Financial technology widely referred to as FinTech has grown primarily in the last decade due to growing Internet access worldwide and the emergence of smartphones and apps. According to the Ericsson Mobility Report published last year, 70 %bof the world’s population is expected to be using smartphones by 2020.
As smart devices are increasingly becoming part of everyday life for most people in the digital age, it is essential for the banking sector to become more innovative to enhance its productivity. “We’re transitioning toward a situation where growth for companies and economies will have to depend more on productivity than before,” said Jarmo Kotilaine, chief economist at the Bahrain Economic Development Board (EDB).
“To achieve that, you will need better management, better innovations, new distribution channels and new capital.” Increasing the efficiency of digital banking will particularly serve customers in Saudi Arabia, where banks’ working hours overlap with those of most employees.
La déclaration récente faite par le ministre de l’Economie et des Finances annonce que le premier sukuk émis au Maroc sera souverain. La structure juridique d’accueil de ce premier sukuk sera un fonds de placement commun de titrisation (FPCT) qui servira de levée de fonds auprès des investisseurs pour le compte de l’Etat. Cette entité spécifique (appelée aussi SPV «Special Purpose Vehicle») pourra être constituée sous forme de fonds de titrisation (FT) avec ou sans personnalité morale, ou de société de titrisation (ST). En optant pour un premier sukuk souverain, le Maroc n’échappe pas aux pratiques internationales en la matière. Les dernières émissions en Afrique vont également dans le même sens (Sénégal, Afrique du Sud, Côte d’Ivoire et Niger).
Winner of the 2016 Islamic Development Bank (IsDB) Prize in Islamic Banking Prof. M. Kabir Hassan has said that Islamic finance could play a bigger role on the global stage especially towards achieving the Sustainable Development Goals (SDGs). This can be achieved through profit-and-risk sharing entrepreneurship, home financing and Islamic social finance instruments of Zakat, Awqaf, and Sadaqah. According to Prof. Hassan, research has proven that the Islamic financial system operates more efficiently and with greater stability. However, he added that for Islamic finance to play its role successfully there is the need to maintain its original binding principles. Prof. Hassan urged regulators to monitor Islamic financial products to ensure that they meet the criteria of maintaining justice. He also urged the IsDB to make available comprehensive and credible Islamic finance data for the use of all industry stakeholders.
The #Nigerian government’s move for sukuk has reached an advanced stage. As work continues on the process of the planned sovereign sukuk, the size of the possible deal has not been determined. The Debt Management Office (DMO) had opened its door for expression of interests from entities, including banks and issuing houses, needed in the process, with deadline for bids submission slated for January 9, 2017. This came a few days after the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, was elected Chairman of the International Islamic Liquidity Management Corporation (IILM). His mandates include the facilitation of effective cross-border liquidity management instruments. Meanwhile, the African Development Bank Group (AfDB) has approved the $250 million loan for the Federal Government for the development of a youth-oriented initiative called ENABLE Youth Nigeria. According to the bank, the scheme would contribute to job creation, food security and nutrition, rural income generation and improved livelihoods for youths.
According to the chief economic adviser of the Qatar Financial Centre (QFC), Islamic finance will need to play a pivotal role in meeting the increasing demand for funds by the Gulf Cooperation Council (GCC). Dr Haitham al-Salama said oil prices are not likely to exceed $100 in the near future and are forecast to stay around the $55-$65 per barrel. Also, a spike in the shale oil production is expected, which will push the prices down. He added that this puts further emphasis on the economic diversification efforts of oil producing countries, particularly in the GCC. Qatar has already taken various measures to diversify the economy, which includes lowering the subsidies and cost optimisation apart from prioritising planned spending. Finance Minister HE Ali Sherif al-Emadi had recently said Qatar would be spending another QR46bn in 2017 to upgrade its infrastructure in the run up to 2022 FIFA World Cup.
According to Noor Bank's CEO Hussain Al Qemzi, Islamic banks need to understand that they need to provide efficient and transparent services to their clients. Just being Sharia compliant cannot make a product less transparent and more expensive to access. Technology remains an important driver for innovation. Islamic banks that only look at product development and not product delivery or customer acquisition, will risk being left behind. There is a need to continue product development. Variable return products need to be developed and propagated in the market. According to Al Qemzi, it is important to refute traditional sayings that Sharia compliance limits innovation. Sharia principles reject prohibited practices but do not reject innovation. Progressive Islamic education is a key area, the Islamic banking curricula have to be developed so that they combine financial sciences with other economic sciences.
According to Abdulla Mohammed Al Awar, CEO of Dubai Islamic Economy Development Centre (DIEDC), leveraging the opportunities that Islamic banking and finance instruments represent is now more critical than ever before. DIEDC has identified a five-pronged approach to achieve this. First, Islamic economy has to be treated as one organic ecosystem that transcends borders and special interests. Second, a partnership is needed between Islamic and traditional finance to develop real projects in which both can work as stakeholders. It is also important to look for new strategic partners, not excluding countries that are experiencing internal conflicts. Such partnerships should be a true reflection of mutual interests. Islamic financial institutions have to factor in inclusive development and social impact as key priorities.
Lors du 37e Midi de la microfinance Mohammed Kroessin, chef de l’Unité mondiale de microfinance islamique à l’ONG Islamic Relief Worldwide, et Fadoua Boudiba, chargée d’investissement senior de la région MENA et Afrique à la banque Triodos, ont expliqué les enjeux du développement de ce secteur dans le monde. Malgré le développement croissant, avec des nouveaux marchés qui s’ouvrent également à ce besoin, comme le Tadjikistan et les pays du Moyen-Orient, le secteur rencontre de nombreux défis, de par le manque de régulation. Paradoxalement, les pays comme l’Arabie Saoudite ne reconnaissent pas encore les produits de la finance islamique.
Malayan Banking (Maybank) has established a sukuk programme of up to RM10 billion in nominal value under the syariah principle of Murabahah. According to Maybank's announcement, the sukuk programme will provide the bank the flexibility to raise funds for its Islamic financial instruments and its business activities. The sukuk programme has been assigned a long-term rating of 'AAA' for issuances of senior sukuk Murabahah and 'AA1' for issuances of subordinated sukuk Murabahah by RAM Rating Services. Maybank IB is the principal adviser, lead arranger and manager, and book runner for the programme.
Iran's central bank will take chairmanship of the Islamic Financial Services Board (IFSB) for the year 2017. Shut out of the global system by sanctions, Iranian banks are eager to resume business with foreign lenders with deals ranging from funding infrastructure to insuring foreign trade. The IFSB Council said late on Wednesday it had appointed Iran's central bank governor Valiollah Seif as chairman, with Bangladesh Bank governor Fazle Kabir as deputy chairman. Iran's entire banking system follows Islamic principles, there are 34 Islamic banks that held total assets of 14,451 trillion rials ($448 billion) as of March. This represents around a third of total Islamic banking assets globally, although Iran's version of Islamic finance can differ with what is observed in other Muslim-majority countries.
Global currency sukuk continued to expand in 2016. Increasing issuances were observed in U.S. dollar, Indonesian rupiah, and Pakistani rupee sukuk, though there were decreases in Malaysian ringgit and Bangladesh taka sukuk compared with last year. The U.S. dollar and Malaysian ringgit sukuk continued to dominate the sukuk market. The Dow Jones Sukuk Index added 17 new sukuk with a total par amount of USD 13.5 billion into the index. Sovereign sukuk continued to dominate the issuance, including USD 2.5 billion from Indonesia, USD 1.5 billion from Malaysia, USD 1 billion from Turkey, and USD 500 million from Oman. The biggest corporate sukuk issuances were USD 1.5 billion from IDB Trust, USD 1.2 billion from DP World, and USD 1 billion from Emirates Islamic Bank. Among all the new issuances, 33% was from the United Arab Emirates.
In an effort to boost the industry, Bank Indonesia has decided to work with Islamic boarding schools known as pesantren. Anwar Basori, Bank Indonesia's head of Islamic Finance and Economy, said there is a lot of potential in the 27,000 pesantren, which have about 3.6 million students. The central bank said it is finalizing a roadmap for the program under which it will work with the Religious Affairs Ministry to help the business units of pesantren to become financially independent. The schools operate in various business areas, including mini-markets and cattle farms, and provide extracurricular entrepreneurship and Islamic finance education to students. Anwar said that the roadmap would be implemented in early 2017, starting with a pilot project.
RHB Bank is eyeing the top three spot in the Islamic banking space for its syariah complaint unit. RHB Islamic Bank CEO Datuk Adissadikin Ali said growth in the recent past years had been strong and that the bank could continue riding on this growth. He said the contribution of Islamic banking assets to the group’s total assets is 25% and that the aim was to grow this figure to 40% by the year 2020. The group syariah business is identified as one of RHB’s key growth areas under its Ignite 2017 transformation programme. The bank intends to achieve by 2017 a return on equity of more than 14%, double contributions from Singapore to 10%, have 30% in overseas contribution, scale growth in small and medium enterprises, and have Islamic banking accounting for 30% of its assets.
Russia and Iran are exploring the establishment of an Islamic bank as the two countries expand their economic cooperation. According to Russian Energy Minister Alexander Novak, the banks are exploring the mechanism, but the related decision has not been made yet. State-linked Russian lenders Vnesheconombank, Sberbank and Tatfondbank have been developing Islamic financial products of their own over the past year. Iran is keen to diversify funding options for its companies. At present, most financing in Iran is sourced from domestic lenders with only a small portion sourced from foreign sources and the debt capital markets.
According to the Islamic Finance Development Indicator (IFDI), global Islamic finance development declined to 8.8 in 2016 from 9.9 in 2015. The report was prepared by Thomson Reuters and the Islamic Corporation for the Development of the Private Sector (ICD) and was released at the World Islamic Banking conference (WIBC) 2016. Malaysia, Bahrain and the UAE continue to dominate the IFDI report for the 4th consecutive year. However, Malaysia posted a slight decline in its overall IFDI performance in 2016. Outside of the top 15, noteworthy emerging countries that have moved up the IFDI rankings are South Africa, Morocco, Tanzania, Japan and Russia. Among the regions with high potential in Islamic finance is West Africa. Unprecedented oil price storm hindered Islamic finance performance, but not asset growth. Despite lower financial performance, Thomson Reuters maintains a positive outlook for the industry projecting Islamic finance assets to reach $3.5 trillion by 2021.
Malaysia and Bahrain should take the lead in exploring the potential of introducing the world’s first Islamic financial technology (fintech). According to Bahrain Economic Development Board (EDB) Director David Parker, the favourable initiatives undertaken by regulators from both countries provide a positive edge for Islamic fintech. In Malaysia, Bank Negara Malaysia Governor, Datuk Muhammad Ibrahim said a regulatory framework to enable the adoption of fintech would likely be announced by year-end. During the 23rd Annual World Islamic Banking Conference held here, Bahrain Central Bank Governor Rasheed Mohammed Al Maraj hinted that the bank would soon issue regulations to facilitate fintech solutions. Bahrain Islamic Bank CEO Hassan Amin Jarrar described the need to introduce Islamic fintech to the world Islamic financial market as "critical" and if Malaysia and Bahrain do not take the first step, other big countries will snatch away the advantages.
Al Baraka Banking Group is targeting the sale of capital-boosting sukuk worth $300 million in the first quarter of 2017. The announcement was made on the sidelines of an Islamic banking conference by the group's CEO Adnan Ahmed Yousef. He also added that the issue would enhance the bank's core Tier 1 capital. Al Baraka had a total capital adequacy ratio of 15.15 percent as of June 30, according to a regulatory disclosure on its website.
According to the Thomson Reuters Islamic Finance Development Report 2016, Bahrain leads the GCC’s Islamic finance development for the fourth consecutive year. The report is jointly produced by Thomson Reuters and the Islamic Corporation for the Development of the Private Sector (ICD). Bahrain ranks first globally in terms of Governance due to its well established regulatory environment and governance mechanisms. The regulations cover Islamic financial institutions including Islamic asset management and Sukuk. Bahrain is among the top ten countries for the other indicators as well. For the Knowledge indicator, its Islamic finance ecosystem is supported by 17 providers offering Islamic finance related education including universities and institutions. Meanwhile, its Islamic financial institutions continue to contribute socially, with US$ 18.5 million charity, zakat and Qardh al Hasan funds disbursed in 2015.
The Moroccan government granted state-owned Crédit Agricole of Morocco (CAM) approval to open a subsidiary of the Islamic Development Bank (IDB). In addition to IDB, three foreign banks are looking to launch subsidiaries with domestic partners after Moroccan officials encouraged partnerships rather than fully owned subsidiaries. Morocco could see additional Islamic products introduced into the domestic market if new regulations are passed. Morocco will also see the introduction of mobile-to-mobile payments next year, which is expected to extend banking coverage, as well as reduce the number of cash transactions. New regulations will allow non-bank entities and individuals to open accounts to expand e-payments to transactions such as retail, utility and mobile phone payments.
Thomson Reuters has released the findings of its fifth consecutive Sukuk Perceptions and Forecast study. Despite a bleak 2015, market players remained hopeful for a robust year ahead. Core markets have adapted to ongoing low oil prices, while apprehension over expected global interest hikes has begun to subside. However, the decision from Bank Negara Malaysia (BNM) to cut short-term Sukuk issuances continues to dampen Sukuk supply. Total Sukuk issued in the first 9 months of 2016 dropped further by 18.46% to $39.8 billion from $48.8 billion for the same period in 2015. According to Thomson Reuters' Managing Director, Nadim Najjar, the global Sukuk market continued to drop in terms of volume and value during 2016. The report found that both potential demand and supply of Sukuk are expected to grow, with demand substantially exceeding supply until 2021.