Islamic Banking

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#Saudi Arabia's Sedco Capital launches #green #investment strategy

Saudi Arabia's Sedco Capital has launched an investment strategy combining environment-conscious and sharia-compliant principles. The move could help develop green investing in the Middle East and make Islamic finance appeal to a wider client base. Green finance is increasingly important for Islamic firms seeking to differentiate themselves from peers. Sedco said its new strategy, dubbed Prudent Ethical Investing, would focus on due diligence and transparency around investment structures, while integrating environmental, social and governance (ESG) criteria. The firm launched two ESG funds in 2012 and has published research which showed how a combined investment approach
can outperform conventional funds. According to its research, such a strategy can lead to investments with lower financial leverage and better cash conversion qualities, adding a prudential element to those portfolios.

#Qatar has ninth-strongest Islamic finance industry

The state of Qatar lists rank nine this year on the annually published Islamic Finance Country Index. The index is part of the Global Islamic Finance Report 2017 and was compiled by London-based Islamic finance consultant firm Edbiz Consulting. Qatar’s ranking is testament to its solid Islamic finance industry which is built upon solely fully-fledged Islamic banks. The country with the world’s strongest Islamic finance industry remains Malaysia, followed by Iran, Saudi Arabia, UAE and Kuwait. This is the second year in a row that Malaysia has been in the top position, taking over from Iran in 2016. According to Edbiz CEO Sofiza Azmi, in the list of 48 countries, there are 14 that saw a decrease in their scores. Among the 13 countries that improved their ranking, Tunisia took the biggest leap. Other big gainers are Pakistan and Kazakhstan. The report concludes that the ranking suggests that countries with large Muslim populations are the future frontiers for growth in Islamic banking and finance.

#NBKR and #Islamic Development Bank work on creation of a bank with #Islamic #finance #principles in #Kyrgyzstan

The National Bank of Kyrgyzstan and Islamic Development Bank are working on creating a bank with Islamic finance principles in Kyrgyzstan, according to the chief of NBKR, Mr Tolkunbek Abdygulov.
Abdygulov said in a statement, that developing Islamic finance principles will allow the citizens to use other types of financing, which will increase the competition between banks and thus improve the quality of bank services and bank products. “After entering into force of a new law on National Bank and banking activities, Civil Code will be complemented by regulations on deals according Islamic principles.”

Why London Will Remain The Islamic Finance Hub Of The West

London’s popularity as an Islamic finance hub emerged in 2013, when Prime Minister David Cameron unveiled plans to develop the city into the Western capital of Islamic finance. In 2014, London took a step further when Britain became the first country outside the Islamic world to issue sovereign Sukuk. The key benefit of this policy was attracting additional liquidity from investors in the Middle East and Asia adhering to Islamic finance principles. The London Stock Exchange is a key global venue for the issuance of Sukuk. According to the LSE Group official website, over $48bn has been raised through 65 issuances. Other centres such as Dublin and Luxembourg also have ambitions to attract Islamic financial services. Furthermore, in April this year Saudi Arabia listed its biggest ever sharia-compliant bond on the Irish Stock Exchange, so the competition between the Western financial centres is more intense than ever.

#Oman's Islamic banking assets reach RO3.3bn

Total assets of Islamic banks and windows in Oman reached to RO3.3bn at the end of March 2017. This accounts for 10.8% of total banking system assets in the country. According to Central Bank of Oman (CBO) statistics, Islamic banking entities provided total financing of RO2.6bn as at the end of March 2017 compared to RO1.9bn a year ago. Total deposits held with Islamic banks and windows also registered a strong growth to reach RO2.4bn in March 2017 from RO1.7bn in March 2016. The statistical bulletin said the financial position of the banks in Oman in terms of asset quality, provision coverage, capital adequacy and profitability remained sound. The gross non-performing loans as a proportion of total loans and advances stood at 2.1% at the end of December 2016. Private sector deposits, which accounted for 66.1% of total deposits with conventional banks, increased by 4.6% to RO12.6bn in March 2017 from RO12bn a year ago.

Sharia-compliant, gold-backed digital #currency OneGram’s ICO kicks off

OneGram, a Sharia-compliant, gold-backed digital currency, has raised $461,497.59 so far in its OGC token crowdsale. The crowdsale will run for a total of 120 days, in which OneGram seeks to raise $500 million by selling over 12 million OGC tokens. For participating, investors are required to create an account on GoldGuard and purchase gold there. According to the official release, once the cryptocurrency is deployed on the blockchain, there will be a 1% transaction fee. 70% of transaction fees are reinvested to buy more gold, increasing the amount of gold that backs each token. 25% is used for development and operations, 2.5% is used for charity donations, and 2.5% is used to reward the POS miners. Sharia compliance is a key differentiator for the OGC token, the founders of OGC developed the solution so it would fit within the parameters of shariah law.

IDB/World Bank #report details role of Islamic finance in ending poverty

A report published by the Islamic Development Bank (IDB) Group and World Bank Group has outlined the potentials of Islamic finance in curbing income inequality and ending poverty worldwide. The report was unveiled by IDB President, Dr Bandar Hajjar, on the sides of the 42nd Annual Meeting of the IDB Group in Jeddah. It details the trends in Islamic finance, identifies the major challenges and recommends policy interventions to leverage Islamic finance. The report notes that the Islamic banking sector needs innovative risk-sharing products and services, enhanced scale and access to Islamic finance, improved liquidity and stability, and bolstered human capital and literacy in Islamic finance. The report also provides an overview of recent policy initiatives taken by several IDB member countries to promote shared prosperity.

New Shariah #standards for Islamic financing, banking launched in Dubai

A set of new Shariah standards for Islamic banking and financing have been launched by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). The launching ceremony was attended by Islamic finance scholars and specialists from across the region. The recently issued Shariah standards include No.(55) Competitions and Prizes Standard, No.(56) Liability of Investment Manager Standard, No.(57) Gold and its Trading Controls Standard and No.(58) Repurchase Standard. These standards are deemed important Shariah reference for the industry, including legislative bodies, regulatory authorities and financial institutions. They are also important to other professional entities such as law firms, accounting and consultancy firms, universities, academic institutions and research centres.

‘Islamic finance is not religious, but ethical business’

Professor Binta Tijani Jibril is the Director of International Institute of Islamic Banking and Finance, Bayero University, Kano State. In this article she talks about Islamic finance and its role in Nigeria. She believes that Islamic findance will help Nigerians in general in the sense that it will increase financial inclusion. The main challenge in Nigeria is how to educate the people to create awareness of this financial model. Bayero University has now short training programs, a masters degree in Islamic finance and very soon a doctorate programme we will start. There is also a special programme for journalists. According to Professor Jibril, Nigeria may soon raise sukuk, just like Osun state has done. It’s going to be about providing for infrastructure development as well as empowering the citizens. So Nigeria would be expanding and widening its reach into Islamic finance.

#Tax provisions related to Islamic finance transactions

The Central Bank of #Oman and the Capital Market Authority allow Islamic financial institutions to follow the standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). AAIOFI’s financial accounting standards differ from International Financial Reporting Standards (IFRS). The differences between AAOIFI and IFRS standards have necessitated specific tax provisions for Islamic Finance Transactions (IFTs). To achieve this, a new chapter has been inserted in the income tax law of 2009. The chapter provides a framework to determine the tax liabilities of parties to an IFT. According to the new tax chapter, income includes any sum received in lieu of interest. The tax provisions also clarify that any partnerships designed solely to comply with Sharia will be disregarded. The latest tax law states that the financial statements can be prepared based on IFRS or any other similar standards approved by the Secretary General of Taxation (SGT). Institutions who have prepared their financial statements based on AAOIFI standards will have to reconcile their tax returns with the SGT.

#UK slowly progressing towards providing Shariah compliant #student #finance

The UK Government has been thinking about the possibility of introducing Shariah compliant student finance since 2011. The Higher Education and Research Bill is currently before Parliament. However, the Bill contains no time-scale for when a Shariah compliant system is likely to be in place. When the Bill was reviewed in the House of Lords, Lord Sharkey proposed an amendment to give a deadline of the 2018-2019 academic year for the introduction of such a scheme. This proposal was rejected by the Government. Lord Sharkey instead proposed an amendment requiring quarterly progress reports from the Secretary of State. The final outcome is that the Bill will proceed forwards and once it has completed all stages, the Secretary of State for Education will have the power to implement a Shariah compliant student finance system.

CBK to implement Sharia governance by year-end – To be applied to all banks

The Central Bank of #Kuwait (CBK) is determined to develop the financial sector’s workforce and plans to introduce Sharia governance by the end of the year. CBK’s Inspection Department Chairman Waleed Al-Awadhi revealed that Sharia governance will be implemented after consultations with local banks and will be applied to all Kuwaiti banks. CBK has recently organized a workshop on the topic in collaboration with the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Waleed Al-Awadhi said that the workshop aimed to familiarize employees of the financial and banking sectors with Sharia governance.

SunTrust, ICD Sign Agreement To Establish Non-interest Banking Window

SunTrust Bank #Nigeria has signed an agreement with the Islamic Corporation for the Development of the Private Sector (ICD) to establish a new non-interest banking window. The two institutions said they were determined to collaborate in order to establish a window that incorporates non-interest banking products and services in Nigeria. The CEO of SunTrust Bank, Mr Muhammad Jibrin, noted that the new offering is expected to attract investors from within and outside the country. On his part, Mr. Khaled Al-Aboodi of the ICD said he was looking forward to strengthening mutual efforts in establishing the non-interest window and promoting Islamic finance.

Wahid urges more listings of Islamic financial institutions on Bursa #Malaysia

The listing of more Islamic financial institutions on Bursa Malaysia is needed to boost the Islamic fund and wealth management industry going forward. The Permodalan Nasional Bhd (PNB) group chairman Tan Sri Abdul Wahid Omar said this would also strengthen Malaysia's position as a global financial hub. He said that of the 672 syariah-compliant securities listed only two were from the finance sector, namely, BIMB Hodings and Syarikat Takaful Malaysia. Wahid said the shortage of listed Islamic finance institutions could pose big challenges to the industry, especially for the government-linked investment companies. He also suggested three possible ways to further grow the industry. The first is the formation of a second listed Islamic universal banking group, apart from BIMB Holdings. The listing of some of Islamic Development Finance Institutions such as Bank Simpanan Nasional and Bank Rakyat is a second option. The third approach is the creation of a separate listing among banking groups that have sizeable Islamic finance activities embedded within them, such as Maybank, CIMB and RHB.

Solid growth in Islamic IAs expected to normalise

In #Malaysia Islamic investment accounts (IA) have grown at a strong pace since they were introduced in 2015. Bank Negara’s latest monthly banking statistics show that IAs have since grown to RM74.2 billion as at February this year, accounting for 13% of total liabilities within the Islamic banking system. According to Simon Chen, senior analyst at Moody’s Investors Service, by 2020 IAs will probably account for some 16% of the Islamic banking system’s total liabilities. An important feature of IAs is the sharing of risk between the bank and the account holder. For an investor, IAs are attractive because they offer much higher returns than a deposit account. But, unlike a deposit account, the principal amount in an IA is not guaranteed by Perbadanan Insurans Deposit Malaysia. According to Chen, a key issue that remains is whether the loss-sharing mechanism in IAs will be honoured by banks in case of actual losses. A significant loss to test the resilience of this regime has yet to occur.

#Algeria edges towards Islamic finance as energy income dives

Algeria is edging slowly towards offering banking services to suit more religiously conservative investors. The country is now looking for more ways to offset the sharp fall in oil prices and its energy revenues. Six state-run banks plan to start Islamic financial services by the end of the year or in early 2018, and a national Shariah board that would oversee Islamic banking is also planned by the end of 2017. However, Algeria’s Islamic finance plan still faces huge barriers. It lacks a legal framework and technical expertise. Algeria is far behind North African neighbours Morocco and Tunisia, which have started to develop legislation for Islamic finance and sukuk bonds, overseen by a central religious board. Algeria is targeting domestic savers rather than foreign investors. Many local people distrust the state-owned banks and keep large sums at home, untaxed, in Algerian and foreign currency.

#Japan keeps making inroads into global Islamic finance

Japan continues foraying into the global Islamic finance sector in order to benefit from previously untapped opportunities. The Japanese Mizuho Bank through its Malaysian subsidiary became the next bank to enter an Islamic finance deal by signing a murabaha credit facility agreement. The deal is valued at $300mn and was signed by Mizuho Bank and the Islamic Corporation for the Development of the Private Sector (ICD). The two-year financing term will be used to fund projects undertaken by ICD in its member countries and is the first cross-border bilateral Islamic facility for Mizuho Bank. The agreement follows a similar deal between the ICD and Bank of Tokyo-Mitsubishi UFJ on a $100mn murabaha facility back in 2014. Japan’s capital market regulator Financial Services Agency supports Japanese banks to conduct Islamic finance business by allowing their foreign subsidiaries to take Islamic deposits. Currently, the sector is waiting for amended banking regulations to enable banks to provide Islamic banking products on the domestic market for the first time.

Islamic Development Bank plans to buy stake in Borsa Istanbul

The Islamic Development Bank (IDB) plans to take at least a 10% stake in Turkey's state-run stock exchange, Borsa Instanbul. Abdulhakim Elwaer, IDB's director of cooperation, said negotiations are expected to finalize in two to three months as part of wider efforts to develop Islamic finance in Turkey. Elwaer emphasized the bank's wish to help develop Turkey as a global Islamic financial center. IDB and Borsa Istanbul signed a cooperation agreement in November, with discussions currently ongoing to decide on a specific size and time frame. The bourse has a share capital of 423 million lira ($115.6 million), implying a value of 42.3 million lira for a 10% stake. Elwaer added that a gold trading platform is also in discussion, although the equity stake remains the bank's biggest priority.

Islamic lender shows #UK appeal of Sharia finance

In Great Britain there are currently six Islamic banks, while another 20 lenders offer Islamic financial products and services. Al Rayan is Britain’s largest Sharia-compliant bank with 70,000 customers and 13 offices and branches. The bank underwent a major overhaul in 2014 when it was acquired by its Qatari parent, Masraf Al Rayan. Since that point, the brand was made more accessible, the imagery is no longer just Arabic, the bank uses British imagery as it is targeting all Brits. CEO Sultan Choudhury says about 25% of the bank’s customers are non-Muslim. Mr Choudhury also has his eyes fixed on the potential of the wider international market. In particular, he highlights the GCC national and expat market and HPPs (mortgages with an interest-free and Sharia-compliant structure). He says, Al Rayan's ambition is to be the number one bank for HPPs for GCC nationals and expats.

#Algeria warily edges towards Islamic finance as energy income dives

Algeria is edging slowly towards Islamic banking services to suit more religiously conservative investors. Finance Minister Hadji Baba Ammi has already announced plans for the country's first local bond. Now six state-run banks plan to start Islamic financial services by the end of the year or in early 2018 and a national sharia board that would oversee Islamic banking is also planned by the end of 2017. Algeria's Islamic finance plan still faces huge barriers. It lacks a legal framework and technical expertise. Algeria is far behind North African neighbours Morocco and Tunisia, which have started to develop legislation for Islamic finance. The country is targetting domestic savers rather than foreign investors. Many local people distrust the state-owned banks and keep large sums at home in Algerian and foreign currency.

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