IslamicFinance.de

The total IT spending in the Islamic banking sector in the Gulf countries reached $400 million in 2011. Notable growth in the following years is expected. The financial crisis since 2008 has hit the Islamic financial sector as well, causing consolidation of institutions, merging of banks etc. Even though Islamic banks have remained on a positive financial footing during the post-crisis period in comparison with conventional banks, the former have had problems with profitability due to rising costs and operational inefficiencies. In order to optimize current infrastructure, banks invest in one major technology area - implementation and adoption of cutting-edge software and IT services.

An agreement was signed between Bank Sohar and Dar al Sharia, which will build the foundations of a Shari'ah-compatible Islamic window. According to the deal, Dar al Sharia shall provide help to the Omani lender in terms of issues relating to Islamic banking and financial services. These include Shari'ah-compliant structuring and documentation services for all types of products.

This week, Abu Dhabi Islamic Bank (ADIB) plans to issue a hybrid sukuk. However, it is likely that investors will demand a big premium for the rare structure. According to expectations, the bank will raise minium $500m to shore up its core capital, complying thus with tighter Basel III global standards. This is a prerequisite for the Tier 1 capital which will be introduced in the UAE in the years to come. ADIB’s Tier 1 sukuk structure is different from the usual instruments to raise Tier 2 capital sold by different Gulf lenders. Firstly, there is no maturity date. Also, the principal is repaid at the discretion of the issuer.

Dana Gas, which announced inability to repay a $920 million sukuk on maturity last week, claims to have no information about any action from bondholders against the company. It is expected that creditors will stake claim to the company's assets in Egypt. In a statement by Dana, it was confirmed that the company is not aware of any enforcement actions against the company by sukukholders. They further added that discussions with the adhoc committee of sukukholders show constructive progress.

It was recently stated in the Financial Times that Saudi Arabia intends to lobby the UK government in November in order to set up a confidential court in London. The court is to settle multimillion pound commercial disputes coming from the Middle Eastern country. The people of Saudi Arabia hope that an arbitration centre based in London will contribute to countering investor concerns about the Saudi Arabian legal system. This way, foreign investment could be stimulated. According to Amgad Husein and John Balouziyeh from SNR Denton, the success of such an arbitration centre depends on its implementation.

Significant growth in the Islamic asset management industry was observed over the past ten years. Starting with structuring and launching of funds, it has developed to a more comprehensive wealth management service. However, the industry has not set its focus on the definition of a suitable asset allocation framework for Islamic investments yet. With the increase of the allocation to sukuk, the selected use of Shariah-compliant derivatives and a risk parity approach to asset allocation can become the foundation for a more effective Islamic portfolio management.

Almarai Co, dairy and food producer in Saudi Arabia, has planned the issuance of the second tranche of its riyal-denominated sukuk programme in the coming months. The sukuk is directed towards private investors who are residents of the Kingdom. The first tranche, which was issued in March, was able to raise 1 billion riyals ($266.6 million). Thus, the deal was 4.7 times oversubscribed. The sukuk programme aims to help finance the company's $4.2 billion investment programme to expand its business between 2013 to 2017.

The jump of Bahrain's sukuk in October resulted in the yield reaching a record and standing out from the neighbour countries. In October, the sukuk fell 65 basis points, or 0.65 percentage point. This is the biggest drop since the start of the trade in March 2010. According to the HSBC/Nasdaq Dubai GCC US Dollar Sukuk Index, this drop got ahead of a 21 basis-point decline to 2.96% in the average yield on sukuk in the Gulf Cooperation Council.

Tilal Development Company turns to Capital Market Authority (CMA) for raising funds by the country's first sukuk issue. According to Abdullah bin Salem Al Salmi, executive president of CMA, they are ready to grant Tilal their approval as soon as the latter are ready with a plan. Al Salmi further added that Islamic financial instruments like sukuk are necessary for Islamic banks in order to invest their deposits. A lack of Islamic debt instruments could result in a deposit growth much higher than the anticipated growth in terms of assets which would make deposit investment very difficult.

Almarai Co, a producer of dairy and food products, announced its intentions of issuing the second tranche of a riyal-denominated sukuk programme. The issuance is to be made in the coming months and is directed towards private investors. The first tranche of the programme brought the company 1 billion riyals ($266.6 million). The investors in the second tranche have to be residents of the Kingdom. The sukuk is to contribute to financing Almarai's $4.2 billion investment programme, the goal of which is the expansion of the company's business between 2013 to 2017.

Recently, Dubai Islamic Bank (DIB) announced a flat third-quarter net profit. Even though there was a big jump in provisioning, the bank exceeded all forecasts of the analysts. During the three months until September 30, DIB made 298.5 million dirhams ($81.3m). Compared to that, the same period last year brought a profit of 298m dirhams. The 43% jump in provisions did not affect the steady quarterly profits. The bank's chairman, Mohammed Al Shaibani, pointed out that DIB's performance was notable for delivering strong results while meantime sticking to its conservative approach to provisioning.

Well, repeatedly we read and hear about the lack of profit/loss sharing (equity finance) in Islamic finance. Here my five cents about it:

1) Islamic commercial law, Fiqh Muamalat, per se has no preference of either permissible mode of finance, be it musharaka, ijara or murabaha whatsoever. All is halal. However, the call for modesty of debt in many hadith and the seriousness of being indebted upon death (withholding of death prayer) shows a call for a solid equity portion in business; let's call it a technical preference.

2) If we look up all debt financing modes (e.g.Murabaha, Ijara) there are remaining difficulties to finance wages, rents and installments on fresh debt. This is a true indicator for a required minimum amount of equity in a company.

3) Point 1) and 2) leads us to demand a sound debt/equity ratio.

Dana Gas could not manage to repay a $920 million sukuk on its maturity date. It is suggested that holders of the bond will stake claim to the extensive Egyptian assets of the company. According to an announcement by Dana Gas, they are in talks with bondholders aiming to amend and extend the terms of the sukuk.

Read more on: http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=340947

IslamicFinance.de offers an overview about new job openings of October 2012 herewith - firms aiming to be included please send a job profile/hyperlink to newsdesk@islamicfinance.de - the full details of the advert has to be accessed by the hyperlink below the brief description:

Product Manager, Islamic Banking

Standard Chartered Bank - United Arab Emirates-SCB (United Arab Emirates)
Job Description
?Development of Islamic wealth products across CBMS, insurance and investment streams to create customer value proposition.
?Ensure successful implementation of the Islamic banking strategy across high value segment.
?Concentrated responsibility to work with the Priority/Wealth/Private/SME product/frontline teams and support functions to build on the current Islamic banking capabilities and to create seamless customer experience
?Act as a product specialist for RMs on client meetings to introduce and explain the Saadiq solutions to meet their needs
?Financial budgeting and business forecast. Evaluation of financial performance.

Dubai Women Establishment (DWE) will again be the host of its flagship Arab Women Leadership Forum. The third edition of the forum will be held on 19th - 20th November at the Grand Hyatt in Dubai. The main focus of the forum will be issues and opportunities regarding the role of women in the boardroom. The theme of the forum is announced to be "Board Leadership '&' the Case for Diversity". National as well as internationally recognised speakers and accomplished women role models will take part. In addition, the forum will play the role of a high-level networking platform for conference attendees.

Read more on: http://gulftoday.ae/portal/d3563b47-a8a2-44bc-bda3-640272425c98.aspx

The case of missing deposits worth over Dh1 million in total has been solved. On Wednesday, a banker was charged with embezzlement in a Dubai court. The 39-year-old Jordanian banker with Dubai Islamic Bank is said to have embezzled funds by squirrelling away payments from customers who had completed their bank loans via a loan recovery agency. The criminal acts took place during the period between 2009 and 2011 when the banker was working at Dubai Islamic Bank.

Read more on: http://gulfnews.com/news/gulf/uae/crime/banker-charged-with-embezzling-m...

According to a recent announcement by Ithmaar Bank, it will convert the banking licence of its wholly-owned subsidiary in Switzerland, Faisal Private Bank, to a family office. The decision to make such a conversion includes focusing on the further development of Ithmaar Bank's core business of retail and commercial banking. The conversion will be compatible with the interests of the clients and stakeholders. The format of Ithmaar Bank's presence in Switzerland is to be approved in due course by the Swiss financial services regulator.

Read more on: http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=340872

Abu Dhabi will be the host of the annual general meeting of the World Future Council (WFC). The event will be held in the Middle East for the first time in the coming month. Prominent personalities from all over the world will take part in the discussion of the interests of future generations in sustainable policy-making. The title of the meeting is ‘Securing Our World: The Crucial Next 5 years’ and it will be conducted from November 21 to 25. WFC has had success in inspiring a number of governments to frame legislations and policies in order to conserve natural resources.

Read more on: http://gulfnews.com/news/gulf/uae/environment/abu-dhabi-to-host-sustaina...

Although since the catastrophic Jeddah floods of 2009 it has been talked a lot about corruption and incompetence in government departments and city municipalities, the issue of state owned enterprises or SOEs has hardly received any attention. That given the fact that these SOEs make up about 50% of the country's non-oil economy and account for over 25% of the employees in the private sector. The management of the Kingdom's SOEs are rarely held responsible for the waste of public funds on the mismanagement of the country’s national assets. As the main reason for this, the way of choosing the boards of directors of these SOEs or state owned enterprises is pointed out.

Read more on: http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentid=20...

Abu Dhabi Islamic Bank (ADIB) has managed to bring up Islamic finance as an ethical and sustainable business model in the global financial scene. In a TV series launched by Bloomberg TV and sponsored by ADIB, CEO of ADIB Tirad Al Mahmoud explained his view of Shari'a-compliant banking being a viable, resilient and ethical business model. Especially because of the global financial crisis, the demand for ethical banking all around the world has been extremely high.

Read more on: http://www.ameinfo.com/adib-islamic-finance-global-ethical-business-316817