IslamicFinance.de

As coronavirus pandemic continues to disrupt businesses in Kenya, the Muslim community has been urged to take advantage of financial institutions offering low bank charges to jump-start their businesses. Islamic finance expert Khalfan Abdallah has urged the government to rethink how to accommodate Muslims in various financial support programmes such as Youth and Women Fund. Mr. Abdallah said the government should borrow a leaf from Momentum Credit Micro Finance which has started offering Sharia compliance loans to Muslims using logbooks as collateral. The official said to bail out Muslims during these hard times, such affordable credit facilities which are sharia compliance are required.

Finance Minister Matia Kasaija has said that whereas Bank of Uganda still has challenges, it should work around the clock to quickly resolve the pending establishment of Islamic Banking. Mr Kasaija said that, as government, they had done their job to pass the law and it was now the work of the Central Bank to operationalise the Shari'a-based banking system. In 2016, government enacted the law that would introduced Islamic Banking, agent banking and bancassurance, among other products. However, whereas other products have already been established, implantation of Islamic Banking continues to be delayed.

Shariah adviser Mufti Ismail Ebrahim Desai noted that Islam was a religion of balanced justice and equity, and had no room for business dealings that could cause social imbalance, deprivation and injustice. He spoke at a recent Webinar organized by TAIF Digital Institute for Islamic Finance. On the side of basic concepts of Islamic finance and banking, he highlighted three basic categories such as equity base transaction, trading based transaction and lease-based transaction. He explained the concepts of Musharaka, Mudarabah, Murabaha, Istina, Takaful and Sukuk. He identified Mediation and Arbitration, Partnership-Equity/Debt, Employment-Hadeeth of sweat and documentation of contracts as part of the common pitfalls that relate to Shariah-compliant businesses.

Islamic banks and investors from the Middle East have been urged to expand their operations into the Philippines which is currently seeing a growing halal industry. Speaking at the webinar ‘Islamic Finance as Vehicle to Economic Recovery’, Philippine Central Bank Managing Director Atty Arifa Ala highlighted the potential of the Islamic finance industry in her country. She also invited foreign Islamic banks and investors, especially from the Middle East to expand their operations in the Philippines. Ala highlighted the new law Republic Act No.11439 or ‘An Act Providing for the Regulation and Organization of Islamic Banks’. She reiterated that the new law was created as an expanded Islamic banking system that involves tax neutrality, stronger risk management, ethical financial stability, further establishment of Islamic banks and other Islamic financial activities.

Banks who are in the Gulf Cooperation Council (GCC) states, will have weaker earnings and profitability this year, due deterioration in nearly all their sources of income said Junaid Ansari, head of Research and Strategy at Kamco Invest, Kuwait. Conventional banks and the Islamic financial institutions will record weaker performance he said, but Islamic banks, due to their structure and focus, may cope better.

Dr. Umar Oseni said that the collaboration between Islamic finance practitioners and academia will be vital to the development of Islamic Finance Law in Nigeria. Dr. Umar Oseni also said that western models dominate financial markets and that conventional banking has existed for over 200 years, while the Islamic finance reemerged towards the end of the last century with Tabung Hajji, West African Muslim Bank, and IsDB which was established in 1975 and this has brought improvement in the Islamic finance industry.

Due the Covid-19 pandemic crisis all banks have introduced measures to help customers that are struggling. Islamic banking are offering now cirisi products and are more flexible to their costumers and their needs.

Le ministre algérien des Finances, Aymen Ben Abderrahmane, a annoncé la mise sur le marché des produits de la finance islamique. Ben Abderrahmane a dévoilé que deux banques publiques ont achevé les procédures d’obtention d’une fatwa, afin de faire adapter les produits à la charia et que ces produits seront mis sur le marché à compter du début du mois d’août prochain. Il s’agit de la Banque nationale d’Algérie (BNA) et de la Banque de l’Agriculture et du développement rural (BADR). L’Algérie compte 30 établissements bancaires, dont sept publics, et plus d’une vingtaine d’institutions étrangères, en provenance particulièrement des pays du Golfe et de la France ainsi qu’une banque britannique et une autre espagnole.

In Malaysia Islamic finance has demonstrated its resiliency in this difficult time with continuing issuances of green and sustainable sukuk, a trend that will continue over the short-to-medium term. To this end, Malaysia’s Employees Provident Fund (EPF) is enhancing its focus on integrating different ESG initiatives into its investment strategy. EPF conducts negative screening and excludes those stocks that it considers unethical. It engages very closely with the investee companies, regulators and asset managers, and has a rating tool to assess the quality of ESG adoption. Banks in Malaysia are also pushing various ESG initiatives. This comes as Bank Negara Malaysia, is coming up with a taxonomy that defines a green loan and ensures that banks indicate whether certain loans are green and, if so, how green they are.

FinTech has spurred the evolution of the Islamic finance industry over the last year. It helps to address the need for simplification and innovation in the sector. It also provides a great opportunity for the sector to streamline services and attract new segments, with the key being digital-savvy millennials. Dubai and Dubai International Financial Centre (DIFC) are key players in the Islamic finance sector. DIFC and Dubai Financial Market have launched the first Dubai Sustainable Finance Working Group to create a sustainable financial hub in the region in line with the UAE Sustainable Development Goals 2030. They are encouraging the use of green financial instruments and responsible investing.

Despite its potential in sheer numbers of underbanked Muslims, Indonesia has been a slow starter in Islamic finance and is about a decade behind Malaysia. Only in the last few years, there have been some visible steps to support Islamic finance and lift its market share in terms of asset volume beyond the current 6%. The government of Indonesia on June 17 issued its latest Islamic bond, a $2.5bn global sukuk, amid strong interest from investors especially from other Asian countries and the Middle East. The sukuk was issued in three tranches, one of which was a five-year green sukuk worth $750mn. Thomson Reuters sees high future potential for foreign direct investment in Indonesia’s Islamic banking industry, for both the retail and the corporate sector.

Malaysia’s Islamic finance sector is expected to sustain double-digit growth to reach almost RM3 trillion in 2020 under the second Capital Market Masterplan. The chairman of Bursa Malaysia, Tan Sri Abdul Wahid Omar, said the country’s Islamic funds industry has demonstrated impressive growth. The country is the third-largest market for global Islamic finance products and the world’s largest Sukuk issuer. At Bursa Malaysia 79% of the listed companies are Shariah-compliant and Shariah market capitalisation makes up 70% of the total market capitalisation of RM1.6 trillion. Over the last ten years Shariah indices consistently outperformed its conventional counterparts. Thus, Shariah-compliant investments are an attractive source of value for investors.

The CEO of Dubai Islamic Economy Development Centre (DIEDC) outlined the phases for the development of a unified legal framework for Islamic finance. Abdulla Al Awar said that once complete, the project would bring standardisation to the Islamic finance sector and reduce discrepancies in practices across the globe. The DIEDC signed an agreement with the Accounting and Auditing Organisation for Islamic Financial Institutions for the use of its standards as a reference point in building the international legal framework. The Sharia-compliant segment of Dubai’s economy contributed Dh41.8 billion to the emirate’s gross domestic product in 2018. Dubai continues to pursue its goal of becoming the top Islamic economy hub in the world.

Pakistan's Adviser on Finance and Revenue, Dr Abdul Hafeez Shaikh said the Covid-19 has engulfed the whole world, and the global GDP is going to contract by 3-4%. Hafeez said Islamic banking was growing at a fast pace in Pakistan and he emphasized the potential of Islamic finance to help developing countries cope with the global financial challenges. The adviser said the government established a corona relief fund and transferred cash to 16 million vulnerable families to provide them support in this difficult time.

Al Salam Bank-Bahrain announced the sponsorship of the Islamic Finance Handbook for practitioners, produced locally by the Bahrain Institute of Banking and Finance (BIBF). The Islamic Finance Handbook will cover all major Islamic financial products and services including FinTech and Takaful Insurance. The book will incorporate case-studies from Al Salam Bank Bahrain as well as interviews and thoughts from the Bank’s senior management on various aspects of Islamic Finance. The BIBF Centre for Islamic Finance was established in 1997 to help promote the growth of both Islamic finance and banking. Today, the BIBF offers degrees and certifications, and conducts training in more than 27 countries worldwide.

The steady rise and adoption in Sharia Fintech has transformed Indonesia’s trillion dollar economy. The majority of Shariah-compliant Fintechs in Indonesia use the P2P model, which usually works well with the profit-sharing model. Sharia Fintechs tend to focus on initiatives that support low-income and underserved segments of the population. Dody Dedy Waluyo, deputy governor of Indonesia’s central bank, says that there should be even more demand for halal or Islamic financial products. He notes that around 40% of the country’s GDP is generated from the Sharia economy.

Wahed raised $25 million in venture funding with proceeds being funneled into ensuring people can invest their money into a diversified portfolio consisting of stocks, commodities, real estate and sukuk. Since launching in 2017, Wahed was recently awarded the first RoboAdvisory permit by the financial regulator, the U.K.'s Capital Markets Authority, to launch its platform in Saudi Arabia. Wahed’s foray into Malaysia in 2019 bolstered their global presence, and the fintech firm now serves over 100,000 clients globally. Wahed believes that they are paving the way for ethical investment in Islamic finance and showing the world how underserved the Muslim market is.

Islamic finance can play an important role in navigating the economic turbulence brought by the Covid-19 crisis on individual and corporate levels. It is believed that the four Islamic finance instruments of Qard Hassana, social sukuk, waqf and zakat in particular can help core Islamic countries, banks and corporates navigate the current tough situation. The Covid-19 crisis has significantly slowed the core Islamic finance economies. According to Mohamed Damak, primary credit analyst at S & P Global Ratings, social instruments could be used directly by the Islamic finance industry to support households by compensating them for lost income, and by providing access to basic services, such as education and health care.

Indonesia’s state-owned BNI Syariah plans to add overseas representative offices to run trade finance, and financial institutions and remittance services. The Islamic bank will leverage the branch offices of its parent company, Bank Negara Indonesia, in Singapore, Tokyo, Seoul, Hong Kong, London and New York. The bank can now expand its international banking services after it received a non-cash capital injection of 255 billion rupiah ($17.5 million) in March. This moved it up to Tier 3, for banks holding core capital of 5 trillion rupiah (around $342.5 million) to 30 trillion rupiah. The lender is also eyeing markets outside its current geographies, such as Malaysia, Saudi Arabia and Taiwan. Alongside expanding its international presence, the bank is mitigating downside risks by optimizing its digital banking channels.

Islamic finance is making further foray in non-Muslim countries in Southeast Asia. The Islamic Bank of Thailand (branded as IBank) announced it will more than double its branches. Etiqa Insurance & Takaful, the insurance division of Malaysian banking group Maybank, has been granted an operation licence in Cambodia. IBank plans to add 60 more branches to its network to reach 100 outlets nationwide. The branch expansion aims not only at increasing the share of Muslim customers of Ibank and support Muslim career development by creating new banking jobs, but also at attracting foreign investors, particularly from the Middle East.