IslamicFinance.de

Al Rayan Bank has started marketing Tolkien Funding Sukuk No. 1, the first UK RMBS issue to be structured on Islamic finance principles. Islamic banks can't access central bank facilities, which means the wholesale markets are fuelling the firm's ambitious expansion plans.

BankIslami Pakistan has launched the country's First Shariah Compliant Commercial Paper (CP) Issue worth Rs1.5 billion for Hascol Petroleum. Hascol is Pakistan’s second largest Oil Marketing Company (OMC) in terms of volume managed through its more than 140,000 MT of oil storages and 498 retail outlets. BankIslami Pakistan acted as Mandated Lead Arranger & Advisor, Issuing & Paying Agent and Investment Agent for this CP Issue which was structured based on the Bai Salam cum Wakala model. The CP issue was oversubscribed by more than 80% of the issue size. The introduction of Shariah Compliant Commercial Paper is aimed to broaden avenues for Mutual Funds and other Institutional investors to invest in short-term/fixed income instruments in a Shariah-compliant manner.

A London High Court judge again ruled in favour of creditors in a dispute over whether Dana Gas must repay $700mln sukuk. Judge George Leggatt rejected an attempt by the company to overturn his decision last November that the purchase undertaking behind the sukuk was valid and enforceable. There was no immediate comment from Dana.

The green bond industry has achieved phenomenal growth since its beginning in 2007. Today, leading corporations in various sectors tap into green bonds to raise funding. Toyota revolutionised the green bond market by introducing the auto industry’s first-ever AssetBacked Green Bond in 2014. In May 2016, the London Taxi Co issued a US$400 million (RM1.56 billion) green bond to finance projects, enabling the production of zero-emission-capable vehicles. The first green sukuk was issued in July 2017 by Tadau Energy, with an issuance of RM250 million Green SRI Sukuk to finance a large-scale solar project. Subsequently in October 2017, Quantum Solar Park Malaysia issued its green SRI sukuk worth RM1 billion to finance the construction of three large-scale solar photovoltaic plants. The green sukuk market is expected to grow further in 2018 and beyond. However, the sukuk industry will have to face a twofold challenge. Firstly to convince the issuers to adopt the Shariah-compliant route, secondly to achieve critical mass for the green sukuk market in order to achieve optimal costs of issuance and enable a liquid secondary market trading.

Unicom Formation, which specializes in professional training, is to organise Algeria's first trade fair dedicated to Islamic financing in partnership with the Sahel Chamber of Commerce and Industry and the wilaya of Boumerdes.

Dubai Islamic Bank (DIB) has announced the successful pricing of $1 billion Sukuk issued with a five-year tenor. The issuance carries a profit rate of 3.625% and is the first dollar benchmark Sukuk transaction from the GCC in 2018. The orderbook was driven by strong demand across the globe, including Middle East, Europe, Asia and North America, and across a broad spectrum of investors base. According to DIB's Group CEO Dr. Adnan Chilwan, the strong investor interest demonstrates not only the continued attraction of DIB, but also the resilience of the Sukuk market in general. Bank ABC, Dubai Islamic Bank, First Abu Dhabi Bank, HSBC, J.P.Morgan, KFH Capital, Sharjah Islamic Bank and Standard Chartered Bank acted as Joint Lead Managers and Joint Bookrunners while Union National Bank and Boubyan Bank acted as Co-Managers on the offering.

First Abu Dhabi Bank has appointed banks to lead a U.S. dollar-denominated sukuk issue. Citi, First Abu Dhabi Bank, KFH Capital, NCB Capital and Standard Chartered will lead the deal, which has a five-year tenor. The sukuk is expected to be of benchmark size, which generally means upwards of $500 million. The bank, formed by a merger of National Bank of Abu Dhabi and First Gulf Bank, is tapping the sukuk market to diversify its funding sources. The planned debt sale would be part of the bank's $2.5 billion sukuk programme.

Mudajaya Group’s unit, Sinar Kamiri, has issued its RM245mil green SRI sukuk wakalah. The coupon rate is between 4.96% and 6.35% per year and the coupon will be payable semi-annually. Proceeds from the issuance of the sukuk will be utilised for the development of a large-scale solar photovoltaic energy-generating facility of 49MW in Perak. The company stated that the issuance of the sukuk is not expected to have any material effect on the net assets and earnings per share of Mudajaya for the financial year 2018. However, the gearing and interest cost for Mudajaya are expected to increase for FY18 and onwards.

The Central Bank of Nigeria released its guidelines for the operations of Non-Interest Banks (NIBs) in 2011 and
issued its first license to Jaiz Bank. At the same time, two conventional banks, Stanbic IBTC and Sterling Bank, received license to operate Islamic windows. Jaiz Bank commenced operations and remained Nigeria’s only full-fledged non-interest bank. However, Sterling Bank CEO Yemi Adeola recently revealed his plans to seek a license for a stand-alone Non-Interest Bank (NIB). He said the decision was informed by the feasibility studies conducted by the lender, judging from the potential market and financial resources of customers expected to embrace NIB. The number of banks in the country offering non-interest banking products is set to increase. SunTrust Bank Nigeria (SBN) and the Islamic Corporation for Development (ICD) signed an agreement to establish a new non-interest banking window in Nigeria.

At 37 years old, Arsalaan Ahmed is the youngest chief executive in the Malaysian Islamic finance industry. As CEO of HSBC Amanah Malaysia, his vision is to change the industry’s narrative on Islamic finance. So far, the narrative has focused a lot on the technicalities of products and services. Arsalaan says these discussions should be focused on the principles of social justice and create a positive impact on society. He plans to allow retail investors to invest directly in sukuk. Currently, individual sukuk requires an initial investment of RM500,000. By lowering the initial investment amount, investors with sufficient knowledge of the market could invest directly. Arsalaan says 2018 is a good time to democratise sukuk because of China’s One Belt, One Road (OBOR) initiative, which aims to improve the infrastructure of land and maritime routes. According to HSBC, the initiative involves US$4 trillion worth of investments and 900 planned projects.

The Islamic finance industry is climbing to new heights on the back of strong global demand for sustainable and socially responsible investments. According to the fifth edition of the Islamic Finance Development Report and Indicator, the growth of the industry is unabated despite an economic slowdown caused by the decrease in oil revenues. The report is the result of a joint research made by Thomson Reuters and the Islamic Corporation for the Development of the Private Sector (ICD). Mustafa Adil, Head of Islamic Finance at Thomson Reuters, says that Islamic finance can serve as a strategic tool for policymakers to cope with the slowdown, especially in the Middle East. The report estimates that the Islamic finance industry will reach a global asset volume of $3.8tn by 2022, up from $2.2tn at the end of 2016, which translates into an expected compound annual growth rate of 9.5%. The leading country remains Malaysia and the leading region the Gulf Cooperation Council (GCC).

Al Rayan Bank has mandated banks to raise 250 million pounds ($352 million) via sukuk, using a residential mortgage-backed securitisation. Al Rayan has appointed Standard Chartered and Masraf Al Rayan to arrange investor meetings. The sukuk would help fund Al Rayan's ongoing efforts to expand into commercial real estate, private banking and financing for small- and medium-sized businesses. The portfolio would consist of Home Purchase Plans secured by residential properties, with a current pool balance of approximately 300 million pounds. The sukuk would securitise contracts known as diminishing musharakah with ijara finance, akin to reducing co-ownership arrangements, secured by residential properties located in England and Wales.

The market for Gulf Arab bonds and Sukuk achieved an all-time high issuance of 70 billion U.S. dollars in 2017, with sustained investor appetite expected in 2018. A recent study titled "The GCC (Gulf Co-operation Council) Fixed Income Market: Then and Now," said that 70% of all debt and Sukuk issuances were from sovereigns, while 30% were from corporations. The study was conducted by Emirates NBD and Swiss portfolio management firm Fisch Asset Management. Regarding the outlook for 2018, increased debt issuance could continue in the region despite elevated geopolitical instability. According to Usman Ahmed, Head of Investments at Emirates NBD, growth of the GCC's debt investor base is expected to continue in 2018, with demand coming from the record inflows to emerging markets and supply provided by the diversification needs of the region.

Bahrain-based Ithmaar Bank plans to add more than 100 branches in Pakistan this year through its subsidiary Faysal Bank. Ithmaar's deputy CEO Abdul Hakeem al-Mutawa says banking penetration is less than 20% in Pakistan, so there are good opportunities to grow. Ithmaar Bank's parent company, Ithmaar Holding, listed recently on the Dubai Financial Market. Al-Mutawa believes the company is well established now to approach the capital markets and the bank has no imminent plans to raise funds through a bond or loan. Ithmaar Holding is also exploring the sale of its 25.4% stake in Bahrain's BBK, which has operations in Bahrain, Kuwait, India and Dubai. Al-Mutawa declined to comment on the timeframe for the disposal of the BBK stake.

UAE-based Residential REIT has completed new property transactions worth AED772 million ($210.1 million). The deals were closed with Abu Dhabi Islamic Bank, Arcapita and an unnamed large Saudi institution. Abu Dhabi Islamic Bank has contributed 165 residential units located in three buildings in Marina Square on Al Reem Island in Abu Dhabi. Arcapita and the Saudi institution have contributed three buildings with a total of 285 residential units located in Saadiyat Beach Residences on Saadiyat Island in Abu Dhabi. Following the new acquisitions, the Residential REIT's portfolio includes a total of 1,069 units across Abu Dhabi, Ras Al Khaimah and Dubai.

Takaful Malaysia aims to expand its market share in the general takaful business after recording higher turnover and earnings for its 2017 fiscal year. The company increased its revenue by 6.5% to RM2.14 billion year-on-year due to the higher sales in the family and general takaful businesses. Group CEO Datuk Seri Mohamed Hassan Md Kamil said the company maintained its lead position in the family takaful segment and the fire and motor classes’ gross contribution shot 20% up from FY16 to close at RM591 million. He added that Takaful Malaysia is also in the middle of enhancing its digital capabilities. Significant investment has been made in tools, applications and new technologies to improve operational efficiencies and enhance the customer experience. The takaful operator surpassed the RM200 million mark for the first time since its inception in 1984, growing at a compounded annual growth rate of 27%.

Saudi SEDCO Capital announced the offering of its first Shariah-compliant real estate investment traded fund SEDCO Capital REIT. The fund will be offered to the general public through an initial public offer during the period of Jan. 24 to Feb. 6. With an occupancy rate of over 92%, SEDCO Capital’s real estate portfolio has grown to include seven assets across various geographical regions. According to CEO Hasan Al-Jabri, SEDCO Capital Real Estate Income Fund targets to generate an initial net yield of 7% through the acquisition of additional assets and by utilizing capital. To facilitate the offering period, three receiving entities were appointed for investors to subscribe, these include NCB, Al Rajhi Bank and Samba Financial Group.

Elshan Rahimov, chairman of the Cooperation of Azerbaijan and Arab Countries Public Association, said the introduction of Islamic banking in Azerbaijan was being delayed.

Takaful Malaysia plans to introduce new product solutions to improve its growth rate. The company said it made significant investments in tools, applications and new technologies to improve operational efficiencies and customer experience. For the fourth quarter ended Dec 31, 2017, Takaful Malaysia’s net profit stood at RM56.3 million, 43.4% higher than the RM39.26 million recorded in the previours period. Revenue increased 5.5% from RM490.82 million to RM517.74 million. Its full-year net profit soared 17.3% from RM176.28 million to RM206.7 million, with revenue rising 6.3% from RM2.01 billion to RM2.14 billion. Takaful Malaysia group CEO Datuk Seri Mohamed Hassan Kamil said the group’s profit surpassed its target and for the first time exceeded RM200 million since its establishment. He added that the group takaful business and general takaful gross contribution grew 20% from the previous financial year to close at RM591 million, mainly derived from the fire and motor classes.

It is well established that good corporate governance strengthens institutions and financial sectors, and in so
doing contributes to building strong economies and economic growth.

Deficiencies in corporate governance were among the factors that contributed to the global financial crisis
(GFC) of 2007–08. As a result, global standard setters such as the Basel Committee on Banking Supervision
(BCBS) and the Organisation for Economic Co-operation and Development (OECD) have been updating and
strengthening their guidelines on good governance practices.

The Islamic Financial Services Board (IFSB), which sets standards for Islamic financial institutions, published its
Guiding Principles on Corporate Governance in 2006 as its standard IFSB-3. The Principles address, within the
context of corporate governance, the distinct features of Islamic banks, such as the different relationship that
they have with some of their stakeholders.

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