Abu Dhabi Islamic Bank (ADIB) has closed an Dhs302m ($82m) syndicated Islamic financing deal for Emirates National Factory for Plastic Industries L.L.C. (ENPI). This financing will be used in conjunction with ENPI's recent acquisition of 100% share of ENPI Packaging Division by Saudi Printing & Packaging Company. ADIB acted as the Mandated Lead Arranger, Sole Bookrunner, Investment and Security Agent Bank for the deal. Other banks that participated in the financing deal included Al Hilal Bank, Mashreq Al Islami as Mandated Lead Arrangers, ADCB, Ajman Bank and FGB as Lead Arrangers.
Bankers have long past expressed their disappointment in the seeming inability of the International Islamic Liquidity Management Corporation (IILM) to issue its debut sukuk. After much speculation and expectation about a debut sukuk launch last April 6, IILM will eventually issue the Islamic bond in the third quarter of 2013 – a $500 million issuance. However, the Saudi Arabian Monetary Agency (SAMA) abruptly divested the IILM’s equity subscription last Friday. But what impact the Kingdom’s departure will have on the future of the IILM remains unclear. IILM also signed signed a Memorandum of Understanding (MoU) with the Asian Development Bank (ADB) in Doha on Saturday to strengthen cooperation between the two organizations.
An estimated 1.28 million clients around the world use Sharia-compliant microfinance services, a four-fold increase since 2006. The number of providers offering these products has doubled since 2006. Ninety-two percent of Sharia-compliant loans are concentrated in East Asia/the Pacific and Middle East/North Africa regions. Indonesia is home to the largest outstanding portfolio at $347 million. Despite this growth, the sector is limited in terms of the number of service providers, product offerings, and overall outreach. Experts say the most important factor is to drive down costs so that clients don’t have to choose between their religion and their wallet.
Ng Nam Sin, Assistant Managing Director of the Monetary Authority of Singapore (MAS), pointed out that, despite the expiry of certain tax incentives, Singapore is still looking to develop the city's Islamic finance capabilities. To ensure that level playing field between Islamic finance and conventional financial products, Islamic finance activities will continue to be incentivized alongside conventional finance activities under Singapore's other existing schemes. However, others have remarked that Singapore is now lagging behind Malaysia, which is establishing itself as the major Islamic financial hub in the region.
Shareholders in Kuwait Finance House (KFH) have agreed to a 20 percent capital hike, The plans to increase its capital are part of the bank's five-year strategic plan. New shares will be issued at 100 fils ($0.35) per share plus a premium of 400 fils. KFH shares are now trading at 780 fils, down 1.27 percent on the Kuwait bourse. According to Al Watan newspaper, a capital increase could boost KFH's paid-up capital to 348.5 million dinars ($1.24 billion) from 290.4 million dinars.
Gatehouse Bank announced its expansion in South East Asia following the acquisition of the law firm SJ Berwin's offices in London, in collaboration with a flourishing Malaysian Sovereign Wealth fund in September 2012. Richard Thomas OBE, will relinquish his current responsibilities as Chief Executive Officer and will take over a new role with the Bank to spearhead this SE Asia business expansion and operations. Mr Fahed Boodai, Chairman has been appointed as interim Chief Executive Officer.
Several airlines have indicated that they are exploring the possibilities of financing new fleet acquisitions and expansion through the issuance of sukuk or other suitable Shariah-compliant financing instruments. Bankers in the UAE and Malaysia stress that sukuk are ideal for the airline and aviation industry because of the match between the long-term nature of the assets with a regular income stream from passenger traffic. However, aviation finance industry experts emphasize that sukuk is not necessarily a better option, it is simply a different option to find a source of financing.
IFC has announced the investment of $5 million equity in Gulf African Bank, one of Kenya’s two Islamic Banks. The bank will use IFC’s financing to increase finance for retail and corporate customers, develop programs for women entrepreneurs and extend more services to small and medium businesses. Jamal Al Hazeem, Chairman of Gulf African Bank, welcomed IFC’s decision to take up a 15% shareholding stake in Gulf African Bank. In addition to the equity investment, a further $3 million trade line will be made available to Gulf African Bank under IFC’s Global Trade Finance Program.
Dana Gas said it has collected a total of Dhs271m ($73.7m) in receivables so far this year. Payment delays were behind Dana Gas's default on a $1bn convertible sukuk last year on Oct. 31, the sukuk's maturity date. Dana Gas added it was on track to complete the Sukuk refinancing process in the second quarter of 2013. The sukuk-holder meeting and final shareholder meeting to approve the refinancing transaction will be held on April 23 2013.
Gulf bond issuers are tapping new bond structures and investors as the energy-rich region embarks on big infrastructure projects, bolsters ties with Asia, and capitalizes on investor appetite for its highly rated paper. With global interest rates low, bond buyers around the world are hunting for higher yields and are buying Gulf bonds. They are attracted by the region’s mostly high-rated sovereign credits and yields that are often higher than other similar-rated issues in other jurisdictions. They are being paid a premium for perceived geopolitical risk in the Gulf. Total Gulf bond issuance in 2012 rose to $42 billion from $25 billion a year earlier, including sukuk. Sukuk sales in 2012 nearly quadrupled to $21.3 billion.
Linklaters has hired KPMG global Islamic finance head Neil Miller as its new global Islamic finance head, based in Dubai. Miller joins the magic circle firm from accountancy firm KPMG. He joined KPMG two years ago from Norton Rose, having developed a leading Islamic finance practice at the firm over around 20 years. Norton Rose moved Miller out to Dubai from London in 2009 in a bid to strengthen its Middle East practice. He previously headed Norton Rose’s Bahrain office from 1997 to 2000.
Dubai Multi Commodities Centre (DMCC) has announced the inaugural Commodity Murabaha transaction on its DMCC Tradeflow platform. The transaction took place between Noor Islamic Bank and Commercial Bank of Dubai, marking the official launch of the DMCC Tradeflow Islamic product portfolio. According to Ahmed Bin Sulayem, Executive Chairman, DMCC, the DMCC Tradeflow pioneered the use of an electronic central registry of commodity ownership in Dubai. The commodities available on DMCC Tradeflow include oil products, foodstuffs and base metals and if required these goods can be inspected easily by Shari’ah scholars.
Although there are some Islamic venture capital (VC) associations, VC funds and VC Banks, there's a lack of VC conferences, articles and high profile funds and investments in information, technology and communication or bio-technology. An opportunity exists for Islamic banks to deploy part of excessive proprietary risk capital to venture capital in financing some of the major concerns of the región, e.g. desert farming or alternative energy. Islamic finance must think about financing ventures beyond simple returns to depositors and shareholders, to include important local healthcare and the stewardship of the environment. In this manner, it can actually lead conventional finance in the region for invention and innovation.
By the end of this year, the Islamic Economy Higher Committee will come out with a unified Islamic legislation to help encourage and support Islamic products in the emirate. The committee will also work on creating bodies or committees authorised to certify and check on the Islamic products. However this will be left optional, the Committee’s member and Director General of Dubai Department of Economic Development, Sami Al Qamzi said.
Islamic endowments, known as awqaf, receive donations from Muslims to operate specific social projects, such as mosques, schools and welfare schemes. Over the past few decades, awqaf have amassed a vast array of assets, from real estate to cash holdings, equities and even valuable books. However, the management of these assets has failed to keep up with their expansion. Basic changes in asset management methods could improve awqaf yields globally by between 1.5 and 2 percentage points. It can therefore be a source of long-term liabilities that the industry is desperately seeking.
Investment Corporation of Dubai (ICD) has launched the syndication of its new $2 billion conventional and Islamic financing facilities. The purpose of the facilities is to refinance the $2 billion five year tranche of the original $6 billion three and five year facilities signed on August 21, 2008. The new facilities will have a tenor of five years. The $4 billion tranche which was due in August 2011 was repaid in full. ICD will be hosting a bank meeting in Dubai during the week commencing March 24, 2013.
Ministry of Finance's Assistant Undersecretary for Economic Affairs, Mr. Yusuf Abdullah Humood said that the Bahraini private sector should benefit from the services provided by the Islamic Corporation for Insurance of Investment and Export Credit (ICIEC). The corporation's benefits include support of exports and provision of services to exporters, banks, investors and other economic establishments. Moreover, the influx of overseas investments is increased and the necessary insurance for new projects and exports of goods is provided. Last year, the ICIEC approved to cover 6 projects of Bahraini investors and banks at the value of USD 273 million.
Many advocates of Islamic banking suggest using gold as a replacement for the money created through the interest rate mechanism. While Islamic banks could be allowed to use gold deposits (by way of selling gold for cash), they must return the depositors’ gold or keep it for safe custody. Furthermore, Islamic banks can not extend credit to their customers as they will not be able to use the depositors’ gold (by selling it for cash) to offer financing to those who may need it. This will, in turn, have implications for economic growth. It is important that the governments take a proactive role in implementing this proposal. As the government of Malaysia is developing tools for liquidity management for Islamic banks, gold dinar may not be an entirely abstruse concept.
The real-estate arm of Qinvest, the Qatari investment bank will focus on the United States and its home market and avoid Europe this year. This is because competition makes the European market tougher. With targeted returns of up to 6 percent and over, the bank's plan is to focus on assets in U.S. retail - such as single-tenant units on New York City's Fifth Avenue - and in the less liquid and less crowded Qatari market. Qinvest is in the process of taking over Egyptian investment bank EFG Hermes , though regulators have yet to approve the deal.
In 2009 and 2010, one survey found that 97 percent of people in Russia who were mainly Muslim or from an Islamic background were interested in using an Islamic bank. Of that 97 percent, 40 reside in Moscow. Though not formally allowed to be practiced in America or Russia, it's still growing at an annual rate of around 15 to 20 percent. However, there are still a few roadblocks to clear before Islamic finance can achieve its true potential in Russia. Islamic banking regulations and laws have to be introduced, then job creation, investment diversification, and foreign investment could serve to give the Russian economy a boost.