IslamicFinance.de

Following are major Islamic bond issues in the global pipeline. Pakistan plans an international issue of sukuk and is asking banks for expressions of interest in managing the sale. Sharjah Islamic Bank said it would begin investor meetings on Aug. 29 for a potential benchmark U.S. dollar-denominated sukuk issue. Ahli United Bank Kuwait has obtained approval from Kuwait's central bank to issue capital-boosting sukuk worth up to $200 million. Ivory Coast plans to complete a sale of 150 billion CFA francs ($263 million) worth of seven-year sukuk on Aug. 31.

JP Morgan's plans to include sukuk in its major bond indices from October will be a boon for the market. Sukuk is commonplace in the Middle East and Southeast Asia. But only a handful of western governments have issued one, with the UK in particular making headlines in 2014. This month's poll is asking readers exactly what's holding back the global sukuk market.

The Islamic Development Bank (IDB) will take part in financing of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline's construction.

Islamic finance is making further inroads in agricultural sectors globally. The trend is increasingly adopted in Central and Westerns Asian countries, in Southeast Asia and in Sub-Saharan Africa. Firstly, the impact of Islamic finance can be higher than that of other financial products due to its asset-based structure. It can be applied in many fields, starting from the purchase of farming machines and equipment, seeds and pesticides, warehouses, as well as in the dairy, livestock and fishery sectors. Ijara contracts can be used for leasing or renting farm machines and other equipment. Other structures such as musharaka or mudaraba can be used for long-term developments such as rural housing, reforestation or irrigation. Secondly, Islamic finance can help broaden financial inclusion by establishing cooperatives or partnership-based financing structures. In Pakistan the state bank has now issued guidelines on Islamic agricultural finance. In Indonesia, the government has launched a new national master plan and has explicitly included agriculture as a field for Islamic finance.

Ivorian Prime Minister Daniel Kablan Duncan has appointed US law firm Cleary Gottlieb Steen & Hamilton to advise his government. The Abidjan branch of Deloitte, led by Marc Wabi and appointed by the Islamic Development Bank (IDB), will serve as auditor. Deloitte's job will be to certify the value of the Abidjan International Trade Centre's buildings.

According to Fitch Ratings the inclusion of sukuk in major bond indexes would be a significant boost for the product, but initiatives to harmonise standards and improve transparency remain key to its long-term development. Reuters reported that JP Morgan would include eight sovereign and corporate sukuk in various bond indexes from 31 October. This may encourage issuers to supply index-eligible sukuk and support secondary market liquidity. However, Fitch Ratings believes the sukuk market's growth rate will be determined by two factors. Firstly, product-specific initiatives around regulation of sukuk issuance, which have been noteable in some jurisdictions, but have not always been harmonised across jurisdictions. Secondly, the broader attempts to deepen the investor base and improve transparency in the relevant capital markets. Sukuk issuance from key markets in 1H16 rose 11% from a year earlier to USD21.74bn, representing 30% of total issuance. Overall, Fitch expects this year's sukuk issuance to at least match 2015 issuance of around USD32bn.

#UAE based National Bonds has started providing financial planning tips and tools via its website. The new financial planning section offers valuable information in both Arabic and English to help customers achieve their financial objectives. Topics cover planning for retirement and children’s education, debt management, investment solutions, takaful and estate planning. In addition, the website offers practical financial planning tips on goal setting, cash management and budgeting, financial health, and the rule of 72. The portal also includes online calculators for accurately computing expenses, commitments and budgets. Mohammed Qasim Al-Ali, CEO of National Bonds, said the new online tool will save time and effort for those looking for simple and straightforward financial planning.

The board of directors of Shahjalal Islami Bank has approved for issuance of Mudaraba Subordinated Bond worth Tk 4.0 billion. The new issuance is part of a process of inclusion in Tier-II Capital for a period of 7 years through private placement. The bond issue is subject to approval of the regulatory authorities – Bangladesh Bank, Bangladesh Securities and Exchange Commission. The bank’s paid-up capital is Tk 7,346.88 million and authorised capital is Tk 10,000 million, while total number of securities is 734,688,133.

#Malaysia Building Society's (MBSB) move to strengthen its presence in Islamic banking is in line with majority shareholder Employees Provident Fund’s (EPF) endeavour. MBSB president Datuk Ahmad Zaini Othman said being a prominent Islamic player would help the firm’s growth plan. MBSB aspires to graduate from a non-lender into a full-fledged Islamic bank to increase its competitiveness. For the first six months ended June, MBSB’s net profit dropped 53.4% to RM97.8 million, despite an 11.6% jump in revenue to RM1.6 billion. The first-half results were below estimates, with operating income declining 1.8% as management continued to focus on corporate loans portfolio in place of the higher-yielding personal financing portfolio.

Dr. Bambang Permadi Soemantri Brodjonegoro, Indonesia’s former Finance Minister and current Minister of National Development Planning, discusses the recent tax amnesty legislation and current economic prospects for Indonesia. Hosting the recent 12th World Islamic Economic Forum (WIEF) in Jakarta aims to promote Indonesia to the Muslim community, sending a message that Indonesia is a reliable economy with a lot of potential. The WIEF tries to develop Islamic finance that is more inclusive. Indonesia wants to focus on Islamic microfinance and on Muslim-friendly tourism. Beyond tourism, Muslim fashion is a sector that already has a huge market and will be increasingly important for Indonesia.

A 2% tax cut announced for all Shariah-compliant companies is bound to give a big boost to Islamic Banking in Pakistan. The government has introduced the 2% rebate for Shariah-compliant companies through the Finance Act 2016. The Finance Act also covers the entire national budget for the fiscal year 2017. The latest decision to expand the programme followed a report by the State Bank of Pakistan (SBP), which confirmed a continuing spread of the Islamic banking system in the country. Islamic banks currently have a 13% share of the conventional banking in Pakistan.

JPMorgan will include sukuk in its emerging markets indices starting from October 31. Dollar-denominated sukuk from Turkey, Malaysia and Indonesia will be included in JPMorgan’s flagship EMBI Global Diversified index, against which an estimated $313 billion in assets is benchmarked. The move could help sukuk break away from their traditional buy-and-hold investor base. Pakistan’s $1 billion sukuk maturing in 2019 will be included in the JPMorgan Asia Credit Index alongside sukuk from Indonesia and Malaysia, but Qatar and Bahrain are currently absent. Only two corporate sukuk will be included in the JPMorgan Corporate Emerging Markets Bond Index: a 2023 sukuk from Dubai’s DP World and a 2024 sukuk from Saudi Electricity Co.

The Indonesian government has launched a national master plan to develop its Islamic finance industry. Indonesian Islamic banks hold roughly 5% of total banking assets, compared with more than 20% in neighbouring Malaysia. According to Farrukh Raza, managing director of IFAAS, an Islamic finance consultancy which designed the 10-year master plan, the government would increase its use of Islamic debt instruments to as much as 50% of total issuance in 10 years time. Indonesia's pilgrims' fund would also see the establishment of a dedicated asset management arm to implement a more rigorous investment policy and attract external fund managers.

#Malaysia-based International Islamic Liquidity Management Corp (IILM) has lengthened maturities in its Islamic bond programme by auctioning $500 million of four-month sukuk. Previously, the IILM has issued three-month and six-month papers, which were introduced to manage short-term funding needs. The IILM sold the four-month sukuk at a profit rate of 1.37389%, attracting 17 bids worth a combined $1.3 billion. It also sold $840 million of three-month sukuk at a profit rate of 1.24411%, attracting orders of $1.6 billion via 14 bids. The issues were bought by 11 primary dealer banks.

The central bank of #Malaysia plans to undertake an in-depth review of important organisations to re-energise the Islamic finance talent development landscape. Bank Negara Malaysia (BNM) Governor Datuk Muhammad Ibrahim said over the years, the central bank had established specialised institutions to enrich the talent ecosystem. These include the International Centre for Education in Islamic Finance, International Shari’ah Research Academy (ISRA), Islamic Banking and Finance Institute Malaysia (IBFIM), the Chartered Institute of Islamic Finance Professionals and the Association of Shariah Advisors in Islamic Finance Malaysia. Ibrahim noted that the new Educator’s Manual on Shariah Standards on Murabahah has several benefits for universities and stakeholders. One benefit is strategising talent deployment, while another area is the reconfiguration of academic programme to nurture talent with enhanced employability.

In #Malaysia Bank Negara governor Datuk Muhammad Ibrahim said Islamic banking assets made up 27% of the total banking system, surpassing Bank Negara’s Financial Sector Masterplan. He said that there were 27 takaful players offering more than 100 financial products now compared with fewer than four Islamic banks and takaful players before year 2000. He added that the penetration rate for takaful now stood at 14.8% of the population, indicating growing acceptance of takaful products. On the launch of the Educator’s Manual on Shariah Standard Murabahah, Muhammad said that the manual was aimed to act as a comprehensive teaching guide to enhance the Islamic finance syllabus. It was jointly developed by Bank Negara in collaboration with the International Shari’ah Research Academy for Islamic Finance and IBFIM.

Brunei is strongly encouraging the growth of the Islamic finance industry. According to the Thomson Reuters Islamic Finance Development Indicator, Brunei was recently ranked 10th out of 92 countries. Yusof bin Haji Abdul Rahman, Managing Director of Autoriti Monetari Brunei Darussalam (AMBD), noted that the Brunei Government Sukuk Al-Ijarah Programme has been consistently issued since 2006 as a benchmark. He said public–private sector dialogue has been increased to raise awareness of the benefits of takaful products. He said he believes that Islamic finance can be a solution to support economic growth and promote long-lasting financial stability.

In #Pakistan the Ministry of Finance stated that amendments in legal framework are under review to strengthen the framework of taxation proposals for Islamic Banking. The initiatives mainly include review of Mudaraba guidelines to align those with overall regulatory framework of Islamic Finance, issuance of Sukuk guidelines, issuance of Takaful rules and government Ijara Sukuk. A multi-tiered Shariah supervisory and compliance framework has been put in place. Also, a Shariah governance framework for Islamic Banking Institutions (IBIs) was formulated, which explicitly defines Shariah related rules and responsibilities of all key organs of IBIs. The initial Minimum Capital Requirement (MCR) for an Islamic Banking subsidiary was revised from Rs 10 billion to Rs 6 billion.

This case study reports on three governance challenges overcome by a diversified family enterprise from the Kingdom of Saudi Arabia. One of the early lessons for the family was to separate emotions from business. They did this by appointing independent directors whose role was to set the strategy behind the business. In order to engage everyone, they established a family assembly, where each and every branch would always be fairly represented. The family assembly membership was and still is based on merit, and its chairman is always the eldest member of the family.

In #Malaysia islamic banking assets now stand at 27% of the total banking system, surpassing the targeted 20% under Bank Negara Malaysia’s financial sector master plan. Bank Negara governor Datuk Muhammad Ibrahim said there were now 27 players offering more than 100 financial products compared with fewer than four Islamic banks and takaful players before 2000. The Educator’s Manual on Shariah and Practical Operational Standards was launched on Tuesday to enhance the quality of education. Of the 14 syariah standards that are being developed by Bank Negara, Murabahah is the first series in the educator’s manual. The manual for other contracts will be developed gradually.