IslamicFinance.de

A group of Indonesian Islamic banks launched on Thursday a standard contract template for sharia-compliant repurchase agreements, aiming to broaden the liquidity management tools available in the sector. The standard will serve as an alternative to interest-based repurchase agreements. Currently Islamic banks in Indonesia rely on tools provided by the central bank, such as an Islamic overnight deposit facility known as FASBIS, while the new agreement would standardise bank-to-bank transactions and help ensure they are cost-effective. An initial group of 18 Islamic banks and Islamic banking units are signatories to the master agreement, which allows use of government-issued Islamic bonds as collateral while tenors can be of no more than one year.

Qatar International Islamic Bank and QNB Capital signed an agreement in April with China-based Southwest Securities to develop Shariah-compliant finance products in the country. Seven months after Hong Kong sold its debut sukuk, China is exploring Islamic finance for projects from hospitals to metro stations, according to London-based Dome Advisory, which is working with a government-owned fund in Shanghai to finance five projects. Ningxia, an autonomous region in northwest China where a third of the 6.5 million population are Muslim, plans a $1.5 billion sukuk sale. However, country will need to make more regulatory changes to promote Islamic finance.

Guidance Financial Group, a wholly-owned subsidiary of Malaysia-based Capital Guidance, wants to link the vast Islamic investment opportunities between the Middle East and Asia, Dr Hasnita Hashim, chief executive officer of Guidance Investments, said. If appropriately linked these two regions can deliver strong value for investors while making innovative investment opportunities and ethical funding bases on Sharia principles available across both the regions, she said. In the GCC and wider Middle East region, the company has plans to replicate the success of its US residential mortgage business targeted at primary mortgage customers and institutional investors seeking secondary market asset pools. The company is already involved in providing primary mortgages through Dar Al Tamleek in Saudi Arabia.

Ahmed Mohammed Ali Al-Madani came for the visit with the head of Russian Central bank Elvira Nabiullina, being accompanied by the President of the Republic of Tatarstan Rustam Minnikhanov. The trip has been organized within the framework of the visit of the Islamic Development bank (IDB) head to the VII International Economic summit of Russia and OIC countries – KazanSummit 2015. During the meeting, Ahmed Mohammed Ali Al-Madani told about the history of the IDB and the principles of its operation. He noted that today Islamic banking is represented even in countries, where there is no Islam, for instance, in China.

The rector of the Russian Islamic Institute (RII) Raffick Mukhametshin awarded the degree of honorary professor, a gown and a diploma to Dr. Ahmad Mohamed Ali Al Madani, the President of the Islamic Development Bank. The ceremony was held in the framework of the Strategic Forum of the VII International economic summit of Russia and the OIC - KazanSummit 2015. Ahmad Mohamed Ali Al Madani arrived to Kazan to participate in the VII International Economic Summit Of Russia and OIC countries and became a guest of Honor of the annual KazanSummit. Head of the Islamic Bank delivered a speech at the Strategic Forum of the summit.

While rating agency has mixed views on the performance of the sukuk market this year, Maybank Islamic Bank Bhd says it remains mindful of the challenging economic backdrop. Its chief executive officer Muzaffar Hashim said the Islamic bond issuance activity, which saw its peak in 2012, is closely tracking the volatile external developments such as Greece debt default risk and US interest rates hike. RAM Rating said new global sukuk issuance is expected to be strong this year at around US$100 billion (RM371 billion) to US$120 billion (RM445 billion) while Standard & Poor’s warns of a slowdown in emerging markets as reduced confidence and low oil prices hit investor demand.

Maxis Bhd has issued the first series of its sukuk murabahah of RM840mil in nominal value pursuant to its unrated sukuk murabahah programme. The tenure is for 10 years from the issue date. The country’s largest mobile phone operator plans to raise as much as RM5bil from a 30-year sukuk for its capital expenditure (capex) and debt refinancing. The company said in a filing with Bursa Malaysia yesterday that the unrated sukuk murabahah programme would be available 30 years from the date of the first issuance, which should be made within two years of approval. The issue price as well as coupon rate and yield to maturity of the Islamic bond will also be fixed prior to each issuance.

Malaysia's Tenaga Nasional Bhd is seeking to raise as much as 10 billion ringgit ($2.7 billion) in an Islamic bond issue to develop a power plant project it is planning to take over from debt-laden state fund 1MDB. The planned purchase of 1MDB's 70 percent stake in 3B, a greenfield 2,000 MW coal-fired plant project, will take the pressure off 1MDB to find the funds to develop the project and help it focus on paring down debt of more than $11 billion - a burden that has weighed on Malaysia's currency and its credit rating. It also fits well with Tenaga's own energy supply needs, although some analysts are worried that the company may end up overpaying if the government pushes for 1MDB to gain the best deal it can.

Moody's Investors Service says the outlook on Indonesia's (Baa3 stable) banking system remains stable, reflecting an expectation that the country's banks will withstand a challenging operating environment owing to their strong buffers. Nonperforming loans will likely rise, given slowing economic growth, nonetheless, the banks are well-positioned to withstand any deterioration in asset quality and will maintain strong capital levels. Moody's conclusions were contained in its just-released "Banking System Outlook: Indonesia", which expresses Moody's view of how bank creditworthiness will evolve in this system over the next 12-18 months. The report looks at the banking system in the five categories of operating environment; asset quality and capital; funding and liquidity; profitability and efficiency; and system support.

Small Medium Enterprise Development Bank Malaysia Bhd (SME Bank) is getting closer to reaching its target of turning into a full-fledged shariah development finance institution (DFI) with its Islamic financing portfolio now standing at 86.5 per cent amounting to RM4.31 billion. The target is to achieve 90 per cent Islamic financing portfolio by December 2015. When SME Bank was set up in October 2005, the Islamic financing portfolio was only 15 per cent. Group managing director, Datuk Mohd Radzif Mohd Yunus, said convincing customers to switch to Islamic financing was not a major challenge. SME Bank, through its unit, Centre for Entrepreneur Research and Development Sdn Bhd, and Islamic Banking and Finance Institute of Malaysia, developed and conducted the Chartered Islamic Development Banker programme.

A bitcoin startup based in the US is now helping Muslims get loans without breaking Islamic law. Matthew J. Martin, who converted to Islam five years ago while he was working fintech world, set up Blossom Finance which partners with microfinance institutions to make “investments” in small businesses then takes a 20 percent cut of the profits in order to still make money. In particular, Martin chose to use bitcoin since it doesn’t incur high transactions costs. Apart from that, the digital currency also features transparency, as the transactions are recorded in a public ledger called blockchain. Blossom is based in Indonesia, where there is a strong demand for financing that is compliant with Islamic law. The company has gotten its first investment from BMT Nusantara Condet, which help 10 to 20 micro businesses within Indonesia to expand.

The sustained effort to enhance the regulatory and legislative framework to support Islamic financial transactions will continue to place Malaysia as the biggest player in the global Islamic banking industry, says CIMB Islamic Bank Bhd. Chief Executive Officer Badlisyah Abdul Ghani said despite the growing competition from other markets, such as Indonesia and Saudi Arabia, Malaysia's better and firm framework would be a value added. Nevertheless, Badlisyah said due to the aggresive external environment, Malaysia should always come out with compelling, commercially driven products, to clearly distinguish itself from competitors. Badlisyah was a speaker at a panel discussion on "The Future of Islamic Banking: Where Do We Go From Here?"

Malaysia’s Islamic insurers are seeking to double policy holders in five years by investing more in digital technologies to attract a younger audience, according to Ahmad Rizlan Azman, chairman of the Malaysian Takaful Association. Takaful operators should also step up educational campaigns to boost customers to 8.4 million by 2020 from about 4 million now, he said. Attracting more professionals is another prerequisite to achieving Malaysia’s targets, Ahmad Rizlan added. Syarikat Takaful’s Mohammad Hassan said the nation’s Islamic insurers have to push for innovative new ideas to keep their growth momentum going. The company is considering an acquisition in the next two years to increase its customer base, he said.

The country’s largest mobile phone operator, Maxis Bhd, is planning to raise as much as RM5bil from a 30-year sukuk for its capital expenditure (capex) and debt refinancing. The company said in a stock exchange filing that the unrated sukuk murabahah programme would be available 30 years from the date of the first issuance, which should be made within two years of approval. The issue price of the Islamic bond will also be fixed prior to each issuance. It added that the Islamic medium-term notes might be with or without periodic profit payments. The coupon rate and yield to maturity would also be fixed prior to each issuance of the sukuk. CIMB Investment Bank Bhd is the sole principal adviser and the sole lead arranger for the programme.

Islamic finance could help Russian companies hit by Western sanctions to gain access to credit, Rustam Minnikhanov, President of the Russian republic of Tatarstan, said at the Kazan Summit Forum. According to Rustam Minnikhanov, Russian banks, including the country’s largest bank Sberbank, are currently showing an interest in Islamic finance. One of the advocates of the development of Islamic banking in Russia is the head of Sberbank, former Russian Minister of Economic Development, German Gref. Minnikhanov also said that the development of Islamic banking in Russia should be done on a federal level and that there is no talk of creating a unique financial zone in Tatarstan.

Brunei's financial regulator is preparing to issue long-term Islamic bonds in the "very near future" while widening the eligible list of buyers of its issuance programme. The Autoriti Monetari Brunei Darussalam (AMBD) wants to develop the local capital market to help shift the economy away from oil and gas exports, with plans to launch a securities exchange as early as 2017. The AMBD did not give a specific timeframe or potential size for the deal. Since 2006, the AMBD has issued sukuk in maturities of up to 1 year for use by the country’s seven domestic commercial banks, but never in longer tenors. The new sukuk will be available to buyers outside the domestic banking sector.

The Malaysia unit of Japan's Toyota Motor Corp. plans to setup a 2.5 billion ringgit ($667 million) programme to raise funds via both conventional and Islamic bonds. The proposed programme from Toyota Capital Malaysia Sdn Bhd was rated AAA by RAM Ratings, and follows a 1 billion ringgit sukuk programme setup in 2008 that matured earlier this month. The Malaysia unit has two other conventional debt programmes that can raise a combined 1.8 billion ringgit; It sold a debut sukuk in 2008. The move comes at a time when Japanese firms are renewing efforts in the sector, with Japan's financial regulator relaxing rules for domestic banks to use Islamic financial products.

Founded in San Francisco and recently moved to Jakarta, a financial startup called Blossom aims at nothing less than shaking up the microfinance sector in Indonesia. The company, launched in October 2014 by US entrepreneur and practicing Muslim Matthew Joseph Martin, plans to bring Shariah-compliant microfinance to the country. What sets Blossom apart from other financing schemes are two special features. First of all, its entire platform is Shariah-compliant. The second feature is the fact that its platform uses the cryptocurrency Bitcoin for global money transfers, at least in the background, to keep transfer costs low and money flows transparent. Last month, Blossom announced that it will make a "pilot investment of up to 100,000" in Bitcoins into BMT Nusantara Condet to fund small to medium businesses in Jakarta.

Bitcoin (https://bitcoin.org) started to make the idea of a cryptocurrency popular. What is missing so far is an intense discussion among Sharia scholars.

What makes Bitcoin unique is, that it is a) created by a computer program b) that it is created and verified by a decentralised process, the so-called 'Blockchain' technology (https://en.wikipedia.org/wiki/Block_chain_(database)), which is solving a practical problem for the first time: To enable trust and accounting without a central ledger, such as a central bank. c) that it faciliates payments quick, efficient and discreet - while the latter leads to accusation of misuse, e.g. for gaming, drugs, terror finance etc.

How it can be seen from an Islamic perspective is not widely discussed, despite it deserves the attention. What we find in search engines are some discussions and also an initiative, which calls itself a bank (https://bitcointalk.org/index.php?topic=21732.0).

A string of innovative financial products from Indonesian start-ups are circumventing the traditional payment and investment system, helping to broaden financial inclusion and challenging the established banks. Indonesia’s tech-savvy youth have already given rise to pioneering start-ups with social and religious missions and the so-called FinTech industry is set to disrupt traditional banks by offering everything from Bitcoin remittances to mobile pawn shops and retail lending platforms. With a large swath of the population still unbanked – in part due to the country’s challenging geography – new technologies in banking, transactions and payments offer significant growth potential, with banks under increasing pressure to respond to the trend.