IslamicFinance.de

Takaful is set to push up its annual growth from existing around 25 percent to stiffen competition with the conventional industry, as public trust is pouring into the Islamic insurance rapidly. There is, however, need to create mass awareness about the industry and its authenticity to increase the general public confidence, according to Head of Marketing Pak-Qatar Takaful Group, Syed Adnan Hasan. He said Takaful is expanding its client base as corporate sector, which is attaining its bigger share. However, there are some challenges the Shariah compliant insurance is facing to increase public response and dispel religious misunderstanding of insurance industry. Religious understanding about the Takaful among the public could help pave way for the industry's penetration. Takaful and conventional insurance practically achieves the same purpose but by starkly different means and that is the fundamental difference between the two. People still associate the feelings they have for insurance with Takaful and that is rather unfortunate.

New rules to rein in credit card debt in Turkey will force the country's banks to set aside more funds to cover non-performing loans, cutting 2 billion lira ($1.03 billion) off their annual profits. The rules obliging credit card holders to repay more of their debts each month were announced weeks after Prime Minister Tayyip Erdogan urged Turks not to use credit cards, accusing banks of locking people into poverty with excessive fees. The measures announced on Friday by Turkey's banking watchdog, the BDDK, will make it harder for consumers to pile up more credit card debt than they can afford. The government also wants to boost personal savings and reduce household spending on imported consumer goods that have bloated Turkey's current account deficit. The effect in the medium-term is that many consumers with existing debts will struggle to make the higher repayments.

Inflated valuations and a reluctance to relinquish control are preventing smaller insurers in the GCC from consolidating, and in a move to avoid reporting losses, they could distort market pricing for all, according to the RatingsDirect analysis from Standard & Poor's Ratings Services. The reports adds that a small number of well-established insurers are reaping the benefits of the fast-growing insurance markets in the GCC region. The GCC insurance sector grew to nearly $16 billion in terms of gross premium written and we observed growth rates of over 10 per cent in the region's largest insurance markets in 2012. Ample capital is available within the industry to back the growth in insurance premiums. Both regional and international investors are looking for a slice of the business because of the growth potential. This creates a highly competitive marketplace in which all companies are contending for profitable business. The ensuing competition puts pressure on margins.

Iran's Bank Mellat is claiming GBP500 million ($782 million) from the U.K. Treasury after a London court ruled against a British decision to sanction the bank. In June, the U.K.'s highest court ruled against sanctions that had been imposed on Bank Mellat as a result of its alleged links to Tehran's nuclear program. The London ruling follows a similar decision in favor of Bank Mellat at a European Union court. But it won't lead to an end to restrictions against the bank for now because EU sanctions remain in place on Mellat. The U.K. sanctioned Mellat in 2009, banning its operations in the country and freezing its assets after it was accused of facilitating Iran's nuclear program. The measure was expanded to the rest of the European Union the following year.

Arcapita Bank announced the sale of 3PD Holding, Inc. (3PD), a last-mile logistics company in the United States and Canada, for $365m. 3PD was acquired by XPO Logistics Inc., a transportation logistics companies serving North America. Arcapita acquired a majority stake in 3PD in 2006 and afterwards provided investment capital to 3PD. Its portfolio managers worked closely with the founders and management of 3PD to develop and deliver a strategy that propelled the business to a market leadership position despite a weak economy. Profitability has since grown by over 70%. The sale of 3PD to XPO is considered to be strategically the right step in the business' development.

Tunisia's El Wifack Leasing has applied to regulators to become the country's third fully-fledged Islamic bank. El Wifack, which has its debt rated BB+ by Fitch Ratings, also said it planned to raise its capital by five million dinars ($3.1m) to 25m dinars, regardless of whether it received approval to operate as an Islamic bank. Currently, Sharia-compliant business accounts for just 2.5 per cent of the Tunisian financial sector with only two fully operational Islamic banks, Zitouna Bank and the Tunisian arm of Bahrain's Al Baraka Banking Group. Last month, parliament approved a law that will allow the state to issue sukuk. The Jeddah-based Islamic Development Bank has offered Tunisia a financial guarantee to issue a sukuk worth $600m, though the issue could be delayed to 2014 because of political instability and approaching elections.

Nigerian Islamic bank Jaiz Bank has announced its commencement of Foreign Exchange trading which now makes it eligible to carry out transactions for eligible Bureau de Change operators at the Central Bank of Nigeria (CBN). It will commence bidding for its BDC customers from all branches by the first week of September 2013. The bank has also commenced over the counter transactions of Basic Travel Allowance BTA sales at all its branches. Jaiz Bank began full operations as the first Non-Interest Bank in Nigeria in January, 2012 and has since expanded its branch network to 10. The capital base of the Bank has also grown from N5 billion when it started operations last year to about N10billion. This level of capitalisation enables the Bank to apply for National Banking license from the Central Bank of Nigerian if it chooses and thus position it to operate in all the States of the Federation.

The GCC insurance industry is slated to grow to approximately $28bn by the end of 2015 and tip $40bn by 2017. Opportunities for both local and international insurers are huge, according to Markaz (Kuwait Financial Centre) in their latest GCC Insurance report, which looks at the trends in Insurance Premium volumes across the GCC. This includes the takaful (Islamic Insurance), life, non-life, health, and reinsurance domains and compares the macro insurance factors such as insurance density, insurance penetration, and so on, of the GCC states with that of world. The drivers for the insurance industry in the GCC include the rising income levels, high amount of expatriate population, the increasing awareness among the population about the benefits of insurance, the government's policies mandating insurance in some sectors. The region also has a favorable demographic trend with youth population projected to grow and the middle class set to rise in the next few years.

Nigeria is trying to establish itself as the African hub for Islamic finance. In recent months, a string of regulatory initiatives have set the groundwork for products such as Islamic bonds (sukuk), insurance (takaful) and interbank lending products, although there is still only a small number of local market participants. Islamic banking is currently offered by the Islamic window of Stanbic IBTC, a unit of South Africa’s Standard Bank, and Jaiz Bank, a full-fledged Islamic lender which has operated since 2012. Sterling Bank has been granted approval in principle for an Islamic window, while two more lenders have expressed interest in obtaining licences to operate Islamic Windows. However, Nigeria’s banking sector remains underdeveloped, with the majority of adults being unbanked.

Kuwait Finance House (KFH) in collaboration with Kuveyt Turk (KFH Turkey) has launched a new Turkish real estate financing service. This service provides KFH customers with an end-to-end solution to their Turkish real estate requirements, tailored to their specific needs. It will support them searching for properties in Turkey, providing assistance on negotiation of an acquisition price, competitive Islamic real estate financing and offering post-sales services, should investors need to manage the properties in their absence. A specialized section has been established by KFH in Kuwait City, in order to support customers purchasing real estate in Turkey. This office acts as a contact point and provides customers with the relevant administrative services related to Turkish real estate, like document gathering and handling, information distribution and logistics handling.

Bank Muamalat Malaysia Bhd is said to be revisiting the idea of a merger, this time with a development financial institution (DFI). Among the possible candidates are Bank Rakyat Malaysia Bhd and Malaysian Industrial Development Finance Bhd (MIDF). DFIs are specialised financial institutions established by the Government with the specific mandate to develop and promote key sectors that are considered of strategic importance. Industry players say the idea of a merger between Bank Muamalat and Bank Rakyat is an attractive proposition as both are Islamic concerns, with Bank Rakyat being the country’s largest Islamic cooperative bank.For the financial year (FY) ended March 31, 2013, Bank Muamalat posted a record pre-tax profit of RM236mil. Bank Rakyat, meanwhile, has been enjoying profitable growth over the years.

The Islamic Development Bank (IDB) and its poverty reduction arm, the Islamic Solidarity Fund for Development (ISFD), have now extended more than $100 million in financing to help eight African nations combat extreme poverty, improve public health and achieve more sustainable development. In each of these projects, host governments will partner with the IsDB, the Earth Institute and Millennium Promise to carry out the projects. The combined $104 million will finance three major programs: The ISFD’s new flagship Sustainable Villages Program (SVP) in Chad, Mozambique, and Sudan ($40 million), Scale-ups of the Millennium Villages Project in Mali, Senegal and Uganda ($29 million), Implementation of the Drylands Initiative in Djibouti, Somalia and Uganda ($35 million). The $104 million will be provided in the form of Islamic finance to the recipient countries, except in the case of a grant provided to Somalia. All of these countries are members of the bank.

Operating income continues to be stable at Ithmaar Bank at BD36.8 million, despite a significant compression of margins in overseas subsidiary due to a 300 basis points cut in benchmark profit rates. However, a net loss of BD2.8m was announced for the first six months of the year, compared with a profit of BD583,000 in the same period last year. According to Bank chairman Prince Amr Al Faisal, the bank continues to focus on cost control after total expenses were reduced by about 4.5 per cent in the first 6 months of the year. Murabaha and other financings increased by 1.6pc to BD1.19 billion in the first half as compared to BD1.17bn a year ago. Liquid assets, comprising cash, balances and commodity placements with banks, financial and other institutions, now represent about 13pc of the balance sheet. The bank continues on its board-approved retail business focus with the objective of becoming the region's premier Islamic retail bank.

The Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) (Amendment) Ordinance is a new piece of legislation, introduced in Hong Kong. This law, which puts the taxation of sukuk on a level footing with conventional bonds in Hong Kong, marks a significant effort by the Hong Kong Government to promote the development of a sukuk market in the territory. However, success in developing a market for Islamic finance is not just about regulation and tax. Most importantly, it is about ethics, in the form of Shariah compliance. Islamic finance continues to be dominated by banking. Insurance (takaful) has received much less attention and its development reflects a degree of neglect. The problem lies in the widespread use of takaful and retakaful contracts which are nothing more than conventional insurance and reinsurance contracts. A strong ethical framework needs to be created and enforced within which Islamic finance can thrive.

Jaiz Bank is now targeting a national license from the Central Bank of Nigeria (CBN) after having grown its capital base from N5 billion when it started operations last year to about N10 billion. The capital increase will enable the bank to apply for National Banking license from the CBN and thus position it to operate in all the States of the Federation. Besides, Jaiz bank has joined other commercial banks in the country in the processing of foreign exchange transactions. The bank will commence bidding for its BDC customers from all branches by the first week of September 2013. Moreover, it also commenced over the counter transactions of PTA and BTA sales at all its 10 branches.

Jaiz Bank Plc has joined other commercial banks in processing of foreign exchange transactions. This allows the bank to process forex transactions for eligible bureau de change (BDC) operators at the Central Bank of Nigeria (CBN). The bank will reportedly commence bidding for its BDC customers from all branches by the first week of September. Furthermore, the bank has also commenced over the counter transactions of PTA and BTA sales at all its branches. Jaiz Bank has 10 branches in several regions of Nigeria. Its capital base had also grown from N5 billion when it started operations last year to about N10 billion.

PT Bank Muamalat Indonesia posted Rp372.20 billion (US36.1 million) in net profits for the first half of 2013, a 51.27 percent increase from the same period of last year. Bank Muamalat’s net earnings as of June 2013 reached Rp 1.25 trillion, compared to Rp 868.33 billion in June 2012. Margins for murabaha totaled Rp 925.23 billion, or an increase of 47.22 percent from the 2012 figure. Muamalats earnings from musharakah, or partnerships, reached Rp 746.65 billion, higher than the Rp 461.64 billion in June 2012. As of the first semester of 2013, Bank Muamalat managed Rp 47.92 trillion in assets, or up 46.59 percent from the same period in 2012. Meanwhile, PT Bank Ekonomi Raharja (BAEK) on the other hand reported a fall in net profits to Rp 105.33 billion, down 23.34 percent from last year’s Rp 137.4 billion. Bank Ekonomi Raharja recorded Rp 26.59 trillion in assets as of June 30 2013.

Citigroup is the third largest bond underwriter in the Gulf region this year, up from fourth a year earlier and 19th in 2011. It’s also the fourth-largest arranger of syndicated loans, up from 11th last year. Citigroup is relying on the UAE and Qatar for lending as rivals including JPMorgan & Chase Co and Deutsche Bank AG expand in Saudi, the region’s biggest economy. However, the bank’s reliance on UAE debt may bear some risks. The spread between bonds from Saudi Arabia and UAE notes widened to 323 points on August 7, the highest since April 2009. UAE yields have risen 128 basis points this year. Besides, Citigroup is also expanding elsewhere in the Middle East. The bank in June got Iraqi approval to open an office in Baghdad. Iraq is the New York-based bank’s first country opening for six years and comes as CEO Michael Corbat seeks to sell or scale back consumer operations in nations such as Turkey, Pakistan and Uruguay, reversing an expansion strategy into faster-growing economies by former CEO Vikram Pandit.

Jordan Islamic Bank began some time ago to develop a plan to provide alternative energy in its branches through the use of electric power generation using solar cells. The Bank seeks to disseminate to all branches and offices which achieves savings and a reduction in the electricity bill incurred by the bank, and contributes to the alleviation of high electrical loads in the Kingdom, thus contributing to the national economy and environmental protection. The Jordan Islamic Bank is one of the main Islamic banks in Jordan and the Arab states, where it has a proven track record of excellence successes. The Bank has a branch network of 80 branches and offices, employing about 2,000 employees, which embodies the vital role played by the Bank in the Jordanian economy.

The stock of outstanding GCC fixed income instruments rose to $239.8 billion in the first six months of this year. The largest debtors are the Qatari public sector (23 per cent), the UAE financial sector (16 per cent) and the UAE public sector (15 per cent). Among non-financial private issuers, the Saudi sector is the most active with 10 per cent of all outstanding GCC debt followed closely by the UAE. Issuance was up 13.2 per cent compared to a year ago, with $30.1 billion worth of debt securities issued over the last six months. The UAE, Saudi Arabia, and Qatar accounted for 82 per cent of the issuance in 2013. The private sector has been increasingly outperforming the public sector over the last twelve months. The average maturity of outstanding GCC debt securities remained steady at 5.8 years at the end of the first half of 2013.