IslamicFinance.de

Experts say the growth potential for Islamic finance in Singapore is still strong. Sukuk or Islamic bond issuances totalled US$137 billion in 2012, up from US$92b in 2011. Yet there is still a gap to fill in the Islamic capital market. According to Mr Ng Nam Sin, Assistant Managing Director (Development) at the Monetary Authority of Singapore, the increased volume of issuance is still insufficient to meet the huge demand for Islamic assets for investments and Islamic financial institutions to manage their liabilities. Moreover, there is also a need to broaden the range of Islamic capital market products. Singapore already has the right infrastructure and good regulations already in place. Experts say Singapore's strong regulatory environment and the depth and diversity of its capital markets will enable it to capture a bigger slice of the Islamic financing market.

State-owned Islamic Bank of Thailand plans to increase its capital by 7.11 billion baht (US$234.9mil) and issue a 5 billion baht sukuk, the country's first-ever Islamic bond. The bank plans to issue the 5billion-baht subordinated sukuk to increase its capital ratio. Last year, bank officials said the sukuk would have a likely maturity of 5 years and the bank would appoint Malaysia's CIMB Bank to handle the deal, targeting domestic and institutional investors in Malaysia and Hong Kong. The bank expects to raise 927 million baht in capital this month and 6.2 billion baht in the fourth quarter. The bank, rated BBB by Fitch, also wants to seek investors to establish a presence in the Middle East in the next three years, while increasing its domestic network of branches to 130 from 106 now. It hopes this strategy will help it to return to profit this year and help the country's Islamic financial sector grow.

According to World Bank, on an average, annual housing need in Pakistan is 1.1 million units which require an annual funding of around Rs3.3 trillion per year. While conventional banks/DFIs are stepping away from the housing finance, the share of Islamic banks and HBFC is surging. The gross house loans of Islamic banks grew year-on-year by 15 percent as of December 2012. Among Islamic banks, Meezan Bank, Burj Bank and BankIslami remained the major growth propellers. Islamic housing finance instruments are attractive to the consumers because of the co-ownership nature of the contract instead of borrowing and lending. Besides, with the purchase of share consistently, the rental amount is gradually reduced every month. Facilitating Islamic banks to extend loans coupled with the suggested development of secondary mortgage market is expected to buttress the housing finance in Pakistan.

Goldman Sachs Group Inc. (GS) led its first sukuk in more than three years after helping a Saudi property developer raise $450 million. The bank was a lead arranger on Dar Al Arkan Real Estate Development Co. (ALARKAN)’s sukuk on May 21, reforging links with the Riyadh-based real estate company after helping arrange the sale of its $450 million five-year bonds in February 2010. The New York-based bank is seeking to catch up with U.S. competitors as demand accelerates for securities that conform to Islamic principles. Increased competition in the industry could work in banks’ favor, as lower fees increase the chances borrowers will come to market and more banks means a greater profile for the Islamic industry.

The African Guarantee Fund (AGF), reportedly has agreed to guarantee an unspecified portion of KES 100 million (USD 1.2 million) to be loaned by Gulf African Bank (GAB) to SMEs in Kenya. After the signing of the agreement, GAB Managing Director Asad Ahmed reportedly expressed his belief that the deal will help to increase the bank’s financing and risk management capabilities. AGF was established in Kenya in June 2012 with initial capital sufficient to issue partial guarantees of loans totaling USD 50 million. AGF has branches in nine African countries as of March 2013. As of March 2011, GAB had total assets of KES 9.6 billion (USD 112.3 million) and customer deposits of KES 8.2 billion (USD 96 million).

Islamic finance is based on two intrinsic features: risk-sharing and the link between financial transactions and the real economy. This critical link brings prudence to the system, promotes equity relative to debt, broadens financial participation, and minimizes overall vulnerability. Another dimension of Islamic finance is the promotion of economic welfare and social justice guided by the objectives of Shariah. Whether Islamic finance is a catalyst for inclusive growth and sustainable development is not as straightforward as one may hope. There are several other areas of Islamic finance which need significant improvements, including regulatory oversight, tax treatment, risk-management practices, and the level of awareness. Despite these limitations, Islamic finance has potential to serve as a tool for financial inclusion through leveraging the entrepreneurial potential of micro, small and medium enterprises (MSMEs) across sectors and bringing the financially underserved into the economic mainstream.

The Islamic Corporation for the Development of the Private Sector (ICD) moves in the Islamic banking sector of Kazakhstan with a mandate of converting a regional Bank into an Islamic bank with expected investment of up to 35 percent of the subscribed and paid up capital of the bank. Accordingly, it will become second Islamic bank in the country. Earlier, ICD , together with a diverse group of International and local investors including owners of Zaman Group established the first Islamic Leasing (Ijara) Company in Kazakhstan with authorized capital of $ 36 million. In addition, ICD extended $ 20 million for the real estate development project and committed $ 40 million lines of financing facility for the SME sector in the country.

Borsa Istanbul (BIST) aims to become one of the most prominent centers that work in accordance with the principles of participation banking in the Middle East, Europe and Africa. Capital Markets Board (SPK) has prepared a regulation on non-interest financing tools, such as five new types of Islamic bond. The new rules, which were sent to Prime Minister’s office for approval this week, will allow Turkish corporate and banks, as well as the Treasury, to issue the world’s most widely used types of sukuk, giving them access to a wider pool of investors via a global market estimated at more than $100 billion. Turkey has also started an initiative to allow companies from 60 countries, chosen according to BIST’s vision of “Istanbul International Finance Center,” to sell their capital market tools in Istanbul and also to buy and sale of tools which are already sold.

Bank Indonesia holds The 3rd Bank Indonesia International Seminar on Islamic Finance on 30-31 May 2013, in Bali. The seminar's theme is, "A New Phase of Islamic Finance: Capturing the Untapped Area to Improve the Quality of Economic Development".The seminar is expected to revisit the essense and purpose of the Islamic finance, and explore new sources of growth to maintain the current high level of growth in the Islamic finance industry. The area of discussion includes shariah norms in the economy, the application of Islamic finance in the government sector, the promotion of inclusive growth, and the implementation of macroprudential policies in Islamic finance. The seminar is attended bymore than 200 participants representing regulators, practitioners, and scholars in Islamic banking and finance, both domesticand international.

Noor Islamic Bank (Noor) is targeting Dhs5bn of lending to small and medium enterprises (SMEs) over the next five years with the launch of Noor Trade. This Shari'a compliant banking service is specifically tailored for SMEs that contribute significantly to the UAE's trade flows. In support of its Noor Trade strategy, Noor has opened its first dedicated trade branch in Almas Tower, home of the Dubai Multi Commodities Centre (DMCC), in Jumeirah Lake Towers (JLT). A second similar branch is scheduled to open in Deira, in July. Under the Noor Trade brand, clients will have access to fully Shari'a compliant financial services, including cash management, trade, and working capital solutions, along with consumer, treasury and takaful products packaged at preferential rates based on eligibility criteria.

During the past year, there have been a number of cross-regional sukuk, mostly by Gulf issuers tapping Malaysia's highly liquid market. However, sukuk structures are not standardised, and some Gulf-based sharia scholars have objected to certain structures used in Asia, a region which has proven to be more flexible in its transactions. Sukuk issuance in the Middle East outside of the Gulf is also becoming more attractive, notably Turkey, which was recently elevated to investment grade credit status and is bidding to develop an Islamic finance industry. Growth in cross-border Islamic bond issues points to greater convergence in the industry, opening the door to a much wider pool of investors.

Kuwait's Boubyan Bank (BOUBYAN.KW) has sold a debt that was owed by an investment bank for 2.4 million Kuwaiti dinars ($8.38 million). Boubyan, which is an Islamic lender 58.33% owned by National Bank of Kuwait, said that it sold the debt to an international bank, without naming it. It added that it had previously set up provisions to fully cover this debt in keeping with the instructions of the country's central bank.

The Dushanbe Business Forum 2013, which took place in Tajikistan, showcased the country as a promising investment destination and focused on the best practices of Islamic banking and leasing. The event aimed to strengthen the economic ties between the Tajikistan and OIC countries by attracting investment into Tajikistan. According to Shayne Heffernan, Tajikistan is one of the most promising emerging markets. As for its outcome, the Dushanbe Business Forum 2013 created linkages and business relations between Tajikistan and the private sector community in OIC and CIS countries, gave opportunity for local participants to discuss business collaboration with potential shareholders and addressed the prospects of developing and introducing Islamic banking and financial tools.

KFH-Research issued a report stating that participation banks (Islamic banks) in Turkey form 5.2% of banking assets and will reach 10% by 2018, since those banks surpass the rest of the banking sector and have steady financing growth over 20% per year. The report noted that KFH-Turkey is first in deposits, and that participation banks are highly demanded and offer a wide array of products. There are currently four participation banks in Turkey, which are Albaraka Turk, Kuveyt Turk, Turkiye Finans, and Bank Asya. The low penetration rate of participation banking should ensure that its significant growth will continue over the coming years. Continuous measures and initiatives taken by the Turkish government as well as the large Muslim population will drive the participation banking sector to grow in the longer term.

Crowell & Moring's Cairo office has advised the Abu Dhabi Islamic Bank-Egypt in connection with an Islamic finance facility extended to Maridive and Oil Services SAE. Abu Dhabi Islamic Bank- Egypt was the Initial Mandated Lead Arranger and the global coordinator in the deal, coordinating the financing with several Banks. The deal is the first Islamic Ijara structure syndication to take place in the Egyptian market, valued at $150 million. As legal counsel to the initial mandated lead arranger, Crowell & Moring advised the facility providers (the banks) on the structuring and documentation of the transaction.

Guidance Investments (GI) has launched a RM150 million Shariah-compliant investment fund for equipment leasing for the Saudi Arabian market in partnership with Lembaga Tabung Haji (TH). This Tabung Haji acted as the capital provider, while the US-based ATEL Capital Group, the equipment leasing company is to provide the machineries for the Saudi market. TH CIO Abd Kadir Sahlan said that his company has committed a total of RM150 million in the private equity fund in support of ATEL in this venture. The funds will be disbursed in phases over the next two to three years, depending on the deployment of the portfolio in the Saudi market. At the same time, Guidance Investments has formally launched its operations in Malaysia with the opening of its headquarters in Kuala Lumpur.

The Islamic Development Bank (IDB) has called for the creation of a global sharia advisory board that can offer greater uniformity for the Islamic finance industry. A centralised format to the supervision of sharia-compliant banking products is gaining favour across the globe, as regulators seek to standardise industry practices and improve consumer perceptions. IDB president Ahmad Mohamed Ali said that IDB and IFSB (Islamic Financial Services Board) should study ways for creating globally acceptable references for the industry. This could include striving for the concept of a globally accepted sharia committee or body, which would be able to assist all Islamic financial institutions and bring them in line with a uniform standard. A global sharia board would also allow the industry to address low penetration rates in majority Muslim countries.

Thomson Reuters has launched an Islamic Finance Development Indicator in collaboration with the Islamic Corporation for the Development of the Private Sector (ICD), the private sector development arm of the Islamic Development Bank (IDB). The indicator is a numerical measure representing the overall health and growth of the Islamic finance industry worldwide. It measures five key components quantitative development, governance, social responsibility, knowledge and awareness. Therefore, the Islamic Finance Development Indicator is a unbiased and reliable multi-dimensional barometer of the development of the Islamic finance industry.

AlHuda Center of Islamic banking and economics (CIBE) Initiated a Islamic Microfinance research study for Yemen Microfinance Network (YMN) in Yemen. This study will be conducted in Yemen's capital Sana'a including Taiz, Adan and Almoukla, so that the Islamic Microfinance products can be examined broadly and further Islamic Microfinance products can be developed with the compatibility of the existing structure. The share of Islamic Microfinance in Yemen's Microfinance sector is approximately 90% and the remaining 10% are also converting their portfolio into Islamic Microfinance. The increased outreach of the Microfinance sector is expected to help eradicate poverty.

'My Savings' is a new initiative announced by the Government of Dubai in collaboration with National Bonds Corporation. During the introductory session on the goals and mechanism of the initiative, National Bonds elaborated on the benefits and advantages of the employee savings programme. The presentation was attended by senior officials,human resource directors and employees from Dubai Public Prosecution who confirmed their support for the initiative. Dubai Public Prosecution employees who opt to participate in the Shari'a compliant 'My Savings' programme will specify a fixed amount to be set aside from their salaries every month as part of their savings and Takaful plan with National Bonds Corporation. Moreover, the initiative also offers employees a 10% discount on Takaful family coverage programmes, as well access to free consultations pertaining to income management and financial planning.