IslamicFinance.de

The Kuala Lumpur-based Islamic Financial Services Board (IFSB) plans to develop guiding principles for capital markets and insurance, seeking to encourage regulatory consistency across new and established markets, its secretary general said.
The new guidelines from the 188-member IFSB, one of the main standard-setting bodies for Islamic finance, will complement existing ones which cover commercial banking.
A wider set of standards could assist the International Monetary Fund which plans to include Islamic finance in its surveillance work, known as the Financial Sector Assessment Program (FSAP).
"Before the FSAP there has to be a set of core principles and that really is the instrument that we feel is going to point the way and facilitate consistency across borders," IFSB secretary-general Jaseem Ahmed told Reuters.
The standards on capital markets and Islamic insurance (takaful) would complement regulatory guidance from the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS).

The Islamic Financial Services Board (IFSB) and International Shari’ah Research Academy for Islamic Finance (ISRA) have successfully organised a Shari’ah Roundtable themed, ‘Financial Safety Nets: Striking a Balance between Shari’ah Requirements and the Soundness of the Islamic Financial System’. The Roundtable was held on 5 November 2015 in Kuala Lumpur, Malaysia.
The Roundtable aimed to provide a platform to Shari’ah scholars, legal practitioners, regulators and market players for having in-depth deliberations on key aspects of financial safety nets such as Lender of the Last Resort (LOLR) and Deposit Insurance Schemes from the Shari’ah perspective.
Over 70 delegates from nine jurisdictions among the IFSB members and non-member organisations – representatives from market players, regulatory bodies, and international agencies – Shari’ah scholars as well as academia attended this Roundtable.

SINGAPORE's nascent Islamic finance industry is finding it tough going amid volatile financial markets and depressed oil revenues.
So far this year, there has been only one sukuk, or Islamic bond, deal in a fairly brisk fixed-income market which saw 136 bond deals worth S$17.7 billion sold in the first nine months of 2015 - Malaysia's mortgage lender Cagamas Bhd sold a S$163 million sukuk in September. The lack of a natural pool of Islamic funds in secular Singapore is a major barrier to sukuk launches, according to Clifford Lee, DBS Bank head of fixed income.
"And so you try to sell in other markets which need education (leading to) higher costs; if you're a strong issuer, the conventional bond market is more than ready to meet your needs," explained Mr Lee.
Islamic finance bans interest, products with excessive uncertainty, gambling, short sales and the financing of prohibited activities considered harmful to society. The strongest indicator that it's not smooth sailing for Islamic finance players here came in September when DBS Group Holdings said it will be winding down its Islamic banking unit, which it said has been unable to achieve the necessary economies of scale.

Malaysian telecoms giant Axiata Group on November 13 issued a US$500 million Wakala Sukuk, or Islamic bond, to fund its investment into a Myanmar towers business. This is the largest-ever corporate bond issued with proceeds to be invested into a Myanmar towers business, demonstrating considerable investor confidence in the frontier market. Telecoms towers companies have led the way in terms of innovative cross-border financing into Myanmar – last year Pan Asia Majestic Eagle completed the first cross-border, non-recourse financing arrangement in the country.
A spokesperson for Axiata told The Myanmar Times yesterday that around $125 million of the bond’s proceeds will be used to fund the acquisition of a majority share in Myanmar Tower Company (MTC) under Axiata’s wholly owned subsidiary Edotco Group.
The remaining funds will be used for “general corporate purposes,” she said, though did not disclose whether or not this would include capex for MTC’s Myanmar rollout. In the bond’s prospectus the use of proceeds is listed as “general corporate purpose/other”.

Aberdeen Asset Management plans to launch a new Islamic compliant fund to invest in overseas assets in the first quarter of next year, president director Sigit Pratama Wiryadi said on Thursday.
Aberdeen, a local unit of the Scottish fund manager of the same name, will be among the first funds in Indonesia to take advantage of recently loosened Financial Services Authority (OJK) rules allowing local fund managers to include foreign assets in portfolios. An OJK regulation issued last week announced managers are now permitted to invest between 51 and 100 % of shariah mutual fund products in overseas securities — from bonds, to stocks and currency.
Bharat Joshi, investment director at Aberdeen, said the fund manager would look for assets in Asia Pacific, the United States and Europe to include in the new fund. Aberdeen currently manages around Rp 2 trillion ($147 million) of the country's equities and bonds. The fund has previously said it is looking to increase assets fivefold over the next five years.

There is no misappropriation of funds by the Malaysian Islamic Economic Development Foundation as the organisation is self-funded.

Deputy Minister in the Prime Minister's Department Datuk Dr Asyraf Wajdi Dusuki said the foundation "is an independent organisation and does not receive any grants from the Government" and tied to its trust deed. "Even the minister has no power in their matters", he said in his ministry's winding up speech for the 2016 Budget.
Asyraf said the foundation was not only formed to do charity work but to uplift the economic status of Muslims. He said the charity work was funded by its own systems such as ar-rahnu, which has generated an income of up to RM83mil to date. Asyraf said the foundation's total income to date was RM1.034bil.
Stressing that the funds are managed by the board of trustees, Asyraf said it has the liberty to decide as it an independent organisation. "If YaPEIM wants to invite a minister and pay for his cost, then that is its right. "The amount spent by YaPEIM for Minister in the Prime Minister's Department Datuk Seri Jamil Khir Baharom is merely 0.0063 % of their annual income," he added.

Prime Minister Najib Razak’s plan to revive Malaysia’s faltering economy is getting no help from the country’s Islamic bond market.
Yields on government 10-year sukuk, used by companies to gauge the cost of Shariah-compliant financing, are at their highest level in 18 months relative to two-year securities, according to data compiled by Bloomberg. And with the slide in Brent crude prices sapping Malaysia’s oil-export revenue against a backdrop of looming U.S. interest-rate increases, investors say longer-term borrowing won’t be getting cheaper anytime soon.
“With the U.S. expected to raise interest rates soon, Malaysia’s yield curve will remain steep next year,” said Elsie Tham, a senior fund manager at Kuala Lumpur-based Manulife Asset Management Services Bhd who oversees more than US$1 billion. “Companies will find it challenging to raise funds because of slower economic growth.”

The launch of MyETF-AGRI, the firm’s second Islamic ETF issued this year, brings the number of Shari’ah compliant ETFs in Malaysia to four and 18 in total in the world.
The global ETF market has closed in on the $3 trillion mark with Shari’ah-compliant ETFs only registering about $320 million of that total. In Malaysia, Shari’ah-compliant ETFs make up of over 30 % of the ETF market.
Malaysia does lead the pack, however, with the most Shari’ah-compliant ETF products in the world. Malaysia’s four Shari’ah-compliant ETFs account for some $75 million or 23 % of the global Shari’ah-Compliant ETF segment.
The launch of this landmark Fund represents many firsts for the industry including being the first agricultural-related Islamic ETF globally and the first sectoral Islamic ETF in the region while reinforcing Malaysia’s position as the global hub for Islamic finance and investment products.
MyETF-AGRI will look to invest in the 30 constituent companies that make up the Thomson Reuters Asia Pacific ex-Japan Islamic Agribusiness Index and in substantially the same weightings as they appear on the benchmark index.

Rapid growth in Islamic finance in recent years is pushing up demand for more experts in the field, with the Financial Accreditation Agency (FAA) identifying five key areas in which specialists are urgently needed.
However, programmes offered by local universities now are too generic and provide only a broad-based education on Islamic finance, noted FAA chief executive Dr Amat Taap Mashor in an interview with The Edge Financial Daily.
The industry and its future growth, at the very least, require experts that are specialised in compliance, risk management, governance, audit and the syariah principles guiding all these areas of expertise, he said.
“What is needed now are specialised areas of studies. Currently, if someone wants to specialise in risk management for Islamic finance, the [local] universities might offer only one class on risk management. How is the student supposed to develop the depth of knowledge needed [in] Islamic finance?
“Without a depth of knowledge in syariah principles, how can you design a syariah-compliant product?” asked Amat.

The idea of having a common currency and a global Islamic mega bank among the Muslim countries is quite remote at the moment and the focus should be on increasing intra-trade, said Prime Minister Datuk Seri Mohd Najib Razak.
Najib said while talks of having a mega global Islamic bank have been on the table for some time, the idea has not materialised.
“There have been some attempts to establish a global Islamic mega bank, but it has not materialised yet. I think there are some challenges to be put together, in a serious fashion, for a mega Islamic bank. Effort should continue,” he said at a press conference at the World Islamic Economic Forum (WIEF) in Kuala Lumpur yesterday.
Najib cited the example of the European Union’s (EU) challenges in adopting a common currency as a reason why the idea of a common currency among Muslim countries is remote.
“I think it is quite remote to have a common currency among the Muslim world. I don’t think we should imply to go down the path as EU was also at the point of breaking up at one time. It is not a feasible option but what we can do is increase the intra-trade among Muslim countries.

Malaysia’s Islamic finance industry will continue to grow strongly despite the withdrawal of some Islamic finance-related incentives in Budget 2016.
Chartered Institute of Islamic Finance Professionals (CIIF) president Badlisyah Abdul Ghani said the country’s Islamic financing market has grown positively over the years, attributed to the tax incentives provided for Islamic financing in previous budgets.
“(But now) the Islamic finance no longer requires that assistance to penetrate the market. (Previously) the incentives were there to create the momentum to build nderstanding and acceptance of Islamic finance,” he told a press conference after the launch of CIIF last Friday.
Badlisyah said the CIIF, a professional body for qualified practitioners in the Islamic finance industry, was established following the increasing need for a global reference point for professional talent in the industry, as it expands internationally.

The ratings of rated Malaysian corporate sukuk, or Islamic bonds, reflect the credit quality of the underlying corporate backing the sukuk, despite the various assets in their sukuk structures, according to Moody's Investor Service.
In a statement today, the credit rating agency said that it had reiterated its conclusion in its analysis of three Malaysian corporate sukuk which it rated in 2015, namely Axiata Group Bhd (Baa2 stable), Telekom Malaysia Bhd (TM) (A3 positive), and Petroliam Nasional Bhd (Petronas) (A1 stable).

The global Islamic finance assets are projected to grow to US$3.2 trillion (RM13.6 trillion) by 2020, says Thomson Reuters, the world’s leading provider of intelligent information for businesses and professionals.
Its Head of Islamic Finance, Mustafa Adil said Islamic finance was considered the most developed sector within the various pillars of the Islamic economy and its growth in the global industry was broadly measured by the value of Islamic finance assets.
As global acceptance of Islamic finance continues to grow, he said more corporates and non-Muslim sovereigns were announcing Islamic finance initiatives such as ethical finance or Shariah-compliant regulations, as well as sukuk issuances.

Currently, there is $65.9b of outstanding in labelled green bonds, with transport and energy remaining the dominant themes. Countries such as the UAE and Malaysia have shown the willingness to issue green sukuks, and advisers such as Climate Bonds Initiative hope to have at least one [issued] in 2016, the chief executive officer of the advisory firm told Gulf News.
“Dewa (Dubai Electricity and Water Authority) has said that they are considering issuing a green sukuk for clean energy,” said Sean Kidney, chief executive officer of Climate Bonds Initiative. The firm has a sukuk advisory group in the UAE, trying to promote issuance.

Channel NewsAsia is shining a deserved spotlight on individuals and organizations dedicated to charitable giving with a new program aptly called "Changing Lives," which celebrated its launch on Tuesday with the support of several billionaire philanthropists from Indonesia.
"The idea for the program came from my conversation with pak Tahir," said Debra Soon, head of news and premier segments at MediaCorp, the parent company of Singapore-based Channel NewsAsia.
Soon was referring to renowned Indonesian businessman and founder of the Mayapada Group, Tahir, who was present at the launch in Fairmont Jakarta.
"We talked about what we can do to promote philanthropy. I said, 'Why don't we organize events [and] have a program, because as a channel, we should be raising awareness of issues that matter to Asia.'"
The event included a gala dinner and talk show which featured Tahir as well as Maritime Affairs and Fisheries Minister Susi Pudjiastuti, who is known as a prominent business owner in her own right.

Malaysia’s takaful industry grew at a faster rate than conventional insurance, recording a compound annual growth rate of 12.4% in the last five years and outperforming the conventional insurance’s CAGR of 7.8%. Malaysian Takaful Association chairman Ahmad Rizlan Azman said takaful contributions last year were RM6.3 billion, accounting for a 13% share of the total insurance market.
“With Malaysia’s low insurance penetration rate of 5.2% of gross domestic product (GDP) in 2014 and its young demographics, significant market growth opportunities are yet to be tapped by its insurance and takaful sector,” Ahmad Rizlan said at the launch of the Malaysian Takaful Dynamics report on the sidelines of the 11th World Islamic Economic Forum yesterday.
The jointly developed report by the Malaysian Takaful Association and Ernst & Young (EY) Malaysia is the country’s first central compendium on Islamic insurance.
Ahmad Rizlan said the low penetration rate of takaful in the country is due to a lack of awareness about takaful-related products as well as the issue of affordability, especially among low-income groups.

Islamic financing is gaining traction even among non-Muslim countries in a bid to use sustainable and equitable form of alternative models, the Malaysian Prime Minister said on Tuesday. London issued its second Islamic sukuk after its first bond issue was oversubscribed 14 times. In addition to London, Luxembourg and South Africa, Hong Kong has also issued sovereign sukuks.
“Ever since the global financial crisis in 2007-08 there has been a sharp demand for alternative economic and business model that reduces the level of speculation as conventional model that has inherent weakness,” Najib Razak told journalists. “Over-leveraging is believed to have been the root cause of the disaster — but again, that is prohibited in Islamic finance. As a result, Islamic banks remained strongly capitalised and resilient against financial market volatility, while continuing to contribute positively to equitable and sustainable growth,” he said.

The International Shari’ah Research Academy for Islamic Finance (ISRA) and Thomson Reuters, the world's leading provider of intelligent information for businesses and professionals today launched an inaugural joint publication on Islamic Commercial Law Report 2016.
The Islamic Commercial Law Report 2016 was launched by the Deputy Minister, Prime Minister’s Department YB Senator Dato’ Dr Asyraf Wajdi Dato’ Dusuki at the International Shari’ah Scholars Forum (ISSF), organised by ISRA and the Islamic Research and Training Institute (IRTI) in Westin Hotel, Kuala Lumpur on 3 November 2015.
The Islamic finance industry has witnessed exponential growth over the last three decades, and has become one of the fastest growing segments of the global financial industry with estimates of the current market size ranging from $1.66 trillion to $2.1 trillion. One key factor that has contributed to this progressive development is the flexible nature of Islamic commercial law, which has imbued Islamic finance with the same core characteristic of flexibility, as the legal maxim says: “the original ruling in Islamic financial transactions is permissibility”.

The Islamic Development Bank indicated that it may issue green sukuk bonds compliant with religious law and increase lending for climate-related projects with an announcement at the United Nations global warming conference in Paris at the end of the year.
“Estimates for the 2030 agenda indicate that we need to move from billions to trillions of dollars of support annually for sustainable development,” Savas Alpay, chief economist of the IDB, said in a phone interview. “Traditional sources of development finance will not be enough. We must also look at non-traditional sources. We will be using Islamic finance to bring new resources to the table.”
Khazanah Nasional Bhd, Malaysia’s state-owned sovereign wealth fund, issued green sukuk last November after introducing guidelines for socially responsible debt in August 2014. It was the second entity after the London-based International Financial Facility for Immunization announce plans to sell ethical-based sukuk.
Green Sukuk

The Islamic countries of South-East Asia represent a rich potential area of growth for insurers, especially those able to offer Sharia-compliant products, Richard Bishop, chief executive officer of Cobalt Underwriting, told SIRC Today. Bishop said that counties such as Indonesia, Malaysia and Pakistan offered a plentiful source of potential business for insurers, especially those familiar with and able to offer Sharia-compliant insurance.
Cobalt Insurance Holdings and its two specialist operations, Cobalt Underwriting Services and Cobalt Advisory Services, were formed in 2012 with the objective of establishing London as a leading global centre for Sharia-compliant insurance capacity.
“When we started we principally focused our efforts on the Middle East as a market,” Bishop said. “We do business in the UK, or inward investment into the UK via Islamic investors, but we wanted to make our product available in the Islamic markets, and the closest Islamic market to the UK is the Middle East. It’s worked quite well for us as a starter market.”