IslamicFinance.de

The Islamic Research and Training Institute (IRTI) and the Islamic Development Bank (IDB) organized a regional consultation workshop on Sukuk Model Law project. The workshop was organized in partnership with the Monetary Authority of Brunei Darussalam and was held in Brunei capital. Participants included senior officials of financial authorities from the IDB member countries in the ASEAN region, namely Brunei, Indonesia, Malaysia, Bangladesh and Maldives, as well as from Hong Kong, South Korea, Singapore, Philippines, Sri Lanka and Cambodia. The project aims to create a model Sukuk law and guidelines that allow IDB member countries and other jurisdictions a basis for a legal framework for Sukuk issuance and regulation. This was the second of four regional consultations on the Sukuk law. The first consultation was held in Senegal, Africa, and other two are planned for Europe/Central Asia and the MENA regions.

With a strong background in Middle Eastern banking, Burj Bank has been building a solid reputation based on integrity. Burj Bank was founded in 2007 under the name of Dawood Islamic Bank as a central pillar of Pakistan’s Islamic Banking landscape. In 2011 the bank was renamed and launched as 'Burj Bank Limited', following a massive capital injection by some Middle Eastern investors of the bank. At present, almost 85% of Burj Bank’s shareholding stems from the Middle East, with majority ownership belonging to the Islamic Corporation for Development of the Private Sector (ICD). In 2012 Burj Bank grew its deposit base by 77% and the financing portfolio also reflected a growth of 67%. The branches grew from 50 to 75, reflecting a percentage distribution network growth of 50%. The bank has entered into diverse new lines of business including SME (small- and medium-sized enterprise) banking, investment banking, agricultural financing, cash management and home Musharaka.

The Central Bank of Kenya (CBK) has licensed Dubai Islamic Bank (DIB) after the bank fulfilled its stipulated requirements. Dubai Islamic Bank Kenya intends to exclusively offer Shariah compliant banking services becoming the third fully Shariah compliant bank in Kenya. The decision is seen to highlight the CBK's confidence in the stability of the banking sector, which has been experiencing turbulence in the past couple of years. DIB is a fully owned subsidiary of Dubai Islamic Bank of the United Arab Emirates, which has an asset base of Sh4.8 trillion and capital of Sh754.8 billion. The Central Bank of Kenya welcomes the entry of international brands and believes that DIB's entry will expand the offerings in the market.

The Islamic Development Bank (IDB) dedicates special concern for promoting waqf in line with its objective of boosting social and economic development of Islamic nations. The eighth forum on fiqh issues was held in Great Britain, at the Oxford Center for Islamic Studies. Dr. Abdullah Mohammad, IDB's representative of the Islamic Institute for Research and Training stated that IDB has always sought to innovate mechanisms to benefit from the waqf institutions. Dr. Farhan Nethami, the center chair, lauded the Kuwaiti General Secretariat for Aqwaf for promoting waqf in all parts of the world, through funding philanthropic projects. He called for following the example of Kuwait and establishing coordination with non-Muslim communities in the social and economic domains, noting such an approach boosts understanding and mutual respect.

In #Malaysia Islamic investment accounts (IA) have grown at a strong pace since they were introduced in 2015. Bank Negara’s latest monthly banking statistics show that IAs have since grown to RM74.2 billion as at February this year, accounting for 13% of total liabilities within the Islamic banking system. According to Simon Chen, senior analyst at Moody’s Investors Service, by 2020 IAs will probably account for some 16% of the Islamic banking system’s total liabilities. An important feature of IAs is the sharing of risk between the bank and the account holder. For an investor, IAs are attractive because they offer much higher returns than a deposit account. But, unlike a deposit account, the principal amount in an IA is not guaranteed by Perbadanan Insurans Deposit Malaysia. According to Chen, a key issue that remains is whether the loss-sharing mechanism in IAs will be honoured by banks in case of actual losses. A significant loss to test the resilience of this regime has yet to occur.

#Malaysian RHB Islamic Bank has issued RM250mil subordinated sukuk murabahah, the bank's first bond issuance in about three years. Parent company RHB Bank said the sukuk would mature in 10 years and could only be redeemed from the sixth year onwards. It has a fixed profit rate of 4.88% per annum, payable semi-annually in arrears throughout the entire tenure. RHB said proceeds raised from the sukuk issuance would be used for RHB Islamic’s syariah compliant working capital. In 2016, RHB Islamic turned in a profit after tax of RM324.8mil, a 27.4% increase against RM254.8mil in the preceding year.

Allianz Malaysia, a subsidiary of the German Allianz SE, has ended discussions to acquire HSBC Amanah Takaful. The company announced it has discontinued its negotiations with the shareholders of HSBC Amanah, namely HSBC Insurance (Asia-Pacific), JAB Capital and Employees Provident Fund (EPF). The life and general insurer did not give a reason why the talks failed. Allianz Malaysia CEO, Zakri Mohd Khir, previously said that he had been approached by takaful operators in the past, but the asking price was too high. Allianz Malaysia had been pursuing a bid for HSBC Amanah since October last year. Allianz Malaysia saw its net profit rise by a marginal 1.1% to RM312.13 million in the financial year 2016 (FY16) from RM308.87 million in FY15 due to higher gross earned premiums and investment income. Revenue also grew by 3.5% to RM4.68 billion from RM4.52 billion.

Algeria is edging slowly towards offering banking services to suit more religiously conservative investors. The country is now looking for more ways to offset the sharp fall in oil prices and its energy revenues. Six state-run banks plan to start Islamic financial services by the end of the year or in early 2018, and a national Shariah board that would oversee Islamic banking is also planned by the end of 2017. However, Algeria’s Islamic finance plan still faces huge barriers. It lacks a legal framework and technical expertise. Algeria is far behind North African neighbours Morocco and Tunisia, which have started to develop legislation for Islamic finance and sukuk bonds, overseen by a central religious board. Algeria is targeting domestic savers rather than foreign investors. Many local people distrust the state-owned banks and keep large sums at home, untaxed, in Algerian and foreign currency.

Japan continues foraying into the global Islamic finance sector in order to benefit from previously untapped opportunities. The Japanese Mizuho Bank through its Malaysian subsidiary became the next bank to enter an Islamic finance deal by signing a murabaha credit facility agreement. The deal is valued at $300mn and was signed by Mizuho Bank and the Islamic Corporation for the Development of the Private Sector (ICD). The two-year financing term will be used to fund projects undertaken by ICD in its member countries and is the first cross-border bilateral Islamic facility for Mizuho Bank. The agreement follows a similar deal between the ICD and Bank of Tokyo-Mitsubishi UFJ on a $100mn murabaha facility back in 2014. Japan’s capital market regulator Financial Services Agency supports Japanese banks to conduct Islamic finance business by allowing their foreign subsidiaries to take Islamic deposits. Currently, the sector is waiting for amended banking regulations to enable banks to provide Islamic banking products on the domestic market for the first time.

QIB-UK has received official licensing to provide Sharia-compliant Murabaha Facilities for London properties. The new product enables QIB-UK to finance a buy-to-live property as well as refinance customers’ existing properties in London. QIB-UK has undergone a restructuring process to focus on serving the bank’s high-net-worth clients by addressing their specific financial needs in the UK. The bank offers its customers a range of Sharia-compliant banking services including Current Accounts in GBP, inward and outward transfers, direct debits, standing orders and more. QIB-UK also provides Debit Cards which are linked to a client’s current account with a high daily allowance of £15,000. Additionally, the Bank offers Wakala Deposits, Instant Access Savings Account, Notice Accounts and other premium products and services. QIB-UK was fully authorised as an Islamic Bank by the UK Financial Services Authority in 2008 and is fully owned by Qatar Islamic Bank.

The Islamic Development Bank (IDB) plans to take at least a 10% stake in Turkey's state-run stock exchange, Borsa Instanbul. Abdulhakim Elwaer, IDB's director of cooperation, said negotiations are expected to finalize in two to three months as part of wider efforts to develop Islamic finance in Turkey. Elwaer emphasized the bank's wish to help develop Turkey as a global Islamic financial center. IDB and Borsa Istanbul signed a cooperation agreement in November, with discussions currently ongoing to decide on a specific size and time frame. The bourse has a share capital of 423 million lira ($115.6 million), implying a value of 42.3 million lira for a 10% stake. Elwaer added that a gold trading platform is also in discussion, although the equity stake remains the bank's biggest priority.

#Saudi Jadwa Investment announced the conclusion of the public offering of its first Shariah-compliant Real Estate Investment Traded Fund, Jadwa REIT Al-Haramain Fund. The new fund will invest in real estate properties in Makkah and Madinah. The REIT, which has an initial size of SR660 million ($176 million), offered SR360 million worth of units to the general public. Over 5,800 individual and intuitional investors subscribed for SR4.53 billion during the offer period, resulting in a 1.257% coverage of the offered units. Haitham Al-Ghannam, head of alternative investments at Jadwa, said the initial portfolio of the REIT would comprise of two hospitality assets, a four-star hotel and a pilgrim accommodation. Both properties are located in Makkah with a combined capacity of 984 hotel rooms. At its initial offer price of SR10 per unit, the REIT offers net initial yield of 5.2%.

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) will develop a package of standards covering Islamic endowments or awqaf. AAOIFI did not give a time frame for the completion of its awqaf standards, but said its board had discussed and approved specifications regarding the accounting standards. The plans are part of wider industry efforts to modernise awqaf, which receive donations to operate specific social projects, such as mosques, schools and welfare schemes. Most awqaf do not disclose full financial figures, although their underperformance is believed to be considerable. In India, awqaf are estimated to own 490,000 properties but their estimated annual income is just 1.63 billion rupees ($25.22 million.)

Malaysia's Public Sector Home Financing Board issued up to RM3.25 billion sukuk to finance housing loans to the public sector employees. The board is also known as Lembaga Pembiayaan Perumahan Sektor Awam (LPPSA). The LPPSA said the RM3.25 billion sukuk notes formed a part of its RM25 billion Islamic commercial papers programme, which is guaranteed by the Malaysian Government. The sukuk was issued in tranches of five-year to 30-year and was priced at 4.17% to 5.225% per annum across tenures. Lead managers include Affin Hwang Investment Bank, AmInvestment Bank, Bank Islam Malaysia, CIMB Investment Bank, Maybank Investment Bank, OCBC Bank and RHB Investment Bank. CIMB is also the facility agent while RHB Islamic is the Shariah adviser.

Sultan Choudhury, CEO of Al Rayan Bank, talks about Islamic finance in Britain and its appeal to non-Muslims. He says, Islamic finance appeals to anyone who agrees with the underlying principles: equitable distribution for everyone, prudent spending and the well-being of the community as a whole. It also provides an ethical alternative to traditional banking. Al Rayan Bank is structured to ensure that it operates ethically on a day-to-day basis. The bank's home-purchase plans (HPP) are structured differently to conventional mortgages. HPPs are based on the Islamic finance principles of ijara and diminishing musharaka. Currently the bank estimates that more than a quarter of customers are non-Muslim and the customer base is expected to grow in the coming years.

Bosna Bank International's net profit increased to 6.4 million marka ($3.5 million/3.3 million euro) last year from 5.6 million marka in 2015. Net interest income grew 22.5% year-on-year to 22.3 million marka in 2016, while net fee and commission income rose to 10.9 million marka from 9.6 million marka. The bank's total assets stood at 895.4 million marka at the end of 2016.

In Great Britain there are currently six Islamic banks, while another 20 lenders offer Islamic financial products and services. Al Rayan is Britain’s largest Sharia-compliant bank with 70,000 customers and 13 offices and branches. The bank underwent a major overhaul in 2014 when it was acquired by its Qatari parent, Masraf Al Rayan. Since that point, the brand was made more accessible, the imagery is no longer just Arabic, the bank uses British imagery as it is targeting all Brits. CEO Sultan Choudhury says about 25% of the bank’s customers are non-Muslim. Mr Choudhury also has his eyes fixed on the potential of the wider international market. In particular, he highlights the GCC national and expat market and HPPs (mortgages with an interest-free and Sharia-compliant structure). He says, Al Rayan's ambition is to be the number one bank for HPPs for GCC nationals and expats.

Turkish lender Albaraka Turk has secured a $213 million murabaha-based loan syndication, up from the $150 million it initially sought. The bank said the profit margin for the 370-day sharia-compliant facility was 125 basis points over three-month LIBOR. The lender had appointed ABC Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital Ltd, Qatar Islamic Bank and Standard Chartered Bank to arrange the transaction. The bank is a unit of the Al Baraka Banking Group, which is also planing to issue dollar-denominated sukuk.

London Stock Exchange welcomes the largest Sukuk issued by a supranational globally in 2017, raising $1.25bn. The isssuance is listed by the Saudi Arabia based Islamic Development Bank and is a five-year bond with a 2.393 % yield. This listing adds to the broad range of Islamic finance products available to investors on London Stock Exchange. According to Nikhil Rathi, CEO of the London Stock Exchange, the listing demonstrates London’s standing as the world’s most international financial centre and confirms the UK as the key destination for Shariah-compliant financial products. The CFO of Islamic Development Bank, Dr. Ahmet Tiktik, said choosing London as the location for the new $1.25bn Sukuk shows the bank's continuous support for London Stock Exchange.

Algeria is edging slowly towards Islamic banking services to suit more religiously conservative investors. Finance Minister Hadji Baba Ammi has already announced plans for the country's first local bond. Now six state-run banks plan to start Islamic financial services by the end of the year or in early 2018 and a national sharia board that would oversee Islamic banking is also planned by the end of 2017. Algeria's Islamic finance plan still faces huge barriers. It lacks a legal framework and technical expertise. Algeria is far behind North African neighbours Morocco and Tunisia, which have started to develop legislation for Islamic finance. The country is targetting domestic savers rather than foreign investors. Many local people distrust the state-owned banks and keep large sums at home in Algerian and foreign currency.