IslamicFinance.de

The standards for Islamic asset management should be raised so that it can compete with conventional peers. according to Fajar Capital Group CEO Iqbal Khan. He said though the Islamic asset management industry remains marginal and fragmented and continues to lag behind conventional systems, its characteristics to compete in the market through values, ethics and authenticity will prove to be advantageous in the future. He added that global Islamic finance assets were expected to hit US$1.8 trillion in 2013, and Islamic asset management is expected to grow around US$300 million to US$500 million this year. He said Malaysia played a leading role, with a well structured approach, in the Islamic wealth management industry and hoped that Malaysia will export its success story to the rest of the Islamic world.

Bombay Stock Exchange (BSE) and S&P Dow Jones Indices have announced the launch of the S&P BSE 500 Shariah index, the first new index resulting from the strategic partnership formed between the two companies in February of this year. The S&P BSE 500 consists of 500 of the largest, most liquid Indian stocks trading at the BSE. The index represents nearly 93% of the total market capitalization on the BSE and covers all 20 major industries of the economy. S&P Dow Jones Indices has contracted with Ratings Intelligence Partners (RI) to provide the Shariah screens and to filter the stocks. BSE and S&P Dow Jones Indices announced on February 19, 2013, a strategic partnership to calculate, disseminate, and license the widely followed suite of BSE indices.

The Saudi Capital Market Authority (CMA) board has approved Aljazira Takaful Ta’awuni Company’s (ATT) initial public offering (IPO) of 10,500,000 shares, representing 30 percent of its share capital, amounting to SR 350 million. The offer price will be SR 10 per share and the subscription period will be from May 13 to 19. ATT's chairman Abdulmajeed Al-Sultan said the step will improve the company’s financial position and enable it to realize its strategic objectives to become the local and regional leader of Shariah-compliant cooperative insurance. Despite being still under establishment, Aljazira Takaful Ta’awuni is considered to be one of promising companies in the cooperative insurance sector in Saudi Arabia.

The Islamic Development Bank has decided to withhold the award of the IDB Prize in Islamic Economics for 2013. According to the Bank, the decision made in the light of the recommendation of the Selection Committee was unanimous after examination of 24 nominations. The IDB established the Prize in 1988 to recognize, reward and encourage activities of outstanding merit to promote Islamic Economics, Banking and Finance. In the last 25 years, 34 researchers, bankers, economists, Shariah scholars and institutions have been awarded the IDB Prize, which alternates annually between Islamic Economics and Islamic Banking & Finance.

Prime Minister David Cameron is looking to Southeast Asia to boost the UK’s role in Islamic finance. It’s the Bank of England he needs to convince first, say Shariah-compliant lenders based in Britain. Central bank rules require lenders to hold easy-to-sell assets as protection against short-term funding shocks. Most are off-limits for Islamic banks because they pay interest. Cameron visited Malaysia last year to build on a pact to promote bilateral engagement in the industry and created an Islamic Finance Task Force in March. Britain’s six Shariah-compliant lenders will struggle to grow unless regulators adapt bank liquidity rules or highly rated borrowers issue sukuk in pounds.

In the past, European arrangers and investors dominated issuance of international bonds from Turkey. But in recent months the Gulf has started to play a major role, for commercial and possibly even political reasons. About $10 billion of last year’s Turkish issuance came in the final four months of the year, and was dominated by banks. The Gulf is central to the current stream of issuance. One reason for the shift is Turkey’s move into Islamic finance. The fact that three of Turkey’s four Islamic banks are affiliates of Gulf banks has also helped steer sukuk issuance to the region. Another factor behind the trend is Turkey’s increasing emphasis on developing political and economic ties with the Gulf. Pricing is also a factor because yields from Turkey are generally higher for similar credit ratings.

Less than one per cent of investment products in Australia are Shariah compliant, suggesting huge opportunities for fund managers in this segment. The Muslim Community Co-operative Australia (MCCA) manages a Shariah compliant property income fund which has just surpassed $30 million in assets under management. MCCA chairman Dr. Akhtar Kalam said this growth shows strong support for IBF products within Australia. MCCA is also reported to be in advanced discussions with an unnamed Middle Eastern company with a view to setting up a $180 million mortgage fund, a $150 million property fund, a $180 million Sukuk fund and a $5 million asset-leasing fund. Kalam said that this deal could signal the start of an exciting growth story driven by overseas interest in investment in Australia.

In the past, European arrangers and investors dominated issuance of international bonds from Turkey. But in recent months the Gulf has started to play a major role, for commercial and possibly even political reasons. One reason for the shift is Turkey’s move into Islamic finance. The fact that three of Turkey’s four Islamic banks are affiliates of Gulf banks has also helped steer sukuk issuance to the region. Another factor behind the trend is Turkey’s increasing emphasis on developing political and economic ties with the Gulf. Pricing is also a factor. A compression of yields in the Gulf over the past 18 months has reduced the returns from bonds issued within the region.

After the debt troubles of Kuwait's Investment Dar (TID) of the past few years, some creditors are hoping for their first payment in June. However, creditors are still concerned over Investment Dar’s court-agreed repayment schedule. The asset disposal plan is reportedly making progress, against a tough economic backdrop, while resisting pressure to sell at distressed prices to buyers who sense a desperate vendor. The debt plan agreed by the court split the creditors into three groups, with repayment over eight and a half years.

Morocco expects to sign a $ 2.4 billion loan deal next month with the Islamic Development Bank (IDB). The North African country has agreed a package with the IDB under which it will receive $600 million each year from 2013 to 2016. A small part of that sum will be a donation rather than a loan. A formal signing will be held in May. Moreover, Morocco is expected to raise around $ 1.5 billion this year by selling its first sukuk, with a final decision on borrowing to be taken by July. Morocco’s government has said it will limit its public debt to 60 percent of GDP despite the rising budget deficit.

Senior Shariah scholars and advisers of Islamic banks and conventional banks with Islamic windows have agreed to standardise Forex and interbank Musharakah agreements between Islamic banks and Islamic banking windows. This move will facilitate the availability of Shariah-compliant venues for deployment of excess liquidity of Islamic banks. This agreement was reached during a meeting called by Meezan Bank Ltd, in which Shariah scholars discussed the challenges in Islamic Treasury Operations.The forum was attended by several prominent Shariah scholars along with Product Development and Treasury professionals of all major Islamic banks and Islamic banking windows of conventional banks.

In Pakistan, a number of businesses have emerged, which are collecting investments informally from an increasing number of people, and offering them very lucrative and frequent returns. Although it may sound incredible, it is not impossible to offer such returns. However, there is a definite need to look into the matter with respect to money laundering, even if the investments are genuine, and the returns offered by those groups actually come from the investments they made. One thing that these informal groups claim is perhaps true: putting your money in banks does not generate appropriate returns to investors. If a proper corporate governance and regulatory framework is devised for these informal Shariah-compliant investment and business groups, one may observe a new way of doing business in compliance with Shariah.

As the conventional financial system is losing credibility, many believe some form of an ethical finance system could be a better option. Ethical finance can mean investing in companies which have business models that are sustainable in an ecological, social, economic and political way. Islamic finance, through its investment filters, provides one means of doing so. However, for ethical finance to take firm root, it must appear to be as competitive as conventional finance. Customers, after all, may not be willing to pay a premium for their beliefs. Moreover, it is important to mention that Islamic banks are open to non-Muslims and Muslims alike. If Islamic finance was presented as ethical financing, which is what it is, there is a lot of demand.

The Islamic Development Bank plans to invest US$3 billion into the Egyptian market over the next five years as it sees promise and many long-term investment opportunities there. The funds would come in the form of financing and investment. Over the past few years the bank has made investments in Egypt worth US$3 billion, of which US$1 billion came during the last year alone. The Islamic Bank increased its investments in Egypt after the 25 January revolution, at a time when several international institutions had doubts about investing in the nation. The bank’s main objective is to support development.

The Kuala Lumpur-based International Islamic Liquidity Management Corp (IILM) plans to issue $500 million through its sukuk programme in the second quarter of this year. The long-awaited announcement was overshadowed by the unexpected pull-out of Saudi central bank, selling its shareholding to Qatar and Malaysia. According to industry executives, the pull-out would not necessarily deter Saudi commercial banks from buying the IILM sukuk - and that even if it did, demand in other countries would be more than ample. A key factor will be the yield that the IILM sukuk pays versus the cost of funds at individual banks.

Islamic finance and socially responsible investing (“SRI”) have been two of the most rapidly growing areas of finance over the last two decades. Although both types of investors seek to achieve a strong return on their investments, Muslim and non-Muslim SRI investors are also looking for their investments to make a positive impact on their societies. Islamic finance and SRI both suffer from a distinct lack of liquid fixed income investment options. A socially responsible sukuk could fill a need for both markets simultaneously and also help bridge the divide between the conventional and Islamic financial markets.

The Saudi Stock Exchange (Tadawul) announces that the suspension of Saudi Basic Industries Corp Sukuk 3 took place on Monday 15/04/2013 based upon the CMA approval of Saudi Basic Industries Corp. request to purchase (redeem) the SABIC SUKUK 3 issue. Accordingly, the SUKUK will be delisted from the Saudi Stock Exchange (Tadawul) on Wednesday 15/05/2013.

Qatar Financial Centre Authority in its first ‘Mena Asset Management Barometer‘ has predicted that Qatar will soon become a “key international distribution hub” for Shariah-compliant products. It suggests that Qatar’s position in the Islamic finance market will be boosted with the development of new infrastructure projects that will help in the growth of alternative fund structures and encourage public-private partnerships. However, the report also highlights that the asset management sector in Qatar is still in its infancy and the alternative sector will need time to develop. Besides, Qatar was also chosen by hedge fund management firms as the most favored location to establish a presence in the GCC.

Qatar Islamic Bank (QIB) has launched its new investment product called International Sukuk Portfolio. It will be invested predominantly in global sukuks issued by sovereign, quasi-sovereign and corporate issuers using well defined investment guidelines and is designed to keep risk exposure under control. The portfolio will be managed by QIB’s subsidiary in the United Kingdom QIB-UK, which has experience in asset management. Since International Sukuk Portfolio is priced and available for trading on a weekly basis, liquidity will be ensured. The portfolio will be diversified across sukuk issuers, a wide sector split and a broad geographic allocation. Part of the profits will be distributed to investors on a quarterly basis.

The CMA Board has issued its resolution approving the initial public offering of 10,500,000 shares, which represent 30% of Aljazira Takaful Ta’awuni Company’s share capital. The offer price will be SAR 10 per share, and the subscription period will be from 03/07/1434H (13/05/2013G) to 09/07/1434H (19/05/2013G). The prospectus will be published within sufficient time prior to the subscription period. The prospectus includes all relevant information that the investor needs to know before making an investment decision, including the company's financial statements, activities and management.