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FinTech can help Islamic finance sector to innovate

FinTech has spurred the evolution of the Islamic finance industry over the last year. It helps to address the need for simplification and innovation in the sector. It also provides a great opportunity for the sector to streamline services and attract new segments, with the key being digital-savvy millennials. Dubai and Dubai International Financial Centre (DIFC) are key players in the Islamic finance sector. DIFC and Dubai Financial Market have launched the first Dubai Sustainable Finance Working Group to create a sustainable financial hub in the region in line with the UAE Sustainable Development Goals 2030. They are encouraging the use of green financial instruments and responsible investing.

At least one in ten billionaires have donated for COVID-19 relief

More than 10% of the world's nearly three thousand billionaires made a philanthropic commitment in support of COVID-19 response and relief efforts between January and May. According to the Billionaire Census 2020, billionaires who have donated were more likely to be in the tech industry and were more likely to be under the age of 50, to be self-made and to be wealthier. The share of women was larger among COVID-19 donors and those women were more likely to be self-made. The seventh edition of the annual study also found that the number of billionaires globally rose 8.5% in 2019, to 2,825, while their combined wealth grew 10.3%, to $9.4 trillion.

FinTech can help the Islamic finance sector to innovate and grow

FinTech has spurred the evolution of the Islamic finance industry over the last year. It helps to address the need for simplification and innovation in the sector. It also provides a great opportunity for the sector to streamline services and attract new segments, with the key being digital-savvy millennials. Dubai and Dubai International Financial Centre (DIFC) are key players in the Islamic finance sector. DIFC and Dubai Financial Market have launched the first Dubai Sustainable Finance Working Group to create a sustainable financial hub in the region in line with the UAE Sustainable Development Goals 2030. They are encouraging the use of green financial instruments and responsible investing.

Islamic Development Bank Deploys #Sukuk to Counter Corona Impact

The Islamic Development Bank Group (IsDB) set aside $2.3 billion for its Strategic Preparedness and Response Programme for its member countries to tackle the economic fallout of the corona pandemic. OIC member states may partake in Digital Country Presentations, a new global gateway that offers investors, governments, and institutions an overview of upcoming trade and investment opportunities. SMEs can open a virtual 'stall' on Made in Series, an open platform that enables smaller businesses to present products, projects, and services to a global audience. Earlier this month, the IsDB issued its first-ever sustainability sukuk for social projects. According to Group President Dr. Bandar Hajjar, the latest sukuk placement allows the IsDB to tackle the aftermath of the pandemic with strong interventions in affected countries and sectors.

Global #sukuk market: A window of opportunity is opening

According to S&P Global Ratings, total sukuk issuance volume for the full year 2020 will be lower than in 2019. Central banks have already taken measures to boost banks' liquidity in core Islamic finance countries, so they are unlikely to issue sukuk this year. They want banks' increased liquidity to reach corporates, thereby minimizing the risk of a long-lasting economic downturn. The difficult economic environment has led to higher financing needs for sovereigns, but most of them are turning to conventional markets due to the complexity of issuing sukuk. The number of defaults among sukuk issuers with low credit quality will likely increase, which will serve to test the robustness of legal documents for sukuk.

The impact of Saudi Arabia's VAT increase on Islamic financial institutions

Value added tax ("VAT") was pioneered by the European Union, but is gradually spreading worldwide. Saudi Arabia recently tripled its rate of VAT. While VAT in Saudi Arabia is only a couple of years old, the Saudi VAT law follows widespread international precedent by also exempting financial services. Accordingly, all financial institutions will suffer a hit to their profit and loss account. All purchases of goods and services which are subject to VAT increase in cost by 9.5%. This may lead to an increase in bad debts in the Saudi banking sector. Islamic financial services are not expected to suffer more (or less) than conventional financial services.

S&P Global expects #sukuk issuance to touch $100bn in 2020

Sukuk issuance volume is expected to total around $100bn for 2020, about 40% lower than in 2019. The issuance volume fell 27% in the first six months of this year. S&P Global Ratings noted the number of defaults among sukuk issuers with low credit quality will likely increase, which will serve to test the robustness of legal documents for sukuk. Also, some sukuk may be issued to tackle social issues as economies recover, rather than solely to serve investors' financial interests.

UAE Islamic Banks: 2019 Results Dashboard

According to Fitch Ratings, Islamic financing and deposits accounted for 27% of total sector financing and deposits at end-2019. Growth in Islamic financing slowed significantly in 2019. Asset-quality metrics deteriorated in 2019, particularly due to pressures in the real estate and contracting sectors, but also in entertainment, hospitality, and retail and wholesale trade. The operating profit/risk-weighted assets ratio also deteriorated due to increased financing impairment charges. Capital ratios have increased over the past four years, while core capital ratios remain below those of conventional banks but the difference has narrowed.

#Qatar- #Merger was a smooth affair: Barwa Bank Chairman

Barwa Bank held yesterday its Ordinary General Assembly and approved all the agenda of the meeting. The annual general meeting was presided over by the Bank's Chairman and Managing Director Sheikh Mohammed bin Hamad bin Jassim Al Thani. It was held via video conferencing. The focus of the meeting was on completing the full merger process with International Bank of Qatar, in addition to statistics and financial results for the year 2019 as well as the Bank's future plans. The merger took place in a record time that did not exceed 11 months. Barwa Bank recorded remarkable growth, as its total revenue increased by 43% to reach QR3.3bn, while total assets reached QR77bn, supported by financing assets that exceeded QR51bn.

Sustainable development for real economy: Some lessons from the 12th ICIEF

The 12th International Conference on Islamic Economics and Finance (ICIEF) was held in Istanbul this month. It was organized by Istanbul Sabahattin Zaim University, Islamic Research and Education Institute (IRTI) and the Islamic Development Bank (IDB). Because of the pandemic the conference committee decided to organize it virtually. 14 eminent personalities and Islamic finance experts shared their thoughts on the future of Islamic economics and finance. Altogether, 132 papers out of some 472 submissions from 40 different countries were selected for presentation. Some papers focused on implementing a circular economic model that facilitates environment-friendly production and consumption. The circular economy concept is very much aligned with the concept of sustainable development and may support achieving the United Nations' SDGs by 2030. Presenters repeatedly underscored that the Islamic financial system can be a major driver in the transformation toward a circular economy.

The Hajj Pilgrimage Is Canceled, and Grief Rocks the Muslim World

The cancellation of the Hajj pilgrimage sent shock waves of sadness and disappointment across the Muslim world. Performing the pilgrimage at least once for those who are physically and financially able is one of the five pillars of Islam. Making the trip is a sacred milestone for the world’s 1.8 billion Muslims. The Saudi government announced on Monday that no pilgrims from outside the kingdom could perform the hajj this year. On Tuesday, Saudi officials narrowed the order, saying that only about 1,000 pilgrims would be permitted this year, a tiny fraction of the 2.5 million who came last year. The cancellation weighs particularly heavily on older Muslims who have been waiting for years to go in hopes that they can fulfill their religious obligation before death.

My Say: Financing Covid-19 stimulus packages with GDP-linked #sukuk

The fiscal cost of fighting the economic fallout of the pandemic has been great for each nation. Many governments have already pledged billions in grants to support fiscal stimulus packages. Through moratoriums and debt relief programmes, capital that would have otherwise been used to pare down debts will instead be utilised by vulnerable groups and SMEs to support their expenditures in times of reduced income. These expenditures will in turn contribute towards GDP growth, save jobs and limit unemployment. But in order to do so, governments have to dig deep into their reserves. GDP-linked sukuk is one way to convert debts into equity repayments based on the GDP performance of the country. GDP-indexed securities can be viewed as desirable vehicles for international risk sharing and for avoiding the disruptions arising from formal default.

NBB diversifies its Murabaha service to clients by offering #Sukuk-based #Murabaha facility

The National Bank of Bahrain (NBB) announced its subscription to Bahrain Bourse’s (BHB) newly introduced Murabaha service, which will be used by the Bank when transacting in Islamic Commodity Murabaha financing. NBB is one of the first banks in the Kingdom to execute a transaction using the new fully Shari’ah compliant service. The service employs Government of Bahrain Islamic Ijara Sukuk, whereby the lender in the financing transaction buys the Sukuk from the CBB and after the transfer of the ownership, sells them to the borrower, with a deferred sell as the underlying commodity.

Religion Meets Profit Generation in a Slew of New Faith-Based ETFs

Wahed Invest launched its first exchange-traded fund in the U.S. in July 2019. In June 2020, money manager Global X filed to launch a bond fund aligned to Catholic values. The surge in religious ETF offerings has come alongside the boom in responsible investing, often referred to by the shorthand ESG, for environmental, social, and governance. Global assets in ETFs under the ESG category have almost doubled in the past year, now reaching more than $110 billion. Wahed FTSE USA Shariah ETF tracks an index compiled by the FTSE Russell, which works with a board of experts that determines each company is compliant. Wahed’s ETF has seen inflows of about $35 million since its July 2019 launch.

Sharjah Islamic Bank lists USD500m #Sukuk on Nasdaq Dubai

A USD500 million Sukuk has been listed by Sharjah Islamic Bank (SIB) on Nasdaq Dubai. The capital raised will support SIB’s activities and strategic development. The five-year Sukuk was subscribed 7.2 times by regional and international investors with 150 investors showing their interest. It brings the total value of SIB Sukuk listings on Nasdaq Dubai to USD2 billion following listings of 500 million US dollars each in 2016, 2018 and 2019. SIB’s latest USD500 million Sukuk listed on Nasdaq Dubai on 23rd June 2020.

Not enough Shari’ah experts, lack of tax neutrality hinder Islamic banking in PH

One of the challenges of developing Islamic banking in the Philippines is that there are not enough Shari’ah scholars or Islamic finance experts. The Bangko Sentral ng Pilipinas (BSP) also noted the lack of tax neutrality as a challenge. In order to have a clear information campaign, the BSP issued the latest FAQs or "Frequently Asked Questions". The BSP also issued "Simplified and concise discussions on lslamic banking fundamentals" that cover the following major points: core features of the lslamic banking law; accessibility of lslamic banking to both Muslims and non-Muslims; key distinctions between conventional and lslamic banking; and requirements for establishing lslamic banks or lslamic banking units (IBUs) in the Philippines.

Al Salam Bank-Bahrain tops key performance indicator rankings for GCC banking sector

Al Salam Bank-Bahrain (Al Salam Bank) has achieved the highest reduction in non-performing financing (NPF) amongst 55 GCC listed banks in 2019. According to KPMG, the Bank also ranked sixth in the region for Capital Adequacy Ratio (CAR), with a strong standing of 20.9%. The KPMG report notes that the region’s positive results were coupled with an increased focus on digitisation. Al Salam Bank has come to be recognised as one of the key institutions driving the digitisation of financial services in Bahrain. Al Salam Bank is continuing the successful roll-out of its three-year strategy, focused on giving customers a virtual branch and an onboarding app that enables clients to open their accounts within minutes.

#Indonesia is finally waking up to Islamic finance

Despite its potential in sheer numbers of underbanked Muslims, Indonesia has been a slow starter in Islamic finance and is about a decade behind Malaysia. Only in the last few years, there have been some visible steps to support Islamic finance and lift its market share in terms of asset volume beyond the current 6%. The government of Indonesia on June 17 issued its latest Islamic bond, a $2.5bn global sukuk, amid strong interest from investors especially from other Asian countries and the Middle East. The sukuk was issued in three tranches, one of which was a five-year green sukuk worth $750mn. Thomson Reuters sees high future potential for foreign direct investment in Indonesia’s Islamic banking industry, for both the retail and the corporate sector.

BusinessJUNE 23, 2020 8:06 AM AESTShare World Bank Approves $US500 Million to support Morocco’s financial and digital inclusion reforms

The World Bank approved a US$500 million Financial and Digital Inclusion Development Policy Financing (DPF) program, which will support key policy reforms to promote digital transformation. The current DPF seeks to improve financial inclusion and access to more competitive digital infrastructure and services. In addition to promoting microfinance, the program will support access to foreign currency for startups. The DPF also paves the way for the Intelaka entrepreneurship program by supporting reforms conducive to startups’ development and creating new asset classes for early-stage financing for innovative enterprises.

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