Indonesia's finance minister Sri Mulyani Indrawati announced the government plans to issue a global sukuk this week. Indrawati did not give further details on the planned issuance. An official has previously said the government will issue global sukuk in the first half of 2017. According to Thomson Reuters, Indonesia has given initial yield guidance of 3.75% for a five-year tranche of the U.S.-dollar sukuk and 4.5% for 10-year tranche.
Dubai Financial Market (DFM) said it has officially published the final version of its Standard on Hedging against Investment and Finance Risks. This standard is the newest addition to DFM’s Sharia-compliant standards, which include Standard on Stocks and Standard on Sukuk issued in 2007 and 2014. The key amendments and add-ons to the draft of the standard are adding two types of risks, property risk and reputational risk. The amendment also emphasises the admissibility of the penalty clause only in Istisna, supply contracts and labour-lease contracts, excluding the contracts that result in a monetary debt owed by the debtor. It also emphasises the admissibility of the third-party guarantee in contracts of partnerships, Mudaraba and agency in investment, provided no link is made between this guarantee and the contract of partnership or Mudaraba.
The Responsible Finance & Investment (RFI) Summit 2017 has announced a series of Executive Sessions organized by the RFI Foundation and INCEIF, the Global University of Islamic finance. These sessions will introduce participants from all backgrounds to the connection between Islamic Finance and Responsible Finance. INCEIF President Daud Vicary Abdullah said the alignment between the guiding principles of Islamic finance and the Sustainable Development Goals (SDGs) was significant. Daud added that these interactive Executive Sessions would provide a platform for people working in responsible finance who do not realize the alignment of responsible investment with Islamic finance.
Bahrain's GFH Financial Group may merge with Dubai-based Shuaa Capital, GFH said in a statement. A web of ties between GFH and Shuaa began forming last year. In May, Abu Dhabi Financial Group (ADFG) and GFH said they were jointly setting up an Islamic bank called ADCorp with initial capital of $100 million. In November, ADFG bought a 48.36% stake in Shuaa, which has a market capitalisation of about $535 million. In December, Shuaa bought 14% of Bahrain's Khaleeji Commercial Bank for $25 million. GFH owns 47% of Khaleeji. On Sunday, Shuaa said it would acquire Integrated Capital and Integrated Securities, both controlled by ADFG. Integrated Capital owns 11.74% of GFH. ADFG officials did not respond to requests for comment about the possible merger.
The United Arab Emirates' Sharjah Islamic Bank (SIB) plans to issue convertible sukuk equivalent to 10% of the lender's capital. Funds raised through the debt sale will be used by Islamic endowments selected by the government of the emirate of Sharjah. The bank also authorised a capital increase to 2.67 billion dirhams ($726 million) from 2.43 billion dirhams.
Oman’s Capital Market Authority (CMA) has given provisional approval for two new sukuk issuances of an aggregate size of RO 300 million (around $780 million). CMA President Abdullah bin Salim al Salmi said the proposed issuances underscore the potential and appetite for sharia-compliant finance and investment in the Sultanate. He noted that as of end-June 2016, the value of the sharia-compliant capital market jumped to RO 3.91 billion ($10.16 billion), comprising sharia-compliant shares, investments and sukuk, versus RO 3.24 billion ($8.42 billion) a year earlier, representing an increase of 21.14%. Significant growth has also been witnessed in the Takaful market with premiums reaching RO 41.99 million as of end-2016, up from RO 38.77 million a year earlier, representing an increase of 9.2%.
Bank Nizwa in partnership with Islamic Finance News (IFN) successfully concluded the second ‘Islamic Finance News Forum’. Sharing his expertise in the IFN Debate was Bank Nizwa’s new CEO, Khalid Al Kayed, who discussed the challenges of standardization and increased regulation. The CEO also took part in the closed-door IFN Oman Dialogue session to openly discuss the benefits and concerns facing the Islamic Finance market. Other sessions at the forum looked into the legal and regulatory framework of Islamic Finance, the development of sustainable and efficient Islamic capital markets, capital market activity and economic development, and innovation in Islamic Finance.
Barwa Bank Group said it will spare no effort to gain the largest possible share of financing infrastructure projects in the country. Barwa Bank chairman Sheikh Mohamed bin Hamad bin Jassim al-Thani said due to the national economy’s provision of promising opportunities, the bank will provide all possible support to the growth of the country’s economy. The group recorded strong growth in each of the financial position and profits, as net profit for 2016 rose to QR738.8mn and earnings per share reached QR2.49. The growth in the group’s business and the increase in its investment activities go in line with maintaining asset quality and risk management policies with total non-performing loans accounting for just 1.5% of the net financing portfolio.
Ajman Bank has signed a financing agreement with Saudi German Hospitals Group for the construction of Saudi German Hospital Ajman (SGH-Ajman). The planned hospital would be a 50- bed facility in the Emirate of Ajman. The total cost of the project is AED327.3 million, and the completion of all phases of the project and formal opening of the hospital is expected in 2018. The signing of the agreement was overseen by Mohamed Amiri, Chief Executive Officer of Ajman Bank, and Sobhi Batterjee, CEO and Chairman of the Saudi German Hospitals Group. Akram Khan, Vice President of Ajman Bank, said that the agreement includes providing a housing fund for hospital workers and a range of items within the framework of the agreement.
Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has launched a comprehensive report on "AAOIFI in 850 Days". The report provides concise details, including infographs, illustrations, and statistical figures, covering AAOIFI's developments in activities over the period from September 2014 to end of December 2016. Dr. Hamed Merah, AAOIFI's Secretary General, said that AAOIFI embarks on efforts to enhance transparency as key to effective communication. Meanwhile, AAOIFI's statute was amended, and a set of 7 by-laws, policies and procedures, charters were developed. These include launching of AAOFI's Shari'ah standards translation projects (for Russian, French, and Urdu languages), and publication of AAOIFI's standards in paper and digital formats including a mobile app for smart phones. The section on strategic relationships cover AAOIFI's ties with stakeholders, specifically development of ties with institutional members. The report highlighted AAOIFI's keenness to further solidify its relationship with central banks and regulatory and supervisory authorities.
The share of sukuk issuance in core markets such as the Gulf Cooperation Council (GCC) region, Malaysia, Indonesia, Turkey and Pakistan are expected to keep up their market share in 2017. New sukuk issuance from the core markets rose to $40 billion (Dh147 billion) in 2016 from about $32 billion a year earlier. This represented 28.5% of total bond and sukuk issuance in these markets in 2016, down marginally from 29% in 2015. Malaysian companies continue to be the most active corporate issuers. Several other key markets have introduced or updated sukuk laws in the past few years, including Saudi Arabia, Oman and Kuwait, which should gradually boost issuance. According to Faisal Hasan, Head of Investment Research at Kamco, the outlook for sukuk issuance in 2017 remains positive as GCC economies are expected to return to issuing sukuks to fund their deficits. Analysts say GCC corporates that tap capital markets are more likely to issue sukuk or a mixture of both, rather than only bonds to attract a wider local and regional investor base.
According to S&P's latest report, the global sukuk market is expected to remain fairly quiet in 2017, with total issuance reaching around $60bn -$65bn. The relatively subdued sukuk market anticipated for this year is mainly due to reasons related to complexity of sukuk issuance. S&P Global Ratings’ Global Head of Islamic Finance Dr Mohamed Damak said returning issuers, new entrants, and regulatory developments can stimulate issuance activity, but more likely in the medium term. S&P anticipates some GCC countries might take the Islamic finance route alongside a conventional one. Bahrain will most likely remain a prominent player after issuing $3.2bn of sukuk in 2016. Other GCC members will probably tap the market in 2017. The buyers of sukuk are not only in the GCC or Malaysia, but come from a broad range of investors, including conventional financiers in developed markets. More importantly, there is reportedly a large gap between sukuk issuance and demand.
Debt issuance from the GCC is expected to surge in 2017 with sovereign issuers leading while conventional bonds outstripping sukuk both in terms of amounts raised and number of issues. The key drivers to bond issuances in the GCC during 2016, which more than doubled to $66.5 billion (Dh244.5 billion), was primarily the sovereign bond issuances by Saudi Arabia, UAE and Qatar. Saudi Arabia’s first international bond issuance valued at $17.5 billion in October last year was the biggest recorded emerging market bond. Saudi Arabia has indicated further bond issuances in the near term and the Kingdom has a target debt-to-GDP ratio of 30% by 2020 as compared to 13.2% for 2016. Banking sector contribution to bond issuance witnessed a steep decline from 22% in 2015 to 15% in 2016, although the size of the total offering increased by 36% $11.7 billion.
ASMA Capital owned by the Islamic Development Bank (IDB), Saudi Arabia’s Public Investment Fund (PIF) and Public Pension Agency (PPA), Ministry of Finance of Bahrain and Ministry of Finance of Brunei has signed a deal with Utico for a significant minority stake. The deal with Utico for a stake in its water business is done through Asma Capital managed IDB Infrastructure Fund II. The deal is valued overall at $ 147 million in equity and project finance and will be completed in the first quarter of 2017. Ernst & Young, Hatch USA, ILFS, GU Advisory UAE, Latham and Watkins, Trowers and Hamlins and Taylor Wessing are advisers to the deal. Utico is making significant investments in the UAE and expanding its infrastructure assets in water, power, transmission and distribution, storage, billing and collection. Richard Menezes, Utico’s Managing Director stated that its model of development has saved the governments billions of dirhams in capital expenditure and subsidies.
According to the chief economic adviser of the Qatar Financial Centre (QFC), Islamic finance will need to play a pivotal role in meeting the increasing demand for funds by the Gulf Cooperation Council (GCC). Dr Haitham al-Salama said oil prices are not likely to exceed $100 in the near future and are forecast to stay around the $55-$65 per barrel. Also, a spike in the shale oil production is expected, which will push the prices down. He added that this puts further emphasis on the economic diversification efforts of oil producing countries, particularly in the GCC. Qatar has already taken various measures to diversify the economy, which includes lowering the subsidies and cost optimisation apart from prioritising planned spending. Finance Minister HE Ali Sherif al-Emadi had recently said Qatar would be spending another QR46bn in 2017 to upgrade its infrastructure in the run up to 2022 FIFA World Cup.
Bahrain-based Bank Alkhair has obtained approval from the State Bank of Pakistan to sell its stake in Pakistan’s Burj Bank to Al Baraka Pakistan Limited (ABPL). This transaction follows the announcement on 5 September 2016 about the merger of Pakistan’s Burj Bank and ABPL, creating an institution with assets totaling more than $1.1 billion. Ayman Sejiny, Group CEO of Bank Alkhair said the bank was pleased to sell its stake in Pakistan’s Burj Bank to Al Baraka Pakistan Limited. Bank Alkhair has completed several landmark transactions since its inception, including the establishment of t’azur, a regional Takaful company and the acquisition of Bahrain Financing Company, the oldest foreign exchange and remittance houses in the GCC.
Al Baraka Banking Group is targeting the sale of capital-boosting sukuk worth $300 million in the first quarter of 2017. The announcement was made on the sidelines of an Islamic banking conference by the group's CEO Adnan Ahmed Yousef. He also added that the issue would enhance the bank's core Tier 1 capital. Al Baraka had a total capital adequacy ratio of 15.15 percent as of June 30, according to a regulatory disclosure on its website.
According to the Thomson Reuters Islamic Finance Development Report 2016, Bahrain leads the GCC’s Islamic finance development for the fourth consecutive year. The report is jointly produced by Thomson Reuters and the Islamic Corporation for the Development of the Private Sector (ICD). Bahrain ranks first globally in terms of Governance due to its well established regulatory environment and governance mechanisms. The regulations cover Islamic financial institutions including Islamic asset management and Sukuk. Bahrain is among the top ten countries for the other indicators as well. For the Knowledge indicator, its Islamic finance ecosystem is supported by 17 providers offering Islamic finance related education including universities and institutions. Meanwhile, its Islamic financial institutions continue to contribute socially, with US$ 18.5 million charity, zakat and Qardh al Hasan funds disbursed in 2015.
The Moroccan government granted state-owned Crédit Agricole of Morocco (CAM) approval to open a subsidiary of the Islamic Development Bank (IDB). In addition to IDB, three foreign banks are looking to launch subsidiaries with domestic partners after Moroccan officials encouraged partnerships rather than fully owned subsidiaries. Morocco could see additional Islamic products introduced into the domestic market if new regulations are passed. Morocco will also see the introduction of mobile-to-mobile payments next year, which is expected to extend banking coverage, as well as reduce the number of cash transactions. New regulations will allow non-bank entities and individuals to open accounts to expand e-payments to transactions such as retail, utility and mobile phone payments.
The Shari’ah Board of AAOIFI held its annual meeting from 17 to 19 November 2016 in the Kingdom of Bahrain. The meeting was concluded with issuance of a number of resolutions as well as the adoption of two new Shari'ah standards. The new standard on the Liability of Investment Manager defines the concepts of transgression and negligence and breach of contractual stipulations on the part of the investment manager. The standard also sets out the Shari'ah rulings pertaining to investment manager's liability or volunteering to bear liability. AAOIFI has also approved a new standard on Gold and it Trading Controls. The standard will be officially launched at a press conference whose date will be announced shortly. It will also be published together with other standards in the new edition of AAOIFI's standards.