Credit intermediation and stock markets have hugely expanded over the past half-century. Since the 1960s, credit by banks and other financial institutions to households and businesses has grown three times as fast as economic activity. Stock markets have expanded, too, but starting from a lower base and at a much slower pace, so that today their value equals 65% of GDP, a little more than half that of financial sector credit.
Improving the structure and composition of finance is as important as avoiding credit booms for the health of our economies. Facilitating stock market funding through ***lowering the costs of equity floatation and making taxation more neutral between debt and equity, is linked with higher GDP growth (Figure 1). Hence, encouraging changes in the mode of finance, away from debt and towards equity,*** would be particularly powerful in raising economic activity. [page 2 link below]
As salamu alaikum,
The best wishes for you and your families for the month of Ramadan. May your fast and prayers be accepted inshallah.
Michael Saleh Gassner
Central Bank of Nigeria (CBN) has advised stakeholders in the financial services sector to adopt sustainable practices to strike a balance between economic development and the protection of the ecosystem. Speaking at a workshop on sustainable finance, CBN Governor, Mr. Godwin Emefiele, represented by his special adviser on sustainable banking, Dr. A'isha Usman Mahmood, tasked the stakeholders to include environmental protection in addition to maximising profit and returns on investments. The apex bank hinged its advice on the positive nexus between environmental, social management and improved economic performance, which it said were being keyed into by financial institutions worldwide.
HSBC Amanah Malaysia Bhd has launched its Islamic Socially Responsible Unit Trusts, the first of its kind in the Islamic banking landscape in Malaysia. The company said the unit trusts are tailored for customers who want to invest and at the same time make a difference in the communities they live and work in. A portion of profits earned from the Socially Responsible Unit Trust proposition will be channelled to the Teach For Malaysia foundation. A contribution of RM10 will be made for every customer placement below RM50,000 into selected funds of the unit trusts and will double to RM20 for placement above or equal to RM50,000. Chief Executive Officer Rafe Haneef said the unit trusts may provide a good return on investment for customers while extending the benefit to children who suffer from education inequity in Malaysia.
Some UAE and Gulf travellers are drawing up plans for short visits to Greece this summer, to pick up choice real estate assets on the cheap. Valuations on Greek realty are down to “10 cents to the dollar” from their 2007 peaks. Gulf investors can tick any number of reasons for picking up a Greek real estate deal now, and they need not be high risk-addicts to head that way. There are some choice valuations being offered up for prime assets as cash-strapped Greek developers/investors seek exits. Hospitality related properties figure prominently, as uncertainty shrouds its tourism industry. Barring a few exceptions, asset prices inevitably recover, although the time taken to recover may vary widely.
Effective regulation and supervision of Islamic banks achieved through a dedicated unit of the Central Bank of Oman (CBO) is positive for the sector as it should strengthen early detection of risks and support growth, Fitch Ratings said. The central bank inaugurated its specialist department for overseeing Islamic banking last week. The department will build up resources and expertise and centralise all aspects of Islamic banking regulation and issuance. Although the industry represents just over five per cent of total banking assets in Oman, it could grow rapidly, as it has in neighbouring countries where market shares range between 20 to 30 per cent, the ratings agency said. The global ratings agency added that a limited number of Omani corporates have issued sukuk and the country's banks may follow.
The Thomson Reuters Global Sukuk Index is at 118.12333 points, up from 117.85307 at the end of last month and 115.79726 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 116.96750 against 116.56666 at end-June and 113.69014 at end-2014. Some of the sukuk in the pipeline are: Malaysia's Sarawak Energy plans to issue 1 billion ringgit ($264 million) of sukuk. The company will offer tenors of 10 and 15 years and for the first time, 20 years. The Bahrain government announced a July 2-7 retail offer of 200 million dinars ($530 million) of 10-year sukuk ijara. Saudi Arabia-based Arab Petroleum Investments Corp mandated four banks for a debut international sukuk issue this year, off a $3 billion sukuk programme.
A government Islamic lease (Sukuk Al Ijara) issue floated to raise BD200 million ($530 million) is open to direct subscription by retail investors, the Bahrain Bourse (BHB) announced. Both Bahraini and non-Bahraini investors can subscribe to the issue through registered brokers at BHB. Each sukuk has a par value of BD1 and the minimum subscription is 500 sukuk (BD500). The securities have a tenure of 10 years with July 9 as the issue date and July 9, 2025 as the maturity date. The subscription ends on Tuesday, and investors will be able to trade the sukuk in the secondary market at BHB post listing, expected to be on July 26. The expected annual return (rent) on the securities is five per cent, to be paid every six months till maturity.
Saudi Arabia's billionaire Prince al-Waleed bin Talal repeatedly invoked the name Bill Gates this week when he pledged his entire $32-billion fortune to charity. He also cited Warren Buffett, who has pledged his wealth to the Gates foundation. The Saudi and the American philanthropists are already collaborating on an effort to eradicate polio, among other things, the prince noted. His foundation, Alwaleed Philanthropies, will focus on empowering women and youths, providing disaster relief, eradicating disease, and bridging cultures both inside and beyond the Arab world. The work will be conducted in communities regardless of religion, a decision the prince defended more than once during his news conference. He described the timeline for his philanthropy as "open-ended".
Emir H H Sheikh Tamim bin Hamad Al Thani, also Chairman of Supreme Council for Economic Affairs and Investment, has issued directives to privatise some government and semi-government-funded investment companies. A council meeting, chaired by the Emir, examined results of a study on investment firms partially funded by government and semi-government bodies. Deputy Emir H H Sheikh Abdullah bin Hamad Al Thani, also Vice-Chairman of the council, attended the meeting along with Prime Minister and Interior Minister H E Sheikh Abdullah bin Nasser bin Khalifa Al Thani, who is Executive Member of the council, and other members.
The Islamic Research and Training Institute (IRTI) is pleased to announce the launch of the Malaysia Islamic Finance Report 2015, which is the latest in the Islamic Finance Country Reports (IFCR) series. You can download your copy of the Malaysia Islamic Finance Report 2015 here: http://www.irti.org/English/News/Documents/406.pdf You may also find the introductory video in YouTube: https://www.youtube.com/watch?v=IuJd-hTTnCE
A group of Indonesian Islamic banks launched on Thursday a standard contract template for sharia-compliant repurchase agreements, aiming to broaden the liquidity management tools available in the sector. The standard will serve as an alternative to interest-based repurchase agreements. Currently Islamic banks in Indonesia rely on tools provided by the central bank, such as an Islamic overnight deposit facility known as FASBIS, while the new agreement would standardise bank-to-bank transactions and help ensure they are cost-effective. An initial group of 18 Islamic banks and Islamic banking units are signatories to the master agreement, which allows use of government-issued Islamic bonds as collateral while tenors can be of no more than one year.
Saudi Prince Alwaleed bin Talal announced Wednesday his plan to give away his entire fortune in the coming years. Educated in California, Alwaleed is thought to be the 20th-richest person in the world, according to Bloomberg, with a fortune of $30.5 billion. He has pledged to give away even more than that, $32 billion, though no time frame was set. Alwaleed’s charity group, Alwaleed Philanthropies, has worked with the Bill & Melinda Gates Foundation and the Carter Center, founded by Jimmy Carter. Alwaleed cites among his causes: health promotion, electricity to remote villages, building orphanages and schools, disaster relief and empowering women. Some have suggested that his emphasis on charity and women’s rights is a tactic to endear his ventures to Westerners. However, few deny his generosity.
Alinma Tokio Marine Company submitted a request to the CMA to approve its capital increase by way of rights issue valued at SAR 250,000,000. The capital increase will be approved in the Company's extraordinary general assembly meeting, which will be determined by the Company’s board of directors at a later date and should be held within six months from the approval date. CMA's Board of Commissioners has issued its resolution approving Alinma Tokio Marine Company’s capital increase request, which is to be conducted in accordance with the tradable rights framework. The rights issue prospectus will be posted and made available to the public at a later time. Investors should carefully read the prospectus, which includes detailed information on the company, the offering and risk factors.
During the World Economic Forum (WEF) in South Africa in June, business and political leaders from multiple African countries including Kenya, Nigeria, and South Africa among others, have emphasized the need for collaboration between regulators in order to promote financial inclusion globally. Nigeria’s minister of Finance, Ngozi Okonjo Iweala stressed the need for cooperation between banking and telecommunication regulators to contribute to further financial inclusion through the use of mobile banking. One of the stated goals of those advocating for financial inclusion is for individuals to keep their money within the formal financial system instead of holding it in cash.
President Abdel-Fattah al-Sisi aims to slash a subsidy bill, mostly for food and energy, that ballooned to about 8 percent of economic output last fiscal year. Instead, money will be directed to those who need it most – eventually, about 18 million Egyptians, the poorest 20 percent of the population. After years of political turmoil the government is eager to make sure they’re spared the impact of spending cuts. Yet it’s also under pressure from investors to trim one of the region’s biggest budget deficits. Targeted handouts are a way of achieving both goals. The program called Takaful or Solidarity gives cash to families on condition that their children attend school and undergo regular medical checkups. Another plan, Karama or Dignity, covers the elderly and the disabled.
Qatar International Islamic Bank and QNB Capital signed an agreement in April with China-based Southwest Securities to develop Shariah-compliant finance products in the country. Seven months after Hong Kong sold its debut sukuk, China is exploring Islamic finance for projects from hospitals to metro stations, according to London-based Dome Advisory, which is working with a government-owned fund in Shanghai to finance five projects. Ningxia, an autonomous region in northwest China where a third of the 6.5 million population are Muslim, plans a $1.5 billion sukuk sale. However, country will need to make more regulatory changes to promote Islamic finance.
The Omani central bank has established an independent department to handle Islamic banking. The new department will handle all Islamic banking matters, though the existing examination and surveillance departments will continue their supervision of banks. The creation of a separate Islamic banking department appears to clear the way for two steps seen as critical to the long-term development of the industry: issuance of sovereign Islamic bonds, and the introduction of sharia-compliant money market tools. The government has said it plans to sell its first sukuk, an issue of OMR 200m ($520m), in coming months, while a central bank task force has been studying Islamic money market operations.
IFAAS (Islamic Finance Advisory & Assurance Services) has launched 'Oxygen', its CSR programme that aims at improving the environment through Islamic finance. The programme, complementing IFAAS's general CSR policies, features 2 major components: planting new trees on annual basis, dedicated individually to IFAAS clients; and creating new woodland for each project that IFAAS completes. The programme is aimed at replacing the wood consumed by IFAAS in form of paper and locking up some of the carbon created while serving its clients worldwide. To this end, IFAAS is supporting the Woodland Trust who will be planting the trees at various native woodland sites across the UK. The Woodland Trust will provide IFAAS with a certificate each year to confirm the amount of woodland created, and how much CO2 has been locked up.
With more than 30 per cent of young Arabs unemployed, social entrepreneurship must be considered to reduce welfare costs in the region by empowering community members to solve social, economic and political issues that affect them. At a time where the MENA is seeing the drastic effects of political and economic instability, it has never been more pressing for people of the region to be encouraged to look towards new beginnings and the reconstruction of society. Despite coming from different backgrounds, social entrepreneurs all have stories that have influenced them to make transformative social changes that they hope will one day have a global impact.