Africa

IMF warns #Kenya of loopholes in Islamic banking #regulation

The International Monetary Fund (IMF) has warned that the rapid growth of Islamic finance in Kenya is happening without adequate protection of depositors. Despite the fact that the Shariah banks are already offering loan products, Kenya is yet to refine its prudential regulations to cater for Islamic banking. Kenya is also yet to come up with a Shariah-compliant deposit insurance scheme and is continuing to manage deposit insurance premiums in a single pool for all banks. This situation could complicate compensation of depositors if a bank offering conventional and Islamic products collapses. According to the IMF, Kenya should seek to bring clarity to the grey areas in Islamic finance as it drafts amendments to the banking law as promised in the 2017/18 budget.

The #Sukuk Investment Opportunity

The #Nigerian Debt Management Office (DMO) is accessing the local market for N100 billion through Sukuk. The first Nigerian Sukuk is a 7-year tenor debt instrument and will go on sale from June 28, 2017, for three days via book building. It will be traded on the Nigerian Stock Exchange (NSE) and the FMDQ Securities Exchange OTC platform. The bond will target retail and institutional investors, while First Bank and Islamic wealth manager Lotus Capital will act as managers for the sale. According to DMO, the introduction of Sukuk is not only a way of raising capital for the government and promotion of greater financial inclusion, it is also part of the plan to fast track infrastructure development. The current manager of DMO, Dr. Abraham Nwankwo will be leaving office at the end of June and the Sukuk issuance is seen as his parting gift.

#Nigeria plans $328mln debut #sukuk sales this month - DMO

Nigeria's Debt Management Office (DMO) announced the sale of its initial $328 million sovereign sukuk in the local market. The proceeds will be used to finance road projects in the country. The bond will be traded on the Nigerian Stock Exchange and also on the FMDQ over the counter platform. The sale will be managed by First Bank and Islamic wealth manager, Lotus Capital, and will aim for retail and institutional investors. Africa’s second largest economy intends to borrow about $10 billion from debt markets to fund a budget deficit aggravated by lower oil prices. It also targets concessionary sources to clear its funding needs and expects to issue N20 billion ($62million) green bond after raising a $1.5 billion Eurobond in the first quarter.

ICD Extends $5 Million Line of Finance Facility to Arab Gambian Islamic Bank

The Islamic Corporation for the Development of the Private Sector (ICD) and Arab Gambian Islamic Bank (Agib) have entered into a Joint Strategic Collaboration to finance the private sector in The Gambia. The financing agreement for the amount of USD5 million was signed by the CEO of ICD, Khaled Al Aboodi and Muhammed Jah, Chairman of Agib Bank. The collaboration will focus on developing the private sector, supporting the local economy and promoting Islamic Banking in the country. CEO of Agib Bank, Nuha Marenah, assured ICD of Agib Bank’s resolve to contribute to the socio-economic development of The Gambia. He also said Agib Bank has the capacity, both in terms of technology and human resources to manage the line of financing to the total satisfaction of all stakeholders.

#Nigeria May Become IsDB Regional Hub for Africa

Nigeria may become the regional operational hub of the 43-year old Islamic Development Bank (IsDB) in Africa. IsDB is considering a proposal to expand its existing country gateway office in Abuja to serve as a key regional office. The office will coordinate the operations of the Bank in its West and Central African member-countries. According to the Ministry of Finance, the Abuja gateway office will serve Nigeria, Gabon, Niger, Mozambique, Burkina Faso, the Republic of Cameroon, Uganda, Senegal, Djibouti and Guinea Bisaau, among others. IsDB President Bandar Mohammed Hajjar said the Bank would enhance the development impact of its projects through comprehensive development solutions that integrate services and products in its member-countries.

Gulf African banks on Shariah compliant #insurance scheme

#Kenya’s first fully Shariah compliant bank Gulf African is banking on a Shariah compliant insurance premium financing facility. The regular Insurance Premium Financing (IPF) enables customers to cover costs of immediate insurance premiums while spreading repayment over an agreed period. This Shariah compliant IPF enables the lender to enter into an agreement with both the insurer and the insured. The bank pays the full insurance premium of the insured immediately while operating under the Tawarruq model. Gulf African Bank CEO Bdalla Abdulkhalik said this policy will act as security for the bank and customers will also enjoy effortless renewals as agreed upon. Gulf African Bank will also act as the billing and collecting agent.

ICD, the private sector arm of the Islamic Development Bank Group (“IDB”) cooperates with Coris Bank International to launch Islamic windows

The Islamic Corporation for the Development of the Private Sector (ICD) and Coris Bank International have entered into a Joint Strategic Collaboration to establish Islamic windows. ICD is assisting Coris Bank International’s subsidiaries in launching four dedicated Islamic windows in Cote d’Ivoire, Mali, Senegal and Benin. The advisory agreement was signed by the CEO of ICD, Mr. Khaled Al Aboodi and Mr. Idrissa Nassa, CEO and Chairman of Coris Bank International. Mr. Nassa stated that the signature of this advisory agreement with ICD aims to achieve the bank's objectives. The current strategy of the group is to implement an Islamic Window in all its banking network. In midterm the group aspires to create sharia compliant subsidiaries.

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Bitcoin Mania versus Tulip Mania?

Dear Reader,

regular readers may remember my critic on bitcoin from an Islamic perspective missing intrinsic value. The former blog entry you find here: http://www.islamicfinance.de/?q=node/7840 - almost two years ago.

So far bitcoin just went up higher and higher, with wild fluctuations but nevertheless.

It reminds on how bubbles work, think about the tulip mania in 1637 a nice piece of economic history. A single tulip bulb was traded and bought on credit. Check the Wiki page on it:

https://en.wikipedia.org/wiki/Tulip_mania

As bitcoin has even less value than a tulip except for payment purposes, it is the payment functionality, which can lead to destruction. What happens if a new alternative currency is becoming en vogue, which has a better usability and faster transaction time? In my view this is most likely trigger to burst the bubble.

FT Alphaville covers now the difficulties coming up with bitcoin's increasing transaction numbers causing inconvenience in using the digital currency:

https://ftalphaville.ft.com/2017/05/17/2188961/the-currency-of-the-futur...

Islamic finance transaction broadens investor base for the Africa Finance Corporation

In 2016 the Africa Finance Corporation (AFC) sought to raise financing at competitive pricing levels to fund a number of new infrastructure projects in Africa. It also aimed to diversify its investor base in the process. This objective was achieved through the successful issue of a Murabahah Sukuk. The AFC initially sought to raise US$100 million, but upsized its issuance o $150 million and was still oversubsribed. Emirates NBD Capital, Mitsubishi UFJ Financial Group and Rand Merchant Bank acted as joint bookrunners and joint lead managers. Emirates NBD Capital also acted as the sole global coordinator. This transaction was awarded the 2017 Deal of the Year in the category Islamic Finance in Africa by The Banker magazine.

‘Islamic finance is not religious, but ethical business’

Professor Binta Tijani Jibril is the Director of International Institute of Islamic Banking and Finance, Bayero University, Kano State. In this article she talks about Islamic finance and its role in Nigeria. She believes that Islamic findance will help Nigerians in general in the sense that it will increase financial inclusion. The main challenge in Nigeria is how to educate the people to create awareness of this financial model. Bayero University has now short training programs, a masters degree in Islamic finance and very soon a doctorate programme we will start. There is also a special programme for journalists. According to Professor Jibril, Nigeria may soon raise sukuk, just like Osun state has done. It’s going to be about providing for infrastructure development as well as empowering the citizens. So Nigeria would be expanding and widening its reach into Islamic finance.

SunTrust, ICD Sign Agreement To Establish Non-interest Banking Window

SunTrust Bank #Nigeria has signed an agreement with the Islamic Corporation for the Development of the Private Sector (ICD) to establish a new non-interest banking window. The two institutions said they were determined to collaborate in order to establish a window that incorporates non-interest banking products and services in Nigeria. The CEO of SunTrust Bank, Mr Muhammad Jibrin, noted that the new offering is expected to attract investors from within and outside the country. On his part, Mr. Khaled Al-Aboodi of the ICD said he was looking forward to strengthening mutual efforts in establishing the non-interest window and promoting Islamic finance.

Shake-up on the way with DIB entry into market

Dubai Islamic Bank’s (DIB) formal entry into the Kenyan market is expected to shake up locally-owned Islamic lenders that have faced little competition for a decade. The Central Bank of Kenya (CBK) has now opened the door for the bank after more than a year of waiting. Kenya has until now had only two fully-fledged Islamic banks, while five other conventional lenders have been offering Shariah-compliant services and products through "Islamic Windows". DIB makes its foray into Kenya at a time when authorities are keen to make Kenya a hub for Islamic finance in Africa with ongoing reforms expected to drive the growth of Islamic-finance operations. The Kenyan government has recently unveiled a package of initiatives to develop a policy framework for Islamic finance in the country.

#Kenya: CBK Licences Dubai Islamic Bank

The Central Bank of Kenya (CBK) has licensed Dubai Islamic Bank (DIB) after the bank fulfilled its stipulated requirements. Dubai Islamic Bank Kenya intends to exclusively offer Shariah compliant banking services becoming the third fully Shariah compliant bank in Kenya. The decision is seen to highlight the CBK's confidence in the stability of the banking sector, which has been experiencing turbulence in the past couple of years. DIB is a fully owned subsidiary of Dubai Islamic Bank of the United Arab Emirates, which has an asset base of Sh4.8 trillion and capital of Sh754.8 billion. The Central Bank of Kenya welcomes the entry of international brands and believes that DIB's entry will expand the offerings in the market.

#Kenya aims to become the next global center of Islamic finance

East Africa’s biggest economy is positioning itself to become a regional hub for Islamic banking. Kenyan finance minister Henry Rotich said on March 30 that the government would propose amendments to the financial laws and issue new regulations to facilitate a Sharia-compliant retirement scheme. It will also amend the public finance management act to provide for the issuance of sukuk. In the past, Kenyan regulators found it hard to issue new regulations, as the government was battling the jihadist fundamentalist group al-Shabaab. Regulatory agencies say Kenya is now ready to allow Islamic finance and banking to thrive. In fact, Kenya is already a regional leader in Islamic banking. The country has two fully-operating Islamic banks. There’s also one takaful Islamic insurance company, a sharia-compliant mutual fund and two cooperatives. In December, Kenya joined the Islamic Financial Services Board based in Malaysia.

‘Jaiz Bank’s NPL within tolerable limits’

The Managing Director of Jaiz Bank, Hassan Usman, has assured that the bank’s loan profile is very healthy. Jaiz Bank, he noted, was not heavily or significantly exposed to the oil sector, but the bank’s exposure is to real estate. While justifying the listing of the bank’s shares in the Nigerian Stock Exchange (NSE), he said Jaiz Bank’s activities remain transparent and open. Jaiz Bank has challenges like any growing institution. One of such challenges has to do with perception, as many people thought it was a charity organization. Other challenges include the enabling environment like infrastructure for non-interest banking like liquidity instruments. Another challenge is the limited number of qualified trained manpower to manage Islamic banking. Inspite of these challenges, Jaiz Bank has proved itself to be sustainable. It has grown into a national franchise with branches in South and South West and is also opening more branches in other parts of the country.

Jaiz Bank anxious to invest massively in #Sukuk for infrastruture

In #Nigeria Jaiz Bank has accumulated funds and is now ready to massively invest in Sukuk to finance in specific infrastructure projects in the country. Managing Director Hassan Usman said that the bank, being an Islamic bank, could not invest in interests yielding instruments and therefore had to wait until Sukuk was ready. He added that there are off-shore funds held by those who share similar non-interests philosophy of Jaiz Bank which could be brought into the country. Usman said that from a capital base of N5 billion, the bank has grown its capital base to about N50 billion. From a deposit of N3. 5 billion, it has grown to about N60 billion. From the initial three branches as a Regional Bank, Jaiz Bank has grown into a National Bank with 30 branches across the nation.

Treasury targets billions through #Sukuk #securities

The Kenyan Treasury will push through the country’s first Sukuk bond in the coming year. The changes will see the Public Finance Management Act amended to allow the issuance of the bond, which has been in the works since 2014.
Treasury CS Henry Rotich said that the Capital Markets Act, the Co-operatives Societies Act and Sacco Societies Act are also lined up for ammendment.
The government plans to borrow up to Sh256 billion from external sources in the next fiscal year, to plug a budget deficit of Sh524 billion. The State has in the recent past taken up foreign loans in form of the Eurobond and syndicated loans from commercial lenders. Kenya has been mulling over a Sukuk bond for the past two fiscal years, given its highly discounted nature, which would provide cheaper financing compared to commercial loans. The lack of the necessary regulatory framework has, however, delayed this option. In the current fiscal year, Kenya has turned to syndicated loans to finance part of her budget deficit. These loans include the just signed $800 million loan from four international banks, and a similar $500 million facility taken from the African Export-Import bank.

#Kenya's #budget paves way for #Islamic #finance

Kenya's government has unveiled a package of initiatives under its latest budget to develop Islamic finance in the country, as part of efforts to mobilise local funds and set Nairobi as a regional hub for the sector. The moves could spur Kenya's decade-old Islamic banking sector and help the government fund infrastructure in a country where Muslims account for about 10% of the population of some 44 million.
Finance Minister Henry Rotich outlined the steps as part of the country's 2017/2018 budget, released on Thursday, aiming to level the playing field between Islamic and interest-based transactions. Amendments to the Public Finance Management Act will also allow the government to issue Islamic bonds, or sukuk, as an alternative funding source. This could prove useful for a government that has set aside billions for infrastructure, with a fiscal deficit set at 524.6 billion shillings ($5.10 billion).

College to draft Islamic finance #curriculum

A #Kenyan college yesterday signed a three-year memorandum of Understanding (MoU) with Malaysian training university to develop curriculum on Islamic Finance. Coast International College (CIC) also signed a letter of collaboration with the Inceif, the global University for Islamic Finance owned by the Central Bank of Malaysia. The MoU was signed by college principal Loise Gichuki, Inceif president and chief executive Daud Vicary Abdullah. The programme will offer Diploma in Islamic finance. The Malaysia University will provide curriculum, course materials and lectures related to Islamic jurisprudence, Islamic Law of contract, financial accounting and fundamentals of Islamic Banking.

Financial regulators keen on Shariah - compliant guidelines

#Kenyan financial regulators expect new guidelines in 2017 for the supervision of the entire sector. Insurance Regulatory Authority (IRA) supervisor Mary Nkiomu said the Islamic Finance Project Management Office established in December 2015 has submitted policy proposals to the National Treasury. The guidelines will enable the financial sector regulators to incorporate Islamic finance regulatory frameworks. Islamic finance institutions are largely operating in a self-regulatory environment governed by religious principles, backed with regulations for conventional operations. The guidelines, drafted in 2015, are set be rolled out to the public for consultations this year. The delay in the roll out has been attributed to terrorist attacks over the years.

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