talks to leading players in the industry
Obligor/Issuer Government of Indonesia / Perusahaan Penerbit SBSN Indonesia
Tenor Three years
Return Fixed coupon 8.15% per annum
Payment Monthly
Maturity date 23rd February 2014
Selling agent Bank Mandiri (Persero), Bank Internasional Indonesia, Bank Syariah Mandiri, Bank Rakyat Indonesia (Persero), Bank CIMB Niaga, HSBC, Bank Negara Indonesia (Persero), Citibank, Standard Chartered Bank, Bank Permata, Bank OCBC NISP, Andalan Artha Advisindo Sekuritas, Mega Capital Indonesia, Bahana Securities, Danareksa Sekuritas, Trimegah Securities, Sucorinvest Central Gani, Reliance Securities, Ciptadana Securities, Kresna Graha Sekurindo
Legal advisors AZP Legal Consultants
Trustee Perusahaan Penerbit SBSN Indonesia
Governing law Indonesian
Shariah advisor National Shariah Board — Indonesia
Structure Ijarah sale and lease back
Tradability Tradable
The Q&A was conducted with the directorate of Islamic fi nancing, ministry of fi nance Indonesia:
1. Why did you use this particular Islamic structure? What other structures were considered? We used this structure because it is well accepted by investors and gives fi xed returns periodically. It is already approved by the National
Shariah Board (Sharia Approval number: B-036/DSN-MUI/I/2011 on the 31st January 2011). Ijarah sale and lease back were used in the previous domestic retail Sukuk issuance (SR-001 and SR-002 series).
2. What will this capital be used for? Based on Indonesia Sukuk Law No 19 / 2008, the sovereign Sukuk is issued for the purpose of fi nancing the state budget (general
budget fi nancing).
3. What were the challenges faced and how were they resolved? The most challenging thing was the distribution of investors which were still concentrated in Jakarta and western Indonesia. The
Indonesian government and selling agents worked together to smooth the distribution of investors through socialization, pre-marketing and marketing which were carried out in almost all major cities in the country. As a result of the SR-003 issuance, the government and selling agents will be more focused on socialization and marketing efforts in the central and eastern regions of Indonesia. We are also currently looking for other methods to increase the participation of investors in both regions.
4. Geographically speaking, where did the investors come from?
No Region Volume (%) Investor (%)
1 DKI Jakarta 55.40 41.17
2 Western Indonesia except DKI Jakarta 40.33 52.32
3 Central Indonesia 2.97 4.62
4 Eastern Indonesia 1.30 1.89
Total 100 100 5. Was this deal rated? If not, explain why. No. The deal was unrated as this is a government bond.
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.
Contact EurekahedgeTo list your fund or update your fund information: [email protected]
For further details on Eurekahedge: [email protected] Tel: +65 6212 0900
Sharpe ratio for ALL funds (as of the 15th March 2011)
FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE
1 Meezan Tahaffuz Pension Fund - Money Market Sub Fund Al Meezan Investment Management 8.90 Pakistan
2 Atlas Pension Islamic Fund - Debt Sub Fund Atlas Asset Management 5.08 Pakistan
3 Meezan Tahaffuz Pension Fund - Debt Sub Fund Al Meezan Investment Management 4.19 Pakistan
4 Al Rajhi Commodity Mudarabah Fund - USD Al Rajhi Bank 3.45 Saudi Arabia
5 Commodity Trading Fund - SAR Riyad Bank 3.34 Saudi Arabia
6 Reliance Global Shariah Growth Fund - USD I Reliance Asset Management (Malaysia) 3.32 Guernsey
7 Public Islamic Money Market Fund Public Mutual 2.95 Malaysia
8 AlAhli Saudi Riyal Trade Fund The National Commercial Bank 2.59 Saudi Arabia
9 AlAhli International Trade Fund The National Commercial Bank 2.58 Saudi Arabia
10 Al Rajhi Commodity Mudarabah Fund - SAR Al Rajhi Bank 2.38 Saudi Arabia
* Eurekahedge Islamic Fund Index 0.07
Top 10 Islamic Funds by Key Performance Statistics
YTD returns for ALL funds (as of the 15th March 2011)
FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE
1 BIMB BIMB UNIT Trust Management 18.59 Malaysia
2 ETFS Physical Silver ETFS Metal Securities 9.25 Jersey
3 ASBI Dana Al-Falah BIMB UNIT Trust Management 7.11 Malaysia
4 Al Madar US Index Fund Almadar Finance & Investment 7.01 Kuwait
5 iShares MSCI USA Islamic Barclays Global Investors Ireland 6.35 Germany
6 Al Rajhi European Equity Al Rajhi Bank 6.34 Saudi Arabia
7 iShares MSCI World Islamic Barclays Global Investors Ireland 5.45 Germany
8 ASBI Dana Al-Munsif BIMB UNIT Trust Management 5.44 Malaysia
9 Reliance Global Shariah Growth - USD I Reliance Asset Management (Malaysia) 5.34 Guernsey
10 Al Rajhi International Small Capitalisation Merrill Lynch Investment Managers 5.17 Saudi Arabia
Anthony YeungRegional Director Hong Kong, China, Taiwan, Korea, Japan, Australia & New ZealandTel: +852 2831 2580 [email protected]
Ariff SultanBusiness Development DirectorMalaysia, Singapore, Indonesia, India, Thailand, Pakistan, Sri Lanka & BangladeshTel: +65 6415 4262 [email protected]
For more information, please visit www.djislamicmarkets.com or contact
INDEX 1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD
DJIM World -2.78 -2.99 -3.47 -2.63 2.18 14.57 12.03 0.72
DJIM US -1.58 -2.53 -3.75 -2.84 4.19 18.02 13.25 2.98
Priced Issuer Nationality Instrument Market Value US$ Managers
23rd Feb 2011 Cagamas Malaysia Sukuk Murabahah Domestic market public issue 132,000,000 CIMB Group, AmInvestment Bank
8th Feb 2011 GOVCO Holdings Malaysia Sukuk Murabahah Domestic market private placement 985,000,000 HSBC, RHB Capital, CIMB Group
2nd Feb 2011 Pembinaan BLT Malaysia Sukuk Domestic market private placement 360,000,000 Lembaga Tabung Haji, RHB Capital, CIMB Group, AmInvestment Bank, Maybank Investment Bank
27th Jan 2011 Emaar Sukuk UAE Sukuk Euro market public issue 500,000,000 Standard Chartere, HSBC, RBS
25th Jan 2011 Pengurusan Air SPV Malaysia Sukuk Murabahah Domestic market private placement 884,000,000 HSBC, CIMB Group
10th Jan 2011 Padiberas Nasional Malaysia Sukuk Murabahah Domestic market public issue 114,000,000 Standard Chartered, Bank Muamalat Malaysia
29th Dec 2010 Senai Desaru Expressway Malaysia Sukuk Domestic market public issue 1,192,000,000 Maybank Investment Bank
14th Dec 2010 National Bank of Abu Dhabi UAE Sukuk Murabahah Foreign market public issue 159,000,000 HSBC, RBS, Maybank Investment Bank
10th Dec 2010 Cagamas Malaysia Sukuk Murabahah Domestic market public issue 287,000,000 HSBC, CIMB Group
8th Dec 2010 Government of Ras Al Khaimah
UAE Sukuk Euro market public issue 400,000,000 RBS, Citigroup
3rd Dec 2010 Malaysia Airports Capital Malaysia Sukuk Murabahah Domestic market public issue 476,000,000 CIMB Group, Citigroup
29th Nov 2010 Boustead Holdings Malaysia Sukuk Domestic market private placement 133,000,000 OCBC, Public Bank, Affi n Investment Bank
5th Nov 2010 Trans Thai-Malaysia Sukuk Malaysia Sukuk Musharakah Domestic market private placement 195,000,000 HSBC, CIMB Group
28th Oct 2010 Abu Dhabi Islamic Bank UAE Sukuk Musharakah Euro market public issue 750,000,000 Standard Chartered Bank, HSBC, Barclays Capital
20th Oct 2010 Islamic Development Bank Saudi Arabia Sukuk Euro market public issue 500,000,000 Standard Chartered, HSBCCIMB Group, Citigroup
20th Oct 2010 Cagamas Malaysia Sukuk Murabahah Domestic market public issue 161,000,000 AmInvestment Bank
30th Sep 2010 Qatar Islamic Bank Qatar Sukuk IjarahSukuk Murabahah
Euro market public issue 750,000,000 HSBC, Credit Suisse, QInvest
21st Sep 2010 Putrajaya Holdings Malaysia Sukuk Musharakah Domestic market public issue 161,000,000 CIMB Group, AmInvestment Bank, Maybank Investment Bank
15th Sep 2010 AmIslamic Bank Malaysia Sukuk Musharakah Domestic market public issue 177,000,000 AmInvestment Bank
30th Aug 2010 Pelabuhan Tanjung Pelepas Malaysia Sukuk Domestic market public issue 167,000,000 RHB Capital, Maybank Investment Bank
3 Perusahaan Penerbit SBSN Indonesia 2,019,555,790 8 4.0
4 Pengurusan Air SPV 2,002,481,940 6 3.9
5 Senai-Desaru Expressway 1,821,445,920 42 3.6
6 Pakistan, Islamic Republic of (Government)
1,594,481,152 3 3.1
7 Celcom Transmission (M) 1,342,937,400 4 2.6
8 Cagamas 1,282,571,730 16 2.5
9 Bank Indonesia 1,124,686,644 19 2.2
10 Govco Holdings 983,928,000 2 1.9
11= ADIB Sukuk 750,000,000 1 1.5
11= Qatar Islamic Bank 750,000,000 1 1.5
13 Danga Capital 621,408,000 1 1.2
14= IDB Trust Services 500,000,000 1 1.0
14= Emaar Sukuk 500,000,000 1 1.0
16 ESSO Malaysia 499,608,060 13 1.0
17 RAK Capital 400,000,000 1 0.8
18 Khazanah Nasional 367,252,800 1 0.7
19 Padiberas Nasional 364,357,251 4 0.7
20 Aman Sukuk 360,773,600 6 0.7
SUKUK ISSUERS DEC 2010 - MAR 2011
IssuerIssuer Commitment
(in US$)Issues
Market Share %
1 BNM Sukuk 6,963,971,650 25 45.3
2 Senai-Desaru Expressway 1,821,445,920 42 11.8
3 Pakistan, Islamic Republic of (Government)
988,910,951 2 6.4
4 Govco Holdings 983,928,000 2 6.4
5 Perusahaan Penerbit SBSN Indonesia 963,662,475 3 6.3
6 Pengurusan Air SPV 884,231,100 3 5.8
7 Emaar Sukuk 500,000,000 1 3.3
8 RAK Capital 400,000,000 1 2.6
9 Aman Sukuk 360,773,600 6 2.3
10 Padiberas Nasional 235,428,851 3 1.5
11 Bank Indonesia 215,448,960 3 1.4
12 BMA International Sukuk 175,040,840 6 1.1
13 National Bank of Abu Dhabi 163,212,000 1 1.1
14 ESSO Malaysia 64,449,600 2 0.4
15 KNM Capital 64,094,745 6 0.4
16 Perbadanan Kemajuan Negeri Selangor
59,235,680 3 0.4
17 Goodway Integrated Industries 39,277,485 9 0.3
18 Hubline 36,069,155 3 0.2
19 TSH Sukuk Ijarah 32,827,450 2 0.2
20 Toyota Capital Malaysia 32,797,600 1 0.2
(12 months) (3 months)
(12 months) (3 months)
Islamic Sukuk league tables refl ect Shariah compliant bonds showing evidence of ownership of assets or their earnings. These results include (but are not limited to) the following securities/assets: Sukuk Salam, Sukuk Mudarabah, Sukuk Ijarah, Sukuk Murabahah, Sukuk Istisna and Sukuk Musharakah.
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.
Islamic Finance news team Published By: 21/F, Menara Park, 12, Jalan Yap Kwan Seng 50450 Kuala Lumpur, Malaysia Tel: +603 2162 7800 Fax: +603 2162 7810
EVENTS DIARY
DATE EVENT VENUE ORGANIZER
March
22nd IFN Roadshow Indonesia Jakarta REDmoney events
17th – 19th IFN Asia Forum Kuala Lumpur REDmoney events
November
1st IFN Roadshow Turkey Istanbul REDmoney events
3rd IFN Roadshow Egypt Cairo REDmoney events
8th IFN Roadshow Canada Toronto REDmoney events
10th IFN Roadshow New York New York REDmoney events
15th IFN Roadshow Hong Kong Hong Kong REDmoney events
30th IFN Roadshow Brunei Brunei REDmoney events
NE-IFN0/10
AAOIFI 26Abu Dhabi Commercial Bank 10Academic Medical Centre 3AIG 12Al Ahli Bank of Kuwait 7Al Fardan Exchange 7Al Salam Bank 11Al-Amanah Islamic Investment Bank 3Allianz Takaful 17AM Best Europe 9Amana Takaful 8Amanie Business Solutions 4Andalan Artha Advisindo Sekuritas 27Arab Banking Corporation 9Arab Union Reinsurance Company 9Arcapita 4Arqaam Capita l 6AssetCo 4Association of the Luxembourg Fund Industry 15, 16Asuransi Winterthur Life Indonesia 8Aviva 8, 17Axis-REIT Managers 4Azmi & Associates 20AZP Legal Consultants 27Bahana Securities 27Baitak Research 5Bank AlJazira 7Bank Asya 7, 11Bank BNI Syariah 22Bank Indonesia 3, 21, 22, 25Bank Internasional Indonesia 27Bank Kesawan 6Bank Mandiri 27Bank Muamalat Indonesia 3, 21Bank Negara Indonesia 27Bank Negara Malaysia 3, 10Bank OCBC NISP 27Bank of London and The Middle East 4Bank Permata 27Bank Rakyat Indonesia 27Bank Syariah Mandiri 27Bank Tejarat 9Banque Française Commerciale Océan Indien 13Barclays Bank 7Bio-XCell 3Bogor Agriculture University 3BRI Syariah 3Bundesanstalt für Finanzdienstleistungaufsicht 13CAAM Islamic 13Capital Intelligence 9Central Bank of Libya 9Central Bank of Luxembourg 15, 17Central Bank of Nigeria 3CIMB 3, 17CIMB Group 4, 8CIMB Niaga 4, 22CIMB Syariah 4Ciptadana Securities 27
Citibank 7Citigroup 13Codexa Capital 25Commercial International Bank 9Commerzbank 13Credit Agricole Asset Management 13Danareksa Sekuritas 27Deutsche Bank 13Dresdner Bank 13Drydocks World 12Dubai Bank 7Dubai Electricity and Water Authority 9Dubai International Financial Centre 5, 13Dubai Islamic Bank 7, 9Dubai SME 5Dubai World 6, 12Durham University 25Emery Oleochemicals Group 3Emirates Islamic Bank 5Emirates NBD 6Ernst & Young 17First Gulf Bank 7Fitch 9, 11FWU International 18Gulf Investment Corporation 11Hogan Lovells 10,HSBC 7, 13, 16, 22HSBC Amanah 4, 22HSBC Bank Middle East 10HSBC Securities Services 4Indonesia Capital Market and Financial Institution Supervisory Agency 8Indonesian Accountant Association 26Institut de Formation Bancaire Luxembourg 15Investment Corporation of Dubai 5,7Islamic Development Bank 3Islamic Financial Services Board 15, 17, 26Ithmaar Bank 6, 11Johns Hopkins International 3JP Morgan 7JPMorgan Chase & Co 7Kresna Graha Sekurindo 27Kuveyt Türk Participation Bank 4, 8Kuwait Finance House 5, 11, 13Kuwait Finance House Group 8Kuwait International Bank 6Labuan Financial Services Authority 8Labuan International Business Financial Center 8Liquidity Management House 5Lloyds 13Luxembourg Financial Group 18Luxembourg for Finance 15Luxembourg School of Finance 15Luxembourg Stock Exchange 17Mabanee Company 6Malaysian Industrial Development Finance 3MARC 9Masraf Al Rayan 7
Mega Capital Indonesia 27Meridio AG Bank 13MIDF Amanah Investment Bank 22Moody’s 11Mulpha International 9MWM Ventures 12Nakheel 7, 12National Bank of Abu Dhabi 6, 7, 12National Bank of Egypt 7National Bonds Corporation 5National Société Générale Bank 9National Spot Exchange 4Neova Sigorta 8Noor Islamic Bank 7OCBC Al-Amin 4OCBC Bank Malaysia 4Palm Jebel Ali 7, 12Participation Banks Association of Turkey 11Perdana University Graduate School 3Pharez Nigera 3Prudential 17PTT Chemical International 3Qatar First Investment Bank 6Qatar General Insurance & Reinsurance Company 8Qatar Islamic Bank 7, 13Qatar National Bank 6RAM 11Regional Financial Center of Almaty 4Reliance Securities 27RHB Bank 3Royal College of Surgeons 3S&P 9Saturna Capital 25Saxony-Anhalt 13SBI Mutual Fund 4Securities and Exchange Commission of Pakistan 10Securities Commission of Malaysia 19Shamil Bank 11Sime Darby Plantation 3Société Générale 13Standard Chartered Bank 4, 7, 12,13State Bank of Pakistan 21Sucorinvest Central Gani 27Syarikat Prasarana Negara 4Takaful Indonesia 8The Avenues Mall 6The Islamic Bank of Britain 13The Islamic Bank of Thailand 3The Royal Bank of Scotland 7The World Bank 22Trimegah Securities 27Turkapital 8Unicorn Investment Bank 7University of Reading 24UTI Asset Management 4West-LB 13
Company IndexCompany Page Company Page Company Page
INDIVIDUAL SUBSCRIPTION
1 Year at US$995 nett
2 Years at US$1,790 nett
COMPANY WIDE SUBSCRIPTION
1 Year at US$4,495 nett
2 Years at US$7,795 nett
Yes! I would like to subscribe to:
YOUR DETAILSFull Name
(First Name) (Surname)
Company Name Job Title
Address
Telephone Fax
Work Email
CountryPostal/Zip
(Max: 10 Individual Subscriptions)
TO INITIATE YOUR SUBSCRIPTION, RETURN FAX TO +603 2162 7810
21/F, Menara Park, 12, Jalan Yap Kwan Seng50450 Kuala Lumpur, Malaysia
c v
news v v
x v cc v
R ch)
P
Credit Card
Check
Telegraphic Transfer (T/T)Please send your T/T advice with your subscription form to us either by post or fax. A confirmation will besent once payment is received. Please note that subscription is not confirmed until payment has been made in full.
The information you provide will be safeguarded by REDmoney, whose subsidiaries may use it to keep you informed of relevant products & services.
