New Straits Times

Do more to boost Islamic #trade finance

As the World Trade Organisation (WTO) reaffirmed commitment to its Aid for Trade initiative, the outlook for global trade over the next two years is indeed mixed. WTO is forecasting that global trade will expand by 2.4% this year and between 2.1 to 4% next year, reflecting the continued uncertainty of the global economy. In Malaysia, Bank Negara Malaysia (BNM) Governor Muhammed Ibrahim wants Malaysia’s Islamic finance industry to boost trade finance to increase largely untapped business opportunities using technological capture. BNM is keen for Syariah-compliant trade financing to support 10% of total trade in the next three years. Malaysia’s Islamic finance industry has assets under management totalling RM742 billion. BNM wants the industry to leverage this pole position and to account for 40% of total financing in Malaysia by 2020.

#Malaysia in bid to lift Islamic finance

The Malaysian Institute of Accountants (MIA) announced that Malaysia could become the first country to incorporate the International Financial Reporting Standards (IFRS) in Islamic finance. MIA president Datuk Mohammad Faiz Azmi said the accounting body was looking into the prospect. He added that MIA will come out with a book on how to apply the IFRS in Islamic finance, as many countries have not adopted it yet. The book will be launched later this month with the help of the regulators and banks. According to MIA, Malaysia adopted the IFRS in 2012, in keeping pace with global trends. The IFRS brings transparency, accountability and efficiency to financial markets. Faiz said MIA’s role was assisting Malaysian Accounting Standards Board (MASB) to prepare the market for IFRS. For that, MIA carries out various workshops and courses.

Dana gas saga far from over

Last month, Dana Gas tried to impose on investors a restructuring of the payment of its two outstanding sukuk tranches totalling US$700 million. The company got an injunction in the High Court in London restraining sukuk holders from taking any hostile action against Dana. The overriding concern is that if the High Court in London rules against Dana Gas, the matter goes to trial and Dana Gas wins, it would set an appalling precedent that can undermine the integrity of sukuk as a fundraising instrument. Syariah advisories agree that the only solution would be the introduction of a world sukuk standard supported by local laws, an Apex Sukuk Standard, which would give legal and syariah certainty. Any dispute could either be subject to arbitration or recourse to law. Dana Gas re-scheduled yet another conference call with sukuk holders to discuss the matter. The High Court in London scheduled a hearing for September. This saga is far from over.

Lessons from Dana Gas #Sukuk debacle

Dana Gas invited holders of its outstanding sukuk to open discussions on restructuring the payment. The reason given by Dana Gas was that the sukuk has now been declared non-syariah compliant and, therefore, not valid. The company also proposed to exchange the sukuk with a new four-year enforceable, syariah-compliant instrument. It seems that Dana Gas is trying to restructure cheap on the back of credit deterioration, hiding behind the façade of syariah validity. Moreover, the company has filed for protection in the Federal Court in Sharjah to impose its structuring plan on certificate holders. It is obvious that the sukuk debacle may have serious implications for Dubai’s ambitions of being a premier sukuk origination and Islamic economy hub. The Dana Gas sukuk is a failure of inadequate capital market legal framework, underdeveloped regulatory framework and a serious lack of uniformity.

#Tawarruq - the 'new kid' in islamic banking

Islamic financial products have evolved from simple and straightforward structures to highly sophisticated instruments. Tawarruq, popularly known as commodity murabahah, has become a new phenomenon in the Malaysian Islamic banking system. This is particularly after the issuance of a 2012 Bank Negara Malaysia circular on bay’ inah (sale and buy-back), which substantially tightens the syariah requirements. Since then, the Malaysian Islamic banking system has started to actively use tawarruq as an alternative to bay’ inah. Nevertheless, its extensive use has raised several questions. The International Islamic Fiqh Academy held in the United Arab Emirates in 2009 resolved that the modern practice of tawarruq is impermissible. As such, the Malaysian regulators and syariah committees have to put certain parameters and limitations in the use of tawarruq.

Maybank Islamic unveils Islamic #Private #Wealth Solution

Maybank Islamic launched a new account for its Islamic private wealth clientele. The new feature will provide high net worth (HNW) clients with comprehensive private banking services. The bank explained that the enhanced platform will allow HNW clients to view and monitor their various Islamic investment portfolios holistically, in one single statement. The recent Asia Pacific Wealth Report by Capgemini indicates that the greatest enthusiasm for putting portfolios to work for social gain comes from high net worth individuals in the emerging markets of Indonesia, followed closely by Malaysia. Maybank's Group Head of Community Financial Services, Datuk Lim Hong Tat, said that Maybank Islamic provides an avenue for HNW individuals to earn returns in a more socially-responsible manner.

IMF acknowledges #Islamic #banking's prolific growth

The International Monetary Fund (IMF) has been a proactive supporter of Islamic banking and has declared it a priority for its operations in countries with Islamic banking. In a recent report titled "Ensuring Financial Stability in Countries with Islamic Banking", IMF economists have created a plan of action that would have game-changing implications for the industry. The report acknowledges the progress achieved in developing prudential standards, but concludes that the current framework governing the global industry contains many gaps. Particular attention needs to be paid to developing resolution, financial safety nets, such as deposit protection insurance and a lender of last resort, and liquidity management frameworks. According to IMF, the emergence of complex hybrid Islamic financial institutions and products is a regulatory challenge.

Islamic capital market can support financing needs

The #Malaysian Securities Commission (SC) released its SC 2016 Annual Report. The report states that the Malaysian capital market remains resilient and sustainable, growing in an orderly trajectory, attracting sound investor interest. According to SC chairman Tan Sri Ranjit Ajit Singh, the outlook for the Malaysian capital market in 2017 is positive. The SC is in capacity-boosting mode armed with several initiatives. These include launching the new Malaysian Code of Corporate Governance, the approval of RM5.95 million by the nascent Capital Market Development Fund aimed at encouraging new entrants into the industry, and the establishment of an Institute for Capital Market Research in 2017. This complements the initiatives by the SC in 2015 and last year, including the introduction of the first Equity Crowdfunding Framework in the region and a peer-to-peer financing framework.

Malaysia remains a forerunner in global sukuk

Malaysia remains a forerunner in global sukuk with the global outstanding sukuk amounting to over US$148 billion as at June 2013, which represents 60.4 per cent of the total global sukuk. Deputy Prime Minister Tan Sri Muhyiddin Yassin said credit must be given to Bank Negara Malaysia, the Securities Commission Malaysia, Shariah scholars and the Islamic financial industry community for their efforts to bring Malaysia's Islamic finance marketplace to the current level of sophistication. Muhyiddin, who is also Education Minister, also pointed out that shortage of qualified experts in Islamic finance was the constraining factor for the innovation of new products and services in most countries.

Bank Islam lodges report against chief economist

Bank Islam Malaysia lodged two police reports against its suspended chief economist, Azrul Azwar Ahmad Tajudin for allegedly possessing and leaking confidential documents. Azrul was found in the possession of the minutes of the bank’s board of directors’ meeting which were reportedly sent to a third party last June. The police is investigating the case. Azrul was suspended by the bank last week after airing his comments on political issuses.

Syndicate content