IslamicFinance.de

Africa represents a huge untapped market for Islamic Banking. The demand for Sharia-compliant products in Africa has been growing for both Muslims and non-Muslims. Most countries such as Senegal, Uganda, Morocco, Kenya, Gambia and Nigeria have already reformed banking laws to allow the setting up of Islamic institutions. While there is a large demand for Islamic Banking, the availability of Islamic Wealth Management Products is still relatively small, leaving a large opportunity for UAE banks. At Noor Bank, for example, each international client is assigned a dedicated relationship manager and customer service officer. Going forward, the African market holds great potential for the UAE Banking sector. Latest forecasts indicate that Africa’s GDP will grow to 3.7% in 2018, according to the African Development Bank.

The Dana Gas sukuk case illustrates the dangers of local country courts favouring domestic companies. Wherever possible, international investors should avoid local law. The most commonly used is English law, even for commercial arrangements that have nothing to do with the UK, because English law is well-developed and English courts have a deserved reputation for legal competence and impartiality. Dana Gas raised money from international investors by issuing sukuk. The money so raised was invested in a mudarabah agreement with Dana Gas, written under UAE law. Dana Gas also entered into a purchase undertaking, written under English law. Under UAE law, sukuk investors would have been sunk, having to litigate about whether the commercial arrangements were or were not Shariah compliant. However, they were saved by the purchase undertaking being under English law.

The Securities and Exchange Commission of Pakistan (SECP) introduced three new international auditing and accounting standards. According to the commission, the AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) shariah standards have been notified after a thorough consultative process. The adopted standards include Shariah Standard No 17-Investment Sukuk, Shariah Standard No 18-Possession (Qabd) as well as Shariah Standard No 23-Agency and the Act of an un-commissioned agent (Fodooli). The commission said it has been playing a proactive role in providing an enabling regulatory environment for the growth of Islamic finance in the country.

The burden of financing Africa’s infrastructure projects is shifting away from banks towards the Sukuk market. To date, Africa has witnessed a growing share of sovereign Sukuk issuances. While states such as Sudan and Gambia have issued Sukuk in the past, it was in 2014 that Senegal debuted the region’s largest Sukuk issuance (USD 208 million). Soon South Africa and Cote d’Ivoire followed suit. In June 2016, Senegal launched its second Sukuk issuance, valued at USD 350 million. Togo issued its maiden Sukuk worth USD 277 million with a 10-year maturity and Cote d’Ivoire issued its second sovereign Sukuk valued at USD 263 million in August 2016. Several African countries are in the midst of preparing legislation to facilitate Sukuk issuances and facilitate Islamic finance in their respective financial market.

For an Islamic bank, Shariah compliance is a foundation attribute, not a leverage attribute. Islamic banks need to give an impression of strength and stability. They also need to be accessible for customers. Historically, a physical branch network was needed, but today Islamic banks compete by providing electronic access, remote deposit facilities and smart phone apps. The key leverage attribute of any bank is accurate credit assessment, so that the bank can charge appropriately for the risk of customer default. A further leverage attribute is to have bankers whose connections in the business community are so strong that they can create deals, such as corporate takeovers or partnerships. It is a leverage attribute for Islamic banks to be able to innovate and devise new Shariah compliant offerings not provided by competitors. The challenge is both in devising those offerings and in preventing their intellectual property being copied by competitor Islamic banks.

The next phase of growth in Islamic banking will be driven by differentiation driven by innovation. There has been a remarkable 11% growth in global Islamic banking assets over the last 5 years. The opening up of a regulated Islamic banking market has allowed for banks to serve an untapped segment. Islamic banking drove innovation through a new set products and services that were Shari’ah compliant. In the future, developing a distinctive customer segment such as age groups or focus groups will be critical. A part of the customer base is quite indifferent to the Shari’ah angle, but more sensitive to the overall experience and the value proposition offered. While customer segmentation, product positioning and partnerships are all helpful, the piece that can make a significant impact is the technology-driven innovation, that is the right omni-channel experience for the customer.

Al Rayan Bank UK has priced its £250mn Islamic bond "Tolkien Funding Sukuk No 1" at 80 basis points over three-month Libor (London Inter-bank Offered Rate). The transaction is secured by a portfolio of prime UK, first-charge, owner-occupied, home purchase plans, originated by Al Rayan Bank. The sterling-denominated sukuk has an expected called weighted average life of three years. Proceeds raised from the sukuk issuance would be used by Al Rayan Bank to fund further growth in its asset book, which has increased by more than 23% over the last 12 months. Such residential mortgage backed securities (RMBS) are relatively rare in Islamic finance. The bank believes that there would be more opportunities to issue sukuk in the future and a higher potential for other Islamic banks to tap into the RMBS market.

Because Shariah compliance is essential for all Islamic banks, it does not distinguish one Islamic bank from another. Hence it is a foundation attribute. About 25 years ago, Price Waterhouse made a distinction between foundation attributes and leverage attributes. Foundation attributes convey no competitive advantage. Al Rayan Bank is the only Islamic bank in the UK which targets ordinary retail customers. The bank's homepage gives very prominent coverage to its Shariah compliance. That is because Al Rayan is not competing against other retail Islamic banks but rather seeking to create a retail Islamic finance market where none has existed before.

The State Bank of Pakistan (SBP) launched the Islamic Long- Term Financing Facility (ILTFF) based on Modaraba for exporters with a maximum limit of Rs1.5 billion. The central bank currently provides the Long Term Financing Facility (LTFF) through conventional banks. The ILTFF will allow exporters an opportunity to avail long-term refinance facility of SBP for purchase of new machinery from eligible Islamic banks. The period of financing under the ILTFF will not exceed more than ten years including a grace period of maximum two years. Islamic banks and Islamic banking branches of conventional banks may also apply to SBP. The allocation is subject to a maximum of 20pc of the limit under LTFF for utilisation under ILTFF. The State Bank’s move would support both the Islamic banking as well as exporters who achieved a positive growth after five years.

Meezan Bank aims to raise up to 7 billion rupees ($63.34 million) through a Tier 1 sukuk issuance. It could be sold either as a public offering or private placement. The bank did not give a time frame for the sale. Meezan had sold Tier 2 sukuk in 2016, raising 7 billion rupees through a 10-year private placement that used a mudaraba contract. There are five full-fledged Islamic banks and 16 Islamic windows in Pakistan, Meezan Bank being the country's largest sharia-compliant lender. The Islamic banking sector held 11.9% of the country’s total banking assets as of September.

Yinson Holdings is raising more funds through its Yinson TMC unit to raise MYR1.5bn ($385.2m) in perpetual mudharabah bonds. The raised money will be used to refinance outstanding financing facilities, provide funds for working capital and capital expenditure for new projects. AmInvestment Bank and Maybank Investment Bank are the joint principal advisers, joint lead arrangers and joint lead managers for the programme. Yinson also launched another $500m multi-currency perpetual bond programme last year in July.

In this interview, two product aggregator start-ups, Jirnexu and Fatberry, are discussing their experiences in collaborating with carriers and regulators. Jirnexu is currently in the BNM Regulatory Sandbox and this way gets great support from the regulator. The regulatory sandbox has a customer-focused vision and uses its technology to help with communication, education and purchasing of Insurance. Fatberry is focused on the General Insurance space. It aims at focusing on the customer’s needs and pain points when building its solutions.

The 12th IFSB-INCEIF Executive Forum on "Preserving Wealth and Generating Long-term Value through Islamic Finance" will take place on 6 and 7 March 2018 in Kuala Lumpur, Malaysia. The Islamic Financial Services Board (IFSB) and the Global University of Islamic Finance (INCEIF) have announced the speakers of the event. The forum will feature topics such as the role of wealth management from an Islamic perspective, the role of the Takaful sector, Shari’ah-compliant opportunities for retirement planning and wealth management, realising long-term societal development through social contracts and regulator’s role in promoting risk management practices. The forum is ideal for regulators and supervisors of the Islamic financial services industry, scholars and researchers, especially those in the area of Islamic wealth management.

The government of Mali will complete its first sukuk sale using a lease-based structure linked to affordable housing projects. The West African nation aims to raise 150 billion CFA franc ($285 million) via a seven-year deal that carries a profit rate of 6.25%. The sukuk uses an ijara structure that is underpinned by social housing projects in N‘Tabacoro in the southwest of the country. The sale is being arranged by the Islamic Corporation for the Development of the Private Sector (ICD), which has advised the governments of Togo, Ivory Coast and Senegal on their own sovereign sukuk. The sukuk assets are managed by Taiba Titrisation, a Senegal-based subsidiary of the ICD.

The chief executive of the Islamic Corporation for the Development of the Private Sector (ICD) has stepped down to take a role with the Saudi government. Khaled Al-Aboodi joined the ICD in 2001 and took over as chief executive officer in 2007. Starting next month, he will join the Saudi Agricultural and Livestock Investment Co (SALIC) as Managing Director. The ICD has appointed Mohammed Al Ammari to lead the multilateral body on an interim basis, until a new chief executive is selected. As the private sector arm of the Islamic Development Bank, the ICD is tasked with supporting economic development across its 53 member countries.

Saudi developer Salman Abdullah Bin Saedan Real Estate Group is planning a debut sukuk issuance in the coming months. Proceeds from the sukuk would be used for Saedan’s social housing projects, which aim to address a shortage of affordable residential properties in Saudi Arabia. The $1 billion sukuk programme will be set up by Ibdar Bank, which was formed in 2013 through a three-way merger of smaller Islamic lenders. The bank's Director of Capital Markets Ikbal Daredia said the sukuk programme would be listed on the Irish Stock Exchange with a possible listing on Nasdaq Dubai. Ibdar Bank aims to bring on board one or two international banks and regional partners as joint lead managers for the deal.

According to a survey by Bloomberg Intelligence, the UAE is ranked third in an analysis of Islamic Fintech start-ups. The analysis finds that tailored regulation and clarity on rules could aid the small and medium-sized Fintech outlook. Crowdfunding and peer-to-peer (P2P) financing could be a game-changer in Islamic finance, giving potential to close the gap for small and medium enterprises. The analysis suggests that new opportunities to invest in gold, integrated by Islamic Fintech blockchain technology, may revive its appeal and lift demand. Development of Shariah-complaint, gold-backed products following the introduction of the Shariah Gold Standard, may encourage investors to place their money in gold. The analysis also noted that the Islamic Financial Services Board has predicted that Shariah-complaint assets will expand by 261% compared to the 2015 figure, to represent US$ 6.5 trillion by 2020.

United Arab Emirates energy producer Dana Gas swung to a net profit of $83 million in 2017 after a $1 billion payment as part of a settlement with the Kurdistan Regional Government (KRG). However, Dana posted a net loss of $42 million in the fourth quarter of last year. Profits in the fourth quarter were affected by an impairment charge of $34 million against the Zora gas field in the United Arab Emirates. Dana, which has struggled to collect receivables from Kurdistan and Egypt over the past four years, collected $466 million from the KRG and $164 million from Egypt last year. Dana’s cash balance at the end of 2017 amounted to $608 million, more than double the $302 million it had at the end of 2016. Dana Gas is at the centre of a legal dispute with the holders of a $700 million sukuk that the company refused to redeem on the grounds that the notes were no longer sharia-compliant. Legal proceedings in English and UAE courts are continuing.

Saudi nationals have been warned against embarking on hazardous investments in cryptocurrencies. According to the Capital Market Authority, there is no monetary oversight inside Saudi Arabia over digital currencies which involve high risks. It warned that digital currencies expose investors to speculative bubbles, loss of capital, fraud, high market volatility, cyber hacking and lack of transparent evaluative regulations. The Capital Market Authority also said that it would be difficult to protect investors as Saudi Arabia has no oversight on the digital currency.

The Islamic Capital Markets and Products. Managing Capital and Liquidity Requirements Under Basel III. Wiley Finance Report has been published. It provides updated in 2018 year analysis of industries from Business and Finance, Capital Markets, Finance, Home Markets. According to Dr. Zeti Aziz, Former Governor of Bank Negara Malaysia, the authors Simon Archer and Rifaat Abdel Karim have succeeded in creating greater awareness about Basel III and other global prudential regulation requirements for the Islamic capital markets. The implementation of these requirements will ensure the sustainability of Islamic finance and banking.