IslamicFinance.de

AmIslamic Bank has obtained approval from the Securities Commission Malaysia to establish a subordinated sukuk murabaha programme of up to 3 billion ringgit (US$903.60 million), which would represent the first Basel III-compliant sukuk in Malaysia. AmIslamic is given the flexibility to issue subordinated sukuk murabaha during the availability period of the programme based on the bank's funding requirements. The AmIslamic programme has a tenor of up to 30 years from the date of the first issuance of the subordinated sukuk murabaha. Each tranche to be issued shall have a tenor of at least three years, subject to their maturing on or before the expiry of the programme. AmIslamic's sukuk murabaha is rated AA3 by RAM.

The global financial crisis as well as the political unease over the last few years have led to weaker performances in Bahrain's banking sector, particularly wholesale banks. Along with banks in other markets, Bahrain-based banks have de-risked their balance sheets, concentrating on more stable sources of funding and reducing their exposure to riskier sectors. Besides, there have been a number of bank mergers in Bahrain recently. However, Bahrain has a more limited shock- absorption capacity compared to other GCC countries, like a budget highly sensitive to oil prices, a weak non-oil revenue base and modest fiscal reserves. Moreover, the political situation remains uneasy. As with other GCC institutions, the stronger Bahrain-based banks are widening their reach in other markets.

The Shariah-compliant sector has grown to $1.6 trillion in assets over the past three decades, which attracts Muslim and non-Muslim financiers from around the globe who noticed the growing investor pool. Several countries have already made forays into the sector, like the UK and several African nations. It’s generally understood that money will be used to finance projects that are socially responsible. That way, even if someone purchased a sovereign sukuk, they know the money will be spent on activities that promote social good. However, many companies don’t understand how to access some of the Shariah-compliant capital, how to structure sukuk or how it affects costs.

Muslim borrowers will be allowed to use Shariah-compliant Home Purchase Plans (HPP) under a change to the Government’s Help to Buy scheme aimed at extending the range of home buyers able to access taxpayer-backed funding. HPPs split ownership of a property between the borrower and their bank, a financing arrangement that accords with Islamic law that prevents muslims from using conventional mortgages that see borrowers paying interest to a lender. Sajid Javid, Financial Secretary to the Treasury, launched the updated scheme on February 11 at an Islamic finance conference in London.

US-based Islamic stock fund manager Saturna Capital Corp is selling its first plan in Malaysia, betting that Southeast Asian equities will weather a global emerging-market rout. The company, which has US$4.1 billion (RM13.6 billion) of assets under management globally, wants to raise RM100 million in the Malaysian fund's first year. The vehicle will invest in syariah-compliant companies in the region, focusing on building-material, healthcare and consumer stocks. The new ringgit-denominated fund will target local and overseas high net worth individuals and institutional investors. The outlook for Islamic fund management in Malaysia is still good, after a constant growth at an average rate of 25 per cent a year since 2009.

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 has said. Currently, boards of Sharia scholars at financial institutions rule on whether activities and products follow religious principles and they are also involved in audits. 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. Clear and specific professional frameworks for the duties and responsibilities of Sharia authorities and their audit function are needed.

After outsourcing its information technology (IT) infrastructure for about five years, Syarikat Takaful Malaysia has decided to bring it back inhouse. The company has adopted Microsoft System Center 2012 to manage its IT infrastructure and end-user computing. It said that the decision to go inhouse has shown immediate benefits, and it has been experiencing a 40 per cent improvement in response time and 27 per cent in cost reduction. Takaful’s adoption of Microsoft System Center was mainly helped by system integrator Redynamics Asia System Management. The cost savings the company achieved from going inhouse can now be used to help the company expand into other areas.

Panin Bank Syariah, the Islamic banking unit of Bank Panin Indonesia, plans to provide prospective hajj saving service for hajj and umrah. Managing Director of Panin Bank Syariah, Deny Hendrawati, said that company targeted hajj and umrah fund between 1 trillion to 1.5 trillion IDR from four thousand to five thousand customers. Panin Bank Syariah also develops its e-banking service. E-banking service is connected online to the Integrated Hajj Computerized System (Siskohat) at the Ministry of Religious Affairs. Hence, the customer's name who meets the minium saving will be automatically enlisted as a prospective hajj. According to central bank's new rule, Bank Panin Syariah can use its 500 parents' networks across Indonesia.

Pakistani Meezan Bank has launched Meezan Kafalah, a Shariah-compliant alternative to Bancassurance, in collaboration with takaful firm Pak Qatar Family Takaful Limited (PQFTL). Meezan Kafalah is a savings product through which customers can save money for their future plans. In addition, the customers also get Free Takaful coverage through PQFTL that in the case of the customer’s death during the savings period, the Takaful Partner will provide the funds needed for completing the savings. This new product, thus, offers a combination of saving, investment and protection. A differentiating feature of Meezan Kafalah is the accumulation of 100% cash value from day one of the investment with flexibility and ease of exit from the plan without any penalty or charges.

Kuwait's takaful firms are still struggling in a crowded market that faces cut-throat competition. This has led to stagnant growth and persistent losses for takaful firms operating in Kuwait, raising doubts about the sector's long-term viability. In a market with 32 insurers, takaful firms say they are at a disadvantage to their conventional peers which have built solid customer bases and amassed large financial surpluses. Kuwaiti takaful firms posted a combined 47.4 million dinars ($167.7 million) in premiums in 2012, an 18.7 percent share of the total. However, many companies in the sector have failed to post consistent profits. Furthermore, the takaful sector lacks a dedicated supervisory body, leaving an opening for negative competitive practices. In the meantime, looking abroad may be the only good option for the Kuwaiti takaful firms which can afford it.

The Shariah-compliant sector has grown to $1.6 trillion in assets over the past three decades. That's why Muslim and non-Muslim financiers from around the globe have noticed the growing investor pool with enough cash to make a serious impact. In Africa, a handful of countries have already laid the groundwork to enable Islamic banking, and some of London’s newest landmarks were built thanks to Shariah-compliant bonds. Other countries have also made forays into the sector. However, there's a general lack of understanding of what Shariah entails, particularly relative to the financial world. Given the fact that a large proportion of the populations in developing countries in the Middle East, South Asia and Africa will be looking for Shariah-friendly ways to finance their projects, the sector is likely to continue its growth.

State-owned Islamic Bank of Thailand made an unaudited profit of 2.7 billion baht ($82.4 million) last year, compared to a loss of 13.25 billion baht a year earlier. Non-performing loans were cut by more than 20 billion baht last year, with about 27 billion baht of NPLs left on its balance sheet. Management now aims to increase capital levels to comply with regulatory requirements. The bank faced several problems in 2013 which affected its image and clients' confidence, leading to a liquidity crisis. The bank, rated BBB- by Fitch, now plans to increase loans by 20 billion baht, focusing on small and medium-sized businesses and retail clients, while growing deposits by about 25 billion baht in 2014. It maintains plans to issue sukuk this year to support expansion plans.

Bank Islam Malaysia expects a 20% year-on-year growth for its financing assets this year led by its retail financing business with demand for individual and housing credit. Bank Islam will also focuse on growing its fee-based income which had been very encouraging in the recent period. Cost is a major concern for banks. There has been some softening in loan demand. Bank Islam has originally been concentrating more on owner-occupied houses rather than speculation-based buying. The bank is planning to open at least five new branches in Malaysia by the end of this year with the first one being in Kelantan. Currently, the bank has 133 branches and a total retail deposit of about RM8 billion.

Abu Dhabi Islamic Bank has reported a net profit of Dh1.45 billion for 2013, up 20.7 per cent compared to Dh1.20 billion in 2012. The profit for the fourth quarter of 2013 increased by 41.4 per cent to Dh343.3 million. The Board of Directors recommended the distribution of 30.66 per cent cash dividends and 26.87 per cent bonus shares for 2013. Total assets have passed an important milestone and are now Dh103.2 billion, increasing by 19.8 per cent in 2013. Moreover, ADIB maintained its position as one of the most liquid banks in the UAE. ADIB Securities increased net profit for 2013 by 416.6 per cent to Dh29.7 million. With regard to Burooj, the Group’s real estate investment subsidiary, there was a reduction of commitments by a net Dh775 million vs 2012.

NCB Capital has joined hands with Jeddah-based SEDCO Development Company to launch the AlAhli SEDCO Residential Development Fund, a public close-end Shariah-compliant investment opportunity. The fund provides investors with capital growth by purchasing land plots in Jeddah for development, construction and sale of residential apartments targeting the middle income segment of the population. Minimum subscription is SR50,000 and the fund aims to have an internal rate of return of 10 percent per year. The new fund has been created to address the shortage of reasonably affordable residential accommodation for middle and upper income home buyers.

Islamic Bank of Britain (IBB) has revealed findings from the first national survey to look into British consumers' understanding of, and attitudes towards Islamic finance. The survey was conducted among 300 British Muslim and non-Muslim consumers by independent research company 2Europe. Around two thirds of those surveyed felt that Sharia finance is appropriate in a modern western society and relevant to all faiths. 58% considered Islamic finance to be an ethical system of finance and one which considers the impact of its activities on society. Moreover, 81% of IBB 's customers are likely to use Sharia compliant finance again. The survey shows that there is strong potential for further growth of Islamic finance.

Last November, Kenyan president Uhuru Kenyatta attended the third Arab-Africa Summit in Kuwait. The visit and subsequent bilateral discussions were largely geared at establishing and strengthening joint financing mechanisms for capital intensive infrastructural projects through strong economic ties. During the visit, the Treasury realised Kenya was a member of the Islamic Development Bank which could help the country to tap more funds and become a highly industrializing, middle-income economy in the next 16 years. While over short term the country is focused on tapping into conventional financing streams from the dominantly Islamic Arab countries, it is angling herself to become the East and Central African hub for Islamic finance and banking over medium to long term period.

National Commercial Bank has mandated its own banking arm, NCB Capital, as well as that of Gulf International Bank and the Saudi Arabian units of HSBC and JP Morgan to arrange a local currency sukuk. The sukuk will enhance the bank's Tier 2 - or supplementary - capital and will have a ten-year lifespan with an option of the bank redeeming the instrument after five years. The size of the issue has yet to be determined. NCB's chairman was quoted in October as saying the bank was planning to issue a capital-boosting sukuk worth up to 4 billion riyals ($1.07 billion).

According to Grant Felgenhauer, a portfolio manager at Euphrates Iraq Fund, the opportunities offered by Iraqi equities overshadow anything else in the world today. Felgenhauer returned 28 percent last year with bets on Iraqi shares such as Bank of Baghdad, compared with a 9.5 percent decline for Iraq’s ISX General Index. That helped make New York-based Euphrates the fourth-best performing emerging-market fund managing more than $50 million in 2013. Iraq is drawing investors from specialized hedge funds to global banks including Citigroup and Standard Chartered as the oil-rich nation rebuilds 11 years after the U.S.-led invasion. The economy will expand 6.3 percent this year and crude production is estimated to rise to 9 million barrels a day by 2020.

This month, Oman's insurer Al Madina Takaful converted itself from a conventional insurer to a takaful company. It changed its conventional insurance clients to takaful policies after a customer education process, reportedly without client exits or other problems. In the next two years, the firm plans to add up to seven new branches to its network of three, and distribute products via Islamic banks, a practice known as bancatakaful. Two new firms could soon follow in Al Madina's footsteps: Takaful Oman Insurance and Oman United Insurance. However, their entry could crowd the market further and add to pressure on profitability. The Capital Market Authority (CMA) has yet to publish its final rules on takaful, while an insurance law is still in the draft stage.