IslamicFinance.de

Algeria is preparing to launch Islamic financial services as the OPEC member seeks new ways to raise money after a sharp fall in energy earnings. Algeria’s outdated financial system has been a barrier to investment as the government seeks to diversify its economy away from oil and gas, which account for 60 percent of the state budget. Boualem Djebbar, head of the state-run Banks and Financial Institutions Association, said a legal framework would need to be finalized before introducing Islamic financial services. Djebbar said developing the banking system had become inevitable, with a particular focus on electronic payment systems, which are still little used in Algeria.

President Abdel-Fattah al-Sisi aims to slash a subsidy bill, mostly for food and energy, that ballooned to about 8 percent of economic output last fiscal year. Instead, money will be directed to those who need it most – eventually, about 18 million Egyptians, the poorest 20 percent of the population. After years of political turmoil the government is eager to make sure they’re spared the impact of spending cuts. Yet it’s also under pressure from investors to trim one of the region’s biggest budget deficits. Targeted handouts are a way of achieving both goals. The program called Takaful or Solidarity gives cash to families on condition that their children attend school and undergo regular medical checkups. Another plan, Karama or Dignity, covers the elderly and the disabled.

Abdulaziz al-Ghurair, one of the United Arab Emirates’ most prominent businessmen, is leading calls for regulations across the Gulf Arab region to smooth the transfer of ownership of family businesses after the death of the founder. Ghurair, the billionaire chief executive of Dubai-based lender Mashreq and chairman of conglomerate Al Ghurair Investment, among his titles, would like to see the introduction of wills and trusts that are compliant with Islamic principles to allow the passing of control to future generations. A draft law will be submitted to Gulf policymakers this year that will include rules governing concepts such as Islamic family trusts and family ownership.

While awareness of CSR has improved in Lebanon, it has not at all become a trend, it’s still in its infancy. Most companies think they are doing CSR but they are doing philanthropy. Corporate social responsibility involves a business going beyond its fundamental profit-making motive to comprehensively and sustainably address social, ethical and environmental considerations in its workplace and the communities it affects. While CSR Lebanon has established itself as a leading authority on the topic and is the only consultancy of its kind in Lebanon, its clients remain located in the Gulf. Moreover, businesses in Lebanon tend to think short-term rather than investing in a multiyear strategy.

A move by Iran to recover bad debts on behalf of banks has shed light on possible corrupt lending under the country’s previous president Mahmoud Ahmadinejad. President Hassan Rouhani’s administration, in power for nine months, says bad debt in the banking system has reached a “critical” level – 15.6 percent. The authorities this week have handed the names of 575 of the biggest defaulters to the judiciary to try and recover some of the $33 billion owed. The list has not released but some believe the bulk may have been borrowed by as few as 100 people and firms. The bad debt may hamper Rouhani’s plans to boost employment and raise living standards. However, analysts also see positives in the new openness on the debt problem and moves to fix it.

Political tensions after the Arab Spring still weigh on Bahrain's banking industry which is deterring some investment and inflows of money, and making it harder for Bahrain to compete with other centers such as Dubai. However, a mass exodus of financial firms from Bahrain has not happened and local banks are proving resilient. Moreover, Bahraini authorities have mounted an active campaign to persuade financial institutions to stay in the country. The central bank of Bahrain has also been active in recent months in trying to strengthen financial institutions, asking them to increase capital, encouraging revenue diversification and, in some cases, merge. Nevertheless, the future health of Bahrain as a banking market will not be assured as long as the political unrest continues.