IslamicFinance.de

Standard & Poor's Ratings Services said today that its 'BBB-' counterparty credit and insurer financial strength ratings on Kuwait-based First Takaful Insurance Co. ( First Takaful) remain on CreditWatch with negative implications, where they were placed on May 12, 2010.

Seeking to diversify its financial industry after a banking crisis, oil-rich Kazakhstan is drawing on Arab and Malaysian investment in an effort to build an Islamic finance industry among its 13mn Muslims. Its success may depend on the fate of pioneer investors and the commitment of its secular government to clear the way for a long-awaited sovereign issue of sukuk, or Islamic bonds, which could prompt other issuers to follow. Al Hilal, owned by the government of Abu Dhabi, was the first bank to respond when Kazakhstan passed new laws last year to allow an Islamic finance industry. The bank opened its Kazakh offices in March 2010. Though modern Islamic finance began three decades ago, its major principles, such as a prohibition on paying interest, would have been familiar to Muslim traders on the medieval Silk Road through Kazakhstan and Central Asia. Investors, though, are cautious. The financial crisis humbled the once-proud Kazakh banking sector; international creditors were forced to write off billions of dollars of debt in a restructuring process that followed local bank defaults.

As Russia's 20 million Muslims observe Ramadan, the country's banks are beginning to wake up to the growing opportunities offered by Islamic banking. Last summer VTB Capital opened an office in Dubai. The bank also plans to launch other Islamic projects, investing in Russian property together with the Sultan of Oman's State General Reserve Fund. However, there are still major obstacles to developing Islamic finance, including a lack of banking legislation that meets Islamic rules.

Pakistan’s government plans to sell Islamic bonds in the domestic market by the end of this month, according to the central bank’s spokesman. State Bank of Pakistan is seeking to sell Islamic bonds maturing in a year or less

MAYBANK, Malaysia's biggest lender, has set up a dedicated Islamic banking hub here as part of a concerted push to expand the business beyond its home market, as it strives to gain an edge over rivals vying to stamp their name on South-east Asia. About one-third of the bank's Islamic financing portfolio comprises corporate and business loans, while the rest includes home loans, receivables from car and equipment hire-purchase financing schemes, credit cards and personal loans, he said. In Indonesia, Maybank is converting its subsidiary Bank Maybank Indocorp into a full Islamic bank that will be re-branded Maybank Syariah Indonesia. It will then use the distribution network of Maybank's other subsidiary there, Bank Internasional Indonesia, which has 290 branches, to sell Islamic banking products and services.

In May this year the National Treasury issued proposed tax amendments as part its stated intention of putting Islamic banks in South Africa on an equal footing with traditional conventional finance. The Proposed Tax Amendments address the Mudarabah (investment), Murabaha (mark-up financing transaction) and Diminishing Musharaka (partnership arrangements generally used for project or home financing) financial structures. The proposed Tax Amendment document acknowledges that, "Tax has become a hindrance to the vibrant and growing Islamic financial market" in South Africa. While these proposed amendments may sound complicated the critical elements for Muslims in South Africa are the real commitment of National Treasury to ensure that South African Muslims enjoy the same benefits from the formal banking sector that are currently enjoyed by other South Africans and that South Africa is positioned to become a key financial hub on the African continent, where Islam is the majority religion.

Finally responding to a strong public demand, the National Bank of Ethiopia (NBE) is about to approve a directive that paves the way for the establishment of Islamic banks. The directive also opens doors for currently operational commercial banks to create an interest-free banking wing. To accommodate muslims, who are by Sharia’h – Islamic law – prohibited from taking or giving interest, commercial banks are currently offering zero interest. However, the sector will, according to Prime Minister Meles Zenawi, remain closed from foreign banks involvement. After the establishment of the first private commercial bank in Dubai, more than fifty interest-free banks were established in Muslim countries and as well as in European countries such as Denmark, Luxembourg, Switzerland and the UK.

Bank Muamalat Malaysia and Standard Chartered Saadiq Bhd have acted as joint principal advisers, lead arrangers and lead managers for Padiberas Nasional Bhd's sukuk.

Malaysia, the world’s largest market for sukuk, plans to improve its legal system to become an alternative location to the U.K. for resolving international Islamic finance disputes. The goal is to position Malaysian laws as the law of choice for Islamic finance transactions globally. Disputes about Shariah principles are a risk to the market for sukuk, bonds complying with Islam’s ban on payment of interest. Persian Gulf companies have traditionally based cross-border contracts on U.K. law to take advantage of the country’s developed legal system and neutrality, according to Unicorn Investment Bank BSC. The challenge will be to gain acceptance in the Middle East because of different religious interpretations in various jurisdictions. A group of scholars in Kuala Lumpur is helping to set up a committee to prepare the first global certification for Shariah experts said Aznan Hasan, the president of the oversight committee

According to the research report Saudi Arabia Insurance Market to 2012 from market research and analytical consultancy RNCOS , Takaful is the fastest growing segments of the Saudi Arabian insurance industry. RNCOS says that protection and savings and health insurance are the fastest growing insurance lines in Saudi Arabia, with health insurance accounted for around 50 per cent of the overall insurance market at the end of 2009. The most recent introduction of compulsory health insurance for private employees, irrespective of the size of the company they are working with, will further boost the health insurance market in the country. The general insurance category has shown substantial growth despite being heavily hit by the financial crisis.

Sudan plans to delay the sale of $300 million of Islamic bonds until next year, after originally planning the sale for 2008, as it waits for global markets to recover from the economic crisis. Sabir al-Hassan said that they are waiting for the right environment. The sale of the bonds, known as Sukuk, may take place this year if conditions improve. The country is sub-Saharan Africa’s third-biggest oil producer.

Malaysia's largest lender Maybank on Friday announced plans to expand its Islamic finance business in Singapore and Indonesia to tap the markets' demand for such services. In Indonesia, home to the world's largest Muslim population, the bank will open at least one new branch a week to increase its network. Maybank chief executive Abdul Wahid Omar is also planning to expand its Islamic services in Singapore, whose population is 13 percent Muslim. Maybank is determined to become the number one Islamic bank in ASEAN. Maybank is aiming to break into the world's top 10 Islamic finance centres, Abdul Wahid said. Bank Melli Iran is the global leader in Islamic finance.

Gulf Finance House announced that its landmark $300 million development project, Jordan Gate, based in Amman, Jordan is due for completion early 2011 following the signing of a new agreement between Bayan Holding Jordan Gate Company, Alhamad Company, the construction company responsible for delivering the project and Hektar as a new investor. With the signing of the new agreement, the Jordan Gate project is expected to be completed early next year. Jordan Gate is the most extensive and significant infrastructure development in Amman. The project consists of two 43 storey towers, with one of the towers to be transformed into a hotel to be operated by Hilton Hotels and the other tower to provide offices, multi-purpose lounges and halls for meetings, presentations and conferences. A commercial podium connecting the two towers will host shops, entertainment centres, a food court and other services.

The Malaysian unit of Kuwait Finance House (KFH), the Gulf Arab state's biggest Islamic lender, is having "strategic alliance" negotiations in Japan, a newspaper reported on Sunday. Kuwait Finance Malaysia was the first foreign Islamic bank to win a licence under the Southeast Asian country's Islamic Banking Act. It is the Kuwaiti bank's Asia-Pacific hub and aims to promote business between the region and the Middle East.

The possibility of the first sovereign or corporate sukuk origination out of France took a step nearer when the French government announced that it had passed new instructions to facilitate the introduction of sukuk, Ijara, Murabaha and Istisna products in France.

It is claimed that France now has a tax neutrality regime in place for facilitating Islamic financial products including Islamic bonds and certificates; cost-plus-financing; leasing and construction industry forward financing.

French banks such as Societe Generale, BNP Paribas, UBAF, Calyon (Banque Credit Agricole) have long been involved in global Islamic finance. BNP Paribas for instance recently listed its first Islamic exchange-traded fund (ETF) in Asia on Bursa Malaysia. Some two years ago it had advised the Malaysian Sovereign Wealth Fund, Khazanah Nasional Berhad, to launch its first Islamic ETF, MyETF i. The new measures are not limited to a particular transaction but form a basis for a framework for Murabaha, Istisna, Ijara and sukuk transactions which satisfy both French law and Shariah principles.

Consumer banking will continue to be an important revenue generator for banks with home loans being one of the major areas of focus amid the prevailing relatively low interest rates. Apart from home loans, the other sectors in consumer banking which banks are focusing on to beef up their revenue streams are car loans, credit cards, personal loans and wealth management. RAM Ratings head of financial institution ratings Promod Dass said the relatively low interest rate environment had fuelled consumer lending, which represented more than half of the banking system’s loans. Malaysian Rating Corp Bhd vice-president and head of financial institution ratings Anandakumar Jegarasasingam said the main challenge for banks would be to ensure the asset quality of household loans. Ernst & Young Malaysia partner (Assurance) Chan Hooi Lam foresee consumer banking facilities like car loans, purchase of residential properties and credit cards to continue its growth momentum into next year. RHB Banking group director of retail banking Renzo Viegas said that apart from credit cards, the focus would also be in debit cards as the bank saw tremendous growth potential in this area.

Al Salam Bank - Bahrain a leading Islamic financial institution, has recently provided £38 million in a unique Shari'a compliant mezzanine facility to refinance a landmark commercial Property located in the heart of Canary Wharf, the financial district of London. The property is leased in its entirety to a leading, multinational financial institution with A+ long term rating with stable outlook form Standard & Poor's. The successful closing of this transaction demonstrates ASBB's ability to provide its valued clients with differentiated investment opportunities with attractive terms that are structured to take advantage of current market conditions. ASBB was advised by Herbert Smith LLP and Knight Frank on legal and commercial matters relating to the transaction, respectively.

Nakheel PJSC’s plan to offer Islamic bonds to creditors may revive sukuk trading in the Persian Gulf after new sales fell to a five-year low, according to Moody’s Investors Service and Mashreq Capital DIFC Ltd. Thomas Barry said that contractors are likely to sell Nakheel’s sukuk to pay bills. Thomas Barry is chief executive officer of Arabtec Construction LLC. In April, the company said its trade creditors would be offered 100 percent recovery of their claims -- 40 percent through a cash payment and 60 percent in the form of a tradable sukuk. More than 80 percent of Nakheel’s contractors have agreed. Abdul Kadir Hussain said sukuk sales from the region are likely to pick up in the fourth quarter. Nakheel and its parent Dubai World, one of the emirate’s three main holding companies, are renegotiating debt terms after the deepest financial crisis since the 1930s roiled Dubai’s real-estate market and left companies unable to raise financing. Property prices have fallen more than 50 percent in the city as banks cut mortgage lending, according to estimates from Colliers International.

Affin Holdings Bhd (AHB) and The Bank of East Asia Ltd, Hong Kong (BEA) have formally established a partnership to jointly develop business in China, Hong Kong, Malaysia and other key markets where they both operate.

BEA chairman and chief executive Dr David K.P. Li said that the China Banking Regulatory Commission is studying the proposal to set up a joint venture between BEA and AHB to conduct Islamic banking in China, but that there are no related laws yet.

Investment manager Argyll Investment Services Limited has launched the World Shariah Funds PCC Limited, a Guernsey-based suite of Islamic-compliant investments which will be listed on the Channel Islands Stock Exchange (CISX) and distributed globally. The World Shariah Funds have brought together three major Islamic investment teams within a single fund structure: From Malaysia, Reliance Asset Management (Malaysia); the south-east Asian CIMB Principal Asset Management Berhad ; and Markaz of Kuwait. The fund launch follows Argyll's participation in the Guernsey Finance presence at the Fund Forum Middle East conference in Bahrain last year at which Legis and the fund's legal advisers, Ogier, were also present. Stuart Place, of Argyll, delivered a presentation on 'Innovation vs. Conservatism: How to achieve results in a post-credit-crunch market' following which the Guernsey parties were introduced to a Middle East fund promoter.