The Securities Exchange Commission of Pakistan (SECP) is in the process of drafting a Shariah regulatory framework. Addressing at the second day of "World Islamic Finance Forum" (WIFF), SECP Chairman Zafar Hijazi said SECP has established a full-fledged Islamic finance department to co-ordinate the Islamic finance initiative. He said SECP is fully supporting Shariah compliant business and the government has implemented the SECP's tax proposal for offering Sukuk. SECP is currently working on harmonisation and standardisation of regulations for a uniform regulatory environment. The commission has an independent Shariah Advisory Board to review product development and adjudicate on Shariah matters.
Speaking at the World Islamic Finance Forum, Pakistan's Finance Minister Ishaq Dar suggested investing in research in order to Islamise the whole economic system of the country. He said Islamic finance industry leaders should play an active role in promoting the industry. At the same time, the leaders should not remain complacent with the traditional model, but should help the finance industry evolve and innovate products based on Shariah compliance. Dar said economic growth in Pakistan had crossed 4% and had remained steady at 5% this year. This growth rate is expected to accelerate to 7% in fiscal year 2017-18. Later referring to a BBC report, he said Pakistan would become the 18th largest economy of the world by 2050 from the current 44th position.
The Islamic Research and Training Institute (IRTI), Thomson Reuters and the Institute of Business Administration (IBA) launched the Pakistan Islamic Finance Report titled "Innovation at Asia’s Crossroads". The ceremony, which took place in Karachi, was attended by senior government officials, market executives and industry professionals. The report highlights that the Islamic capital market sector registered a double-digit growth rate in the past decade, recorded mostly by Islamic mutual funds. In all Islamic finance industry segments, finance professionals and investors maintain a positive economic outlook, and Islamic finance institutions have built strong fundamentals.
While the number of Islamic products in #Malaysia has grown in the last 10 years, there still aren’t enough to cater for the needs of local investors. According to Rohani Mohd Shahir, president of the Association for Islamic Financial and Wealth Management Malaysia (AIFiWM) the growing demand is due to a greater awareness of compliance for religious purposes. There is a lack of Islamic real estate investment trusts (REITs) and fewer shariah-compliant stocks in Malaysia today due to the tightening of regulatory requirements. To increase the number of listings available, AIFiWM is championing a move to restore the shariah-compliant status of companies that were once deemed compliant.
In #Indonesia fintech startups will be invited to a safe space where they can test any service under the supervision of the central bank before it issues regulations and allows full authorization. The safe space, known as a "regulatory sandbox", has been adopted in many countries around the world. The central bank will also set up a designated fintech office to overlook the sandbox. The Indonesian Fintech Association applauded the planned sandbox approach as it will serve as a tangible platform for all fintech initiatives to be tested into the regulatory system. The association's secretary-general Karaniya Dharmasaputra said this concept was a good one as shown by many countries implementing it toward success.
S&P Global Ratings believes that the drop in Islamic finance growth is likely to continue in 2017. Nevertheless, it estimates the industry’s total assets will reach $2.1 trillion at year-end 2016. S&P Global Head of Islamic Finance Mohamed Damak said Islamic finance will maintain growth of around 5% in 2017. The oil price environment will weigh negatively on economic growth in the GCC for the next two years. A broader consensus around the need to standardize legal structures and Sharia interpretation could help the industry to progress. Another great help could be the industry’s potential contribution to the United Nation’s sustainable development financing goals.
State Bank of Pakistan Deputy Governor Saeed Ahmed said that there is a dire need to create awareness to promote Islamic banking. According to the Global Islamic Finance Report (GIFR) 2016, Pakistan ranks ninth in terms of development of Islamic financial services industry. However, there is still a capacity of 40 million more people in the banking market that the Islamic finance sector can explore. In June the State Bank of Pakistan (SBP) noted that the Islamic banking industry had witnessed a growth of 7.4% in April to June quarter. Its assets reached Rs 1,745 billion while its deposits also increased by 9.3%. This shows a market capitalisation of 13.2%. There is still room to grow and the Islamic financing institutions can increase their operations and market shares.
Islamic entities known as participation banks offer bonds with potentially greater upside and more stability than standard government debt. According to a recent report from Standard & Poor’s, participation banks doubled their share of the country’s overall banking assets to about 5% between 2005 to 2015. Turkish President Recep Tayyip Erdogan’s support for further integration of Islamic law into all walks of life means participation banks are likely to grow. The system’s assets could reach some $300 billion by 2025, according to the Participation Banks Association of Turkey.
India's central bank has proposed working with the government to introduce interest-free banking. The Reserve Bank of India (RBI) made the proposal last week, as departing central bank governor Raghuram Rajan hands over the reins to Urjit Patel. Development of Islamic finance has been slow in India because of strong opposition from bureaucrats and politicians from the ruling Hindu-nationalist Bharatiya Janata Party. An estimated 180 million Muslims have been unable to access Islamic banking because of laws that require banking to be based on interest. The RBI said it would explore introducing interest-free banking products in consultation with the government, a key detail as this opens the prospects of supportive legislation.
The African market for Islamic banking is unique for several reasons. The continent is witnessing an unprecedented economic growth in the last decade. Return on investment in Africa is higher than in any other developing region. Moreover, Islamic banking in Africa is supported by a growing openness and acceptability by many regulators and politicians. There is growing interest from sovereign states in issuing sukuk and countries such as South Africa, Senegal Ivory Coast and Togo have already tested the international market. At the same time, there is a need to be aware of the challenges facing the industry and how the associated risks can be mitigated. African regulators need to adopt the right policies and increase the level of cooperation. They should work closely with the multinational financial institutions such as the Islamic Development Bank, the African Development Bank and the World Bank.
The International Accounting Standards Board (IASB) has appointed Datuk Mohammad Faiz Azmi as chairman of the Islamic Finance Consultative Group. Commenting on his appointment, Mohammad Faiz said he hoped to be able to continue the good work of the IASB in the area of global finance. He appreciates IASB's commitment in helping the emerging markets adopt their International Financial Reporting Standards (IFRS). IASB Chairman Hans Hoogervorst said Mohammad Faiz had always been a valued member of the IFRS community and is renowned for his expertise in Islamic Finance.
Together with Fintech Indonesia Association, Deloitte released the Fintech Survey 2016 at the Indonesia Fintech Festival & Conference 2016. Conducted between June to August 2016, the survey interviewed 70 respondents from various Indonesian fintech companies. 27 different types of fintech companies participated in the survey. All of them shared three major concerns. A great number of fintech players agreed that the current regulatory process is "not so clear." Another pressing matter faced by Indonesian fintech players is talent shortage. The third concern is the local market’s low levels of financial education. Ironically, this problem happens not only among members of the general public but also among players in the conventional finance industry.
In #Indonesia the National Police have warned the public to be on guard against fraudulent investment companies. Criminal Investigation Department director Agung Setya said investors who understood investment often fell prey to fraudsters because of greed, while other were lured by religious symbols and public figures. He cited as an example the 2007 Gama Smart Karya Utama case and the 2012 Langit Biru cooperative case, in which the founders claimed to be spiritual leaders. Data show that fraudulent investments lead to billions of rupiah in losses per year. In 2007, losses amounted to Rp 16.13 trillion (US$1.21 billion), but decreased to Rp 604 billion in 2008. In 2011 and 2012, losses rose to Rp 68.62 trillion and Rp 10.22 trillion, respectively, but declined to Rp 235 billion (2014) and 285 billion (2015).
Saudi Arabian construction firm Abdullah Abdul Mohsin Al Khodari and Sons has renewed an existing 132 million riyal (Dh129.2 million, $35.2 million) Islamic credit facility with Samba Financial Group. The facility will provide bonding commitments as well as capital and working capital requirements for projects and general business. Credit limits for projects covered by the facility will range from 36 to 60 months. Khodari has also won a 69 million riyal contract from the kingdom’s Ministry of Environment, Water & Agriculture for the maintenance of water networks. The financial impact of the project is expected to start in the third quarter.
The Islamic Development Bank (IDB) will take part in financing of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline’s construction. Economic feasibility of the TAPI project is confirmed by experts of the countries participating in the project and independent international experts. They testify to the guaranteed capacity of Turkmenistan to ensure long-term gas supply via this route. The development of Galkynysh field envisages 33 billion cubic meters of natural gas per year. Turkmengas state concern has announced a tender for the provision of services on project management, which will be implemented with the participation of the IDB. The project is expected to be completed in late 2019.
The Islamic Development Bank (IDB) will take part in financing of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline's construction.
Islamic finance is making further inroads in agricultural sectors globally. The trend is increasingly adopted in Central and Westerns Asian countries, in Southeast Asia and in Sub-Saharan Africa. Firstly, the impact of Islamic finance can be higher than that of other financial products due to its asset-based structure. It can be applied in many fields, starting from the purchase of farming machines and equipment, seeds and pesticides, warehouses, as well as in the dairy, livestock and fishery sectors. Ijara contracts can be used for leasing or renting farm machines and other equipment. Other structures such as musharaka or mudaraba can be used for long-term developments such as rural housing, reforestation or irrigation. Secondly, Islamic finance can help broaden financial inclusion by establishing cooperatives or partnership-based financing structures. In Pakistan the state bank has now issued guidelines on Islamic agricultural finance. In Indonesia, the government has launched a new national master plan and has explicitly included agriculture as a field for Islamic finance.
The federal government has asked for the scaling up of Islamic Development Bank’s (IDB’s) concessional resource and increased overall financing to Nigeria and other African member countries of the bank. Speaking at the inauguration of the IDB Country Gateway Office (CGO) in Abuja, the Minister of Finance, Mrs. Kemi Adeosun, said there are immense opportunities in Nigeria. The minister pointed out that Nigeria requires far more resources to face the challenges and diversify its economy. She also urged the the IDB Group to help in the recently constituted Buhari Plan for the Revitalisation of the Northeast Region of Nigeria.
#UAE based National Bonds has started providing financial planning tips and tools via its website. The new financial planning section offers valuable information in both Arabic and English to help customers achieve their financial objectives. Topics cover planning for retirement and children’s education, debt management, investment solutions, takaful and estate planning. In addition, the website offers practical financial planning tips on goal setting, cash management and budgeting, financial health, and the rule of 72. The portal also includes online calculators for accurately computing expenses, commitments and budgets. Mohammed Qasim Al-Ali, CEO of National Bonds, said the new online tool will save time and effort for those looking for simple and straightforward financial planning.
Dr. Bambang Permadi Soemantri Brodjonegoro, Indonesia’s former Finance Minister and current Minister of National Development Planning, discusses the recent tax amnesty legislation and current economic prospects for Indonesia. Hosting the recent 12th World Islamic Economic Forum (WIEF) in Jakarta aims to promote Indonesia to the Muslim community, sending a message that Indonesia is a reliable economy with a lot of potential. The WIEF tries to develop Islamic finance that is more inclusive. Indonesia wants to focus on Islamic microfinance and on Muslim-friendly tourism. Beyond tourism, Muslim fashion is a sector that already has a huge market and will be increasingly important for Indonesia.