IslamicFinance.de

Many prospective banking customers cannot easily discriminate between the convential and the Islamic banking system. Despite this lack of clarity, the number of Islamic banks and Islamic banking counters of conventional banks have increased by the day. The question to ask is as to how exactly are they operating here and what models are they adopting in the presence of a well-established interest based banking system. Around 99 per cent Islamic banking in Pakistan revolves around lending and buy-back model and not even one per cent is based on profit and loss sharing. A physical asset is involved in deals. The real challenge for Islamic banks is how to cater to the borrowing needs of the government that are huge.

Oman Telecommunications Co (Omantel) cancelled plans for what would have been a $130 million, five-year dual-currency sukuk issue due to high interest rates from lenders, the company's CEO Talal al-Mamari said. The sukuk was priced last month at a profit rate of 5.3 percent, after receiving commitments worth $82.1 million in the dollar tranche and $47.9 million in the Omani rial tranche. But in a statement Wednesday to Muscat's bourse, Omantel announced it would postpone issuing the sukuk at the present time. Proceeds from the Sukuk would have helped to fund the company's new headquarters and to diversify its investment portfolio. Mamari said Omantel's investments would not stop, but did not give further details.

Bank Nizwa SAOG has signed an agreement to provide a structured financing facility of USD 50 million to Hydrocarbon Finder E&P LLC (HCF), an independent Oil & Gas exploration & production company. The Bank's Shari'a-compliant package is tailored to meet the requirements of HCF, which has been granted concession rights by the Government of Oman for oil & gas exploration, development and production within an onshore geographical area in Oman termed as Block 7. Hydrocarbon Finder E&P LLC is part of the Services & Trade (S&T Group), an Oman based business conglomerate. The Facilities agreement was signed by Dr. Jamil El Jaroudi, CEO of Bank Nizwa and Brig. Gen. (Retd) Sulaiman Al Adawi, Group Chairman of the S&T Group, on February 10th in Muscat.

Saudi Arabia is reportedly easing rules on bank lending to stimulate growth in the largest Arab economy. Banks were told they can lend the equivalent of 90 percent of their deposits, up from an earlier limit of 85 percent, by the Saudi Arabian Monetary Agency on Sunday. The move followed a request from the country’s committee of treasurers to ease liquidity constraints. Saudi Arabia is seeking to revive its economy and stimulate credit as the slump in oil and government spending strain the banking system. The three-month Saudi Arabia Interbank rate rose to 1.73 percent on Feb. 3, its highest in about seven years. Bets for a devaluation of the riyal reached their highest in about two decades in January, even after the country pledged to keep its currency peg.

Minister of Islamic Affairs Saleh Al-Asheikh inaugurated Sunday the 3rd Endowment Forum in Riyadh. On the first day of the two-day event, sessions were held on endowment management systems and on endowments and their application. On Monday, sessions covered topics such as the reality of endowment in Saudi Arabia, international experiences in endowment, as well as the institutional structure of endowment. In addition to the discussion sessions, other activities included an exhibition and consultation service on endowments along with workshops on establishing endowments, modern trends in using endowment revenues, factors of successful investment, and the reality of charitable association endowments in the Kingdom.

David Loundy, Chairman and CEO of Devon Bank in the US, scored the highest mark on the Certified Islamic Finance Executive (CIFE) examination to win Ethica's "Weekend in Dubai" competition. Among the prizes are an internship at an Islamic bank, airfare to Dubai, accommodation, and meetings with Islamic finance scholars and bankers. David commented that Ethica's CIFE program has allowed him to put together a "proto-Islamic bank" upon completing the program that commenced formal operations January 1, 2016 as Abraham's River, a liquidity source and investment company for non-interest based finance. Ethica and Devon Bank are now working together to help make Abraham's River an interest-free vehicle for the entire US. Ethica's prize also included a free internship at an Islamic bank which David donated to the second-highest scorer.

As high as 38 percent of KSA respondents would recommend their bank as a first choice to friends or colleagues according to the first ever NPS Survey conducted in the Kingdom by Souqalmal.com. Respondents were asked to evaluate various aspects of the overall banking experience. The parameters covered customer service, product offerings and financial education, among others. The results of the survey have been used to conceptualize the inaugural Souqalmal Bank Satisfaction Index. The ripple effect of the findings will be discussed in greater detail at a FINTECH event to be held in Dubai on February 25. Souqalmal.com will also be factoring in data from the NPS Survey to award the Most Recommended Bank in KSA and UAE at the event. The nominees from KSA are National Commercial Bank, the Saudi British Bank and Alinma Bank.

Fiscal pressures exerted by low oil price are expected to increase the role of private sector and capital markets in the financing of hundreds of billions worth of project financing in the GCC countries. Standard & Poor’s estimate that $604 billion (Dh2.2 trillion) worth of project contracts need funding through 2019. Assuming there are no further cancellations, reprioritisations, or deferrals of projects through 2019, the rating agency expects $140 billion-$160 billion in contract awards per year. The countries awarding the most projects will be Saudi Arabia, the UAE, Kuwait and Qatar. Out of the projects planned and under way in 2016 of $140 billion, about 48 per cent involve real estate; oil and gas, 17 per cent; and infrastructure, 17 per cent.

Australia has begun to see a steady stream of property deals using Islamic financing as the attraction of low-risk tenants and a weak Australian dollar offset concerns about the lack of a welcoming tax environment for such transactions. While the emergence of such deals represents a breakthrough for Gulf and Southeast Asian investors, questions remain over how much momentum will develop as Australia has yet to follow the lead of other jurisdictions like Britain and Hong Kong in passing tax law amendments to facilitate Islamic finance. Interest is strong, and structures have now been developed that can suit commercial investment deals as well as development financing.

Iran remains essentially off limits to US banks, despite the lifting of some US sanctions. The Obama administration in mid-January eased several restrictions on doing business with Iran, including former “secondary” sanctions that had threatened to penalize companies outside the US for their business with Iran, as well as some restrictions on Americans seeking to make inroads in the oil-rich country. Nevertheless, most “primary” sanctions tied to accusations that Tehran supports terrorism remain in effect, blocking US businesses from joining a rush by non-US companies to cash in on Iran’s potential revival. It means that US banks have little access to the oil-rich country compared to their rivals in other countries.

Al Hilal Takaful has signed a distribution agreement in Abu Dhabi with Euler Hermes, specialized in trade credit insurance. The agreement was forged recently at Al Bahr Towers, Al Hilal Bank’s headquarters in Abu Dhabi, during a special ceremony attended by Euler Hermes’ Regional Board. The partnership will enable Al Hilal Bank’s Abu Dhabi customers to take advantage of a broad range of trade credit insurance solutions for the management of business-to-business trade receivables offered by Euler Hermes.

Since reaching the nuclear agreement that lifted economic sanctions on Iran, President Barack Obama has pledged to continue to punish foreign companies that do business with the regime’s powerful Islamic Revolutionary Guards Corps. In theory, this will chill European investment in Iran because the IRGC, along with its front businesses, controls major portions of Iran’s economy in vital sectors such as oil, construction and banking. But despite recent reports of billions of dollars worth of new European investment in Iran, the US Treasury Department has seen no evidence that European companies are conducting transactions with the IRGC. Many sanctions experts question whether this is really possible.

International Islamic Liquidity Management Corp (IILM) plans to sell US$1.34bil (RM5.54bil) of three-month bills, its biggest offering since being set up in 2010 to support syariah-compliant financial activity. The Kuala Lumpur-based institution would auction the Islamic notes on Feb 18, it said in a statement. IILM has a short-term issuer rating of A-1 from Standard & Poor’s, and has sold a total US$14bil of debt denominated in the US currency. While IILM has increased issuance of short-term paper each year since its debut offering in 2013, the supply is far short of the US$400bil that Ernst & Young LLP estimates is needed to help Islamic banks manage their liquidity.

UBL Fund Managers Limited (UBL Funds) announced the launch of the Al-Ameen Islamic Active Allocation Plan–IV, under the Al-Ameen Islamic Financial Planning Fund. This Plan is now open for subscription. The plan actively allocates investments between Islamic equity and Islamic income/money market classes with an aim to achieve potentially high returns. It has a term of two years and is ideal for investors who wish to benefit from the equity market and desire active management of their investment portfolios. Mir Muhammad Ali, Chief Executive UBL Funds, said that the Al-Ameen Islamic Active Allocation Plan series has been well received by investors with initial investments of Al-Ameen Islamic Active Allocation Plans I, II and III totaling more than Rs. 6.3bn.

IFC, a member of the World Bank Group, has released a study that finds overwhelming demand for Islamic finance among smaller business in the Kyrgyz Republic. The report revealed that 80 percent of micro, small, and medium enterprises (MSMEs) are interested in Shariah-compliant financing, a market that could be worth up to $456 million for lenders. Despite that potential, the study "Islamic Banking and Finance: Opportunities across MSMEs in the Kyrgyz Republic" found that Islamic finance was not widely available because of a lack of awareness and the high cost of structuring transactions. Yet Kyrgyz officials are working to overcome these challenges.

Malaysia retained its leading position as a sukuk hub in 2015, accounting for 53% of global issuance at the end of the year, RAM Ratings head of Islamic finance Ruslena Ramli said. Although the performance pales in comparison to the country's 69% of share of global sukuk as at end-2014, the ringgit remained the currency of choice accounting for 39% of sukuk issuance followed by the US dollar (32%) and the Indonesian rupiah (9%). However, RAM Ratings noted that Malaysia's share of outstanding global sukuk had declined to 52% in 2015 from 55% in 2014 due to the weaker ringgit. On the overall global sukuk market, RAM Ratings noticed an increase in sukuk issuance from new markets, as Oman and the Ivory Coast have joined the growing list of sovereign sukuk issuers.

The Responsible Finance Summit has announced the support of the International Shari'ah Research Academy for Islamic Finance (ISRA) for the Summit. The Summit, which will be hosted by Bank Negara Malaysia, will include the participation of ISRA's Executive Director Prof. Dr. Mohamad Akram Laldin, who will join a panel session on the popular perceptions about responsible finance and how Islamic finance can contribute to expanding its appeal to a wider audience. The Summit, organized by RFI Foundation and co-organized by Middle East Global Advisors, also represents a setting for ISRA to highlight its work in applied Shari'ah research on Islamic finance, particularly on ethical dimensions of Islamic finance.

The Deputy Director of the Middle East and Central Asia Department (MCD) at the International Monetary Fund (IMF) Adnan Mazarei said that it is necessary to establish a minimum level of security in Syria before the IMF and international institutions can evaluate its economic needs. In an interview, Mazarei said that the Fund estimates the urgent humanitarian needs and costs, the costs of reconstruction and contributes to the reconstruction of the institutions that were destroyed. He also said that the removal of sanctions on Iran will have a positive effect by allowing the country to produce and export more oil, it has also regained access to its international reserves which will also allow greater investment, and all of these things will encourage growth.

Ashraf Piranie, deputy chief executive and finance director at The Nottingham, has received an accolade for his contribution to finance and banking at the British Muslim Awards. Mr Piranie joined the board of The Nottingham in 2007 and was previously the finance director and joint managing director at the Islamic Bank of Britain and director of finance at Alliance & Leicester Plc. One of his most notable achievements was the proactive part he played in introducing Islamic finance legislation to the UK's Finance Acts. He continues to play an important role on UK banking regulation and since 2013 has been a member of the PRA's Practitioner Panel representing the building society sector.

A potential listing of Bank Muamalat Malaysia Bhd could be an option should its major shareholder DRB-Hicom Bhd fail to find a suitable suitor to buy up a stake in the bank. The requirement to pare down DRB-Hicom’s stake in Bank Mualamat is to comply with Bank Negara’s requirements from current 70% to 40%, which has been delayed for a few years. Last week, the proposed merger between Malaysia Building Society Bhd (MBSB) and Bank Muamalat was called off as the parties involved were not been able to reach an agreement on the terms and conditions. Disagreement over valuations and control were believed to be factors that led to the breakdown of negotiations that began last October.