IslamicFinance.de

There are several sukuk issuances in the pipeline, among others the following: The Malaysian government will raise 2.6 billion ringgit ($797 million) via Islamic bonds on April 7 to finance new and existing housing loans held by government servants. The Tunisian government plans to issue sukuk worth "a few hundred million dollars" this year. Maybank Islamic will set up a 10 billion ringgit subordinated sukuk programme. Bahrain-based Gulf Finance House plans to issue convertible sukuk worth up to $500 million to restructure liabilities, develop projects and fund possible acquisitions, subject to shareholder and regulatory approval. A proposed bill in Luxembourg would allow securitisation of three properties for a sovereign sukuk issue worth 200 million euros ($275 million).

Etiqa Takaful Bhd, Malaysia's largest Islamic insurance provider and a unit of Malayan Banking Bhd, will issue a sukuk to raise 300 million Malaysian ringgit ($91.39 million). Etiqa is supported by a strong liquidity position although its family takaful business has seen poor growth due to unattractive pricing and a limited portfolio.

Researchers in Kenya have developed a pioneering insurance policy for nomadic Muslim livestock herders, which has now delivered its first payout of approximately $5,800 to 101 farmers to compensate them for drought losses. The policy, which was purchased by about 4,000 pastoralists in Northern Kenya, was developed by the International Livestock Research Institute and commercially delivered by Takaful Insurance of Africa. Since the farmers usually habitat isolated areas, index-based insurance works better than traditional insurance. For Takaful Insurance of Africa, the project is a leap of faith, as they are not currently making a profit. However, hopes are the project will eventually be self-sustaining.

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. In its current form, the proposed legislation appears to address the tax issue well. It provides for the use of special purpose vehicles (SPVs), while transfers of real estate between sukuk originators and SPVs would not face double taxation.

Al Baraka Bank Pakistan Ltd is the lead advisor and arranger of Rs 3 billion first Musharaka based Islamic transaction to Zaver Petroleum Corporation Limited. The signing ceremony took place in Islamabad. Present at the occasion were Saddruddin Hashwani, Chairman Hashoo Group, CEO Al Baraka Pakistan, Shafqaat Ahmed and representatives of the Zaver Group, Al Baraka and member banks of the consortium; United Bank, Askari Bank, Bank of Punjab, Dubai Islamic Bank and Burj Bank. This is Al Baraka's first step in providing value added services to major players in the oil and gas sector and more such transactions are expected in the future.

Statistical, Economic and Social Research & Training Centre for Islamic Countries (SESRIC) – OIC and AlHuda Centre of Islamic Banking and Economics (CIBE) have signed a Memorandum of Understanding (MoU) to provide trainings and Capacity Building services to the central banks of 57 member countries of the Organization of Islamic Conference (OIC). The main purpose of the initiative is to mould the expertise, scholastic ideas and international best practices according to international standards. The MoU was signed by Muhammad Zubair Mughal, Chief Executive Officer, AlHuda CIBE and Mr. Mehmet Fatih Serenli, Director, Training and Technical Cooperation, SESRIC - OIC. Muhammad Zubair Mughal, said that this relation will be extended to Islamic Microfinance, Halal tourism and other pertinent fields. Find more information in the attached file.

The loan book of Saudi banks is expected to grow at pace of 12% in 2014. The increased proportion of younger population in Saudi Arabia can result in demand for personal financing to grow robustly. The UAE’s banking sector indicates strong loan growth led by retail and consumer banking and improved profitability. In Oman, lending slowed in 2013, but is expected to improve in 2014 and can even reach 10%. Kuwait bank lending is expected to pick up in 2014 after investment firms cut debt and government implements projects. In Bahrain further consolidation is expected this year after a spree of tie-ups in 2013. Qatar’s banking system remains profitable. The Qatar Central Bank has also come out with guidelines for implementing capital adequacy and liquidity under Basel III in 2014 and Qatari banks will adhere to it.

Islamic banking in Oman is growing at a slower pace than expected and requires new legislation and stronger public awareness of the industry to flourish, Bank Nizwa CEO Jamil El Jaroudi said. He added that there is also a skills shortage in the Omani market. The legal and regulatory framework in Oman supports the launch of the Islamic banking industry but further development of legislature is needed for the sector to mature. Bank Nizwa, Oman's first independent Islamic bank, started operations in January 2013 and raised OMR 60 million in an initial public offering of 40% of its shares in May 2013. Jaroudi said the bank had no plans to issue new sukuk, or Islamic bonds. He said the bank planned to launch Internet banking services and other shariah-compliant products.

Noor Bank on Monday reported a net profit of Dh255 million for 2013, up from Dh76 million for the year ended 2012. Last year, Noor Bank’s total assets rose 29 per cent to Dh23.2 billion, compared with Dh18 billion, at the beginning of the year. While the total customer financing increased by 32 per cent to Dh14.3 billion, banks’ customer deposits increased by 33 per cent to Dh18.6 billion in 2013. The bank is strongly capitalised with a capital adequacy ratio of 17.6 per cent and has a coverage ratio of almost 100 per cent. With a strong wholesale and retail deposit base, the bank is abundantly liquid. In 2013, Noor Bank launched its trade and SME brand, Noor Trade, and more than doubled financing to SMEs.

Ahmad Hamad Algosaibi & Brothers Co. invited creditors including BNP Paribas SA (BNP) and Standard Chartered Plc to discuss claims on $5.9 billion of debt as it seeks to recover from the Middle East’s biggest default. The Saudi Arabian company will outline proposals aimed at achieving a comprehensive settlement with more than 70 creditors at a May 7 meeting in Dubai. The company didn’t give further details on the proposed terms. Banks rejected an original debt restructuring proposal from Algosaibi four years ago. Algosaibi hired Simon Charlton, former head of forensic services in the Middle East for Deloitte LLP, as chief restructuring officer and Ben Jones, also from Deloitte, as chief financial officer last June to restructure its operations.

The Bank of England is studying ways to increase the number of Shariah-compliant assets that Islamic financial institutions can use in their liquidity buffers. Currently, sukuk issued by the AAA-rated Islamic Development Bank are the only assets that meet the central bank’s criteria for use in the liquidity buffers of the 22 Islamic financial institutions operating in Britain. In addition to reducing risks, expanding the eligible list could improve growth prospects for the industry and remove a potential entry barrier to the sector. The Bank of England’s proposal is in line with the approach of Basel III global banking regulations, which allow sukuk issued by high-rated sovereigns to be included in the liquid assets buffer without a haircut. Sukuk issued by sovereigns with lower credit ratings and other non-financial issuers could also be eligible, subject to haircuts and caps.

Sharia-compliant structures could help revive the securitisation market tarnished by the global financial crisis, providing a fresh source of funds for companies. Because Islamic finance shuns outright speculation it could offer the benefits of securitisation minus the weaknesses that led to the sub-prime mortgage crisis. While still at an early stage of development, the features of Islamic securitisation could help re-open a market that can fund a wide range of activities, including mortgages, car loans and working capital for businesses. Despite the sector's small size, several deals have proven the concept works, although existing legal and taxation issues have hindered greater transaction volume.

Qatar Islamic Bank (QIB) has entered into exclusive discussions to acquire a stake in Turkey’s Bank Asya. QIB is seeking to finalise the transaction within the next few months, subject to obtaining the required regulatory approvals. The Qatari bank did not say what stake it might buy or disclose any other details. Bank Asya had said earlier it had started talks on a strategic partnership with QIB and planned to complete the process soon. It gave no further details. The Islamic bank has been in focus since state-owned companies and institutional depositors have reportedly withdrawn 4 billion lira ($1.8 billion), or some 20 percent of the bank’s total deposits. Bank Asya said it had weathered the mass deposit withdrawals and was not at risk.

Prof. Abu Nasser Muhammad Abduz Zaher, Chairman, Board of Directors of Islami Bank Bangladesh Limited was re- elected as Chairman of Islamic Banks Consultative Forum (IBCF) while Md. Nazrul Islam Mazumder, Chairman of EXIM Bank and Badiur Rahman, Chairman of Al-Arafah Islami Bank were re- elected as Vice Chairmen of the Forum. The election for the year 2014 of IBCF was held recently at the Meeting Room of BAB's Office in the city.

The Islamic Development Bank (IDB) has approved $515.6 million to fund several socioeconomic development projects. The funds consist of $490 million for the energy sector, divided into $220 million for a power plant project in Pakistan, $90 million for a similar project in Morocco, $83.4 million in Senegal, $60 million for power plant expansion in Mauritania, and $36 million for rural electrification project phase II in Cameroon. The education sector received $17.8 million consisting of $7.5 million for a project in Burkina Faso, and $10.27 million for Suriname. In the transport sector, the Board approved a $6 million technical assistance loan to the Republic of Niger. IDBs Waqf Fund had approved $780,000 as a grant for Muslim communities in non-member countries for educational projects in Bosnia and Herzegovina, Burundi, India and Malawi.

The Council of the Islamic Financial Services Board (IFSB) has resolved to admit Bank of Korea, the Central Bank of the Republic of Korea into the IFSB membership as an Associate Member. The 24th meeting of the IFSB Council was held on 27 March 2014 in Brunei Darussalam. It was chaired by the Managing Director, AMBD, H.E. Dato Mohd Rosli Sabtu and attended by 10 central bank governors and heads of regulatory and supervisory authorities, as well as 12 senior representatives from among the Council and Full members of the IFSB, representing 17 countries. The meeting was also attended by the President of the Islamic Development Bank.

The Council of the Islamic Financial Services Board (IFSB) has resolved to approve the adoption of a new Standard in its 24th Meeting in Brunei Darussalam on 27 March 2014. The document is IFSB-16: Revised Guidance on Key Elements in the Supervisory Review Process of Institutions Offering Islamic Financial Services (Excluding Islamic Insurance (Tak?ful) Institutions and Islamic Collective Investment Schemes). The overall aim of the revised Standard is to update the earlier standard on this subject (IFSB-5). IFSB-16, which is broadly analogous to Pillar 2 of the Basel Accords, is about the supervisory process and how regulatory and supervisory authorities should supervise some specific areas pertinent to the IIFS. The softcopy of IFSB-16 will be available on the IFSB website, www.ifsb.org in due course.

Thomson Reuters has released the Islamic Social Finance Report 2014 in collaboration with the Islamic Research and Training Institute (IRTI). The report is the first of its kind study covering Islamic social finance across countries in South and Southeast Asia with sizeable Muslim populations including Indonesia, India, Pakistan, Bangladesh, Malaysia, Singapore and Brunei Darussalam. According to the report, Islamic social funds could potentially meet resource shortfalls to alleviate widespread poverty in those countries. The potential of Islamic social funds remains unrealized as actual Zakah and returns of Awqaf are not fully utilized in most countries. Additionally, there is no Islamic microfinance industry in most countries, which further diminishes the optimal potential of Islamic social finance.

The Securities Commission Malaysia (SC) and the Oxford Centre for Islamic Studies (OCIS) co-hosted the 5th annual Roundtable on Islamic Finance in Kuala Lumpur on March 22 and 23. The roundtable, themed ’Harnessing Waqf Into a Bankable Social Financing and Investment Asset Class’ discussed the development of waqf and how it can contribute towards broadening the Islamic finance industry globally. Industry practitioners and scholars from around the world gathered to discuss challenges and potential of waqf in the philanthropic spheres, including issues of legislation, governance and professionalism, and capital. The global effort to harness Waqf into a bankable social financing and investment asset class is also in line with the SC’s strategy to identify new growth segments to further internationalise Malaysia.

Costs of issuing Islamic bonds in Asia are still significantly higher than the costs of issuing conventional bonds, a study by the Asian Development Bank found. In Indonesia, profit rates for sukuk issued by the government are on average 86 basis points higher than comparable conventional government bonds. In Malaysia profit rates for sukuk are on average 8 bps higher. However, lack of familiarity with complex sukuk structures can translate into higher advisory fees for prospective issuers, while investors demand higher yields because of limited trading activity in secondary markets for sukuk. The average gap between issuance costs for sukuk and conventional bonds in the Gulf is believed to be very small or non-existent - and in some cases, it has even proved cheaper to issue sukuk.