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Securities Regulation: USA-SEC Adopts Rules to Permit Crowdfunding

Dear Readers,

The US Securities Exchange Commission has issued recently press release regarding equity crowd funding and its regulation:

"Washington D.C., Oct. 30, 2015 —
The Securities and Exchange Commission today adopted final rules to permit companies to offer and sell securities through crowdfunding. The Commission also voted to propose amendments to existing Securities Act rules to facilitate intrastate and regional securities offerings. The new rules and proposed amendments are designed to assist smaller companies with capital formation and provide investors with additional protections."

Equity funding is discriminated threefold in finanical markets despite most people assume that a market economy would leave choices to market participants. The three key problems are: 1) Risk weighting of equity finance a multiple higher than debt finance, thus making it unattractive for banks to provide equity finance and consequently destabilizing economies with excess debt. 2) Tax deductibility of interest expense. 3) Entry barriers to the securities markets to raise equity.

Faysal Bank to lauchen Sharia-compliant operation

The board of directors of Faysal Bank has decided to covert make the bank’s operations Sharia compliant from conventional, but the snail’s pace migration is raising questions about its success in a highly competitive regime and in times when Islamic banking is expanding at a fast pace.

The bank is operating its 277 branches with 63 dedicated Islamic Banking branches having vision to migrate overall operation into full-fledged Islamic banking in next three to four years but its strategy is not being reflected into its plan but seems confusing with its offering to customers and investment in government papers. In a talk show “Aap Aur Karobaar” on Business Plus Tv, Host Khalil Ahmed and Banking Analyst SN Arif discussed business, operations and strategy of bank and its success in its peer in the banking industry.

Ivory Coast launches Sovereign Sukuk

Five year 150 billion CFA issuance sukuk priced at a profit rate of 5.75%
The Ivory Coast is to become the latest state to issue a Sovereign Sukuk as it today launched its debut five year 150 billion CFA issuance sukuk priced at a profit rate of 5.75%. The addition of the Ivory Coast displays the continued growth of the Islamic finance market into Africa and represents a highlight in quiet year for sukuk issuance’s with total issuance volumes down considerably due to tightening of liquidity in traditional Islamic financial markets of the Gulf and South East Asia.
The sukuk is being arranged by the Islamic Corporation for Private Sector Development (ICD). The ICD signed an agreement in April 2015 for the implementation of a five-year Sukuk programme for 300 billion CFA to be issued in two equal phases of 150 billion CFA each. A road show was held in Saudi Arabia from 14 to 19 November and followed a recent upward revision of the Ivory Coast’s sovereign rating by Moody’s from B1 to Ba3.

Value of global Islamic finance assets projected to reach $3.2 tn by 2020

Global Islamic finance assets had an estimated value of $1.8 trillion in 2014 and are expected to almost double by 2020 to reach $3.2 trillion, according to the ICD Thomson Reuters Islamic Finance Development Indicator.

The projections come ahead of the 2015 World Islamic Banking Conference (WIBC 2015), which will be hosted by Thomson Reuters, the world's leading provider of intelligent information for businesses and professionals, and The Islamic Research and Training Institute (IRTI), an affiliate of the Islamic Development Bank Group.

The Islamic Development Bank and the National Bank of Kyrgyzstan are planning to launch a joint Islamic bank in the republic

The head of National Bank of Kyrgyzstan Tolkunbek Abdygulov and the president of the Islamic Development Bank (IDB) Ahmad Mohamed Ali Al-Madani had discussed the prospects of jointly opening an Islamic bank in Kyrgyzstan.
Additionally, they had talked about the other relevant things such as the perspectives of Kyrgyz Republic economy development, the establishment of a joint Shariyah compliant commercial bank and the possibility of opening an IDB representative office in Kyrgyzstan. The discussion took place during the International Financial conference “Islamic Finance: Meeting Global Aspirations” in Kuwait, on November 11, 2015.

Tolkunbek Abdygulov also had a meeting with Christine Lagarde, the Managing director of the International Monetary Fund, in which they discussed further course of cooperation between Kyrgyzstan and the IMF and drew a plan on joint actions during the financial crisis. Ms Lagarde also noted the concerted actions of Kyrgyztan’s National Bank and the government on monetary and fiscal policies.

Linar Yakupov is on the list of the most influential figures in Islamic finance

Linar Yakupov is marked out in ISLAMICA 500, the unique project of ISFIN, the largest consulting organization for the Islamic financial markets.
In ISLAMICA 500, data on leading experts in area of Islamic economy and the "halal" industry from around the world are published. The peculiar guide contains curriculum vitae about each of experts, whose efforts and achievements formed the basis of development of the Islamic economy on a global scale. The encyclopedia contains information on pioneers of the Islamic finance world, Muslims and non-Muslims, men and women who represents a range economy sectors: finance, science, business, politics, the international relations, the law, mass media and the capital markets – all the areas that exert influence on Islamic economy.

Islamic Finance: A new role for Islamic banks?

Baiza Bain had the opportunity to attend the recent World Islamic Economic Forum.
“It was a surreal experience as I had the opportunity to interact with a number of international delegates on areas that are outside my realm of Islamic finance. The various conversations I had certainly allowed me to have a different perspective on my area of practice. It made me realise that there are many ways in which Islamic finance could evolve to keep up with the rapidly changing times.
So, in what way has Islamic finance tried to keep up with the times? I remember having a conversation with an old friend who highlighted a unique initiative that is currently being worked on. This initiative was actually announced under Budget 2015. Called the Investment Account Platform (IAP), its aim is to diversify the roles that are currently being played by the Islamic financial institutions by way of adding on the responsibility of being an investment intermediary.

KAUST and ICD collaborate on venture capital fund for KSA

The King Abdullah University of Science and Technology (KAUST) and the Islamic Corporation for the Development of the Private Sector (ICD), the private sector arm of the Islamic Development Bank Group (IDB), in collaboration with Anfaal Capital agreed to establish a Saudi Arabia-focused venture capital fund.
The joint initiative aims to promote and foster the development of the domestic venture capital market in Saudi Arabia. The initiative leverages KAUST’s expertise in new technologies, as well as the ICD SME Program’s experience in the development and management of investment vehicles.
The Fund will provide venture capital (VC) funding for high-tech start-ups located in Saudi Arabia and lead early-stage financing rounds attracting local investors and international venture capitalists. Furthermore, it will invest in sectors that are strategic for the region and nurture entrepreneurship and technological innovation, stimulating the creation of high-value jobs.
The Fund will search for unique and innovative venture capital opportunities and provide the “smart and hands-on capital” needed to start and then sustain these companies.

The world needs the moral and human side of Islamic finance: Turkish minister

Islamic finance is based on growth of assets, not financial engineering, and this organic growth makes it different from Western debt constructs, Justice and Development (AK) Party parliamentarian and economist has said.
Ibrahim Turhan, member of Turkish parliament for AK Party from Izmir, made the remarks in an interview with Anadolu Agency on the sidelines of the Second International Islamic Finance and Economics conference in Istanbul on Thursday.
Turhan, who is also an economist and former chief executive officer of Borsa Istanbul, said: “One of the principal causes of financial crisis of 2008-2009 was the vast market that had grown up for securitized instruments.

IFSB to develop standards for Islamic capital markets, insurance

The Kuala Lumpur-based Islamic Financial Services Board (IFSB) plans to develop guiding principles for capital markets and insurance, seeking to encourage regulatory consistency across new and established markets, its secretary general said.
The new guidelines from the 188-member IFSB, one of the main standard-setting bodies for Islamic finance, will complement existing ones which cover commercial banking.
A wider set of standards could assist the International Monetary Fund which plans to include Islamic finance in its surveillance work, known as the Financial Sector Assessment Program (FSAP).
"Before the FSAP there has to be a set of core principles and that really is the instrument that we feel is going to point the way and facilitate consistency across borders," IFSB secretary-general Jaseem Ahmed told Reuters.
The standards on capital markets and Islamic insurance (takaful) would complement regulatory guidance from the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS).

Islamic insurance products come to market

The US and Canada are expected to follow London's lead with the development of Islamic insurance products. Not just because of the burgeoning market for Shariah-compliant financial products worldwide but also because of increasing demand for old-fashioned transparency.

So says James Bagshawe, a member of the executive committee of the recently established Islamic Insurance Association of London (IIAL) and COO of UK-based Cobalt Underwriting.

Earlier this month, the London Market pointed to the growth of commercial Shariah-compliant products as an important example of the innovation required by London to maintain its position as a global insurance hub. At the inaugural conference of the IIAL in Dubai, chief executive of the International Underwriting Association (IUA), Dave Matcham, said that Islamic financial activity in London is developing a growing maturity and said the IUA and IIAL are cooperating to support the trade in Islamic insurance, promoting standards and transparency.

New bond scheme for Mideast, N. Africa World Bank: World Bank official

A new international bond and grant scheme to help countries dealing with the fallout of war and instability in the Middle East and North Africa should be in place by spring, a senior World Bank official said.
In a Reuters interview, Hafez Ghanem, the World Bank's vice president for the Middle East and North Africa, said the type of investment targeted by the plan - education, infrastructure and jobs - was vital to addressing the region's refugee crises. He said that humanitarian aid alone was not enough and the alternative was “one or two lost generations” in a region with 15 million refugees or internally displaced people.

SUKUK PIPELINE - Issue plans around the world

Following are major Islamic bond issues in the global pipeline.
The Thomson Reuters Global Sukuk Index is at 117.30055 points, down from 118.24280 at the end of last month but up from 115.79726 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 115.33833 points against 116.64293 at end-October and 113.69014 at end-2014.

Powerhouse partners from across global Islamic financial ecosystem joining World Islamic Banking Conference

More than 1200 distinguished guests from more than 45 countries and 300 organizations participating this December, Bahrain

Key players from the global Islamic finance industry will be participating with the 22nd annual World Islamic Banking Conference (WIBC) 2015, taking place on the 1st, 2nd and 3rd of December at the Gulf Hotel, Bahrain. Focusing on 'New Realities, New Opportunities', WIBC will play host to more than 1200 leaders including Central bank governors, regulators, C-suite bankers & asset managers, policy makers, Fintech entrepreneurs and contemporary thought leaders.
WIBC 2015 will host 5 central bank Governors and deputy governors and feature speeches and discussions by the Governor of the Central Bank of Bahrain, H.E. Rasheed Al Maraj, the Executive President of the Central Bank of Oman, H.E. Hamood Sangour Al Zadjali, Deputy Governor of the State Bank of Pakistan, Riaz Riazuddin and the Deputy Governor of the National Bank of Kazakhstan, Nurlan Kussainov.

GCC banks to seek regional opportunities for expansion

Banking and financial services sectors in the GCC are actively seeking opportunities beyond their borders triggering a number of cross border mergers and acquisition deals in recent years.
Domestic markets focus of GCC banks has limited the scope for expanding their business. While this has benefited local banks in increasing their banking penetrations in the economies that they are based in significantly, it did take away from the potential to grow outside their boarders and broaden their geographic reach. This is an important point particularly as domestic markets will have limits to their potential. Expanding beyond their borders is one channel for GCC banks to add value to their business models.

PIA closes over-subscribed structured syndicated Islamic facility

Pakistan International Airlines Corporation (PIA) recently announced the successful closure of its US$ 120,000,000 Secured Syndicated Islamic Facility.
Citibank and Mashreq Bank PSC acted as joint initial mandated lead arrangers, bookrunners and coordinators for the facility. The transaction received an overwhelming response from the market and was over-subscribed.
The syndicate comprised of a diverse set of banks spread across GCC and South Asia. The participating banks included Askari Bank Limited, National Bank of Pakistan, Noor Bank PJSC, United Bank Limited and Warba Bank KSCP as mandated lead arrangers and bookrunners, Bank Islam Brunei Darussalam Berhad as lead arranger and Bank Alfalah Limited as arranger. This transaction once again reiterates the multitude of synergies developing between the Middle East and Pakistan.
The facility carries a tenor of three years and will be utilized to support the Company’s ongoing strategic growth plans and general corporate purposes.

Shari’ah scholars and industry stakeholders meet at IFSB-ISRA Shari’ah roundtable

The Islamic Financial Services Board (IFSB) and International Shari’ah Research Academy for Islamic Finance (ISRA) have successfully organised a Shari’ah Roundtable themed, ‘Financial Safety Nets: Striking a Balance between Shari’ah Requirements and the Soundness of the Islamic Financial System’. The Roundtable was held on 5 November 2015 in Kuala Lumpur, Malaysia.
The Roundtable aimed to provide a platform to Shari’ah scholars, legal practitioners, regulators and market players for having in-depth deliberations on key aspects of financial safety nets such as Lender of the Last Resort (LOLR) and Deposit Insurance Schemes from the Shari’ah perspective.
Over 70 delegates from nine jurisdictions among the IFSB members and non-member organisations – representatives from market players, regulatory bodies, and international agencies – Shari’ah scholars as well as academia attended this Roundtable.

JP Morgan clients buy into Islami Bank

JP Morgan's clients have bought around 3 % shares of Islami Bank Bangladesh Ltd or IBBL over the past several years, officials said. The US-based banking firm bought the shares for its institutional and indi-vidual investors. The shareholding empowers JP Morgan to hold a post in IBBL's board of directors as the law allows a shareholder to become a director in a publicly-listed company in Bangladesh with a stake of 2 %.
“The market plunge that began in December 2010 in Bangladesh has attracted foreign investors to buy IBBL shares,” MA Mannan, managing director of IBBL, told The Daily Star.
“JP Morgan's investment in IBBL shares reflects our strength.”
The current market price of IBBL's total shares stands at Tk 4,508 crore -- at over Tk 28 a share as of yesterday. Presently, IBBL has nearly 161 crore shares, with a face value of Tk 10 per share. If the current market price of IBBL shares is taken into account, JP Morgan's holding of 3 percent shares is valued at over Tk 137 crore. JP Morgan is one of the largest asset and wealth managers in the world with assets under its management worth $1.7 trillion (as of December 31, 2014).

Bumpy road for S'pore Islamic finance

SINGAPORE's nascent Islamic finance industry is finding it tough going amid volatile financial markets and depressed oil revenues.
So far this year, there has been only one sukuk, or Islamic bond, deal in a fairly brisk fixed-income market which saw 136 bond deals worth S$17.7 billion sold in the first nine months of 2015 - Malaysia's mortgage lender Cagamas Bhd sold a S$163 million sukuk in September. The lack of a natural pool of Islamic funds in secular Singapore is a major barrier to sukuk launches, according to Clifford Lee, DBS Bank head of fixed income.
"And so you try to sell in other markets which need education (leading to) higher costs; if you're a strong issuer, the conventional bond market is more than ready to meet your needs," explained Mr Lee.
Islamic finance bans interest, products with excessive uncertainty, gambling, short sales and the financing of prohibited activities considered harmful to society. The strongest indicator that it's not smooth sailing for Islamic finance players here came in September when DBS Group Holdings said it will be winding down its Islamic banking unit, which it said has been unable to achieve the necessary economies of scale.

Malaysian telco issues $500m Islamic bond for Myanmar towers investment

Malaysian telecoms giant Axiata Group on November 13 issued a US$500 million Wakala Sukuk, or Islamic bond, to fund its investment into a Myanmar towers business. This is the largest-ever corporate bond issued with proceeds to be invested into a Myanmar towers business, demonstrating considerable investor confidence in the frontier market. Telecoms towers companies have led the way in terms of innovative cross-border financing into Myanmar – last year Pan Asia Majestic Eagle completed the first cross-border, non-recourse financing arrangement in the country.
A spokesperson for Axiata told The Myanmar Times yesterday that around $125 million of the bond’s proceeds will be used to fund the acquisition of a majority share in Myanmar Tower Company (MTC) under Axiata’s wholly owned subsidiary Edotco Group.
The remaining funds will be used for “general corporate purposes,” she said, though did not disclose whether or not this would include capex for MTC’s Myanmar rollout. In the bond’s prospectus the use of proceeds is listed as “general corporate purpose/other”.

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