According to a new special report published by Moody's Investors Service, the Saudi sukuk market will continue to grow over the next 12-18 months. Strong sukuk issuance has continued in 2013, with SR 11.6 billion already issued during Q1, leading the rating agency to expect that 2013 sukuk issuance will surpass 2012 levels. With limited investment options available, IFIs tend to maintain higher levels of very low-yielding cash and Islamic interbank placements. A larger sukuk market would facilitate liquidity management through a pool of higher-yielding Shariah-compliant securities and offer a profitability boost to local IFIs. Moody's says that the record issuance is being driven by strong investor demand; increased financing opportunities to fund the country's large-scale infrastructure projects; and a developing yield curve following the sovereign-guaranteed benchmark sukuk issuance by the General Authority of Civil Aviation in early 2012.
A majority of high net worth individuals (HNWIs) in the Middle East believe wealth creation is faster today than in the past, according to the latest report of Barclays Wealth Insights. Over half (60%) of respondents in the Middle East agreed that wealth can be created faster today than in the past, in comparison to 43 per cent in Europe and 31 per cent in North America. Interestingly, more than half (54%) of Middle Eastern respondents stated that personal investments have contributed largely to their overall wealth portfolio, compared to other sources of income such as inheritance at 49 per cent. In terms of how this wealth is used, HNWIs in the Middle East have a tendency to allocate more of their resources to personal property than to tangible assets and collectibles. Many HNWIs around the world now prefer to give their money to family and friends and charitable causes in their lifetime rather than as inheritance, the report revealed.
The second issue of the quarterly CSR Al Youm newsletter, released by Dubai Chamber of Commerce and Industry 's Centre for Responsible Business (CRB), marks the Sustainability Network's membership reaching 50 from just 2 in 2010. It also focuses on the members' sharing of their experiences on CSR, Sustainability and Corporate Governance to further support its development and adoption in the UAE. In its 'Sustainability Network Interview Series', the newsletter features Mr. Wasim Javed, HR Director, Middle East and Africa, TNT Express, who talks about his company's approach to CSR. The newsletter covers Engage Dubai's annual Give & Gain Day programme where business volunteers helped with everything from cooking classes at special needs schools to employability workshops for university students. Also, the newsletter profiles the CSR partnership in action of CHEP, Imdaad and Union Paper Mills to minimise waste to landfill and there is an article highlighting the environmental requirements of the Dubai Chamber CSR Label.
Bindu Ananth and Amit Shah recently published the book "Financial Engineering for Low-Income Households". The motivation of this book is to systematically compile principles from finance and economics theory and apply them to the context of design and delivery of financial services for low-income households. This is meant by the term financial engineering in this context. The biggest opportunity is in going away from standardized products to customized delivery. Financial engineering is essential to this customization because it provides the algorithms/rules for this customization. Therefore, in theory, each person can have a uniquely designed portfolio of financial services that reflect her growth and risk management needs. KGFS, a growing rural financial services company, has developed products and an operating model to meet the needs of low income households and to apply financial engineering.
Deloitte released its new Takaful report titled "The global Takaful insurance market: charting the road to mass markets". The report studies the emerging regulatory and practice challenges that will impact the Takaful industry, as well as assesses the business structures and strategies, market developments and growth trends globally. A roundtable was held in Bahrain in June, where Deloitte experts, national regulators, and executive Islamic bankers discussed the report and focussed on the regulatory and industry challenges specifically facing the Middle East Takaful market as well as identifying potential business strategies in the region. Latest industry data estimates that the global Takaful business will reach $20 billion by 2017. Ten key challenges were identified that would significantly impact the future of the Takaful industry.
The National Commercial Bank (NCB) recently signed an agreement with King Khalid Foundation to give financial donations to the best charity foundations that were able present a plan of a charity project. The aim of this initiative is to support training programs and build the capabilities of charity foundations’ staff to promote efficiency, effectiveness and performance, which will be positively reflected on the society. The list of wining projects included Qualifying the Adolescents project presented by Charity Society for Marriage & Family Care in Baha, Rehabilitation of Visually Impaired project presented by Ebsar Foundation, My Skill is Enough project presented by Albir Society Jeddah, and Qualifying the Job Seekers from Ensan Committee project presented by Charity Committee for Orphans Care (Ensan), Riyadh. Each foundation received a financial donation at the value of SR 200,000.
Alkhabeer Capital, a leading asset management and investment banking firm headquartered in Jeddah, Saudi Arabia, announced the appointment of Tariq Hayat as Chief Corporate Communication Officer. Tariq joins Alkhabeer Capital from Arcapita Bank where he had worked since 2003 in senior corporate communications and management roles before being appointed as Arcapita’s Head of Corporate Communications. His key responsibilities will be to direct Alkhabeer’s internal and external corporate communication strategies, in addition to delivering specific stakeholder engagement initiatives to support the company’s accelerated growth.
Venture Capital Bank successfully secured the acquisition of a prime boutique new-build freehold residential development in Mayfair Chambers, one of London's most eminent residential districts.. This investment opportunity comprises of a building currently being developed to house six luxurious residences. Construction of the development has commenced and delivery of the apartments is expected to be in April 2014. VCBank has been working on this development and investment opportunity for several months. The Bank has engaged Trowers & Hamlins - an international law firm- to conduct a full legal due diligence on the site and offer advice given the new changes in the tax regime addressing matters such as stamp duty land taxes, capital gain taxes, and annual tax on enveloped dwellings (ATED).
Tunisia has won $1.2 billion in funding from the Islamic Development Bank (IDB), aimed at backing industrial, agricultural and trade projects. The IDB funding line will include loans and grants, and will be for three years, with disbursements of $400 million each year until 2015. The IDB has also given Tunisia a financial guarantee to issue a sukuk worth $600 million before 2014. Tunis is also in talks with Qatar about the Gulf state making a deposit at the Tunisian central bank with easy conditions. The assassination in February of opposition politician Chokri Belaid triggered the worst street violence since the revolution. Elections expected towards the end of this year will create fresh uncertainty. The state budget deficit is expected to rise to around 5.9 percent of gross domestic product this year from 5.1 percent last year.
Tunisia's fledgling Islamic finance industry could take a 25 to 40 percent share of the country's financial sector in five years' time if necessary rules, consumer education and private investment plans materialize, according to a Thomson Reuters study. Currently, sharia-compliant business accounts for just 2.5 percent of the Tunisian financial sector. The study estimates that Islamic financial assets in Tunisia could reach $17.8-$28.5 billion by 2018, up from $1.4 billion at present. Some industry practices that are controversial among some Islamic scholars, like tawarruq or commodity murabaha, are generally being avoided in Tunisia, the study found. One boost for Islamic finance in Tunisia would be issuance of the country's first sukuk, which the government is planning. Islamic Development Bank (IDB) has given Tunisia a financial guarantee to issue a sukuk worth $600 million. Last week, the IDB extended said it would extend $1.2 billion in funding to Tunisia for industrial, agricultural and trade projects.
Al Madina Insurance Company is planning to float an initial public offering (IPO) in the fourth quarter of this year in an attempt to change its status to a Sharia-compliant takaful firm. As per the draft takaful regulation, insurance companies have to be public firms to function as takaful companies. The promoters will reportedly divest 40 per cent of their holding in the company in favour of investing public through the IPO, which will be a premium issue. Al Madina Insurance, which has branch operations in several parts of the country, has a capital base of OMR10 million. Besides, three other companies made similar proposals: Al Maha Ceramics, Sembcorp Salalah Power and Oman Arab Bank. Al Madina has received an 'in principle' approval from the Capital Market Authority for converting its status into an Islamic insurance firm and a final approval will be given only after the company lists its shares on the Muscat Securities Market (MSM).
Fitch Ratings has affirmed HSBC Amanah Takaful (Malaysia) Sdn Bhd's (HSBCAT) Insurer Financial Strength (IFS) rating at 'A-' with Stable Outlook and has simultaneously withdrawn the rating. The rating of HSBCAT is no longer considered by Fitch to be relevant to the agency's coverage. The rating reflects HSBC group's franchise value, distribution channel and management support. HSBC Holdings Plc (AA-/Stable) has a strong ability and willingness to provide it with continuing support. The rating also incorporates HSBCAT's conservative investment mix, healthy capitalisation, and prudent management. The rating is constrained by the takaful operator's modest size, and a limited track record amid a competitive and evolving takaful operating environment. Additionally, the company is challenged to manage its expenses effectively as it builds up its business portfolio.
Dubai Exports , the export promotion agency of the Department of Economic Development (DED), recently showcased the emirate's expertise and resources in Islamic economic services to the business community in Toronto and Vancouver across a series of seminars. The seminars, jointly organised by Dubai Exports and Borden Ladner Gervais LLP focussed on encouraging linkages between Islamic financial and advisory firms in Dubai and their counterparts in Canada. Participants in the seminar also discussed the changes required in Canada's taxation and regulatory system regarding Islamic financial products. Opportunities are especially seen in the connection of the sophisticated financial and business communities in Dubai with leading edge Canadian technology companies and entrepreneurs in such areas as clean tech, life sciences, advanced materials and information technology, which are all shari'a compliant.
In Sudan, Sharia-compliant microfinance is the government-mandated rule, not the exception. That’s because the country’s banking system went fully Islamic in the 1980s, legislating Sharia principles. In 2007, the Central Bank of Sudan established a dedicated microfinance unit to foster a conducive policy environment, a regulatory framework, and the intellectual, human, and financial capital to provide those services effectively. Moreover, the Central Bank introduced various Shariah-compliant products, such as musharaka, mudaraba, salam financing and istisna, to meet specific needs of potential customers. Banks were required to channel at least 12% of their total loan portfolio toward microfinance clients. Out of this have emerged several exciting programs that are offering early evidence that the country’s strategy is paying off.
Algeria hopes to stem high unemployment rates among its young population by promoting the development of micro, small and medium sized enterprises (MSMEs). Key to that effort, of course, is the provision of financial services. Therefore, the Algerian government set out to make a Sharia-compliant product available that is both affordable and scalable. In collaboration with several national and international institutions the Algerian Ministry for Industry, piloted one such product in the Ghardaia region of Algeria. Four years later, this musharaka product has provided new opportunities for 167 MSMEs. Given the success of this product, musharaka is now available through Al Baraka branches nationwide. The bank is also working with its nationwide branches to test other Sharia-compliant products, including, murabaha and qard hassan as well as Sharia-compliant micro-insurance products.
A U.S. judge Tuesday approved Arcapita Bank B.S.C.'s plan to gradually liquidate itself in a process that conforms with Islamic Shariah law, which generally prohibits borrowing money with interest. The Bahrain-based investment firm entered bankruptcy protection last year with a goal of restructuring itself but ended up with a plan to orderly liquidate its private-equity investments. The modified proposal solved several concerns from creditors, including creating a new entity that will retain the firm’s management, and setting a minimum valuation for the company’s remaining assets. Arcapita manages infrastructure, real-estate, private-equity and venture-capital investments that are compliant with Shariah.
In Tunisia, the development of Islamic banking and Islamic insurance primarily depends on the introduction of a law that is more in line with market needs and expectations. Still, Mahfoudh Barouni, an expert in banking and finance, believes that the imperfections of the existing law have not so far hindered the smooth development of Islamic finance. In the past, there were already laws governing the sector that had been drafted according to market needs, but this legislation did not actually govern the Islamic finance sector. Currently, there are texts that legislate Islamic finance and grant all Tunisians the freedom to choose between Western and Islamic finance. Speaking on the topic of Islamic insurance, the CEO of Zitouna Takaful, Makram Ben Sassi, recalled that this business has existed in Tunisia for 30 years. Yet, the real problem is that there is a lack of awareness and responsibility rooted in the mentality of Tunisians in general.
In India, there are only two fund houses, namely Tata MF and Taurus MF, which offer Shariah-compliant funds. Industry experts say that the major challenge in ethical funds is product awareness and its marginal market demand. These funds only cater to a particular section of society. Some experts also believe that the returns in Shariah funds are not very astonishing as compared to equity funds. Experts believe that creating awareness about these funds will help attract investors. Not only Muslims but also Hindu, Jain and other community might show interest after knowing the significance of these products, they added. The Taurus Ethical Fund was launched in 2009 and has benchmark of CNX 500 Shariah. The scheme has generated annualized returns of 20.97 percent since inception. The Tata Ethical Fund Plan A-G was launched in April 2001 and has given an annualized return of 21.36 percent. The benchmark of the fund is CNX 500 Shariah.
Islamic banks Al Khair and Khaleeji have set up a committee to study the feasibility of a merger, with any agreement subject to due diligence and approvals by shareholders and the regulator. Bank Al Khair, a Bahrain-based investment bank, expects its potential merger with local player Khaleeji Commercial Bank to help provide it with retail banking exposure and more stable revenues. A merger would create an entity with paid-up capital of about $500 million and assets in the range of $600 million to $1 billion. An independent firm is now finalising valuations for the two businesses. A deal would probably involve both cash and an exchange of shares. Bank Al Khair posted a first-quarter loss of $2.8 million, while Khaleeji had a profit of BD302,000.
Malaysia's BIMB Holdings Bhd has received approval from the country's central bank to begin talks with Lembaga Tabung Haji for the latter's 18.5 percent stake in Bank Islam, the country's oldest Islamic bank. BIMB, which presently owns 51 percent of Bank Islam, is also in the process of acquiring the 30.5 percent stake held by Dubai Financial Group. If it acquires both stakes, BIMB will control 100 percent of Bank Islam. Negotiations between BIMB and Lembaga Tabung Haji will be completed by the end of the year. BIMB's chief executive officer Johan Abdullah told reporters in May that the valuation of the Dubai stake was already determined, although a complete proposal had not been filed and the amount has not been disclosed.