IslamicFinance.de

Corruption remains the biggest obstacle hindering Nigeria from achieving its economic potentials, according to the Managing Director of Jaiz Bank, Muhammad Nurul Islam. Speaking in a keynote lecture at a one-day forum of the Finance Correspondents Association of Nigeria (FICAN), Islam said corruption had often given way to a situation where the wrong people had been given leadership responsibilities. Moreover, he said FICAN had a critical role to play in exposing illegal financial transactions. The aim of the FICAN platform was to promote a mechanism for reviewing and analysing activities in the country's economic sphere.

Draft Islamic banking and insurance regulations have been prepared in Morocco and could be passed by parliament before the end of next year. Morocco has been seeking to develop Islamic finance for about two years, partly as a way to attract Gulf money and fund the huge budget deficit. The government originally planned to issue its first sovereign Islamic bond this year but that plan appears to have been delayed. The Islamic finance laws could clear the way for Morocco to see its first conventional bank with an Islamic window, as well as sukuk issuance by private firms. Two or three private firms could tap the market fairly quickly after the laws are passed.

According to the African Development Bank (AfDB), Nigeria has an infrastructure deficit of $360 billion. However, the adequate physical infrastructure in the country has been identified as one of the major factors to support sustained and broad-based strong economic growth. Addressing these challenges will require a substantially larger annual level of investment in infrastructure. However, access to finance, to fund the development of most of these critical sectors has remained a challenge. One of the alternatives today is Islamic finance. Moreover, Islamic finance products have the capacity for ensuring financial inclusion of significant segment of the population.

Jaiz Bank has appointed Muhammad Nurul Islam from the Islami Bank Bangladesh Limited as its new managing director/chief executive to steer its affairs and better position the bank. He takes over from Hassan Usman, who had been acting managing director of Jaiz Bank since April. Nurul Islam has vast knowledge of non-interest Islamic banking experience garnered for over three decades. He holds Masters in Business Administration from the Institute of Business Administration (IBA), University of Dhaka in 1982, with a major in finance and has attended several professional training and seminars. Moreover, he is a member of many professional associations, including Life Member, Association of the Bankers’ Bangladesh.

Somaliland President Ahmed Mohamed Silanyo has received a delegation from Islamic Development Bank (IDB) as the president congratulated the delegation for the ongoing development projects run by the Organization in the country. The delegation from the IDB has been in the country for the last 4 days. The Islamic Development Bank is currently implementing several ongoing development assignments including projects relating enhancing Hargeisa main hospital's infrastructures, as well as, Hargeisa and Gabiley Orphanage centers. The delegation and the President of Somaliland have agreed to continue expanding their co-existance and make their cooperation more effective than ever before.

Djibouti is promoting Islamic finance to increase banking penetration in the tiny African nation and help fund upgrades to the country's infrastructure. Since most people are still not customers of banks, Djibouti sees sharia-compliant finance as a way to pull itself out of poverty and to assemble capital for investment. Central bank governor Ahmed Osman said banking penetration had risen from 10 percent of the population six years ago to 17 or 18 percent now, but that conventional banks were not attractive to many people for religious reasons. The spread of Islamic banking will also help authorities move more business activity from the informal economy to the formal sector.

The 2nd Annual Islamic Banking Summit Africa (IBSA 2013), which opened today in Djibouti, saw more than 350 leaders in the international Islamic banking and finance industry engage in discussions that focused on capturing the growth opportunity for Islamic finance and Takaful in Africa. The inaugural session of the two day event assessed the progress and development of Islamic finance in Africa and discussed required key government and regulatory initiatives. The keynote plenary session discussed key strategies for capacity building and how to best position Islamic finance as a catalyst for a new wave of economic development in Africa. The Power Debate session discussed key initiatives to strengthen Islamic finance’s links to the real economy in Africa and connect Africa to the broader world of Islamic finance.

Dear Reader,

IslamicFinance.de is still edited by myself, Michael Saleh Gassner. In the same time the website became part of the family's publishing house, Al Kitab.

Myself I moved to Geneva for professional reasons, working as Islamic private banker. IslamicFinance.de remains to be a private passion.

Best regards,

Michael Gassner

Dear Readers,

Venture Capital has often been regarded as the ideal tool for Islamic finance, particpating in profits and losses of innnovative companies.

Now a major assessment has been done by Cambridge Associates in terms of performance, comparing it to the wider stock market. Result: No outperformance. Considering the lack of liqudity it seems to be much less attractive to professional investors than thought.

See: http://www.cambridgeassociates.com/pdf/Venture%20Capital%20Index.pdf

The lack of success also is induced by lack of transparency and fee models taking away the eventual outperformance. This is for the US market of course. Experiences in less advanced markets could be better or even much worse.

It still has other benefits, as diversifying risk, promoting overall growth and eventuall fostering social benefits.

In order to protect the investor, proper disclosures must be integrated to grow this industry in a healty manner. Further the focus on impact investing will ensure that value is created and risk better managed. What impact investing means could be read here:

See: http://www.thegiin.org/cgi-bin/iowa/home/index.html

More than 250 leading players, key regulators and thought leaders in the international Islamic banking and finance industry will be gathering on the 6th & 7th of November 2013 in Djibouti, for the 2nd Annual Islamic Banking Summit Africa (IBSA 2013). Held under the theme “Islamic Finance and Takaful: Capturing the Africa Opportunity”, IBSA 2013 will provide a platform to specifically focus on the opportunities and challenges that are forging the Islamic banking, finance, Takaful/ReTakaful, and investment landscape in Africa. IBSA will also provide a platform for industry players seeking to further build their presence in the evolving African markets for Islamic finance and to explore emerging opportunities which will further increase the momentum of growth.

The Islamic Corporation for the Development of the Private Sector (ICD), a member of the Islamic Development Bank Group (IDB), and the government of Senegal and have announced the African state’s plan to relaunch a XOF 100 billion ($200 million) sukuk project next year. Amadou Ba, Senegal’s minister of economy and finance, has reaffirmed the interest of his government of Senegal to diversify its financing instruments. This project is the beginning of an ambitious program which could lead to the financing of innovative infrastructure and energy projects through sukuk issuances. This project is the first of its kind in the West African Economic and Monetary Union (WAEMU) and aims to promote Islamic finance as an alternative instrument to finance the economies of the member states of the union.

Operators seeking the licence to underwrite Takaful Insurance have continued to turn in their applications to the National Insurance Commission (NAICOM). Since the process is still ongoing, the number of applications is still not known. Interests have been received from underwriters and the general public. NAICOM will through the licensing demystify insurance practice, making it possible for operators to operate at the grassroots. Ibrahim Hassan, deputy commissioner for Insurance (Technical) NAICOM, said the interested companies must maintain a minimum deposit in a non-interest financial institution at all times and that the provision for the establishment of an Advisory Council of Experts (ACE) must be made in the articles of the Company and there should be establishment of investment policy for the participants’ Risk Fund.

The Nigerian State of Osun has completed N11.4bn sukuk bond issue. The sukuk bond was issued in accordance with enactment of the Osun State Bonds, Notes and Other Securities Law 2012 and setting up the Osun Sukuk Company Plc. Though Islamic in nomenclature, the sukuk bond was a conventional bond and coordinated by the regular investors in the nation’s capital and money market. The N14. 4 bn sukuk (14. 75 per cent) fixed return tranche 2 has 42 investors with Lotus Capital Limited as the leading issuing house and Augusto and co, one of Nigeria’s rating agencies, as the rating agent. Out of the 42 investors, only one of them (Jaiz Bank) is Islamic and the name sukuk is just a nomenclature, saying that the investors are regular Nigerians.

Nigerian Jaiz Bank has increased its branch network to ten, with the commissioning of its Katsina branch this week by the state governor Alhaji Ibrahim Shehu Shema. The bank now has branches in Gombe, Maiduguri, Katsina, and an additional branch in Kano, making two branches in the state. The bank has also added two branches in Abuja, the Federal Capital Territory. The branches are located at the National Assembly and Wuse District. Commissioning the bank yesterday, the governor promised to identify and support the operations of the bank.

The Islamic Development Bank (IDB) is actively involved in supporting African governments’ efforts to diversify funding through Islamic capital markets, according to Kodeidja Malle Diallo, director, group risk management department of IDB. n addition, the IDB Group and group entities are committed in supporting development projects and capital market linked Islamic fund raising efforts. IDB Group’s portfolio investments in sovereign sukuks will be purely driven by credit worthiness of issuing sovereigns. Despite the strong potential for developing Islamic capital markets in Africa, the plans are moving at a slow pace. At a political level, many countries are yet to agree on what state assets should become collateral (underlying) for a sukuk issue. Additionally, relatively low yields in conventional bonds could also emerge as a challenge for sukuk issues in these markets.

Nigeria's Jaiz Bank is currently devising a strategy, leveraging on its relationship with the Islamic Development Bank (IDB), which will enable it invest and help facilitate financing of the nation’s power sector. Representatives of IDB are expected in Abuja for advanced talks. $3.4 billion is currently being sort by government to bridge the yawning infrastructure gap in the electricity transmission sub-sector, considered to be the weakest link in the power value chain. Last month, minister of power, Chinedu Nebo, suggested that Nigerian banks should consider forming consortiums to provide the much needed funding. Jaiz Bank as an entity is on its own not able to finance such large ticket transactions, so leveraging on this relationship with IDB is crucial to being able to invest in the power sector.

In September 2012, the Central Bank of Nigeria launched the Nigerian Sustainable Banking Principles. The adoption and implementation of these principles are compulsory and require Nigerian financial institutions to develop a management approach that balances environmental and social risks. Since its launch, there have been a series of initiatives and dynamism towards embedding sustainability in the Nigerian banking sector. However, sustainable banking in Nigeria could be abandoned if it is not pursued by subsequent Central Bank governors. Unfortunately, the Nigerian business environment is particularly characterised by poor governance and weak consumer voice, which will in turn have implications for the success or failure of the longevity of the Nigerian Sustainable Banking Principles.

Shariah banking offers an opportunity for Africa's existing banks. In Kenya, the Gulf African Bank and the First Community Bank experienced exceptional growth. Standard Chartered said it would soon start offering Islamic banking products in Kenya. As African banks embrace Islamic practices, regulatory bodies are scrambling to issue Shariah-compliant policy statements and rules. Nigeria brought in new guidelines to help deal with sukuk and guidelines were established to deal with takaful. South Africa has rewritten its tax laws to ensure that Shariah-compliant products are more transparent. Uganda, Botswana and Zambia are also looking to make regulatory changes to grow their Islamic banking sectors.

The Governor of Zamfara State, Alhaji Abdul’aziz Yari, has said the state would invest the sum of N1.5 billion in Jaiz Bank to shore up the financial institution’s capital base. Speaking in Gusau while inaugurating the bank's 11th branch since it started operations in January last year, he urged citizens of the state to patronise the bank in order to realise the gains of non-interest banking. Moreover, the governor said local government funds would be invested in the bank. People will be mobilised through the mass media to educate them on the importance if the bank, he added. Meanwhile, the Chairman of the bank, Alhaji Umaru Mutallab, expressed appreciation to the governor for his interest in the bank.

Africa has big potential for Islamic finance. Nigerian Jaiz Bank for example aims to expand outside northern Nigeria and open 100 branches by 2017. Local conventional banks are getting ready to move into Islamic finance too, including Sterling Bank, which recently gained a licence to open an Islamic window. Despite Kenya’s smaller Muslim population compared to Nigeria, the country’s Islamic finance sector is also emerging. Gulf African Bank for example enjoyed over 154% net profit growth to $2.8 million. Other countries like Zambia are eager to catch up. However, the lack of competition might be a challenge, as well as conventional banking laws dictating Islamic finance.