IslamicFinance.de

Khazanah Nasional Bhd., Malaysia’s state-owned investment fund, has sold 1.5 billion ringgit ($476 million) of Islamic bonds. The firm priced the five-year debt to yield 4.14 percent, within its earlier guidance of 4.1 percent to 4.18 percent. The issuance is part of a 7 billion ringgit program to raise funds for corporate purposes. Khazanah will issue the new debt via its unit Rantau Abang Capital Bhd. It’s the second time this year that the company has tapped the ringgit sukuk market after selling 15-year securities in March at a coupon of 5.2 percent. Khazanah is in the process of buying up the 30.6 percent stake in Malaysian Airline System that it doesn’t already own.

A blueprint being drawn up for Indonesia’s Islamic finance industry may include incentives to help revive the domestic market for sukuk. Indonesia’s financial services authority, Otoritas Jasa Keuangan (OJK), is preparing a five-year plan for the sector to help it expand. The document is expected to be ready for public consultation by year-end, and will address issues including a lack of scale in the industry, sector consolidation and the role of foreign ownership. The regulator is also exploring ways to revive a sukuk market, which has seen no corporate issuers so far this year. The reasons for the drop-off in activity are not clear, but may be related to higher costs involved in issuing sukuk, a lack of experience among arranging banks, or a lack of regulatory clarity.

A new study by International Finance Corporation (IFC) showed that around 35 per cent of SMEs in the Middle East and North Africa (MENA) are excluded from the formal banking sector because they seek Sharia-compliant products that are not readily available in the market. The study, which was carried out across nine countries, found a potential market gap of up to $13.2 billion for SME Islamic financing in the region with a corresponding depository potential of $9.71 billion to $15.05 billion across these countries. The study pointed out that apart from a high level of risk aversion that banks in the region have, poor regulatory environments, differing perceptions of Islamic finance, and a lack of relevant products were hindering the growth of Islamic SME banking.

The Royal Award for Islamic Finance (The Royal Award) Dinner and Award Presentation will be held in Malaysia on 2 September 2014 in conjunction with the Global Islamic Finance Forum 2014 (GIFF 2014). The Royal Award, held once every two years, is spearheaded by Bank Negara Malaysia and Securities Commission Malaysia under the Malaysia International Islamic Financial Centre (MIFC) initiative. The Royal Award recognises and honours an Islamic finance visionary whose achievements and innovation contribute significantly to both the growth of the global economy and social progress of communities around the world. An independent seven-member international jury panel will select the deserving individual for the award.

In an attempt to check financing of militancy, the government will investigate how Islamic banks, including Islami Bank Bangladesh, and other financial institutions have spent their profits till date, said State Minister for Home Affairs Asaduzzaman Khan yesterday. Intelligence personnel have been instructed to check whether there are any inconsistencies in the financial statements of the institutions, the minister added. Intelligence personnel will also intensify their vigilance in Chittagong Hill Tracts, as some NGOs in the name of Islam are carrying out suspicious activities there. The national committee will also launch a campaign against militancy involving eminent media personalities, said Asaduzzaman, adding that the government would intensify its monitoring on social media like Facebook.

Retail investors will soon get to invest in Singapore’s first syariah-compliant real estate investment trust (Reit), the Sabana Reit – set to hold about $850 million of Singapore industrial properties. Maybank Singapore is offering smaller firms an Islamic commercial property loan that comes with one of the longest fixed interest rate terms here. The product, called Maybank Islamic Term Financing, will provide small- and medium-sized enterprises (SME) with financing for completed commercial and industrial properties, on a mid- to long-term basis. Maybank Singapore head of Islamic banking Ismail Hussein said the product had contributed significantly to Maybank’s Islamic SME financing portfolio.

Investors treat a company’s shares differently depending on the specific types of Islamic bond it issues and the reputation of the Islamic scholars who oversee the instruments, a study by the International Monetary Fund found. About a dozen types of sukuk are in use worldwide. The study found the ijara structure tended to draw a positive reaction from the stock market, with the shares of companies using that structure performing relatively well. By contrast, equity-based structures such as musharaka met a relatively negative reaction. The IMF also looked at other characteristics of sukuk such as their tenors and pricing, but did not find these factors to be statistically significant for the responses of equity market investors.

Demand for Islamic finance training from non-Muslims rose more than fourfold in the past seven years as students seek to enter an industry whose assets are set to double to $3.4 trillion by 2018. Malaysia’s International Centre for Education in Islamic Finance had 2,000 people enrolled on its courses this year, of whom about 14 percent are from nations with small Muslim populations. That compares with 3 percent in 2007. While students from South Korea, Japan and the U.S. dominate the enlistees, those nations have yet to introduce Shariah-compliant legislation. The industry needs 1 million people with Islamic finance knowledge by 2020 as Shariah-compliant assets are set to reach $6.5 trillion by then.

Hong Kong, Indonesia and Pakistan are banking on pent-up investor demand as they look to raise up to a combined US$3.5bn in the fast-growing Islamic bond market. The three sovereign sukuk issues, including a planned US$1bn debut from Triple A rated Hong Kong, are set to launch before the end of September. Indonesia is Asia’s only regular in the global sukuk market, having issued annually since 2010. Pakistan has sold Islamic debt overseas only once before, in 2005, while Malaysia has typically preferred to target its own domestic market. Hong Kong, in particular, is looking to promote itself as a regional hub for Islamic financing to capitalise on growing trade links between Greater China and the Middle East.

Islamic credit unions are expanding in Thailand and offering investors sharia-compliant services. Worawit Baru, a former senator from Pattani, heads the Southern Thailand Islamic Co-operatives Network (Sticon), an association of faith-based credit unions. During his days in parliament, many businessmen in Bangkok were unaware of the popularity of the Islamic co-operative business model in the Deep South, he said. Today, the network of member-owned, non-profit savings and loan co-operatives has expanded to other parts of Thailand. Among the fastest growing faith-based credit unions is Hat Yai-based As-Siddeek Islamic Co-operative Limited (AIC). Under an agreement with other Sticon members, AIC has no plans to expand farther south.

Countries including Pakistan, Tunisia and South Africa are drawing up plans to issue government bonds that comply with Islamic law as they seek to take advantage of strong investor demand for emerging market sovereign debt. Tunisia is working with the Islamic Development Bank to issue a 1bn dinar ($580m) sukuk this year, while Jordan has instructed a committee to look into the possibility of issuing sukuk next year. Governments in South Africa and the Philippines also say they are considering raising money through the sale of Islamic debt.

India is preparing legislation to promote Islamic banking as a way to make its financial markets more inclusive and provide new capital-raising opportunities to companies. India’s Ministry of Finance has formed an internal committee to study the prospects for Islamic banking. Sources said the ministry is talking to the Reserve Bank of India and the Securities and Exchange Board of India about introducing rules to streamline sukuk issuance by Indian entities, among other regulatory amendments. Although Islamic banking is not new to India, its services have not prospered. Existing regulation is prohibitive and there is a general lack of awareness about the benefits of Sharia-compliant finance. Sukuk could help close the US$300bn funding gap for the infrastructure sector.

The Gulf banks are fast replacing European lenders in expansion within the Middle East region and into some of the fast growing emerging markets in Asian and Africa in the context of improving health of their balance sheets and strong support from shareholders. Banks from GCC, particularly those from the UAE and Qatar are in the forefront of overseas expansion.First Gulf Bank (FGB), for example, announced last month that it has a new representative office in South Korea as part of plans to expand its presence in Asia Pacific. Qatari banks have been seeking overseas expansion to cut dependence on local markets and access trade flows across the Middle East, Africa and Asia. Doha Bank is expanding its presence in Hong Kong, India and Saudi Arabia.

There are several issues which appear to indicate that Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim's integrity has been compromised. Shah Alam MP Khalid Samad said he hoped Abdul Khalid will clear the air over several issues, including his out-of-court settlement with Bank Islam over his RM66.67 million debt. Another issue Abdul Khalid is expected to clarify is his claim that he will be suing Permodalan Nasional Berhad (PNB) and will win RM300 million. Khalid also expressed doubts over the awarding of a RM591 million contract to Eco World to build 2,400 affordable houses in Sungai Sering, Ukay Perdana. PKR has been pressuring Abdul Khalid to step down from his position with party president Datuk Seri Dr Wan Azizah Wan Ismail chosen to replace him.

Standard Chartered Saadiq expects 2014 to be good for the Malaysian sukuk industry, driven by the strength of the economy. Chief Executive Officer and Global Head, Consumer Banking, Standard Chartered Saadiq, Wasim Saifi, said the bank is already in discussions with several customers in looking at setting up specific sukuk issuances. Despite expectations of a further hike in Malaysia’s key interest rate, he said it would not hold back issuances, as borrowers are unlikely to defer raising money even if the cost of doing so goes up. Malaysia’s Overnight Policy Rate (OPR) was raised by 25 basis points to 3.25 per cent on July 10, the first increase for the past three years.

Brunei Darussalam’s only Islamic bank hopes oil industry investment will help stoke a sukuk market now dominated by government issuance of short-term Shariah-compliant bills. Bank Islam Brunei Darussalam is seeking to arrange as much as B$2 billion ($1.6 billion) of corporate debt in the next 12 months as companies seek to fund projects aimed at boosting crude oil output. Islamic banking assets total about $6.8 billion in the Southeast Asian sultanate, which funds investment largely with its oil wealth. Bank Islam currently supplies Shariah-compliant loans and a global corporate sukuk it was underwriting two years ago never came to fruition.While Brunei’s corporate sukuk has been in a lull, the formation of a central bank is a positive development for the market.

The Reserve Bank of India (RBI) has begun the process of reviewing regulations on Islamic banking in India. The central bank has set up an internal committee to examine the matter. The three-member panel comprises senior RBI officials, Rajesh Verma, a deputy general manager, department of banking operations, Archana Mangalagiri, general manager, non-banking supervision and Bindu Vasu, joint legal adviser. The demand for re-look at Islamic banking regulations have revived again with the Indian central bank opening up doors for differentiated banks in India – payments banks and smaller banks – to begin with. Supporters of Islamic banking are making a case for Islamic banking in the face of the reforms in the banking sector.

Bank Islam Malaysia Bhd, is revising its base financing rate (BFR) to 6.85 per cent per annum from 6.6 per cent per annum effective tomorrow. Bank Islam in a statement today said the revision is in line with Bank Negara Malaysia’s recent move to increase the overnight policy rate (OPR) by 25 basis points to 3.25 per cent. The last revision in Bank Islam’s BFR was on May 16, 2011, when the rate was revised from 6.3 per cent to 6.6 per cent.

A Chittagong court yesterday placed Mohammad Solaiman, director of Shahjalal Islami Bank Ltd, on a five-day remand in a case filed for misappropriating Tk 140 crore. Solaiman was on remand for seven days once before. Referring to an investigation of the bank, Farman R Chowdhury, managing director of the bank, said Solaiman had influenced the bank to lend Tk 140 crore to SK Steel and gave false assurances about the loan and Solaiman's company Paradise Corporation took over Tk 18 crore as bribe from SK Steel for this. On April 13, the case was filed accusing Solaiman and others.

Turkish lender Turkiye Finans Katilim Bankasi has raised 800 million ringgit ($252.21 million; Dh922.5 million) from an Islamic bond in Malaysia, its first issuance from a 3 billion ringgit programme announced last month. The issuance by Turkiye Finans, in which Saudi Arabia’s National Commercial Bank is the largest shareholder, is the first ringgit-sukuk done in Malaysia by a Turkish issuer. Proceeds from the five-year sukuk will fund general corporate purposes and working capital requirements, according to HSBC Amanah Malaysia Bhd. HSBC Amanah and Standard Chartered Saadiq Bhd are jointly advising the Turkish bank.