Islamic Banking

empty Description of term "Islamic Banking"

Baft to create industry #benchmark for Islamic trade finance

The Bankers Association for Finance and Trade (Baft) and International Islamic Financial Market (IIFM) are creating an industry standard for buying and selling Islamic trade-related risk. The two parties have announced they have signed a memorandum of understanding to create a so-called master risk participation agreement. The industry already has such a standard, which was introduced 10 years ago and became the industry benchmark for such trade finance transactions. Baft president Tod Burwell said the association aims to repeat that success in the Islamic trade finance space, where standardisation is much needed. The Islamic risk participation agreement will incorporate considerations for funded and unfunded risk participations in trade assets within a Sharia-compliant framework. IIFM chairman Khalid Hamad said the cooperation with Baft would contribute to increasing the trade finance business on a Sharia-compliant basis.

Islamic finance set to extend growth, says Moody’s

According to Moody's Investors Service, the growth of the Islamic finance sector will continue to outstrip that of conventional assets across core Islamic finance markets. Islamic banking penetration in the Gulf Cooperation Council (GCC) increased to 45% of the total banking market, as of September 2017 from 31% in 2008. Moody's Senior Analyst Nitish Bhojnagarwala, said the Islamic finance sector would be supported by governments, as well as by continued demand for Islamic products from individuals. Another growth factor will be Islamic insurers' penetration into Southeast Asia and North Africa. Sukuk issuances grew 17% in 2017 to $100 billion, driven largely by GCC sovereigns. A similar level of issuance is expected in 2018, although the recent recovery in oil prices could lower financing needs for some sovereigns. Corporate and asset-backed sukuk activity was muted in 2017 because of more attractive conventional market opportunities and Moody's expects the same for 2018.

Toward A Global Islamic Finance Standard

The Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is working to establish standards and norms for Shariah-compliant banking practices worldwide. The AAOIFI has hundreds of member institutions from over 45 countries. In October 2017, Saudi Arabia’s central bank, the Saudi Arabian Monetary Agency, joined AAOIFI. Its standards are widely used in the industry and are compulsory in some countries such as Bahrain and Oman. To homogenize industry practices, in 2017 the AAOIFI adopted guidelines for centralised Shariah boards and new standards for gold-based products. In 2018, the AAOIFI is developing new draft rules on Shariah compliance and fiduciary ratings.

IIFM, BAFT to create MRPA for Islamic trade finance

BAFT (Bankers Association for Finance & Trade) and IIFM (International Islamic Financial Market) announced a memorandum of understanding to jointly create a master risk participation agreement to support Islamic Trade Finance. The Islamic Risk Participation Agreement (IMRPA) will incorporate the practical considerations for funded and unfunded risk participations in trade assets within a Shari’ah-compliant framework. BAFT President Tod Burwell said BAFT was proud to partner with IIFM to introduce some much-needed standardization to the market in support of Islamic trade. IIFM Chairman Khalid Hamad said this collaboration would contribute to increasing the trade finance business on a Shari’ah-compliant basis.

#UK Islamic bonds to be worth GBP58 billion by 2028

UK’s Gatehouse Bank has calculated that the value of Sukuk assets listed on the London Stock Exchange (LSE) would double to GBP57.8 billion in the next decade, if issues continue at their current rate of growth. Sukuk only began life in the UK in 2007, but their numbers have been swelling at an annual rate of around 5%, though they are still little understood. Gatehouse Bank CEO Charles Haresnape sees this growth as a huge opportunity for Britain. He urges the Government to capitalise on this week's summit on Islamic finance and make it more than just a single effort for one large oil company to list on the LSE. He believes an on-going trade mission is needed to make London the world centre for all Islamic finance.

#Kenyan firm tapped to train Islamic Finance #professionals

The Bahrain-based General Council for Islamic Banks and Financial Institutions (CIBAFI) has accredited Kenyan firm Aqeel Consulting to offer its professional development courses in Islamic finance. Aqeel Consulting's Managing Director Jaafar Abdulkadir said this partnership would develop a critical mass of professionals to support the growth of Islamic finance in the region. Aqeel will be conducting professional development courses on behalf of CIBAFI, which will be the certification body. The courses will be customised to suit the local scenario. Abdulkadir added that the collaboration with CIBAFI would reduce reliance on expertise from other countries. The professional development courses will meet global standards, but with local relevance.

#Saudi Arabia expands $10b loan #refinancing to $16b, adds Islamic tranche

Saudi Arabia is expanding the refinancing of a $10 billion international loan to raise $16 billion. The kingdom is introducing a significant Islamic tranche to the transaction, supporting Saudi Arabia’s goal of becoming the leading centre for Islamic finance. A $16 billion facility would be one of the largest syndicated loans ever extended in emerging markets. The kingdom raised the original $10 billion loan from 14 core banks in 2016, in what was its first jumbo transaction after a slump in international oil prices. A further dollar debt issuance is also planned, which could be marketed over the next few weeks.

Draft Sharia rules for companies notified

The Securi­ties and Exchange Commission of Pakistan (SECP) has notified draft Sharia Governance Regulations 2018. The regulations concern Sharia-compliant companies and entities including the Sharia-compliant securities and Islamic financial institutions. The regulations are the first-ever holistic Sharia governance framework introduced by the corporate sector regulator. Considering the need for an extensive framework, IFD conducted consultation sessions with Sharia advisors, State Bank, Pakistan Stock Exchange, Institute of Chartered Accountants Pakistan, takaful companies, modaraba and NBFI Association. The regulations are now open to public consultation and stakeholders have the opportunity to share their comments and suggestions within two weeks.

#Russia’s Sberbank inks MoU with ICD to offer Islamic finance products

Sberbank of Russia (SBR) has signed a Memorandum of Understanding (MOU) with the Islamic Corporation for the Development of the Private Sector (ICD) to help the bank’s clients access Islamic finance products. ICD senior regional manager Samir Taghiyev said the MoU would reinforce SBR efforts to develop Russia as a strong hub. He added that the ICD would help share its knowledge to develop the corporate, retail and private banking as well as the training needed. The MoU was signed by Okan Altasli, the Director of Regional offices at ICD and Oleg V Ganeev, Deputy Chairman of SBR. The document was signed on the sidelines of the 1st Russian Islamic Economy Forum co-organized by ICD, IAIB, Sberbank, KPMG and Thiqah in Moscow.

#Kazakhstan getting closer to implementing Islamic finance

Kazakhstan will host a meeting on the implementation of Islamic finance on March 5. The Islamic Corporation for the Development of the Private Sector (ICD) is organizing the event to discuss the development of Islamic finance with the further release of sukuk in Kazakhstan. The list of participants includes the regional manager of the ICD Samir Tagiyev, the representative of the Entrepreneurship Development Fund "Damu" Rustem Ismailov, the chairman of the Islamic Finance Development Association (ARIF) Timur Rustemov, along issuers and investors of the Kazakhstan Stock Exchange. The parties will also consider the ARIF projects on Islamic financing in Kazakhstan, as well as the possibility of the Kazakhstan Stock Exchange functioning as a platform for the development of Islamic finance.

New Islamic economy products unveiled in Dubai

The International Innovative Platform for Islamic Economy Products (IIPIEP 2018) took place on 21 February in Dubai. The event was organized by Dubai Airport Freezone Authority (DAFZA) in cooperation with International Center of Islamic Economy (ICIE). The first product launched was the 'Exchangeable Sukuk', which has been created to mobilize resources using Sukuk that are tradable and don’t require the utilization of bank assets. The second product announced was the 'Awqaf Fund' which aims to create a new simple sustainable product for anyone who wants to put their money into waqf. The 'Flexible Credit Card' was the third product launched at IIPIEP 2018, which seeks to combine investment with funding. The customer gets balance in credit and at the same time an investment account. Held at Grand Hyatt Dubai, the event was attended by industry experts, innovators and decision-makers. It was supported by Alinma Bank, Islamic Development Bank and Dubai Islamic Economy Development Centre, sponsored by National Bonds and National Commercial Bank.

A transaction apparently complying with Islamic finance rules which dismays most Muslims who look at it

In this article Mohammed Amin discusses a structure which sidesteps Shariah rules but nevertheless was approved by Shariah scholars. He encountered this structure at a recent conference and the paper was titled "The Doomsday Fatwa". The "total return swap" structure would allow Muslims to achieve the same economic returns as investing in any identified asset. For example, a Muslim could achieve the economic results of investing in brewery shares without ever owning them. The "Shariah conversion technology" underlying the transaction appears to violate any purposes which underlie Islamic finance.

Comic explainer: how does Islamic finance work?

In this comic the University of Queensland’s Mamiza Haq explains the foundations of Islamic fincance and the Dana Gas sukuk case.

Tapping the Islamic banking potential in Africa

Africa represents a huge untapped market for Islamic Banking. The demand for Sharia-compliant products in Africa has been growing for both Muslims and non-Muslims. Most countries such as Senegal, Uganda, Morocco, Kenya, Gambia and Nigeria have already reformed banking laws to allow the setting up of Islamic institutions. While there is a large demand for Islamic Banking, the availability of Islamic Wealth Management Products is still relatively small, leaving a large opportunity for UAE banks. At Noor Bank, for example, each international client is assigned a dedicated relationship manager and customer service officer. Going forward, the African market holds great potential for the UAE Banking sector. Latest forecasts indicate that Africa’s GDP will grow to 3.7% in 2018, according to the African Development Bank.

An example of the risk to international investors from local country legal regimes

The Dana Gas sukuk case illustrates the dangers of local country courts favouring domestic companies. Wherever possible, international investors should avoid local law. The most commonly used is English law, even for commercial arrangements that have nothing to do with the UK, because English law is well-developed and English courts have a deserved reputation for legal competence and impartiality. Dana Gas raised money from international investors by issuing sukuk. The money so raised was invested in a mudarabah agreement with Dana Gas, written under UAE law. Dana Gas also entered into a purchase undertaking, written under English law. Under UAE law, sukuk investors would have been sunk, having to litigate about whether the commercial arrangements were or were not Shariah compliant. However, they were saved by the purchase undertaking being under English law.

Long-term Islamic financing facility launched

The State Bank of Pakistan (SBP) launched the Islamic Long- Term Financing Facility (ILTFF) based on Modaraba for exporters with a maximum limit of Rs1.5 billion. The central bank currently provides the Long Term Financing Facility (LTFF) through conventional banks. The ILTFF will allow exporters an opportunity to avail long-term refinance facility of SBP for purchase of new machinery from eligible Islamic banks. The period of financing under the ILTFF will not exceed more than ten years including a grace period of maximum two years. Islamic banks and Islamic banking branches of conventional banks may also apply to SBP. The allocation is subject to a maximum of 20pc of the limit under LTFF for utilisation under ILTFF. The State Bank’s move would support both the Islamic banking as well as exporters who achieved a positive growth after five years.

Islamic Capital Markets and Products. Managing Capital and Liquidity Requirements Under Basel III. Wiley Finance – Business and Finance, Capital Markets, Finance Industries

The Islamic Capital Markets and Products. Managing Capital and Liquidity Requirements Under Basel III. Wiley Finance Report has been published. It provides updated in 2018 year analysis of industries from Business and Finance, Capital Markets, Finance, Home Markets. According to Dr. Zeti Aziz, Former Governor of Bank Negara Malaysia, the authors Simon Archer and Rifaat Abdel Karim have succeeded in creating greater awareness about Basel III and other global prudential regulation requirements for the Islamic capital markets. The implementation of these requirements will ensure the sustainability of Islamic finance and banking.

#Uganda to publish Islamic banking rules soon -central bank

The government of Uganda has approved regulations covering Islamic banking. Governor Emmanuel Tumusiime-Mutebile said that once the regulations are gazetted, the central bank would be open for applications from financial institutions to offer sharia-compliant products. Uganda joins several African countries that have sought to develop interest-free banking in recent years, including Nigeria, Morocco and Senegal. Despite small populations of Muslims, countries such as Uganda, Kenya and Ethiopia are also developing the sector to expand financial access and inclusion. In December, the central bank of Uganda became an associate member of the Islamic Financial Services Board (IFSB), one of the industry’s main standard-setting bodies.

Time for Islamic finance to move away from replicating debt contracts

2017 was in many ways a dichotomous year for the global economy. The US, Western Europe and industrial Asia had all seen strong growth. While developed countries have had a good year, the Muslim world, by both economic and political measures, appeared to have had a fairly miserable 2017. With a few exceptions like, Malaysia, Indonesia, and Turkey, the traditional powerhouses, Saudi Arabia and the Gulf Cooperation Council (GCC) countries have had quite a dismal year. Looking ahead to 2018, the geopolitical problems of 2017 will not simply disappear this year, the many underlying causes of the last global recession remain unresolved. The hope for the restructuring of the financial sector never really happened. The tough regulatory initiatives then proposed, have also been pushed back. For its own rejuvenation and to truly contribute to the Muslim world, Islamic finance needs to move away from merely replicating debt contracts to risk-sharing contracts.

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.

Syndicate content