Although Malaysia is a leader in Islamic finance research, very few of the research papers published have translated into feasible innovations, until recently. To help push the sector forward and bring the research and ideas to fruition, International Centre for Education in Islamic Finance, with the support of Bank Negara Malaysia, the Association of Islamic Banking Institutions Malaysia and the Malaysian Takaful Association, recently held the Islamic Finance InnoFest 2016. For this festival, INCEIF accepted idea submissions from all over the world, including Japan, Australia and Pakistan, to promote inclusiveness.
“We believe that to really push for innovation, we cannot be stuck in a silo. That is why it is not limited to only Malaysians,” says Associate Professor Dr Baharom Abdul Hamid, director at INCEIF’s Centre of Research and Publication and InnoFest chairman.
SGI-Mitabu, a joint venture of two Australian solar companies, The Solar Guys International and Mitabu Australia, has revived its plans to fund its Indonesian 250 megawatt solar project with Islamic compliant funding. SGI-Mitabu will offer its sukuk in Labuan, Malaysia. SGI-Mitabu's sukuk issue is set to be the first Islamic finance offering by an Australian corporate and could provide a useful example of alternative sources of capital to other companies. Companies seeking alternative sources of funding may wish to consider whether a form of Islamic finance would be suitable for their next project, even if they have to look outside their own jurisdiction to make it happen.
Equitable Financial Solutions (EFSOL), Australia's largest, international Islamic finance company has announced the establishment of its Dubai office at Emirates Towers. EFSOL is actively pursuing its Middle-East expansion strategy, following the successful establishment of its ASEAN office based in Singapore. Usman Siddiqui, Managing Director of EFSOL said the new Dubai office will give investors access to the company's superior products and returns. He is confident that the EFSOL team will boost their financial products' offerings in key areas of Islamic finance.
In #Australia microfinance organisations are expecting a growing demand for financial help. Every year about 20.000 Australians obtain such loans and the figures are expected to double by the end of 2017. For example Good Shepherd Microfinance has partnered with state and federal governments and the National Australia Bank to provide the loans. Manager Adam Mooney said the increasing availability of no-interest loans of up to $1.200 would steer people away from credit cards and high-interest, short-term loans. He also said Good Shepherd was looking for more support to expand its programs.
Usman Siddiqui, the Managing Director of Equitable Financial Solutions (EFSOL), a Australian Islamic finance company announced the establishment of the company’s office in Singapore. The Singapore branch, which is registered as EFSOL Asset Management, will play a key role in the company’s regional strategy. EFSOL also announced the offering of its investment scheme, the EFSOL Income Fund, registered under the Monetary Authority of Singapore as a restricted Collective Investment Scheme.
The call to set up a Royal Commission on Banking has set in motion the debate on ethics in banking and finance, and the possible remedies to overcome the problem of unethical conduct. It is accepted that the problem is systemic, and yet the remedy suggested is at the individual level - for example the Banking + Finance Oath. The latest Panama Papers scandal dwarfs the past scandals yet again. As long as the money banks can make out of the deals is in excess of the fine they pay, such scandals will continue.
Australia has begun to see a steady stream of property deals using Islamic financing as the attraction of low-risk tenants and a weak Australian dollar offset concerns about the lack of a welcoming tax environment for such transactions. While the emergence of such deals represents a breakthrough for Gulf and Southeast Asian investors, questions remain over how much momentum will develop as Australia has yet to follow the lead of other jurisdictions like Britain and Hong Kong in passing tax law amendments to facilitate Islamic finance. Interest is strong, and structures have now been developed that can suit commercial investment deals as well as development financing.
The launch of MyETF-AGRI, the firm’s second Islamic ETF issued this year, brings the number of Shari’ah compliant ETFs in Malaysia to four and 18 in total in the world.
The global ETF market has closed in on the $3 trillion mark with Shari’ah-compliant ETFs only registering about $320 million of that total. In Malaysia, Shari’ah-compliant ETFs make up of over 30 % of the ETF market.
Malaysia does lead the pack, however, with the most Shari’ah-compliant ETF products in the world. Malaysia’s four Shari’ah-compliant ETFs account for some $75 million or 23 % of the global Shari’ah-Compliant ETF segment.
The launch of this landmark Fund represents many firsts for the industry including being the first agricultural-related Islamic ETF globally and the first sectoral Islamic ETF in the region while reinforcing Malaysia’s position as the global hub for Islamic finance and investment products.
MyETF-AGRI will look to invest in the 30 constituent companies that make up the Thomson Reuters Asia Pacific ex-Japan Islamic Agribusiness Index and in substantially the same weightings as they appear on the benchmark index.
A team lead by Ashurst finance partner Jamie Ng has completed the first Shari’ah compliant murabaha in Australia.
The structured financing arrangement funded by ANZ enabled a commodity transaction to finance an interest in a Melbourne property at 747 Collins St, by one of Malaysia’s largest pension funds, Tabung Haji. Ashurst acted for investment manager CIMB-TrustCapital, as well as Tabung Haji on the deal.
“Shari'ah compliant financings can be complex and involve parallel consideration of various Shari'ah structuring, legal and taxation issues to produce an outcome that is not only viable, but which is commercially and legally robust,” Ng told Australasian Lawyer.
The demand for Shari’ah compliant financing, particularly in the real estate sector, is a growing trend driven by both Australian and off shore investors, according to Ng.
“We are seeing a considerable degree of interest in Shari'ah compliant on-shore financing products, and we have fielded an influx of enquiries from offshore investment vehicles out of the Middle East and Asia wanting to know more about the structures available in Australia,” he said.
“Ethical finance” is a term used to describe finance that is put to good social and environmental use. Interest in it has risen since the 2008 global financial crisis, with Islamic finance and socially responsible investment funds becoming its two fastest areas of growth. The World Bank Treasury has brought the two together by helping the International Finance Facility for Immunization issue two Sukuks in less than a year.
IFFIm is an international organization that finances child immunization and strengthens health systems related to it in some of the poorest countries of the world through Gavi, the Vaccine Alliance. Backed by nine sovereign governments—the United Kingdom, France, Italy, Norway, Australia, Spain, the Netherlands, Sweden, and South Africa—the organization raises money in the international capital markets.
The fund manager behind the first private Islamic superannuation fund in the world, Crescent Wealth, has passed $100 million in funds under management. The benchmark figure was passed after the Australia-based group reported a 245 per cent growth in funds under management for the 2015 financial year with the group tapping into demand for ethical Islamic investment products. Crescent Wealth launched the first private Islamic superannuation fund in the world in 2013 growing fund members close to ten-fold between the 2014 and 2015 financial years to reach 4200 members, with an expectation of further growth due to interest from overseas investors.
Australia-based Islamic fund manager Crescent Wealth is now managing over $100 Million in Islamic Super and Investments. This makes Crescent Wealth not only one of Australia’s fastest growing Super funds, but also one of the best performing with many of their funds market leaders in their respective sectors. This is a remarkable achievement for a company that launched the world’s first private Islamic pension fund a little over 2 years ago. Crescent Wealth’s International Equity Fund was ranked as the #1 Top Performing Ethical Fund returning 27.9% after fees (ranking by Financial Express for the 2015 financial year). Since its launch on 22 February 2013 to 30 June 15, the same fund has achieved a great total return of 60.65%.
The Index of Philanthropic Freedom 2015 by the Centre for Global Prosperity at the Hudson Institute ranked Australia behind New Zealand, the USA, Canada, Japan and Spain in terms of barriers and incentives for individuals and organisations to donate money and time to social causes. Australia was ranked 13th overall for philanthropic freedom out of 64 countries, with the Netherlands, the USA and Germany taking out the top three places. New Zealand was ranked eighth while the UK was one place behind Australia at 14. Australia’s philanthropic environment is decidedly disjointed. On the one hand, Australia maintains the region’s most favorable environment for the operation and registration of CSOs (Civil Society Organisations), on the other hand, Australia has a variety of policies that are not necessarily designed to deter cross-border flows but do exactly that.
Middle East investors are increasingly looking at Australia as a destination to expand their real estate portfolios, according to IP Global. A stable economy coupled with strong population growth continues to underpin the property markets in cities such as Brisbane and Melbourne, the property investment firm said in its latest quarterly global real estate outlook. While there are signs that property prices are overheating in traditional investor hot spots like Sydney, pockets of value still exist in suburbs of Brisbane and Melbourne. Paul Preston, Director, Head of EMEA at IP Global, which has offices in the UAE, said that a rising population and big infrastructure spending programs support the outlook for real estate returns in areas beyond the more well-known, traditional investment locations.
Sydney-based Waratah Resources Limited plans to launch an Islamic commodities trading business as it shifts focus from Asian markets to the Middle East. The move adds to a growing number of firms keen to tap into an Islamic finance market that is developing beyond its traditional homes in the Middle East and southeast Asia. Waratah will setup a company domiciled in the Malaysian offshore finance centre of Labuan under a 50/50 joint venture agreement with Malaysia's Amanie Holdings, an Islamic finance advisory firm. The firm's next goal is to secure funding arrangements with partners who have been introduced by its sharia partners over the past few months, to provide the required capital for its joint venture vehicle, said executive chairman Ben Kirkpatrick.
The No Interest Loan Scheme (NILS) New South Wales (NSW) Conference 2013 will take place in Sydney, Australia on October 22-23, 2013. The event will highlight NILS and microfinance topics including energy efficiency programs, impact investing and social innovation, strategies to facilitate best practices in microfinance, and integration, collaboration and consolidation of NILS in microfinance institutions and community organizations in eight territories of Australia. NILS is a community-based program that provides interest-free loans for individuals or families living on low incomes to purchase essential goods and services in Australia.The cost to attend the two-day event is AUS 360 (USD 335), additional discounts are available. For more information visit the event website http://www.nilsnsw.org.au/latest-news/events.
Amanie Advisors Australia Pte Ltd, which is part of the Malaysian Amanie Advisors Group, has proposed to raise multiple short-term sukuk to cover Australia’s manufacturing ecosystem as part of the strategy to win funds from the Gulf area. Amanie founder and group chairman Dr Mohd Daud Bakar said the structures used in Islamic finance transactions mirror very closely the types of funding that are currently in demand in Australia, particular with respect to real economic activity which include leasing, financing of mining activities and farming. Amanie's idea involves funding from the whole value chain of any business, for examples electricity production. This is a totally new way of approach in the Islamic finance industry, which seems to have been well accepted in Australia. The short-term sukuk will involve the banks in the value chain, reduce the dependency of farmers and producers from conventional or private funds though the risk is quite high but the third party acts as the underwriter.
Crescent Wealth has developed its own platform for its four investment options and has appointed Corporate Combined Superannuation (CCSL) as trustee. The Shariah-compliant funds - Australian equities, international equities, income fund and Australian infrastructure and property - were previously only available on the Association of Independently Owned Financial Planners Personal Choice Private e-wrap platform, after they were launched late last year. The company is also in talks with industry super funds to white-label the product as an ultra-ethical investment option. Although the product follows Islamic finance principles, the company expects the majority of its clients to be attracted to its ultra-ethical investing philosophy
Less than one per cent of investment products in Australia are Shariah compliant, suggesting huge opportunities for fund managers in this segment. The Muslim Community Co-operative Australia (MCCA) manages a Shariah compliant property income fund which has just surpassed $30 million in assets under management. MCCA chairman Dr. Akhtar Kalam said this growth shows strong support for IBF products within Australia. MCCA is also reported to be in advanced discussions with an unnamed Middle Eastern company with a view to setting up a $180 million mortgage fund, a $150 million property fund, a $180 million Sukuk fund and a $5 million asset-leasing fund. Kalam said that this deal could signal the start of an exciting growth story driven by overseas interest in investment in Australia.
Insurance Australia Group (IAG) is growing in Asia, but also interested in Australia. Its chief executive Mike Wilkins recommended Australia pull down tax barriers in order to encourage Islamic finance. The federal government is yet to respond to a subsequent Board of Taxation review. Indonesia is also a target market for IAG. In order to fund its takaful liabilities, IAG would need to invest the cash flows received from policyholders into sharia-compliant products such as sukuk. At present however, because sukuk is based on several transfers of assets into and out of an SPV, the cost of issuance os well above a conventional bond.