The National

Dubai outlines plans to unify legal framework for Islamic finance

The CEO of Dubai Islamic Economy Development Centre (DIEDC) outlined the phases for the development of a unified legal framework for Islamic finance. Abdulla Al Awar said that once complete, the project would bring standardisation to the Islamic finance sector and reduce discrepancies in practices across the globe. The DIEDC signed an agreement with the Accounting and Auditing Organisation for Islamic Financial Institutions for the use of its standards as a reference point in building the international legal framework. The Sharia-compliant segment of Dubai’s economy contributed Dh41.8 billion to the emirate’s gross domestic product in 2018. Dubai continues to pursue its goal of becoming the top Islamic economy hub in the world.

Dubai Islamic Bank closes $1bn #sukuk

Dubai Islamic Bank (DIB) closed a $1 billion (Dh3.67bn) 5-year sukuk with a profit rate of 2.95%. The sukuk attracted more than 170 investors with the order book rising to over $4.5bn. The sukuk was issued as a drawdown under DIB’s $7.5bn Trust Certificate Issuance Programme, which is listed on Euronext Dublin and Nasdaq Dubai. It is the first public benchmark sukuk issuance from a regional financial institution after the Covid-19 outbreak. Bank ABC, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, HSBC, ICBC, The Islamic Corporation for the Development of the Private Sector, KFH Capital, Sharjah Islamic Bank and Standard Chartered Bank acted as joint lead managers and bookrunners on this transaction.

DIFC invests in four FinTech start-ups through $100m fund

Dubai International Financial Centre (DIFC) said it invested in four innovative FinTech start-ups on Monday. The companies receiving funding are: Sarwa, a roboadvisory wealth management firm; FlexxPay, a cloud-based B2B employee benefits platform and two financial services platforms for migrant workers, Now Money and Go Rise. DIFC CEO Arif Amiri said the investments strengthened the free zone’s position as one of the world’s top 10 FinTech hubs. DIFC has rolled out a number of changes in recent months to attract top financial firms and strengthen its credentials.

#Bahrain's Al Baraka Bank looks for acquisitions as coronavirus pandemic hits valuations

Bahrain's Al Baraka Banking Group plans to expand into India, China and Indonesia as the coronavirus pandemic pushes valuations down. The pandemic, which has tipped the global economy into a recession, slated to be the deepest since the Great Depression, has dented lending. Al Baraka Banking Group plans to setup a small commercial bank in China focusing on trade financing to capitalise on growing commercial ties. In Indonesia, the lender has already explored the possibility of taking a stake in Bank Muamalat three years ago and will continue to look for further opportunities. Al Baraka currently operates in Sudan, Turkey, South Africa, Algeria, Pakistan, Syria, Tunisia, Saudi Arabia and Lebanon.

#Oman's Taageer Finance and Sohar disclose 4.67m rial exposure to NMC

Oman's Taageer Finance and Sohar International Bank disclosed they have exposures to NMC Health. Taageer has a 1.23 million rial (Dh11.72m) exposure to NMC, while Sohar International Banke's exposure stays at 3.45m rials. Last week NMC was placed in administration by a UK court on the application of one of its biggest lenders, Abu Dhabi Commercial Bank. The joint administrators from turnaround advisory firm Alvarez & Marsal will take immediate control of NMC Health and will work on behalf of all stakeholders. In February, the UK’s Financial Conduct Authority launched an investigation into NMC's activities after the company's shares were suspended from trading on the London Stock Exchange.

NMC Health set for administration as negotiation attempts with creditors fail

Abu Dhabi's biggest healthcare company is heading for administration as the company revealed it had been unable to secure an agreement on its debt. NMC Health has made a series of damaging disclosures in the past few months after a report by activist investor Muddy Waters in December alleged it inflated cash balances, overpaid for assets and understated its debt. Following the disclosures, chairmen and executives departed from the firm. According to a disclosure from Abu Dhabi Commercial Bank (ADCB), NMC Health owes money to more than 80 local, regional and international lenders. ADCB said it expects joint administrators to launch a full, transparent and independent investigation into the company's affairs and the misrepresentation of its finances.

Islamic finance to expand in 2020 as demand for Shariah-compliant products grows

According to Moody’s Investors Service, Islamic finance is poised to expand in 2020 and beyond, helped by growing use of Shariah-compliant products in the GCC region and Malaysia. Moody's vice president Nitish Bhojnagarwala expects sukuk issuance to remain stable at around $180 billion (Dh661bn) this year, and the takaful insurance market will see steady growth as insurance premiums pick up in newly-penetrated markets. However, downside risks are rising because of the coronavirus outbreak. Mergers between Islamic and conventional banks in the GCC will drive one-off increases in assets, as they did in 2019. Saudi Arabia will remain the world's largest Islamic banking market, while the sector will continue to expand rapidly in Malaysia.

British Museum to exhibit 150 works by Middle Eastern artists in new major exhibition

The British Museum has emerged as one of the foremost sites for collecting and exhibiting Middle Eastern art in the UK. Much of the museum’s prominence is due to Venetia Porter, its curator of Islamic and contemporary Middle East art. The 150 works on paper that the museum will show are not loans, they have been acquired by the museum. The exhibition in the autumn will be accompanied by a major catalogue of the acquisitions and a conference. Among its subjects will be those of conflict and exile, two key areas for recent art of the region, explored by well-known artists such as Dia Azzawi, Hanaa Malallah, and Hayv Kahraman. There are also works of Syrian artists affected by the country’s civil war and more recently from Lebanon.

#Bahrain's GFH Financial Group launches $200 million schools investment arm

GFH Financial Group, the Bahrain-based Islamic investment bank, plans to invest $200 million (Dh734m) in the privately-owned schools sector through its new investment platform, Britus Education. Developed and emerging markets have both seen a surge in private education during the last decade. Britus Education will invest in mid-market schools that can be improved through maximising student capacity, improving academic outcomes and optimising fee structures. According to a report published by Alpen Capital, the total number of students in GCC schools is set to grow at a compound annual rate of 2.3% per year to reach 14.5 million in 2022. Enrolment in private schools is expected to grow at a compound rate of 4.1% per year until 2022, much faster than the 1.3% growth anticipated for public schools.

Islamic pound is demanding credibility from today's consumer brands

A new trend is emerging among consumers, one that emphasises the importance of ethical consumption. Over the past 20 years, Muslim consumers have been searching for brands and products that speak to their religious identity. According to the seventh edition of the State of the Global Islamic Economy report published last week, Muslims spent $2.2 trillion last year on food, pharmaceuticals and lifestyle products and services. This is set to rise to $3.2 trillion by 2024. With the majority of Muslims under the age of 30 and many living in countries with large consumer markets, such as Indonesia, Malaysia and the UAE, there is immense potential for the global community. Halal brands are now finding their way into a wider consumer beauty movement seeking cruelty-free, animal-free products.

Assets under management in GCC to grow steadily from $260bn in 2018, Moody's says

The asset management industry in the Arabian Gulf is set to grow, as regional governments overhaul their hydrocarbon-dependent economies and ease regulations. According to Moody’s Investors Service, investment managers in the six-member economic bloc of the GCC had $260 billion (Dh954bn) of assets under management at the end of last year. The Gulf states are trying to overhaul their economies and cut their dependence on oil. Saudi Arabia and the UAE are pursuing their own economic reforms to develop alternative lines of revenue. Both countries have introduced laws to broaden their appeal to foreign investors. Moody’s expects global market leaders to expand their presence in the Saudi Arabia due to a relaxation of foreign ownership limits coupled with more transparent regulations.

Boards of Kuwait Finance House and Ahli United Bank agree terms of possible #merger

The boards of Kuwait Finance House and Ahli United Bank agreed on a share swap ratio. AUB said its board approved a final exchange ratio between the two lenders of one KFH share for every 2.325581 AUB shares. A final decision on the deal is subject to approval from shareholders of both banks, central banks and other authorities in Kuwait and Bahrain. The approved ratio is the same as the one announced in January, when the lenders hired HSBC and Credit Suisse as advisers to carry out financial and legal due diligence of each other’s accounts. According to equity analysts Mohamad Al Hajj and Elena Sanchez-Cabezudo, this merger would increase KFH’s expected weight within MSCI Emerging Market Index by 8 basis points and increase expected flows in May 2020 by $370 million. KFH has tried to acquire AUB in the past, but talks stalled over a difference in valuation.

Gaps in Islamic finance a pressing issue, says ICIEC

The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) is trying to fill a gap in the absence of third-party guarantees, which has affected liquidity and hindered growth of Sharia-compliant financing. ICIEC head Oussama Kaisi said the group was engaging with central banks of several countries to find ways to increase liquidity for Islamic financing and allow more third-party guarantees. He added that by accessing the sukuk market companies can increase their investor base through stronger ratings, raise loan tenors and decrease borrowing costs. The value of sukuk issuance in 2018 was $115 billion (Dh422.33bn) and the market looks set for a similar amount this year. According to Standard & Poor’s, the UAE may sell $8bn worth of sukuk this year, slightly lower than $9.1bn recorded at the end of 2018, with private-sector corporations dominating the issuances.

Potential Noor Bank acquisition 'positive' for Dubai Islamic Bank

According to Egyptian investment bank EFG-Hermes, the potential acquisition of Noor Bank by Dubai Islamic Bank would be a positive move for the buyer. Also, there is room for more consolidation among local lenders as the UAE is overbanked, with 22 local and 38 foreign banks, most of which have "sub-optimal" market shares. EFG-Hermes expects a potential transaction to be made through a share-swap. It estimates a share-swap of 1 DIB share for 7.8 Noor Bank shares that would lead to a 1% earnings per share dilution for DIB. The merged entity would have an assets market share of 10%, as Noor Bank's assets amount to Dh51 billion or 2% market share and DIB’s assets amount to Dh224bn or 8% as of 2018.

Dana Gas issues new #sukuk, drawing earlier dispute to a close

Dana Gas has completed refinancing its $700 million sukuk which has been sized down to $530m. The issuance of the debt instrument had been completed and listed on the Euronext Dublin, previously known as the Irish Stock Exchange. Dana has paid $235m in redemptions, profit payments and early participation fees bringing an end to its long legal battle. Dana Gas CEO Patrick Allman-Ward said the new sukuk represented a fair consensual deal for all sukuk holders. The new sukuk will have a three-year life, maturing in October 2020, with a new profit rate of 4% per annum. Legal proceedings in courts in the UK and UAE have been brought to an end by all parties. Last month, Dana Gas received about $44m in dividends from Kurdistan Region of Iraq for the first half of the year and expected its output from operations there to rise by 25% in the third quarter.

ADIB plans a Dh1.16bn rights issue and tapping the #sukuk market

Abu Dhabi Islamic Bank (ADIB) plans to maintain growth and pay off some of its old debt. The board of ADIB is recommending to increase the bank’s issued capital through more than a Dh1.16 billion rights issue. The proposed deal includes issuing 464 million new shares at a nominal face value of Dh1 per share. The bank’s board has also proposed the issuance of a $750m (Dh2.75 billion) perpetual tier 1 sukuk, and the repayment of its $1bn hybrid tier 1 sukuk issued in 2012. ADIB’s vice-chairman Khamis Buharoon said the pace of the bank's growth has been fast, increasing its number of customers to 1 million in the UAE, nearly double the number it had five years ago. He noted that the bank was raising capital to maintain its growth trajectory, while maintaining a capital buffer.

#Sukuk issuance growth to remain 'unspectacular' on structural constraints, Fitch says

According to Fitch Ratings, the moderate growth in sukuk issuances in the first quarter underpins continued investor interest, but it also points out to structural constraints. The total volume of sukuk rated by Fitch for the three-month period through to March end, stood at $80 billion (Dh294bn), a 6% rise from the figures recorded at the end of 2017. New sukuk issuance with a maturity of more than 18 months from the Arabian Gulf states, Malaysia, Indonesia, Turkey and Pakistan came in at $14.9bn for the first quarter of 2018, a modest 1% year-on-year rise. The issuances during the first quarter of 2018 were largely driven by the GCC region, whose funding needs are likely to fall if oil prices stay high. Issuer funding needs and investor appetite for the remainder of the year will be determined by factors including oil prices and tighter global financing conditions.

Dana Gas close to a deal on $700m #sukuk dispute, say sources

Dana Gas has reached an agreement with key holders of $700m of its sukuk to restructure the securities. A committee representing sukukholders agreed to accept an immediate cash payout of 20 cents to the dollar and to roll the rest into a three-year security. According to the agreement, the new security will pay an annual coupon of 4%, bondholders agreed to remove the convertible option in the securities. Dana Gas said it would pay a further 20% of the sukuk after two years and will raise the coupon to 6% if it fails to do so. The majority of sukukholders have agreed to the terms. Investment bank Houlihan Lokey is advising Dana Gas and Moelis & Co is the consultant to the committee of sukukholders.

Inherent tension in #sukuk market, says analyst

The Dana Gas controversy has shown that Sharia-compliance driven structural complexity can expose investors to legal risks that do not apply to conventional instruments. The industry has struggled to harmonise, given the fractured nature of the Islamic capital markets. Most current market participants seek to replicate the risk, return and rating profile of the corresponding conventional instrument. In the current sukuk market there exists an inherent tension between the underlying equity and asset financing principles encouraged by Islam and the current investor/issuer demand for a debt-like instrument. If implemented, standards would reduce the costs for investors and issuers. Issuers can re-use already endorsed market structures saving costs and hence encouraging them to issue more.

Wahed Invest: a Sharia-compliant #investment #robo-adviser

Robo-advisers are opening up investment advice to the masses. They can provide sound investment advice for a fraction of the cost of their human counterparts, making it affordable enough for those with as little as US$100 to invest. Junaid Wahedna has taken the robo-investment concept a step further, making it available for those looking for Sharia-compliant investment options. Wahed Invest charges far lower fees than those charged by a conventional wealth manager. The robo-advisor Betterment has accrued over $10 billion worth of assets under management in the US since its launch in 2008. Currently, all of Wahed’s clients are from the US and Mr Wahedna says it plans to start accepting international customers. The company has 50 full-time employees and it has offices in New York, London, Dubai and Mumbai. The company sees a lot of potential in India, having seen strong demand for Islamic investing in the country from its pre-registered clients.

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