The National

Goldilocks Investment builds Dana Gas stake

An Abu Dhabi Global Market fund, Goldilocks Investment, has acquired 5% of Dana Gas. Goldilocks has a reputation of buying companies going through financial difficulties. Goldilocks has recently acquired 350 million shares in Dana Gas, which has seen its share price rise by nearly 70% in the past month. Goldilocks is part of Jassim Alseddiqi's Abu Dhabi Financial Group, a diversified investment company with about US$5 billion under management. Dana Gas has assets in Egypt and the Kurdish region of Iraq that have had good operational results but have suffered from erratic payments. Dana Gas also has an ongoing dispute with holders of its $700 million in sukuk, for which it has taken preemptive legal action to avoid a declaration of default.

#GCC governments seek to diversify funding with Islamic #bonds

According to S&P Global Ratings, GCC sukuk issuances jumped 37.7% in the first half of 2017 as governments are seeking to plug deficits amid low oil prices. The rating agency added that issuances of sukuk will not grow at the same rate in the next couple of years, with hurdles such as a lack of standardisation of sukuk rules deterring sales. Mohamed Damak, primary credit analyst at S&P, said the volume of sukuk issuance is expected to remain strong in 2017, but this is likely to be the exception rather than a new norm. 2016 was a record year for regional bond issues in the GCC region, with over $60bn worth of fixed income sold. Last year Saudi Arabia sold $17.5bn worth of bonds in its first international sale and Qatar sold $9bn. Despite the record value of issuances, S&P said that a big funding gap remains. It is estimated at $275bn and about half of that gap is expected to be raised through bonds and sukuk.

Dana Gas’s #sukuk move is a surprising one

Dana Gas’s sukuk move is a surprising decision as it could have a detrimental effect on Dubai's goal of becoming the Global Centre for Islamic Finance. Financial analysts agree that Dana's manoeuvre to invalidate its own sukuk on Sharia non-compliance grounds harms the whole Islamic finance sector. Several questions arise and Dana Gas provides no answer. It is difficult to understand how Dana went from "discovering" the "unlawful" nature of the sukuk to getting injunctions in at least two jurisdictions without actually managing its communications. When DG acts in this way, it does not only potentially harm Dana's creditors but every investor in the UAE and the whole financial system.

#Dubai strategy centre for #Islamic #finance close to its #goals

A strategy centre that was tasked to implement a strategy for Dubai to become a global hub for the Islamic economy can report that progress was made on about 75 % of its initiatives to this date.
The Dubai Islamic Economy Development Centre, that was set up in 2013, stated yesterday it had held a board meeting on Tuesday which was attended by Sultan Al ¬Mansouri, the Minister of Economy as well as the chairman of the centre, to discuss these achievements.
The centre identified key sectors for developing three segments of Dubai‘s Islamic economy: Islamic finance, halal products and Islamic lifestyle including culture, art, fashion and family tourism.
The minister said: "Dubai and the UAE are instrumental in raising awareness about the culture of Islamic economy worldwide and boosting global interest in adopting its principles. The Islamic economy ¬strategy adopted by Dubai and the wider UAE is truly unique in its ability to foresee economic changes, offer secure investment options and utilise bonds to finance major projects across the globe."

#Fintech for Islamic finance faces standardisation challenges

Fintech has become a buzzword in the Islamic finance industry. Fintech has the potential to play a major role, primarily to improve processes and cost effectiveness while maintaining Sharia compliance. The need for more agile and simpler financial services, the growing usage of mobile devices and the shift towards technological and mobile financial services could underpin growth in the industry. However, there are also challenges. The principal challenge could be the regulatory environment. Regulatory limitations and concerns could hinder the ability of Islamic finance institutions to forge ahead. Fintech has its own cost and integration requirements to consider as well. This could push fintech to the backburner, which in time could turn into a significant hindrance to growth. Regulators and institutions have a significant challenge ahead in balancing the use of new technology to provide better services while controlling new operational risks.

Different approach pays off for Al Rayan Bank

Sultan Choudhury, CEO of Al Rayan Bank, talks about Islamic finance in Britain and its appeal to non-Muslims. He says, Islamic finance appeals to anyone who agrees with the underlying principles: equitable distribution for everyone, prudent spending and the well-being of the community as a whole. It also provides an ethical alternative to traditional banking. Al Rayan Bank is structured to ensure that it operates ethically on a day-to-day basis. The bank's home-purchase plans (HPP) are structured differently to conventional mortgages. HPPs are based on the Islamic finance principles of ijara and diminishing musharaka. Currently the bank estimates that more than a quarter of customers are non-Muslim and the customer base is expected to grow in the coming years.

Islamic lender shows #UK appeal of Sharia finance

In Great Britain there are currently six Islamic banks, while another 20 lenders offer Islamic financial products and services. Al Rayan is Britain’s largest Sharia-compliant bank with 70,000 customers and 13 offices and branches. The bank underwent a major overhaul in 2014 when it was acquired by its Qatari parent, Masraf Al Rayan. Since that point, the brand was made more accessible, the imagery is no longer just Arabic, the bank uses British imagery as it is targeting all Brits. CEO Sultan Choudhury says about 25% of the bank’s customers are non-Muslim. Mr Choudhury also has his eyes fixed on the potential of the wider international market. In particular, he highlights the GCC national and expat market and HPPs (mortgages with an interest-free and Sharia-compliant structure). He says, Al Rayan's ambition is to be the number one bank for HPPs for GCC nationals and expats.

#Sukuk ‘too complex’ as tool to raise funds

Sukuk issuance growth in the Arabian Gulf is likely to remain subdued this year even as ­countries in the region need to raise more debt to plug budget deficits. According to the latest research from S&P Global Ratings, the reason lies in the complexity of selling Sharia-compliant bonds. S&P's analyst Mohamed Damak said sales of Islamic bonds fell in 2015 and 2016 in the GCC as the issuance of conventional bonds soared. Globally, the market for sukuk is also expected to remain stable this year at between US$60 billion and $65bn. Despite the recent rebound in oil prices, the GCC will need about $275bn of financing between this year and 2019, of which half is expected to come from bonds and sukuk. Complexity of sukuk issuance is not the only headwind facing Islamic financing. According to S&P, rising interest rates in the US will also dampen appetite for sukuk this year.

Would-be #entrepreneurs #rise up #to the #challenge at #Abu #Dhabi #fintech #hackathon

The fintech event, held earlier this month, was organised by GlassQube and Startup Weekend, a global movement coordinated by TechStars and supported by Google for Entrepreneurs, with the support of Abu Dhabi Global Market, Abu Dhabi’s financial free zone and financial regulator, and Temenos, a global financial software vendor. It brought together more than 100 developers, designers and aspiring entrepreneurs – many of are at university and some still at school – and challenged them to build a functional minimum viable product.
"We took those products and judged them based on their technical aspects, their commercial viability, how thoughtful those teams were about what is the actual potential of these products and services to find a market," says Bernard Lee, GlassQube’s chief executive and a co-founder.
"What’s important here is that it’s not just an idea. It is how do we take this idea and how do we actually convert it into something that is real? Something that shows how a consumer base can potentially interact with this particular application."

Talal Al Zain to head new Islamic investment bank in Abu Dhabi

The newly formed Islamic investment bank ADCorp has named Talal Al Zain as its chief executive. Its two main shareholders, Abu Dhabi Financial Group (ADFG) and GFH Financial, said the new company has an authorised capital of US$100 million and will be the first Sharia-compliant institution in Abu Dhabi Global Market. Mr Al Zain, formerly chief executive of PineBridge Investments Middle East, said that ADCorp would focus on corporate finance, wealth and asset management for institutions and ultra high net worth ­clients. He said that geographically the firm’s investment strategy will allow ADCorp to become the long-term business partner of choice for clients in the region.

Gulf investments in Africa beginning to spread far and wide

Traditionally, investments from the Arabian Gulf into Africa have focused on North Africa, but this scenario is slowly changing. According to the Economist Intelligence Unit, FDI inflows from the Gulf to sub-Saharan Africa topped US$9.3 billion between 2005 and 2015, with Kenya, Uganda, South Africa and Nigeria attracting the largest number of Gulf investors. Especially the sectors with high return margins are capturing the attention of investors. Saudi Arabia and the UAE are among the top investors on the continent when it comes to agriculture. The UAE’s Al Dahra Agriculture is investing in wheat farming in Egypt, while Saudi companies have invested heavily in Sudan’s agricultural sector.

Islamic banking set to launch in #India amid controversy

India will get its first taste of sharia-compliant banking when the Islamic Development Bank launches operations in the state of Gujarat. No date has yet been announced, but already complaints have emerged within the ruling Hindu nationalist Bharatiya Janata Party. Prominent BJP politician Subramanian Swamy says Islamic banking goes against India’s principles of secularism. India's prime minister Narendra Modi visited Saudi Arabia in April and signed an extensive agreement with the bank. Under the agreement, the IDB will establish its first Indian branch in the Gujarat city of Ahmedabad and go on to open more branches in India in the future.

Arab Monetary Fund calls for central banks to step up in #Islamicfinance

Central banks need to have a stronger role in setting regulations for the region’s Islamic banks. Abdulrahman Al Hamidy, the head of the Arab Monetary Fund, said regulators need to introduce new liquidity management tools. The region’s central banks have moved to offer Islamic banks new, Sharia-compliant liq­uidity facilities to help shore up their short-term financial positions. The UAE Central Bank introduced a Sharia-compliant short-term lending facility in March last year. It allows banks to sell and repurchase Sharia-compliant securities overnight at profit.

#ArabianGulf #Islamicbanks to weather the storm

According to Standard & Poor’s the profitability of Islamic banks in the Arabian Gulf is likely to deteriorate this year due to the fallout from the price of oil. The 70 per cent drop in oil over the past two years has put pressure on growth prospects and widened deficits across the region. Yet S&P predicts that Sharia-compliant lenders will weather the storm without too much damage because they have capital buffers that include quality assets. Islamic banking assets are continuing to grow at a rate of 16 per cent per year and by 2020, the global Islamic banking industry profit pool is expected to reach $30.3bn.

Counting the cost of personal debt in the UAE

Hundreds of readers have written to The National to share their financial woes, following a series of articles in the Money section about worrying levels of personal debt in the UAE. The reason why UAE residents are building up such alarming liabilities is the lack of knowledge about the sky-high credit card interest rates in the country. According to a recent Compareit4me.com survey, about two-thirds of credit card holders are unaware of their card’s interest rate.

Sukuk market gains Gulf interest

Long-term sukuk issuance rose by 21 per cent year-on-year in the first quarter, as Gulf states with worsening fiscal balances tapped international bond markets. According to Fitch the GCC states – along with Mal­aysia, Indonesia, Turkey, Singapore and Pakistan – issued US$11.1 billion of sukuk in the first three months of the year. These countries issued 39.3 per cent of their debt as sukuk – the highest ratio of sukuk to conventional debt in eight years.

Saudi insurance sector to outperform oil

The Saudi insurance sector will grow by up to 17 per cent a year over the next five years thanks to regulation enforcement and growth in motor insurance, the Dubai-based investment bank Arqaam Capital said yesterday. Arquaam expects the Saudi insurance sector to be the least affected by weaker oil prices, budget cuts and the tightening liquidity as the enforcement of existing regulations will propel motor and medical premiums growth at a rate of 15-25 per cent and 14-16 per cent respectively. According to an Alpen Capital report released last year, the Saudi central bank has issued several new regulations regarding underwriting practices, reserving, actuarial-backed pricing and solvency requirements in the past two years, to help grow the industry.

Islamic banking assets to reach $1 trillion milestone by end-2015

Global Islamic banking assets are expected to reach $1 trillion by the end of the year as Sharia-compliant financing increases market share in emerging markets, according to the consultancy firm EY. Sharia-compliant assets of commercial banks in Qatar, Indonesia, Saudi Arabia, Malaysia, the UAE and Turkey are set to exceed $801 billion in 2015, representing 80 per cent of international banking assets. Islamic banking assets are continuing to grow at a rate of 16 per cent per year and by 2020, the global Islamic banking industry profit pool is expected to reach $30.3bn, EY said. Islamic finance is especially picking up in the corporate world, where demand for sukuk has been on the rise in the Middle East in recent years.

Innovation a vital growth driver for Islamic finance industry

Product innovation has become imperative for the Islamic finance industry. This is going to be one of the key growth drivers for the industry in the coming years as demand for new products across segments such as Islamic banking, Takaful, sukuk and funds rises thanks to increased understanding and acceptance of Sharia-compliant products.
Islamic banking
Islamic banks are struggling with lower profitability compared to the conventional banks. The estimated 19 % lower profitability of Islamic banks compared to the conventional banks can be primarily attributed to higher expenses and lower average product holding (APH) per customer. Islamic banks have an APH of 2.1 compared to the APH of 4.9 for the conventional banks. Higher profitability can be aimed and achieved by Islamic banks by developing new products, which would provide cross-selling opportunities and higher APH. Islamic banks can also benefit from shedding their existing obsolete systems and embracing technological innovation to bring down costs.
Sukuk

Emirates Reit first-half property earnings increase

Emirates Reit yesterday posted an 8 per cent rise in first-half earnings generated by its properties, thanks to higher rents and service charge ­income. Revenue between January and June reached US$19.1 million, up 7.9 per cent from $17.7m for the same period last year. Net income grew 6 per cent to $44.7m because of a $31m gain from the revaluation of its properties. The company said its investment properties were valued at $613.4m as of June 30, up 9.6 per cent from $559.7m for the year-earlier period. Emirates Reit has $1.3m of property that is being fitted out. About $344m worth of its investment properties have been mortgaged against Islamic financing facilities.

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