IslamicFinance.de

In principle, Islamic banks act as financial brokers between the investors (depositors) and companies or individuals seeking finance solutions that are sharia compliant; sharing the profit/loss. One of the most important principles of Islamic banking is to play an active role in achieving social development. Islamic banks should be able to provide financing solutions for the different investment and commercial projects in a way different from the traditional commercial banks. However, Islamic banking institutions in the world in general and GCC in particular face many challenges on the foremost of which is the inability to attract leaders and manpower specialised in Islamic banking. They are therefore required to provide high quality and intensive training for their staff.

Sharjah Islamic Bank (SIB) has joined NASDAQ Dubai’s Islamic financing Murabaha platform, which offers bank customers solutions for processing Sharia’a-compliant financing transactions. SIB is the first bank to join the facility since the official launch of the NASDAQ Dubai Murabaha Platform last month. Through the NASDAQ Dubai Murabaha Platform, individual and institutional clients of SIB will be able to complete financing transactions within minutes. The platform is an alternative to many traditional Islamic financing solutions, which can carry a risk of losses through price movements, spreads and poor liquidity as well as delays.

Iran's Bank Mellat filed an application for a judicial review against the UK Government in the Administrative Court on 16 April 2014. In its final ruling last June, the UK Supreme Court found that by imposing domestic sanctions against Bank Mellat, the UK Government acted both “unlawfully and irrationally”. Following the UK Supreme Court decision, Bank Mellat had asked the UK Government to withdraw its 2010 listing proposal to the EU Council. It was hoped that this may have been sufficient to convince the EU Council to give up on its own sanctions against the bank. However, the UK Government has refused to withdraw the proposal. The UK Government has also now applied for permission to intervene in support of the EU Council’s appeal against the first European Court decision.

Since the Islamic Development Bank (IDB) commenced its journey in the late seventies, Islamic banking has been growing globally, with Islamic banking assets crossing the $ 1.8 trillion mark in 2013. The distinctiveness of Islamic banking in comparison with the conventional banks is not merely hypothetical. The aim, objective, policy and work strategy of this banking system are dedicated for the wellbeing of a wider section of people. This banking system does not attach preference to making only profit to satiate the greed of a few individuals. Rather, it gives priority to fulfilling the basic needs of all people in the society. Now all concerned should work collectively to present the theoretical and hypothetical issues of Islamic banking to the people easily.

London-based European Islamic Investment Bank (EIIB.L) will propose a capital reduction plan next month to enhance returns for its shareholders, after the firm swung back into profit in the 2013 financial year. EIIB will seek shareholder approval for the plan, which could potentially take the shape of a share buyback or a tender offer, during its annual general meeting in June. The firm posted a pre-tax operating profit of 1.5 million pounds in 2013, compared to a 10.1 million pounds loss a year earlier. Under its 2012-2016 strategy, EIIB is restructuring its business by exiting higher-risk private equity investments, seeking more stable income streams such as asset management and advisory services under its EIIB-Rasmala brand.

Amid talk of merging banks in the country to boost size and competitiveness in the region, the Financial Services Authority (OJK) has said that consolidation of sharia banks is also needed. At the moment, however, many sharia lenders are units that operate within conventional banks. OJK expects the consolidation to take place after all existing sharia business units (UUS) had been spun off from their parent banks. At the moment, there are 11 sharia lenders and 23 UUS operating in the country. After the spin-off, there would be more than 34, but the OJK would like to fix the number at between 25 and 30. One sharia business unit of a commercial bank is reportedly ready to be spun off in 2014.

The volume of finance provided by Saudi banks to Kafala-supported small and medium enterprises (SMEs) grew by 28 percent to SR 571.8m in the first quarter of 2014 compared to SR 448.3m in the same period last year. The Kafala Program, meanwhile, issued 652 guarantees for SME projects in Q1, an increase of 34 percent compared to Q1 last year. The value of those guarantees stood at SR 311.6 million. The National Commercial Bank ( NCB ) ranked top supporter to the Kafala Program during the first quarter of the year at 36 percent of the total guarantees, followed by Riyad Bank (22 percent), Rajhi Bank (17 percent), Saudi Hollandi Bank and Samba Financial Group (5 percent for each), whereas the remaining 15 percent of finance went to other banks.

Bank Muamalat Malaysia Bhd plans to grow its total deposits by up to 20 per cent this year from RM15 billion at present by diversifying its depositor base. Chief Executive Officer Datuk Mohd Redza Shah Abdul Wahid said the bank was aggressively diversifying its depositor base through the "Oh Yeah Deposit Campaign" as well as working with small and medium enterprises (SMEs) and business chambers. On overseas ventures, he said the bank was exploring opportunities for tie-ups with Islamic banks in Asean countries which were expected to take place in the next 12 months. Meanwhile, Chief Operating Officer Asri Awang said Bank Muamalat of optimistic of a loans growth of 15 per cent this year from its current financing base of RM11 billion.

The chief executive of Dubai Islamic Bank (DIB), Adnan Chilwan, said it was in talks to buy a 40 percent stake in an Indonesian Islamic lender to help diversify its revenues. DIB hopes to conclude a deal before the end of the year and that it will pay for the purchase using its own cash reserves. However, Chilwan declined to name the acquisition target, adding its parent was a listed company. Chilwan said in March that DIB planned to expand its operations into Indonesia, Kenya and other African countries. DIB's last acquisition came last year when it completed the takeover of Dubai-based mortgage lender Tamweel, having previously owned 58.2 percent of the firm before the buyout offer.

Dubai Islamic Bank (DIB) has completed a five-year consolidation from 2009 to 2013 and has charted a plan for strong balance sheet growth in 2014-16 period. DIB’s first quarter figures vouch for its growth momentum. While the bank reported a 111 per cent increase in net profit to Dh636.6 million in the first quarter of 2014, the bank’s total assets increased by 6.9 per cent to Dh121.1 billion from the end of 2013. Key themes for this year are to grow both consumer and wholesale banking business achieving return on assets of about 1.7 per cent with a return on equity of 15 to 17 per cent. Improved profitability is targeted through growth in financing book and redeployment of liquidity from low earning assets to higher earning assets.

Deputy Governor, State Bank of Pakistan, Saeed Ahmed has said that the SBP has evolved a comprehensive five-year strategy to promote Islamic mode of banking in the country. The SBP would strive to get 20 percent market share during this period which is 10 percent at the moment, he added. Moreover, the SBP is in regular contact with the Institution of Business Administration (IBA) in Karachi for the establishment of Centre of Excellence on Islamic Banking. He said as soon as the first centre will be established, three more such centres would also be established in Lahore, Islamabad and Karachi respectively. Besides, a lot of attention is focused on solutions, which are not far from the Islamic financing where system allows fairness of return, sharing of risk and reducing income inequalities.

Tirad Mahmoud, chief executive of Abu Dhabi Islamic Bank (ADIB), believes the banking industry is on the cusp of a historic transformation that will see a convergence between conventional and ethical banking. Mahmoud argues Islamic banking is only part of a larger move towards ethical banking in the post-crisis world. Earlier in April, ADIB acquired the retail operations of Barclays in the United Arab Emirates for a price tag of $177 million, giving it access to expatriate customers. The purchase will see 110,000 accounts transferred to Sharia-compliant accounts. ADIB has posted a 20.4 percent increase in first-quarter net profit, driven by higher lending. Its stock is up over 40 percent so far this year, outperforming the benchmark Abu Dhabi Securities Exchange (ADX).

Jordan Islamic Bank (JIB) achieved $14.71 million in net profits in Q1 2014, compared to $14.68 million during Q1 2013. The bank’s assets reached about $5.079 billion compared to $4.968 billion by the end of 2013. Clients’ deposits reached about $4.581 billion compared to about $4.500 billion as of end-2013. Facilities and investments reached about $3.565 billion compared to $3.519 billion at end-2013. The non- performing finance (NPF) ratio reached about 4.34 per cent, its coverage ratio about 86 per cent. The bank enhanced its capital base by increasing its paid capital by distributing 20 per cent as free shares to shareholders in addition to distributing cash dividends to shareholders at 15 per cent for the year 2013.

Dubai-based Noor Bank has reported record net profit of Dh85 million for first quarter of 2014, up from Dh31 million for first quarter 2013, an increase of 174 per cent. Return on equity improved to 14 per cent, total assets grew 9 per cent to Dh25.2 billion. Total customer financing increased by 14 per cent to Dh16.3 billion. Customer deposits grew by 11 per cent, reaching Dh20.7 billion. Hussain Al Qemzi, CEO, Noor Bank and Group CEO, Noor Investment Group said that the bank's business strategy continues to focus on satisfying the needs of its customers across wholesale, capital markets, corporate, commercial and personal banking. He believes the franchise is well capitalized and positioned for balanced and sustainable growth.

The Banking Regulation and Supervision Agency (BDDK) approved expansion requests from Bank Mellat last month in light of the U.S. and the UN Security Council loosening economic sanctions. Afterwards, applications from the Iranian banks Pasargad and Tejarat to set up shop in Turkey were approved by the Ministry of Foreign Affairs. Bank Mellat has operated in Turkey through its three branches in Izmir, Istanbul and Ankara. Turkey and Iran have reportedly come to an agreement allowing an increase in banking transactions between the two countries. Earlier this year, Turkish Prime Minister Recep Tayyip Erdogan made a visit to Iran aimed at strengthening economic ties between the neighboring countries.

Ajman Bank has signed a strategic alliance with Al Ramz Capital, aiming to provide Ajman Bank customers with the services to trade in the UAE's stock market. The alliance has been officially signed by Mr. Mohamed Abdulrahman Amiri, Ajman Bank 's CEO and Mr. Mohammad Murtada Al Dandashi, Partner and Managing Director, Al Ramz Capital. Ajman Bank has launched a share finance product to invest in the UAE's financial markets based on Murabah. This product will double the investors purchasing power in the financial market by offering finance amount equivalent to the market value of the client's stock portfolio. Customers will be also able to trade with their own shares in addition to the finance provided by the bank.

Big Arab banks with money to spend are expanding across the Middle East in markets such as Egypt and Iraq, as they take advantage of a retreat from some areas by major international rivals. Since 2011, some global banks have downsized some of their businesses in the region to cut costs, help shore up capital and focus on their core markets, while competition from local banks has intensified. Meanwhile, UAE and Qatari banks have led the way in making some sizeable acquisitions and increasing their stakes in other lenders. In Egypt for example, Gulf banks are eyeing acquisitions because there is a lot of potential.

Pakistan's MCB Bank Ltd will set up a wholly owned Islamic banking subsidiary while dropping plans to take a stake in Islamic lender Burj Bank. Last month, MCB started due diligence on taking a 55 percent stake in unlisted Burj, which held assets worth 53.3 billion rupees ($547 million) as of December, but it said it would not proceed for commercial reasons. The move comes amid increased activity in Pakistan's Islamic banking sector, with regulators stepping up development efforts and lenders expanding operations. MCB currently operates the country's sixth-largest Islamic window with 28 branches. It will reportedly spin off its Islamic window into a separate subsidiary with 10 billion rupees in paid-up capital, using its existing Islamic banking branches to form the new entity.

Al Rajhi Bankk is losing ground to peers in Saudi Arabia, its home market, as slowing credit growth and intensifying competition for retail customers weigh on earnings. The world’s biggest Islamic bank said this week that first-quarter profit fell 17% from a year earlier, its third quarter of declining earnings. Lending growth in the three months slowed to 7% from 19% in the same period of 2013. That compares with 30% for Bank Albilad and 11% for Samba Financial Group. Profit at the Riyadh-based bank is slowing even as the Saudi economy is poised to grow 4.2% this year, because rival banks are increasingly turning their attention to retail customers as new labour laws stifle construction projects. Construction lending accounted for 7.7% of total bank loans in 2013.

Bank Islam Malaysia Bhd has reiterated its interest in the Indonesian Islamic banking market despite previous attempts at penetrating the world’s largest Muslim country seeing a dead-end. Managing director Datuk Seri Zukri Samat said Indonesia possessed tremendous prospects as the country, with a population of 240 million, is still underserved in the Islamic banking sector. Islamic banking penetration in Indonesia is about 3% to4%, whereby Malaysia is between 23% and 24%. There is a huge Muslim population in Indonesia but Islamic banking penetration is very low, certainly there is a lot of business opportunity there, he said.