IslamicFinance.de

The Dubai Center for Islamic Banking and Finance in Hamdan Bin Mohammed Smart University (HBMSU) concluded the 2nd China-UAE Conference on Islamic Banking and Finance. The two-day event focused on the objectives of the One Belt, One Road (OBOR) initiative, which aims to revitalize the Silk Road connecting Asia and Europe. The event was organized in cooperation with China Islamic Finance Club, ZhiShang Intercultural Communication, and Knowledge Partner Thomson Reuters. Talks focused on challenges and prospects for Islamic finance in achieving the goals of the ambitious Chinese initiative. The agenda comprised a series of panel discussions moderated by key international figures such as Prof. Baydoun; Mr. Gao Lin, Vice Director, Shenzhen Municipal Commission of Economy, Trade and Information Technology, and Dr. Adnan Chilwan, CEO of Dubai Islamic Bank.

Dr. Adnan Chilwan, CEO of Dubai Islamic Bank (DIB), said that Kenya stood out to the Bank as a stepping stone to expanding its operations into Africa. In May 2017 DIB was granted a banking licence by the Central Bank of Kenya to operate a subsidiary, DIB Kenya. According to Chilwan, Dubai always had the ambition to venture into Far East Asia and East Africa. As DIB had already ventured into Far East Asia, East Africa was the next logical point. From the East African countries Kenya stands out in its regulatory framework and the stability in the country. DIB Kenya is already open and the bank has ambitious plans for East Africa. Chilwan added that Kenya was a country that DIB would be surely focussing on in years to come.

In this interview, Dr. Adnan Chilwan, CEO of Dubai Islamic Bank, reflects on the bank’s performance in the last couple of years and prospects for future growth. Dubai Islamic Bank (DIB) has entered the billion dollar profits club and the challenge is to keep up the pace of exponential growth. Chilwan says a billion dollars is just a start and he wants to find the right way of replicating the successful strategy. He hopes the bank will be able to keep up that good work, making sure the customers are happy, the regulator is happy, the ratings agencies, research analysts and shareholders are all happy with what they get from the bank. He is grateful for the board of directors and for the team behind him that made this billion dollar profit possible.

According to Fitch Ratings, a tougher operating environment is continuing to challenge Saudi Islamic banks. Sustained low oil prices have taken their toll on economic growth and government spending and this affects certain sectors. Asset-quality metrics are likely to deteriorate from their current strong position due to slower Islamic financing growth. Islamic banks accounted for about 43% of the sector at end-1H16, up from 36.6% in 1H15. There are 12 licensed commercial banks in Saudi Arabia. Four are fully sharia-compliant, with the rest providing a mix of sharia-compliant and conventional banking products. The performance and credit matrices of Islamic and conventional banks are similar in many ways due to the largely Islamic finance nature of the lending market in Saudi Arabia.

The total Islamic finance industry was estimated at around $ 1.9 trillion in assets for the year end of 2016, and it pales into insignificance compared with traditional finance. However of special interest is the growing popularity of Islamic finance from both the Muslim and non-Muslim financial institutions and investors. Islamic assets are very much concentrated in the banking sector which holds $1.5 trillion in total, with the Islamic bonds or sukuks worth $320 billion, and investment funds and insurance or so called takaful worth $56 billion and $25 billion respectively.
The majority are purchase and sale or murabaha and leasing or ijara transactions. Some major Gulf companies are turning to the sukuk market to raise funds, with Saudi Aramco and the Government of Saudi Arabia both successfully launching sukuk tranches which were heavily oversubscribed.

The Islamic Corporation for the Development of the Private Sector (ICD) in collaboration with IE Business School offers a training program for the development of executives across the Islamic finance industry. The Master in Islamic Finance program has a blended format, combining on-site periods in Spain and Saudi Arabia with dynamic, interactive online modules to minimize the time away from work. The length of the training is 13 months and intake starts in October 2017. Throughout the program, participants will obtain practical knowledge of high-level financial tools, develop practical Islamic Finance technical skills and acquire leadership skills. Upon program completion participants receive a University Private Degree from IE Business School and IE Universidad. IE Business School is a school within IE Universidad, which is a University officially accredited by the Spanish education authorities.

Barwa Bank has almost finished legal and financial studies regarding its merger with Masraf Al Rayyan and International Bank of Qatar (IBQ). Barwa Bank CEO Khalid al-Subea said that any development in this regard will be announced through a joint statement by the three banks. Barwa Bank's recent Al Majd initiative offers its clients an exceptional banking package within the framework of various ongoing national initiatives. Barwa Bank also announced the launch of its new Shariah-compliant savings account that offers high flexibility and profit rate of an expected 3%, where profits are paid on a quarterly basis. The account allows clients to withdraw once every quarter up to 25% of the current balance.

The Dubai Financial Services Authority (DFSA) and Hong Kong’s Securities and Futures Commission (SFC) have signed an agreement to cooperate on Fintech innovation. The two public entities said the agreement will further strengthen the efforts of both authorities to develop an innovation-friendly ecosystem and regulatory environment. This continues a trend by both countries to ink bilateral relationships to boost emerging technology within the financial sector. The agreement was signed in Hong Kong by DFSA chief executive Ian Johnston and Ashley Alder, chief executive of the SFC. This step follows the introduction of regulations formalising a tailored regime for loan and investment crowdfunding platforms earlier this month. It also follows the launch of the FinTech Hive at DIFC and its Innovation Testing Licence (ITL).

Moody’s Investors Service has upgraded Dubai Islamic Bank’s (DIB) local and foreign currency long-term issuer ratings to A3 from Baa1. The outlook for the bank has been changed from positive to stable. Moody's also upgraded the bank’s baseline credit assessment (BCA), adjusted BCA as well as the long and short-term counterparty risk assessment. The primary driver for the BCA upgrade is the bank’s significant improvement in its asset quality and provisioning coverage. The upgrade also captures DIB’s improving profitability in recent years, with return on assets (ROA) improving to 2.0% for 2016. DIB said that its net income rose 13.8% in the second quarter to Dh1.1 billion compared with Dh929 million in the same period last year. Going forward, the rating agency expects that the bank’s net profitability may face modest pressure, due to increased funding costs, but that it will remain above the domestic average and global median.

Qatari banks are turning to Asia and Europe for funding after clients from other Arab states pulled billions of dollars from their accounts. Analysts warn that more heavy withdrawals are likely in the coming months. Qatar Islamic Bank has recently raised funds through private placement deals in Japanese yen and Australian dollars. It is now exploring more such deals in Europe and Asia, as well as a certificate of deposit program and a Murabaha facility. Many Qatari banks are facing greater urgency to secure funding since June when the United Arab Emirates, Saudi Arabia, Egypt and Bahrain imposed a boycott on Qatar, accusing it of funding terrorism. Qatar denies the allegations. The crisis has led to an outflow of around $7.5 billion in foreign customers' deposits and a further $15 billion in foreign interbank deposits and borrowings. In response, Qatar's government deposited nearly $18 billion with local banks in June and July.

Saudi Arabia auctioned 13 billion riyals ($3.5 billion) of local currency sukuk, with the offer 295% subscribed. It sold 2.1 billion riyals of five-year, 7.7 billion riyals of seven-year and 3.2 billion riyals of 10-year sukuk. The size of the issue was down slightly from the government’s offer in July, when it sold 17 billion riyals and attracted 51 billion of bids. The ministry qualified 13 Saudi banks to buy its sukuk issues in the primary market but hopes other institutional investors will eventually buy in the secondary market. Also, yields on Riyadh’s internationally issued US dollar sukuk have come down by about 12 to 15 basis points since the last domestic sale. Investment expert Mohieddine Kronfol said the way in which domestic and international Saudi yields were linked was a positive sign for Riyadh’s effort to develop a healthy debt market.

Some countries have introduced laws to level the playing field between Islamic and conventional finance when it comes to the relationship between VAT and financial products. Whereas countries like Malaysia and Singapore have legislated to level the playing field between conventional and Islamic finance by recognising its religious underpinning, the United Kingdom have dealt with the issue in a not dissimilar manner but with a secular approach. Customers have enough difficulty understanding conventional finance. Investment in training to ensure product sales persons can comfortably communicate their Islamic finance offerings will be essential.

Qatar Islamic Bank (QIB) has agreed a 1.6 billion Qatari riyal ($439.4 million) funding deal with Al Jaber Engineering (JEC) to finance a large food security facility at the new Hamad Port. The new food security facility is being built on a 530,000 square metre site and contains facilities that can be used for storing, processing and manufacturing of various foods. The complex will house rice silos, oil storage tanks and associated infrastructure. The funding deal was signed by QIB's CEO, Bassel Gamal, and JEC CEO Osama Hadid. Gamal said the bank was proud to finance JEC’s food security facilities project which is of strategic importance to the country. Hadid added that JEC would be responsible for both the design and construction of the new food security facility. Hamad Port is a $7.4 billion project which has been built to the south of the country's capital, Doha.

Sameer Nawaz has been appointed head of investment banking at Saudi Arabia’s Al Rajhi Capital. Nawaz will be responsible for building an investment banking team at the securities division of Al Rajhi Bank. Previously, he was co-head of investment banking at Saudi Fransi Capital. Usman Sikander, who was co-head of investment banking at Saudi Fransi Capital with Nawaz, will become head of investment banking. Banks are hiring in Riyadh in anticipation of a boom in fees as the government ramps up efforts to wean the economy off oil. Elyas Algaseer, Mitsubishi UFJ Financial Group's co-head said that the bank was looking to hire in Saudi Arabia in expectation that privatizations in the country could exceed $350 billion in about five years.

The Dubai Financial Services Authority (DFSA) launched its regulatory framework for loan and investment-based crowdfunding platforms. The DFSA crowdfunding regulations have the ability to catalyse growth in the FinTech industry by targeting the specific requirements of crowdfunding platforms. The regulations ensure clear governance for FinTech businesses and provide appropriate protection for their customers. They also formalise the DFSA’s approach to regulating crowdfunding platforms which had operated since 2016. Data provided by the Khalifa Fund shows that approximately 50-70% of SMEs have had their applications for funding from conventional banks rejected. Crowdfunding is expected to grow further in importance in the UAE as entrepreneurs seek alternative sources of funding.

The Dubai Gold & Commodities Exchange (DGCX) and Ayedh Dejem Group have agreed to develop and launch the Middle East’s first Sharia compliant Spot Gold contract to be traded on an international exchange. This development is reflective of the growing potential of the Saudi Arabian and wider GCC regions Sharia compliant gold markets. Ayedh Bin Dejem, Chairman for the Group, said this cross-border collaboration offered access to the regional gold and commodities market. It provides customers with improved hedging and investment solutions in compliance with Sharia law. DGCX Chief Executive Gaurang Desai added that Amanie Advisors LLC, the leading global Islamic Finance advisory firm, have been selected to advise on the initiative. The launch of this product appealing to a wider range of investors in the region is an ideal way for the Exchange to extend its reach.

Abu Dhabi Global Market (ADGM) has launched a Foundations regime in support of more effective structures for wealth preservation and wealth management. The new ADGM Foundations regime provides a strategic platform for financial planning and structuring, serving as an alternative to trusts and corporate vehicles. The platform offers a variety of services, including family succession planning, tax planning, asset protection, wealth management and corporate structuring, without relying on foreign regimes and practises. Both local and foreign entities will benefit from the ease-of-doing-business environment. The ADGM Foundations Regime creates a new type of legal structure with its own distinct attributes. It combines compliance regime with a high degree of operational autonomy to the founder and offers access to the double tax treaty network of the United Arab Emirates.

The entire business of Solidarity General Takaful (SGT) is proposed to be transferred to Al Ahlia Insurance Company. The Central Bank of Bahrain (CBB) received separate applications from SGT and Al Ahlia. SGT has applied to transfer its business to Al Ahlia and be dissolved under article 66 of CBB Law. SGT, a subsidiary of Solidarity Group Holding, is aiming to consolidate its position through the merger. The combined entity, which would be named Solidarity Bahrain, will have a paid-up capital of BD11.2 million and an estimated 15% market share with 10 branches, making it the largest takaful company in the country. In order to facilitate the merger, Al Ahlia shareholders approved the conversion of the insurance licence from conventional to takaful. Last year, Solidarity acquired a majority stake in Bahrain Bourse (BHB)-listed Al Ahlia Insurance Company via an open offer in a deal worth BD10.7m. Officials had said then that Al Ahlia would continue to be listed on BHB.

Holders of Dana Gas’s sukuk could be liable to repay the company excess on account profit payments. The company said it had sought legal advice on the matter. Advisers said that the terms of the Sukuk are not compliant with Shari’a principles and are unlawful under the laws of the United Arab Emirates (UAE). The company is now pursuing the litigation route to resolve the matter and is confident pursuant to independent legal advice of prevailing in its interpretation of the outcome.

Al Hilal Bank has distributed car seats for newborns at Danat Al Emarat Hospital for Women & Children in Abu Dhabi, as part of its new initiative for promoting child safety in the UAE. The Car Seat initiative forms part of the bank’s long-term Corporate Social Responsibility (CSR) programme. Alex Coelho, the CEO of Al Hilal Bank, said the Bank takes CSR very seriously and is proud to play a role in providing support to local families. Mohammed Ali Al Shorafa Al Hammadi, CEO & MD of United Eastern Medical Services (UEMedical) stressed on the importance of such campaigns in the UAE. Government led research found that the majority of parents still do not believe in the importance of car seats. An astonishing 34% saw no necessity to buy them, 28% do not know which seat to buy, while 15% believe that passengers holding children is safe enough. The new programme will be complemented by an extensive car seat awareness campaign on social media and across Al Hilal Bank branches, with the objective of reinforcing the importance of car safety for children.