The markets for Islamic banking, insurance and sukuk bonds have all seen solid growth in recent years, but the sharia-compliant fund industry remains tiny. According to Hasan Al Jabri, chief executive of Saudi Arabia’s Sedco Capital, the growth of sharia-compliant investment has been stunted by a reputation for a lack of diversity, poor performance and high fees. Since May 2012, Sedco Capital has been building what is believed to be the largest sharia-compliant fund platform in Luxembourg. Its five vehicles hold $900m of assets. Sedco is currently launching two more vehicles. Mr Al Jabri emphasized that their investments are responsible, help creating value for the economy and jobs.
The CMA Board has issued its resolution approving Bank Albilad’s request to increase its capital from SAR (3,000,000,000) to SAR (4,000,000,000) through issuance of bonus shares. One bonus share will be issued for every (3) existing shares owned by the shareholders who are registered in the shareholders registry at the close of trading on the day of the extraordinary general assembly. Such increase will be paid by transferring an amount of SAR (1,000,000,000) from retained earnings account to the Company's capital. Consequently, increasing the Company's outstanding shares from (300,000,000) shares to (400,000,000) shares, by an increase of (100,000,000) shares.
Following approval from the Securities and Commodities Authority, Dubai Islamic Bank (DIB) has published its formal offer for the shares in Tamweel. Tamweel shareholders will receive 10 new DIB shares for 18 Tamweel shares. They will receive a copy of the offer, the offer statement and the acceptance form by mail and can accept until 5pm on Saturday, March 16. DIB’s offer is subject to final approval from its shareholders and will be presented to them at an extraordinary general meeting to be held on March 3.
Political tensions after the Arab Spring still weigh on Bahrain's banking industry which is deterring some investment and inflows of money, and making it harder for Bahrain to compete with other centers such as Dubai. However, a mass exodus of financial firms from Bahrain has not happened and local banks are proving resilient. Moreover, Bahraini authorities have mounted an active campaign to persuade financial institutions to stay in the country. The central bank of Bahrain has also been active in recent months in trying to strengthen financial institutions, asking them to increase capital, encouraging revenue diversification and, in some cases, merge. Nevertheless, the future health of Bahrain as a banking market will not be assured as long as the political unrest continues.
Regulatory reforms are underway to help Malaysia’s Islamic banking industry expand further. According to the country’s master plan for capital markets development, Malaysia aims for a 40 per cent share of Islamic domestic financing by the year 2020 and intends to make the industry more international. Therefore, regulators are preparing to release a new legal framework for Islamic finance this year. However, private-sector banks need initiatives of their own, including steps to address a leadership vacuum and to strengthen their overseas strategies.
Alderman Roger Gifford, the Lord Mayor of The City Of London, said that London is becoming increasingly important in the Islamic finance world. A lot of infrastructure exists to service Islamic finance, however it is nothing more than a niche product in London which represents less than 1 per cent of the entire market. Gifford is therefore promoting further cooperation between Dubai and the wider UAE market with London. This can help Dubai to become a global capital of the Islamic economy, according to the Lord Mayor.
The seminar titled "Islamic Microfinance - Approaches & Practices: A Case Study of Akhuwat" was held in Pakistan last Wednesday. Various initiatives of Islamic microfinance in Pakistan, their philosophies and methodologies were highlighted in the seminar and the case of Akhuwat Foundation was discussed as a case study. It was also observed that Islamic microfinance was still in its evolution, and speakers therefore gave recommendations for further growth and strengthening the operations of Islamic microfinance institutions.
During the last ten years, Pakistan-based Akhuwat, the world’s first completely interest-free microfinance program, has disbursed $30 million to over 1 million people, without charging any interest. The company now has more than 1,000 regular employees and offices in 105 cities of Pakistan across the country. Their mission is to challenge the interest based system and challenge Islamic finance to evolve out of its current complacency with interest-mimicking products towards products based on the foundational principles of equity, sharing, and gifting and therfore fight poverty.
Al Khonji Real Estate & Development (Aqar) signed today that it has hired the services of Shariyah Review Bureau (SRB), to advice and supervise its future course of actions and transactions in light of Shari'a principles. Mohamed Al Khonji, Chairman/CEO, said that it has decided to spread its wings in the real estate market while ensuring it is truly Shari'a compliant. The assignment of Shariyah Review Bureau is expected to help developing an enterprise-wide Shari'a compliant framework, which will cover compliance with Islamic finance across all function streams in Aqar.
Shariah-compliant exchange-traded funds (ETFs), which provide low-cost exposure to conventional equity markets while strictly adhering to Shariah investment principles, are benchmarked to indices that apply a series of trade activity and financial screens to weed out non-compliant companies. The screening process is typically overseen by leading Islamic scholars and results in a portfolio of securities in adherence with Shariah law. The major difference compared to conventional indices is the application of financial/leverage screens. By excluding companies with high levels of debt, the resultant portfolio has lower financial risk and superior credit fundamentals.
The Libyan General National Congress (GNC) looks to amend regulations of the financial services sector and to introduce Islamic financing into Libya for the first time. Currently there are a number of discrepancies between a new law about Islamic finance and some of the existing supervisory legislation. This has resulted in confusion that is likely to put a brake on the development of this sector, as investment companies will not be willing to develop new products. Clear common objectives, separation of powers and clarity of written rules and regulations are necessary to raise the competitiveness of Lybia's domestic banking markets, develop new Shariah-compliant financing products and provide a secure approach to the growing needs of the Libyan customers.
The Qatar Financial Centre (QFC) has a tax system that enables sukuk transactions to be carried out without excessive tax costs, according to a study conducted by the experts Mohamed Amin, Salah Gueydi and Hafiz Choudhury. The study reviewed the tax treatment of four common Islamic finance structures ‘murabaha’, ‘sukuk’, ‘salaam’ and ‘istisna’ in the eight Mena countries. Mr. Amin said the study shows clearly that the additional transactions required by Islamic finance are at risk of being subject to taxes, and can make Islamic finance transactions prohibitively expensive. Only Turkey and the QFC have modified their tax laws to facilitate Islamic finance.
Indonesia, the country with the world’s largest Muslim population, is developing its Islamic finance industry. It’s speeding up government approvals and fixing a fragmented regulatory system as part of an effort to reach more unbanked Muslims and increase the portion of Islamic assets in the banking system to 15 percent by 2017, from 4.3 percent. Currently, Indonesia ranks fifth in the amount of outstanding Islamic bonds, the number of Indonesians using Islamic financial products increased 36 percent over the past year. However, that’s still only 13.4 million people in a country of 208 million Muslims, which shows Indonesia's growth potential regarding Islamic finance.
Egypt's Principal Bank for Development and Agricultural Credit (PBDAC) is expanding its Islamic finance activities. The bank which has 18 branches offering Islamic finance, plans to open further six branches offering Islamic services in 2013. Furthermore, PBDAC is launching Shari’ah-compliant retail banking this month with a portfolio of EGP 50 million ($7.5 million) that can be raised to EGP 100 million next June based on demand, according to Abdel Rahman Al Kafrawi, head of Islamic transactions at PBDAC. The new Islamic services will reportedly cover areas including purchases of durable goods and agricultural equipment, the setting up of clinics and medical laboratories, and the financing of education fees.
United Gulf Financial Services - North Africa has announced the launch of its 'Themar Investment Fund', with a capital of TND 50 million (approximately US$ 32 million). The fund targets small and medium Tunisian institutions seeking financing in different business sectors that support the Tunisian economy. Priority is given to existing and restructured projects in urban areas. According to Mohamed Fekih, Chairman of UGFS - North Africa, the fund will contribute to boost and diversify the Tunisian economy as well as increase Foreign Direct Investment and further develop Islamic banking in the country.
Bahraini GFH Capital is considering selling a majority stake of Championship club Leeds United which it has owned since December 21. GFH bought Leeds from Ken Bates for £17million plus payments based on reaching the Premier League within four years. A multi-national consortium led by former Hull City executive Adam Pearson has made proposals to buy either 51 per cent or all of GFH's shareholding, which values Leeds at around £25m. According to a GFH statement, they received an offer for a majority stake that has not been accepted, although they have been seeking strategic investors.
Kuwait's Capital Market Authority (CMA) published a statement on Tuesday about self-regulation by Islamic financial institutions to ensure compliance with Shariah standards. The statement recommends to appoint a sufficient number of legal observers in accordance with the size of the institution and to provide full transparency in their communications with compliance officers. The CMA also urged companies’ sharia boards to take more care to issue rulings that were in line with each other.
Speakers at the seminar titled "Agriculture and Micro Insurance: Experience in Afro-Asian Region" discussed the need for Shari'ah-compliant financial services, including Takaful insurance. One speaker said that many poor Muslims are financially excluded because of both involuntary and voluntary reasons. Therefore, providing Shari'ah-compliant financial services is needed to accelerate financial inclusion. At the same session, the speakers also discussed about how Takful (Islamic) insurance can solve challenges in the micro-insurance sector.
A mass awareness campaign to increase public trust and confidence in Islamic banking, to be led by the Islamic banking industry with the support of State Bank of Pakistan (SBP), is being launched shortly. According to Deputy Governor of SBP Kazi Abdul Muktadir, the Islamic banking industry is still facing many challenges which include low awareness and understanding of public at large about Islamic banking and its distinction over conventional banking. The campaign is expected to lead to further acceleration in the growth of Islamic banking.
Technical report for free download regarding the Agricultural Development Fund (ADF), the first lender to the agricultural sector in Afghanistan in over 25 years, which was initially designed to be a wholesale lender utilizing existing financial institutions as conduits to reach farmers.
While the original design did not emphasize on the provision of Islamic financial products, there was the implicit assumption that with the help of technical assistance and grants some financial intermediaries would do so.