IslamicFinance.de

The Islamic Development Bank signed an agreement with Jordan to provide the Kingdom with US$100 million in loans and grants. Jordan's Minister of Planning and International Cooperation Imad Fakhoury said that the deal included a US$79 million loan and a US$21 million grant, adding that the amount would be used to finance projects in the field of health. The minister also highlighted pressure on Jordan in various fields of energy, education and infrastructure since the start of the Syrian crisis in 2011. The minister urged all countries to provide further support to Jordan to help it cope with the challenges, noting that such support is vital for Jordan. Between 1975 and 2017, the bank provided Jordan with US$975.6 million in loans and grants to support projects in various fields.

Dear Reader,

regular readers may remember my critic on bitcoin from an Islamic perspective missing intrinsic value. The former blog entry you find here: http://www.islamicfinance.de/?q=node/7840 - almost two years ago.

So far bitcoin just went up higher and higher, with wild fluctuations but nevertheless.

It reminds on how bubbles work, think about the tulip mania in 1637 a nice piece of economic history. A single tulip bulb was traded and bought on credit. Check the Wiki page on it:

https://en.wikipedia.org/wiki/Tulip_mania

As bitcoin has even less value than a tulip except for payment purposes, it is the payment functionality, which can lead to destruction. What happens if a new alternative currency is becoming en vogue, which has a better usability and faster transaction time? In my view this is most likely trigger to burst the bubble.

FT Alphaville covers now the difficulties coming up with bitcoin's increasing transaction numbers causing inconvenience in using the digital currency:

https://ftalphaville.ft.com/2017/05/17/2188961/the-currency-of-the-futur...

A UNICEF study covering 11 countries in the Middle East and North Africa (MENA) states that at least 29 million children live in poverty, one in four children in the region. The analysis said that children were deprived of the minimum requirements in two or more of the most basic life necessities. These include basic education, decent housing, nutritious food, quality healthcare, safe water, sanitation and access to information. It added that lack of education was one of the key factors of inequality and poverty for children. The study showed that almost half of all children were not fully immunized or were born to mothers who did not get birth assistance. UNICEF also revealed that one in five children were forced to walk more than 30 minutes to fetch water, adding that more than one third of children live in homes with no tap water.

Hogan Lovells has advised Aktif Bank on the first Sukuk ever to be listed on the Global Exchange Market of the Irish Stock Exchange (ISE). The $118million Sukuk was issued under a mudarabah structure with GAP Insaat Yatirim ve D?s Ticaret, a Turkish construction company. While the Irish Stock Exchange has listed Sukuk historically, this is the first Sukuk to be listed on the ISE's Global Exchange Market. The Hogan Lovells team was led by Imran Mufti (Partner, Dubai), with support from Annalisa Feliciani (Counsel, Rome), Ahmet Kalafat (Senior Associate, Dubai) and trainees Marjun Parcasio and Luigi de Angelis. Onur Aksoy from Aktif Bank said this Sukuk represents a milestone for Islamic capital markets originating out of Turkey. He added that Aktif Bank was pleased to work with the Hogan Lovells team, benefitting from their deep understanding of Islamic finance and capital markets.

The government of Tunisia is preparing its first ever issuance of a sukuk with the Tunisian stock exchange, Bourse de Tunis and Nasdaq Dubai. Preparation work will consider commercial, legal and regulatory issues, including sharia-compliance aspects. This January finance minister Lamia Zribi said that Tunisia needs about $2.85 billion in external funding in 2017 and plans to issue a sukuk of $500 million to cover its budget deficit. Then in February the North African country issued a €850 million bond with a seven-year maturity.

This paper provides a first analysis of the extent to which firms in the Arab region use capital markets to obtain financing and grow. It addresses two questions: First, how many and which firms issue equity, bonds, and syndicated loans in the Arab region? Second, how do these firms perform relative to non-issuing firms? Two main findings emerge from the analysis. Over the last two decades, the amounts raised in equity, bond, and syndicated loan markets have considerably increased. The typical issuing firm is larger, grows faster, is more leveraged, and holds more long-term debt relative to the typical non-issuer. The firm size distribution of issuers lies to the right and shifts more rightwards over time, indicating a divergence in firm size among listed firms.

#UAE-based airline Etihad Airways tapped the Islamic finance market with the largest ever sukuk issuance in the MENA region’s aviation history. In November 2016, Etihad Airways made its debut on the debt capital markets with a benchmark US$1.5bn sukuk deal. Etihad was initially rumoured to be raising US$500mn, but there was strong demand and the company’s debut US$1.5bn sukuk became the highest rated paper from an airline issuer. The book consisted of high-quality investors from the MENA region, Asia and Europe, creating significant price tension that enabled Etihad to optimize pricing and issue size. Banks dominated the distribution cross-section (77%), while 13% of the notes were allocated to fund managers, 5% to private banks, 4% to insurance and pension funds, 1% to other investors. The 5-year sukuk was launched under the newly established Islamic Trust Certificate (Sukuk) programme and represented a landmark debt capital market transaction.

Turkey's new sovereign wealth fund has signed a framework agreement with the Islamic Development Bank (IDB) to develop Islamic mortgages. Turkey's government has already transferred stakes worth billions of dollars in Turkish Airlines, major banks and other companies to the wealth fund to finance big-ticket infrastructure projects. Fund chairman Mehmet Bostan said the fund had authority to support mega projects but its priority is to invest in leading global industries in areas like technology, telecoms and energy. Bostan said financial technology was one of the fund's areas of operation, adding it was working on a joint payment platform and mobile banking. He added that the Turkish fund has received invites from other national funds and was negotiating with two of them after signing an agreement with the Russian Direct Investment Fund (RDIF).

Algeria is edging slowly towards offering banking services to suit more religiously conservative investors. The country is now looking for more ways to offset the sharp fall in oil prices and its energy revenues. Six state-run banks plan to start Islamic financial services by the end of the year or in early 2018, and a national Shariah board that would oversee Islamic banking is also planned by the end of 2017. However, Algeria’s Islamic finance plan still faces huge barriers. It lacks a legal framework and technical expertise. Algeria is far behind North African neighbours Morocco and Tunisia, which have started to develop legislation for Islamic finance and sukuk bonds, overseen by a central religious board. Algeria is targeting domestic savers rather than foreign investors. Many local people distrust the state-owned banks and keep large sums at home, untaxed, in Algerian and foreign currency.

The Islamic Development Bank (IDB) plans to take at least a 10% stake in Turkey's state-run stock exchange, Borsa Instanbul. Abdulhakim Elwaer, IDB's director of cooperation, said negotiations are expected to finalize in two to three months as part of wider efforts to develop Islamic finance in Turkey. Elwaer emphasized the bank's wish to help develop Turkey as a global Islamic financial center. IDB and Borsa Istanbul signed a cooperation agreement in November, with discussions currently ongoing to decide on a specific size and time frame. The bourse has a share capital of 423 million lira ($115.6 million), implying a value of 42.3 million lira for a 10% stake. Elwaer added that a gold trading platform is also in discussion, although the equity stake remains the bank's biggest priority.

Turkish lender Albaraka Turk has secured a $213 million murabaha-based loan syndication, up from the $150 million it initially sought. The bank said the profit margin for the 370-day sharia-compliant facility was 125 basis points over three-month LIBOR. The lender had appointed ABC Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital Ltd, Qatar Islamic Bank and Standard Chartered Bank to arrange the transaction. The bank is a unit of the Al Baraka Banking Group, which is also planing to issue dollar-denominated sukuk.

Algeria is edging slowly towards Islamic banking services to suit more religiously conservative investors. Finance Minister Hadji Baba Ammi has already announced plans for the country's first local bond. Now six state-run banks plan to start Islamic financial services by the end of the year or in early 2018 and a national sharia board that would oversee Islamic banking is also planned by the end of 2017. Algeria's Islamic finance plan still faces huge barriers. It lacks a legal framework and technical expertise. Algeria is far behind North African neighbours Morocco and Tunisia, which have started to develop legislation for Islamic finance. The country is targetting domestic savers rather than foreign investors. Many local people distrust the state-owned banks and keep large sums at home in Algerian and foreign currency.

77 academics from the Abant Izzet Baysal University (AIBU) face between 7.5 years and 15 years in jail on accusation of membership to a terrorist organization. 75 academics are sentenced to 15 years in prison, while the remaining two to 22 years. The prosecutor listed among evidence for terror charge the academics’ previous transactions within Bank Asya. The Turkish government closed down the Islamic lender as part of its crackdown against the Gulen movement. The government also pinned the blame for July 15 on the movement. The accused academics have withdrawn TL 2 million from other banks to deposit into Bank Asya since late 2013 when the bank was struggling. The prosecutor underscored that some academics transferred money from spouses’ accounts to another account in Bank Asya so that they could benefit from state insurance in case the bank faces closure.

IFC, a member of the World Bank Group, has announced an equity investment of $30 million via the consortium fund Network International to expand the payment infrastructure in the Middle East and Africa. Network International is jointly controlled by the Emirates NBD Bank and Warburg Pincus/General Atlantic consortium. The investment will help the company expand and modernise its banking client network in the Middle East and Africa. The investment is expected to allow MSMEs to access card-based payments and develop digital data records, to help them grow their customer base. Bassel Hamwi, Head of the IFC Middle East and North Africa Fund, said the shared infrastructure brings down costs and boosts financial inclusion, while reducing the risk of fraud.

Turkey's state grain board TMO and construction firm Gap Insaat have received regulatory approval for debut sukuk sales. Turkey has seen steady issuance of sukuk from the government and the country's Islamic banks, but an increase in corporate issuance could help tap into a much wider stable of issuers. According to the country's Capital Markets Board, the TMO will raise 150 million lira ($41.6 million) via a sukuk that will be arranged by Islamic lender Kuveyt Turk. Turkey is seeking to build a bigger role in the industry and forge closer ties with fast-growing economies in the Gulf and southeast Asia. The Turkish Treasury hired banks to arrange a sale of sukuk in the international markets, with meetings set to begin this week in the United Arab Emirates.

Turkish treasury mandated the Dubai Islamic Bank, HSBC, and Standard Chartered to explore opportunities for a possible sukuk issue. A series of investor meetings will be organised in the UAE on March 28, 2017. Meanwhile, the country’s monetary authority raised its highest interest rate while leaving all of the other rates unchanged. The lira rallied as the move was seen paving for they way for tighter policy and serving as insurance against bouts of currency weakness.

Casablanca Finance City welcomes international businesses that have been flocking to Morocco to take advantage of its cheap labour, skilled work force and proximity to sub-Saharan Africa. Amid the uprisings that characterised the Arab Spring, Morocco remained relatively stable. Political and social stability continued after 2010, while the neighbour countries struggled. Adding to Morocco’s allure is the introduction of formal Islamic financial products, officially labelled participatory finance in the country. In 2017 authorities issued five participatory banking licences to Moroccan banks and three to international banks. As Morocco continues to roll out participatory financial products and services slowly and cautiously, the sector will remain a niche.

The Central Bank of Jordan (CBJ) the second sukuk issuance on behalf of the National Electric Power Company (NEPCO) at a total value of JD75 million, 4.1% returns and a five-year maturity period. The bank reported that demand on the sukuk was 2.73 times the value of the issue, having received orders for JD205 million-worth bonds. The CBJ said the high turnout underlines the increasing demand on the financing tools compatible with the Islamic Law, which have been lacking in the local market during past decades. The bank said the success of this issuance was a result of the continuous coordination of the Finance Ministry, the CBJ, NEPCO, the Jordan Securities Commission and the Central Sharia Oversight Commission.

Bank Al-Maghrib and the Islamic Financial Services Board (IFSB) co-organized a regional workshop entitled "Facilitating Implementation of IFSB Standards" in Rabat. The workshop focused on 3 standards for participatory banking: IFSB-15 "Revised Capital Adequacy Standard" on Prudential Capital and Solvency Standards, IFSB-16 "Revised Guidance on Key Elements in the Supervisory Process" on Supervision Standards, and GN-6 "Quantitative Measures for Liquidity Risk Management" on prudential liquidity standards. This event is part of the measures taken by Bank Al-Maghrib to finalize the regulatory framework governing participatory banking activities in Morocco.

Morocco's central bank has approved the use of five types of Islamic banking transactions. This means a final regulatory nod for the country to launch an Islamic finance industry. The central bank has recently set up a central sharia board to oversee the sector. The five approved transactions include murabaha, musharaka, ijara, mudaraba and salam. The central bank also set regulations for conventional banks to open windows selling Islamic products. It had given regulatory approval to three major Moroccan banks to open Islamic subsidiaries: Attijariwafa Bank, BMCE of Africa and Banque Centrale Populaire, as well as to smaller lenders Credit Agricole and Credit Immobilier et Hotelier. Subsidiaries of Societe Generale of France, Credit du Maroc and BMCI have also won permission to sell Islamic products.