IslamicFinance.de

Iran is working on a plan to establish a joint bank with Azerbaijan. Elman Rustamov, the chairman of Azerbaijan's Central Bank (CBA) is discussing the matter with Iran's Minister of Economic Affairs and Finance Ali Tayyebnia. The two neighbors are also discussing the opening of branches of the two countries’ banks in Baku and Tehran. The Iranian minister said the main obstacle on the way of banking cooperation is the existing sanctions against Iran's financial sector.

The Islamic Financial Services Board (IFSB) plans to tighten oversight of market practices and revise capital adequacy and disclosure requirements. The new disclosure requirements would cover financial but also sharia-compliance aspects, and may include guidance on specific sukuk formats such as convertible instruments and those used for regulatory-capital purposes. Islamic finance has now systemic importance in 11 countries, these include Qatar, Kuwait, Malaysia, Saudi Arabia and Brunei, with the latest entrant Djibouti. Bahrain and Jordan are close to achieving that status as well.

The Central Bank of Nigeria (CBN) has granted Jaiz Bank national license to operate Islamic non-interest banking in all the states of the federation. Chairman of Jaiz Bank Alhaji Umaru Abdul Mutallab said the bank intends to roll out in all the 36 states and the Federal Capital Territory (FCT) in two or three months times. Alhaji Sa’ad Abubarkar III, the Sultan of all Muslims in Nigeria, congratulated and warned that Jaiz bank must conform with all rules and regulations of Islam.

The private sector arm of the Islamic Development Bank Group plans to regularly tap Islamic debt capital markets. Regular access to Islamic financing tools is helping the Islamic Corporation for the Development of the Private Sector (ICD) expand its economic development efforts. Last month ICD completed a debut sale of $300 mn worth of five-year sukuk. CEO Khaled Al-Aboodi said two more sovereign deals are expected this year from West African countries in particular to finance infrastructure projects.

#Dubai ports operator DP World has selected more than a dozen banks for its sale of Islamic bonds. Fifteen lenders have been hired for the offering of dollar-denominated, benchmark-sized securities whose maturity may be as long as seven years. Proceeds from the sale will be used for a tender offer for the company’s existing sukuk due in 2017.

Islamic and Christian finance have evolved from the same roots and a shared history. They share much in common and divergent views on interest and usury will probably remain the key difference for the near future. Like Islamic Finance, Christian Finance operates alongside modern-day conventional financial services. For example Reliance Bank in the UK avoids dealings with any company whose main source of income is derived from sales of tobacco, alcohol, gambling, pornography and armaments.

Emirates Islamic Bank completed a $50 mn (Dh183 mn) Collateralised Murabaha deal with France-based Natixis on the Nasdaq Dubai. This was the largest collateralised Murabaha transaction closed by Emirates Islamic this year, and the first of its kind executed on the Nasdaq Dubai Murabaha Platform. CEO of Emirates Islamic Jamal Bin Ghalaita said the transaction sets a precedent for other financial institutions considering Sharia-compliant financing.

Emirates Islamic Bank has mandated banks including HSBC for the sale of Islamic bonds. The sale of the dollar-denominated, benchmark-sized securities may begin this week and the sale is arranged by Standard Chartered, Emirates NBD, Dubai Islamic Bank, Noor Bank and Bank ABC. Emirates Islamic Bank last sold bonds in July 2012, when it raised $500 mn from securities with maturity of between five and six years.

In Pakistan Islamic modes, financing and products have captured at least 15% of the overall financial market share in 2016. The interest is illustrated by the results attained by the UAE-based banks Alfalah and Bank Al Meezan. Bank Alfalah CEO Atif Bajwa reported a double-digit top line growth, Rs7.523 bn in CY-15, 33% growth from 2014. Meezan Bank reported a Rs2.67 bn profit for the first half of CY-2015. The bank has also introduced Meezan Asset Allocation Plan-1, Pakistan's largest asset management company.

In #Malaysia the Employees Provident Fund (EPF) expects 1.5 mn to 2 mn members to convert their contributions to the syariah-compliant fund in the first year of implementation. CEO Datuk Shahril Ridza Ridzuan said 71% of the members agreed on the need for the Islamic pension scheme called Simpanan Shariah. Simpanan Shariah’s initial fund size will be RM120 bn. EPF is in the process of classifying its assets as syariah-compliant and conventional, with about 40% of its assets now fully syariah-compliant.

Kuwait’s Investment Dar has offered to hand assets to creditors immediately in order to win them over to its latest plan to restructure debts of KD 813m ($2.7bn). Investment Dar has had mixed success in restructuring its debts since getting into trouble during the financial crisis. Its latest attempt, called Al Sharq, promises to immediately hand over control of assets in the company to creditors, while also guaranteeing that shareholders will not get paid until all creditors are paid.

Islamic banking is increasingly attracting global funds. Mark Mobius, executive chairman at Templeton Emerging Markets Group sees great potential in Islamic finance and emerging markets. Tepleton invested $1.2 bn in sukuk alone and plans to invest more. Emerging markets have been negative in the last 3 years, but are now growing rapidly. The trend is towards greater privatization, more fairness and more disclosure.

Badlisyah Abdul Ghani, president of Chartered Institute of Islamic Finance Professionals, says we need a megabank in every country. Today most jurisdicitons do not have effective infrastructure for Islamic finance, some banks are efficient in their own country, but not in other countries. Megabanks have to be multi-country players.

Saudi International Petrochemical Company (Sipchem) plans to recall a sukuk maturing on July 6 three weeks early. The firm will send a notice to sukuk holders informing them of its intentions and will use available cash to pay it off. It originally issued 1.8 billion riyals of sukuk in 2011. Sipchem also plans to issue a new sukuk and appointed Riyad Capital and NCB Capital as lead managers for the issue.

Mushtak Parker, research consultant at Islamic Finance, says millennials are the main drivers in Saudi Arabia and Oman. The biggest challenge of Islamic finance is public policy, that most Islamic countries do not have a recognized or stated public policy in Islamic finance. It is the responsibilty of the governments because nothing can happen in a market without government approval or facilitation.

Shariah investing is forecast to grow very rapidly, following the long-term trends of emerging markets. Executive Chairman of Templeton Emerging Markets Group, Dr. Mark Mobius found that emerging markets outperformed US and world markets in 17 out of the last 28 one-year periods. Islamic stocks in Indonesia, Malaysia and Turkey are doing particularly well. Dr. Mobius said 40% of world GDP is in emerging markets, currently Muslim majority countries have a GDP growth of 8%, up from 4% in 1987.

The International Monetary Fund (IMF) has calculated that, if oil prices remain low, the fiscal deficits of the Gulf Cooperation Council (GCC) and Algeria will total almost $900 bn between 2016 and 2021. The non-oil sector in the GCC is projected to grow at an average rate of 3.25% per year over the next five years, compared to an average of 7.75% between 2006 and 2015. Thus, regional governments are being forced to review their expenditure plans. A recent PwC survey found that 75% of the more than 130 owners have already been impacted by funding constraints, while 65% forecast they will have less to spend next year.

The Islamic Financial Services Board (IFSB) plans to tighten oversight of market practices and revise capital adequacy and disclosure requirements. The new disclosure requirements would cover financial but also sharia-compliance aspects, and may include guidance on specific sukuk formats such as convertible instruments and those used for regulatory-capital purposes. Islamic finance has now systemic importance in 11 countries, these include Qatar, Kuwait, Malaysia, Saudi Arabia and Brunei, with the latest entrant Djibouti. Bahrain and Jordan are close to achieving that status as well.

Turkey wants to set up a new Islamic megabank. Deputy Prime Minister Mehmet Simsek said the prime shareholders would be Turkey's Treasury and the Islamic Development Bank. Simsek prepares for talks with Indonesia in Jakarta next week on proposals to start a Shariah-compliant megabank that will lend to companies and infrastructure projects. Indonesia and Malaysia have long tried separately to establish a Shariah-compliant lender but faced obstacles until now. Turkey is ready to commit more than $300 mn for the lender as capital.

Qatar's Ezdan Holding has priced a $500 mn five-year sukuk issue. The wakala-structured transaction carries a profit rate of 4.375 percent, equivalent to a spread over midswaps of 333 basis points. The reoffer price was 99.446 percent. Barwa Bank, Emirates NBD Capital, HSBC and Mashreq arranged the transaction and were joined by Abu Dhabi Islamic Bank before its close.