A tax waiver is needed, especially on asset transfers, to make Islamic financing in Indonesia more competitive with conventional financing. According to Qudeer Latif, a partner at law firm Clifford Chance, in the UK and Malaysia, the asset transfer tax is annulled, they categorize the asset transfer in the Islamic financing structure as a financial transaction, rather than a sales and purchase transaction. Another problem, he continued, stemmed from the high building transfer fee, which varied from 5% to 7%. The central government had tried to reduce it to 2.5%, but some regional governments still objected to it. According to the expert, changing the taxation rule will create a level playing field between Islamic and conventional financing.
Corporate and infrastructure sukuk issuance in the Gulf region and Malaysia has continued to stagnate so far this year and this may carry over to the coming quarters, according to S&P Global Ratings. Despite the slump, essential infrastructure funding requirements, low interest rates, and investors' appetite for Islamic assets in their portfolios continue to be supportive for the world's core corporate sukuk markets.
In the GCC, corporate and infrastructure sukuk issuance totalled $2.5 billion in the first eight months of 2016, compared with $2.3 billion for the preceding eight months. Versus the same periods in 2013 and 2014, issues are down sharply from $5 and $6.5 billion, respectively, S&P said.
"Further out, we see possible brighter prospects for issuing corporate and infrastructure sukuk over the medium to long term. We estimate that Gulf government spending on projects alone - including infrastructure contracts awarded over 2016-2019 - could be about $330 billion," said S&P Global Ratings analyst Karim Nassif.
Moody's Investors Service says that the liquidity coverage ratios of Islamic banks in key Asian and GCC countries highlight sound liquidity profiles and broad compliance with Basel III regulatory requirements.
"In the report, we highlight that a key driver of LCR performance is the funding profile of banks and, in this context, over-reliance on corporate deposits and unsecured wholesale funding means higher potential liquidity pressures," says Simon Chen, a Moody's Vice President and Senior Analyst. "However, banks with a greater proportion of retail deposits that are considered more 'sticky', typically display stronger LCRs," adds Chen.
Malaysia’s stock exchange operator is discussing a tie-up with Indonesia’s bourse and plans further alliances to mobilize funds targeting the world’s almost $12 trillion in Shariah-compliant equities.
Bursa Malaysia Bhd. is in talks with the Indonesia Stock Exchange to explore various forms of cooperation such as allowing cross listings and hopes to start collaborating by mid-2017, Jamaluddin Nor Mohamad, Bursa’s Islamic capital market director said in an interview in Kuala Lumpur. Bursa plans to forge partnerships with exchanges in Asia and the Middle East to develop the Islamic capital market, he said.
Malaysia already tightened compliance rules for Shariah stocks in 2013 as it sought to draw overseas funds who have a stricter view on permitted investments. Shariah law forbids investments in shares of companies involved in activities considered unethical such as gambling, prostitution, alcohol and pork-related businesses.
Some 669 stocks, or 74 % of the total shares listed on Bursa Malaysia, comply with Shariah principles, according to the Securities Commission. The market regulator reviews the list twice a year based on the companies’ audited financial statements.
Lender Maybank Indonesia has called on the Indonesian government to promote Islamic financing as an alternative funding to boost infrastructure projects in the country. Its president director Taswin Zakaria said infrastructure projects covered tangible assets such as land and equipment that could be securitized for Islamic financing such as sukuk.
"We view Islamic financing as an alternative, not a substitute, that can be used simultaneously with conventional financing […] We’re looking to finance more government projects using Islamic loans," he said during Maybank's Invest ASEAN 2016 event on Wednesday in Jakarta. Islamic financing, he further said, would attract money from the Islamic world, such as from Middle Eastern investors in Indonesia as the infrastructure projects were mostly supported by the government.
Maybank's sharia unit, Maybank Syariah, disbursed 80 % of its Rp 10.8 trillion (US$ 817.25 million) loans in the first half of 2016 to the infrastructure sector. However, it is currently struggling with unsafe gross non-performing financing (NPF) of 5.58 %.
Bank Islam Malaysia Bhd said the proposed move to allow developers to provide loans to house buyers will not have a severe impact on the bank, as it will continue to focus on its target market.
“For us, we don’t see any reduction in (our) approval rate, mainly because our target market remained stable,” its deputy CEO Khairul Kamarudin told reporters after launching the bank’s Visa Infinite Business Credit Card-i (business card-i) here yesterday. “Our target market has always been the middle income (segment) and we will continue focusing on our target market and we are seeing the same approval rate (going forward)”. Khairul said the bank’s approval rate last year was 70%, and slightly better this year at 71%, to date. He also said the bank has not experienced high loan rejections despite the current uncertain economic conditions. “People (borrower) who are eligible last year are also eligible this year. For the ones who have their applications get rejected are maybe for the ‘high ticket’ properties,” he added, noting that the bank is more focused on providing loans for affordable housing.
If we look back at the emergence of the Muslim Lifestyle markets as a global phenomenon, we can see an interesting pattern developing. From 2004 - 2007, Malaysia was the epicenter of the Halal movement, bringing the terms ‘Halal market’ and ‘Halal industry’ into the global business vocabulary. Bidding to become a global Halal hub, the development of their Halal food sector made Malaysia a role model for other countries looking to position themselves in this fast-growing marketplace. Abdalhamid David Evans, Founder, HalalFocus.net/ImaratConsultants.com, will be speaking about this topic at the Muslim Lifestyle Expo 2016 in Event City, Manchester on the 30 October 2016.
The Reserve Bank of India’s proposal to tap Islamic banking to provide banking services to Muslims - who are averse to a interest-based model, has raised hope of this system becoming a reality in the near distant future.
According to Dr D.K. Batra, marketing professor, IMI, New Delhi, a large section of Muslims in India did not access banking services on religious grounds due to the element of interest which is prohibited in Islam. So it is interesting that “RBI will explore the opportunity to offer interest-free banking in consultation with the government to open Islamic banks,” he said. This requires a law to be passed, and therefore legislative support, since it concerns net interest margin for banks. The Islamic finance has not grown fast enough as the concept faced opposition from political parties, said Dr Batra.
The Malaysian Rating Corp Bhd (MARC) has affirmed its ‘AAA’ rating on special purpose vehicle Aman Sukuk Bhd’s (Aman) Islamic medium-term notes (IMTN) programme of up to RM10 billion with a stable outlook. MARC said the rating reflects the credit strength of the government as the sole paymaster of the sublease rental payments that are sufficient to meet the principal and profit payments under the IMTN programme.
In the statement the rating agency added the stable outlook reflects its expectations that the sublease rental stream backing the transaction will continue to be supported by timely receipt of payments from the government.
Aman is a wholly owned funding vehicle of Pembinaan BLT Sdn Bhd (PBLT), the developer of 74 projects comprising quarters and facilities for the Polis DiRaja Malaysia. The projects, which are located throughout the country, were developed under a build, lease and transfer (BLT) project model. As at end of August 2016, PBLT has fully completed the construction of the 74 projects with a value of RM7.5 billion, of which 73 projects have been awarded with certificates of completion and compliance (CCC).
In this interview deputy CEO of Bank Islam in Malaysia, Khairul Kamarudin, talks about the challenges Bank Islam had to face during the years. The bank had heavy losses in 2005 and 2006 and had to manage the misconceptions of the public as well. Today, Bank Islam’s customers have grown to more than 5 million. The bank was one of the four founding Islamic banks to form a consortium that launched the Investment Account Platform (IAP) in 2015. The IAP platform facilitates direct investment by investors into viable ventures of their choice. Bank Islam is involved in several social projects and foundations, like the Projek Bantuan Rumah (Housing Aid Project) and Promoting Intelligence, Nurturing Talent and Advocating Responsibility (PINTAR) Foundation.
While the number of Islamic products in #Malaysia has grown in the last 10 years, there still aren’t enough to cater for the needs of local investors. According to Rohani Mohd Shahir, president of the Association for Islamic Financial and Wealth Management Malaysia (AIFiWM) the growing demand is due to a greater awareness of compliance for religious purposes. There is a lack of Islamic real estate investment trusts (REITs) and fewer shariah-compliant stocks in Malaysia today due to the tightening of regulatory requirements. To increase the number of listings available, AIFiWM is championing a move to restore the shariah-compliant status of companies that were once deemed compliant.
In #Indonesia fintech startups will be invited to a safe space where they can test any service under the supervision of the central bank before it issues regulations and allows full authorization. The safe space, known as a "regulatory sandbox", has been adopted in many countries around the world. The central bank will also set up a designated fintech office to overlook the sandbox. The Indonesian Fintech Association applauded the planned sandbox approach as it will serve as a tangible platform for all fintech initiatives to be tested into the regulatory system. The association's secretary-general Karaniya Dharmasaputra said this concept was a good one as shown by many countries implementing it toward success.
The International Accounting Standards Board (IASB) has appointed Datuk Mohammad Faiz Azmi as chairman of the Islamic Finance Consultative Group. Commenting on his appointment, Mohammad Faiz said he hoped to be able to continue the good work of the IASB in the area of global finance. He appreciates IASB's commitment in helping the emerging markets adopt their International Financial Reporting Standards (IFRS). IASB Chairman Hans Hoogervorst said Mohammad Faiz had always been a valued member of the IFRS community and is renowned for his expertise in Islamic Finance.
Together with Fintech Indonesia Association, Deloitte released the Fintech Survey 2016 at the Indonesia Fintech Festival & Conference 2016. Conducted between June to August 2016, the survey interviewed 70 respondents from various Indonesian fintech companies. 27 different types of fintech companies participated in the survey. All of them shared three major concerns. A great number of fintech players agreed that the current regulatory process is "not so clear." Another pressing matter faced by Indonesian fintech players is talent shortage. The third concern is the local market’s low levels of financial education. Ironically, this problem happens not only among members of the general public but also among players in the conventional finance industry.
In #Indonesia the National Police have warned the public to be on guard against fraudulent investment companies. Criminal Investigation Department director Agung Setya said investors who understood investment often fell prey to fraudsters because of greed, while other were lured by religious symbols and public figures. He cited as an example the 2007 Gama Smart Karya Utama case and the 2012 Langit Biru cooperative case, in which the founders claimed to be spiritual leaders. Data show that fraudulent investments lead to billions of rupiah in losses per year. In 2007, losses amounted to Rp 16.13 trillion (US$1.21 billion), but decreased to Rp 604 billion in 2008. In 2011 and 2012, losses rose to Rp 68.62 trillion and Rp 10.22 trillion, respectively, but declined to Rp 235 billion (2014) and 285 billion (2015).
Kuwait Finance House (KFH Malaysia) has appointed David Power as its new chief executive officer (CEO). Power, who has been Kuwait Finance House (KFHK) group chief retail and private banking officer since 2014, is now replacing Ahmed S. Al Kharji. KFH Malaysia had also appointed Nor Azzam Abdul Jalil as its deputy CEO and chief (consumer banking) effective June 1, and David Wee Kim Peng as chief operating officer, effective April 1. KFH Malaysia was established on Aug 8, 2005.
Khazanah Nasional, the Malaysian sovereign fund, is considering selling as much as $500 million of exchangeable sukuk. The state-owned firm is currently choosing banks for the potential offering. Khazanah has been reducing stakes in listed Malaysian companies through Islamic debt offerings that can be converted into shares. The fund last sold $500 million sukuk that can be exchanged into shares of Tenaga Nasional, the country’s biggest power producer, in 2014. It is also the largest shareholder of IHH Healthcare, Asia’s biggest hospital operator. Sales of Islamic bonds in Malaysia surged 60% this year to 45.8 billion ringgit ($11.4 billion), while offerings of global sukuk climbed 19% to $28.1 billion.
Indonesia is all set to host the Indonesia Fintech Festival & Conference 2016 (IFFC 2016). The event is organised by Indonesia Financial Services Authority (OJK) in association with Indonesian Chamber of Commerce and Industry (KADIN) and will be held in Tangerang from August 29 to 30. IFFC 2016 will focus on several issues related to fintech, including financial inclusion. A series of workshops and conferences for fintech players will be conducted. Also, a startup competition will take place as part of the event. Indonesia’s President Joko Widodo and Queen Maxima of the Netherlands will be special guests. According to the organising committee, up to 2,000 tickets have been sold so far.
Amana Takaful Life Limited (ATLL) rang the opening bell to commence trading and celebrate the listing of its shares on the Colombo Stock Exchange (CSE). Speaking at the event, ATLL Director Dato' Mohd Fadzli Yusof stated that the listing brings ATLL to the mainstream of the financial landscape in Sri Lanka. Chairman of CSE Vajira Kulatilaka congratulated ATLL for achieving a successful listing. He also added that while listing on the CSE adds immense value and prestige, it also comes with obligations to investors and other stakeholders. Amana Takaful Life Limited and its parent, Amana Takaful PLC are fully fledged Takaful companies, offering life and general insurance solutions. ATLL distributes its products through an island-wide network of 26 branches, covering 22 districts.
The board of directors of Shahjalal Islami Bank has approved for issuance of Mudaraba Subordinated Bond worth Tk 4.0 billion. The new issuance is part of a process of inclusion in Tier-II Capital for a period of 7 years through private placement. The bond issue is subject to approval of the regulatory authorities – Bangladesh Bank, Bangladesh Securities and Exchange Commission. The bank’s paid-up capital is Tk 7,346.88 million and authorised capital is Tk 10,000 million, while total number of securities is 734,688,133.