IslamicFinance.de

Bahrain-based Gulf Finance House (GFH) has won approval from the shareholders for a reduction in the group’s issued and paid-up capital. GFH board chairman Dr Ahmed Al-Mutawa said the rate of reduction approved is six shares for each 10 shares held at a nominal value of $0.265 per share, thereby resulting in elimination of $897 million of accumulated losses. In addition to this, the investors also discussed the continuation of GFH’s shares listing in London and Kuwait Stock Exchange and authorised the board of directors to adopt the necessary resolutions in this respect. The firm reported a consolidated net profit of $17 million for the year 2014.

Geopolitical entanglements and new Cold War era tussles with the west, compounded by lower oil prices, have brought the Russian economy to its knees. Investment prospects for the Eurasian giant appear bleak, with credit ratings agencies Standard & Poor's and Moody's downgrading its economy to 'junk' status earlier this year. For support Russia is turning its attention to the Muslim populations of its various republics. Around 14 per cent of Russians follow Islam. However, the tradition of centralisation in the Russian Federation offered until now little room for the growth of Islamic finance. This, however, appears to be changing.

Investors are no closer to understanding how the opening of Saudi Arabia’s stock market will work than they were in August, when the country published draft rules on the plan. Eleven weeks before the deadline that the Middle East’s largest bourse set itself to give foreigners direct access to the market, the Riyadh-based Capital Market Authority has yet to explain how it will square the new rules with existing restrictions on foreign involvement in Saudi businesses. The lack of clarity underscores the difficulty the world’s biggest oil exporter has in giving outsiders greater influence. The kingdom is seeking to attract increased investment to the $521 billion stock market without angering conservatives dedicated to preserving the nation’s Islamic roots.

Turkish Islamic asset manager Alkhair Capital plans to launch new funds this year and will start a service to advise on Islamic bonds, its general manager Ali Ilhan said. Alkhair Capital, majority-owned by Bahrain's Bank Alkhair, is the only full-fledged Islamic investment firm in the country, with AZ Global and BMD Securities offering some sharia-compliant products of their own. Last month, the firm raised its capital to 5 million lira ($1.86 million) from 2 million lira, to meet new capital requirements coming into force in July, a move that will also help fuel its expansion drive.

Triggered by rapidly growing demand for Islamic financial instruments, Shariah-compliant exchange-traded funds (Islamic ETFs, or iETFs) are beginning to add potential to the portfolios of Muslim and ethical investors. Malaysia last week came up with the first regional Islamic ETF that will include Shariah-compliant stocks from Malaysia, Singapore, Indonesia, Thailand and the Philippines. It is being launched by investment firm i-VCAP Management. The region is joining the growing number of Islamic ETFs provided by large investment companies. The latest addition to the Islamic ETF family was an iETF launched by Seattle-based investment firm Falah Capital in October last year.

RAM Rating Services expects new global sukuk issuance to remain fairly resilient in 2015 at around US$100bil to US$120bil when compared with 2014’s US$116.23bil. The rating agency said this was despite the challenging environment for Malaysia and the Gulf Cooperation Council (GCC) amid the steep fall in global oil prices since last year. RAM Ratings said geopolitical risks in the GCC, Europe’s quantitative-easing programme and the rate increase by the US Federal Reserve this year have compounded the uncertainties for GCC sukuk issuers and their potential investors. Perhaps the next leap for global sukuk will materialise when GCC sovereign wealth funds reallocate more of their portfolios to invest in sukuk from Asia, Europe, the US and other non-OIC nations.

According to a survey for Zurich International Life by YouGov, 71 per cent of UAE residents will receive a company bonus during 2015. However, for 39 per cent of bonus recipients, the primary use of their payment will be to settle debt, with a further 16 per cent using the bonus to pay bills, such as rent or school fees. Another 13 per cent of respondents said they will leave their bonus in the bank, 11 per cent will invest in property and 10 per cent will invest in a savings scheme, while only seven per cent will spend the majority of their bonus. Besides, only 44 per cent of expats believe they will fulfil their financial goals when they leave the UAE.

Emirates Islamic Bank (EIB) is willing to invest in the Moroccan Islamic banking sector in the two upcoming years. EIB’s CEO, Jamal Bin Ghalaita, said the bank is planning to explore the potentials of the Moroccan Islamic finance through a policy of acquisitions and obtaining operating licenses from regulating authorities. He added that the Moroccan Islamic banking market is among the markets with the greatest potentials for Islamic banking outside the GCC. Ghalaita also said the bank has the same planned investments in other countries with strong economic ties with the United Arab Emirates and GCC countries. He said the bank is also assessing opportunities for expansion in the coming period in Egypt and Turkey.

The significant premium growth in the global takaful sector is expected to continue and reach $20 billion by 2017, with the majority of that increase coming from Malaysia and Saudi Arabia, according to A M Best. A M Best said in its report that despite the rapid growth of takaful on a global basis, it has struggled to take hold in Middle East markets, other than Saudi Arabia, which are considered to be concentrated with a few large players dominating their respective markets. Moreover, a number of challenges remain, including market conditions that leave takaful operators subject to fierce pricing competition from more established insurers that benefit from brand awareness and more established distribution networks.

Several Islamic insurers in the United Arab Emirates are seeking guidance from the UAE Insurance Authority on the possibility of mergers and acquisitions in the sector, Ibrahim Al Zaabi, director-general of the authority, has said. Talks are at an early stage, he said on the sidelines of an Islamic insurance event, without naming any of the companies. The comments signal that tough new regulations, combined with financial losses and stiff competition are pushing some of the providers in one of the Gulf’s largest takaful markets to consider consolidation. Zaabi also said a committee to oversee Islamic insurance would be established in the UAE by the end of this year to help standardise the sector.

Qatari banks plan to borrow more than $6 billion to finance a construction boom ahead of the 2022 soccer World Cup as slumping oil prices constrain government deposits. Shareholders in Al Khaliji Commercial Bank approved a $2.5 billion bond program, and Qatar National Bank said it arranged a $3 billion loan. Qatar International Islamic Bank may issue sukuk. Government deposits at Qatar’s banks more than tripled in the five years ended February 2014 before declining 4 per cent the following year. Qatar is spending $182 billion, or 90 per cent of its 2013 gross domestic product, on roads, stadiums and other facilities by 2019 to play host to the World Cup.

Two Qatari banks and Chinese brokerage Southwest Securities signed a memorandum of understanding to establish a company handling Islamic finance deals in China, Qatar's central bank governor Sheikh Abdullah bin Saud al-Thani said on Tuesday. The banks are Qatar National Bank and Qatar International Islamic Bank. No further details of the venture were immediately available.

The Islamic Financial Services Board (IFSB) is adding financial inclusion to the industry's to-do list, launching initiatives aimed at widening the reach of sharia-compliant banking to include poorer people. After years of rapid growth, Islamic finance is under pressure from some scholars to build stronger credentials for social responsibility. One criticism is that it has neglected farmers, small traders and poor households. Guidance from the Kuala Lumpur-based IFSB could help address this issue in majority-Muslim countries where less wealthy people have stayed out of the formal banking system for religious reasons. The IFSB plans to include a dedicated work stream on financial inclusion in its new strategic performance plan 2016-2018.

31.3.2015

Monetary Reform - A better monetary system for Iceland

Frosti Sigurjonsson, Member of the Parliament of Iceland and Chairman of the Committee for Economic Affairs and Trade, today published a report outlining the need for a fundamental reform of Iceland's monetary system.

The report, commissioned by the Prime Minister, considers the extent to which Iceland's history of economic instability has been driven by the ability of banks to ‘create money' in the process of lending.

The Icelandic economy has struggled with inflation and unstable exchange rates. Iceland also suffered one of the costliest banking crises in history.The report describes how commercial banks in Iceland created far more money than was needed for economic growth. The Central Bank failed to bring the money supply under control using conventional means.

The significant premium growth in the global takaful sector is expected to continue and reach USD 20 billion by 2017, with the majority of that increase originating from Malaysia and Saudi Arabia, according to a new A.M. Best special report. The Best’s Special Report, titled “Takaful Operators Struggle with Growth and Profitability,” also notes that despite the rapid growth of takaful on a global basis, it has struggled to take hold in Middle East markets, other than Saudi Arabia, which are considered to be concentrated with a few large players dominating their respective markets. To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=235591.

The Cyprus Stock Exchange is currently intensifying its efforts for promoting new initiatives and plans in this direction in order to help our country overcome the present difficult and challenging economic situation,thus contributing to the rebuilding of Cyprus’ economy. Very recently, within this general direction, the Cyprus Stock Exchange has started examining, along with other interested authorities and market participants, the possible development of the Islamic Financial Instruments. Last but not least, it should be underlined and stressed that the CSE is ready to discuss listings of Islamic financial investment with interested parties.

Kenya Commercials Bank (KCB) Group has launched its Islamic Banking unit as it seeks to tap into the growing demand for Islamic financial products across the East African region. KCB Group Chairman Ngeny Biwott said the move is aimed at tapping investments in the Islamic financial sector to help spur capital flows. Biwott said the launch is part of the Bank’s long term vision to diversify its product offering while riding on technology as it reaches out to more citizens across the East African region and beyond who feel left out by the conventional banking system. In addition to the Kenyan operation, KCB Bank Tanzania is offering Islamic Banking services which is well supported with the regulatory framework that is in place.

La Banque Zitouna a créé un “Prix de la Finance Islamique” qui couronne la meilleure publication doctorale dédiée au sujet durant les trois dernières années. Le prix est attribué annuellement à l’occasion des Journées Banque Zitouna de la Finance Islamique. La compétition est réservée aux publications soutenues avec succès au niveau des universités et instituts supérieurs maghrébins, sur un sujet en relation avec l’économie et la finance islamique, notamment la banque islamique, l’assurance Takaful, les Sukuk, les fonds d’investissement islamiques, la Zakat, le Waqf, la jurisprudence islamique moderne des transactions (fiqh al mouâamalat) et la microfinance islamique.

Dubai Islamic Bank (DIB) is set open operations in Kenya, in what could be the start for Gulf-based lenders scouting for growth outside their home markets. The Emirate's largest Sharia-compliant lender has started head-hunting top managers for its Nairobi unit. DIB Kenya said it is obtaining a banking licence from the Central Bank of Kenya (CBK). DIB Kenya Ltd has been issued with an approval-in principle- to operate pending completion of the licensing process. The lender is seeking qualified persons in multi-nationals and local banks in Kenya to fill some 36 top and middle level positions within the bank.

Indonesia’s branchless banking initiative faces an uphill battle against misconceptions of financial services in the country, a survey report from consultancy firm InterMedia Indonesia revealed. Nearly half of Indonesians do not use any form of financial services, according to the firm’s Financial Inclusion Insights report. It also found that one-third of people who use informal financial services cited “an inability to afford an account” as the main reason behind their reluctance to use formal banking services. The report surveyed 6,000 people across 24 provinces in Indonesia between August and November last year.