IslamicFinance.de

The Islamic Development Bank (IDB) will elect a new president next week in Jakarta, replacing long-serving president Ahmad Mohamed Ali. Saudi Arabia, the IDB's largest shareholder, has nominated Bandar Hajjar for the post. His candidacy was also endorsed by the outgoing IDB president. The new president will have big shoes to fill: Mr Ali tripled the bank's authorised capital to US$150 bn in 2013 and last year up-sized its sukuk issuance programme to US$25 bn.

Kuwait’s Investment Dar has offered to hand assets to creditors immediately in order to win them over to its latest plan to restructure debts of KD 813m ($2.7bn). Investment Dar has had mixed success in restructuring its debts since getting into trouble during the financial crisis. Its latest attempt, called Al Sharq, promises to immediately hand over control of assets in the company to creditors, while also guaranteeing that shareholders will not get paid until all creditors are paid.

Egyptian Takaful Property and Liability Insurance (EGTAK) will soon start talks to renew its reinsurance agreements with Hannover Re SE. Head of the Reinsurance Department Hamed Mahmoud said he expects the German reinsurer would renew its agreements without placing any additional conditions.

Islamic banking is increasingly attracting global funds. Mark Mobius, executive chairman at Templeton Emerging Markets Group sees great potential in Islamic finance and emerging markets. Tepleton invested $1.2 bn in sukuk alone and plans to invest more. Emerging markets have been negative in the last 3 years, but are now growing rapidly. The trend is towards greater privatization, more fairness and more disclosure.

Badlisyah Abdul Ghani, president of Chartered Institute of Islamic Finance Professionals, says we need a megabank in every country. Today most jurisdicitons do not have effective infrastructure for Islamic finance, some banks are efficient in their own country, but not in other countries. Megabanks have to be multi-country players.

RHB Islamic International Asset Management is favoring the sovereign and corporate debt in maturities of 7 to 10 years. CEO Sharizad Jumaat said the company sees limited currency weakness in 2016 and expects the key central bank rate to remain unchanged. Sharizad said the ringgit will be quite stable within the weak environment of slower growth in China and Europe.

The Central Bank of Nigeria (CBN) released guidelines on the regulation and supervision of non-interest microfinance banks (MFBs) in the country. In the document the banking sector regulator placed the NIMFBs into three categories namely Unit, State and National. A Unit NIMFB is required to have a minimum paid-up capital of N20 mn, a State NIMFB is required N100 mn, while a National NIMFB required N2 bn.

Saudi International Petrochemical Company (Sipchem) plans to recall a sukuk maturing on July 6 three weeks early. The firm will send a notice to sukuk holders informing them of its intentions and will use available cash to pay it off. It originally issued 1.8 billion riyals of sukuk in 2011. Sipchem also plans to issue a new sukuk and appointed Riyad Capital and NCB Capital as lead managers for the issue.

Mushtak Parker, research consultant at Islamic Finance, says millennials are the main drivers in Saudi Arabia and Oman. The biggest challenge of Islamic finance is public policy, that most Islamic countries do not have a recognized or stated public policy in Islamic finance. It is the responsibilty of the governments because nothing can happen in a market without government approval or facilitation.

Shariah investing is forecast to grow very rapidly, following the long-term trends of emerging markets. Executive Chairman of Templeton Emerging Markets Group, Dr. Mark Mobius found that emerging markets outperformed US and world markets in 17 out of the last 28 one-year periods. Islamic stocks in Indonesia, Malaysia and Turkey are doing particularly well. Dr. Mobius said 40% of world GDP is in emerging markets, currently Muslim majority countries have a GDP growth of 8%, up from 4% in 1987.

The International Monetary Fund (IMF) has calculated that, if oil prices remain low, the fiscal deficits of the Gulf Cooperation Council (GCC) and Algeria will total almost $900 bn between 2016 and 2021. The non-oil sector in the GCC is projected to grow at an average rate of 3.25% per year over the next five years, compared to an average of 7.75% between 2006 and 2015. Thus, regional governments are being forced to review their expenditure plans. A recent PwC survey found that 75% of the more than 130 owners have already been impacted by funding constraints, while 65% forecast they will have less to spend next year.

#Bahrain-based First Energy Bank (FEB) appointed Khaleefa Butti Omair as the Bank's new chairman, following the recent departure of the Bank's former chairman, Khadem Al Qubaisi. Mr. Khaleefa is a national of the United Arab Emirates with over 13 years experience in investment management. He serves as Chairman and board member of several companies.

The Board of Directors of Al-Khaleej Takaful Group has agreed to increase the company's stake in Qatari Unified Bureau Insurance to 25 % from 20 % at a cost of QAR 6.75 mn. Al-Khaleej Takaful Group reported net profit of QAR 43.38 mn for the year to end-December 2015, down from QAR 74.4 mn a year earlier. Qatari Unified Bureau Insurance is a limited liability company which provides insurance on vehicles entering the country and sells insurance cards for vehicles travelling outside the country.

The head of the Savings and Deposits Insurance Fund said the deadline for the sale of Bank Asya is May 29. If a buyer cannot be found, the bank will be liquidated. The bank started reporting huge losses throughout 2015, while its shares were suspended from trading in Borsa Istanbul. Later it was taken over by the Savings Deposit Insurance Fund. According to the audit report on Bank Asya the bank's shareholders signed blank transfer contracts and a large number of dubious transactions were carried out.

The Islamic Financial Services Board (IFSB) plans to tighten oversight of market practices and revise capital adequacy and disclosure requirements. The new disclosure requirements would cover financial but also sharia-compliance aspects, and may include guidance on specific sukuk formats such as convertible instruments and those used for regulatory-capital purposes. Islamic finance has now systemic importance in 11 countries, these include Qatar, Kuwait, Malaysia, Saudi Arabia and Brunei, with the latest entrant Djibouti. Bahrain and Jordan are close to achieving that status as well.

Turkey wants to set up a new Islamic megabank. Deputy Prime Minister Mehmet Simsek said the prime shareholders would be Turkey's Treasury and the Islamic Development Bank. Simsek prepares for talks with Indonesia in Jakarta next week on proposals to start a Shariah-compliant megabank that will lend to companies and infrastructure projects. Indonesia and Malaysia have long tried separately to establish a Shariah-compliant lender but faced obstacles until now. Turkey is ready to commit more than $300 mn for the lender as capital.

Qatar's Ezdan Holding has priced a $500 mn five-year sukuk issue. The wakala-structured transaction carries a profit rate of 4.375 percent, equivalent to a spread over midswaps of 333 basis points. The reoffer price was 99.446 percent. Barwa Bank, Emirates NBD Capital, HSBC and Mashreq arranged the transaction and were joined by Abu Dhabi Islamic Bank before its close.

Bank Negara Malaysia Governor Datuk Muhammad Ibrahim called on the Islamic finance sector to embrace the financial technological revolution. Technologically-driven applications have spread to every segment of the financial sector, with the number of fintech start-ups having doubled in one year. He noted that the potential impact can be significant, with 10 to 40 % banking revenue possibly at risk by 2025 due to fintech innovations outside banking institutions that are able to offer significant pricing advantage. Bank Negara is reviewing the changes needed to its regulatory framework to ensure that it remains appropriate to manage the risk while encouraging productive innovation.

The Islamic Financial Services Board (IFSB) sees a potential for an increase of sukuk funding in 2016 in line with regulatory reforms in the industry such as Basel III and Guidance Note 6 (GN-6). Secretary-General Jaseem Ahmed said sovereign sukuk sector might gain momentum this year on the back of increased budget deficits, particularly in the energy-exporting countries. He added that Islamic banking assets showed a positive association with oil revenues while the liquidity and profitability of Islamic banks might be adversely affected by low oil prices.

International Islamic Financial Market (IIFM) found that the year 2015 saw a major drop in issuances when only $60.6bn of sukuk were issued, a 43%-slump compared to 2014. A large part of the decline in sukuk issuance was due to the policy decision of Malaysia’s central bank to discontinue the issuance of short-term investment sukuk. Lower sovereign spending in leading Islamic finance jurisdictions continues to take its toll, issuances are not likely to recover in 2016.