IslamicFinance.de

I just published an article with the Dow Jones Islamic Market Indexes Newsletter, giving an overview about the lines of arguments regarding performance and ethical screens, be it Islamic or Sustainability and what empiricial findings have been published.

It is claimed by critics that the reduction of the universe through ethical screens shall reduce the performance, likewise corporate social responsiblity comes against a cost. Similar counterarguments have been raised regarding Islamic screening criteria.

Bank Sarasin published a study doing own research with partners and reviewing published empirical analyses in the literature. It shows that there is no negative impact on performance. My review of empirical analyses in regard to Islamic finance concluded the same and all publications let conclude that ethical screens add value by way of risk management. An example is the debt limitation of the Sharia tolerance criteria.

Ethical screens may therefore improve the investment decision process and more research shall determine, which factors add value to the portfolio and therefore form part of a professional process.

Nopporn Wong-Anan wrote in Arabianbusiness on 30 March that Saleh Malaikah, chairman of Islamic reinsurance operator BEST Re sees the takaful business growing by 17 % over the next 3 years. The growth prospects lying in the fact that insurance coverage is not widely used in the Middle East and shows therefore potential; Saudi Arabia has a market share of 20 % in takaful from the overall insurance market, and promises the highest growth rate. In Malaysia the takaful market share has reached 30 %.

Allianz Indonesia grew by 8.5 % and is the fourth biggest life insurer in the country. In 2008 the MENA region has proven to be one of Allianz's growth powerhouses. Revenues from the region grew to 2.4 billion euros, an increase of 40 percent from last year. In Asia Pacific Property and casualty business (P&C) remains growth driver, unique opportunities to strengthen distribution.

Allianz offers conventional and Islamic coverage.

Inovest (previously Al Khaleej Development Company – Tameer), a Bahrain-based shariah compliant investment company, has launched a new water technology venture in partnership with a US company.

The project size is USD 32 mn, from which USD 24 mn will be the net equity, and USD 7.2 mn is being subscribed by Inovest and its technology partner.

The product launch is subject to approval from Central Bank of Bahrain and other statutory approvals, the company added

Inovest CEO is Dr. Khalid Abdulla.

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James Makau reported in Business Daily on 31 March that the Gulf African Bank and First Community Bank became the first fully fledged Islamic banks in Kenya but both had to record losses in their first year of operations as operating expenses and heavy set-up costs took a heavy toll on earnings.

Gulf African Bank recorded a loss of Sh281 million last year while First Community Bank (FCB) posted a loss of Sh307 million within the same period despite both players recording increases in net income during the year.

Sukuk sales may rebound and reach a record this year, with the Gulf accounting for about two-thirds of the debt issued as higher yields attract investors according to NCB Capital. There is an estimated ‘pipeline’ of about USD 39.3 bn of so-called sukuk, Jarmo Kotilaine, chief economist at Saudi Arabia’s NCB Capital, said in a report. He estimates the pipeline from the Gulf Cooperation Council to be USD 24.6 bn.

The average extra yield on corporate and government sukuk above the London interbank offered rate is 12.26 % points, up from 5.76 % points a year ago, according to HSBC-Nasdaq Dubai indexes.

B.K. SIDHU reported in The Star Malaysia on 30 Marcht that it has won 19 mandeates to raise nearly USD 2.5 bn from the Islamic capital markets and that it is planned to launch a USD 500 mn infrastructure fund. The issuers of the Sukuk are partially situated in the Gulf including a sovereign.

Badlisyah Abdul Ghani is the CIMB Islamic chief executive officer.

Bursa Malaysia’s regulated platform has not finalised the precise structure yet. But according to Bursa Malaysia CEO Yusli Mohamed Yusoff Short-selling is perceived as an essential ingredient for capital markets to perform efficiently.

Press Release

LONDON, March 30, 2009 -- In a report published today, Standard & Poor's Ratings Services explains the way that its rating approach has been adapted to meet the growth of takaful insurance.

The article, "Standard & Poor's Approach To Rating Takaful And Retakaful (Islamic Re/Insurance) Companies," says that the last five years have seen takaful (Islamic insurance) grow from a niche product servicing relatively limited demand to become a mainstream risk management offering.

"In particular, we have seen rapid growth in the Arab world and an expansion across Europe. A further market development has been the growth of retakaful as a Sharia-compliant version of reinsurance," said Standard & Poor's credit analyst Kevin Willis.

Standard & Poor's has rated a number of Islamic insurers and reinsurers and so is able to comment on the way that the rating criteria have been adapted to address the specifics of this product.

Stanley Carvalho reported in Arabianbusiness on 29 March that Abu Dhabi Islamic Bank became the fourth Abu Dhabi bank to announce it has secured financing from the Ministry of Finance. ADIB secured AED 2.2 bn of government deposits and converted it into regulatory capital following similar moves by rivals in the credit crisis.

With the conversion into Tier 2 capital, ADIB's total equity increases to AED 11.02 bn and its capital adequacy ratio (CAR) will be 19.75 percent.

Tiras Mahmoud is CEO of ADIB.

Albaraka Banking Group B.S.C (ABG) held its Ordinary and Extra Ordinary General Meetings today in Manama, the capital of Bahrain. A cash dividend of USD 27.9 mn was decided, which represents 4 % of the issued capital further bonus shares were approved in an amount of USD 46.5 at the rate for one share for every 15.

After deducting all the expenses, the total net income amounted to USD 201 mn in 2008, reflecting an increase of 37.1 % over the income in 2007 after excluding the effect of the extraordinary profit arising from the IPO of the Group's unit in Turkey from the profits of 2007.

The Saudi Capital Market Authority aims to promote the bond and Sukuk markets said its chairman Chairman Abdulrahman Al Tuwaijri according to Arabiya.

The Amana Group was recently given a Letter of Provisional Approval by the Central Bank (CB) to establish a licensed commercial bank named Amana Bank Ltd., among the conditions is to raise a minimum capital requirement of Rs 2.5 bn.

Dubai Islamic Bank is set to implement this year its joint-venture with Jordan Dubai Capital and Dubai International Capital to invest in Industrial Development Bank and convert it to the Jordan Dubai Islamic Bank.

"The opportunities offered by Islamic finance in promoting global financial stability and financial inclusion are worth assessment by the leadership of the G-20 countries," said Jeddah-based Islamic Development Bank President Ahmed Mohamed Ali, reported Mushtak Parker in the Arab News.

The President told an Islamic Financial Architecture Colloquium hosted yesterday by Lord Mayor of the City of London Ian Luder at his official headquarters that it is time that the wider world should consider mainstreaming Islamic financial services. And the best way to do this is to accord the relevant Islamic finance stakeholders "observer status" within the framework of the G-20 and the expanded Financial Stability Forum of the International Monetary Fund (IMF).

Press Release

LONDON (Standard & Poor's) March 27, 2009--Standard & Poor's Ratings Services today said it had revised its outlook on the Federal Republic of Nigeria to negative from stable. At the same time, the 'BB-' foreign currency and 'BB' local currency long-term sovereign credit ratings were affirmed. The 'B' foreign and local currency short-term ratings and the 'ngAA+' national scale ratings were also affirmed. The Transfer & Convertibility Assessment on Nigeria remains 'BB-'.

"The institutional policy response to the global economic downturn and the consequent sharp fall in the price of oil, on which Nigeria is overwhelmingly reliant, motivated our revision of the ratings outlook," Standard & Poor's credit analyst Ben Faulks said. "We believe the adverse terms of trade shock will hurt Nigeria's credit profile both on the fiscal and external side."

The Muslim Community Co-operative (Australia) (MCCA) has recently received an Australian financial services licence from the Australian Securities and Investments Commission (ASIC). It is necessary for the MCCA to set up its Managed Investment Scheme, the ‘MCCA Islamic Finance Investment Fund’, by which the MCCA plans to launch its Shari’ah-compliant home finance products.

The MCCA has until now been a mutually-owned co-operative. The plan for the next three years is to wind down the co-operative outfit and sell its assets to the new fund. And the intended launch date will either be 1st May or 1st July 2009.

Chaaban Omran is the managing director of the MCCA

The country’s parliament has approved legislation enabling all commercial banks in Kyrgyzstan to operate according to Shari’ah principles. National Bank of Kyrgyzstan will be responsible for issuing licences to Shari’ah-compliant financial institutions, as well as supervising and regulating their activity.

New Horizon reported that other IT vendors now think about certification by the Accounting and Auditing Organisation of Islamic Financial Institutions (AAOIFI) and following the example of Path Solutions.

Malaysian Rating Corp. starts offering from July 2009 onwards services to rate the degree of Sharia compliance of Islamic financial institutions. The audit will review the risk management culture and frequence of Sharia meetings aside from management skills.

The Agency targets fund managers, insurers and banks in Malaysia first before it plans expansion to South-East Asia.

Mohd Razlan Mohamed is the CEO of the Malaysian Rating Corp.