Saudi Arabia plans a new Islamic bond issue in a sale that could come as early as February. The sharia-compliant sukuk will form part of a pipeline of bond sales to finance the kingdom’s budget deficit and invest in economic diversification away from oil. Last year, Saudi Arabia set a record for developing countries with its first sovereign bond sale, attracting $67bn in investor bids for a $17.5bn issue. Bashar Al-Natoor, global head of Islamic finance at Fitch Ratings, said diversification is natural for any emerging market, but the fall in oil prices have made it a necessity for exporters like Saudi Arabia. Lower oil prices have led to a drop in government reserves held in banks, which in turn has had an impact on their willingness to lend, so they have to look for alternative sources of financing.
The increasing economic importance of banks in Muslim-majority countries has made Islamic finance a useful skill. The globalisation of business education means that many schools now have campuses in countries where Islamic finance is a significant part of the local banking sector. British higher-education institutions lead the non-Muslim world in the teaching of Islamic finance, with longstanding courses run by London Business School, Durham, Aston, Bangor, Salford and Cass Business School. More than 60 institutions in the UK now teach Islamic finance, up from fewer than 10 a decade ago. London Metropolitan University is the latest UK institution to add an option to learn about the subject, relaunching its MBA in January with Islamic finance.
The Turkish Deposit Insurance Fund (TMSF) announced it would temporarily suspend operations in Bank Asya, which is closely associated with the cleric Fethullah Gulen. Turkish President Recep Tayyip Erdogan blamed Gulen and his supporters for the coup attempt on Friday in which more than 200 people have been killed. The coup attempt was suppressed by early Saturday as 103 army generals and admirals were detained. The arrests now amount to a third of the country’s top military officials.
Real estate developer Sharif El-Gamal has secured $219 mn in sharia-compliant financing for a luxury condominium tower in New York City. The financing is led by Maybank and Warba Bank, other participants include Intesa Sanpaolo and MASIC, the investment arm of Saudi Arabia’s Al Subeaei family. The financing comes seven years after El-Gamal purchased the property for $4.85 mn with the goal to build a centre for reconciliation between Islam and the west.
Mauritania is turning to Islamic finance to modernise its banking sector, trying to raise the number of people with accounts from its meagre levels today and in turn increase liquidity so banks can lend more to companies. Many of the Islamic republic’s citizens are uncomfortable with western banking, opting for informal banking collectives or just “keeping money under the bed”, says one local banking executive. Dieng Adama Boubou, director of banking supervision at the Mauritanian central bank, says that the goal was to increase the number of people with bank accounts from 10 per cent today to 25 per cent by 2018, partly by promoting Islamic banking.
The Church of Scotland has joined forces with Islamic finance experts to draw up a “practical ethical financial solution” to help the poor while sticking to the principles of both faiths. The agreement, which was announced on Tuesday, marks an unusual attempt to promote cross-religious financial innovation. Backers say it is too early to say what “solution” the initiative could yield, but possibilities include the creation of a new financial institution with cross-faith legal articles. The Scottish initiative is supported by international Muslim clerics and experts including Lamido Sanusi, a former Nigerian central bank governor famed for cleaning up the banking sector and now one of the country’s highest Islamic authorities.
Singapore has seized a “large number” of bank accounts over possible money laundering offences linked to an international investigation into the Malaysian state investment fund 1MDB, authorities in the city-state said on Monday. In an illustration of the mounting pressure from global regulators on the troubled fund, Singapore confirmed that it was “cooperating closely” with relevant authorities in Switzerland and the US. The Swiss attorney general announced on Friday that there were “serious indications” that $4bn had been misappropriated from Malaysian state companies and that a portion of the funds was transferred to accounts held in Switzerland.
Sharia-compliant funds have suffered their worst sales in four years as the price of oil plummets and tensions in the Middle East spook investors. Sales of the products fell more than 75 per cent last year compared with 2014. The slowdown is a big setback for the fledgling $60bn Islamic fund industry, which only began finding its feet in recent years, and raises questions about the products’ prospects. As recently as 2013, the Islamic fund industry was growing at a rate of 10 per cent a year. However, because a large number of investors in Islamic funds are based in countries dependent on oil or commodities for their wealth, the fall in the price of oil has had a large impact on sales.
The collapse in the price of oil has compounded the problems for Aberdeen Asset Management, with Europe’s third-largest listed fund house reporting its 10th consecutive quarter of net fund outflows. The Scottish-based asset manager has been battling with investor nervousness over the continued turmoil in its core regions, but net redemptions have been exacerbated by oil-producing countries pulling money from their wealth funds to make up for a loss of export earnings. Aberdeen suffered net outflows of almost £13bn during the three months to the end of September. So far this year, the Saudi Arabian Monetary Agency — the world’s third-largest sovereign fund with $661bn invested — has withdrawn about $70bn from external asset managers to support its economy.
The central bank had spent $28bn propping up the currency in less than two years; equivalent to more than a quarter of the combined central bank reserves and national oil fund. The immediate result was a 23 per cent plunge in its value. The move was a boost to Kazakhstan's struggling resources sector. Officials argue that relatively few groups in Kazakhstan will suffer as a result of the currency fall: three-quarters of depositors held savings in dollars, while 70 per cent of company borrowings were in tenge before the move.
The government of Hassan Rouhani, Iran's centrist president, has made attracting foreign investment a priority since taking office as he seeks to create jobs and bring down a youth unemployment rate that stands at 25 per cent, as well as stave off any Arab spring style unrest.
It seems to be getting harder and harder to find a news story about the Middle East and North Africa (MENA) that doesn’t fall within the narrow narrative of disorder and political violence. From state collapse in Libya and the tragic conflict in Syria to the geopolitical flashpoint in Yemen, the headlines from the broader region make for bleak reading indeed. These challenges are real and they are significant, but there is another story about the region that remains under-reported. It is a story of dynamism and entrepreneurship, and it’s one of how private capital is playing a critical role in creating new realities for the region and its people.
Tunisia was once one of Africa's most sophisticated and prolific bond issuers, selling bonds denominated in euros, dollars and yen, and later this year it is expected to issue its first Islamic government bond. International investors keen to capitalise on the country's recent presidential elections put in orders of more than $4bn for the $1bn bond, allowing the country to borrow at a lower than expected rate of 5.875 per cent over 10 years.
Shares in Bank Asya plummeted by nearly 20 per cent on Tuesday, reaching a new low, after Turkey's president Recep Tayyip Erdogan urged the country's banking watchdog to “make a decision” on the beleaguered Islamic lender's future.
Iran has eight state-run and 19 “privately owned” banks – although these are frequently subject to interference from the state, with their shares bought by entities affiliated to power centres, which then influence banking policies and exploit funds - all of which have invested heavily in the ownership and management of commercial entities outside the banking sector. The central bank, state-run Bank Melli and privately owned banks of Ansar, Saderat, Mellat, Pasargad and Parsian refused to comment. Pasargad and Parsian are considered the leading private banks in non-banking operations.
Countries including Pakistan, Tunisia and South Africa are drawing up plans to issue government bonds that comply with Islamic law as they seek to take advantage of strong investor demand for emerging market sovereign debt. Tunisia is working with the Islamic Development Bank to issue a 1bn dinar ($580m) sukuk this year, while Jordan has instructed a committee to look into the possibility of issuing sukuk next year. Governments in South Africa and the Philippines also say they are considering raising money through the sale of Islamic debt.
Plans to levy capital gains tax on property owners who hold their homes through a company structure risk discouraging investment in the private rented sector, tax specialists and investors warn. Scott Nicol, vice-president of Gatehouse Bank, which channels Middle Eastern investors' money into UK property, said he was also worried about the proposals. Gatehouse backed Sigma Capital last year to develop 6,600 privately rented houses in a deal worth £700m. If all the homes are built, Sigma will become Britain's biggest private landlord.
The UK government's decision not to choose a local Islamic bank as an arranger for its sukuk is a lost opportunity to promote the homegrown Islamic finance industry, according to Harris Irfan, of European Islamic Investment Bank. Malaysia’s CIMB, Qatar’s Barwa, National Bank of Abu Dhabi, Standard Chartered and HSBC have been chosen to lead the sale.
Wissam Shawkat, an Iraqi calligrapher who moved to Dubai at the end of 2002, splits his time between fine art calligraphy and designing logos for some of the largest companies in the UAE. As well as logos for regional companies trying to emphasise their roots, he also translates international brand names into Arabic typography for their Middle East operations. Calligraphy is an obvious choice for companies targeting Arab consumers as it creates more emotional reference to them. International companies that open operations in the Gulf often use calligraphy as a stamp of authenticity. Calligraphy might be considered an odd choice for those international companies that employ and cater to non-Arabic speakers, but the designs are rarely judged on their legibility alone. It's about creating an icon.
Middle Eastern debt issuance surged 40 per cent in the first half of 2013, the strongest period on record, according to new data released by Thomson Reuters. Debt raised reached $26bn, including $20.8bn of investment grade corporate debt in the first two quarters of the year, accounting for around 80 per cent of debt capital markets activity. In a further sign of a brighter outlook for the financial sector, debt capital markets underwriting earned banks $102m, more than double the income of the same period last year, and the best first-half performance ever, the report said.