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Last month, two UAE real estate developers - Al Futtaim Group and Emaar Properties - announced a big project in Egypt. Not only was this a boost to the country’s property market but it also acted as a sign of a revival of cross-border investment in the region. According to the two companies, they plan to invest about 5bn Egyptian pounds ($820m) in building the "Cairo Gate" which will be situated off the Cairo-Alexandria desert highway. The complex will be 65 hectare big and will be build around a shopping mall. An office park, a luxury hotel, schools, medical facilities and residential space are included in the plan.

Dear Reader,

The issue of debt vs. equity is now going to be increasingly recognised - in microfinance - as I found out today on the cfi blog:

"Debt to Equity. The demand for equity and subordinated debt is huge and continuing to grow, mainly coming from mature MFIs. More MIVs are moving away from debt toward equity, being driven in part by a desire to be more involved in governance, to play a larger role in risk management, and because the regulators are requiring more capital. Also, fund investors increasingly want to know how much of a fund’s return is coming from debt versus equity. Some of the larger DFIs need to disburse large amount of funds, so they have to make debt investments, leaving an unmet demand for equity."

http://cfi-blog.org/2012/11/19/microfinances-new-normal/

An important food for thought beyond microfinance itself in my opinion.

Best regards,

Michael Saleh Gassner

The new web portal that launched in Egypt claims to be the first crowd funding service in the country subject to the principles of Islamic finance. The portal enables a huge number of investors to become shareholders in a project. In order to that, they will need to contribute only very small amounts of money and will not have to go through stock exchange. Co-founder of the portal Shehab Marzban explains that micro-projects and larger projects are funded by banks. However, projects worth between $50,000 and $300,000 need to find another source of funding. The portal is aimed to bridge this gap.

A new internet portal, which was recently launched in Egypt, is said to be the first crowd funding service in the country compliant with the principles of Islamic finance. Through cloud funding, numerous investors will be able to participate as shareholders in a project by contributing very small amounts of money. Going through a stock exchange will not be necessary. According to Shehab Marzban, co-founder of shekra.com, the portal is aimed at smaller projects needing between $50,000 and $300,000 and for which there are no banks taking care of funding. The idea of the website is to bridge this gap and to gather creative people an investors in order to fund ideas and projects.

In cooperation with Abu Dhabi Islamic Bank Group, Egyptian National Bank for Development (NBD) signed up to Standard Chartered Bank's Islamic Euro Nostro Account. Using this Nostro product, NBD will be able to earn Shariah-compliant profits on its account balances at Standard Chartered Bank Germany Branch in Frankfurt. The agreement was made at SIBOS 2012 in Osaka, Japan. The main feature of the Standard Chartered Saadiq EUR Nostro Account is that it utilises a Shariah-compliant account sweep facility. Available EUR balance in NBD's Saadiq clearing account will be used for investment using the Islamic finance mode of Murabaha at the end of each business day.

The moderate Islamists-led government of Tunisia makes plans to issue sukuks worth 1 billion dinars ($634 million) in the coming year. Thus, the country will be using this financial sector for the first time in order to fund public borrowing. Chadli Ayari, the governor of the Central Bank, prompted that the issuance is t be expected at the beginning of 2013. Just as several other government in North Africa, Tunisia has waken up after last year's Arab Spring to see and make use of the strong growth potential in the Islamic banking sector.

Egypt's Investment Minister - Osama Saleh - announced three days ago that the government discusses the issuance of sukuk in order to redress the state budget deficit. A work group is already formed. It consists of ministries of investments and finance and the Central Bank of Egypt to set Sukuk legal structure. Currently, the ministry is preparing to inaugurate projects affiliated to the public sector in different fields in Upper Egypt.

Significant growth in the Islamic asset management industry was observed over the past ten years. Starting with structuring and launching of funds, it has developed to a more comprehensive wealth management service. However, the industry has not set its focus on the definition of a suitable asset allocation framework for Islamic investments yet. With the increase of the allocation to sukuk, the selected use of Shariah-compliant derivatives and a risk parity approach to asset allocation can become the foundation for a more effective Islamic portfolio management.

Well, repeatedly we read and hear about the lack of profit/loss sharing (equity finance) in Islamic finance. Here my five cents about it:

1) Islamic commercial law, Fiqh Muamalat, per se has no preference of either permissible mode of finance, be it musharaka, ijara or murabaha whatsoever. All is halal. However, the call for modesty of debt in many hadith and the seriousness of being indebted upon death (withholding of death prayer) shows a call for a solid equity portion in business; let's call it a technical preference.

2) If we look up all debt financing modes (e.g.Murabaha, Ijara) there are remaining difficulties to finance wages, rents and installments on fresh debt. This is a true indicator for a required minimum amount of equity in a company.

3) Point 1) and 2) leads us to demand a sound debt/equity ratio.

IslamicFinance.de offers an overview about new job openings of October 2012 herewith - firms aiming to be included please send a job profile/hyperlink to newsdesk@islamicfinance.de - the full details of the advert has to be accessed by the hyperlink below the brief description:

Product Manager, Islamic Banking

Standard Chartered Bank - United Arab Emirates-SCB (United Arab Emirates)
Job Description
?Development of Islamic wealth products across CBMS, insurance and investment streams to create customer value proposition.
?Ensure successful implementation of the Islamic banking strategy across high value segment.
?Concentrated responsibility to work with the Priority/Wealth/Private/SME product/frontline teams and support functions to build on the current Islamic banking capabilities and to create seamless customer experience
?Act as a product specialist for RMs on client meetings to introduce and explain the Saadiq solutions to meet their needs
?Financial budgeting and business forecast. Evaluation of financial performance.

The past year and a half were marked by economic stagnation which has affected numerous businesses. However, some Egyptian Islamic investment banks have a vision on how to act in the new emerging order. For example, Ridge Islamic Capital, has found a niche in the finance sector and intends to capitalize on it. The portfolio of the investment bank includes Sharia-compliant investment banking, asset management and wealth management services. Their target market is, according to experts, primarily for Islamic finance.

Read more on: http://www.egyptindependent.com/news/economic-flux-islamic-banking-and-f...

The last couple of years of financial crisis proved to be unfavourable for the international banking sector. Nevertheless, one sub-sector was growing rapidly and reached significant success - Islamic finance. The majority of people still have not enough understanding and appreciation for Islamic finance. However, the facts show it is a US$1.3 trillion global industry with annual growth of 15% to 20%. During the past few years alone this sector has expanded to even not particularly expected markets adding to the portfolios of conventional international banks. The latter have already made the development of sharia-compliant services a priority.

Read more on: http://www.scmp.com/comment/insight-opinion/article/1071883/islamic-fina...

THE NINTH INTERNATIONAL CONFERENCE ON
ISLAMIC ECONOMICS AND FINANCE (ICIEF)
Growth, Equity and Stability: An Islamic Perspective
10-12 September 2013, Istanbul, TURKEY

The Ninth ICIEF at a Glance

Recovery from the global financial crisis and subsequent economic downturn remains fragile. Persistent risks to financial and economic development include sluggish growth in developed countries – which is now spilling over into developing economies as well; increasing income and wealth inequalities; and still-unrestored financial, economic and political stability in many regions. High poverty and unemployment rates, large macroeconomic imbalances, deteriorations in sovereign credibility, increasing food price volatility and food shortages, and lack of access to basic infrastructure further intensify and magnify these risks – particularly for the underprivileged segments of the world population. As a result, for many countries it has become even more challenging to achieve the Millennium Development Goals (MDGs) set by the United Nations.

According to data from World Bank, nine out of ten adults in Egypt do not have a bank account because they rarely have excess money to put in and do something with it. With a little number of clients, promoting Shariah- compliant financing is quite problematic. In order to enable the growth and profit of Islamic banking in the nation constituted mostly of Muslims, the Egyptian President Mohamed Mursi neesd to lift the country's economic growth from 2011’s 19-year low of 1.8%. New laws increasing the share of Shariah-compliant deposits from the current 6% and enabling borrowers to sell bonds in accordance with Shariah principles are being prepared by the President.

Read more on: http://www.bloomberg.com/news/2012-10-24/egypt-s-savings-vacuum-shows-st...

According to expectations, financing SMEs shall be a measure to deal with unemployment in the MENA region. Reports suggest rapid growth of the market share of Islamic banking in Egypt due to the change in public policy. Smaller markets such as Oman and Morocco are also considered important in this context. Observers point out that Islamic finance is a potential source of spurring economic growth in the countries which experienced the Arab Spring. However, it is highly doubtful whether Islamic finance can solve the unemployment issue especially among young people. The question is rather if it should make conscious efforts to contribute to dealing with unemployment as part of its business strategy instead of a byproduct of its activities.

According to an announcement by Samy Khallaf, the Ministry of Finance’s head of the Public Debt Unit, a preliminary agreement on the issuance of Egypt's first sukuk in Islamic markets was made. Ten international investment banks will be involved in the issuing procedures. The sukuk project will be worth between $750 million and $1 billion. The move is dependent on IMF approval of the $4.8 billion loan requested by the Egyptian government.

Read more on: http://dailynewsegypt.com/2012/10/17/news-of-sukuk-issuance-agreement-cr...

Last month the intention of issuing one or two rounds of sukuk by the end of this year by the Egyptian government was announced. The business community has a prevailing positive attitude towards the idea. Now the Egyptian government is busy figuring out the details of the proposal. Establishing rules to govern the issuance of sukuk are to be discussed.

Read more on: http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentid=20...

Tunisia's ruling party has set to turning Tunisia into a regional centre for Sharia-compliant finance. However, critics claim that by putting scarce resources into the sector the economy could be harmed. People suspect that the leading motives of the governments initiatives are political rather than economic and that they mostly endeavour to win the support of voters. Even though change in policy might benefit the economy of Northern African countries after the Arab Spring by enabling access to a huge pool of Islamic investment funds from the Gulf, Tunisia faces serious political complications.

According to Arqaam Capital Ltd, EFG-Hermes Holding SAE plans to sell its 40% stake in 2013 in the investment bank it is forming with QInvest. Thus, it will turn into a holding company. EFG-Hermes' assets will be held in Lebanese unit Credit Libanais SAL and in a private equity unit managing $980 million (Dh3.6 billion).

Read more on: http://gulfnews.com/business/markets/efg-to-sell-qinvest-joint-venture-s...

According to a senior bank official, Barclays Bank Egypt SAE discusses involving in the Egyptian Islamic banking market and to increase loans to small and medium businesses. Thus, the bank intends to implement new ways to generate revenue. Replication of its South African Islamic products in Egypt is one of the main topics considered. Since SMEs provide 70% of the country's economic growth, Barclays Bank have been examining in detail lending to SMEs for the last two years.

Read more on: http://www.bloomberg.com/news/2012-10-10/barclays-weighs-islamic-finance...