IslamicFinance.de

Looking forward, market conditions should continue to support growth but we also need to consider what structural changes will add depth to the GCC market and assist it in moving to the next level. To date key drivers of the sukuk market growth have included the need for banks’ to prudently manage funding risks and address changing regulatory requirements. Non-bank issuers have followed suite to diversify their funding sources and access cheaper financing. The current trend of influential factors should continue to be supportive for the GCC sukuk market. However, there are additional factors that must be addressed like improved public disclosure by issuers, improving investor knowledge and sukuk market liquidity.

Asian sukuk offerings are drawing more demand from the Middle East, boding well for regional hubs such as Hong Kong as they try to raise their profiles in the Islamic finance market. When the Government of Hong Kong issued a $1bn five-year sukuk last week, 42% was allocated to the Middle East, up from 36% for the borrower's debut Islamic bond last September. Middle-Eastern buyers also snapped up 56% of a five-year $500 million offering by Indonesian airline Garuda Indonesia. The momentum in Asian sukuk offerings is raising hopes that Hong Kong will be able to achieve its goal of stimulating more Islamic issuance from the city. Alexi Chan, HSBC's global co-head of debt capital markets believes the time is right for issuers from Greater China to consider the sukuk market as a viable option in a diversified funding approach.

London-based Islamic finance advisory firm, Edbiz Consulting, has partnered with Labuan International Business and Financial Centre (Labuan IBFC) to produce an Islamic Wealth Management Report (IWMR) to be published in the last quarter of 2015. The report will explore the growth and Islamic wealth, highlighting its concentration in different regions, providing crucial business intelligence to supply-side leaders and potential clients of the Islamic wealth management industry. In addition, different Islamic wealth management solutions will be analysed, with a focus on Islamic philanthropy and social responsibility.

As Saudi Arabian authorities prepare to open the stock market to direct foreign investment this month, they're laying plans for a fresh set of reforms: measures to expand and energise the corporate debt market. The Capital Market Authority wants to change things under a five-year strategy that would encourage issuance of sukuk and conventional bonds as alternatives to bank loans, which currently dominate corporate fund-raising. This would spread corporate risk beyond the banking system, making the financial sector more healthy, and provide more channels for Saudi Arabia's growing investment industry. The CMA plans to introduce rules for credit rating agencies in September and is developing guidance for special purpose vehicles.

The Thomson Reuters Global Sukuk Index is at 118.42537 points, down from 118.50812 at the end of last month but up from 115.79726 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 117.32893 against 117.54139 at end-April and 113.69014 at end-2014. Some of the sukuk in the pipeline are: The Turkish Treasury said in late May it would issue local currency sukuk in August with volume of 1.5 billion lira ($563 million). Saudi Binladin Group began marketing a 364-day sukuk issue to local investors in the kingdom which could raise up to 1 billion riyals ($265 million). Abu Dhabi Islamic Bank will ask shareholders on June 21 to approve an increase in the size of its Tier 1 sukuk programme to $3 billion from $2 billion.

Speaking in the aftermath of the Banking Regulation and Supervision Agency’s seizure of publicly traded Islamic lender Bank Asya, Lawyer Süleyman Ta?ba? vows that the continued illegal measures were political and illegal. He states that the unjust seizure will inevitably come to an end, even if it means going to the European Court of Human Rights (ECtHR). Ta?ba? also expressed that the takeover was an attempt to incite panic and cause a run to the bank, calling for the customers to display the same solidarity as in the aftermath of February 3 measure. Banking sector experts warn that illegal bank takeovers have cost Turkey dearly in international courts.

Information technology specialists from Turkey's banking watchdog, the Banking Regulation and Supervision Agency (BDDK), discovered that 800,000 transaction records were deleted at Bank Asya, which was seized by the Saving Deposit Insurance Fund (TMSF) in February. According to an investigation, the mentioned transactions were deleted just after the Dec. 17, 2013 operation. After the Gülen Movement was included in the Red Book as a national security threat and deemed a terrorist organization, the accounts of some of the people that are included in the movement will be investigated. In case any relations to the movement's members are revealed, the bank may be forcibly terminated for national security reasons.

Turkish authorities said on Friday they had decided to take over Bank Asya. The move was announced by the banking watchdog BDDK just over a week ahead of a parliamentary election and on the same day that Erdogan launched the Islamic business of the state-owned Ziraat Bank. The BDDK statement said it acted as "problems experienced in the bank's activities with its financial structure, its partnership and management make-up presented a danger ... in terms of confidence and stability in the financial system." It handed over control of the bank to Turkey's Savings Deposit Insurance Fund (TMSF) which said that the bank's operating licence had not been cancelled at this stage.

Turkish regulators seized the remaining shares in Bank Asya, the Islamic lender taken over by authorities this year amid a political dispute. The move against the bank was announced late Friday on the website of the bank watchdog. The aim was to protect savers and ensure “stability and confidence in the financial system,” it said. Deputy Prime Minister Ali Babacan denied that the seizure was politically motivated in an interview late Friday. The seizure comes before parliamentary elections on June 7 and about two weeks after the cabinet appointed Mehmet Ali Akben, a career Islamic banker and board member of the state Savings Deposit Insurance Fund, to head the Banking Regulation and Supervision Agency.

Denying any political motives, Turkey Prime Minister Ahmet Davutoglu says regulators’ action purely based on “technical, fiscal and financial” evaluation. Turkish regulators on Friday seized remaining shares in Bank Asya. Appeals process is open on Bank Asya seizure: Bank Asya went beyond “normal banking” due to ties with "parallel state,” Davutoglu says in reference to supporters of Islamic preacher Fethullah Gulen, accused of plotting to overthrow the government.

A branch of al-Baraka Bank Syria had been opened on Thursday in the coastal Tartous city with the participation of official and economic figures. Governor of the Central Bank of Syria (CBS) Adib Mayaleh affirmed in a press statement that banks in Syria have had an effective contribution to national economy, considering it a sign of growth and recovery despite the critical stage that Syria is passing through. Several branches of a number of banks are under construction in different areas in Syria, Mayaleh added. For his part, Mohammed Halabi, Chief Executive Officer of Al Baraka Bank Syria highlighted the importance of opening the bank’s tenth branch in Syria.

Turkish President Tayyip Erdogan said he expected other state banks to establish Islamic banking units soon after state-run Ziraat launched an Islamic unit on Friday. Erdogan, speaking at the launch ceremony of Ziraat's new business, said he also expected Ziraat to set up an Islamic insurance unit.

Tengku Razaleigh Hamzah says we should not fall prey to over-optimism and entertain the illusion that Islamic banking and finance is immune from the effects of any great shift or turn in the forces and currents that shape the world— culturally, politically, socially or economically. Thus, we must continuously make the effort to monitor and understand the happenings in the world as well as the apparent and hidden forces giving rise to them. These include the civilizational crisis, globalization, the shift from the real economy to the financial economy and the rise of the global Occupy movement and the Arab Spring uprisings. In the mission to empower the global ummah economically, it is now quite obvious that the system of choice is the Islamic economic system.

A new report from JPMorgan Chase’s research arm examined the deposit and spending patterns of 100,000 of its 27 million accounts during 2013 and 2014. It found that almost all the customers in the sample experienced changes in income and spending of 5 percent or more a month — not a tremendous fluctuation by any measure. But over the course of the year, 26 percent experienced income changes of 30 percent or more —10 percent suffered declines, while16 enjoyed increases. Income and consumption changes didn’t move in tandem. Just 28 percent of the survey subjects spent more money when they had more, and less when they had less.

Islamic Corporation for the Development of the Private Sector (ICD) CEO Khaled Al-Aboodi speaks out on the work he does around the world to bolster the private sector in accordance with the principles of Shari’ah law, and harnessing the Islamic economy’s vast potential. He says that all of the Halal activities need to be focused and there needs to be an established link between Islamic finance and the Halal activities, and make sure they are served by Islamic finance. The more links, the more demand there will be for Islamic finance, so these forces will work together to make both bigger. However, there are also weak links, like he lack of unified regulation for Islamic finance.

Upside for sovereign Sukuk issuance in countries in the Gulf Cooperation Council is limited in 2015, in Standard & Poor's Ratings Services' opinion. The rating agency expects that lower oil prices will lead to fiscal deficits in some countries in the GCC, but nonetheless most governments' net asset positions will likely remain strong enough to enable their financing. Most sovereign Sukuk issues will relate to essential infrastructure projects and refinancing needs. Government-related entities' (GREs) financing activity, the availability of large government assets, and healthy liquidity in the banking sector all limit the linkage between changes in oil prices and the potential for sovereign Sukuk issuance, according to S&P.

BIMB Holdings Bhd is expecting a 15% growth in assets for its banking arm Bank Islam Malaysia Bhd for 2015, despite saying that it will be a very challenging year for the banking industry. Hizamuddin Jamalluddin, chief strategy officer of the managing director's office, said the expected asset growth is based on the group's current balance sheet. He added that in terms of loan growth, the group is expecting this year's growth to be similar to that of last year's. Hizamuddin was speaking to reporters during BIMB's launch of three new term investment accounts under the Islamic Financial Services Act 2013 (IFSA). The three products launched are the Special Investment Account Mudarabah, Waheed Investment Account Wakalah, and the Al-Awfar Account.

Michael Gassner, Editor of IslamicFinance.de presented on the 3ème Congrès International de la Finance Islamique “Les Banques Islamiques et le Financement des Entreprises: Pratiques et enjeux théoriques” en Marrakech, 25/26 Mai 2015.

The presentation discussed that exponential growth of debt in Islamic finance is ruled out, nevertheless, debt and equity finance exists. The specific significance of equity finance (musharaka, mudaraba) lies in need for solid debt/equity ratio, as Muslims shall never die being in debt. Still Islamic banks barely provide any equity finance and the reason often given are moral hazard costs. This is denied as debt as well as equity has specific moral hazard problems, and if anything, even conventional banks would offer a mixture of debt and equity. Rather the assumed reason appears to be in the regulation (capital weight) and taxation (interest deductibility), which makes equity financing from a bank 2-4 times at least more expensive than debt finance, and thus not worth being offered.

The attached presentation is in French.

Comprehensive reforms in Turkey’s capital markets over recent years have exceeded EU standards and bred confidence among investors, says the Chairman of the Capital Markets Board Vahdettin Erta?. The Turkish government has a plan to develop the participation banking sector and also the instruments we provide under Islamic principles. The sukuk regulation was renewed in 2013 and also a new regulation was made after the reform on the private pension system which allows for the establishment of Sharia-compliant pension funds. The government also has a plan to develop the Islamic insurance (takaful) industry.

Turkish President Tayyip Erdogan said the launch of Ziraat Bank's Islamic business should help to attract new funds to Turkey and urged other state lenders to help to triple Islamic banking's share of the market by 2023. Speaking at Friday's launch ceremony for Ziraat's new business, Erdogan said he also expects Ziraat to set up an Islamic insurance operation and called on other state lenders to introduce Islamic banking divisions soon. Turkey's other two state lenders, Vakifbank and Halkbank, have also been looking to set up Islamic banks as part of the government's efforts to develop the sector and tap a pool of cash-rich investors in the Gulf and southeast Asia.