Islamic Banking

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Islamic finance has prominent role in financial #inclusion, says SC chairman

According to Securities Commission Malaysia chairman Datuk Syed Zaid Albar, Islamic finance has a prominent role in helping to address unmet needs of the world's Muslim population. He delivered a keynote speech at the SC-World Bank- IOSCO Asia Pacific Hub Conference 2019 and he underlined that Shariah-based financial contracts could be utilised for financial inclusion. World Bank Group representative to Malaysia and country manager, Dr Firas Raad, said Islamic finance could play a role in addressing the high levels of poverty in Organisation of Islamic Cooperation (OIC) countries. Meanwhile, touching on the Malaysian bond, ringgit and equity markets, he said the country's economy has strong fundamentals that could cope with any economic shock that might come its way.

Bank Alfalah & Ghandhara Industries signed a MoU for Promoting Isuzu D Max Variants

Pakistan’s Bank Alfalah Islamic has recently signed a Memorandum of Understanding (MoU) with Ghandhara Industries Limited (GIL). Under this MoU, Bank Alfalah Islamic and Ghandhara Industries Limited have agreed on a joint campaign to promote “Isuzu D-Max Pickup variants” through Bank Alfalah Islamic’s Auto Finance product. The signing ceremony took place at Bank Alfalah Head Office, Islamic Banking Division in Karachi. The memorandum has been signed by Dr. Muhammad Imran, Group Head Bank Alfalah Islamic Banking Division and Mr. Muhammad Kuli Khan Khattak, DCEO Ghandhara Industries Limited.

IRTI and Dar Al Sharia Sign MOU to Develop Solutions for Islamic Financial Institutions

The Islamic Research and Training Institute (IRTI) and Dar Al Sharia have signed a memorandum of understanding (MOU) for strategic collaboration. The MOU was signed by IRTI Director General, Dr. Humayon Dar, and CEO of Dar Al Sharia, Mian Muhammad Nazir. IRTI and Dar Al Sharia will jointly provide Islamic finance advisory services to Islamic financial institutions, multilateral financial institutions, sovereigns and quasi-sovereigns, corporate entities, development funds, regulators, Fintech companies, educational institutions and other clients offering Sharia-compliant products and services. Nazir said the strategic collaboration with IRTI was a landmark initiative towards the development of a sustainable platform for innovation in the Islamic finance industry.

The IFSB Database Completes Five Years Data for Islamic Banking Systems in 21 Countries, including the United Kingdom for the First Time

The Islamic Financial Services Board (IFSB) published country-level data on financial soundness and growth of the Islamic banking systems for Q1 of 2018 from 21 IFSB member jurisdictions. This report includes the data from four newly joined countries, namely: Qatar, Palestine, Lebanon, and the first time for the United Kingdom. With the inclusion of new countries’ data, the total assets of the Islamic banking industry grew by 8.0% from USD 1,573 billion in 2017Q1 to USD 1,699 billion in 2018Q1. Financing by Islamic banks grew by 6.7% and reached USD 1,033 billion in 2018Q1 from USD 968 billion in 2017Q1. The number of full-fledged Islamic banks and Islamic windows of conventional banks in 21 IFSB member participating countries stood at 188 and 85 in 2018Q1 as compared to 184 and 84 in 2017Q1 respectively.

Wahed Invest launches #UK’s first easy access digital Halal investment platform

Wahed Invest has launched the UK’s first Halal online investment platform that is authorised by the Financial Conduct Authority. This way savers from all income brackets can easily invest in a globally diversified portfolio of ethically responsible stocks, Islamic bonds and gold. The platform, which is already available in the USA across all 50 states, allows users to open an account in minutes with a minimum investment of £100. For the first time, mainstream investors can gain access to products not traditionally available to retail investors, such as Sukuk. In order to ensure all returns are Halal, Wahed has a full-time Ethical Review Board. The Ethical Board is chaired by Sheikh Taha Abdul Basser alongside Sheikh Humza Maqbool Chaudhry and Sheikh Musa Furber.

Islamic finance in the shipping industry

As the shipping industry continues to struggle with access to finance, Islamic finance may be a viable option for ship owners. The global growth of sukuks has been steadily increasing, but Islamic finance has its own uncertainties. The lack of standardisation in documentation contributes to this uncertainty. The UAE had established the Higher Shari’ah Authority back in 2016, whose mission is to issue fatwas and ensure the legitimacy of Islamic products and services. Any documentation developed under the auspices of the Authority still needs to be negotiated by the parties and adapted according to the structure and type of the sukuk. It is hoped that the shipping industry will be able to benefit from the continuous growth of Islamic finance.

Creating footsteps in Kuwait’s Islamic banking sector

Kuwait Finance House (KFH) has embarked on a digital transformation journey. Kuwait and Bahrain have each launched their respective digital banking platforms and soon, Malaysia will have its own. By the end of 2018, a seamless digital customer experience is expected to be publicly available. In Malaysia the KFH is active in the infrastructure financing front, supporting the third light rail transport system (LRT 3) and the second Mass Rapid Transit (MRT 2) projects through the provision of Islamic financing facilities. The project is expected to benefit the local communities through the promotion of real estate developments around the proposed train stations. Furthermore, the project is expected to generate more than 2,000 jobs during the construction phase.

AAOIFI adoption set to standardise #UAE Islamic finance

The Central Bank of the UAE announced that the country's Islamic finance industry will be required to comply with AAOIFI Shariah standards from September 1. Islamic finance products in the UAE have historically adhered to AAOIFI standards, but the formal move to adopt AAOIFI standards will benefit the Islamic finance industry not only in the UAE. According to Dar Al Sharia CEO Mian Nazir, this move will facilitate standardisation of the Islamic finance industry across markets. These regulations are expected to grow consumer confidence and benefit the sukuk market as well. Dar Al Sharia is holding workshops to help relevant stakeholders, from internal Shariah control committee members to lawyers, develop an understanding of AAOIFI’s Shariah standards.

Common Shariah norms for Islamic finance still remain a tricky issue

Shariah governance and regulations in Islamic finance remain a diverse topic despite countless initiatives to set a common international framework. There are different approaches towards establishing unified standards. Another issue is that Islamic scholars are often of different opinion on a subject, owing to different interpretations of Islamic laws. In countries with more liberal interpretations of Shariah rules such as Malaysia or Turkey, economic factors will be given more weight at the cost of Shariah principles, which can lead to a conflict of interest. Countries with comprehensive guidelines on Shariah banking are Sudan, Indonesia and Malaysia. Oman, Pakistan, Bangladesh and Nigeria also have regulatory bodies and common guidelines. The UAE, Kuwait and Qatar are practising self-regulation of Islamic financial institutions. All this makes a common regulatory structure on Shariah compliance an extremely tricky issue.

Islamic Banks' Assets Surge To AED565 Billion In H1 2018

Assets of Islamic banks operating in the UAE amounted to AED565 billion by the end of H1 2018, a 6.7% growth of AED35.5 billion over the corresponding period in 2017. The assets of Islamic banks account for 20.55% of total bank assets in UAE, valued at AED2.749 trillion, by the end of June 2018. The value of credit provided by Islamic Banks during the first half of the year surged to AED367 billion, a growth of 5% against the same period in 2017. Loans and credit facilities provided by Islamic banks made up 22.6% of total loans. Deposits held by Islamic banks amounted to AED392.4 billion, making up 23.3% of total deposits held by UAE banks, estimated at around AED1.7 trillion by the end of June.

Albaraka Türk launches mobile-only banking service for Europe's Muslim community

Turkey's Albaraka Türk is targeting Europe's Muslim community with the launch of an interest-free digital banking app. "Insha" is initially being rolled out in Germany ahead of a Europe-wide expansion. It features a document-free account opening process and comes complete with a debit card. In addition to financial products, the app offers a range of Islamic-friendly services including a Zakat Calculator and a "Nearest Mosque" locator. Meliksah Utku, general manager at Albaraka Türk, says that the insha project marks the first step in the bank’s strategic entry into the European market.

#Malaysia's use of Islamic bonds to fund deficit credit positive: Moody's

According to Moody's Investor Service, the Malaysian government is increasingly using longer-term Islamic instruments to fund its deficit to lower liquidity risk. The shift toward Islamic financial instruments is seen as credit positive for the sovereign. The Malaysian government has a sizable debt burden currently at 50.8% of the country's gross domestic product (GDP). The Malaysian Government Investment Issues (MGII), local currency, Shariah-compliant debt instruments, accounted for 50% of total federal government financing in 2017, up from a 26.4% share in 2008. The country's active participation in Islamic finance is part of Malaysia's broader vision to position itself as an international center for the instrument, and a recognized goal in the central bank's financial sector master plan.

La Société internationale islamique de financement du commerce fait le point de son portefeuille au #Cameroun

La Société internationale islamique de financement du commerce du Groupe de la Banque islamique de développement (BID) est satisfaite de sa coopération avec le Cameroun. Aliou Barki Kane et le ministre camerounais en charge de l’Economie, Alamine Ousmane Mey ont passé en revue le portefeuille de coopération avec la BID. Aliou Barki Kane a déclaré que 560 millions de dollars ont été tous décaissés, remboursés et les bénéfices ont été mesurés à travers les intrants agricoles et également la commercialisation du coton à travers la Sodecoton. Barki Kane a ajouté que la coopération avec le Cameroun a été fructueuse et les fonds ont été mis à la disposition des bénéficiaires finaux.

New products, standards buoy Islamic trade finance business

Islamic trade finance is poised for change with the launch of new products and common standards. Islamic banks have been laggards in trade finance but some see a business opportunity here. According to the General Council for Islamic Banks and Financial Institutions (CIBAFI), digital tools such as blockchain can support this by helping to lower costs and speed up sharia-compliant transactions. Islamic trade finance is estimated at around $186 billion, compared to the $4.4 trillion worth of trade finance activity in Muslim-majority countries. Some firms are now introducing digital Islamic trade finance platforms. Emirates Islamic Bank has already launched its online supply chain tool. There is also a push towards standardisation of practices. The Bankers Association for Finance and Trade (BAFT) and the International Islamic Financial Market (IIFM) are developing standard documentation for both Islamic-funded and unfunded trade finance deals.

How Islamic finance can manage rupiah stability

According to the Jakarta Interbank Spot Dollar Rate, the rupiah dropped to a new low of 14,418 against the US dollar on July 3. In the last few weeks, all emerging markets showed an increase in foreign currency volatility. Since April 2018, there has been capital outflow from the Indonesian bond market amounting to almost US$1.9 billion. Solving this problem can be done in two steps. First, sensitivity to capital outflow must be reduced by reducing dependency toward it. Second, capital inflow is needed that is less sensitive to global externalities. Islamic finance may contribute to financial stability, as all transactions must be asset-backed. The principle of risk-sharing between counterparties will help prevent excessive risk-taking. Islamic finance can also help create rupiah stability through its various sharia-compliant instruments, which could attract global investors.

Official Launch of the IFSB Islamic Financial Services Industry Stability Report 2018 at the Astana Islamic Economy Forum

Astana International Financial Centre (AIFC) officially launched the sixth edition of the Islamic Financial Services Industry (IFSI) Stability Report 2018. The Secretary-General of the IFSB, Dr. Bello Lawal Danbatta highlighted some of the key findings of the 2018 Report, particularly the rising domestic systemic significance of Islamic finance in many key jurisdictions. According to the report, the global IFSI has returned to a robust growth of 8.3%, following two years of growth stagnation. While Islamic capital markets marked a strong performance in 2017 on the back of sovereign sukuk issuances, some underlying weaknesses persisted from the previous year, including those in the corporate sukuk market. The takaful sector continues to face challenges as a result of stiff competition from larger and more established insurance companies.

Savings Status Quo Challenged As 79% Of Shariah-Compliant Accounts Now Beat The Market

Gatehouse Bank surveyed eight different types of account: easy access, 1, 2, 3 and 5 Year Fixed Term and 30, 60 and 90 Day Notice accounts. It found average returns on Shariah-compliant savings products trumped their mainstream counterparts on all account types bar one, easy access. Overall, the average rate on Shariah-compliant products was 1.54% while the average for mainstream accounts was 1.29%, a difference of 0.25%. All but three of the 14 Shariah-compliant accounts surveyed beat the market average. Shariah-compliant savings accounts in the UK are growing in popularity, amongst both Muslim and non-Muslim savers. According to Gatehouse Bank CEO Charles Haresnape, what we’re seeing is the emergence of a genuine challenge to the UK savings establishment.

IFSB launches 2018 financial services industry stability report

The Islamic Financial Services Board (IFSB) has launched the 2018 Islamic Financial Services Industry (IFSI) Stability Report. The Secretary-General of the IFSB, Dr. Bello Lawal Danbatta, highlighted some of the key findings of the 2018 Report, particularly the rising domestic systemic significance of Islamic finance in key jurisdictions. The study found that the global IFSI has returned to a robust growth of 8.3%, following two years of growth stagnation. In addition, the IFSI surpassed the $2 trillion mark as of the end of 2017. The report also states that the growth of the industry in 2017 was actively driven by all three sectors of the IFSI, but with a significant contribution by the performance of the Islamic capital markets boosted by Sukuk issuances from sovereign and multilateral institutions.

#China’s support is critically instrumental in developing Islamic finance

While China and Arab countries discuss ways to develop their bilateral ties, #Kazakhstan aims to become a new global financial hub. At the newly established Astana International Financial Center (AIFC) an economic event was carried out between July 3rd and 5th to talk about the main issues of global finance. Experts have emphasized China has a priority role in the global economy and that China’s support can be very instrumental in the development of Islamic Finance. Kazakhstan has also positioned itself to take advantage of China’s Belt and Road initiative as it strived to draw investors from Central Asian countries as well as from the Arab world. Lawyers have also stressed that because the newly formed Astana International Exchange will be operating under the principles of English common law, it will create even more opportunities for collaboration between Central Asian countries and the Arab world.

Blockchain platform-as-a-service for Islamic finance launched

Blockchain experts ArabianChain Technology and Curiositas will offer blockchain-based smart contracts and legal automation for Islamic finance products. The 'Wethaq' platform is targeting Islamic capital markets, acting as a platform-as-a-service for financial institutions, fundraisers and investors to use in the trading of sukuk products. Wethaq is expected to see issuance of its first Smart Ijara in the first half of 2019. The joint venture will combine Curiositas' legal automation and financial engineering expertise with ArabianChain's Distributed Ledger Technology (DLT) Protocol and smart contracts. According to Dimitrios Vourakis, Managing Director of Curiositas, Wethaq separates the essential structuring services provided by financial institutions from additional services such as custodianship and payments, and offers the latter on its automated platform.

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