IslamicFinance.de

Prince Muhammad Al-Faisal, the pioneer of Islamic Banking, says that Islamic banking today is a baseless theory. Some think Islamic Banking represent Islamic Economy. But we must realize the difference between a) the financial services and b) the general economic theories controlling them, he adds. In our rush to provide Islamic financial tools, we concentrated on application without linking it to the main philosophy. We ended up with a system devoid of human values, he regrets. Today, the pioneer of Islamic banking, Prince Muhammad Al-Faisal, (79), stands alone in his search for an Islamic Economy theory. Muslim scholars and economists should join his pursuit. More than ever, the world needs a better economic system.

Eduware, a provider and integrator of comprehensive technology-based learning products and services in the MENA region, said Wednesday that 21st century education is inevitable and should undergo a paradigm shift to prepare children for the jobs that have not yet been invented. The company, which will be addressing challenges facing educators, parents and businesses at the Microsoft in Education Global Forum taking place in Dubai on Feb. 22-23, said the new generation has to be armed with a different set of skills than their parents did if they were to enter the emerging job market. The company will present its 21st Century edu-digital tools at the forum.

Despite the global takaful insurance market exhibiting impressive double digit growth of 18 percent over the period 2007-2012, the regulatory environment remains a work in progress and faces the challenge of inconsistency and conflicting interpretation across jurisdictions. These are the findings of Deloitte’s 2014 Takaful Insurance Report for Asia, Middle East and Africa, entitled ““The Way Forward for Takaful". Examining six key markets, the report identifies practice gaps and product offerings. Among the findings the study observes that takaful product offerings and diversity of products are lacking, and that the Takaful business is by far underpenetrated in the six countries examined.

A source at the Saudi Arabian Monetary Agency (SAMA) said a number of insurance companies that have incurred huge losses may be forced to halt operations to protect their clients. The source added that many of these companies’ financial situations are continually deteriorating, they have not committed to presenting a strategic plan to correct their situation and, at the same time, they have refused to merge with other companies. Insurance experts said there are six companies that have incurred losses of 55 to 75 percent: Salamah, Wafa, Arabian, International, Amanah and Inmaa. SAMA has seized the operations of Sanad and Wiqayah insurance companies due to their huge losses.

After a decision by the Saudi Arabian Monetary Agency (SAMA) prohibiting banks from compounding interest, Saudi commercial banks were expected to improve their services. However, the services remained substandard. In their terms and conditions for extending loans, the banks determine the profit rates depending on the size of the loan and the financial position of the customer. You will often see customers waiting in long queues to be served because the banks do not appoint sufficient number of employees to serve customers. The complaints against Saudi commercial banks have become a normal phenomenon. The banks would have improved their services if they had heeded SAMA's instructions.

The demand for real estate in Saudi Arabia is expected to remain healthy as the rising Saudi population and evolving lifestyles are expected to keep real estate demand positive in the years to come. This is anticipated across the Kingdom, but especially in the major urban centers of Riyadh, Jeddah, Makkah, Al-Khobar and Dammam. According to recent reports, current demographics require that around three million housing units need to be created by 2040 to meet the needs of the growing population. However, a significant rise in building costs is hampering attempts by developers to meet a target of building up to 500,000 low-cost homes. As a result, rental inflation is expected to remain high over the coming years.

The forum "The Best Governance Practices for Combating Corruption in Family Businesses,” was held at the headquarters of the Council of Saudi Chambers in Riyadh. Representatives of a number of international organizations and CEOs of family businesses participated, among others. Speakers at the forum said serious efforts are needed to bring the concept of good governance to family-run businesses in the Kingdom. It was called for generalizing the culture of good governance in private sector firms as well as in government institutions, commissions and ministries and all civil society institutions. Good governance culture should prevail not only in financial aspects, but in all legal, administrative and financial work that combats corruption of all kinds.

Arab Petroleum Investments Corporation (APICORP), the multilateral development bank of the 10 member states of the Organization of Arab Petroleum Exporting Countries (OAPEC), has closed a five-year SR1 billion ($267 million) bilateral Shari’ah-compliant facility with Al Rajhi Bank. The facility is aimed at retaining and increasing APICORP’s medium-term funding. Al Rajhi Bank was the sole Murabaha Facility Arranger, Lender and Agent. APICORP enjoys a foreign currency issuer rating of Aa3 for long-term debt and Prime-1 for its short-term debt with stable outlook from Moody’s Investors Service. Al Rajhi Bank is the largest retail bank in KSA with total assets of SR279 billion ($74.4 billion).

There are big opportunities to promote Islamic finance in Tunisia which can be the global hub of Islamic finance for French speaking countries, said Muhammad Zubair Mughal, Chief Executive Officer, AlHuda Centre of Islamic Banking and Economics (CIBE) in an international conference on “Finance and Enterprise” in Tunisia. Mughal said international financial crisis can be addressed in a better way through Islamic finance. Tunisia has a good recognition in Islamic financial industry having 2 full-fledged Islamic banks, takaful companies, universities with Islamic finance program, sukuk laws and some other similar institutions which indicate the best future of Islamic finance in Tunisia. However, Islamic microfinance is a missing component of Islamic finance in Tunisia.

There are big opportunities to promote Islamic finance in Tunisia which can be the global hub of Islamic finance for French speaking countries, said Muhammad Zubair Mughal, Chief Executive Officer, AlHuda Centre of Islamic Banking and Economics (CIBE) in an international conference on “Finance and Enterprise” in Tunisia. He also said no Islamic financial institution was effected by the global financial crisis. He added that Tunisia has a good recognition in Islamic financial industry having 2 full-fledged Islamic banks, takaful companies, universities with Islamic finance program, sukuk laws and some other similar institutions which indicate the best future of Islamic finance in Tunisia. Realizing the need of Islamic microfinance, he further said that Islamic microfinance is missing component of Islamic finance in Tunisia while socioeconomic development and poverty reduction can be done in better way through Islamic microfinance.

The largest ever government guaranteed sukuk in Saudi Arabia for the General Authority of Civil Aviation (GACA) totaled SR15.211 billion ($4.056 billion), representing a 3.21 percent profit per annum. The deal was 1.9 times oversubscribed with strong demand from a wide range of investors. This diversity of investors means that any subsequent issuance won’t be over reliant on any one sector and GACA could tap into a ready investor base. HSBC and NCB Capital acted as Joint Lead Managers and Bookrunners of the sukuk. Additionally, HSBC acted as the Sukuk Coordinator, Sole Shariah Coordinator, Sukuk Holders' Agent, and Payment Administration Agent. Standard Chartered Saudi Arabia was Co-Lead Manager for the Issuance.

The Sukuk insurance policy of the Jeddah-based Islamic Corporation for the Insurance of Export Credit and Investment (ICIEC) is ready to roll out but the corporation to date has received no applications from sovereign issuers, Dr Abdul Rahman Taha, CEO of ICIEC, said. ICIEC has had initial inquiries from Egypt and Senegal regarding the credit enhancement for Ijarah-based sovereign Sukuk issuances. A major drawback of the Sukuk Insurance Policy is that ICIEC can only guarantee up to $125 million of an issuance, because of its lack of capacity. However, it has reached agreement with the insurance majors to provide further capacity for sovereign Sukuk issuances. ICIEC is expecting more business to come from industrialized countries ECAs, and has signed agreements with Atradius, the Dutch ECA, and with Ducroire Delcredere, the Belgium ECA.

Bankers have long past expressed their disappointment in the seeming inability of the International Islamic Liquidity Management Corporation (IILM) to issue its debut sukuk. After much speculation and expectation about a debut sukuk launch last April 6, IILM will eventually issue the Islamic bond in the third quarter of 2013 – a $500 million issuance. However, the Saudi Arabian Monetary Agency (SAMA) abruptly divested the IILM’s equity subscription last Friday. But what impact the Kingdom’s departure will have on the future of the IILM remains unclear. IILM also signed signed a Memorandum of Understanding (MoU) with the Asian Development Bank (ADB) in Doha on Saturday to strengthen cooperation between the two organizations.

Oman's Capital Market Authority (CMA) is encouraging consolidation in the country’s crowded financial sector, aiming in the long term for local banks to build a regional presence in the Gulf region. There are now 18 banks in the sultanate, whereas Oman’s three largest lenders account for approximately two-thirds of banking assets. According to Abdullah Salem Al Salmi, CMA’s executive president, the crowded field could lead to cutthroat competition, which would be unhealthy for the market and cause new entrants to struggle. However, he did not specify any ways in which the CMA might encourage consolidation.

Saudi Arabia issued final regulations on real estate financing, leasing and supervision of financial companies. The regulations outlining three of the five laws were posted Sunday on the website of the Saudi Arabian Monetary Agency. Rules on the enforcement of foreclosures and mortgage registrations have yet to be completed. The package goes into effect when regulations for the two remaining laws are finished and once the final version of the legislation are publicized in the official newspaper, which should be in the next few weeks. The regulations bar mortgage lenders from providing loans for other purposes and prohibit home-financing providers from developing property.

Shuaa Capital announced the establishment of Saudi-based Gulf Installments Company, which focuses on providing installment and lease financing to businesses across a variety of sectors and assets. Lease periods are available from 1 to 4 years and can be tailored to suit the needs of each individual client based on the term, down payment and rental plan. David Hunt was appointed CEO of Gulf Installments Company which will be operated by Gulf Finance under a management contract with Shuaa.

In a recent announcement SHUAA Capital made known that its wholly-owned subsidiary - Gulf Finance Corporation - has engaged with the UAE Central Bank for a license which shall serve to establish an Islamic Window for some of its financing activities. The plans of Gulf Finance include the submission of the necessary applications in the first quarter of 2013. It is expected to be market-ready in the spring of 2013, subject to regulatory approvals. The proposed programme to offer Islamic financial services is consistent with the vision of Sheikh Mohammed bin Rashid Al Maktoum, Prime Minister of the UAE and Ruler of Dubai. He recently explained the necessity to establish a platform of Islamic economic products and services aiming to grow the Islamic economy.

2013 is the 38th year for the global Islamic banking industry in its contemporary phase. The start of the new year is filled with invigorated optimism, partly due to its continued proliferation in new markets, particularly in Oman and Arab Spring countries. Another reason for the optimistic attitude is the impressive momentum of the sukuk market. However, the Islamic finance industry tends to be beguiled by its own relative success largely because of the absence of independent evaluation of its performance and policy and architectural development.

In 2013 the government of Saudi Arabia plans to issue bonds backed by the Kingdom’s Ministry of Finance. The bonds will be used to fund construction work at airports in Riyadh and Jeddah. According to the Kingdom’s General Authority for Civil Aviation (GACA), its plans include the issuance of a second sukuk at the end of 2012 in order to help fund its SR27 billion ($7.2 billion) airport in Jeddah. The first sukuk which was launched earlier in 2012 managed to raise SR15 billion to help fund the Jeddah airport development.

Banque Saudi Fransi (BSF) wants to close a SR1.9 billion ($506.6 million) Lower Tier 2 Islamic bond issue. This should grow bank's subordinated debt or Tier 2 capital. Although the sukuks has a seven-year maturity, it is callable, so it can be repaid already after five years.