Islamic Banking

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Yielders Claims First #UK #Fintech Company with Sharia Compliance Certification

Yielders has claimed to be the first UK Fintech company gaining a Sharia Compliance Certification. The equity-based property crowdfunding platform, founded by Irfan Khan, successfully completed the independent sharia certification conducted by IFC. Achieving the certification means that Yielders may significantly expand its market presence by operating across Asia, Europe, and the Middle East. Being compliant with FCA regulation, Yielders offers the opportunity for the public to invest as little as £100 towards buying a share of a crowdfunded property. Yielders explains that the UK Islamic market is one of the largest, most vibrant and dynamic outside the Middle East. Ethical Islamic investment is described as being crucial to the Yielders’ philosophy. Yielders only offer pre-funded investments to the retail crowd, meaning the assets are already generating an income.

#FinTech In Islamic Finance Public Lecture

The University of East London Centre for Islamic Finance, Law and Communities held a public lecture on 22 February 2017 focused on FinTech in Islamic Finance. The keynote speaker was Professor Volker Nienhaus. Professor Nienhaus dealt with four topics: Islamic FinTech and crowdfunding regulations, Shari’ah limits to innovation in FinTech, Shari’ah encouragement for FinTech solutions and the potential disruption of Islamic consumer banking by genuine trade credit. Nienhaus predicted that Islamic consumer banking could be disrupted in the future by genuine trade credit. Islamic-compliant cash rich e-commerce platforms could provide financial services equivalent to Amazon or Alibaba on a Shari’ah-compliant basis. These platforms could sell halal goods and approve Shari’ah compliance. These platforms could instantly check the credit worthiness of buyers and would have a higher credit risk tolerance than traditional banks.

Launching AAOIFI in 850 Days #report and Shari'ah #standards e-learning platform

Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has launched a comprehensive report on "AAOIFI in 850 Days". The report provides concise details, including infographs, illustrations, and statistical figures, covering AAOIFI's developments in activities over the period from September 2014 to end of December 2016. Dr. Hamed Merah, AAOIFI's Secretary General, said that AAOIFI embarks on efforts to enhance transparency as key to effective communication. Meanwhile, AAOIFI's statute was amended, and a set of 7 by-laws, policies and procedures, charters were developed. These include launching of AAOFI's Shari'ah standards translation projects (for Russian, French, and Urdu languages), and publication of AAOIFI's standards in paper and digital formats including a mobile app for smart phones. The section on strategic relationships cover AAOIFI's ties with stakeholders, specifically development of ties with institutional members. The report highlighted AAOIFI's keenness to further solidify its relationship with central banks and regulatory and supervisory authorities.

Legal and regulatory framework for #Islamic #banking needs tightening: IMF

According to the International Monetary Fund (IMF), the current framework governing Islamic Banking contains many gaps that need to be closed through the development of a more comprehensive enabling environment. In a recently adopted staff paper “Ensuring Financial Stability in Countries with Islamic Banking”, the IMF calls for further strengthening of the legal and regulatory environment and institutional framework in countries that have Islamic banking. The study notes that Islamic banking has established a presence in more than 60 countries and has become systemically important in 14 jurisdictions. International guidance is needed to address the limited progress that has been achieved in developing financial safety net frameworks. Country practices have diverged on several important fronts. The emergence of hybrid financial products in Islamic Banking that replicate aspects of conventional finance in an Islamic Banking context has raised financial stability concerns. The IMF has been providing technical advice to member countries for the past 20 years and plans even more involvement in policy advice and capacity development.

Can't share details of govt response on Sharia banking: RBI

The Reserve Bank of India (RBI) has said it cannot disclose the Finance Ministry's response about the introduction of Sharia banking in India. The RBI had earlier proposed opening of Islamic window in conventional banks for gradual introduction of Sharia- compliant or interest-free banking in the country. RBI was asked to give the copy of the letter sent to it by the ministry on the recommendation of its Inter Departmental Group (IDG) regarding Islamic banking.
The central bank had sought response from the Department of Financial Services (DFS) under the finance minister whether their letter can be disclosed under the Right to Information (RTI) Act. As advised by the DFS, the disclosure of information would cause a breach of privilege of Parliament or the state legislature.

Islamic finance

The International Monetary Fund (IMF) has released its guidelines for the Islamic finance sector. The guidelines noted the need to develop a policy framework in the countries where Islamic banking has become systemically important. While accounting for a small share of global financial assets, Islamic banking has established a presence in more than 60 countries and has become systemically important in 14 jurisdictions.
Although Pakistan finished the IMF loan programme last year, there are still numerous reforms that need to be undertaken. In recent years, the State Bank of Pakistan (SBP) has made efforts for the promotion of Islamic banking, but no real effort has been made by the private sector and the government. The growth of Islamic banking poses new challenges and risks for regulatory and supervisory authorities. The IMF has proposed support for developing and providing policy advice on Islamic banking-related issues in the context of fund surveillance, programme design, and capacity development activities.

Asset-backed #sukuk: Is the time right for true securitisation?

In the conventional finance space asset-backed financings have proved a successful method of funding social and civil infrastructure. However, in Islamic finance, asset-backed sukuk have not yet taken off. The majority of sukuk are more dependent on the creditworthiness of the sponsor, rather than the performance of the assets. The concept of securitisation of assets, limited in recourse solely by the performance of the assets underpinning them, has only enjoyed limited application in the Islamic finance space so far. For asset-backed sukuk to succeed, investors have to go beyond simply looking at the credit standing of government and quasi governmental entities and start looking at the actual cash flow and exposure to asset values.

#Malaysia leads in #Islamic #banking assets in region, says World Bank report

Islamic finance has largely been a priority area in Malaysia for three decades and it is not about to slow down. The World Bank's recent Global Report on Islamic Finance highlighted Malaysia as having the largest Islamic banking assets in the region with US$156.7 billion (RM697.15 billion) as at 2013. Malaysia is also the second-largest economy in terms of total syariah-compliant financial assets. However, the report also suggested the need to address several challenges like the need for alternative investments. On a positive note, the report said the syariah governance framework was advanced in Malaysia. Within Asia, Malaysia has been dominating the sukuk issuance market. The US dollar-denominated sukuk have been growing, but sukuk denominated in Malaysian ringgit are growing even faster and dominate the market.

#Russia on course to implement Islamic Finance in its banks

The global Islamic finance industry will see a new entrant in Russia. Moscow Industrial Bank has already started the process of getting acclimatized with the Islamic finance industry by learning from the established model of the Islamic Development Bank (IDB). Abubakar Arsamaskof, president of Moscow Industrial Bank, said that the bank has 7,000 employees working in 260 branches that provide different products and services. He added that their main focus is on industry, construction and agriculture. He also highlighted that they issue Muslim debt card to those wanting to perform Haj. He also indicated that Russian companies are moving towards the Halal industry in a big way and have investments that are estimated at $100 million. The Russian delegation was visiting the IDB to collaborate with regard to Awqaf and enhance the Islamic finance system in Russia. Other negotiations include collaboration between IDB and Moscow Industrial Bank to find investment opportunities and create jobs for youth.

ICD and International Association of Islamic Business (IAIB) sign a MoU

The Islamic Corporation for the Development of the Private Sector (ICD) and the International Association of Islamic Business (IAIB), signed a Memorandum of Understanding (MoU) to explore collaboration between entrepreneurs from Islamic countries and Russian Federation. The two institutions are determined to collaborate on introducing Islamic banking products in Russia and lobbying for changes in Russian banking legislation. ICD's CEO Khaled Al-Aboodi said he was looking forward to the collaboration, while IAIB President Marat Kabayev said the purpose of the partnership was to develop economic ties among Islamic countries, to promote Islamic Finance in Russia and attract investors from Islamic countries. ICD and IAIB also agreed to organize joint professional programmes, market research, workshops, publications, study tours and assistance in production and certification of Halal goods.

Islamic Banking M&A plausible, says AllianceDBS Research

According to AllianceDBS Research, a new wave of merger and acquisition (M&A) activities in the Islamic banking space is plausible, although the timing remains the key risk. Potential M&A candidates include the Malaysia Building Society (MBSB), and Bank Muamalat Malaysia (Muamalat). The research house added domestic Islamic financing growth was expected to continue outpacing conventional loans growth, driven by regulatory push for internationalisation of Islamic finance. This was mainly underpinned by a growing push by banks to fulfil Bank Negara Malaysia’s target of 40% proportion of Islamic financing. AllianceDBS predicts the big game-changer will be product innovation. The research house named the main Islamic banking proxy, the BIMB Holdings (BIMB) as the largest Shariah compliant financial institution with strong potential to lead product innovation.

New Report Outlines Actions to Leverage Islamic Finance for Development

The World Bank Group and the Islamic Development Bank published the first Global Report on Islamic Finance. Subtitled “A Catalyst for Shared Prosperity?”, the report provides an overview of trends in Islamic finance, identifies major challenges hindering the industry’s growth, and recommends policy interventions to leverage Islamic finance. According to the report the Islamic finance industry needs to expand beyond banking, which is currently a dominant component of Islamic finance, accounting for more than three-quarters of the industry’s assets. Another area of development is Islamic capital markets. The use of sovereign sukuk to mobilize financing is essential to develop the market. The report also notes that using Islamic social finance can alleviate poverty and create a social safety net for the extremely poor. By tapping into the potential of the institutions like zakat and waqf, the report estimates that resource needs for the most deprived in South and Southeast Asia and Sub-Saharan Africa could be met.

REVIEW: DIB breaks open #sukuk market for financials

Dubai Islamic Bank became the first Gulf financial institution to print a sukuk this year as it priced a US$1bn 3.664% five-year issuance. The only other bank from the region to have issued this year is Gulf International Bank, which sold a conventional US$500m five-year last month. Proceeds will go towards refinancing a US$500m sukuk coming due in May, as well as a US$300m maturity for the subsidiary Tamweel. Middle East accounts took 61%, Europe 20%, and Asia 19%. By investor type, banks got 52%, asset managers 39%, agencies 3%, private banks 2% and insurers 2%. Lead arrangers include Bank ABC, DIB, Emirates NBD, HSBC, KFH, Maybank, National Bank of Abu Dhabi, Sharjah Islamic Bank and Standard Chartered.

#GCC #VAT a test for Islamic Finance- Fitch

According to Fitch Ratings, the plan to introduce Value Added Tax (VAT) in Gulf Cooperation Council (GCC) member states could be a key test for the region's Islamic finance industry. Saudi Arabia and Bahrain approved the implementation of VAT in the GCC, however, local implementation laws must still be agreed in each country. This paves the way for the introduction of an expected 5% VAT rate as early as the beginning of 2018. Without tax neutrality or equality rules, the introduction of VAT would put Islamic finance transactions at a disadvantage to conventional transactions. A VAT charge adds to the instalment payments in a murabaha, while a conventional transaction would not have VAT for the sale of the asset added to the interest payments. Numerous countries with VAT have provided for some form of tax neutrality or equality for Islamic finance transactions, including Malaysia, Indonesia, Turkey and Pakistan.

Islamic finance body drafts new #standard for centralised sharia boards

A global body for Islamic finance has issued a draft standard on centralized sharia boards, aiming to improve corporate governance in the industry. The proposed rules come at a time when Islamic banks are trying to widen their appeal in the Middle East and Southeast Asia, while opening up entirely new markets in Africa. The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is seeking industry feedback on the proposed standard until the end of February. AAOIFI said the standard would encourage convergence of industry practices by avoiding contradictory rulings and fostering consistency across products and services. While the standard does not prescribe term limits for scholars, it does require sharia boards to implement a rotation policy for its members while including members with expertise in areas such as accounting and law.

Diversification in the #Gulf

The banking sector in #Kuwait remains solid, robust and unaffected by regional events. The operating environment can be described as low-risk thanks to the country’s central bank regulatory role and conservative approach. Kuwait International Bank (KIB) has risen to become one of the most established in Kuwait. The bank's CEO, Loai Muqames, says diversification into the retail sector took priority with the launch of stand-alone retail banking operations. Since adopting a unified CRM system the quality and efficiency of the customer service has dramatically increased. KIB partners with Kuwait’s telecom providers to offer SMS banking for those account holders without a mobile internet connection. KIB is also investing in those sectors related to the $100bn government funded national development plan currently in motion. These sectors include infrastructure, oil and gas, energy, and real estate.

Halic Leasing widens #Turkey's #Islamic #finance market

Halic Leasing is expanding its sharia-compliant business portfolio to tap demand from small businesses. This is a sign that Turkey's Islamic finance market is growing beyond traditional banking services. According to Halic's General Manager Gokcen Sahin, the company is building a portfolio of leased assets and is targeting new business of around $25 million by the end of the year. Halic also aims to attract further investments from Islamic mutual funds while expanding into construction equipment later this year. The plans come after the firm's new shareholders injected fresh capital at the end of last year and set up a sharia committee to ensure its products conform to Islamic principles. Gokcen Sahid added that with a good quality portfolio, Halic may also consider raising funds via sukuk in the future.

Lower liquidity not driving drop in #GCC #sukuk volumes

According to S&P Global Ratings, the lower liquidity level in the GCC is not the main reason for a drop in the region’s sukuk issuances in recent years. The volume of sukuk was muted last year, particularly compared with conventional bond issuance in GCC countries. S&P believes the complexity of structuring sukuk is the main reason behind muted sukuk issuance in 2016 and it will continue to weigh on volumes in 2017. S&P also estimates GCC sovereigns financing needs at around $275bn over the next three years, the majority of which pertains to Saudi Arabia. While sukuk comprise only a small amount of total outstanding issuance, various governments established the necessary legal frameworks for their issuance.

#Pakistan's National Savings Scheme may offer #Islamic #banking services

Pakistan's government-operated National Savings Scheme (NSS) is evaluating whether to offer Islamic banking services. This plan will help depositors put their cash into Islamic Shariah-compliant Ijara sukuk. As soon as that happens, millions of new accounts are expected to be opened, bringing a huge population of medium and small savers into the banking stream. Millions of others who are currently operating accounts in conventional banks may also be snatched away by the NSS. Investments in all types of the NSS go directly to the government of Pakistan, which uses this cash inflow to fill the budgetary gap and to fund its development projects. NSS deposits by people totalled Rs233 billion in 2015-16 and Rs337 billion in 2014-15. In the event of introduction of Ijara sukuk, some of these deposits are likely to be switched to this Islamic mode.

1st regional #consultation on #Sukuk Model Law held

The first workshop on the Sukuk Model Law was held in Dakar, Senegal. The event was organzied by the Islamic Development Bank (IDB) and the Islamic Research and Training Institute (IRTI), in partnership with the Central Bank of West African States (BCEAO). A number of experts and finance officials from the eight BCEAO member countries participated in the event. The project aimed to create a model Sukuk law and guidelines that leverage global best practices. Subsequent regional consultations are planned for South East Asia, Central Asia and the MENA regions. Speaking on the occasion, IRTI Director Mohamed Azmi Omar said the workshop reaffirmed the importance of Sukuk as an increasingly significant instrument of resource mobilization.

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