IslamicFinance.de

Dubai Economy in partnership with Dar Al Tawreeq has launched a Sharia-compliant smart programme to offer receivables finance to suppliers dealing with government entities in Dubai. Dubai Economy is the first government entity to offer such a financing option to suppliers. Faster payment will support businesses in growing sustainably and maintaining cash flows. Businesses working with government entities can use the smart software developed by Dar Al Tawreeq to ensure liquidity by obtaining financing on their invoices. The programme also provides easy access to on-demand working capital for businesses at no additional cost. The programme was launched by Khalid Al Kassim, Assistant Director General in Dubai Economy and Haitham Al Refaie, CEO of Tawreeq Holdings. The programme emphasises the principle of public-private partnership adopted by Dubai in its evolution into an Islamic Economy Capital.

Islamic banks are becoming increasingly popular with non-Muslim savers due to their attractive rates and their ethical principles. In the UK, Islamic banks come under the same governance as high street branches and other private banks, offering the same statutory protections under the Financial Services Compensation Scheme (FSCS). This scheme means savers get their money back if a bank or building society goes bust, although there is a cap of £85,000 per lender. According to Robert Parker, founder of Holborn Assets, with Islamic finance profit schemes, after-tax return needs to be compared between schemes to judge potential before making decisions on return rates alone. Islamic banks offer competitive rates, although savers will have to be prepared to tie up their money for at least a year to access the best deals.

In this interview David Parker, Executive Director of Bahrain's Economic Development Board, talks about the kingdom's efforts to position itself as a fintech hub. He recognizes that certain regulatory requirements can make it more challenging for firms to experiment. To mitigate this, the Central Bank of Bahrain launched a regulatory sandbox to help enable innovation. A number of accelerators and incubators have also launched operations recently, including the region’s first cloud accelerator, operated by C5 and powered by Amazon Web Services (AWS). When determining the structure of the regulatory sandbox, the Board was in close consultation with the industry. An agreement was signted with the Singapore Fintech Consortium and advisory firm Trucial Investment Partners to support the local Fintech ecosystem. The Central Bank also issued directives on crowdfunding for both Shariah compliant and non-Shariah compliant platforms and launched a national e-wallet.

The #Malaysian Ministry of International Trade and Industry (MITI) has approved funding totalling RM1.595 billion under the Shariah-compliant SME (Small and Medium Enterprises) Financing Scheme. Deputy Minister Datuk Ahmad Maslan said since the scheme was started in 2012, 1,181 applications had been received but only 971 applications had been approved. He added that the scheme would be administered by 13 participating Islamic banking institutions and the Federal government would bear 2.0% of the profit rate. The rebate is specifically to assist the SMEs which carry out business activities in all Shariah-compliant sectors. Ahmad said in Penang some RM112.6 million had been approved to-date to 76 SMEs which were Shariah-compliant.

First National Bank of #Botswana is re-launching products and service offering to the local Muslim community. Held at the Travel Lodge Conference Centre in Gaborone, the re-launch seeks to sensitize patrons and attract new customers. FNB Botswana CEO, Steven Bogatsu, said the re-launch has been long coming since the product was launched ten years ago in 2007. According to FNBB Islamic Banking Representative, Tahera Mhaisker, the offered services encompass transactional banking, vehicle and asset financing, as well as property finance for both residential and commercial properties. Mhaisker added that the re-launch was the culmination of an exciting journey for the bank.

In #Malaysia Danajamin is of national importance because of its role to ensure continued flow of credit in the financial system. It contributes to the democratisation of the capital market by giving financial guarantee insurance to companies that are raising funds from the market through the issuance of bonds and sukuk. Danajamin has provided credit enhancement guarantees for RM9 billion bond/sukuk programmes issued by 31 Malaysian companies across various sectors. These include guaranteeing sukuk issuances to finance the West Coast Expressway Project, connecting the west coast of the peninsula from Banting, Selangor, to Taiping, Perak. Recently, Danajamin has become the first financial guarantee insurer in the world to issue its own sukuk. The agency issued its maiden Tier II Subordinated RM500 million Sukuk Murabahah, with a tenure of 10 years and priced at a yield of 4.8% per annum on Oct 6. The demand from investors was so encouraging that Danajamin decided to upsize the issuance from an initial RM300 million to RM500 million.

Sberbank is considering setting up an Islamic finance entity and will propose regulatory changes to facilitate sharia-compliant business. Vnesheconombank and Tatfondbank are also developing Islamic finance products. Legislation will need to be passed in Russia to make Islamic finance cost-effective. Taxation is often an obstacle, as transactions have double or triple tax duties since they require multiple transfers of underlying assets. Sberbank is currently testing pilot transactions in leasing, financing food production and trading. Oleg Ganeev, deputy chairman at Sberbank, said the decision on whether to set up a separate entity could come by next year. He added that local businesses could also consider issuing sukuk, as they have a variety of tangible assets that can support such deals.

The Securities and Commodities Authority (SCA) launched a strategy for Islamic capital market development. The strategy includes the supervisory role played by SCA, the role played by self-regulatory organizations (SROs) and the challenges encountered. SCA's role is to issue legislative regulations for the Islamic capital market, updates on sukuk and capital adequacy regulations, the introduction of shari'ah board governance system and the organization of training programs. Markets' role is to issue provisions regulating trading securities, update existing regulations and develop investment indicators for Islamic securities. There are numerous challenges facing the Islamic finance market. They include the high costs of Islamic contracts, the increased complexity of Islamic products, the difference in perspectives of Islamic law and the availability of trained and qualified human resources.

There are several rumors about possible mergers of the smaller Islamic banks in the GCC region. According to UCapital, the relatively small size of Islamic banks is one of the compelling reasons for them to consider consolidation. However there is no compelling reason for a big number of regional banks to rush into merger deals. Banks across the region are facing pressure on profitability and tighter liquidity. The UAE, Bahrain and Oman would benefit from consolidation as many banks in these countries lack sufficient scale. A proposed merger of Kuwait Finance House and Ahli United Bank is expected to result in second biggest Islamic Bank in the GCC. Merger of Qatari banks Masraf Al Rayan, Barwa Bank and International Bank of Qatar which was announced last year is progressing and is expected to complete by end of the year.

Warba Bank announced that it will be partaking in a USD 1.25 billion five-year joint venture with the Islamic Development Bank (IDB). Warba Bank said that subscription for the deal had attracted regional and international financial institutions. The amount of issued bonds reached over 136%, around USD 1.7 billion. Warba Bank indicated that it would reap around 2.6% of annual income due to the deal. The IDB issued around 53% of the bonds to investors from the MENA region and Europe, while 47% of the bonds target investors from Asia.

The Malawi government has approved to embrace the Islamic banking system, however not through fully fledged Islamic banks, but through the "window model" only. According to Reserve Bank Governor Dalitso Kabambe, bank supervisors will shortly be engaging with each bank to prove guidance on reporting requirements of Sharia-compliant products and services. Kabambe promised that as soon as the guidelines are developed, they will be shared with each bank. In relation to this, the Muslim Association of Malawi recently invited an expert in Islamic Finance who facilitated the meeting. The South African Mufti, Ismail Ebrahim Desai, a renowned scholar in Islamic Finance advised the government on issues of proper regulation and supervision.

The Sultan of Perak State, Sultan Nazrin Muizzuddin Shah, spoke at the opening ceremony of the 14th Kuala Lumpur Islamic Finance Forum (KLIFF) 2017. He said Islamic finance has come far but there are at least six challenges at the moment. He said challenges at present include lower oil prices and changes in the global regulatory and supervisory framework. Sultan Nazrin said Islamic finance managed to cope better than its secular counterpart in terms of growth, albeit from a smaller base. Sultan Nazrin addressed the six challenges faced by the industry. In his view, the Islamic banking industry needs to improve profitability, the industry needs to maintain high standards of loan quality and corporate governance. Islamic capital markets need to grow at a faster pace, the negative trends of corporate issuances of sukuk need to be reversed. The Islamic equity market and takaful insurance need more development. Sultan Nazrin reminded that Islamic finance community must not be deviated from the objective of doing good.

#Malaysia is second only to Saudi Arabia in terms of Islamic banking in the world. Of the US$71 billion Syariah-compliant asset funds managed, 33% are in Malaysia. The country’s central bank, Bank Negara Malaysia (BNM) continues to raise awareness of Malaysia as an international Islamic financial centre. According to BNM assistant governor Marzunisham Omar, the next area of focus is quality growth. The 16 Islamic banks and 11 takaful operators are seeing value-returns by embarking on initiatives through Value-Based Intermediation (VBI). VBI is a business strategy by Islamic financial institutions, driven by a desire to create value rather than focus on short-term objectives. VBI is a business strategy of the institution to drive growth and sustain growth. It is a collaborative effort by the central bank together with Islamic banking institutions. Today nine Islamic banks are already involved and the central bank is working to develop a value-based scorecard to measure the success of banking institutions.

The 72nd session of the UN General Assembly was held from September 19 to 25 in New York. The event was co-organised by the Islamic Development Bank (IDB) and the UN Development Programme (UNDP). It emphasised that the successful implementation of the SDG (Global Goals) require a significant amount of financial resources. The UNDP once more mentioned Islamic finance and how it could be tapped as a scalable funding source for global development. According to Magdy Martínez-Soliman, UN assistant secretary general, the gap in SDG financing is currently estimated at $2.5tn every year. He noted that official development assistance alone is not an adequate source of financing, but Islamic finance could effectively come to the rescue. As a key driver, the IDB has established the Global Islamic Finance and Impact Investing Platform (GIFIIP) to create the framework of the investing ecosystem. The GIFIIP’s role is also the matchmaking between Islamic finance investors and other players, such as business incubators, development organisations and inclusive business ventures seeking capital.

Algeria’s Prime Minister, Ahmed Ouyahia, announced that Islamic banking is to be approved in two public government banks before the end of this year and will be approved in four other banks in 2018. According to Ouyahia, this funding was inevitable because of the country's difficult economic and financial situation, and it will be limited in time because it will continue till no later than 2022. Algeria has about 29 banking institutions, seven of them are government-owned public banks, and more than 20 foreign banks from the Gulf countries, others are French and one is British. The Algerian government has applied Islamic banking in a limited way through the Zakat Fund of The Ministry of Religious Affairs and Wakfs, that was launched in 2003. The country has been facing an economic crisis for three years due to the fall in oil prices. Its foreign exchange earnings fell from 60 billion dollars in 2014 to 27.5 billion dollars at the end of last year.

Uncertainty over the UK’s future status as a financial hub after leaving the European Union (EU) is already casting a shadow over London’s Islamic finance sector. It is estimated that London would lose at least 10,000 banking jobs and 20,000 roles in financial services as clients move €1.8tn of assets out of the UK. The banking exodus would also hit the Islamic finance sector in London, which is the largest globally in a non-Muslim jurisdiction. London currently hosts more than 15 large banks that operate Islamic finance windows and dozens of related service providers. A banking lobbying group has already urged the UK government to introduce post-Brexit laws that make sure that demand for Islamic finance services does not diminish. As long as the UK gives no clear direction whether and how it would excel as a financial hub, competitors will continue positioning themselves as alternative locations. Within the EU, Luxembourg and Dublin, and partly Frankfurt, have good chances to take on roles as Islamic finance hubs for Islamic finance institutions with business in the EU.

Muscat Securities Market (MSM) adopted a list of Sharia compliant companies for the second quarter of 2017. The list of companies includes 35 public shareholding companies: Al Saffa Food, Al Anwar Ceramic Tiles, Al Izz Islamic Bank, Al Jazeera Services, Al Kamil Power, Al Madina Takaful, Al Maha Ceramics, Bank Nizwa, Computer Stationery Industry, Dhofar Beverages and Food Stuff, Gulf International Chemicals, Gulf Mushrooms Products, Gulf Quarries, Majan Glass, Muscat Gases, Muscat Thread Mills, National Biscuit Industries, National Real Estate Development, Oman Cables Industry, Oman Cement, Oman Fisheries, Oman Flour Mills, Oman International Marketing, Oman Packaging, Oman Refreshments, Omani Telecommunications, Ooredoo, Port Services Corporation, Raysut Cement, Salalah Port Services, Shell Oman Marketing, Takaful Oman Insurance, United Power, and Voltamp Energy. The list is reviewed every three months by adding standards-compliant companies and eliminating those that lost their eligibility.

#Pakistan's Silk Bank plans to expand its Islamic banking business amid growing demand for Shariah-compliant financial products in the country. The State Bank of Pakistan has given approval to the bank for opening of 20 Islamic and 15 conventional branches this year. Silk Bank CEO Shaukat Tarin said the bank was going to reduce the size of corporate banking, but increase consumer and SME segments. The bank’s consumer banking portfolio continued to grow, while its non-performing loans fell by Rs10 billion in January-June 2017. The bank also made its commitment to revive the mortgage business in the current low interest rate environment. Shuja Alvi, head of investment at Silk Bank, said the bank continued to make heavy investments. Since acquisition, the sponsors have invested Rs430 billion in the bank through multiple funding.

The State Bank of #Pakistan (SBP) issued the Islamic Banking Bulletin for April-June. It reveals that deposits of the Islamic banking industry increased by Rs156 billion or 10% quarter-on-quarter to Rs1,720bn. Deposits of the overall banking industry grew 6.5% over the same period. The share of Islamic banks’ deposits in overall banking industry’s deposits increased to 13.7% at the end of June from 13.2% a quarter ago. This growth helped Islamic banks improve their asset base. The share of Islamic banks’ assets in overall banking assets was 11.6pc at the end of June. Investments also improved thanks to sukuk worth Rs71bn that the government issued in June. Net investments of the Islamic banking industry increased Rs48bn or 9.9% in April-June to Rs537bn. SME financing increased to 3.2% and the share of agricultural financing stood at 0.4% at the end of June.

Hong Leong Islamic Bank (HLISB) has pledged RM350 million for the Bumiputera Agenda Steering Unit (TERAJU) via its new Bumiputera companies programme. Of that amount, RM225 million will go to working capital and the balance for asset acquisition. The programme aims to increase Bumiputera SME's participation in the Malaysian economy by enabling small medium enterprises (SMEs) to scale up and compete in the open market. HLISB chief executive officer Jasani Abdullah said the bank targets to provide financing facilities to between 20 and 30 companies annually. He pointed out HLISB would be focusing on industries such as construction and infrastructure, telecommunications, agriculture, manufacturing and green technology sectors. Meanwhile, TERAJU chief executive officer Datuk Husni Salleh said HLISB's participation would assist Bumiputera participants to expand locally and overseas.