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According to sources, the Saudi Arabia’s Islamic Development Bank has asked banks for proposals to arrange a U.S. dollar-denominated sukuk. The bank in Jeddah is a regular issuer of international Islamic bonds. The new sukuk, possibly with a five-year maturity, could be issued in the next month or two. The deal will probably have a size of between $1 - $1.5 billion. Banks were given a deadline of July 26 to respond to IDB’s request.

Bahrain has sent out a request for proposals to banks to arrange issues of US dollar-denominated conventional bonds and sukuk. Bahrain needs to raise external financing to plug a budget deficit caused by low oil prices, as the state struggles to build political consensus around planned austerity measures. Last month the cabinet approved a draft budget projecting a BD1.3bn (US$3.4bn) deficit for 2017 and a BD1.2bn deficit in 2018. Bahrain had a deficit of BD1.5bn in 2016. Bahrain is rated BB- by S&P with a negative outlook. The agency last month revised the outlook to negative from stable, citing Bahrain's weakening external asset and fiscal positions. Fitch followed suit, revising the country's outlook to negative but affirming its BB+ rating.

Kuwait Finance House (KFH) is considering expanding into China and Egypt as the region’s banking sector nears saturation. According to bank's CEO, Mazin Saad al-Nahedh, there are opportunities for a Kuwaiti bank to operate in China. He added that the bank was looking at options to buy a license to operate in Egypt as well. KFH is cautiously optimistic about its operations in Turkey. Its subsidiary Kuveyt Turk contributes 22% to the group’s bottom line as of the end of June. The bank expects credit growth of no less than 20% to 25% over the next three to four years as long as base rates remain where they are. As KFH continues its restructuring and sale of non-core assets, the bank is studying offers for its stake in Aref Investment Group, which it aims to sell by the end of the year. KFH is also planning to buy Bahrain’s Ahli United Bank, but hasn't started negotiations yet.

Kuwait Finance House (KFH) disclosed that it is studying a merger with Bahrain-based Ahli United Bank. Although the merger would present significant integration challenges owing to the banks’ geographically dispersed asset bases, it would be credit positive for KFH. If successfully completed, the transaction would create the sixth-largest bank in the Gulf Cooperation Council (GCC), with approximately $85 billion in total assets as of year-end 2016. The merger is at an early stage of evaluation, with financial analysis underway. The merger would expand KFH’s banking operations, which are primarily focused in Kuwait and Turkey, and include relatively small operations in Malaysia and Bahrain. In addition to Bahrain, AUB has principal subsidiaries in the UK, Kuwait, Iraq, and Egypt, and has an associate in Oman.

Saudi Arabia's ministry of finance has established a program to issue local currency sukuk, as the government covers a large budget deficit caused by low oil prices. The program has been submitted to the Capital Market Authority, the ministry said without specifying when the first sukuk issue would take place. Saudi commercial bankers said they expected the first issue in the next few days and believed 10 billion riyals ($2.7 billion) would be offered. The ministry noted that 13 domestic banks had qualified to participate in the sukuk issues. The Saudi government issued its first international sukuk in April and raised $9 billion.

Qatari banks may need more cash injections from the state because of the risk of investor withdrawals. Banks have been feeling the fallout of the feud with Saudi Arabia, the United Arab Emirates, Bahrain and Egypt, which cut diplomatic and transport ties with Qatar on June 5 and imposed economic sanctions. They accuse Qatar of financing Islamist militant groups and allying with their regional adversary Iran. Because of the sanctions, several Qatar banks have seen an outflow of deposits. Fitch Ratings estimates that the majority of deposits in Qatar from other Gulf Cooperation Council countries are Saudi and United Arab Emirates' deposits, and that they are being withdrawn as they mature. Analysts expect funding challenges for the Qatari banks, considering the government would still intend to continue their project plans for FIFA 2022.

The Dubai Islamic Economy Development Centre (DIEDC) announced the commencement of nominations for the fifth edition of the Islamic Economy Award (IEA). The award is a joint initiative of DIEDC and Dubai Chamber of Commerce and Industry under the directives of Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum. The eight key categories of the Islamic Economy Award 2017 are: Money and Finance, Food and Health, Media, Hospitality and Tourism, Waqf and Endowments, SME Development, Islamic Economy Knowledge Infrastructure and Islamic Arts. In addition to the eight main categories, the Lifetime Achievement Award recognizes a notable individual, whose work over several decades, has inspired others and had a major positive impact on the Islamic economy.

In this interview Abdulmohsen Al-Fares, CEO of Alinma Bank, discusses the growth in the company's balance sheet, credit growth, their Sukuk issuance and competition from other banks. Alinma Bank has maintained its growth pace and Al-Fares is optimistic about the upcoming Saudi Arabian government sukuk. It is an opportunity not only for companies and banks, but also for the secondary markets. Timing and size of the sukuk has not been decided yet. In his opinion, competition from other banks will not affect Alinma Bank, as they will compete only in very small segments, not in retail. He added that the stand-off with Qatar would not have a negative impact on the Saudi economy, as the kingdom's economy is strong and the economic relationship with Qatar is small in size.

Kuwait Finance House (KFH) is looking to merge with Bahrain's Ahli United Bank. The Gulf's banking sector is in consolidation as three years of low oil prices squeeze deposits and push up bad loans. KFH Chief Executive Mazin Al-Nahedh said the merger was currently only under study and there has been no agreement so far. In other regional bank mergers, First Abu Dhabi Bank was recently created in the United Arab Emirates after a tie-up between two Abu Dhabi lenders, while mergers are under way in Qatar and Saudi Arabia. KFH said in the statement that it was looking at a range of alternatives to boost its profitability, adding that such decisions require approval from regulators, including the central bank.

The sukuk issued by Sharjah-based Dana Gas and recently denounced as non-shariah compliant will not damage confidence in the Islamic debt markets, as some have claimed. The gas provider's announcement in June that $700 million worth of its bonds are not compliant with shariah law in the United Arab Emirates (UAE) perplexed the market. The firm’s chief investment officer, Mohieddine Kronfol, said that the impact of this restructuring will be insignificant to the wider industry in the long-term. He added that Dana Gas is owed around $1 billion from Iraq and Egypt, Dana Gas is only one issuer in a global sukuk market with over 90 issuers. In his opinion, the media and public attention spent on Dana Gas is out of proportion with what has transpired so far.

Dana Gas described decisions by the High Court of Justice in London as favourable, as the company seeks to restructure $700 million of outstanding sukuk. On July 5 the High Court upheld an injunction blocking holders of the bonds from enforcing claims related to the securities against Dana. The court ordered Dana to cancel an injunction in a court in Sharjah and to seek a stay of proceedings there. The company remains keen to engage with sukuk holders and reach an agreement on a consensual basis, which is not prevented by the injunctions in place.

#Kuwait’s Warba Bank announced a new Shari’ah-compliant, joint, multi-currency financial deal of $236 million with the Ziraat Participation Bank of Turkey. Warba Bank acted as the Lead Arranger and Subscription Manager of the deal, which was initially launched at $160 million. Due to oversubscription, the deal was increased so as to reach $ 236 million, with an increase of 52%. The Murabaha-based financing deal includes both US Dollars and Euros. It will be employed mainly in SME financing and income diversification at Ziraat Bank. Shaheen Hamad Al-Ghanem, Warba Bank’s CEO said the Bank was proud to be entrusted and to contribute to the financing of the agricultural sector, which is one of the pillars of the rise of the Turkish economy. This is the second participation of Warba Bank in arranging a financing transaction for the Ziraat Participation Bank of Turkey. In 2016, it contributed to a $155 million multi-currency co-financing transaction for the Turkish bank.

Dubai International Financial Centre (DIFC) signed a Memorandum of Understanding (MoU) with Dubai Islamic Economy Development Centre (DIEDC). Earlier this year, DIFC launched FinTech Hive, a 12-week accelerator programme which allows tech start-ups to test and develop FinTech related business ideas. As part of the agreement, the programme will include institutions such as Emirates Islamic Bank, Dubai Islamic Bank, and Abu Dhabi Islamic Bank, to mentor participants in the field of Islamic finance technology. Arif Amiri, CEO of DIFC said this MoU was an important step for FinTech, for the Islamic economy and for FinTech Hive. For his part, Abdulla Mohammed Al Awar, CEO of DIEDC, said FinTech Hive at DIFC will go a long way towards developing segments like mobile banking and payment systems, as well as SME financing.

Last month, Dana Gas tried to impose on investors a restructuring of the payment of its two outstanding sukuk tranches totalling US$700 million. The company got an injunction in the High Court in London restraining sukuk holders from taking any hostile action against Dana. The overriding concern is that if the High Court in London rules against Dana Gas, the matter goes to trial and Dana Gas wins, it would set an appalling precedent that can undermine the integrity of sukuk as a fundraising instrument. Syariah advisories agree that the only solution would be the introduction of a world sukuk standard supported by local laws, an Apex Sukuk Standard, which would give legal and syariah certainty. Any dispute could either be subject to arbitration or recourse to law. Dana Gas re-scheduled yet another conference call with sukuk holders to discuss the matter. The High Court in London scheduled a hearing for September. This saga is far from over.

According to Dana Gas CEO Patrick Allman-Ward, the company aims to communicate proposed terms of a restructured sukuk issue in coming weeks. He spoke to sukuk holders in a conference call, but there was no question and answer session and no immediate response from creditors. In mid-June, Dana stunned creditors by announcing it would halt payments on its four-year sukuk because they no longer complied with changing interpretations of the Sharia code. Dana said it would exchange the sukuk for new Islamic instruments with lower profit rates than the existing paper. Investors and bankers are concerned that other sukuk issuers could imitate Dana in refusing to redeem paper on the grounds that it has lost its sharia-compliance. CEO Allman-Ward insisted that Dana's arguments did not apply to other, lawful sukuk formats. Dana's existing paper features profit rates of 7 and 9%. The new sukuk would provide profit distributions at less than half the rates. Sukuk holders are contesting the plan in courts in London and the emirate of Sharjah.

The Islamic finance industry is seeking ways to safeguard deals against challenges to their religious permissibility. Sharjah-based Dana Gas declared it would not make payments on $700 million of sukuk because Islamic finance standards had changed since the instruments were issued. This raised concern across the Islamic finance industry that more companies could avoid redeeming sukuk by adopting the same argument as Dana. To try to avoid similar cases in future, investors may demand more detailed and restrictive language in sukuk documentation. Such language already exists for some sukuk, but it is not used consistently and is not standardised. Investors may also screen the groups of scholars who provide sharia endorsements for sukuk. The newly formed high sharia authority for Islamic banking and finance is expected to set rules and a general framework for Islamic finance governance in the United Arab Emirates.

London's High Court plans to hold a full hearing in September on efforts by Abu Dhabi-listed Dana Gas to restructure $700 million of its outstanding sukuk. Dana Gas declared the bonds invalid last month, saying they were no longer compliant with changing interpretations of the Sharia law. The judge upheld an interim High Court injunction blocking holders of the bonds from enforcing claims related to the securities against Dana Gas. However, he imposed restrictions on asset sales by Dana and its ability to raise more debt or pay dividends. The case has worried the Islamic finance industry as it has raised the prospect that other firms could justify not honouring obligations by claiming sharia-based financial standards had changed.

According to Mohamed Rafe Mohamed Haneef, CEO of CIMB Islamic Bank, Dana Gas’s case will leave the global Islamic finance industry relatively unaffected. Dana Gas said it no longer considered its two securities due in October as compliant with Islamic principles under UAE law. Unlike Malaysia, most Arab countries have no centralised Shariah boards to approve deal structures. In Haneef's opinion, Dana Gas’s case will probably be dismissed, as the sukuk agreement is subject to laws in both the United Arab Emirates and the U.K. A U.K. court is due to issue a ruling on Dana Gas' attempt to extend an injunction preventing sukuk holders from taking action regarding the debt. The company has proposed restructuring the notes on terms that are less advantageous to investors and plans to explain the legal action on a conference call with investors on July 6.

Health insurer Saudi Enaya has joined hands with Shariyah Review Bureau, a global Sharia Advisory firm, to offer Sharia-compliant value creating policies. CEO Lee Shurey stated that offering Sharia compliant products provides a tremendous opportunity to strengthen Enaya’s position in the region. The company had already identified Islamic cooperative insurance as a major potential more than three years ago. Enaya's HR director Moneer Brembali said that the insurer has undertaken several initiatives over the years and this agreement with SRB is another demonstration of their commitment to customers. He added that SRB’s Sharia Review Certification and Audit experience will complement the company's knowledge. SRB is a Sharia Advisor which currently serves 24% of the Saudi Cooperative Insurance market in the kingdom. It also has an established record of innovation to expand and improve leading insurance practices.

More and more stakeholders concede that the Shari’ah-authorized way of banking has hit a glass ceiling. They acknowledge that Islamic banking and financial services have largely failed to innovate at the speed they were expected to. It is also admitted that Islamic finance is caught in an oil-price cycle, definitely in the Gulf and wider Middle East region. Global rating agency, Standard & Poor’s, estimates that Islamic banks in the GCC are expected to face a tough year ahead. According to S&P Head of Islamic Finance, Mohamed Damak, GCC Islamic banks’ asset quality indicators will deteriorate in the second half of this year and in 2018. Very few Islamic banks have set aside significant amounts of profit-equalization reserves. As for oil price, both Islamic and conventional banks are affected and must adopt a new strategy that is not highly dependent of energy prices. For that a diversification of the economy is needed, which doesn’t seem to be happening anytime soon.