IslamicFinance.de

The Kenyan Treasury will push through the country’s first Sukuk bond in the coming year. The changes will see the Public Finance Management Act amended to allow the issuance of the bond, which has been in the works since 2014.
Treasury CS Henry Rotich said that the Capital Markets Act, the Co-operatives Societies Act and Sacco Societies Act are also lined up for ammendment.
The government plans to borrow up to Sh256 billion from external sources in the next fiscal year, to plug a budget deficit of Sh524 billion. The State has in the recent past taken up foreign loans in form of the Eurobond and syndicated loans from commercial lenders. Kenya has been mulling over a Sukuk bond for the past two fiscal years, given its highly discounted nature, which would provide cheaper financing compared to commercial loans. The lack of the necessary regulatory framework has, however, delayed this option. In the current fiscal year, Kenya has turned to syndicated loans to finance part of her budget deficit. These loans include the just signed $800 million loan from four international banks, and a similar $500 million facility taken from the African Export-Import bank.

The merger of Qatari banks Masraf Al Rayan, Barwa Bank and International Bank of Qatar is said to take six months to complete, Masraf Al Rayan’s chairman Hussain Ali al-Abdulla said lately. In December Reuters had reported that merger talks had begun which, if successful, would create the Gulf state’s second-largest bank. The new bank would have assets worth more than 160 billion riyals ($44 billion).
KPMG and PricewaterhouseCoopers have been appointed as merger advisers, along with law firm Allen & Overy as legal adviser, and furthermore the Barwa Bank and International Bank of Qatar. Masraf Al Rayan’s shareholders approved the issuance of sukuk worth up to $2 billion to meet the bank’s liquidity needs. In January banks had been appointed to handle a debut sukuk issue of around $500 million, banking sources told Reuters that month, but Abdullah said on Sunday the timing of the issue had not been finalised. Asked whether the bank’s liquidity had been affected by low oil prices Abudullah said “liquidity now is better than in 2016” and that the U.S. Federal Reserve’s raising of interest rates last month would improve the profits of Qatari banks.

The shareholders of Qatar's Masraf Al Rayan, an Islamic lender, approved the issuance of sukuk worth up to $2 billion to meet the bank's liquidity needs on Sunday. The Gulf state's second largest lender by market value appointed banks in January to handle a debut sukuk issue of around $500 million, banking sources told Reuters that month.

Kenya's government has unveiled a package of initiatives under its latest budget to develop Islamic finance in the country, as part of efforts to mobilise local funds and set Nairobi as a regional hub for the sector. The moves could spur Kenya's decade-old Islamic banking sector and help the government fund infrastructure in a country where Muslims account for about 10% of the population of some 44 million.
Finance Minister Henry Rotich outlined the steps as part of the country's 2017/2018 budget, released on Thursday, aiming to level the playing field between Islamic and interest-based transactions. Amendments to the Public Finance Management Act will also allow the government to issue Islamic bonds, or sukuk, as an alternative funding source. This could prove useful for a government that has set aside billions for infrastructure, with a fiscal deficit set at 524.6 billion shillings ($5.10 billion).

The book "Another Economy is Possible" examines new ways of organising work and life, from co-operatives, barter networks, and ethical banking to community currencies, shared time banks and solidarity network. Co-operatives such as The Cooperativa Integral Catalana (CIC) in Barcelona are used as examples of how this can work. With over 600 members and 2,000 participants, CIC acts as an umbrella structure for independent producers and consumers of organic food. According to environmental scientist Giorgios Kallis, CIC has its own conceptual mode of the economy, consisting of five co-centric cycles, with reciprocity and gift exchange at the core. This conceptual model is materialised into an alternative economy.

Shahid Hossain joined Social Islami Bank (SIBL) as chief executive officer. The bank also promoted Tarik Morshed as its additional managing director. Prior to joining SIBL, Hossain had been serving Southeast Bank as managing director. He started his banking career as a probationary officer with National Bank in 1983. He completed his MSS in political science from Dhaka University in 1980. Prior to the promotion, Tarik Morshed had been serving SIBL as deputy managing director. He has been with SIBL since its inception in 1995 and holds a master's degree in management from Rajshahi University.

Islamic financial products have evolved from simple and straightforward structures to highly sophisticated instruments. Tawarruq, popularly known as commodity murabahah, has become a new phenomenon in the Malaysian Islamic banking system. This is particularly after the issuance of a 2012 Bank Negara Malaysia circular on bay’ inah (sale and buy-back), which substantially tightens the syariah requirements. Since then, the Malaysian Islamic banking system has started to actively use tawarruq as an alternative to bay’ inah. Nevertheless, its extensive use has raised several questions. The International Islamic Fiqh Academy held in the United Arab Emirates in 2009 resolved that the modern practice of tawarruq is impermissible. As such, the Malaysian regulators and syariah committees have to put certain parameters and limitations in the use of tawarruq.

Al Rayan Bank has introduced a new range of home purchase plans (HPPs) to facilitate the move of an existing home finance product to the Sharia-compliant provider. The lender will assist customers by waiving or contributing to the fees associated with refinancing home finance to another provider. Al Rayan will waive the £399 HPP administration fee and the valuation will be paid by the bank, up to a maximum of £600, while the first monthly payment will see Al Rayan pay a cashback of £300 to the customer. The news comes after Al Rayan posted a 228% surge in home finance completions in January as it reported demand for Islamic finance was at an all-time high.

A #Kenyan college yesterday signed a three-year memorandum of Understanding (MoU) with Malaysian training university to develop curriculum on Islamic Finance. Coast International College (CIC) also signed a letter of collaboration with the Inceif, the global University for Islamic Finance owned by the Central Bank of Malaysia. The MoU was signed by college principal Loise Gichuki, Inceif president and chief executive Daud Vicary Abdullah. The programme will offer Diploma in Islamic finance. The Malaysia University will provide curriculum, course materials and lectures related to Islamic jurisprudence, Islamic Law of contract, financial accounting and fundamentals of Islamic Banking.

Saudi Aramco is paying a significant premium to the government and to its previous borrowing in its first sukuk sale. Aramco is offering 7-year, riyal-denominated sukuk at 25 basis points (bps) over the six-month Saudi Arabian Interbank Offered Rate (SAIBOR). The private placement, part of a 37.5 billion riyal ($10 billion) Islamic bond programme, could be as large as about 6 billion. It is expected to take place early next week. Riyadh is restructuring the company and its regulatory environment to make Aramco attractive as an investment. But major decisions on the company's structure and its post-IPO dividend policy have not been announced. Alinma Investment, HSBC Saudi Arabia, NCB Capital and Riyad Capital are the joint lead coordinators. They are joined by GIB Capital, Samba Capital and Saudi Fransi Capital in dealer roles.

A year ago, when Tatagroprombank launched The Partnership Banking Center, many analysts believed in its success. At the moment, Robert Musin, one of the main shareholders of Tatagroprombank is facing criminal charges for alleged large-scale fraud. In addition to that, on March 9 the Russian parliament decided to reject the bill that would let Islamic banking fully and legally operate in Russia. Since 1997, several Islamic "windows" were set up, but most eventually closed down. According to Nina Mamedova, head of the Iranian sector at the Russian Academy of Science, Russia doesn’t have a well-developed legal framework for Islamic banking. She added that inspite of that, due to the growth of the Muslim population in Russia, some forms of the Islamic banking system will continue to exist in Russia.

Saudi Arabia is considering whether to change the structure of its planned U.S. dollar sukuk issue, which would be the kingdom's first international sukuk issue. The structure would comprise a mudaraba agreement plus a murabaha facility. Potential changes to that structure are now under discussion to make the instrument more easily tradable and less complex to understand for international investors. So the structure may be changed to an ijara format, a lease-financing structure which is common among sovereign sukuk issuance around the world. The new issue would be Saudi Arabia's second international bond sale after a $17.5 billion debut conventional bond issue last October. Citi, HSBC and JP Morgan are global coordinators, BNP Paribas and Deutsche Bank are also involved with lead roles.

Dubai-based building company Drake & Scull said it breached financial covenants in relation to a sukuk syndicated facility and other bank facilities in 2016. The company incurred an annual loss 815.3 million dirhams ($222.01 million) last year as low oil prices and an economic slowdown hit the construction sector in the Gulf region. Drake & Scull was not able to comply with reporting requirements requested for a conditional waiver and therefore, breached financial covenants. These loans are now overdue on their principal and interest payments, and they are technically payable on demand.

Maybank Islamic is turning to its home markets for growth, in particularly Indonesia where it manages $2 billion worth of assets and is aiming to compete with domestic Islamic banks. According to CEO Mohamed Rafique Merican, the bank could grow beyond its core markets of Malaysia, Singapore and Indonesia, but expansion in other markets would be opportunistic. Indonesia remains a key market for the bank, after Malaysia which accounts for 90% of the bank's business. As part of the ASEAN banking integration framework (ABIF), Indonesia and Malaysia have agreed in August to give their banks greater access to each other's markets. The move would give Malaysia's Islamic banks a potential lead to tap into the world's biggest Muslim-majority country, and one that continues to restrict to foreign lenders.

Faith-based advisors assist clients with financial planning, investment management, insurance, and other aspects of wealth management that their secular counterparts do. But according to Kingdom Advisors President Rob West, faith-based advisors generally help clients determine "what’s enough" for them to live on and use the rest to "serve others". One example is Ronald Blue & Co., a US$65-billion multi-branch advisory firm that incorporates religious values and laws into financial plans. While some faith-based advisory firms cater to lower-value investors, many serve relatively high-net-worth clients and charge higher than the standard 1% of assets per year. At Islam-oriented Azzad Asset Management, fees start at 1.75% to 2% of assets and decline with increasing asset values. The high fees are justified by labour-intensive services such as screening out certain stocks and calculating the zakat.

According to panellists speaking at the Finnovasia 2017 Conference, Shariah contracts' greater regulatory complexity can be eased by fintech solutions. Raja Teh Maimunah, CEO of Aminvestment Bank in Kuala Lumpur, stressed that the complex nature of Sharia instruments requires bankers take a different approach. Raja and her bank had wanted to digitise their banking transaction processes by introducing a new type of contract for current and savings accounts. It was eventually addressed with a fintech solution developed by one of her staff. Dato’ Yasmin Mahmood, CEO of Malaysia Digital Economy Corporation, pointed out that the growth of Malaysia’s digital economy currently stands at 17.8% of the country’s total GDP of $296.3 billion, and is expected to meet or exceed the 18.2% target set by the government for 2020.

IFC, a member of the World Bank Group, has announced an equity investment of $30 million via the consortium fund Network International to expand the payment infrastructure in the Middle East and Africa. Network International is jointly controlled by the Emirates NBD Bank and Warburg Pincus/General Atlantic consortium. The investment will help the company expand and modernise its banking client network in the Middle East and Africa. The investment is expected to allow MSMEs to access card-based payments and develop digital data records, to help them grow their customer base. Bassel Hamwi, Head of the IFC Middle East and North Africa Fund, said the shared infrastructure brings down costs and boosts financial inclusion, while reducing the risk of fraud.

Saudi Arabian Oil Co (Aramco) set final pricing for its debut Islamic bond as the company presses ahead with plans to raise $10 billion in debt. Aramco is selling debt with a seven year tenure in a private placement at 25 basis points over the country’s interbank offered rate. The oil giant is selling debt ahead of an initial public offering in 2018 as the country’s finance ministry plans to cut taxation on the company. The cut will boost Aramco’s net income by 300%, putting per-barrel income in a range similar to that of international oil companies. Aramco’s sukuk follows Saudi Arabia’s $17.5 billion bond issue in October, which was the state’s debut international debt sale. Saudi Arabia is also said to be planning a sale of riyal-denominated Islamic bonds to local institutions to help boost the country’s Islamic bond market.

The Auditing Organisation for Islamic Financial Institutions (AAOIFI) has published the exposure draft of the accounting standard on Sukuk and invites feedback from the Islamic finance industry. The objective of the standard is to prescribe the accounting and financial reporting guidance for the accounting treatment and classification with regard to the Sukuk issuance. It also covers the presentation and disclosure of Sukuk issuance. It provides principle-based accounting treatments for broadly two types of Sukuk issuance, off balance sheet and on balancesheet as well as respective subcategories. Comments on the exposure draft are welcome and should be directed no later than 31 March 2017 to accounting@aaoifi.com. Comments and suggestions will be presented in an upcoming meeting to discuss and make necessary changes to the standard.

#Kenyan financial regulators expect new guidelines in 2017 for the supervision of the entire sector. Insurance Regulatory Authority (IRA) supervisor Mary Nkiomu said the Islamic Finance Project Management Office established in December 2015 has submitted policy proposals to the National Treasury. The guidelines will enable the financial sector regulators to incorporate Islamic finance regulatory frameworks. Islamic finance institutions are largely operating in a self-regulatory environment governed by religious principles, backed with regulations for conventional operations. The guidelines, drafted in 2015, are set be rolled out to the public for consultations this year. The delay in the roll out has been attributed to terrorist attacks over the years.