A consortium of Gulf-based banks has announced the successful closing of a $230.5 million and a euros 115.3 million syndicated dual-currency Murabaha financing facility for Turkish Bank Asya. Launched at $225 million, the facility was oversubscribed to close at $382 million equivalent with participation from 28 banks from across the globe. The facility carries a profit rate of 125 bppa over the relevant benchmark. The proceeds from the facility will be used by Bank Asya to expand its financing activities in Turkey. ABC Islamic Bank, Barwa Bank, Emirates NBD Capital, National Bank of Abu Dhabi, Noor Islamic Bank and Standard Chartered Bank were the Initial Mandated Lead Arrangers and also the Bookrunners for the deal.
The Nigeria Deposit Insurance Corporation (NDIC) said yesterday that it has assessed the deposit liabilities of Jaiz Bank Plc, and that in a couple of weeks, the bank will start paying premium as insurance cover for its depositors. NDIC Managing Director/CEO Alhaji Umaru Ibrahim said the premium collected from the bank would be invested in non-interest bearing instruments. A sensitisation workshop for NDIC solicitors was organized to educate the legal team because excessive litigations remained a major challenge to developing formidable deposit insurance system in the country. According to him, other challenges are the lack of proper understanding of the distinction in the legal status of NDIC as liquidator and deposit insurer by legal practitioners, the court and the public at large.
Sheikh Ahmed bin Saeed al-Maktoum, advisor to Dubai's ruler, has said the emirate may issue another sovereign bond in 2013. He also said the government is looking at alternate means to repay its debt if asset sales don't materialise. When asked if an alternative to asset sales was in place, he confirmed that they were considering it. However, he could not specify what, since it's confidential information because of the restructuring.
The Capital Market Authority is finalizing a regulatory framework which will allow foreigners to directly own stocks in Saudi Arabia, though the market has no need for liquidity from international investors. Foreign investment is attracted to come to the market for the technical expertise and human capacity. Indications are that foreign appetite is strong to invest in the largest regional exchange, which could add greater depth and breadth to the market and ultimately benefit all participants, Furthermore, large institutional investors could push for greater disclosures and transparency which will pave the way for Saudi equities to be included in widely followed emerging markets indices. Following this, the next steps would be the introduction of new instruments such as REITs, options and warrants, and covered shorts. An efficient and well-regulated market should be the eventual goal.
According to Omar Al Mardi, Managing Director, Bahrain Financial Harbour, Bahrain depends on direct foreign investment. However, when there is political instability there is risk of having little foreign investment. Bahrain Financial Harbour ("BFH") has recently signed a 7 year BD90.5 million (US$ 240 million) Ijara facility for the Financial Center Project with several banks. The transaction was subject to Shariah Law and to English law. With this financing, the intention is to complete the infrastructure systems and facilities in Bahrain and to support the businesses within the Financial Harbour complex to eventually become the business location of the choice in the Middle East, Al Mardi said. Within the next six months to a year BFH will seek new targets and projects, he added.
Bank Nizwa and INCEIF signed a Memorandum of Understanding (MoU), under which the institutions will collaborate to jointly provide structured training and development initiatives for Omani nationals working in the Islamic Finance Industry. The MoU was signed at the Oman Islamic Economic Forum (OIEF), held recently at the Al Bustan Palace. The OIEF, the brainchild of Amjaad Development and Bank Nizwa, took the theme of 'The Islamic Economy: a Culture of Excellence'. INCEIF, The Global University of Islamic Finance, was set up by Bank Negara Malaysia (Central Bank of Malaysia) to develop human capital for the global Islamic finance industry. The collaboration aims to provide thought leadership training to the Omani Islamic finance industry in order for the regional and global industry to benefit.
Azzad Asset Management recently hosted Dr. Mehmet Yesilyaprak of Turkiye Finans Bank at its headquarters in Washington, D.C. Yesilyaprak gave the Azzad staff an update on the banking sector in Turkey and met afterwards with Azzad management to discuss areas of future collaboration. The Azzad Wise Capital Fund invests in deposits and notes from Turkiye Finans Bank, among other Islamic banks. The Fund also invests in sukuk. As of March 31, 2013, deposits from Turkiye Finans Bank represented approximately 13% of the Fund's holdings. Portfolio Manager Jamal Elbarmil recently highlighted the contribution of Turkey's Islamic banking sector to the Azzad Wise Capital Fund's first quarter results, stating that exposure to bank deposits from the four Turkish Participation Banks, including Turkiye Finans Bank, helped the Fund outperform its benchmark for the period.
Kuwait-based Asiya Investments has launched an Islamic trade finance fund with $20 million in seed capital, aiming to cater to small Asian manufacturers. Asiya aims to fill a gap left by Western banks that are scaling back their trade finance business, making credit scarce for small and medium-sized firms. Due to the world financial crisis and higher capital requirements under upcoming Basel III regulations, about 20 percent of the trade finance business could be opened up to non-bank institutions. Asiya's fund aims for a net return to investors of above 5.0 percent and it has $55 million worth of assets in the pipeline, with capacity for approximately $400 million. The firm identifies clients such as denim and latex manufacturers through its Singapore-based joint venture partner, EuroFin Asia.
As Malaysians welcome their newly elected and returned Members of Parliament as well as state assemblymen, there is hope that people develop a better understanding and acceptance regarding different aspects of Islamic finance. People might better understand the different financial institutions that are undertaking Islamic financial activities in the market. Moreover, they might stop accusing Islamic financial institutions in general of merely emulating and replicating the products and services of conventional financial institutions. Legislators play a significant role in creating the right platform for a more inclusive Islamic financial market and we have not communicated enough on their roles in making Islamic finance in Malaysia the best in the world all these years.
Qatar Islamic Bank is not expecting to issue more Islamic bonds before 2014, according to its Chief Executive Officer Bassel Gamal. The CEO said that there seems to be enough liquidity currently. Last October, it tapped the bond market with a US$750 million five year sukuk bond issue. This is part of the overall sukuk programme of the bank valued at US$1.5 billion. Gamal added that local currency sukuks would be expected to be issued in the coming years. He also said that many countries encourage local issuances of sukuk, such as Saudi Arabia and Malaysia.
Indonesia’s plan to shift 11 trillion rupiah ($1.1 billion) of pilgrim’s savings into Shariah- compliant lenders is a booster-shot that will help narrow the gap with neighboring Malaysia. Deposits set aside by those planning a Hajj visit to Mecca in Saudi Arabia will be shifted by the Ministry of Religious Affairs from non-Islamic banks within a year of announcing the policy. The funds are equivalent to 7.3 percent of the 150.8 trillion rupiah in savings at Islamic lenders, less than a sixth of Malaysia’s 310 billion ringgit ($102 billion). The entire Hajj fund totaled 55 trillion rupiah in March, with about 35 trillion rupiah invested in non-tradable sovereign sukuk and 9 trillion rupiah already placed at Islamic lenders.
Industry experts and analysts said Abu Dhabi World Financial Market (ADWFM) and Dubai International Financial Centre (DIFC) will complement each other in attracting investments to the UAE. The focus of the ADWFM will be on energy, oil and gas, renewable energy, carbon credits and other new products, benefitting from the fragile recovery in the USA and European markets. Abu Dhabi will differentiate this centre in terms of capabilities in annual operational costs, prompting businesses from the region and from the EU and US to invest in the UAE market.Both DIFC and ADWFM will be housing regional headquarters for many of the world’s biggest banks and finance firms as well as energy companies. The ADWFM will have a positive impact on the UAE economy regarding per capita income and unemployment.
The standards for Islamic asset management should be raised so that it can compete with conventional peers. according to Fajar Capital Group CEO Iqbal Khan. He said though the Islamic asset management industry remains marginal and fragmented and continues to lag behind conventional systems, its characteristics to compete in the market through values, ethics and authenticity will prove to be advantageous in the future. He added that global Islamic finance assets were expected to hit US$1.8 trillion in 2013, and Islamic asset management is expected to grow around US$300 million to US$500 million this year. He said Malaysia played a leading role, with a well structured approach, in the Islamic wealth management industry and hoped that Malaysia will export its success story to the rest of the Islamic world.
Bombay Stock Exchange (BSE) and S&P Dow Jones Indices have announced the launch of the S&P BSE 500 Shariah index, the first new index resulting from the strategic partnership formed between the two companies in February of this year. The S&P BSE 500 consists of 500 of the largest, most liquid Indian stocks trading at the BSE. The index represents nearly 93% of the total market capitalization on the BSE and covers all 20 major industries of the economy. S&P Dow Jones Indices has contracted with Ratings Intelligence Partners (RI) to provide the Shariah screens and to filter the stocks. BSE and S&P Dow Jones Indices announced on February 19, 2013, a strategic partnership to calculate, disseminate, and license the widely followed suite of BSE indices.
The Saudi Capital Market Authority (CMA) board has approved Aljazira Takaful Ta’awuni Company’s (ATT) initial public offering (IPO) of 10,500,000 shares, representing 30 percent of its share capital, amounting to SR 350 million. The offer price will be SR 10 per share and the subscription period will be from May 13 to 19. ATT's chairman Abdulmajeed Al-Sultan said the step will improve the company’s financial position and enable it to realize its strategic objectives to become the local and regional leader of Shariah-compliant cooperative insurance. Despite being still under establishment, Aljazira Takaful Ta’awuni is considered to be one of promising companies in the cooperative insurance sector in Saudi Arabia.
The Islamic Development Bank has decided to withhold the award of the IDB Prize in Islamic Economics for 2013. According to the Bank, the decision made in the light of the recommendation of the Selection Committee was unanimous after examination of 24 nominations. The IDB established the Prize in 1988 to recognize, reward and encourage activities of outstanding merit to promote Islamic Economics, Banking and Finance. In the last 25 years, 34 researchers, bankers, economists, Shariah scholars and institutions have been awarded the IDB Prize, which alternates annually between Islamic Economics and Islamic Banking & Finance.
Prime Minister David Cameron is looking to Southeast Asia to boost the UK’s role in Islamic finance. It’s the Bank of England he needs to convince first, say Shariah-compliant lenders based in Britain. Central bank rules require lenders to hold easy-to-sell assets as protection against short-term funding shocks. Most are off-limits for Islamic banks because they pay interest. Cameron visited Malaysia last year to build on a pact to promote bilateral engagement in the industry and created an Islamic Finance Task Force in March. Britain’s six Shariah-compliant lenders will struggle to grow unless regulators adapt bank liquidity rules or highly rated borrowers issue sukuk in pounds.
In the past, European arrangers and investors dominated issuance of international bonds from Turkey. But in recent months the Gulf has started to play a major role, for commercial and possibly even political reasons. About $10 billion of last year’s Turkish issuance came in the final four months of the year, and was dominated by banks. The Gulf is central to the current stream of issuance. One reason for the shift is Turkey’s move into Islamic finance. The fact that three of Turkey’s four Islamic banks are affiliates of Gulf banks has also helped steer sukuk issuance to the region. Another factor behind the trend is Turkey’s increasing emphasis on developing political and economic ties with the Gulf. Pricing is also a factor because yields from Turkey are generally higher for similar credit ratings.
Less than one per cent of investment products in Australia are Shariah compliant, suggesting huge opportunities for fund managers in this segment. The Muslim Community Co-operative Australia (MCCA) manages a Shariah compliant property income fund which has just surpassed $30 million in assets under management. MCCA chairman Dr. Akhtar Kalam said this growth shows strong support for IBF products within Australia. MCCA is also reported to be in advanced discussions with an unnamed Middle Eastern company with a view to setting up a $180 million mortgage fund, a $150 million property fund, a $180 million Sukuk fund and a $5 million asset-leasing fund. Kalam said that this deal could signal the start of an exciting growth story driven by overseas interest in investment in Australia.
In the past, European arrangers and investors dominated issuance of international bonds from Turkey. But in recent months the Gulf has started to play a major role, for commercial and possibly even political reasons. One reason for the shift is Turkey’s move into Islamic finance. The fact that three of Turkey’s four Islamic banks are affiliates of Gulf banks has also helped steer sukuk issuance to the region. Another factor behind the trend is Turkey’s increasing emphasis on developing political and economic ties with the Gulf. Pricing is also a factor. A compression of yields in the Gulf over the past 18 months has reduced the returns from bonds issued within the region.