IslamicFinance.de

Tirad Al Mahmoud, chief executive of Abu Dhabi Islamic Bank, has urged the Central Bank to broaden its provision of short-term liquidity to Sharia-compliant lenders. The UAE should also offer longer-term funding facilities to Islamic banks so as to improve their business capability, he added. The Central Bank allows Islamic banks to park Sharia-compliant assets on its balance sheet in exchange for profit. This is only available on an overnight basis. The central banks of the UAE and Bahrain recently introduced a series of short-term treasury management tools to help Islamic lenders to manage their cash flows. Bahrain and the UAE are the only countries in the region whose central banks offer liquidity tools to Islamic lenders.

CEO Dr. Adnan Chilwan, Dubai Islamic Bank (DIB) says that the Islamic finance sphere demonstrated a greater degree of resilience when compared to conventional banks during the most recent financial crisis. The bank also noticed an upswing of fresh clients, partly due to what he considers a shift in perception. DIB recently launched a comprehensive SME offering targeted towards the SME sector in the UAE. The product and services suite primarily focuses around the liquidity management and working capital finance needs of the customers across this segment, Mr. Chilwan explains. DIB is also pursuing a growth strategy, looking at opportunities in Indonesia and Kenya.

Al Hilal Bank has on Tuesday, June 2, 2015 inaugurated its new branch in Masdar City, a mixed-use project being developed in Abu Dhabi which is envisioned to emerge as the world’s most sustainable eco-city. Aside from meeting the conventional and Islamic banking needs of the surrounding community, the branch also serves as a hub for students of the nearby Masdar Institute of Science and Technology. The banking facility integrates elements such as a vending machine and wall-mounted touch screens for social media interaction to provide a venue for the Institute’s students and faculty to do research or simply to relax. Al Hilal Bank now has a total of 25 branches spread across the UAE in addition to three overseas branches in Kazakhstan.

Middle East fund managers have on balance become bearish on the region’s biggest stock market, Saudi Arabia, after oil’s rally ran out of steam and the Kingdom confirmed strict rules on foreign investment, a monthly Reuters survey shows. The survey of 15 leading investment firms, conducted over the past 10 days, shows none expects to raise its equity allocation to the Middle East in the next three months — the first time this has been recorded since the survey was launched in September 2013. The proportion intending to cut equity allocations has risen to 20 percent from 7 percent. Also, falling trading volumes and thin corporate news flow indicate that markets are already slipping into a summer lull.

The Middle East private equity industry, which went through a period of shake out post-financial crisis is back on its feet and the market has matured in the last five years in terms of deal structures, volumes and values, according to industry practitioners. Family-owned businesses, in particular, are looking for ways to grow and expand regionally or internationally and they too are becoming more sophisticated in how they structure and govern their businesses in order to attract private equity investors, said Alexander Gross, Director at Merrill DataSite. Overall, the panellists agreed that there is more maturity on the sellers’ side and they recognise the value of private equity, more than they did five years ago.

Looking forward, market conditions should continue to support growth but we also need to consider what structural changes will add depth to the GCC market and assist it in moving to the next level. To date key drivers of the sukuk market growth have included the need for banks’ to prudently manage funding risks and address changing regulatory requirements. Non-bank issuers have followed suite to diversify their funding sources and access cheaper financing. The current trend of influential factors should continue to be supportive for the GCC sukuk market. However, there are additional factors that must be addressed like improved public disclosure by issuers, improving investor knowledge and sukuk market liquidity.

As Saudi Arabian authorities prepare to open the stock market to direct foreign investment this month, they're laying plans for a fresh set of reforms: measures to expand and energise the corporate debt market. The Capital Market Authority wants to change things under a five-year strategy that would encourage issuance of sukuk and conventional bonds as alternatives to bank loans, which currently dominate corporate fund-raising. This would spread corporate risk beyond the banking system, making the financial sector more healthy, and provide more channels for Saudi Arabia's growing investment industry. The CMA plans to introduce rules for credit rating agencies in September and is developing guidance for special purpose vehicles.

Michael Gassner, Editor of IslamicFinance.de presented on the 3ème Congrès International de la Finance Islamique “Les Banques Islamiques et le Financement des Entreprises: Pratiques et enjeux théoriques” en Marrakech, 25/26 Mai 2015.

The presentation discussed that exponential growth of debt in Islamic finance is ruled out, nevertheless, debt and equity finance exists. The specific significance of equity finance (musharaka, mudaraba) lies in need for solid debt/equity ratio, as Muslims shall never die being in debt. Still Islamic banks barely provide any equity finance and the reason often given are moral hazard costs. This is denied as debt as well as equity has specific moral hazard problems, and if anything, even conventional banks would offer a mixture of debt and equity. Rather the assumed reason appears to be in the regulation (capital weight) and taxation (interest deductibility), which makes equity financing from a bank 2-4 times at least more expensive than debt finance, and thus not worth being offered.

The attached presentation is in French.

Abu Dhabi Islamic Bank will convene shareholders on June 21 to vote on a rights issue worth Dh504 million ($137.2 million) and raise its sukuk limit to $3 billion from the existing $2 billion ceiling. Under the rights issue plan, 168 million shares will be offered at a price of Dh3 per share, equating to a 40 per cent discount to Wednesday's closing share price. Shareholders will be allowed to subscribe for 56 new shares for every 1,000 they currently own. Adib will also seek shareholder assent to expand its existing Tier 1 sukuk programme to $3 billion from $2 billion.The bank wants to keep expanding its retail network in the UAE, as well as its financing in the SME, large and emerging corporate segments.

Saudi Binladin Group has begun marketing a 364-day sukuk issue to local investors in the kingdom which could raise up to one billion riyals ($265 million) for the construction firm. The transaction is being managed by BNP Paribas' Saudi unit and the investment banking arm of Gulf International Bank. Funds from the deal will be used to finance costs related to its work at the King Abdulaziz International Airport in Jeddah. The last time Binladin Group was in the bond market was in July 2013, when it sold a 1bn riyal 364-day sukuk, which carried a profit rate of 2.5 per cent. That transaction was arranged by the same two banks appointed for the current issue.

Abu Dhabi Islamic Bank will ask shareholders for permission to expand its existing Tier 1 sukuk issue, originally sold in 2012, by $2 billion to $3 billion, it said in a bourse filing on Thursday. The increase is subject to regulatory approval, the Abu Dhabi lender said. The Abu Dhabi lender will also ask shareholders to vote to increase the bank's capital by 168 million dirhams ($45.74 million) through a rights issue.

Saudia Arabia’s Al Khozoma Management Company is conducting a feasibility study to develop a Sharia-compliant resort in the Maldives. Some 4,120 holidaymakers from the Middle East visited the Maldives this year, representing a market share of 3.7 percent. In January 2014, the ADK company in association with Turkish hotel giant Caprice Gold announced plans to build the first Islamic resort in the Maldives. The five-star, 673-room resort was to be built on Shaviyani Atoll Gaakoshibee. However, the two companies reportedly cancelled the agreement late last year.

Over the years, there have been a number of cases involving suicides due to the inability to settle debts. Defaulters can end up in jail over bounced cheques, lose their jobs, have their visas blocked, and taken to criminal and civil court. In the face of the impending consequences, the defaulters sometimes resort to extreme measures. Many debtors who are stuck in a rut are nevertheless determined to settle their dues. Their biggest concern is that due to the rigid bank rules, they are effectively unable to find a middle road till the time their issue is resolved. Many who have little financial literally and lived a credit card swipe-happy life end up in a continuous state of shock, weighed down by interest and other charges.

Abu Dhabi Islamic Bank will ask shareholders for permission to expand its existing Tier 1 sukuk programme to $3 billion from $2 billion, it said in a bourse filing on Thursday. The increase is subject to regulatory approval, the Abu Dhabi lender said. It will also ask shareholders to vote to increase the bank's capital by 504 million dirhams ($137.2 million) through a rights issue.

The United Arab Emirates' bank industry association has discussed a proposal to create a centralised sharia board that would monitor Islamic banking. The central bank had proposed setting up a Higher Sharia Authority that would complement and oversee the work of sharia boards at individual Islamic banks. Details of the timing and structure of the new entity were not specified. The UAE Banks Federation, which represents 50 banks, also said on Sunday that it had approved the appointment of a new, independent monitoring agency that would help to implement its code of conduct for member institutions. It did not give details.

King Salman has reorganized his cabinet, removed princes from government roles, merged ministries and realigned succession since ascending to the throne in January. As a consequence, Saudi companies have yet to market a single security in 2015, making it the country’s quietest start for Islamic sales in nine year. The companies need some stability before they start looking at sukuk-type issuance. Saudi Arabia is pursuing a $130 billion spending plan to diversify its economy away from oil, and has vowed to invest in major infrastructure projects. King Salman’s changes will impact many areas, especially financial markets.

The Islamic Financial Services Board (IFSB) and INCEIF - The Global University of Islamic Finance have renewed an agreement to facilitate international cooperation between the two organisations to provide relevant activities relating to capacity building and awareness promotion in Islamic finance. This mutual co-operation aims to strengthen the efforts in promoting an exchange of information, undertaking research, development, training and education in the Islamic financial services industry. Under the first MoU, signed in 2012, the IFSB and INCEIF held a series of six Executive Forums (EF). he next Executive Forum on Islamic Finance, themed Building Momentum for Islamic Liquidity Management will be held on 3 - 4 June 2015 in Kuala Lumpur, Malaysia.

Dubai Islamic Bank (DIB) has picked six banks to arrange fixed income investor meetings from Thursday for a potential benchmark size, U.S. dollar-denominated senior sukuk issue, a document from lead arrangers showed. DIB has mandated First Gulf Bank, HSBC, Maybank, National Bank of Abu Dhabi, Standard Chartered Bank and itself to arrange the meetings in Asia and Europe. Meetings will be held in Kuala Lumpur on Thursday and Singapore on Friday before concluding in London on Tuesday, the document showed. The offer will be under DIB's $2.5 billion sukuk programme, subject to market conditions.

Qatar Islamic Bank (QIB) expects to issue a Tier 1 capital-boosting bond between this quarter and the third quarter, the bank’s chief financial officer Gourang Hemani said. The Doha-listed lender in February received shareholder approval to issue up to 5 billion Qatari riyals (Dh5.04bn) to increase its Tier 1 or core capital in line with Basel III banking standards. The bond will have a perpetual tenor. It is going to be a private placement, most likely within Qatar. QIB’s net profit rose 19 per cent to 400 million riyals in the first quarter of this year, compared to a year earlier. Total income grew 13 per cent in the first quarter to 950m riyals, compared with the year-earlier period.

Nasdaq Dubai said on Monday Ajman Bank has begun transacting on the its Murabaha Platform, which facilitates the provision of streamlined Sharia-compliant financing services. Ajman Bank’s initial activity on the platform has enabled it to meet the needs of customers throughout the country, the bourse said in a statement. Since it was officially launched in April 2014, the Nasdaq Dubai Murabaha platform has completed a total of more than Dh46.5 billion of transactions and is playing a growing role in Dubai’s expansion as the global capital of the Islamic Economy.