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Consumer banking will continue to be an important revenue generator for banks with home loans being one of the major areas of focus amid the prevailing relatively low interest rates. Apart from home loans, the other sectors in consumer banking which banks are focusing on to beef up their revenue streams are car loans, credit cards, personal loans and wealth management. RAM Ratings head of financial institution ratings Promod Dass said the relatively low interest rate environment had fuelled consumer lending, which represented more than half of the banking system’s loans. Malaysian Rating Corp Bhd vice-president and head of financial institution ratings Anandakumar Jegarasasingam said the main challenge for banks would be to ensure the asset quality of household loans. Ernst & Young Malaysia partner (Assurance) Chan Hooi Lam foresee consumer banking facilities like car loans, purchase of residential properties and credit cards to continue its growth momentum into next year. RHB Banking group director of retail banking Renzo Viegas said that apart from credit cards, the focus would also be in debit cards as the bank saw tremendous growth potential in this area.

A £20m capital injection into Islamic Bank of Britain will help develop more home loans in line with Sharia law, an expert from Defaqto has said. David Black, banking expert from Defaqto, said: “The £20m capital investment will enable the IBB to grow its Islamic mortgages. With some other banks recently reducing their involvement in Sharia loans in the UK, the IBB’s capital injection will provide fresh impetus for what will be a growth area.” Its products are structured in a different way to those provided by conventional banks. Instead of a traditional mortgage, customers pay monthly rent and purchase instalments over the agreed period to the bank on the basis of which the bank gradually sells its share of the property to the customer. The recent cash injection has meant IBB has launched two new home loans. “With a fresh injection of capital we are well placed to grow the business through our Home Purchase Plan products. The products will offer peace of mind for customers, both financially and spiritually, which is especially important in the holy month of Ramadan” , said Sultan Choudhury.

Sovereign Islamic bonds from Asia to the Persian Gulf are lowering returns on corporate sukuk for the first time in three months.

Malaysia’s Lembaga Tabung Haji fund, France’s BNP Paribas Investment Partners and Duet Mena Ltd. in Dubai forecast government debt will outperform until property prices in the Persian Gulf recover from a slump that prompted credit-ratings companies to downgrade corporate bonds.

Saudi Arabia's parliament delays the decision concerning the mortgage law until the members return from summer recess. Saudi Arabia, the Middle East's biggest economy, needs 1.2 million new homes by 2015, says the Deutsche Bank research.

The creation of a mortgage liquidity center is a critical milestone for developing a stable and effective mortgage market.

Capitas Group International (CGI), an affiliate of the Islamic Corporation for the Development of the Private Sector (ICD), has released a whitepaper entitled Expanding the Saudi Mortgage Market: The Path to Homeownership. The whitepaper highlights the key stages of mortgage industry development, examines the role that mortgage liquidity centers have played in other emerging markets, and outlines the best solution for Saudi Arabia.

In order to spur lending and grow the sector a mortgage liquidity center should be created through government sponsorship as primary lenders require a source of long-term liquidity. As the mortgage industry matures, deeper secondary market access is created through direct access to capital markets and mortgage lenders can move beyond relying solely on centralized liquidity centers.

Saudi Arabia has chosen the perfect time for the enactment of the mortgage law because it has the benefit of hindsight to avoid mistakes made in other economies, said Capitas Group International, a Jeddah-based management firm specializing in the Shariah-compliant finance industry.

Nasser Al-Nubani, Capitas' executive vice president and general counsel, said the effectiveness of supporting regulation in managing and implementing this legislation will be the key measuring stick of the success of the Mortgage Law. Indications are that the Saudi Arabian Monetary Agency (SAMA) will be responsible for establishing the regulations that will support the mortgage law once it is enacted.

Currently mortgages only make up one percent of the country's GDP and only 2 percent of bank assets.

Therefore, developers have shied away from building homes that meet the needs of consumers who are unable to purchase on a cash basis.

Unlike banks, which offer multiple lending products, are mainly motivated by capturing a consumer's deposit relationship, and are restricted by overexposure to real estate, mortgage finance companies operate on a more targeted business strategy.

Capitas Group International, a Jeddah, Saudi Arabia based management firm specializing in the Shari'ah compliant finance industry, released an opinion article today entitled "The Mortgage Law - What Comes Next?" which gives insight on mortgage regulation and offers recommendations on successful implementation of the Saudi Arabia Mortgage Law once it is enacted.

Written by Nasser Al-Nubani, Capitas' Executive Vice President and General Counsel, Saudi Arabia has chosen the perfect time for the enactment of the mortgage law because it has the benefit of hindsight to avoid mistakes made in other economies.

The effectiveness of supporting effective regulation in managing and implementing this legislation will be the key measuring stick of the success of the Mortgage Law. Indications are that the Saudi Arabian Monetary Agency (SAMA) will be responsible for establishing the regulations that will support the mortgage law once it is enacted.

Press Release

Today sees the launch of a new Journal on Islamic finance from dedicated Islamic finance media entity Yasaar Media.

The Journal, called So Far – the Journal of Strategic Thinking in Islamic Finance, is written and edited by members of an Islamic finance Think Tank and is modelled on traditional academic journals. The difference with So Far is that the members of the Think Tank are predominantly practitioners rather than academics.
Member of the Think Tank are drawn from the ranks of committed Islamic finance professionals around the world and range from the Gulf and the Far East to the USA and Europe.

Each issue of So Far is dedicated to a single topic of core importance to the Islamic finance industry – and the launch issue looks at the thorny issue of the problems facing the Sukuk market. Unlike many other journals So Far is distributed free in PDF format and is available from a variety of sources including Yasaar Media thus guaranteeing maximum readership and exposure.