IslamicFinance.de

Orix Leasing Pakistan Limited (OLPL) plans to tap the high growth Islamic finance market. The company has entered into a non-binding Memorandum of Understanding (MoU) with Standard Chartered Bank (Pakistan) Limited (SCBPL) with regard to a prospective merger/amalgamation of Standard Chartered Leasing Limited (SCLL), a subsidiary of SCBPL with and into OLPL or acquisition of SCBPL’s 86.45 per cent equity stake in SCLL. The MoU further provides the acquisition of SCBPL’s 100pc stake in Standard Chartered Services of Pakistan (Private) Limited and acquisition of SCBPL’s 20pc stake in Standard Chartered Modaraba. There is no certainty that the MoU would result in a binding transaction.

Qatar has expressed its willingness to set up an Islamic bank in Tajikistan, which would be the first Shariah-based financial institution in the Central Asian country. The establishment of a full-fledged Islamic bank under Qatari-Tajikistan partnership was discussed when Ezdan Holding chairman Sheikh Dr Khalid bin Thani bin Abdullah al-Thani called on Tajikistan President Emomalii Rahmon in the country's capital Dushanbe last week. Sheikh Dr Khalid said the Qatari business community was viewing the Tajikistan market with great interest and willing to invest in the country, besides sharing its knowledge and expertise with local businessmen in different sectors, particularly Islamic banking. He termed as "extremely positive", the Tajikistan government's decision to enact necessary legislation required for Islamic banking.

Azerbaijani company Joint Leasing will conclude the first corporate Islamic leasing agreement next week. The company is considering the opportunity of attracting additional resources as part of the Islamic leasing project. At present, there is an opportunity to attract additional funds. In principle, leasing is a tool of Islamic finance. Ijara is among the tools used in Islamic finance.

SECP is striving to establish a comprehensive Islamic financial system to cater for the needs of people, which are not inclined to use conventional financial products. The decision of SECP to permit conventional insurance companies to launch Takaful operations will result in rapid development of this sector. However, the development of an Islamic financial system needs to include Islamic banking industry, Takaful industry and Islamic capital and money markets with strong linkages, interdependence and synergies. Although Takaful has been in the market for long, it has yet to make significant inroads as the concept is clouded by unfamiliar terms and principles for commoners resulting in hesitancy. In absence of a viable Islamic capital market the adequate supply of quality financial instruments could be a difficulty.

Kazakhstan is reviving plans to develop Islamic finance and is “fine-tuning” legislation for Shariah-compliant banking, central bank Chairman Kairat Kelimbetov said. Some lenders are seeking to convert into Islamic banks, he said. The drive by Kazakhstan comes two years after its debut sukuk, which was denominated in Malaysian ringgit. Abu Dhabi’s Al Hilal Bank opened a branch in Kazakhstan in 2010, and remains the only Islamic lender in the oil-rich nation. However, Al Hilal Islamic experienced difficulties in generating business because of a lack of understanding of Shariah-compliant products by customers. Moreover, Kazakhstan will face legislative hurdles as it seeks to promote the industry and the nation is experiencing the early stages of development.

Until recently the banking and financial services sector and business in Uzbekistan have had limited exposure to and understanding of Islamic finance. The key laws such as the Civil Code, the Tax Code and laws on banking and investment do not refer to Islamic finance or to Islamic finance instruments. It is therefore important that Islamic finance and Islamic banking instruments are first recognised as a legislative concept before any regulatory mechanisms are put in place. Foreign banks including Islamic banks may open representative offices or set up subsidiary outlets in Uzbekistan provided they comply with minimum criteria and qualify under requirements imposed by the CBU in accordance with the Regulation on the Procedure for Registration and Licensing of Banking Operations.

Iran has eight state-run and 19 “privately owned” banks – although these are frequently subject to interference from the state, with their shares bought by entities affiliated to power centres, which then influence banking policies and exploit funds - all of which have invested heavily in the ownership and management of commercial entities outside the banking sector. The central bank, state-run Bank Melli and privately owned banks of Ansar, Saderat, Mellat, Pasargad and Parsian refused to comment. Pasargad and Parsian are considered the leading private banks in non-banking operations.

Pakistan’s insurance sector is set for a boost in competition after the industry regulator allowed conventional firms to offer takaful earlier this year. The regulator, the Securities and Exchange Commission of Pakistan (SECP), has now granted two takaful licenses and has up to 10 applications currently being finalised. 20 to 25 new takaful window operators are expected in the market within one year. The regulator sees greater opportunity in life insurance although commercial lines of business could also find appeal in rural markets where the demand for products like crop, agricultural, livestock insurance is increasing. Such an increase in activity could face challenges, in particular a lack of experienced staff as well as the need for Islamic re-insurance products to help manage excess risk.

The Obama administration unveiled a host of new sanctions Friday against more than 30 companies and individuals doing business in or with Iran, seeking to thwart that nation’s nuclear ambitions, its support for organizations the United States deems as terrorist groups and mute its support for the embattled regime of Syrian leader Bashar Assad. The sanctions come at a period where the United States needs Iran’s help in trying to defeat the Islamic State (ISIS). Friday’s additions to the list include more banks, providers of equipment to Iran’s state oil company, banks that help to funnel U.S. currency to Iran’s central bank and transport-related businesses that have helped the Syrian and Iranian governments.

Al Baraka Bank Pakistan aims to play an active role in social and economic development, by way of contributing to secure the welfare, balance and solidarity of financially and socially challenged segments. Setting the ethical standards for a sustainable society A Group of Volunteers from Al Baraka Bank spent a day, celebrating the Independence Day, with the Children at The Citizens Foundation (TCF) School. Concluding the ceremony, Gift hampers were distributed amongst the attending children. Al Baraka is a sponsor of The Citizen’s Foundation (TCF) Schools. Development of Education sector, through various activities and funding is one of the primary concerns of Al Baraka, in the longer run.

Pakistan's health ministry has said that if new funds are not arranged for the delayed anti-polio campaign, it is likely to halt after two months. The Economic Coordination Council (ECC) was supposed to approve funds for the campaign in the second week of August, but it has not been allocated owing to a political crisis. The Islamic Development Bank, Japan and other organisations were to provide a loan of $326 million, with the interest on the amount to be paid by the Bill and Melinda Gates Foundation. A total of 115 polio cases has been registered in Pakistan this year. According to the National Institute of Health (NIH), only 39 polio cases were registered last year.

The attempts to offer conventional financial products in Afghanistan are perceived as yet another foreign attempt to challenge basic tenets of the Afghan society. This perception - shared not only in the countryside but also by sectors of urban society - is fuelling resentment and distrust among people. As a consequence, the already meager financing in the rural areas, where 75% of the population lives, is drying up and almost non-existent. This is undermining any meaningful economic and social take-off. Within this landscape, Islamic finance and takaful represent a necessary tool to address the population's discomfort with the conventional approach, ease cultural tensions and creatively mend social relations.

Currently, Pakistan ranks ninth globally terms of development of the Islamic financial services industry but some recent purposeful steps would prove to be a game changer, said Mian Shahid, Chairman United International Group (UIG). Now, the conventional insurance companies in Pakistan are set to make major inroads into the Islamic insurance business with the active support of regulators, he added. The potential of Takaful in the Muslim world is still largely unexploited, he said, adding that its premiums are expected to reach $20 billion by 2017. Saudi Arabia, UAE and Malaysia enjoy the lion’s share on account of their advanced Islamic finance sector while Pakistan would need more simplified regulatory frameworks to propel the industry’s expansion, the insurance veteran observed.

The International Bank of Azerbaijan (IBAR), the biggest bank in Azerbaijan managing more than 35% of total banking assets in the country, has announced the signing of a Shari'a Supervisory agreement with Shariyah Review Bureau (SRB). IBAR hopes that SRB and its experience will help the bank to build the Shari'a Complaint business and lift its Islamic financial sector to a successful future. Shariyah Review Bureau is today recognized globally for its iconic Shari'a Compliance services. With more than 37 Shari'a scholars, the company's growth includes recently doubling Shari'a review and Certification capacity in the GCC. As the pace of change in the Islamic financial industry accelerates at an international level, institutionalized services of Shari'a Advisory firms like SRB has become increasingly evident.

International Bank of Azerbaijan (IBA), 50.2% owned by Ministry of Finance, is preparing to launch a separate sharia-compliant banking unit as the former Soviet state prepares an Islamic banking law slated for next spring. A stand-alone unit would allow IBA to more than quadruple its Islamic financing business in the country. IBA has thus far extended $180 million of Islamic financing in the country; after legislation is passed, this could increase to as much as $750 million within a year. IBA also wants to create a strong domestic Islamic banking platform for use with its subsidiaries in Russia, Georgia and Qatar. IBA has hired Bahrain-based consultancy Shariyah Review Bureau to help in the design of several projects.

A new study by International Finance Corporation (IFC) showed that around 35 per cent of SMEs in the Middle East and North Africa (MENA) are excluded from the formal banking sector because they seek Sharia-compliant products that are not readily available in the market. The study, which was carried out across nine countries, found a potential market gap of up to $13.2 billion for SME Islamic financing in the region with a corresponding depository potential of $9.71 billion to $15.05 billion across these countries. The study pointed out that apart from a high level of risk aversion that banks in the region have, poor regulatory environments, differing perceptions of Islamic finance, and a lack of relevant products were hindering the growth of Islamic SME banking.

A shortage of global sukuk will probably help cut borrowing costs on Pakistan’s first Islamic bonds since 2005, boosting a government besieged by opposition street protests. The government plans to offer $1 billion of the notes, with the sale scheduled for the first week of September. Assuming it’s a five-year maturity, the coupon rate will probably be 5.75 percent to 6.25 percent. The nation paid 7.25 percent for 2019 non-Islamic dollar debt in April. This deal will be an important test to see how a politically volatile country, as Pakistan is at the moment, can issue a high-yield sukuk. There will be demand because no other country is giving this huge return. The rupee has rebounded 9.3 percent from a record-low of 108.70 per dollar on Dec. 3. It closed at 99.49 yesterday.

The National Bank of Pakistan (NBP) has sought regulator’s approval to conduct due diligence of Burj Bank, as the bank wants to continue its footprints in the Islamic banking industry. The NBP had already initiated the process of converting its existing branches into Islamic ones, which will increase to 175 by the end of this year. The acquisition of Burj Bank provides NBP with the opportunity to become a key player in the Islamic banking industry of Pakistan. Burj Bank is the smallest of five full-fledged Islamic banks in Pakistan with a network of 75 branches. The State Bank of Pakistan is stepping up its push to develop Islamic banking, encouraging lenders to expand their operations in the world’s second most populous Muslim nation.

Hong Kong, Indonesia and Pakistan are banking on pent-up investor demand as they look to raise up to a combined US$3.5bn in the fast-growing Islamic bond market. The three sovereign sukuk issues, including a planned US$1bn debut from Triple A rated Hong Kong, are set to launch before the end of September. Indonesia is Asia’s only regular in the global sukuk market, having issued annually since 2010. Pakistan has sold Islamic debt overseas only once before, in 2005, while Malaysia has typically preferred to target its own domestic market. Hong Kong, in particular, is looking to promote itself as a regional hub for Islamic financing to capitalise on growing trade links between Greater China and the Middle East.

Countries including Pakistan, Tunisia and South Africa are drawing up plans to issue government bonds that comply with Islamic law as they seek to take advantage of strong investor demand for emerging market sovereign debt. Tunisia is working with the Islamic Development Bank to issue a 1bn dinar ($580m) sukuk this year, while Jordan has instructed a committee to look into the possibility of issuing sukuk next year. Governments in South Africa and the Philippines also say they are considering raising money through the sale of Islamic debt.