IslamicFinance.de

The Malaysia-based International Islamic Liquidity Management Corp (IILM) will issue a $490 million 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 Feb. 25. Last month, the IILM sold $860 million worth of three-month paper, designed to meet a shortage of highly liquid, investment-grade financial instruments for the short-term funding needs of Islamic banks. Since the programme's launch, primary dealers have held on to the IILM instruments after auction and there has been little if any secondary market trade in them.

The Turkish Treasury said on Monday it will issue a lira-denominated Islamic bond, or sukuk, on Feb 19. In order to diversify the borrowing instruments, broaden the investor base and increase the domestic savings, Turkish lira-denominated Lease Certificates will be issued. The Treasury previously said it would issue a sukuk worth 1.5 billion lira in February.
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An independent legal entity should oversee the way in which Islamic financial institutions certify they are following sharia principles, Kuwait’s central bank governor Mohammad Al-Hashel said. Currently, boards of sharia scholars at financial institutions rule on whether activities and products follow religious principles. They are also involved in audits that determine whether the institutions are operating in a compliant manner. At the same time, the scholars are on the payroll of the Islamic banks which they vet, an arrangement contrary to good governance. The growing role of Islamic finance in some national economies is now prompting government watchdogs to pay more attention to the sector. The creation of an independent legal body could see scholars independently reviewing the work of their peers. Establishing the body would involve challenges but it could take its cues from the conventional financial auditing profession.

Brunei will introduce new guidelines for its takaful sector by June, in order to standardise the way agents are managed by firms. The guidelines will regulate commission rates payable to agents and the qualifications required for them to sell takaful products, Osman Jair, chairman of industry body Brunei Insurance & Takaful Association (BITA) said. An inter-company agreement will be signed, so companies will be better disciplined and the correct treatment of agents ensured. The impending guidelines are being reviewed by industry consultants and Autoriti Monetari Brunei Darussalam (AMBD), the country's central bank.

The Islamic Corporation for the Development of the Private Sector (ICD) has celebrated the completion of the First Cohort of its Islamic Finance Talent Development Program (IFTDP). The IFTDP has been designed for mid-career professionals who possess prodigious leadership competencies. Its sole objective is to build up a pool of highly talented Islamic finance executives who are capable of leading the industry in the future. While the IFTDP is the latest addition by ICD to develop world-class Islamic finance executives, the Young Professional Program (YPP) has been the preeminent program preparing outstanding young graduates to become global development leaders. Both programs are based on the belief that attracting and retaining talent is the most powerful factor behind the success and excellence of organizations.

Indonesia has a history of high inflation and a dependence on foreign capital. The Indonesian Rupiah was Asia’s worst performing emerging market currency in 2013. But Indonesia is also the world’s most populous Muslim nation. In order to reduce its reliance on other economies, the country’s religious ministry has built up $5.4 billion in reserves from deposits made by the millions of its citizens seeking to make the pilgrimage, or Hajj, to Saudi Arabia each year. Last year, the Hajj department began to invest in Sharia compliant bonds issued by the Indonesian government. Like its neighbor Malaysia, the country is now setting up a Hajj financial management agency, which could realistically play a key role in developing the country’s Islamic finance markets and reduce its reliance on offshore funds.

DIFC-based investment bank Alpen Capital has advised Dubai Investment Park Development Company LLC (DIPDC) on its $300 million debut Sukuk offering. Alpen Capital also advised DIPDC on its Ratings ahead of the Sukuk offering. The landmark transaction is structured as a Wakala Sukuk and issued through a special purpose vehicle (DIP Sukuk Limited). The issue was oversubscribed 13 times. DIPDC was able to price the Sukuk with a yield of 4.291 per cent (equivalent to a spread of 265bps over five-year USD Mid-Swaps) on the back of an order book that peaked at over $4 billion. Al Hilal Bank, Citigroup, Dubai Islamic Bank PJSC and Emirates NBD Capital acted as Joint Lead Managers and Joint Bookrunners.

Islamic finance could develop in North Africa, according to a report titled "Islamic Finance Could Make Inroads Into North Africa" published by Standard & Poor's Ratings Services. Large current account deficits and declining conventional financing sources have prompted governments from Arab spring countries to look at opportunities offered by Islamic finance. Moreover, public awareness is increasing. Egypt, Tunisia, and Morocco have recently taken steps to implement policies to support the development of Islamic finance. Nevertheless, Islamic finance in this region has yet to demonstrate its economic added value, through creating access to a new class of investors or by offering Sharia-compliant products at costs comparable with their conventional counterparts.

Italy is seeking trade and investment with wealthy Gulf Arab states as a way to grow out of its debt problems. Gulf investors have already shown considerable interest in Italy's luxury good firms; in 2012, for example, Italian fashion brand Valentino was bought by Qatar's royal family. Moreover, Kuwait's sovereign wealth fund announced this month that it would invest 500 million euros ($685 million) in Italian companies in coordination with the Italian government's own strategic investment fund. Italy made a similar deal with Qatar last year. These activities should include a review of existing regulations. Currently, however, only broad discussions are taking place with Italian policy makers and no specific agenda is in place. Italian companies have explored Islamic financing options in the past but did not do deals, partly because of a lack of regulatory support in Italy.

Islamic Development Bank (IDB) has picked seven banks to arrange meetings with fixed income investors ahead of a potential sukuk issue. The banks are CIMB, Commerzbank, First Gulf Bank, HSBC, Natixis, National Bank of Abu Dhabi and Standard Chartered. IDB will hold roadshows in the Middle East and Asia commencing February 23, with a dollar-denominated Islamic bond to follow subject to market conditions. The AAA-rated bank last sold a sukuk in May, when it priced a $1 billion five-year Islamic bond with a profit rate of 1.535 per cent.

The Islamic Banking and Finance Society (IBFS) was inaugurated at Oxford Union Debating Chamber last Wednesday. The new society aims at acting as a platform for the Islamic finance as well as creating relationships between professionals in Islamic banking and finance students at Oxford. Financial experts have debated aspects of Islamic finance and banking, offering future economists a platform to better understand the industry. Presentations from Islamic finance Experts have also highlighted the ethical spirit of Islamic finance. The United Kingdom is one of the leading countries in the European Union to have Islamic banks. It is also developing its takaful market for Islamic insurance. Moreover, the UK also has a strong foothold in developing products such as commodity murabaha and Islamic retail services.

American International Group Inc. is plotting its entry into Malaysia’s Islamic insurance market, lured by the country’s economic expansion and an industry that has grown more than fivefold in less than a decade. The insurer will start a Shariah-compliant reinsurance business by June and may eventually offer a fuller range of services, Antony Lee, chief executive officer at AIG’s Malaysian unit, said. In line with the continuing expansion of the takaful business, the demand for retakaful is expected to expand between 15 percent and 20 percent on an annual basis. However, a key challenge for retakaful companies is their limited ability to compete with their larger non-Islamic counterparts for business that requires a bigger balance sheet.

Bank Islam Malaysia (Bank Islam) plans to open 141 branches nationwide by year-end. Managing director Datuk Seri Zukri Samat said the new branches will be opened at Jalan Chan Sow Lin in Kuala Lumpur; Bandar Enstek in Negeri Sembilan, Bukit Ibai in Trengganu, Sri Damansara, Puchong and in Johor. Nine more branches are planned for 2015. In addition to the bank's branch expansion, Zukri said Bank Islam has also enhanced its distribution channels by establishing five urban business centres, improve on internet banking and mobile banking services as well as provide more than 1,200 self-service terminals nationwide. Due to the new set of terms and conditions introduced by Bank Negara on loans, the bank suffered a 10 per cent decline in assets and loan performance.

Sultan Choudhury, managing director of Islamic Bank of Britain, discussed findings from a poll of more than 300 investors by IBB, which showed one-third of respondents were non-Muslim. Some 66 per cent of those surveyed believed sharia finance was appropriate in a modern western society. A similar number (60 per cent) said sharia finance was relevant to all faiths, while more than half (58 per cent) said they considered Islamic finance to be an ethical system. IBB also reported 81 per cent of its customers said they were likely to use sharia-compliant finance again. This first piece of research will shape how the retail market for Islamic finance evolves, he added.

Al Baraka Bank Syria and Arabia Engineering & Contracting (AEC) have signed an agreement for the construction of the bank’s headquarters in Damascus. The agreement was signed by Al Baraka Bank Syria CEO Mr Mohammed Halabi , and Nizar Obaid, CEO of AEC. The bank said the nine floor-building will be the first of its kind in Syria; built on eco-friendly’ principles. Al Baraka Bank Syria’s latest results show assets rising by more than 68 per cent in Q3 2013 to a record SYP 71.219 billion with profits of SYP 3.683 billion.

Bahrain-based Islamic lender Al Baraka expects at least 15 percent growth in net profit this year as its business recovers across a region hit by the Arab Spring unrest. The growth will also be fuelled by the company's entry into the Moroccan and Libyan markets and expansion in Tunisia. In Syria, where the bank has 10 branches, it has not been able to expand operations since the 2011 start of the civil war. The bank's fast growing 30-branch Algerian subsidiary has now captured nearly 5 percent of the country's foreign trade business and plans are under way for further expansion. The lender hopes to expand its global branch network from a current 480 to around 560 branches by end of 2014, with half of the 84 new branches opened in Turkey and Pakistan. The focus of expansion remains fast growth areas in the Middle East and Asia such as Pakistan and Indonesia because the Gulf is overbanked.

Since Shariah itself is very wide, selectiveness is needed so the most relevant aspect of Shariah is being exposed to the students of Islamic finance. The starting point has to be “Usul Al- Fiqh” which embodies the study of the sources of Islamic law and the methodology for its development. The second most important aspect of Shariah that is relevant to Islamic finance has to be laws of contracts. While these two aspects of Shariah form the main body of Shariah knowledge in Islamic finance, it is imperative for the students to appreciate the various Shariah issues that are begining to emerge in the market. Then there is the technical knowledge, which covers the basic theories of finance itself as well as banking, insurance, capital market and wealth management.

Luxembourg's parliament could pass a bill as soon as two months from now to facilitate its first issue of sovereign sukuk, though an upcoming budget vote may delay approval for five months. Last month, the Luxembourg government presented a bill to parliament to allow the securitisation of assets for a proposed sukuk worth 200 million euros ($275 million), part of efforts to boost the tiny state's Islamic finance credentials. Lawmakers are now studying the bill's conformity to existing laws, while the actual structure and issuance of the sukuk depends on the finance ministry. Legal filings show Luxembourg's sukuk would be denominated in euros and listed on an exchange, but such details are not final.

The Inauguration of the Islamic Banking and Finance Society (IBFS) at the Oxford Union Debating Chamber on February 12 featured presentations by leading figures from the Islamic finance world. Keynote speakers included Salah Jaidah, vice chairman of Mena at Deutsche Bank and chief country officer for Deutsche Bank Qatar; Baroness Warsi, Senior Minister of State and Minister for Faith and Communities, and the Ministerial lead on Islamic Finance; Nigel Denison, executive director of Bank of London and the Middle East (BLME), and Azeemeh Zaheer, vice president of Gatehouse Bank and former vice consul, US oil & gas sector head for the British Consulate General. The IBFS hopes to act as a platform for leading professionals in Islamic banking to create relationships with students at Oxford interested in pursuing a career in finance.

Our employer of the week has several vacancies to offer job seekers out there. Gulf African Bank which opened its doors in the country in 2008 is looking for customer service officers, product development, shariah compliance officers and tellers. Swaleh Sharif who is the human resource director says the deadline to submit your applications is in two months’ time.