IslamicFinance.de

In 2007, Selangor Menteri Besar Khalid Ibrahim initiated a suit against Bank Islam seeking damages from the bank for alleged wrongful sale of his shares in Guthrie. Bank Islam then filed a counter suit to recover RM66.67 million claiming that Khalid’s failure to repay his loan. Twice the High Court ordered Khalid to pay the RM66.67 million in summary judgments obtained by Bank Islam. And then this year, Bank Islam withdrew its legal challenge to recover the RM66.67 million from Khalid to allow for an out of court settlement. Among the questions being raised is how Khalid has managed to get Bank Islam to agree to an out-of-court settlement. A point to note is that negotiations for the settlement are still in progress with a decision expected to be announced shortly.

Export-Import Bank Malaysia (Exim Bank) has established a RM3.3 billion (US$1 billion) Multicurrency Sukuk Issuance Programme under the special purpose vehicle, Export- Import Sukuk Malaysia. On Feb 19, 2014, the first sukuk series from the programme was issued. A hybrid structure was decided upon on the basis of wakala principle. The Exim Bank sukuk received strong investor demand. It was oversubscribed by approximately 10 times attracting approximately US$3.2 billion orders. The strong demand from the investors allowed the sukuk to be priced at the tighter end of final price guidance at T+140 bps following an initial price guidance of T+165 bps area, which is equivalent to an all-in yield of 2.87% per annum.

Issues like rating requirements, cost of issuance and complexity of documentation meant that capital raising through sukuk is predominantly by larger corporations and entities. This means that sukuk offer no opportunity for direct investments by retail investors. In order to facilitate greater direct retail participation in the corporate bonds and sukuk market, the Securities Commission Malaysia in 2012 developed the framework for retail bonds and sukuk as envisaged under the Capital Market Masterplan 2, enabling retail investors’ access to a wider range of investment products. However, there are several challenges. One area that requires considerable effort is investor education. Although the new approach may not achieve overnight success, it will help widening access to the capital market and ensuring that Islamic finance takes the path of inclusiveness.

German insurer Allianz Malaysia is still keen on takaful business but is in no rush to get a licence, according to its CEO Jens Reisch. The Bursa Malaysia-listed company is involved in both general and life businesses, but unlike most other insurers, it does not have any takaful tie-ups. Reisch added that Bank Negara Malaysia (BNM) is not issuing any new takaful licence. He believes, however, that the implementation of the Islamic Financial Services Islamic Act (IFSA) will consolidate the industry and require additional capital for family takaful licence. Reisch also said that they were reviewing takaful constantly and closely, and if there was a chance to get a licence or a chance to team up or acquire another takaful company, his company would explore.

The standards for Islamic asset management should be raised so that it can compete with conventional peers. according to Fajar Capital Group CEO Iqbal Khan. He said though the Islamic asset management industry remains marginal and fragmented and continues to lag behind conventional systems, its characteristics to compete in the market through values, ethics and authenticity will prove to be advantageous in the future. He added that global Islamic finance assets were expected to hit US$1.8 trillion in 2013, and Islamic asset management is expected to grow around US$300 million to US$500 million this year. He said Malaysia played a leading role, with a well structured approach, in the Islamic wealth management industry and hoped that Malaysia will export its success story to the rest of the Islamic world.

Many advocates of Islamic banking suggest using gold as a replacement for the money created through the interest rate mechanism. While Islamic banks could be allowed to use gold deposits (by way of selling gold for cash), they must return the depositors’ gold or keep it for safe custody. Furthermore, Islamic banks can not extend credit to their customers as they will not be able to use the depositors’ gold (by selling it for cash) to offer financing to those who may need it. This will, in turn, have implications for economic growth. It is important that the governments take a proactive role in implementing this proposal. As the government of Malaysia is developing tools for liquidity management for Islamic banks, gold dinar may not be an entirely abstruse concept.

Azrul Azwar Ahmad Tajuddin, Bank Islam’s recently suspended chief economist, is a member of the party PKR. However, PKR vice-president Mohd Azmin Ali said that Azrul’s party membership was irrelevant to his recent prediction that Pakatan Rakyat would win the 13th general election and that the analysis he gave is a professional opinion based on strong figures. However, Bank Islam released a statement yesterday saying the suspension was unrelated to Azrul’s personal political views.