IslamicFinance.de

Indonesia's Islamic bond yields have fallen faster than Malaysia's in the past three months, as the nation's higher-yielding notes do better at attracting foreign investors. Yields on rupiah sukuk due 2019 slid 37 basis points in the period, compared with 24 basis points for equivalent paper in Malaysia. Indonesia's three-year Islamic bonds pay 7.16%, while those in Malaysia yield 3.26%. Indonesian bonds are the best performers in South-east Asia this year after the government passed a tax amnesty bill on undeclared income held overseas. Bank Negara Malaysia lowered borrowing costs for oil, as well as its projection for consumer prices to 2%-3% in 2016, from 2.5%-3.5 %. Currently both nation's currencies are seeing a revival.

Deloitte and the Islamic Research & Training Institute (IRTI) have launched a new whitepaper entitled "The catalysts for change: Strategic priorities in governance and regulation in Islamic Finance practice." It is the first publication of a series of whitepapers aiming to address industry issues and present practical analyses. According to Joe El Fadl, Partner at Deloitte Middle East, the primary goal of the series is to provide a forum through which best practice, knowledge and Islamic finance research can be shared with stakeholders. It also presents the progress in governance, regulatory compliance, risk, sustainable business models, financial reporting, transparency and leadership.

For over three decades Turkish governments did not dare speak the name Islamic banking for fear of being branded radical. These institutions were officially named special finance houses, profit-and-loss banks, interest-free banks and more recently, participation banks. Now Islamic finance public policy is elevated to a pivotal position in the official management of the Turkish economy.
Ankara has recently embarked on a wholesale restructuring of its participation banking sector, which has seen the entry of three new banks including Ziraat Participation Bank, Halk Participation Bank and Vakif Bank. This brings the total number of participation banks in Turkey to seven including the four established ones, Kuveyt Turk Participation Bank, Albaraka Turk Participation Bank, Turkiye Finans and Asya Bank. Ankara is also keen in making Turkey a leading proponent of Islamic finance and developing Istanbul into an international financial centre.

Somaliland's President has signed the Central Banking Act into law. According to Central Bank Governor Abdi Dirir the Commercial Banking Act will be passed in the next three to four months.
Back in 2012 the financial sector agreed to have a Dual Banking system where both Conventional and Islamic banking systems operate in the country. However, the Commercial Banking Act is more than four years overdue. Economically, Somaliland's longterm competitiveness can only be ensured by introducing the Dual Banking System in the country.

Oil prices have plummeted sharply since mid-2014, putting an end to the commodities super cycle that started a decade ago. S&P Global Ratings expects oil prices will remain substantially below peak levels and stabilize at $50 per barrel by 2018 and beyond. While governments affected by the price drop are looking to spending cuts, taxation, and the privatization of state companies, their financing needs remain significant. Despite the significant drop in oil price since mid-2014, total sukuk issuance didn’t pick up in 2015 or the first half of 2016. In fact, issuance actually dropped in the first half of 2016 by 12.5% compared with the same period in 2015. Issuances in the second half of 2016 will continue to depend on monetary policy developments and volatility in developed markets as well as the policy actions of sovereigns in Gulf Cooperation Council (GCC) countries and Malaysia.

The Islamic Financial Services Board (IFSB) has announced the fourth dissemination of data on financial soundness and growth of the Islamic banking systems from 17 IFSB member jurisdictions, covering quarterly data from December 2013 to Q3 of 2015. The 17 member countries include Afghanistan, Bahrain, Bangladesh, Brunei, Egypt, Indonesia, Iran, Jordan, Kuwait, Malaysia, Nigeria, Oman, Pakistan, Saudi Arabia, Sudan, Turkey, and United Arab Emirates. The total assets of the Islamic banking industry grew from $1,216 billion in 2014Q3 to $1,245 billion in 2015Q3. Total funding/liabilities declined from $1,007 billion in 2014Q3 to $946 billion in 2015Q3. Financing by Islamic banks from the jurisdictions participating in the PSIFIs project reached $710 billion in 2015Q3 from $681 billion in 2014Q3.

The government of Oman sold a $500 million six-year sukuk in a private placement. The profit rate is set at 3.5%, the amount will have to be repaid in three equal instalments after four, five and six years. Oman's first Ijara format five-year sukuk worth RO 200 million ($520 million) was issued in October last year and received strong orders. The government which is facing a widening fiscal deficit has been adopting several measures tide over the falling revenue from lower oil prices. Recently, the government raised a $2.5 billion two-part bond and a $1 billion loan from banks. This was the first international bond issue in two decades by the Sultanate.

S&P Global Ratings expects Sukuk issuance will remain muted over the next 6 to 18 months, with total issuance of US$50 bil to US$55 bil in 2016. The ratings agency explained that plummeting oil prices have not boosted sukuk issuance despite some commentators' expectations. Instead, total issuance actually dropped in 2015 compared with the previous year. S&P Global Ratings Global head of Islamic finance Mohamed Damak said while governments affected by the price drop are looking to spending cuts, their financing needs remain significant. At the same time, he believes the European Central Bank's quantitative easing programme and the entrance of a few new issuers to the Sukuk market will continue to support issuance volumes.

Kader Merbouh, expert en finance islamique penser que la finance islamique est la solution pour capter l’épargne dormante et en dehors du circuit bancaire en Algérie. L’Algérie a été un point d’encouragement à la finance islamique. Tant par les banques conventionnelles qui proposeront dans les prochaines années des produits de la finance islamique pour capter leur clientèle et tant par les banques islamiques comme Salam ou Baraka. Il y a aussi l’arrivée de nouveaux acteurs qui voudront être présents sur le marché algérien. Cela va créer une triple dynamique. L’Algérie est un marché formidable. La loi de modernisation bancaire en Algérie va introduire quelques règlements pour faciliter la finance islamique.

Maxis Broadband, a unit under telecommunications group Maxis, is planning a sukuk issuance to raise as much as MYR10 bn for acquisitions and capital expenditure. CIMB Investment Bank is the sole principal adviser and sole lead arranger for the programme, while CIMB Islamic Bank is the shariah adviser for the programme. The Islamic Development Bank (IDB) has issued a MYR350 mn ($86.6 mn) sukuk for project financing and other development activities. IDB president Ahmad Mohamed Ali said the successful issuance of sukuk in Malaysian Ringgit is a testimony to the increasing interest for sukuk.

Somaliland's President has signed the Central Banking Act into law. According to Central Bank Governor Abdi Dirir the Commercial Banking Act will be passed in the next three to four months.
Back in 2012 the financial sector agreed to have a Dual Banking system where both Conventional and Islamic banking systems operate in the country. However, the Commercial Banking Act is more than four years overdue. Economically, Somaliland's longterm competitiveness can only be ensured by introducing the Dual Banking System in the country.

Equitable Financial Solutions (EFSOL), Australia's largest, international Islamic finance company has announced the establishment of its Dubai office at Emirates Towers. EFSOL is actively pursuing its Middle-East expansion strategy, following the successful establishment of its ASEAN office based in Singapore. Usman Siddiqui, Managing Director of EFSOL said the new Dubai office will give investors access to the company's superior products and returns. He is confident that the EFSOL team will boost their financial products' offerings in key areas of Islamic finance.

The small European nation of Luxembourg is expected to threaten and take over London’s role as European hub for Islamic finance in a post-Brexit world. The big hit the UK is suffering politically and economically by the June 23 "Leave" vote will result in years of uncertainty and the risk of thousands of job cuts or relocations to mainland Europe. Over the past years Islamic finance has gained a strong foothold in London which served as a gateway for Arab investors to Europe. Now that the UK voted to quit the European Union, an exodus of investors is expected as they fear tighter regulations and higher taxes looming.
As an alternative, Luxembourg has shown readiness for innovation and will continue to improve its competitiveness. Luxembourg was the first European country that joined the International Islamic Liquidity Management Corp (IILM). In September 2014, Luxembourg also issued the first sovereign sukuk in the eurozone and is soon expected to host its first fully-fledged Islamic bank on its territory.

Malaysia is adapting to fintech revolution by adjusting its financial regulatory guidelines with an Islamic angle. According to Muhammad bin Ibrahim, governor of the Central Bank of Malaysia, the recent Islamic finance initiative could be the next game changer. The Investment Account Platform (IAP) is a platform that connects lenders, banks and enterprises seeking funds, one that could shift the role of Islamic lenders to investment intermediaries. Serving as a central marketplace to finance small and medium-sized enterprises (SMEs), the IAP was launched by six Malaysian Islamic banks: Affin Holdings, Bank Islam Malaysia, Bank Muamalat Malaysia, Maybank Islamic, Bank Kerjasama Rakyat Malaysia and Bank Simpanan Nasional.

Pakistan Industrial and Traders Associations Front (PIAF) has felicitated Wapda and National Bank of Pakistan (NBP) for the Rs 100 billion agreement of 16 banks under Shariah compliant facility for Neelum Jehlum Hydro Power (NJHP) project. There was a long delay and the cost of project escalated up to Rs 414 billion from initial estimates Rs 84 billion. PIAF chairman Irfan Iqbal Sheikh said that now a ray of hope appeared for the completion of the project. He said this is the biggest ever funds mobilisation for a public sector entity in which 16 local banks participated. The issuance of Sukuk worth Rs 100 billion for NJHP would go a long way in arranging funds for other hydropower projects.

In #Malaysia Danajamin Nasional is guaranteeing a 17-year sukuk murabahah programme amounting to RM300 million for Chellam Plantations. The first tranche of the programme amounting to RM150 million with a tenure of up to 17 years, was issued and subscribed last Friday. Funds from the sukuk issuance will support Chellam Plantations’ new planting in Kalimantan and expansion in Indonesia. Proceeds from the sukuk will also be used to refinance its outstanding borrowings and finance its capital expenditures. Joint lead arrangers of the transaction are RHB Investment Bank and OCBC Al-Amin Bank.

Sarawak Hidro, the state-owned developer of Malaysia’s biggest hydropower project, plans to offer 5.5 billion ringgit ($1.3 billion) of sukuk without a government guarantee. The electricity generator is weaning off government guarantees to ease the nation’s fiscal burden. Sarawak Hidro’s plant on Borneo island is part of Prime Minister Najib Razak’s $444 billion development plan to become a developed economy by 2020. Malaysia aims to cut its ratio of debt to gross domestic product to 45% by 2020, from 54.5% at the end of last year.

Le Sénégal a lancé cette semaine son deuxième emprunt obligataire sous la forme de sukuk. L’opération consiste en la levée de 150 milliards de F CFA (228,6 millions d’euros), à travers l’émission de 15 millions de parts d’une valeur nominale de 10 000 F CFA, sur le marché financier de l’Union économique et monétaire ouest-africaine (UEMOA). La période de souscription de cette levée de fonds s’étend sur un mois (du 20 au 19 juillet). Elle offre une marge annuelle de profit de 6 % avec une maturité de 10 ans.

Interview with director and head of Islamic Corporation for Development's India operations.
For the first time, the Jeddah-based Islamic Development Bank has forayed into a non-member country by announcing setting up of a non-banking financial company in India through its 100% subsidiary Islamic Corporation for the Development of the private sector. Based on the Islamic principle of not charging interest on loans, ICD will operate through a registered office in Mumbai, with prominent businessman from Gujarat, Zafar Sareshwala, heading its India operations as director. In an interview with Vinay Umarji, Sareshwala talks about how the NBFC will play a catalyst for small businesses by sharing their profits and losses instead of charging interest on finance extended.

What kind of entity is Islamic Development Bank setting up in India? How will it function?

Baker & McKenzie advised Mohammed I. Alsubeaei & Sons Investment Company a leading private equity investment company based in Saudi Arabia in a $219 mn dollar Murabaha facility to develop a luxury condominium development. MASIC provided the mezzanine financing for the development project, 45 Park Place, located in New York's TriBeCa neighborhood. The deal highlights the expansion of Islamic financing into the US real estate market.
MASIC partnered with other financial institutions and Soho Properties on the downtown condo project, which is scheduled for completion in 2018. Financiers for the project include Malayan Banking Berhad, London Branch; Intesa Sanpaolo S.p.A.; Warba Bank K.S.C.P.; and MASIC.
Baker & McKenzie partner Mona Dajani said, “This successful financing by MASIC is a milestone transaction in the United States using tiered Shari’ah-compliant facilities for commercial transactions. This transaction aptly demonstrates the increased activity in Islamic financings in the United States which has emerged over the past year.”
The Baker & McKenzie team, led by Ms. Dajani, included partner, Pat McDonald and associates Michael Reed, and Maher Haddad.