IslamicFinance.de

The State Bank of #Pakistan (SBP) has announced a reduction in Statutory Liquidity Requirement (SLR) for Islamic banks and Islamic banking branches by 5% to fix at 14%. Presently, some Rs 570 billion of Islamic banking industry has been placed under the SLR with SBP. This amount includes some Rs 308 billion of Sukuk and Rs 225 billion of Bai-Muajjal. With the maturity of Rs 255 billion Bai-Muajjal, the amount will reach Rs 345 billion, therefore SBP has decided to cut the SLR and fix it at 14%. Time Liabilities, including Time Deposits with a tenor of 1 year and above, will not require any SLR. According to Islamic banking representatives, with the maturity of Rs 225 billion Bai-Muajjal, surplus liquidity of Islamic banking industry will surge to some Rs 400 billion, while there are no more investment opportunities for the Islamic banks in Pakistan.

Professor Datuk Rifaat Ahmed Abdel Karim was conferred the Royal Award for Islamic Finance 2016 by the King of Malaysia, His Majesty the Yang di-Pertuan Agong. The biennial Royal Award initiative recognises individuals who have excelled in advancing Islamic finance globally. Professor Datuk Rifaat’s contributions include the establishment of two international standard setting bodies, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). He is the first Secretary-General of the IFSB, a post he held since the IFSB started to operate in 2003 until 2011. Under his stewardship, the membership of the IFSB expanded from nine founding members in 2003 to almost 200 members in 2010. He is a prolific writer and has authored several academic papers in key areas including accounting, finance, governance, Shari’ah and regulatory issues to further contribute to the development of Islamic finance.

The unexpected victory of Donald Trump in the US presidential election caused the Islamic Development Bank (IDB) to wait a bit longer to assess the impact on the regional bond market. IDB will announce this week plans for investor roadshows covering its planned sukuk sale. The issue, expected to be in excess of $1 billion, is one of the few remaining debt sales likely to be completed in the Middle East before the end of this year. Some Middle Eastern bond transactions for which banks had already been mandated have been put on hold and potential borrowers have decided to wait until January to see how markets perform. In addition to the IDB, Abu Dhabi airline Etihad is also expected to launch a sukuk issue soon, likely to be in the $1 billion region. The bond is expected to be executed later this week.

Italian money manager Azimut Holding will jointly manage its Islamic bonds fund with Maybank Asset Management Group to cater to growing demand for hard currency sukuk products. The partnership will allow the fund to penetrate new markets including Malaysia and Singapore, where Maybank Asset Management already operates. Azimut launched its global sukuk fund in 2013 which has over $130 million in assets. Maybank Asset Management launched a U.S. dollar-denominated sukuk fund of its own in 2014. Sukuk funds remain tiny compared to their conventional fixed-income counterparts, but the sukuk market has widened in recent years thanks to an increasing number of issuers and investors.

According to Maisam Fazal, head of commercial finance at Al Rayan Bank, Sharia-compliant peer-to-peer (P2P) lenders could soon be coming to the UK market. Despite welcoming more firms to the Islamic finance market, Maisam suggested that rates as low as Al Rayan’s could make it off-putting for potential new entrants. He explained that having competitive rates was paramount for Islamic finance banks, as the cost of funding could make products more expensive. Maisam claimed that Al Rayan was unique in offering lenders Sharia-compliant debt.

New market research conducted by Timetric expects the rise of contactless payment services (CPS) and Sharia-compliant credit cards in Morocco over the next few years. According to the United Kingdom-based research, Centre Monetique Interbancaire, Morocco’s own internal network switch, launched CPS in the kingdom just over a year ago alongside MasterCard. So far the CPS point of service terminals have only been deployed in Casablanca, but they are expected to reach Rabat and Marrakesh in the coming months. By the end of 2016, Moroccans will be able to take advantage of 6,000 terminals, and by 2017 that number will more than double to 17,000. By the end of the year, the government plans to authorize a total of 10 banks which provide Sharia-compliant credit card services.

Istanbul's Sabahattin Zaim University established the International Research Center for Islamic Economics and Finance (IRCIEF) in order to produce relevant research to guide policy design and implementations. It also organizes workshops and training programs to provide society with opportunities toward a better understanding of Islamic economics. According to IRCIEF director Prof. Dr. Arif Ersoy, the center will also intensify its research activities on finding new solutions for the problems encountered by SMEs, who are the main consumers of Islamic banks. IRCIEF offers graduate studies on Islamic Economics and Finance, furthermore post graduate studies on Islamic Economics and Law in Arabic. For next year the center is planning to open the programs in English as well.

China plans its first dollar sukuk issuance to tap a four-fold increase in Chinese funds that can invest in bonds overseas. Sichuan Development Financial Leasing plans to sell $300 million of Islamic bonds via Singapore-based special purpose vehicle, Silk Routes Capital. According to investment manager Hasif Murad, the predominant interest for this issuance will remain from yield-hungry domestic Chinese investors. Silk Routes Capital hired Standard Chartered, CIMB Group Holdings, Bank of China and Bank of China International to help to arrange investor meetings. In a sign that the traditional Silk Road is coming back to life, Chinese companies are building roads, railways and ports along the route to the Middle East, Africa and Europe.

Kazakhstan is currently working on the launch of its new Astana International Financial Center (AIFC) in order to become a financial hub for the Commonwealth of Independent States (CIS), West and Central Asia. It is part of Kazakhstan President Nursultan Nazarbayev's vision entitled 100 Steps to lift Kazakhstan into the world’s 30 most developed nations by 2050. The creation of the AIFC is step 70 in the programme. Its regulatory framework is modelled after the Dubai International Financial Center and will open avenues for investors within the Eurasian Economic Union between Kazakhstan, Russia, Belarus, Kyrgyzstan and Armenia. Plans are to attract more than $350bn in foreign investment and to issue a total value of $91bn in sovereign bonds, mostly sukuk. The launch of the AIFC is anticipated for 2018 after the country will have had hosted the Astana Expo 2017 in the capital from June 10 to September 10 next year.

China plans its first dollar sukuk issuance to tap a four-fold increase in Chinese funds that can invest in bonds overseas. Sichuan Development Financial Leasing plans to sell $300 million of Islamic bonds via Singapore-based special purpose vehicle, Silk Routes Capital. According to investment manager Hasif Murad, the predominant interest for this issuance will remain from yield-hungry domestic Chinese investors. Silk Routes Capital hired Standard Chartered, CIMB Group Holdings, Bank of China and Bank of China International to help to arrange investor meetings. In a sign that the traditional Silk Road is coming back to life, Chinese companies are building roads, railways and ports along the route to the Middle East, Africa and Europe.

The international sukuk market received a major boost when Saudi Finance Minister Ibrahim Al Assaf confirmed that the kingdom’s public debt issuance programme will not be limited to conventional bonds and that sukuk will play an important role. The global sukuk market had a flat year in 2015, impacted by the slump in the price of crude oil and other commodities. The signs are of a rebound this year, with sukuk issuances already reaching US$50 billion in the first four months of the year. The Saudi announcement augurs well for the sukuk market next year. The Saudi Finance Ministry had also stressed that the kingdom plans to raise US$120 billion from the international markets by 2020. Saudi bankers expect a debut Saudi sovereign sukuk early next year and stress the need for a well-structured public borrowing policy in the international market.

According to Standard Chartered Saadiq, much of the growth in Islamic finance is expected to come from capital markets business relating to sukuk. Ahsan Ali, Global Head of Islamic Origination, said that sukuk was a mainstream component of capital markets in core Islamic finance markets such as Malaysia and the UAE. There is a healthy pipeline of issuance across the world and more issuers are expected to come to the market over the next year. Although a significant share of capital market issuance have been dominated by conventional bond issuance and loan syndications, Ali expects GCC issuers to issue sukuks along with conventional bonds. In the future a pickup in issuance from Bank Negara Malaysia, coupled with the deficit financing needs of the GCC members is expected to boost issuance.

Etihad Airways plans to issue a debut US dollar-denominated benchmark sukuk and will soon meet investors to determine its size, maturity and interest rate. Investors said the sukuk could be as large as $1 billion. HSBC, JP Morgan, National Bank of Abu Dhabi, Abu Dhabi Islamic Bank, Dubai Islamic Bank and First Gulf Bank are the deal underwriters, according to an investor presentation dated Nov. 3. The airline, whose credit is rated A by Fitch, reported total revenues of about $9 billion in 2015. At the end of last year it had 121 aircrafts and it plans to take delivery of a further 188 by 2026.

En marge de la Conférence sur le climat COP22 qui se tient à Marrakech du 7 au 18 Novembre 2016, la Banque Islamique de Développement (BID) animera son propre pavillon dans la dynamique amorcée par la BID pour devenir une banque multilatérale de développement Sud-Sud. ICD filiale de la BID dédiée à la promotion du secteur privé organise samedi 12 Novembre 2016 une conférence dédiée au Secteur Privé, à la Finance Climat et à la Coopération Sud-Sud. ICD participe à la COP 22 avec la volonté d’apporter une valeur ajoutée aux opportunités d’investissement vert, en démontrant le potentiel de la finance islamique de soutenir les projets durables et écologiques dans les pays membres, notamment par l’émission de Green Sukuk.

Kenya plans to develop Islamic finance through a wide-ranging taxation review and the establishment of a national sharia board. The country wants to build up the industry as part of a long-term plan to turn Nairobi into an international financial centre. The initiatives are being led by the Islamic Finance Project Management Office (PMO), a body setup recently to coordinate efforts among Kenya's regulatory agencies. According to finance consultant Farrukh Raza, the PMO has submitted an initial set of policy amendments focused on taxation of sharia-compliant products. A second batch of policy amendments will be presented by the end of this year, covering banking, insurance, pensions and capital market products. Kenya's National Treasury has said it is looking at the possibility of a debut sale of sukuk, although it has yet to finalize details for such an issuance.

The investment arm of the Sichuan provincial government has hired four banks to help raise $300 million via Islamic bonds, the first such deal from a Chinese state-owned company. According to advisor Bobby Tay, the five-year sukuk will be raised through the leasing arm of Sichuan Development Holding (SDH) and is expected to be completed in the next two months. CIMB, Standard Chartered, Bank of China and Bank of China International have been hired to arrange the transaction, with proceeds to be used for the acquisition of sharia compliant assets in mainland China. The sukuk will include credit enhancement features and be listed in Singapore, with listing in other regional exchanges also being considered.

Ethiopia's central bank aims to develop Islamic finance to help expand financial access and inclusion. The country has one of the highest economic growth rates in Africa, but relies heavily on an agricultural sector that employs three-quarters of the workforce. According to Getahun Nana, Vice Governor of the National Bank of Ethiopia, the government wants to industrialize its economy but this requires sustaining investment rates of almost 40% of GDP over the next five years. Islamic finance could help in this endeavor, so the central bank is conducting a study to determine the demand for sharia compliant financial products. Islamic finance is still new in Ethiopia. Currently 8 out of 18 financial institutions offer sharia compliant products via Islamic windows but they have so far mobilized less than 1% of total deposits.

The increasing economic importance of banks in Muslim-majority countries has made Islamic finance a useful skill. The globalisation of business education means that many schools now have campuses in countries where Islamic finance is a significant part of the local banking sector. British higher-education institutions lead the non-Muslim world in the teaching of Islamic finance, with longstanding courses run by London Business School, Durham, Aston, Bangor, Salford and Cass Business School. More than 60 institutions in the UK now teach Islamic finance, up from fewer than 10 a decade ago. London Metropolitan University is the latest UK institution to add an option to learn about the subject, relaunching its MBA in January with Islamic finance.

In #Indonesia high-ranking officials announced they were preparing to establish the National Committee of Sharia Finance (KNKS) that would be directly chaired by President Joko Widodo. Bank Indonesia Governor Agus Martowardjo noted that human resources quality would determine the success of the KNKS, including its system and management’s regulation. He added that the committee would be established this month and also aims to involve 22,000 Islamic boarding schools across the archipelago. Boarding school graduates will be expected not only to become knowledgeable in religious affairs, but also to understand sharia economics and develop their entrepreneurship skills.

Standard Chartered's Islamic division is seeking banking licences in three African countries in order to offer its services to the population. According to the bank's head of Islamic banking, Mohammad Ali Allawalla, Standard Chartered Saadiq could enter at least one of three markets, Nigeria, Botswana and Zambia, as early as 2017. The bank is also in discussions about gaining an Islamic banking licence in Brunei in South East Asia. Standard Chartered Saadiq's core markets are Pakistan, Malaysia, Bahrain, United Arab Emirates, Indonesia and Bangladesh and in 2014 it entered the Kenyan market, its first move into Africa.