IslamicFinance.de

A new Islamic bank will open in the Palestinian territories later this year. Al Safa Bank, founded locally, will be based in Ramallah, the seat of the Palestinian government in the Israeli-occupied West Bank. It will be capitalised at $75 million. Co-founder Abdel-Rahim Al-Hassan said the bank has already bought some 37 million shares, valued at $37 million, with another 38 million shares now on sale to the public. Al Safa will be the third bank in the West Bank to operate under Islamic law. The bank's services will include project-funding, foreign currency trading and real estate investment.

At a conference on Islamic finance in Singapore many experts warned that the industry depends too heavily on oil and gas for revenue. According to expert Rushdi Siddiqui the industry saw a 43% drop in sukuk issuance and he argued for the need to 'delink' Islamic finance from oil and gas. Other participants noted that the industry's growth is slowed by the 'perception price' that comes with political volatility in the Middle East and Malaysia.

Bank Al Jazira has priced a 2 billion riyal ($533 million) sukuk issue that will boost the lender’s capital reserves. The bank priced the transaction at 190 basis points over the six-month Saudi interbank offered rate. The Islamic bond issue is structured with a ten-year lifespan but includes an option for the lender to redeem the sukuk after five years. It was arranged by GIB Capital as well as the bank’s own investment banking arm.

Offshore jurisdictions have become increasingly popular with Islamic finance institutions in the recent past. Such jurisdictions allow the hassle-free incorporation of trusts, special purpose vehicles or other financial intermediary bodies necessary to be established between parties within an Islamic finance structure. Also, offshore financial centres are usually offering services at lower costs in a favourable tax environment. The most developed in this respect are the Cayman Islands, Luxembourg and Labuan in Malaysia, as Kuala Lumpur-based International Islamic Finance Center pointed out.

Turkey is issuing $1 billion dollar-denominated sukuk after a 18-month absence from the Islamic finance market. The government is offering five-year notes at 290 basis points above the midswap rate, aiming to sell debt before the Federal Reserve acts on its stated intention to increase interest rates. Turkey has already raised $3 billion in capital markets this year, completing two-thirds of its planned borrowing program for 2016. Turkish government debt is rated Baa3 at Moody’s Investors Service, the lowest investment grade.

Mohammad Abdul Mannan has been reappointed as the chief executive officer of Islami Bank Bangladesh for a third term. Mannan recently received 'The Asian Banker CEO Leadership Achievement Award-2016' and the bank was judged as 'The Best Managed Bank in Bangladesh' for the same year.

Kuwait's Boubyan Bank issued $250 million Perpetual Tier 1 Capital Certificates, completed May 16, the first public sukuk from a Kuwaiti bank, the first public sukuk out of Kuwait since 2007 and the world’s first public fully Basel III-compliant Tier 1 sukuk. The certificates were made available on the Irish Stock Exchange and NASDAQ Dubai. The issuance was advised by Dentons. Joint coordinators included Standard Chartered, HSBC and Boubyan, Emirates NBD Capital, Dubai Islamic Bank, KFH Capital and National Bank of Kuwait. Co-managers of the transaction were Abu Dhabi Islamic Bank, Ajman Bank and Noor Bank.

Russia is hoping to close deals shortly to attract Islamic banks to invest in Russia to help make up for a shortfall in international finance caused by Western sanctions. The head of Vnesheconombank Sergei Gorkov said funds invested by Islamic banks will be used for infrastructure projects in the country. He added that that Russia is expected to close its first deals to attract Islamic capital in the autumn of 2016. However, the active introduction of Islamic banking is opposed by some Russian lawmakers.

In the USD sukuk pipeline, DP World and Noor Bank have selected banks for a possible benchmark issuance. Turkey’s Deputy Prime Minister Mehmet Simsek mentioned plans of an issuance within 1H16. Bloomberg Malaysia Sukuk Ex-MYR Total Return (BMSXMTR) and Dow Jones Sukuk Total Return (DJSUKTXR) indices closed lower at 103.55 (-0.26%) and 159.18 (-0.44%) respectively. Malaysia’s revenue fell slightly to MYR1.54bn (-0.7%) in 2015 while income tax revenue increased by 7.8%. Turkey's unemployment rate declined to 10.9% and its government budget balance improved to TRY5.36bn in April. Indonesia’s trade balance rose to USD667m in April mainly due to the larger than expected decline in imports.

The Islamic world is sizeable market by any global standard: 1.7 billion consumers, with a birth rate growing two times the pace of the world average. Consumer spending in 2014 tallied $1.8 trillion (Dh6.6 trillion) and is slated to surge to $2.6 trillion by 2020 according to a study by Thomson Reuters. The market development is being led primarily by a handful of countries with Malaysia, the UAE and Singapore standing out. The fastest growing sectors are halal food, halal travel and leisure, the pharmaceutical and cosmetics arena and Islamic finance. But the reality is too many countries are being left behind. Poverty rates remain too high, with a quarter of the population for example in Egypt still living on less than $2 a day.

Several Omani private firms are keen to raise funds by way of sukuk after Mohammed Al Barwani Holding received approval for a OMR58 million-issue. The companies interested in issuing sukuk can avail tax concession if the special purpose vehicle for sukuk issue is registered in Oman and the issue is floated in the local market. Mohammed Al Barwani Holding's sukuk issue opened subscription on Monday either in Omani rial or dollar. So far, Oman witnessed only two sukuk issues that raised a total of OMR300 million, OMR50 million from real estate development firm Tilal Development Company and the other one a OMR250 million sovereign sukuk issue.

Kenya has a higher percentage of Christians compared to Muslims, but this country is seeing a surge in Islamic financing. According to Rahma Hassan Hersi, Managing Partner at Awal Consulting, the lack of regulations is deterring potential growth. There is a need to address this issue in tandem with the central bank. There is also very limited expertise. The penetration of Islamic finance in Kenya is estimated at 2% with a limited number of banks and insurance companies playing in that space.

#Malaysia’s state investment company 1MDB paid the coupon on its Islamic debt after missing two payments on other securities earlier. The company undertook the scheduled payment of 143.8 million ringgit ($34.9 million) on its 5 billion ringgit 5.75% notes due 2039. President Arul Kanda said 1MDB has ample liquidity to make interest payments and service its current debt obligations. 1MDB’s separate $1.75 billion of 5.99% notes due 2022, which are guaranteed by IPIC, rose 0.1 cent to 103.7.

Saudi Arabia’s government is investigating the country’s banks for creating structured products which allow traders to speculate on the possible end of the currency’s US Dollar peg. Saudi officials continue to maintain that the country has no plans to devalue, and a number of political analysts say such a move would be a last resort. Saudi Arabia’s oil price driven crisis has seen the country’s budget deficit widening out to 19% of GDP. This caused a collapse in government spending which has slowed economic growth to near zero. A devaluing of the Riyal would increase oil revenues in Riyal terms and provide more domestic revenues for the government, but would make imports a lot more expensive.

Crowdfunding is a way to connect ordinary individuals with the innovative projects they support. It is possible for retail investors to become venture capitalists and probably own shares in the next giant tech company. In Indonesia, however, this method of raising money might face some challenges. Firstly, Indonesians have trust issues with money transactions carried out over the internet. Secondly, there is a lack of crowdfunding education among retail investors. The government needs to undertake supervisory and regulatory functions to respond to the problems.

In Uganda the outgoing minister of Gender and Social Development has advised commercial banks to urgently develop products for Islamic Banking. Muruli Mukasa said the parliament passed the law and the all the communities in Uganda have accepted this model of banking. The Financial Institutions Bill 2015 paved way for the introduction of three new products: Islamic Banking, Bancassurance and Agency Banking. But Bank of Uganda still has to issue regulations that will guide commercial banks on how to manage the new form of banking.

Islamic banking in #Uganda will broaden government financing options and will ease its borrowing from the private sector, through the Sukuk bonds. According to the managing director of ABL Dunamis, Abubaker Mayanja, Sukuk funding will be available for government infrastructure projects; as long as they meet sharia requirements and the funds are invested directly into the project. He said the bonds will be issued by all commercial banks, regardless of whether they are Muslim founded or not.

Abu Dhabi Financial Group (ADFG) and Bahrain’s GFH Financial Group are jointly setting up an Islamic bank in Abu Dhabi’s new financial free zone with initial capital of $100 mn. ADFG's CEO Jassim Al Seddiqi said the bank will open very soon, it will be run as a commercial bank accepting offshore deposits and dealing in dollars. ADFG has recently raised its stake in GFH to 11.74% from 10% and the two firms are seeking other joint opportunities for the future.

Emirates Islamic Bank has launched the sale of $750 million in sukuk with five years duration. Pricing for the instrument has been set at 220 basis points over midswaps after attracting orders from investors worth more than $2.2 billion. The pricing is tighter than the 225 bps over the same benchmark indicated earlier in the day, and well inside initial guidance of the 240 bps area. The issuance was arranged by Standard Chartered, Al Hilal Bank, Bank ABC, Dubai Islamic Bank, HSBC, Maybank and Noor Bank.

GFH Financial Group plans to list its Bahraini subsidiary Khaleeji Commercial Bank in Dubai and acquire a financial services company to increase shareholder value. GFH's CEO Hisham al-Rayes said the company wants to regarded by investors as a financial holding company rather than an investment bank. The company aims to generate around 15% of its income over the next two years from real estate investments, which will be managed by a new Dubai-based operation called GFH Real Estate.