IslamicFinance.de

Al-Rajhi Bank (Malaysia) provided RM325,000 in funding today to two education centres under the management of Yayasan Salam. The centres are the Taska Baitul Amal and Pusat Jagaan Baitul Amal, and the funding was under the bank's corporate social responsibility (CSR) Baitul Amal Children's Programme which provides for 70 children from the ages of two months to six years. Roseta Mohd Jaafar, Al-Rajhi Bank's vice-president and head of corporate communications said the programme was geared towards helping underprivileged children in the Jalan Chow Kit area. Registered under the Social Welfare Department, the Taska Baitul Amal was officially launched on July 19, 2010 and the Pusat Jagaan Baitul Amal on January 2, 2012.

Islamic finance aims to move into infrastructure, as governments and bankers plan a new organisation to handle deals and expand efforts to use sukuk for projects in majority-Muslim countries. An estimated US$800 billion (RM2.96 trillion) worth of infrastructure financing will be needed each year in Asia over the next decade. But so far, technical, legal and political issues have mostly confined sharia-compliant infrastructure deals to mid-sized ones with shorter tenors. Only a handful of project finance deals have been done. Governments are now trying to break the impasse. Indonesia, Turkey and the Islamic Development Bank said last month that they planned to launch an Islamic infrastructure bank, with Indonesia and Turkey pledging at least US$300 million each.

TH Plantations Bhd has issued RM1bil of sukuk murabahah to parent company Lembaga Tabung Haji (LTH) to raise funds for its subsidiaries to repay their bridging loans. The RM1bil sukuk is part of the sukuk murabahah programme of up to RM1.2bil in nominal value set up by its unit, THP Suria Mekar Sdn Bhd, with LTH. RHB Investment Bank Bhd has been appointed as the principal adviser, lead arranger, facility agent and lead manager for the sukuk programme. In separate announcements, TH Plantations said it had appointed as directors LTH deputy group managing director and chief executive officer Datuk Johan Abdullah, Datuk Md Yusop Omar and Datuk Shari Osman.

Herman Gref, the head of Russia’s largest bank Sberbank, welcomed the introduction of Islamic banking in the country’s traditionally Muslim regions, saying it would help attract capital from Arab countries. The rapid growth of the Muslim population in Russia contributes to a sharp increase in demand for Islamic banking tools expected in the coming years, said Samir Tagiyev, manager for business development in the CIS and Europe, the Islamic Corporation for the Development of the Private Sector (ICD). The Russian government has to elaborate a legal framework that will integrate Islamic banking into Russia's financial system.

Asian sukuk offerings are drawing more demand from the Middle East, boding well for regional hubs such as Hong Kong as they try to raise their profiles in the Islamic finance market. When the Government of Hong Kong issued a $1bn five-year sukuk last week, 42% was allocated to the Middle East, up from 36% for the borrower's debut Islamic bond last September. Middle-Eastern buyers also snapped up 56% of a five-year $500 million offering by Indonesian airline Garuda Indonesia. The momentum in Asian sukuk offerings is raising hopes that Hong Kong will be able to achieve its goal of stimulating more Islamic issuance from the city. Alexi Chan, HSBC's global co-head of debt capital markets believes the time is right for issuers from Greater China to consider the sukuk market as a viable option in a diversified funding approach.

BIMB Holdings Bhd is expecting a 15% growth in assets for its banking arm Bank Islam Malaysia Bhd for 2015, despite saying that it will be a very challenging year for the banking industry. Hizamuddin Jamalluddin, chief strategy officer of the managing director's office, said the expected asset growth is based on the group's current balance sheet. He added that in terms of loan growth, the group is expecting this year's growth to be similar to that of last year's. Hizamuddin was speaking to reporters during BIMB's launch of three new term investment accounts under the Islamic Financial Services Act 2013 (IFSA). The three products launched are the Special Investment Account Mudarabah, Waheed Investment Account Wakalah, and the Al-Awfar Account.

Alkhair Islamic Bank Bhd (AKIIB) has appointed Datuk Adissadikin Ali as its new chief executive office, succeeding Ikbal Daredia effective June 1, 2015. The bank said on Friday that Adissadikin would be responsible for the development of AKIIB, as it is the first Islamic bank in the country to conduce a full range of non-Malaysian ringgit banking activities. He will also oversee all aspects of AKIIB business in Malaysia and the surrounding regions. Meanwhile, it noted that Adissadikin has 15 years experience in the financial services sector which gave him wealth of management and leadership exposures in the industry.

Hong Kong recently issued $1 billion five-year sukuk. Pricing was aggressive, with the $1 billion sukuk pricing at Treasuries plus 35bp. The sharia-compliant note had a profit rate of 1.894%. However, the leads took comfort in the fact that there were solid anchor orders in place before launching the deal. Roadshows were held in key Islamic centres including Kuala Lumpur, Saudi Arabia, the Emirates and London and much of those orders came from reverse enquiries from roadshows. The sukuk gathered an orderbook of $2 billion from 49 accounts. Given that it was an ultra-low yielding AAA product, banks treasuries took close to three quarters of the deal. Central banks and sovereign wealth funds took close to a quarter of the deal.

Indonesia will become a founding member of a cross-border sharia-compliant infrastructure bank to help boost infrastructure development in various countries. The bank, named Islamic Investment Infrastructure Bank, will be cofounded with Turkey and the Saudi-based Islamic Development Bank (IDB), according to Finance Minister Bambang Brodjonegoro. To qualify as a founding member, Indonesia must contribute more than US$300 million. The sharia infrastructure bank is expected to be established in the second half of this year, following Indonesia’s announcement to join as one of the founding members in the upcoming China-led Asian Infrastructure Investment Bank (AIIB), which is also expected to help finance the country’s infrastructure projects.

Indonesia is set to co-found a new cross-border Islamic (sharia-compliant) infrastructure bank together with Turkey and Saudi-based Islamic Development Bank (IDB). Indonesian Finance Minister Bambang Brodjonegoro said that Indonesia will contribute more than USD $300 million as start-up capital for the establishment of the new bank, named Islamic Investment Infrastructure Bank (IIIB), which aims to boost infrastructure development in various countries. The bank is set to be established in the second half of 2015. Muliaman D, Chairman of the Financial Services Authority (OJK), recently stated that Indonesia and Turkey are competing to become host of the Islamic Investment Infrastructure Bank’s headquarters.

Hong Kong Government has successfully sold its second Islamic sukuk bond to raise US$1 billion in its latest effort to promote Islamic finance in the city. The Hong Kong Monetary Authority, which handled the issue on behalf of the government, said on Thursday that the issue was popular and it received US$2 billion in orders from 49 global institutional investors including central banks and sovereign funds among others. The orders were double its US$1 billion issue size. The five-year bond was priced at 1.894 per cent, which is lower than last year’s issue and is 35 basis points over 5-year US Treasuries. The new government sukuk will be listed on June 3 in the stock exchange of Hong Kong, Nasdaq Dubai and Bursa Malaysia.

Hong Kong sold US$1 billion (RM3.6 billion) of Islamic bonds in its second sukuk issue since the city’s debut in 2014. The five-year debt was priced at 1.894 per cent, with orders amounting to US$2 billion, according to a government statement. The city sold the same amount and tenor in September at 2.005 per cent, which drew bids for US$4.7 billion. Those notes last yielded 2 per cent. The city sold its latest bonds at a spread of 35 basis points above similar-maturity US Treasuries. That compares with 23 basis points for its debut offering. Standard & Poor’s assigned a preliminary AAA credit rating to the deb, the same as the government.

Prime Minister Datuk Seri Najib Razak today urged Japan to partner Malaysia in engaging in Islamic finance-related activities and tap the huge global market. With Japanese industrial expertise and technology, and Malaysia’s technical expertise in Islamic finance, he said there was an opportunity to establish a formidable alliance. On a much larger scale, he said that in late 2013, China announced the plan to establish the Asian Infrastructure Investment Bank or AIIB, and currently has 57 charter members and a paid-up capital of US$50 billion.He added that Malaysia understands and respects that Japan has reservations over the AIIB, but regardless of the vehicle, it is apparent that Asian countries need to invest in tangible infrastructure assets.

Moody's Investors Service says that the Indonesian government's (Baa3 stable) Islamic finance roadmap will encourage consolidation among smaller Islamic banks in the country, and foster the development of a larger domestic Sukuk market. The consolidation of state-owned and commercial Islamic banks will increase the size of the banks' capital bases, improve cost efficiencies, and allow increased underwriting in the corporate and infrastructure sectors. Moody's report points out that Islamic banks operate less extensive branch networks when compared to conventional banks, and their capital bases are smaller. Their riskier customer base has led to non-performing financing ratios that are consistently higher than the comparable non-performing loan ratios at conventional banks.

Indonesian airline Garuda Indonesia has mandated a total of 15 banks to arrange its first dollar outing, which will be executed in sukuk format. The company has chosen National Bank of Abu Dhabi (NBAD) as sole global co-ordinator. Dubai Islamic Bank and NBAD are working as joint structuring banks.

One serious complaint against the prevalent model of Islamic banking is that interest is being charged in the garb of service fee. In fact loans from Islamic banks are much costlier than those from conventional financial institutions, particularly public sector banks. Thus, one issue that must engage us is that if Islamic banking is a viable alternative for us, how can we justify the collapse of so many Islamic financial institutions in India in recent times. The real problem is that we are not prepared for a reasoned debate. Confusion continues to prevail with sharp division of opinion. The spate of failures of Islamic banks in India have caused untold suffering to small depositors. There is no alternative except to transact with conventional banks.

The Crocus-Expo Center in Moscow has opened Moscow Halal Expo 2015. Over 200 halal companies from Russia and other countries will be presenting their products until May 23. The main theme of the exposition this year will be growth and development of national manufacturers and international commercial and investment relations with the Islamic world. Food, fashion, tourism, financial and medical companies are taking part in Halal Expo this year. Madina Kalimullina, the director of the exposition, explained that one of the main goals of the Halal Expo was to demonstrate development of the halal market in Russia.

Indonesia completed its largest-ever global sukuk sale, selling US$2 billion of Islamic bonds at the lowest yield in three years. The Finance Ministry issued the notes at 4.325 per cent, lower than the initial 4.55 per cent indicated, Robert Pakpahan, director general at the budget financing and risk management office, said in a text message on Friday. That compares with the 4.35 per cent rate paid on similar Shariah-compliant debt sold last year and the record-low 3.3 per cent on 10-year sukuk issued in 2012.

Fitch Ratings has assigned Indonesia's proposed sovereign global certificates (sukuk) issued through Perusahaan Penerbit SBSN Indonesia III (PPSI-III) an expected 'BBB-(EXP)' rating. The expected rating is in line with Indonesia's Long-Term Foreign Currency Issuer Default Rating (IDR) of 'BBB-', which has a Stable Outlook. The rating reflects Fitch's view that cash flows supporting payment on the sukuk will constitute direct, unconditional, unsecured and general obligations of Indonesia, ranking equally with Indonesia's unsecured and unsubordinated marketable external debt. The rating will be sensitive to any changes in Indonesia's Long-Term Foreign Currency IDR.

Demand for Malaysian Islamic real-estate investment trusts may withstand a sluggish property market as their steady rental income is popular with pension funds amid a shortage of Shariah-compliant assets. Johor Corp plans to list the RM900 million (S$333 million) Al-Salam REIT, Kamaruzzaman Abu Kassim, the company's president said. The prospectus will be registered by July and the trust expects to deliver returns of around 6.3 per cent in 2016, he said. Al-'Aqar Healthcare REIT, majority owned by Johor Corp, returned 11.7 sen a unit to shareholders. That worked out to a dividend yield of 8.4 per cent based on its year-end closing price.