IslamicFinance.de

The plan to create national Shariah boards to oversee sukuk sales is drawing criticism from bankers and lawyers who say the groups would increase bureaucracy in the $1 trillion Islamic finance industry.
The Accounting & Auditing Organization for Islamic Financial Institutions, a leading global regulator, is in the final stages of a plan recommending governments appoint panels of scholars and experts at the national level to rule whether products comply with the religion’s tenets, Mohamad Nedal Alchaar, secretary-general of the Manama, Bahrain-based body, said in an interview in Kuala Lumpur on Oct. 26. The proposal will be submitted early next year.
The regulator says such a system will help clarify standards and bolster investor confidence in an industry whose assets are forecast by the Kuala Lumpur-based Islamic Financial Services Board to almost triple to $2.8 trillion by 2015. The changes risk adding bureaucratic hurdles and slowing approvals at a time when sales are down 19 percent this year, according to CIMB-Principal Islamic Asset Management Sdn. and Atlanta-based law firm King & Spalding LLP.

A report prepared KFHR Limited, a subsidiary of Kuwait Finance House (KFH), brought attention to the fact that the financing deals in compliance with the provisions of Islamic Sharia'a contributed to the growth of aviation and shipping sectors in the region.
This growth was achieved through huge financing deals concluded over the past few years and introduced benefits to these sectors.
The report, which addresses in detail the issues relevant to Islamic finance industry, aviation and shipping, explains that the aviation sector which is seeing strong growth in demand since it emerged from the rescission crisis in 2003 to reach a peak demand in 2007, seems to poise for further recovery given several key factors to support this fact. This level is therefore supported by: (i) rapid development of aviation sector in emerging markets; (ii) booming of low-cost carriers; and (iii) replacement of less efficient aircraft. The overall volume of deals compliant with the provisions of Islamic Sharia'a reached during the period from August 2006 to August 2010, $1.882bn through various structures of Islamic financing.

HEWLETT-PACKARD (HP), the world's largest technology company, has issued its maiden US$100 million (RM310 million) sukuk to part- finance the development and construction of its multi-million-dollar next generation data centre (NGDC) in Cyberjaya.
The company, via its Malaysian subsidiary HP Multimedia Sdn Bhd, and CIMB Islamic Bank Bhd signed an agreement to formalise the Islamic term financing facility agreement in Kuala Lumpur yesterday.
At the signing, CIMB Islamic was represented by group chief executive officer Datuk Seri Nazir Razak, while HP was represented by HP Enterprise Services senior vice president for Asia Pacific and Japan, Kevin Jones.
The loan will help finance the development of HP's first phase NGDC project, with an option to be extended to subsequent phases in due course.
Upon completion in 2016, the campus will stand as one of HP's four global network centres, alongside India, Mexico and Costa Rica.

SOUTH Korea is keen to foster further cooperation with Malaysia to beef up its Islamic finance and services sector that is at its infancy stage.
Korea Investment and Securities head of Islamic finance Yul-Hee Lee said there has been many enquiries made by Korean companies on how it can raise funds using the sukuk.
Lee noted that the South Korean government is in the midst of fine-tuning laws on Islamic finance and introducing tax incentives but development is still at its early stage and will take time to be ready.
The South Korean government announced an Islamic financing tax regime for sukuk as early as August 2009.
South Korean firms have been using Islamic finance products for a couple of decades, but only in relation to their business activities in the Middle East.
Post-global economic crisis, Lee said the country is considering other options and diversifying its investments. Part of its plan is to tap into the Islamic finance market.

Malaysia, the world’s biggest market for Islamic bonds, will issue a license before the end of this year to a new Islamic bank that will be jointly established by institutions from Asia and the Middle East.
The newly formed entity will have a capital of at least $1 billion, Zeti said in an interview late yesterday, without naming the companies or organizations involved. A second so- called “mega Islamic bank” permit may be issued by the central bank next year.
Muslim-majority Malaysia began pioneering Shariah-compliant finance with its first Islamic bank three decades ago. It is today responsible for more than 60 percent of the world’s $130 billion outstanding Islamic bonds, or sukuk, that comply with the religion’s ban on interest, according to data compiled by Bloomberg. The new bank will be able to facilitate larger issuance of such notes.
The country has offered tax breaks and other incentives to attract global financial institutions including Aberdeen Asset Management Plc and Franklin Templeton Investments in a bid to cement its role as the global Islamic financial hub of Asia.

Islamic private equity funds in the Persian Gulf plan to take advantage of lower asset prices after the property market in Dubai tumbled as much as 50 percent from its peak in 2008.
Middle East and North Africa investment groups have about $10 billion available after raising a record $5.4 billion in 2008 that they haven’t been able to spend, Gulf Venture Capital Association said in a July 20 statement. Mid-sized businesses in the Gulf may need as much as $1 billion from investors, Jalil said. The Bloomberg GCC 200 Index of regional stocks has declined 26 percent since the end of September 2008 after credit markets collapsed.

Abu Dhabi Islamic Bank, or ADIB, the emirate’s largest Islamic lender by market value, is planning to sell five-year benchmark Islamic bonds, or sukuks, this week, according to people familiar with the matter.
Company officials, who have been on a series of investor meetings in Asia, Europe and the Middle East since Oct. 20, end their roadshow Tuesday. Benchmark-sized bond deals are those worth at least $500 million. The securities are expected to price later this week.

Bahrain'sc plans to restructure or sell assets to pay back $ 90 million in debt next year, a document showed, highlighting its struggle to meet obligations amid dried-up revenues.
The Islamic investment firm and other Bahraini investment houses have struggled to restart revenue growth, after a 2008 regional property crash pulled the rug out from under their business model of earning fees on investor money raised for private equity and property projects.
GFH posted a net loss of $ 40 million for the second quarter and did not book any income from investment banking services, the main income source during the region's five-year oil and property boom that ended in 2008.
Some large investors have indicated that they may wish to accept land in such projects as their method of exit," she also said. The investor presentation also showed GFH plans to cut its operating expenses by some 40 percent through the reduction of staff costs and funding costs. The firm slashed its staff costs by 66 percent during the first half compared with a year earlier, partly through lay-offs.

Bahrain's Gulf Finance House said on Wednesday its third-quarter net loss nearly quadrupled as the investment firm set aside more money to meet investment and loan losses amid shrinking revenues.
The Islamic investment firm and other Bahraini investment houses have struggled to restart revenue growth, after a 2008 regional property crash weakened their business model of earning fees on investor money raised for private equity and property projects.
GFH, which has restructured two loans worth a total of about $400m this year, said in an investor presentation seen by Reuters it plans to either restructure or sell down assets to repay $90m in term debt next year.
It plans to slash its paid-up capital by about 75 per cent to absorb its losses and raise up to $500m in additional funds through issuing a murabaha, an equity-linked Islamic money-market instrument. The Kuwait-listed shares in GFH have lost about 57 per cent of its value since the beginning of the year.

Kuwait Financial Centre (Markaz) in its recent research on the GCC Fixed Income Market has highlighted the trends in the Kuwaiti bonds and sukuk market during the period from 2003-2009.
CBK issued 1) Treasury Bills, which are debt obligations with maturities of less than one-year and no periodic interest payments, 2) Central Bank Bonds, which are debt obligations with maturities of less than one-year carrying a fixed coupon rate, and 3) Treasury Bonds which are debt obligations with maturities greater than one-year with a fixed coupon rate.

Arcapita Bank, a leading international investment firm headquartered in Bahrain, announced today that it and its affiliates have successfully completed the IPO of a portfolio of 64 industrial properties in Singapore.
In July 2008, Arcapita’s Singapore-based real estate team entered into a joint venture with Mapletree Investments Pte Ltd, a leading Singapore real estate company, to acquire a diverse, industrial real estate portfolio strategically located in Singapore. The portfolio comprises flatted factories, stack-up/ramp–up buildings, business park buildings and a warehouse.

Dallah Albaraka Group chairman and founder Shaikh Saleh Abdullah Kamel has been awarded the 2010 Royal Award for Islamic Finance.
Shaikh Saleh was awarded the accolade for his visinary drive, extraordinary leadership and personal commitment in spurring global accessibility of Islamic finance.
The Royal Award is spearheaded by the Malaysia International Islamic Financial Centre and supported by Bank Negara and the Securities Commission.
The seven-member jury comprises eminent individuals, syariah scholars, academicians and Islamic finance practitioners from Asia, Europe, the Middle East and the United States.

MUSLIM countries should allocate a fraction of their sovereign funds to financial institutions which have the expertise to invest in syariah-compliant investment funds and instruments.
Perak Regent Raja Dr Nazrin Shah said one of the driving forces for Islamic finance to prosper is for large investment organisations such as sovereign wealth funds of Muslim countries to take a developmental view when determining their asset allocations.
Initiatives such as the commodity trading paltform Bursa Suq Al-Sila can be utilised to facilitate liquidity management of Islamic financial instituions.
Saudi Arabia's Al Rajhi Bank and Cagamas Bhd also collaborated to issue an innovative sukuk which aims to meet the syariah demands of investors in the Middle East as well as in Asia.

Malaysia plans to let issuers sell to individual investors sukuk that can be traded on the local stock exchange as the government seeks to reverse a 24 percent decline in sales in the world’s biggest market for Islamic bonds.
Bursa Malaysia Bhd., the exchange operator, is working with regulators on rules to enable companies to issue Islamic debt that would be affordable to the public, Chief Executive Officer Yusli Yusoff said last week. Issuance of the securities fell to 19.8 billion ringgit ($6.4 billion) this year from 26.2 billion ringgit in 2009, the steepest drop since 2003.
Bursa Malaysia is working on developing the sukuk for individual investors.

Maldives Islamic Bank (MIB) and Islamic Banking and Finance Institute Malaysia (IBFIM) will sign a Memorandum of Agreement (MoA) to set up the first Islamic bank in Maldives.
According to the agency, the agreement will bind both parties to co-develop Islamic finance in Maldives through extensive study of Maldives’ legal and banking framework to create a harmonise environment for the growth of Islamic finance.
MIB Chairman Khalid Khaled Al-Aboodi and IBFIM Chief Executive Officer Dr Adnan Alias will sign the agreement during the Global Islamic Finance Forum (GIFF) to be held from October 25-28 in Kuala Lumpur.
The agency quoted MIB Managing Director Harith Harun as saying that the bank is expected to be established within the next six months.

At a macro level, it is needed, beyond short term liquidity and risk management, standardisation, scholars, qualified human capital the following:
First, we need to scientifically establish the size and growth rate of the industry.
Second, we need to establish leading and lagging economic/financial indicators for this geographically fragmented market, some will be same as “conventional”, but others will be different, i.e., more emphasis on applied over academic research.
Third, post crisis, deposit taking Islamic banks need to under go a stress test, as exposure to realty is greater, risk and liquidity management is not as robust, issues with deposit insurance, etc., as a confidence building measure.
Areas that need work are: syariah screening, funds, convergence of IF and halal industry, and venture capital (VC).
Suggestions for Malaysia:
There are five FSA approved Islamic banks in the UK, a G20 country, but not one had a Malaysian founding shareholder, and, now, the European wholesale market may have potential for comparable profits to Indonesian retail.

Demand for Islamic bonds from the Middle East will return to “pre-crisis” levels by the end of the third quarter as companies restructure debt and higher yields lure investors, according to Citigroup Inc.
Shariah-compliant bond sales from the Persian Gulf are rising after Dubai World, the state-owned holding company, reached an agreement with 99 percent of its creditors in September to change terms on $24.9 billion of debt. Economic growth in the Middle East and North Africa will accelerate to 5 percent in 2011 from 3.8 percent this year and 1.1 percent in 2009.

The Islamic Banking and Finance Institute Malaysia (IBFIM) and the Maldives Islamic Bank will sign a Memorandum of Agreement (MoA) to set up the first Islamic bank in Maldives and to develop Maldives Islamic Bank Shariah-compliant banking products. The MoA, among others, will bind both parties to co-develop Islamic finance in Maldives through extensive study of Maldives legal and banking framework to create a harmonise environment for the growth of Islamic finance.
The MoA will be sign by Maldives Islamic Bank s Chairman, Mr. Khalid Khaled Al-Aboodi and IBFIM s Chief Executive Officer, YBhg. Dato Dr. Adnan Alias and witnessed by YBhg. Dato Mohd Razif Abd Kadir, Deputy Governor of Bank Negara Malaysia and YBhg. Dato Sri Zukri Samat, Chairman of IBFIM during the Global Islamic Finance Forum (GIFF) in Kuala Lumpur.

Capivest, a Bahrain-based Islamic investment bank, will support Jewellery Arabia 2010, the region’s largest and most prestigious jewellery and watch exhibition, as a sponsor.
Jewellery Arabia will be held at the Bahrain International Exhibition and Convention Centre from October 26 to 30 under the patronage of His Royal Highness Prince Khalifa bin Salman Al Khalifa, Prime Minister of Bahrain.

Businessman and investor Ibrahim Al Asmakh has donated QR100m to Qatar Charity to set up a micro-lending bank based on Shariah law for supporting poor and low-income segments of the society in Qatar and other Arab and Islamic countries.
Al Asmakh and Qatar Charity have signed an agreement in this respect. The proposed bank will help unemployed youth set up income-generating projects and undergo training.