Maybank Islamic is turning to its home markets for growth, in particularly Indonesia where it manages $2 billion worth of assets and is aiming to compete with domestic Islamic banks. According to CEO Mohamed Rafique Merican, the bank could grow beyond its core markets of Malaysia, Singapore and Indonesia, but expansion in other markets would be opportunistic. Indonesia remains a key market for the bank, after Malaysia which accounts for 90% of the bank's business. As part of the ASEAN banking integration framework (ABIF), Indonesia and Malaysia have agreed in August to give their banks greater access to each other's markets. The move would give Malaysia's Islamic banks a potential lead to tap into the world's biggest Muslim-majority country, and one that continues to restrict to foreign lenders.
BankIslami Pakistan and fintech startup CompareOn Pakistan have signed a strategic alliance that will further enhance BankIslami’s reach. CompareOn Pakistan provides the online comparison platform Karlocompare.com.pk, which delivers product information and enables customers to apply without the need of visiting or calling BankIslami branches. The agreement was signed by Sumair Farooqui, CEO of CompareOn Pakistan and Yasser Abbas, Head of Islami Auto Finance. Speaking on the occasion, Sumair Farooqui said CompareOn Pakistan intends to serve the growing customer base of Auto Financing Industry and contribute to enhancing awareness around BankIslami’s products.
The Centre for Excellence in Islamic Finance (CEIF) IBA held an International Forum on 'Unlocking Islamic Finance Potential in CPEC and Beyond'. The China-Pakistan Economic Corridor (CPEC) consists of $45 billion worth of domestic infrastructure projects planned by the government of Pakistan. The Forum analyzed the effects and impact of CPEC on the Islamic Finance industry in Pakistan. In his keynote address Irfan Siddiqui, President & CEO Meezan Bank, highlighted that CPEC is not just a need of China but also of Pakistan. From the government Chief Economist Nadeem Javaid stated that there are four main components of CPEC: Energy, Infrastructure Development, Economic Incentives and Industrial Cooperation. He said that CPEC will greatly lower the per unit cost of energy, incentives such as exemption from local duties and materials, whereas suspension of trade union activities will give opportunities to investors. Therefore, designing cost-effective, Shariah compliant finance options is the need of the hour.
The planned China-Pakistan Economic Corridor, or CPEC, is expected to bring the full potential of Islamic finance in infrastructure funding into action. The CPEC will see €54bn in investments up to 2030 to create or expand highways, railways, ports, airports, power plants, solar parks and wind farms, pipelines and optical fibre lines. Pakistan’s Finance Minister Ishaq Dar has repeatedly emphasised that Pakistan wanted to make Shariah-compliant financing its first choice for infrastructure and long-term financing needs. In fact, the government plans to shift between 20% and 40% of its debt financing to Islamic sources from conventional ones, which is also the case for CPEC projects. Co-financing for the corridor comes from Chinese state loans, as well as from the Asian Development Bank and the new, China-backed Asian Infrastructure Investment Bank. The CPEC is predicted to create more than 700,000 direct jobs up to 2030 and add two to 2.5 percentage points to Pakistan’s annual economic growth.
Standard & Poor’s believes that in view of the fast growth of the Islamic finance industry robust Sharia governance structures are very important. While this model has provided an additional layer of control, actions requested by internal auditors are typically not disclosed to the public. So far only the authorities in Oman and Pakistan have asked Islamic banks to submit themselves to an external Sharia audit. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB) have already made significant strides in this area. However, S&P believes the current governance framework shows room for improvement. Only a handful of Islamic banks disclose their profit and loss sharing formulas, profit equalisation reserves, or investment risk reserves.
Standard Chartered Saadiq plans to expand its Sharah-compliant products beyond its core markets such as Pakistan, UAE, Malaysia, Indonesia and Bangladesh. Currently Standard Chartered Saadiq is the only international bank that covers all segments of Islamic banking ranging from retail, corporate and capital markets. Standard Chartered has operations across 16 African and 23 Asian countries. Analysts say the recent slowdown in growth of Islamic finance reflects more challenging economic conditions across a number of core Islamic markets. Despite the current challenges, the sector still has potential for further growth, especially in countries such as Oman, Turkey and Indonesia where the penetration of Islamic financing assets remain relatively low (between 5 and 10%) and there are recent initiatives supporting the growth of the industry.
Al Baraka Bank (Pakistan) and Burj Bank have successfully merged operations under the name of Al Baraka Bank (Pakistan). The amalgamated entity will operate with a combined network of 224 branches and net assets in excess of 120 billion. Sheikh Saleh Abdullah Kamel, Chairman of Al Baraka Banking Group (ABG) said that the merger was part of the group’s strategy to expand its reach in Pakistan and strengthen the global footprint of Islamic Finance. This merger will further catalyze the growth by establishing Al Baraka as an even stronger institution in the Islamic Banking sphere. The substantial increase in combined capital and branch network will help to reach out to a broader customer base with a full range of Islamic Banking services.
More than 400 Islamic banks and financial institutions are now operating in over 60 countries from different regions. The Dubai Center for Islamic Banking and Finance (DCIBF) has released its second annual report on Islamic economy during the third Global Islamic Economy Summit in Dubai. The report focuses on the efficiency performance of 131 Islamic banks operating globally and other various key facets of Islamic banking. The Kuwait Finance House (KFH) received the highest efficiency score, followed by Al Inma Bank from Saudi Arabia, which obtained the top score in terms of cost-efficiency. Although it is expected that Islamic banking will continue to grow globally, the report warns that it may face challenges especially in countries that heavily rely on oil and other commodity prices. In this regard, diversification of the industry and further expansion is essential for its sustainable growth.
Dubai Islamic Bank #Pakistan Limited (DIBPL) and 1-Link signed historic agreement for the issuance of PayPak cards in Pakistan. In line with State Bank of Pakistan (SBP) Vision 2020 to enhance and promote Financial Inclusion, 1LINK introduced Pakistan’s First Domestic Payment Scheme 'PayPak' which is aimed to provide efficient, cost-effective, and robust payments solutions. DIBPL remains committed to SBP vision to enhance and promote financial inclusion of unbanked population nationwide. PayPak’s strategic objective includes offering Domestic Payment Scheme to provide low cost payment services to every citizen of Pakistan.
According to Moody’s Investors Service, growth prospects for the Islamic banking are still strong despite subdued sukuk issuance predicted for 2016. Growth in the Islamic banking sector continues to broadly outpace that of conventional banks in most systems in which Islamic banks have been established. The current size of the Islamic finance market has been estimated to range from $1.66 trillion to $2.1 trillion with expectations of market size to be $3.4 trillion by end of 2018. According to the Moody's report, Islamic banking sector growth is driven by strong retail demand and proactive government legislation for the industry. There is potential for further growth, especially in countries in which the penetration of Islamic banking assets remains relatively low, at between 5% and 10% of Islamic financing assets.
Moroccan state-owned bank Credit Agricole (CAM) has won authorisation to create an Islamic subsidiary with The Islamic Development Bank (IDB). Morocco’s central bank is in the final stages of launching an Islamic finance industry. The North African kingdom adopted legislation allowing Islamic banks and insurers in the domestic market, and the central bank has set up a central sharia board to oversee the new industry. IDB and CAM will inject 200 million dirhams ($20.55 million) of capital into the offshoot of the new subsidiary before doubling it to 400 million later. The Moroccan bank will hold 51% stake in the new banking unit.
In #Pakistan Al-Ameen Funds hosted an awareness session on Shariah Compliant Investment. The meeting was organised by Al-Ameen Funds and UBL Fund Managers in collaboration with Pakistan Stock Exchange Limited (PSX). Speakers agreed that the Islamic Funds Industry has shown impressive growth in recent years. Yasir Qadri, CEO of UBL Funds said that the local investors are more aware about the equity market than ever before. However, Islamic funds offer opportunities of investment for a vast audience which is yet to be tapped. Shahid Gul Motiwala, CEO Al-Ameen Islamic Financial Services said that there is a lot of awareness required in Pakistan regarding the benefits of making sound investment choices.
A 2% tax cut announced for all Shariah-compliant companies is bound to give a big boost to Islamic Banking in Pakistan. The government has introduced the 2% rebate for Shariah-compliant companies through the Finance Act 2016. The Finance Act also covers the entire national budget for the fiscal year 2017. The latest decision to expand the programme followed a report by the State Bank of Pakistan (SBP), which confirmed a continuing spread of the Islamic banking system in the country. Islamic banks currently have a 13% share of the conventional banking in Pakistan.
Investors from the Islamic financial world could be the answer to Italy’s problems in the wake of the Brexit. On a recent conference in Italy, participants said this would require legislative changes to follow Islamic principles. A working group at the Lower House’s financial commission is looking into the matter. Participants also suggested issuing State bonds following the rules of Islamic finance. Under the proposal, the assets would consist of State-owned real estate, bought and re-sold by a company set up for the purpose, whose participating shares would be bought by investors.
Silkbank introduced Emaan Islamic Banking (EIB) through conversion of its seven conventional banking branches into dedicated Islamic Banking branches. Emaan Islamic Banking offers a complete suite of deposit products including Current Account, Saving Accounts and Term Deposits. Diminishing Musharaka, Musawamah, Murabaha, Musharaka and Trade Finance facilities are also available. The Emaan Islamic Banking’s branch network stands at a total of 10 branches in 8 cities across Pakistan.
A new Islamic bank will open in the Palestinian territories later this year. Al Safa Bank, founded locally, will be based in Ramallah, the seat of the Palestinian government in the Israeli-occupied West Bank. It will be capitalised at $75 million. Co-founder Abdel-Rahim Al-Hassan said the bank has already bought some 37 million shares, valued at $37 million, with another 38 million shares now on sale to the public. Al Safa will be the third bank in the West Bank to operate under Islamic law. The bank's services will include project-funding, foreign currency trading and real estate investment.
According to Fitch Ratings the total new Sukuk issuance (with a maturity of more than 18 months) in the Gulf Cooperation Council, Malaysia, Indonesia, Turkey, Singapore and Pakistan was around US$11.1 billion (RM42.9 billion) in the first quarter of 2016. Fitch said that Sukuk issuance was up 22% from Q4’15 and 21% from a year earlier, while non-Sukuk bond issuance of US$17.1 billion was down 23% quarter-on-quarter and 45% year-on-year. Sukuk represented 39.3% of total bond and Sukuk issuance in these countries during the quarter – the highest proportion in the past eight years.
The Bank of England has fined Qatar Islamic Bank’s UK, a subsidiary of Qatar Islamic Bank, for failings in reporting its financial resources to the regulator in 2011 and 2012. The Bank’s Prudential Regulatory Authority (PRA) imposed a fine of 1.385 million pounds ($1.95 million) on QIB for failing to undertake a regular assessment of its capital. Guy Priestley, QIB UK’s interim chief executive, said the problems identified by the PRA have been remedied.
Honda Atlas Cars (Pakistan) Limited and BankIslami Pakistan Limited have joined hands to offer their customers with valuable Honda products coupled with Shariah compliant Auto financing solutions. Yasser Abbas, Section Auto Ijarah BankIslami and Nadeem Azam, General Manager Sales & Marketing Honda signed the agreement. Maqsood Rehmani Vice President, M. Afzal Senior Manager Sales & Marketing and Shahzad Wahla Deputy Manager Sales & Marketing from HACPL and Syed Jibran Ali Unit Head Auto Ijarah, Hafiz Shabir HSM Central Region and Rizwan Haider TL Retail Central from BankIslami were also present on the occasion.
Sofyan Djalil, Minister of National Development Planning, said that the National Sharia Finance Committee (KNKS) is tasked with building the industry by implementing the Master Plan for Indonesian Islamic Financial Architecture. The plan will include the formation of sharia investment banks owned by the government and privates, as well as the formation of takaful and retakaful firms owned by the state. It will also include the formation of the Islamic Financial System Safety Net. The KNKS, Sofyan said, will be led by President Joko Widodo. The government will work together with the Financial Services Authority (OJK) in preparing regulations that can accommodate the industry.