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CALL FOR PAPERS - Islamic capital markets, Deadline: Submission of Abstract: March 15, 2012
Islamic Research and Training Istitute – Islamic Development Bank, Jeddah, Saudi Arabia

Islamic capital markets are to become an important part of the Islamic financial system. While new products are steadily coming into the market and the Islamic investment instrument are growing, Islamic capital markets still constitute a very small niche. For a discernible impact on the investment promotion, market stability, and equitable socio-economic development there is a growing need to accelerate the process of product development, to create conducive regulatory environment and to improve the market practices. This task requires development of new human capital and knowledge base.

With this larger objective, the immediate focus of this conference is on three issues:
• Design and use of Islamic financial products for Islamic capital markets.
• Identification of the needs for and the implications of market regulations for development of Islamic capital market.

In its 2012 Islamic Wealth Management Report illustrated by masterpieces of Islamic calligraphy, by the Chinese Muslim master Hajji Noordeen, deals with the theme “The path to corporate transformation – converting a company to Islam”.

Bank Sarasin reviews the complexities of converting a business to Islam, a topic which is rarely discussed or written about. Conversion is complicated by the need to address every aspect of a business, the lack of broadly accepted standards and regulations, and differences in the Muslim world itself. The Report, released today, is the Bank’s third on Islamic Wealth Management.

Converting a business to Islam can increase the value of a company by 18-25% due to the scarcity of genuine Islamic investments. But the conversion process is arduous, extending from the design to distribution and beyond, to how the company spends its profits. As Sarasin notes, the market potential is massive, with the global Muslim population expected to increase by 26% to 2030, to 2.2 billion, rivalling China and India in terms of market size.

The Libyan Foreign Bank will present Shariah-compliant products as the government prepares regulation to make Islamic banking the norm in the North African nation following the ouster of Muammar Qaddafi.
Shariah-compliant finance may acquire the benefits of regime changes in North Africa, where protests last year overthrew three leaders who persecuted Islamists. While Muslims make up about 95 percent of North Africa’s 220 million people, access to Shariah-compliant financial services is still limited because past leaders, including Qaddafi, held back the industry’s growth to curb the influence of Islamic parties.

Takaful is coming out globally as a very viable model and being used successfully as engine of growth in a number of Muslim countries. The statement came from Chief Executive Officer Pak-Qatar Takaful, Pervaiz Ahmad while speaking at Lahore Chamber of Commerce and Industry.
He added that, despite of the fact that it is an untapped market, Islamic mode of banking and all its tools are fast gaining ground in Pakistan when compared to conventional mode of banking.
It seems that Islamic financing products such as Murabaha, Ijara, Musharaka and Islamic Export Refinance, etc, are catering to a diverse cross-section of the economy, including corporate, SME and consumer sectors.

According to Morgan Stanley & Co., Middle East and North Africa foreign bond sales from this year will surpass last year’s $27.6 billion because borrowers need to pay loans and will increasingly choose bonds.
It seems that International bond sales from the Middle East and North Africa fell 17% in 2011 from $33.1 billion in the previous year.
Bloomberg states that borrowers in the Middle East and North Africa have gathered $1.3 billion from three issues this year, all of them sales of sukuk by financial institutions.
Tamweel PJSC raised $300 million from five-year Islamic bond Jan. 12, while Emirates Islamic Bank PJSC sold $500 million in five-year Islamic bonds Jan. 10.

Dubai Bank Kenya has launched two Shari’ah compliant accounts, one aimed at low income earners, the other at higher income earners as it looks to satisfy the insatiable request for Islamic banking products in Kenya.
Dubai Bank is among around half a dozen conventional commercial banks in Kenya that have opened up Islamic finance windows in order to lock-in their existing Muslim customers, discouraging them from shifting their loyalty to the two fully fledged Islamic banks in Kenya: First Community Bank and the Gulf African Bank.

Kenya has blocked the licensing of new Takaful companies until a suitable law to manage them is completed. This gives Kenya’s existing Takaful firms the opportunity to grow unrestrained by new competition. But the regulator’s strategy risks losing its position as the leading IF hub in East Africa to neighbors Tanzania and Uganda, who have put no such restrictions on new local and foreign firms entering their markets.
At present Kenya’s insurance law does not admit Takaful as a standalone product, although the law empowers the IRA to launch ad hoc regulations authorizing individual operators on a case-by-case basis to sell Takaful products. The insurance law also does not permit companies to invest in offshore assets, locking out Kenyan Takaful entities from established capital markets in the Middle East and Asia.

Islamic finance banking options are progressively being seen as a viable alternative to traditional banking services in Africa and are growing to found not only the African Islamic community but all those searching for an interest-free banking alternative.
Key speakers from Nigeria, Malaysia and Saudi Arabia will join leading South African experts from ABSA, alBaraka Bank, KPMG and other financial institutions in the Islamic Finance Africa Conference that will take place on 21 - 24 February 2012 in South Africa.

Gulf Finance House (GFH) has officially stated that the Tunis Financial Harbour (TFH) has started the prequalification process for prospective contractors.
This comes after an announcement made by the Tunisia government that it supports the TFH project. The project is arranged to be built in the Rawad Area. TFH is going to be North Africa's very first offshore financial centre, helping to transforme the region's economy.

The 1st Ernst & Young World Islamic Banking Competitiveness Report 2011 presented at the 18th Annual World Islamic Banking Conference stated that Islamic banking assets with commercial banks globally will reach US$1.1 trillion in 2012, a significant jump of 33% from their 2010 level of US$826 billion. In the MENA region, Islamic banking assets increased to US$416 billion in 2010, representing a five year CAGR of 20% compared to less than 9% for conventional banks. As new geographies open up to Islamic banking, the MENA Islamic banking industry is expected to more than double to US$990 billion by 2015.

Africa is mooving its economic attention away from the west to the Middle East and Asia as a primary source of capital raising. This shift in alignment partially explains the expected launch of a number of Sukuk across the continent in 2012.
Countries that have announced sovereign Sukuk to raise capital for their budgets are: South Africa, Senegal, Nigeria and Kenya. This move is especially welcomed by sovereign wealth and Islamic finance institutions - especially in the GCC.

The deadline for financial institutions to submit proposals for advising the South African government on the structuring and issuance of its debut sovereign Sukuk will expire on Dec. 21.
Shortlisted candidates will be informed by Jan. 20, 2012, which means that the global mandate may take a few more months to be launched. Taking into account the structuring of the issuance, the documentation and the investor road shows, realistically, the South African debut benchmark issuance may only happen by the middle of 2012. The only one who can speed up the process is the South African National Treasury in Pretoria.
According to an official statement, the request for proposals is in line with the National Treasury's intention to mix up its funding and investor base.

Africa has begun to move its economic attention away from the west to the Middle East and Asia as a primary source of capital raising. This shift in alignment partially explains the forthcoming launch of a number of Sukuk across the continent in 2012.
South Africa, Senegal, Nigeria and Kenya have all divulged sovereign Sukuk to raise capital for their budgets, a marked move away from aid and loans from the economies of Europe and the US and a move broadly welcomed by sovereign wealth and Islamic finance institutions – especially in the GCC.
Senegal, for exmaple will issue a $200m Sukuk, initially planned for this year but now most likely for the begin of 2012. Finance minister Abdoulaye Diop stated that proceeds from the Sukuk will be used for budgetary support.

Abstract academic paper:

Using a large international sample of 35 developed and emerging markets, we analyze
whether Islamic indices exhibit a different performance to conventional benchmarks. While there is no compelling evidence of performance differences in robust Sharpe ratio tests and after controlling for market risk, we find a significantly positive four-factor alpha for the aggregate developed markets region. This outperformance stems, however, mainly from the U.S. and is largely attributable to the exclusion of financial stocks in Sharia-screened portfolios. As the extensive downturn of financials is related to the recent financial crisis, we do not argue that this outperformance will continue over time. The style analysis reveals that

Islamic indices invest mainly in growth stocks and positive momentum stocks. This, for a passive portfolio intriguing result can, however, be explained by the strong sector allocation towards energy firms and their strong momentum characteristic during the sample period.

The latest development in Tanzania and East Africa’s emerging Islamic finance industry is the opening of Tanzania’s first Islamic bank, Amana Bank, last month. The headquarters of the bank are in the Kariakoo trade centre in the city, the hub of commerce in Tanzania, where an important portion of merchants are Muslims.
The area is so meaningful that another bank, the People’s Bank of Zanzibar (PBZ) has launched this month a branch specializing on Islamic banking.
President Ali Mohammed Shein encouraged the Bank of Tanzania to create a conducive atmosphere for positive service delivery in Islamic finance.

International Islamic (QIIB) chairman and managing director Sheikh Dr Khalid bin Thani al-Thani and Morocco’s new Prime Minister Abdelilah Benkirane discussed in a meeting the prospects of setting up an Islamic bank and an insurance company in the North African country.
They analyzed ways to further strengthen bilateral ties between the two countries with particular focus on Qatari investments in Morocco.
Sheikh Khalid proposed the opening of a joint venture Islamic bank and an insurance company in Morocco with majority participation (51%) by the North African country’s citizens and the remainder with Qataris (49%).

According to Standard Chartered Saadiq, Islamic banking assets in the UAE are forseen to grow to 20 % of the total banking sector in 2012 from an estimated 18 % this year.
The bank anticipates Islamic assets to comprise 38 per cent of total consumer banking assets in the UAE in 2012, compared to about 35 per cent in 2010.
Globally, the Islamic banking industry is estimated to be worth $1 trillion.
Standard Chartered Saadiq plans to begin Islamic banking operations in Nigeria and Oman next year, as it seems to grow its Shariah-compliant business in the Middle East, Africa and southeast Asia.

Dubai Standard Chartered Saadiq is researching opportunities to expand into newly-opened Islamic banking markets such as Oman and Nigeria and is closely evaluating the opportunities in the Middle East and North Africa (Mena) region.
With the opening up of new markets in Mena and Africa, Standard Chartered awaites meaningful growth in the asset size of both Islamic banks and the Islamic banking operations of conventional banks.

South Africa welcomed banks to submit proposals by Dec. 21 for the sale of its first Islamic bond as the continent’s biggest economy seeks to enlarge the access to financing.
It seems that South Africa is a relatively low-risk debtor, which would make its sukuk bonds attractive for Islamic investors searching to mix their portfolios outside the Middle East and North Africa region.
Islamic bonds will also help diversify the government’s funding and investor base.

Real Economy Partners (REP) is going to launch the world’s first Francophone Islamic finance resource by the name of the French Islamic Finance Review. The new service has the purpose to circulate academic research on Islamic finance in partnership with Paris’s Collège de Sorbonne in French, English, Arabic and Turkish.
FIFR will also help the development of Islamic finance not only in France, but in the French-speaking world, with special emphasis in the Maghreb and French-speaking sub-Saharan Africa.
FIFR also wants to help advance the initiatives of French banks in the Islamic finance sector and will publish articles and news in four languages throughout the Francophone world.