Asia

Cover Story: Rediscovering the spirit of Islamic banking

At 37 years old, Arsalaan Ahmed is the youngest chief executive in the Malaysian Islamic finance industry. As CEO of HSBC Amanah Malaysia, his vision is to change the industry’s narrative on Islamic finance. So far, the narrative has focused a lot on the technicalities of products and services. Arsalaan says these discussions should be focused on the principles of social justice and create a positive impact on society. He plans to allow retail investors to invest directly in sukuk. Currently, individual sukuk requires an initial investment of RM500,000. By lowering the initial investment amount, investors with sufficient knowledge of the market could invest directly. Arsalaan says 2018 is a good time to democratise sukuk because of China’s One Belt, One Road (OBOR) initiative, which aims to improve the infrastructure of land and maritime routes. According to HSBC, the initiative involves US$4 trillion worth of investments and 900 planned projects.

#Takaful #Malaysia to leverage on #digitalisation after high returns

Takaful Malaysia aims to expand its market share in the general takaful business after recording higher turnover and earnings for its 2017 fiscal year. The company increased its revenue by 6.5% to RM2.14 billion year-on-year due to the higher sales in the family and general takaful businesses. Group CEO Datuk Seri Mohamed Hassan Md Kamil said the company maintained its lead position in the family takaful segment and the fire and motor classes’ gross contribution shot 20% up from FY16 to close at RM591 million. He added that Takaful Malaysia is also in the middle of enhancing its digital capabilities. Significant investment has been made in tools, applications and new technologies to improve operational efficiencies and enhance the customer experience. The takaful operator surpassed the RM200 million mark for the first time since its inception in 1984, growing at a compounded annual growth rate of 27%.

#Takaful #Malaysia plans new products to boost boost growth

Takaful Malaysia plans to introduce new product solutions to improve its growth rate. The company said it made significant investments in tools, applications and new technologies to improve operational efficiencies and customer experience. For the fourth quarter ended Dec 31, 2017, Takaful Malaysia’s net profit stood at RM56.3 million, 43.4% higher than the RM39.26 million recorded in the previours period. Revenue increased 5.5% from RM490.82 million to RM517.74 million. Its full-year net profit soared 17.3% from RM176.28 million to RM206.7 million, with revenue rising 6.3% from RM2.01 billion to RM2.14 billion. Takaful Malaysia group CEO Datuk Seri Mohamed Hassan Kamil said the group’s profit surpassed its target and for the first time exceeded RM200 million since its establishment. He added that the group takaful business and general takaful gross contribution grew 20% from the previous financial year to close at RM591 million, mainly derived from the fire and motor classes.

CIBAFI and The World Bank presenting study on "Corporate Governance Practices in Islamic banks 2017"

It is well established that good corporate governance strengthens institutions and financial sectors, and in so
doing contributes to building strong economies and economic growth.

Deficiencies in corporate governance were among the factors that contributed to the global financial crisis
(GFC) of 2007–08. As a result, global standard setters such as the Basel Committee on Banking Supervision
(BCBS) and the Organisation for Economic Co-operation and Development (OECD) have been updating and
strengthening their guidelines on good governance practices.

The Islamic Financial Services Board (IFSB), which sets standards for Islamic financial institutions, published its
Guiding Principles on Corporate Governance in 2006 as its standard IFSB-3. The Principles address, within the
context of corporate governance, the distinct features of Islamic banks, such as the different relationship that
they have with some of their stakeholders.

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ESG progress faster than investors’ expectations, says PRI #China country head

According to Luo Nan, China country head at The Principles for Responsible Investment (PRI), the country faces immense challenges in pushing the environmental, social and governance (ESG) programme. Still, ESG is fast becoming a well-known concept. 2016 was a big turning point, when China released the "Guidelines for Establishing the Green Financial System". The China Securities Regulatory Commission has set out a timetable which will require all listed companies to mandatorily disclose environmental information by 2020. There is increased awareness and interest from investors in relation to the Principles for Responsible Investment. There is also an increasing volume of jobs available in China relating to ESG. Luo Nan believes that communication to the public and broader education among investors are key to developing the broad ESG programme in China. Evidence on risk and consequent implications for investors need to be much better developed and communicated.

Indonesia hires for dollar #sukuk, could include Green tranche

The Republic of Indonesia has appointed banks for a US dollar sukuk offering that could include the first offshore Green bond from an Asian sovereign. Abu Dhabi Islamic Bank, CIMB, Citigroup, Dubai Islamic Bank and HSBC are joint bookrunners. The sukuk maturities are expected to be of 5 and 10 years, and the issuer may also consider the possibility of a longer dated tranche. Poland was the first sovereign to issue Green bonds, in a euro-denominated transaction in 2016. In Asia, Hong Kong has also expressed interest in issuing Green bonds. Indonesia last issued dollar bonds in December, when it completed a $4 billion transaction split across three tenors.

Great Eastern #Takaful appoints Shahrul Azlan as new CEO

Great Eastern Takaful has appointed Shahrul Azlan Shahriman as its new Chief Executive Officer (CEO). Shahrul Azlan was the Chief Distribution Officer in Prudential BSN Takaful, with local and international experience in multichannel distribution. Great Eastern Takaful Chairman, Datuk Kamaruddin Taib said Shahrul Azlan was the best person to steer the company given his vast experience and established track record. He added that in Malaysia there was tremendous potential for Great Eastern Takaful to serve the underinsured and fast-growing Islamic insurance market in the country.

Bank Islam launches social finance platform, Sadaqa House

Bank Islam Malaysia has recently launched its social finance initiative, Sadaqa House. It aims to provide products and services to collect sadaqah, waqf and hibah. The public can contribute to realising social finance projects for sectors such as healthcare, education and entrepreneurship through the bank’s digital crowdfunding partnership with Ethis Ventures and GlobalSadaqa.com. Bank Islam CEO Khairul Kamarudin said the bank was utilising technology in its Shariah solutions to deliver a service that is aligned with the current digital trend. Also, contributors can ensure the funds contributed are being channelled accordingly and track the progress of the chosen project. Ethis Ventures founder Umar Munshi said the platform was not limited to Muslims and Malaysians. Any amount of money can be donated by the public into the Sadaqa House fund account, while Bank Islam will match the raised fund at the rate of 1:1 to a maximum of RM500,000.

Khazanah Launches #Sukuk Exchangeable into Citic Shares

#Malaysia's Khazanah Nasional pushed out an exchangeable sukuk to raise US$ 309.4 million to US$ 320.8 million. The zero-coupon sukuk are exchangeable into CITIC Securities Co Ltd’s Hong-Kong listed H-shares. They have a tenor of five years and an investor put option after three years. The sukuk will be listed on the Singapore Exchange Securities Trading Limited, Labuan International Financial Exchange and Bursa Malaysia. CIMB and J.P. Morgan are the joint bookrunners and joint lead managers for the transaction.

Khazanah's RM1.27b #Sukuk oversubscribed 5.5 times

Khazanah Nasional's exchangeable Sukuk of USD320.8mil (RM1.27bil), which has a tenure of five years, was oversubscribed by 5.5 times. The exchangeable Sukuk would reference the value of H-shares in CITIC Securities, China’s largest securities brokerage firm. Khazanah managing director Tan Sri Azman Mokhtar said it was opportune for the fund to price the deal on the back of positive market sentiments in China. The exchangeable Sukuk is structured based on the principle of Wakalah and provides the Sukuk holder with the option to receive cash or shares upon exchange. The Sukuk will be listed on the Singapore Exchange Securities Trading Limited, Labuan International Financial Exchange and Bursa Malaysia. CIMB and J.P. Morgan are the joint bookrunners and joint lead managers for this exchangeable Sukuk transaction.

US$50m of i-VCAP Islamic ETF expected to be subscribed

i-VCAP Management is expecting US$50 million (RM198 million) to be subscribed upon its initial subscription period via an initial public offering on Feb 9. The MyETF-US50 will be the first US dollar-denominated Syariah-compliant security to be listed on Bursa Malaysia. i-VCAP CEO Khairi Shahrin Arief Baki said ETFs are one of the fastest growing investment products in the world. The MyETF-US50 is aimed at providing investment results that closely correspond to the performance of the benchmark index, the Dow Jones Islamic market US Titans 50. According to i-VCAP chairman Tuan Haji Rosli Abdullah, the MyETF-US50 enables investors to access the US equity market in US dollars, marking a new chapter in the Malaysian capital market.

Responsible finance: #Malaysia leads the way with new guidelines

The Securities Commission Malaysia recently issued its 'Guidelines on Sustainable and Responsible Investment (SRI) Funds' to promote the growth of such funds in Malaysia. Often termed as ethical investments, SRI investments not only provide benefits to society, but also encourage corporate practices that embrace environmental stewardship, consumer protection, human rights and diversity. The new guidelines, which enable market funds to be designated as SRI funds, will widen the range of SRI products. According to the new guidelines, the policies and strategies of SRI funds must adopt one or more sustainability considerations such as the UN Global Compact Principles, the Sustainable Development Goals and other environmental, social or governance factors. The Guidelines also introduce additional disclosure and reporting requirements to encourage more transparency.

An Islamic Bank for The Poor, Including 4% Hindus, Who Can't and Need Not Pay Interest

Reserve Bank of India guidelines specifically state that banks are compulsorily required to charge an interest and pay taxes to the central government. However, the Muslim Fund Trust in Deoband headed by Haseeb Siddiqui is a financial institution that works on an interest-free loan module. The trust offers loans to only those who have a savings deposit account with them. Conventional banks demand security before issuing loans, which it has the option of falling back upon, in case the consumer defaults. The Muslim Fund Trust accepts only ornaments as security. Locals who avail the services of the Muslim Fund Trust identify Siddiqui as a social worker. Popularly known as Abbaji, Siddiqui has been politically active as a member of BSP. The trust neither has debit or credit cards, nor does it have netbanking facilities like other banks. The Muslim Fund Trust also runs an eye-care hospital, driver-training centre and an orphanage.

SBP voted as best central bank for promoting Islamic finance

State Bank of Pakistan has been voted as the Best Central Bank in Promoting Islamic Finance by a poll conducted by International Finance News (IFN). The central bank has also won this award in 2015. In 2016, Pakistan was awarded Global Islamic Finance Award (Advocacy Award) by Edbiz Consulting Limited, UK. This recognizes the dedication and commitment of State Bank of Pakistan for laying the foundations for the sustainable growth of Islamic finance. In September 2017, the share of Islamic banking stood at 11.9% in terms of assets, while in terms of deposits its share is 13.7% with a network of 2,368 branches across the country.

TradePlus Shariah #Gold Tracker marks #Malaysia’s first commodity ETF

Affin Hwang Asset Management has launched the TradePlus Shariah Gold Tracker (GOLDETF MK) on Bursa Malaysia, the first commodity-tracking ETF listed in Malaysia. The fund provides investors with exposure to gold through a shariah-compliant investment structure. The fund tracks the LBMA Gold Price AM Index by investing in physical gold bars purchased from London Bullion Market Association-accredited refineries. Datuk Seri Tajuddin Atan, CEO of Bursa Malaysia, said this ETF would allow investors to buy and sell gold in the same manner as trading shares on Bursa Malaysia. The government of Malaysia has also announced that ETFs traded on Bursa Malaysia will be exempted from stamp duty starting from 1 January 2018. GOLDETF’s annual fees (including management, trustee and custody fees) is 0.76%.

BTMU provides $353m Islamic #loan to Malaysian Saudi Telecom unit

The Bank of Tokyo-Mitsubishi UFJ has provided an Islamic syndicated loan to the Malaysian affiliate of Saudi Telecom. The ringgit-based loan amount is about 41.7 billion yen ($353 million). BTMU is the first Japanese bank to act as an agent bank for a syndicated loan in Malaysia. The loan will be provided with HSBC and Standard Chartered Bank of the U.K. Japanese banks in Malaysia mostly provide loans to Japanese companies operating in the country. Now, BTMU aims to expand operations in the country through Islamic finance. BTMU has extended foreign-currency Islamic loans in Malaysia since 2008 and ringgit-based Islamic loans since 2014. The ratio of Islamic finance to total loans in Malaysia rose to about 30% at the end of 2017, from 17% at the end of 2009.

Saudi Telecom gets 1.5 bil ringgit Islamic #loan

Saudi Telecom Co (STC) has obtained a 1.51 billion ringgit (US$378.5 million) Islamic loan through its Malaysian subsidiary. The company will use the Islamic loan to refinance existing debt originally used to acquire a stake in Malaysian mobile-phone firm Maxis. STC Malaysia Holdings hired Bank of Tokyo-Mitsubishi UFJ (Malaysia), HSBC Amanah Malaysia and Standard Chartered Bank Saadiq to arrange the deal. The syndicated financing uses a sharia-compliant structure known as commodity murabaha. Bank of Tokyo-Mitsubishi UFJ (Malaysia) will act as the investment agent to manage the cash flows of the facility and to execute the commodity murabaha transactions.

Nominations open for Royal #Award for Islamic Finance

The Royal Award for Islamic Finance is on a global search for an exceptional individual in the field of Islamic finance. The biennial award is spearheaded by Bank Negara Malaysia and the Securities Commission Malaysia. It recognises Islamic finance visionaries who contribute significantly to the growth of Islamic finance. The award recipient is selected by an independent seven-member international jury chaired by Tun Musa Hitam. The most recent recipient of the Royal Award for Islamic Finance in 2016 was Prof Datuk Dr Rifaat Ahmed Abdel Karim. He was instrumental in founding the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). The closing date for nominations is March 31, 2018, and interested persons can submit their nominations online.

New top brass for Shahjalal Islami Bank

Akkas Uddin Mollah has recently been elected chairman of Shahjalal Islami Bank. The election took place at the 259th meeting of the bank's board of directors in its head office in Dhaka. The meeting also reelected Khandoker Sakib Ahmed and Mohammed Golam Quddus as vice chairmen. Mollah is the chairman of Osman Memorial Hospital and Russel Spinning Mills. Ahmed is the managing director of Zuairia Group, while Quddus is a director of the bank representing Anwer Khan Modern Hospital.

Deoband’s new #fatwa bans Muslim women from marrying into families of bankers

The largest seminary in #India, Darul Uloom Deoband, has issued a fatwa asking Muslim women to not marry into a family whose members work in banks. Deoband argued that the income from banking jobs is considered haram (forbidden) earnings. The edict was pronounced after a person asked Darul Ifta if he should marry his daughter to a man whose father worked in a bank. The Islamic scholars have upheld the fatwa, contending that the religious body’s stand was in line with the Islamic law. Islamic researcher Maulana Nadimul Vajdi said that if a person, knowingly or unknowingly, has indulged in haram earning, the person concerned should quit the job and find another one in which the income was not considered forbidden under the Islamic law.

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