IslamicFinance.de

Iran may be about to restore banking links with the rest of the world after years of separation, but the process won’t be easy as its Islamic financial system has evolved in ways that will complicate ties with foreign banks. Smothered in bad debt and shut out of the global system by sanctions, Iranian banks badly need to resume business with foreign lenders, for whom this would be a huge opportunity. Iran’s Islamic banking assets totalled 17,344 trillion riyals as of March 2014, or $523 billion at the free market exchange rate. But the Iranian banks’ shaky finances and close ties with their government will increase the risks of dealing with them. And during their years of isolation, they have developed a version of Islamic finance that is in some ways markedly different from that practiced in other Muslim-majority states.

State Bank of Pakistan informed that the amalgamation of the defunct KASB Bank into Bank Islami Pakistan Ltd has been implemented smoothly. As a result all the depositors which are over 150000 in number and have Rs 57 billion in deposits are free to operate their accounts. Many of them have already started operating their accounts and more than 1200 employees have continued their jobs, a statement of SBP said. An important issue is the notional value at which the defunct bank has been handed over to BankIslami. Following international practices, a notional value of Rs 1000 was set for the defunct bank. BankIslami has planned to gradually transfer the defunct bank's conventional banking operations into Shariah based operations.

The Security and Exchange Commission of Pakistan (SECP) has asked the State Bank of Pakistan (SBP) to review the deal to merge KASB Bank and BankIslami, which cost millions of rupees to the equity investors. Sources said that SECP Chairman Zafar Hijazi wrote a letter to SBP Governor Ashraf Mehmood Wathra, urging him give compensation to equity traders who faced losses as a result of the amalgamation of BankIslami with KASB Bank. The value of KASB Bank’s shares became zero after the amalgamation process – as the shares now stand cancelled and retired – and there was no protection to investors’ money, mainly that of shareholders.

The federal government has approved the merger of KASB Bank Ltd with BankIslami Pakistan Ltd (BIPL). KASB Bank had been in trouble since 2009 as it failed to meet the Minimum Capital Requirement (MCR) and Capital Adequacy Ratio (CAR). The case became complicated when a Chinese company showed interest in buying the bank but the request was turned down by the SBP. However, the SBP clarified that the Chinese company neither had required capital nor was willing to show its credential as required by the SBP’s fit and proper condition needed to run a bank. All branches and customers of the former KASB Bank will be considered as BankIslami’s from Friday.

The government of Hassan Rouhani, Iran's centrist president, has made attracting foreign investment a priority since taking office as he seeks to create jobs and bring down a youth unemployment rate that stands at 25 per cent, as well as stave off any Arab spring style unrest.

The Islamic Corporation for the Development of the Private Sector (ICD) is considering options for support of the private sector in Azerbaijan. According to the Ministry of Economy and Industry, Minister Shahin Mustafayev has received Khaled Mohammad Al Aboodi, ICD CEO. During the meeting, the Minister proposed to cooperate in the industrial and agricultural sector including the project of the Sumgait Chemical Industrial Park and establishment of agricultural parks in Azerbaijan, the Ministry said. Aboodi expressed his satisfaction with the cooperation with Azerbaijan and proposed to expand it.

The make-up of Islamic banks' loan books is changing in Pakistan and Indonesia with the growing use of profit-sharing contracts that could help Islamic finance win more customers in the two largest Muslim-majority countries. Murabaha has been the workhorse of Islamic bank financing globally, but after years of dominance the structure is losing favour in some areas to profit-sharing contracts such as musharaka, istisna and salam, which are seen by many scholars as closer to the economic principles of Islam. In Indonesia, the change is more gradual as murabaha still represents over half of all financing by Islamic banks.

The State Bank of Pakistan feels that under the current circumstances, merger of KASB Bank with Bank Islami is a viable option wherein the bank’s depositors’ interest would be safeguarded and its problem would be resolved on a sustainable basis. Although there is a possibility of foreign investment worth $100 million from a Chinese investor yet the State Bank is concerned of the safety of depositors’ money and prompt payments to them. At the same time SBP does not want to fall in any conflict with the shareholders. Considering the fact that Chinese investor company called Cybernaut was not able to establish its bonafide even after elapse of considerable time their request was declined on 27th April 2015.

Every fourth person on the planet is Muslim. However, the vast majority of them happen to be among the poorest in the world. However, there is a growing middle class in the Muslim world, including Pakistan, of which the upper sub-segment called the ‘mass affluent’ may potentially be relevant to wealth creation and subsequently to the business of wealth management. Muslim high-net-worth individuals (HNWI) hold an estimated $3.35 trillion, which is less than 30% of the total Islamic wealth. The remaining 70% is held by Muslim businesses, Islamic financial institutions, the mass affluent, and by the governments in the OIC block.

Bill Gross, well known fixed income fund manager twittered (https://twitter.com/januscapital/status/590519759797530624) and moved markets with his idea to sell German sovereign bonds short (selling without having them) to buy them back later cheaper. He called it "The Short of a lifetime"; the only issue would be the "timing"...

Interest rates will be once raising again but will short seller stay solvent long enough to benefit? The German economy is doing fine, but other EURO zone countries do not perform as well and need low interest rates for a prolonged period of time. Japan has so far not convincingly ended their easy money policy.

About 180 companies are considering Islamic bond sales in 2016 after a decade of international sanctions, according to Hossein Saeedi, a senior financial analyst at the corporate finance division of Tehran-based Amin Investment Bank. The companies have already started planning to design specific financial instruments to attract foreign investors to come to the Iranian market, Saeedi said. If the sanctions are lifted, they are looking for aggressive sukuk financing. Iran is home to the world’s biggest Islamic banking industry but market instability and currency fluctuation have been among the impediments to growth.

Despite a robust mobile money market, six years after the launch of the first branchless banking product, the number of active, registered mobile money accounts in Pakistan stands at only 0.4% of the population. The percentage of users of mobile money products, however, is 7%, which means that the majority of the customers prefer to transact over-the-counter via an agent. However, true financial inclusion only results when customers open their own mobile money accounts. It is only then that customers can avail of more advanced financial products such as insurance, savings, and credit. Hence, mobile money accounts are an important indicator for financial inclusion.

With the easing of economic sanctions against Iran, the country is expected to unleash its enormous potential of Islamic finance and enter the global stage with new Shariah-compliant products at a size that could threaten the dominance of Malaysia and Saudi Arabia in the sector. Iranian banks represent the world’s largest financial system based on Shariah law. However, due to the sanctions, the country has so far only marginally participated in the global Islamic finance sector and thus did not benefit from the rapid global growth of Islamic finance in the recent past. The entire banking system in Iran is Shariah-compliant, and there are no conventional banks to compete with.

The Islamic Development Bank (IDB) plans to expand its cooperation with Azerbaijan in respond to the request of the national government. In this regard the bank may send the MDPS to the country. The material is distributed only on private subscription conditions. If you are interested in it please contact the Marketing Service of Fineko Agency.

Securities and Exchange Commission of Pakistan (SECP) Chairman Zafar Hijazi said on Wednesday the regulator is looking to enhance Shariah compliance in the capital markets by restructuring and reorganising the Islamic capital market. Speaking at the fourth Islamic Finance Expo and Conference as chief guest, Hijazi discussed in detail the roadmap for the promotion of Islamic finance in Pakistan. He added that the SECP is centralising the Shariah-related capital market activities besides improving the regulatory framework for Takaful, Modarabas, Islamic mutual funds, Islamic pension funds and Islamic real estate investment trusts (REITs).

Russia hopes to learn from the experience of Azerbaijan in the field of Islamic banking, said Sergey Drobyshevsky, the scientific director of the Gaidar Institute for Economic Policy in Baku. He said the presence of IBA Moscow, a Russian subsidiary of the International Bank of Azerbaijan, must contribute to this. Drobyshevsky believes it will be easier for the Azerbaijani banks and businessmen to work in Russia than the Malaysian specialists of that sphere. Behnam Gurbanzada, the director of Islamic banking at the IBA, earlier called Russia a "promising" platform to further the development of Islamic finance.

Pervez Said is no stranger to adversity. In his 33 year-long career, he has worked with 10 different organizations, having served as chief executive at four different institutions. He is considered to be the pioneer of Islamic banking in Pakistan due to his instrumental role at the State Bank of Pakistan in the formative years of Islamic banking. But his current stint at the House Building Finance Company may well be the biggest challenge he has taken on yet. You can find excerpts from a recent interview in which Said discussed the housing crisis in Pakistan and the role HBFCL is playing in alleviating it following the article link.

The Islamic Financial Services Board (IFSB), the prudential and supervisory standard-setting body for the estimated US2.3 trillion global Islamic finance industry, convenes its 12th Annual Summit on 19 - 21 May 2015 at the Rixos Almaty in Kazakhstan. The Summit, which is hosted by the National Bank of Kazakhstan, could not have a more pertinent theme: 'Core Principles for Islamic Finance: Integrating with the Global Regulatory Framework.' Indeed, the Council of the IFSB at its 26th Meeting, held in Jakarta, Indonesia in early April, approved the adoption of a new Standard on Core Principles for Islamic Finance Regulation (CPIFR)(Banking Segment), known as IFSB-17.

The Federal Investigation Agency (FIA) has expanded the scope of its investigations to two more insurance companies and detained three persons in a case that involves a huge embezzlement on account of oil products' insurance. FIA has taken into custody three persons and has also identified two more persons. The insurance companies had entered in a deal with one of the biggest oil refineries in 2002 to insure oil consignments imported in Pakistan. In this deal, insurance companies had earned a commission Rs 152.39 million at a total premium of Rs 950.23 million and these companies in order to conceal this earned amount withdrew the same through various cheques of 170 fake agents.

Kazakhstan's parliament approved new Islamic finance laws yesterday, moving a step closer to launching the oil-producing nation's first sovereign Islamic bond - possibly early next year. The lower house of the legislature passed a bill introducing new definitions, such as Islamic insurance, Islamic leasing and "murabaha", an acceptable form of credit sale under Sharia. The Finance Ministry is expected to propose a new draft law on sukuk very soon. Kazakhstan's first Islamic bond was a 240 million Malaysian ringgit ($73m), five-year sukuk issued by state-owned Development Bank of Kazakhstan in 2012.