IslamicFinance.de

Malaysia, the world’s biggest market for Islamic bonds, will issue a license before the end of this year to a new Islamic bank that will be jointly established by institutions from Asia and the Middle East.
The newly formed entity will have a capital of at least $1 billion, Zeti said in an interview late yesterday, without naming the companies or organizations involved. A second so- called “mega Islamic bank” permit may be issued by the central bank next year.
Muslim-majority Malaysia began pioneering Shariah-compliant finance with its first Islamic bank three decades ago. It is today responsible for more than 60 percent of the world’s $130 billion outstanding Islamic bonds, or sukuk, that comply with the religion’s ban on interest, according to data compiled by Bloomberg. The new bank will be able to facilitate larger issuance of such notes.
The country has offered tax breaks and other incentives to attract global financial institutions including Aberdeen Asset Management Plc and Franklin Templeton Investments in a bid to cement its role as the global Islamic financial hub of Asia.

The Islamic Banking and Finance Institute Malaysia (IBFIM) has joined forces with Maldives Islamic Bank to set up the first Islamic bank in Maldives, which aims to be operational next January.
Both parties signed a memorandum of agreement (MoA) yesterday at the Global Islamic Finance Forum.
The MoA will bind both parties to co-develop Islamic finance in the Maldives through an extensive study of Maldives’ legal and banking framework to create a harmonised environment for the growth of Islamic finance.
The signing ceremony was witnessed by Bank Negara deputy governor Datuk Mohd Razif Abd Kadir and IBFIM chairman Datuk Seri Zukri Samat.

Islamic private equity funds in the Persian Gulf plan to take advantage of lower asset prices after the property market in Dubai tumbled as much as 50 percent from its peak in 2008.
Middle East and North Africa investment groups have about $10 billion available after raising a record $5.4 billion in 2008 that they haven’t been able to spend, Gulf Venture Capital Association said in a July 20 statement. Mid-sized businesses in the Gulf may need as much as $1 billion from investors, Jalil said. The Bloomberg GCC 200 Index of regional stocks has declined 26 percent since the end of September 2008 after credit markets collapsed.

Abu Dhabi Islamic Bank, or ADIB, the emirate’s largest Islamic lender by market value, is planning to sell five-year benchmark Islamic bonds, or sukuks, this week, according to people familiar with the matter.
Company officials, who have been on a series of investor meetings in Asia, Europe and the Middle East since Oct. 20, end their roadshow Tuesday. Benchmark-sized bond deals are those worth at least $500 million. The securities are expected to price later this week.

Cagamas Bhd, the national mortgage corporation, will look at issuing up to RM2bil in new Islamic medium term notes, said chief executive officer Steven Choy.
A business daily reported recently that Cagamas was expected to issue another landmark sukuk after the success of its benchmark Sukuk Al-Amanah Li Al-Istithmar (Sukuk ALIm) in July.
During the panel discussionon Islamic Finance Developments and Expansions in Asia, Choy said Cagamas experienced its fair share of challenges in the secondary market for its mortgage loan deals.
Islam Bank of Thailand president Dheerasak Suwannayos added that political will was needed to back the acceptance of Islamic finance in a country.
Businesses among the Muslim community were predominantly family-owned, hence the hesitation in letting strangers into the businesses.

Islamic private equity funds in the Persian Gulf plan to take advantage of lower asset prices after the property market in Dubai tumbled as much as 50 percent from its peak in 2008.
The National and Kipco Asset Management Co., a Kuwaiti investment bank, started a $200 million Shariah-compliant fund this month, Yahya Jalil, director of private equity at Abu Dhabi-based investment and advisory company The National Investor, said. Bahrain’s Capital Management House plans to complete a transaction and buy stakes in companies specializing in aviation and energy, Chairman Khalid Al Bassam said.

With the room for further organic growth being limited, mergers and acquisitions should be considered as an avenue for sustained growth, says A.T. Kearney.
According to A.T. Kearney, the global financial crisis has put an end to the heydays of growth in the banking sector and the current market outlook suggests that these days are not returning quickly. Islamic banks, which traditionally grew faster than their conventional peers, are also affected.
The global financial crisis highlighted the need for consolidation in the Islamic banking industry in the region. Growing out of their niche and becoming mainstream business is considered one of their major challenges and if Islamic banks do not succeed, the room for further organic growth is limited as the market space in some GCC countries is already overcrowded.

Bahrain'sc plans to restructure or sell assets to pay back $ 90 million in debt next year, a document showed, highlighting its struggle to meet obligations amid dried-up revenues.
The Islamic investment firm and other Bahraini investment houses have struggled to restart revenue growth, after a 2008 regional property crash pulled the rug out from under their business model of earning fees on investor money raised for private equity and property projects.
GFH posted a net loss of $ 40 million for the second quarter and did not book any income from investment banking services, the main income source during the region's five-year oil and property boom that ended in 2008.
Some large investors have indicated that they may wish to accept land in such projects as their method of exit," she also said. The investor presentation also showed GFH plans to cut its operating expenses by some 40 percent through the reduction of staff costs and funding costs. The firm slashed its staff costs by 66 percent during the first half compared with a year earlier, partly through lay-offs.

Bahrain's Gulf Finance House said on Wednesday its third-quarter net loss nearly quadrupled as the investment firm set aside more money to meet investment and loan losses amid shrinking revenues.
The Islamic investment firm and other Bahraini investment houses have struggled to restart revenue growth, after a 2008 regional property crash weakened their business model of earning fees on investor money raised for private equity and property projects.
GFH, which has restructured two loans worth a total of about $400m this year, said in an investor presentation seen by Reuters it plans to either restructure or sell down assets to repay $90m in term debt next year.
It plans to slash its paid-up capital by about 75 per cent to absorb its losses and raise up to $500m in additional funds through issuing a murabaha, an equity-linked Islamic money-market instrument. The Kuwait-listed shares in GFH have lost about 57 per cent of its value since the beginning of the year.

Capital Intelligence (CI) has affirmed the ratings for Gulf Finance House (GFH) and subsequently withdrawn the ratings at the rated entity's request.
The Outlook for the Foreign Currency Long and Short-Term ratings of BB and B respectively and Financial Strength Rating of BB was 'negative' at the time of withdrawal. The outlook and ratings reflect CI's opinion that GFH's capacity for the timely fulfilment of its financial obligations remains vulnerable to ongoing adverse changes in internal or external circumstances.
GFH commenced operations in October 1999 as an Islamic investment bank operating under a wholesale banking licence granted by the Central Bank of Bahrain. A large share of its business has focused on major infrastructure projects; notably in the real estate sector.

Eleven central banks and two multilateral organisations signed the Articles of Agreement for the establishment of the International Islamic Liquidity Management Corporation (IILM) in Kuala Lumpur on 25 October 2010.
The collaboration is a landmark global initiative that is aimed to assist institutions offering Islamic financial services in addressing their liquidity management in an efficient and effective manner. In addition, the initiative should facilitate greater investment flows for the Islamic financial services industry.
The initial Memorandum of Participation for the IILM was signed on 7 October 2010 in Washington on the sidelines of the IMF-World Bank Annual Meetings. The signing of the Articles of Agreement today signifies the official establishment of the IILM.

Kuwait Financial Centre (Markaz) in its recent research on the GCC Fixed Income Market has highlighted the trends in the Kuwaiti bonds and sukuk market during the period from 2003-2009.
CBK issued 1) Treasury Bills, which are debt obligations with maturities of less than one-year and no periodic interest payments, 2) Central Bank Bonds, which are debt obligations with maturities of less than one-year carrying a fixed coupon rate, and 3) Treasury Bonds which are debt obligations with maturities greater than one-year with a fixed coupon rate.

New rules for Islamic banking in Qatar released by the Central Bank in late August will change the way conventional banks offer sharia-compliant services and likely boost the performance of banks that focus solely on such services, reports Global Arab Network according to OBG.
The new regulations, made public on August 29, prohibit conventional banks from allocating more than 10% of issued capital to Islamic banking operations and from opening additional branches for Islamic banking. There is also a limit on mudaraba (profit-sharing) and musharaka (joint ventures) to 5% of a bank’s total Islamic operations.
The message seems to be that banks can either focus on conventional or sharia-compliant banking, but not both. The new rules come into effect immediately but banks have until the end of 2011 to fully comply.
While that may be true in the short term, the limits on conventional banks may spur them to increase product offerings in other areas and will likely increase competition among institutions that offer only sharia-compliant services.

Arcapita Bank, a leading international investment firm headquartered in Bahrain, announced today that it and its affiliates have successfully completed the IPO of a portfolio of 64 industrial properties in Singapore.
In July 2008, Arcapita’s Singapore-based real estate team entered into a joint venture with Mapletree Investments Pte Ltd, a leading Singapore real estate company, to acquire a diverse, industrial real estate portfolio strategically located in Singapore. The portfolio comprises flatted factories, stack-up/ramp–up buildings, business park buildings and a warehouse.

Dallah Albaraka Group chairman and founder Shaikh Saleh Abdullah Kamel has been awarded the 2010 Royal Award for Islamic Finance.
Shaikh Saleh was awarded the accolade for his visinary drive, extraordinary leadership and personal commitment in spurring global accessibility of Islamic finance.
The Royal Award is spearheaded by the Malaysia International Islamic Financial Centre and supported by Bank Negara and the Securities Commission.
The seven-member jury comprises eminent individuals, syariah scholars, academicians and Islamic finance practitioners from Asia, Europe, the Middle East and the United States.

MUSLIM countries should allocate a fraction of their sovereign funds to financial institutions which have the expertise to invest in syariah-compliant investment funds and instruments.
Perak Regent Raja Dr Nazrin Shah said one of the driving forces for Islamic finance to prosper is for large investment organisations such as sovereign wealth funds of Muslim countries to take a developmental view when determining their asset allocations.
Initiatives such as the commodity trading paltform Bursa Suq Al-Sila can be utilised to facilitate liquidity management of Islamic financial instituions.
Saudi Arabia's Al Rajhi Bank and Cagamas Bhd also collaborated to issue an innovative sukuk which aims to meet the syariah demands of investors in the Middle East as well as in Asia.

Malaysia plans to let issuers sell to individual investors sukuk that can be traded on the local stock exchange as the government seeks to reverse a 24 percent decline in sales in the world’s biggest market for Islamic bonds.
Bursa Malaysia Bhd., the exchange operator, is working with regulators on rules to enable companies to issue Islamic debt that would be affordable to the public, Chief Executive Officer Yusli Yusoff said last week. Issuance of the securities fell to 19.8 billion ringgit ($6.4 billion) this year from 26.2 billion ringgit in 2009, the steepest drop since 2003.
Bursa Malaysia is working on developing the sukuk for individual investors.

Muhammad Raza, Head of Commercial Banking at Meezan Bank, outlines the difference succinctly by using an often-quoted reference from the Quran that allows trade but forbids ‘riba’ or usury. He explains that riba is a form of a transaction that is impermissible in Islam.
The transaction is straightforward: the lender extends a certain amount of money to the borrower and the two enter a contract that obligates the borrower to return the principal amount and additional interest payments.
In the Islamic version of a loan, the lender can only claim the amount extended to the borrower and not more, while a gift, or donation, is a unilateral transfer or irreversible promise of transfer of asset.
Furthermore, he emphasises that the sale of an asset or claiming periodic payments for renting an asset is within the boundaries prescribed by Islamic law.
By using combinations of sale contracts, rental contracts, unilateral promises and equity contracts, Islamic finance has managed to mirror the cash flows of most conventional banking products. To stay competitive, Raza acknowledges that rental payments are linked to the more conventional interbank interest rate.

Saudi Arabia’s biggest real estate company by market value, Dar Al Arkan Real Estate Development Company, has seen profits fall more than half for the third quarter against last year, citing a slump in sales.
The decrease in net income during the third quarter compared to the corresponding quarter last year is mainly due to the lower volume of the land and residential unit sales.

Participation Banks Association of Turkey President Fahrettin Yah?i has announced that 2009-2010 was a successful year for the sector and that this is expected to continue through to next year.
Yah?i, who is also the CEO of Albaraka Participation Bank, expects the Turkish banking sector to grow by 12 percent by the end of this year while participation banks will grow in the range of 20-25 percent. He noted that participation banks grew by 32 percent in 2009 while conventional banks only grew 14 percent.
However, as the loan mechanisms of participation banks depend on private sector needs, financial distress in the private sector does impact them.
They had not been significantly affected by the global financial crisis as participation banks’ unpaid loans were only 4 percent of their total portfolio between 2009 and 2010 while the banking sector was at 5 percent.