IslamicFinance.de

Following on from S&Ps comments regarding strong demand for Sukuk and low yields; credit spreads have been tightening in the Sukuk space for quite some time, due to supply outstripping demand and strong fundamentals in the Middle East. In addition, with the recent geopolitical tensions in Ukraine and other emerging markets, a flight to credit quality has led to further tightening. The news of Dubai rolling over its debt owed to Abu Dhabi and the UAE Central Bank for 5yrs at 1% has lowered yields further. With yields at such low levels it seems an opportune time for borrowers to issue Sukuk, even for existing conventional issuers.

The month of March has produced the most volume of sukuk issuances for the global sukuk market in 2014 with total sukuk issuances amounting to USD11.2bln. This represents an increase of more than 23% as compared to the USD9.07bln issuances in February 2014 and a 3.13% increase as compared to the USD10.86bln issuances in January this year. However, there was a substantial decline in corporate sukuk issuances in March with only USD1.45bln worth of issuances. The decline in corporate sukuk issuances was contributed mainly by a noticeable absence of issuers from the Gulf Cooperation Council (GCC). The sukuk volume in March saw heavy involvement of the sovereign and government related entities issuers in the primary market as collectively these two types of sukuks represented over 87% of total sukuks issued.

BLME, Europe's largest Islamic bank, has been selected to co-lead the Islamic Development Bank (IDB) US$1.5 billion five-year Sukuk. The bank's representative office in Dubai was appointed in to handle the issuance. DB Sukuk is the largest ever Islamic bond issued from the AAA rated supranational lender in 2014. It is also the largest Sukuk issuance BLME has been appointed to act as co-lead manager on to date. The IDB issued 16 Sukuk in London since 2005 which raised around US$7 billion. It has a US$ 313 million programme listed in Malaysia and has raised 700 million ringgit since 2008 via three Sukuk. BLME listed on NASDAQ Dubai in October 2013, and announced a strong performance for the full year on 3rdMarch 2014.

Caretaker President Moncef Marzouki this week received presidents and directors of Islamic banks of West Africa. The meeting discussed ways to strengthen the national economy, boost investment and find ways to finance small and medium enterprises in Tunisia (SMEs). The President of the Republic on Monday commended the signature of a strategic draft agreement between the Zitouna Bank and the Islamic Development Bank (IDB) to create a specialised joint institution in Islamic micro-finance that would allow both partners to expand to Africa. He insisted on the need to speed up legal reforms in the finance field to allow Tunisian banks to integrate in Africa and overcome challenges. The IDB will contribute to the Tunisian government's programmes to meet the challenges of employment, fight against poverty and regional development.

A group of Saudi Arabian lenders has rejected an invitation from Ahmad Hamad Algosaibi & Brothers Co. to attend a meeting next month to discuss their claims on $5.9 billion of debt. The banks have no interest in attending the meeting proposed, according to a letter to Algosaibi from a law firm representing the unnamed Saudi lenders. The letter, dated April 3, didn’t give a reason why the banks don’t want to attend. Algosaibi and billionaire Maan al-Sanea’s Saad Group missed payments on at least $15.7 billion of debt in 2009 in the Middle East’s biggest default, as the global financial crisis froze credit markets and asset prices slumped. The two family holding companies, which are related by marital ties, have been locked in legal disputes ever since.

Malaysia-based International Islamic Liquidity Management Corp (IILM) will reissue $860 million of its three-month Islamic bond next week, after expanding its issuance programme to $1.35 billion in January. The auction of the three-month sukuk, rated A-1 by Standard and Poor's, will be conducted on Apr. 17. In February, the IILM sold $490 million worth of three-month paper, designed to meet a shortage of highly liquid, investment-grade financial instruments which Islamic banks can trade to manage their short-term funding needs.

Britain could become the first truly global Islamic finance centre if the government sets its mind to attracting infrastructure investment, according to Gatehouse Bank’s chairman Fahed Faisal Boodai. He estimates the industry is worth $1.5 trillion, and the sector is growing at around 20 per cent per year. Chancellor George Osborne is raising £200m with a sharia-compliant bond, the bank alone expects to buy £30m to £40m of the sukuk, and predicts bids for the debt to run into the billions of pounds. However, one problem is finding investment opportunities which meet stringent sharia standards. More certainty is needed if the government wants to unlock Islamic investment into infrastructure on the grand scale needed.

In a statement to the Bahrain Bourse, Al Salam Bank-Bahrain noted the increase in its authorised share capital to BHD 250 million and in its issued and paid up share capital to BHD 214,093,075. The bank’s share capital has been increased as part of its acquisition of BMI Bank, approved by shareholders at EGM on 8 October 2013 and following the obtaining of the required regulatory approvals.

A mutual insurance scheme based on Islamic Sharia law has been launched to reduce the impact of extreme weather events on pastoral livelihoods in Kenya’s arid northern regions where perennial drought often decimates thousands of livestock. The Islamic Takaful insurance is boosting risk management. Those insured under the Tafakul scheme are compensated for the loss, or reduction in value, of their livestock based on an index formulated by the International Livestock Research Institute (ILRI), and according to information gathered by satellites to measure vegetation coverage and thus the severity of drought. Recently, some 101 livestock farmers received their first pay-out.

With Islamic financing growing significantly in Kenya over the last five years and now accounting for 2% of the country's total banking industry, it's not surprising that Standard Charted chose Kenya as the first African nation in which to launch its Sadiq suite of Islamic banking products. Trade Finance caught up with Wasim Saifi, Standard Chartered's global head of Islamic banking, to find out what Islamic trade products it has planned for Kenya and why the bank sees Africa as the new growth frontier for the $1 trillion plus Islamic finance market.

Qatar-based Islamic Holding Group reported a net profit of QR2.96bn for the first quarter of 2014, up 40 percent compared to QR2.11bn in the corresponding period in 2013. Dr Yousef Ahmed Al Neamah, Chairman and Managing Director of the group, said during a meeting of the board of directors that these positive results are an indicator of growth potential. He added that there was a sense of optimism, especially at the Qatar Exchange. The group seeks to discover new opportunities for investment, achieving better growth and adequate return for the shareholders.

Jaiz Bank has increased its investment portfolios by N7.5bn within the last two years. The investments represent an increase of 380 per cent from the N1.9bn in January 2012 to the current N9.4bn. In terms of profitability, the bank grew its total earnings by more than 750 per cent during the year. Jaiz has expanded its operation from just 3 branches to 13 branches since 2012. It plans to operate in every state capital of Nigeria before the fifth year of operation. In December, 2013, the bank submitted its application for a National Banking License to the Central Bank of Nigeria. Hopes are that this will come through before the end of the second quarter.

Baitul Mal Wa Tamwil (BMT) is a microfinance institution in Indonesia that is a shariah compliant. It aims to develop micro and small business enterprise for the poor and economically marginalized sector in the society. BMT is a small financing institution which operates using mixed concepts of "Baitul Maal" and "Baitul Tamwil" with its target focused on the small business sector. By this concept, BMT also acts as Zakah institutions (Amil). BMT has been in operation since 1995 under the supervision of Incubation Center of Small Business (PINBUK). Since its establishment in 1995, around three million customers have obtained micro-financing from BMTs in Indonesia. At present, the role of BMT as an Islamic microfinance institution has become increasingly important, particularly regarding poverty alleviation in Indonesia.

Morocco is set to give Islamic finance a second try, counting on closer regulation and a clearer legislative framework to resolve problems which plagued its first attempt in 2007. Morocco's parliament is considering a detailed bill that would regulate Islamic banks and issues of sukuk, and its passage - which could occur this year - is expected to prompt some Moroccan banks to establish dedicated sharia-compliant subsidiaries. Meanwhile, Morocco's central bank plans to set up a central sharia board to oversee the sector. Moroccan officials are also looking to develop Islamic finance in areas outside banking. Moreover, the ministry is studying the operations of real estate investment funds.

RAM Ratings said the Malaysian Islamic banking industry’s assets have almost doubled in the last five years, expanding to RM423bil as at end-February 2014 and accounting for 21% of the banking system’s assets. Gross financing continued to outpace deposits last year. In terms of asset quality, RAM said the the Islamic banking system’s gross impaired-financing (GIF) ratio stood low at 1.4% as at end-February 2014. RAM noted Islamic banks in Malaysia are well capitalised, with common-equity tier-1, tier-1 and total capital ratios of 12.5%, 12.5% and 14.7%, respectively, as at end-February 2014. The gradual derecognition of Basel II securities as qualifying capital, besides being an alternative source of long-term funding, will support the issuance of Basel III-compliant capital instruments for Islamic banks in Malaysia.

Murabaha Company inked a deal with Saudi-Kuwaiti Finance House (KFH-Saudi) to serve as its financial advisor, in order to plan and take steps towards the company’s goal to offer 30% of its shares for public offering. KFH-Saudi CEO Tarek Al-Rekheimi said that the bank will, according to this agreement, offer all financial consultations regarding the evaluation of the company, and the preparation of all documents, as per regulations. He went on to say that the bank works with several Saudi corporations to enlist them in the Saudi market during the coming period. He stressed that the increase in number of companies expected to be offered during the coming period, will play a significant role in reinforcing the Saudi bourse, not to mention opening commercial and financial channels for those companies, in order to diversify forms of financing.

Abu Dhabi Islamic Bank PJSC (ADIB) is seeking to bring a boom in Shariah-compliant lending to the expatriate population in the UAE. ADIB agreed to buy the conventional retail assets of Barclays Plc (BARC) in the United Arab Emirates for 650 million dirhams ($177 million). The deal is the second of its kind for ADIB, which bought a stake in Egypt’s National Bank of Development in 2007. ADIB has been a corporate-focused bank so having a larger retail footprint will be positive for balancing it’s loan book. Barclays’s U.A.E. customers will notice a difference during the transition, even while they won’t experience any disruption.

The EIIB-Rasmala has closed the second tranche of FWU Group’s US$100 million sukuk al-wakala programme. The second tranche of the programme has closed for US$40 million. The former is acting as the lead arranger and bookrunner for FWU’s sukuk al-wakala programme. The FWU sukuk has been assigned the investment grade credit rating BBB- by Fitch and is being issued in amortizing tranches, each with a term of five years. The first tranche of the programme previously closed for US$20 million in October 2013. Distributions are made quarterly to investors on a fully amortizing basis and the profit rate is 7% per annum. The sukuk will fund, in a fully Sharia’a-compliant manner, a set of retakaful transactions for one of FWU’s five main subsidiaries, Atlanticlux.

Abu Dhabi Islamic Bank (ADIB) is the latest lender after JPMorgan, Citi and Standard Chartered to expand business in Iraq as the oil-rich country boosts crude production and rebuilds its infrastructure. ADIB plans to open a branch in Basra before the end of the year after it opened a branch in Erbil in October. The lender’s expansion in Iraq is part of a larger strategy to grow its international network, which includes branches in the United Kingdom, Egypt, Qatar, Saudi Arabia and Sudan. Iraq’s economy is expected to grow by 6.3 per cent this year, up from 3.7 per cent growth last year. The country raised its crude oil production by 530,000 barrels per day (bpd) last month to 3.6 million bpd. However, Iraq remains a fragile state and security risks can never be understated.

UK Universities Minister David Willetts has launched a 12-week consultation period on Shari’ah compliant student loans with the aim of getting more Muslim students into higher education in the UK. The Department for Business, Innovation and Skills (BIS) has been developing a model alternative finance product which would be Shari’ah-compliant and could potentially be offered alongside traditional loans. This model finance product has been developed by experts in Sharia-compliant finance and has received preliminary approval from the Islamic Bank of Britain’s Sharia supervisory committee. The consultation seeks to determine whether the alternative finance model identified would be acceptable to anyone who might be deterred from the conventional system.