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IDB hopes for closer ties with IFSB

Islamic Development Bank (IDB) president Dr Ahmad Mohamed Ali Al Madani suggested four key areas for the Islamic Financial Services Board (IFSB) to focus on durich his keynote address at the 10th IFSB Summit in Kuala Lumpur. These include the creation of a conducive enabling environmen, adoption of IFSB and AAOIFI standards by all stakeholders, shortage of qualified manpower and financial inclusion through Islamic microfinance, supported by Zakat and Awqaf. In this context, IDB hopes for more collaborative opportunities with IFSB. Meanwhile, Sheikh Abdulla Saoud Al-Thani, chairman of IFSB 2013, highlighted some of the challenges that lie ahead in the Islamic financial service industry like the under-penetrated Takaful industry.

Can Islamic Microfinance spur Inclusive Prosperity?

Ensuring the provision of financial services to the poor can address the challenge of poverty alleviation. A large portion of the poor population, however, is excluded from formal financial services. Although access to Islamic microfinance is critical to growth and prosperity in many countries it is provided only by a small number of providers covering less than 1% of the total microfinance outreach. Sustainability of Islamic microfinance institutions (MFIs) is also an emerging challenge. Moreover, Islamic MFIs tend to predominantly use murabaha (cost-plus credit sale) and qard hassan (interest free loans). These products have implications related to sustainability and outreach of MFIs as the cost can be higher in the former and the latter does not generate any return. Innovative solutions are needed to develop more comprehensive and efficient instruments which build on sustainable business models and product diversity.

Tamkeen, Family Bank launch 'Mantoojati' initiative

Tamkeen and Family Bank announced the launch of 'Mantoojati', a joint initiative aimed at enhancing the growth and sustainability of productive families in Bahrain. Through "Mantoojati", the beneficiaries will receive support to set up kiosks in selected shopping malls around the kingdom to market their products and services to a wider customer base. The support will be around BD6000 per applicant and will cover the cost of renting and setting up a booth. This will be complemented by the advisory services already provided to the beneficiaries by Tamkeen and Family Bank. According to Dr. Atef Elshabrawy, CEO of Family Bank, the programme seeks to encourage and motivate local and home-made goods and crafts, which the bank supports through funding and guidance.

Can Dubai Become The World’s Leading Islamic Business Hub?

Dubai recently announced that its latest aspiration was to become the leading Islamic business hub in the world. Under the umbrella of Islamic finance, the emirate is hoping to provide the best facilities for Islamic finance instruments, Islamic insurance, the halal food industry and Islamic trade and quality-management standards. Dubai has numerous advantages as an Islamic finance hub, like its existing strong business and financial infrastructure as well as an established regulatory framework and political and socio-economic stability. Moreover, the emirate plans to set up a central Shariah board to supervise all Islamic financial products used in Dubai. However, the emirate needs to integrate a Shariah- compliant business framework with the already established conventional framework. Furthermore, Dubai also faces rivalry from the other GCC nations.

BIMB to deliberate on Bank Islam stake by end-May

The board of BIMB Holdings Bhd is set to deliberate on Dubai Financial Group LLC's (DFG) sale of a 30% stake in Bank Islam Malaysia Bhd. BIMB's group managing director and CEO Johan Abdullah said that there is no official agreement yet, and that the board is going to discuss this by the end of the month. He added that the sale must have value proposition and earnings accretion for shareholders of the company as a whole. Bank Negara Malaysia (BNM) gave BIMB Holdings until June 30, 2013 to complete its negotiations to buy DFG's 30% stake in Bank Islam Malaysia. Therefore, the parties must ensure the negotiations are completed within this deadline.

Islamic Microfinance in Yemen: Challenges and Opportunities

In an effort to foster hope and stability among Yemen’s por, Al-Amal Microfinance Bank is working to introduce a range of Sharia-compliant microfinance products aimed at reaching the unbanked. However, demand for Islamic financial products can far exceed the capacity of existing microfinance institutions to provide them. That’s why institutions like Al-Amal are often forced to limit their suite of Sharia-compliant products to one or more products that are relatively simple to administer and offer a clear return. In Al-Amal’s case, the signature Islamic product is murabaha. The mark-up ranges between 14.5% (for purchases more than $5,000) and 24% (for purchases below $5,000). Further development of Al-Amal’s murabaha offering and the introduction of other Sharia-compliant products, will hinge on the bank’s ability to reach Yemen’s rural poor, who represent some 80 percent of the country’s population

Islamic finance: Attractive for non-Muslims?

It is often claimed that Islamic finance is not only for Muslims, sending the message that the market potential of Islamic finance is far greater than just the global population of Muslims. However, Shari'ah compliance as the constitutive element of Islamic finance is in itself rather irrelevant for non?Muslims. It could be macro?systemic or micro?commercial or ethical implications of the observance of Islamic law which make it appealing to non?Muslims. If it is not 'systemic superiority' that will attract non?Muslims, then it could be the pricing of Islamic products or their quality that the customers see as individual benefit for themselves. The responsible investing movement is a great opportunity for Islamic finance, but also a great challenge at the same time.

Islamic Development Bank President reiterates support for Somalia

The President of the Islamic Development Bank Group, Dr Ahmad Mohamed Ali has stressed that the IDB would cooperate with the Government of Somalia in a bid to rebuild and consolidate the public finance institutions through various methods such as staff training and transfer of knowledge and technology from IDB member countries. He also said that the IDB would assist the Government in the fields of Islamic banking and finance and improve legislation on investment so that the private sector can play its role in economic and social development. IDB's future activities in Somalia would be geared toward building government institutions, restoring basic services and improving infrastructure he added.

GCC banks close dual-currency deal for Asya

A consortium of Gulf-based banks has announced the successful closing of a $230.5 million and a euros 115.3 million syndicated dual-currency Murabaha financing facility for Turkish Bank Asya. Launched at $225 million, the facility was oversubscribed to close at $382 million equivalent with participation from 28 banks from across the globe. The facility carries a profit rate of 125 bppa over the relevant benchmark. The proceeds from the facility will be used by Bank Asya to expand its financing activities in Turkey. ABC Islamic Bank, Barwa Bank, Emirates NBD Capital, National Bank of Abu Dhabi, Noor Islamic Bank and Standard Chartered Bank were the Initial Mandated Lead Arrangers and also the Bookrunners for the deal.

Nigeria: NDIC Okays Jaiz Bank's Deposit Liabilities

The Nigeria Deposit Insurance Corporation (NDIC) said yesterday that it has assessed the deposit liabilities of Jaiz Bank Plc, and that in a couple of weeks, the bank will start paying premium as insurance cover for its depositors. NDIC Managing Director/CEO Alhaji Umaru Ibrahim said the premium collected from the bank would be invested in non-interest bearing instruments. A sensitisation workshop for NDIC solicitors was organized to educate the legal team because excessive litigations remained a major challenge to developing formidable deposit insurance system in the country. According to him, other challenges are the lack of proper understanding of the distinction in the legal status of NDIC as liquidator and deposit insurer by legal practitioners, the court and the public at large.

Dubai may issue sovereign bond in 2013

Sheikh Ahmed bin Saeed al-Maktoum, advisor to Dubai's ruler, has said the emirate may issue another sovereign bond in 2013. He also said the government is looking at alternate means to repay its debt if asset sales don't materialise. When asked if an alternative to asset sales was in place, he confirmed that they were considering it. However, he could not specify what, since it's confidential information because of the restructuring.

CMA finalizing rules for foreign stock ownership

The Capital Market Authority is finalizing a regulatory framework which will allow foreigners to directly own stocks in Saudi Arabia, though the market has no need for liquidity from international investors. Foreign investment is attracted to come to the market for the technical expertise and human capacity. Indications are that foreign appetite is strong to invest in the largest regional exchange, which could add greater depth and breadth to the market and ultimately benefit all participants, Furthermore, large institutional investors could push for greater disclosures and transparency which will pave the way for Saudi equities to be included in widely followed emerging markets indices. Following this, the next steps would be the introduction of new instruments such as REITs, options and warrants, and covered shorts. An efficient and well-regulated market should be the eventual goal.

Bahrain Financial Harbour: Business Location in the Middle East

According to Omar Al Mardi, Managing Director, Bahrain Financial Harbour, Bahrain depends on direct foreign investment. However, when there is political instability there is risk of having little foreign investment. Bahrain Financial Harbour ("BFH") has recently signed a 7 year BD90.5 million (US$ 240 million) Ijara facility for the Financial Center Project with several banks. The transaction was subject to Shariah Law and to English law. With this financing, the intention is to complete the infrastructure systems and facilities in Bahrain and to support the businesses within the Financial Harbour complex to eventually become the business location of the choice in the Middle East, Al Mardi said. Within the next six months to a year BFH will seek new targets and projects, he added.

Bank Nizwa teams with INCEIF

Bank Nizwa and INCEIF signed a Memorandum of Understanding (MoU), under which the institutions will collaborate to jointly provide structured training and development initiatives for Omani nationals working in the Islamic Finance Industry. The MoU was signed at the Oman Islamic Economic Forum (OIEF), held recently at the Al Bustan Palace. The OIEF, the brainchild of Amjaad Development and Bank Nizwa, took the theme of 'The Islamic Economy: a Culture of Excellence'. INCEIF, The Global University of Islamic Finance, was set up by Bank Negara Malaysia (Central Bank of Malaysia) to develop human capital for the global Islamic finance industry. The collaboration aims to provide thought leadership training to the Omani Islamic finance industry in order for the regional and global industry to benefit.

Azzad Hosts Leader in Turkish Finance

Azzad Asset Management recently hosted Dr. Mehmet Yesilyaprak of Turkiye Finans Bank at its headquarters in Washington, D.C. Yesilyaprak gave the Azzad staff an update on the banking sector in Turkey and met afterwards with Azzad management to discuss areas of future collaboration. The Azzad Wise Capital Fund invests in deposits and notes from Turkiye Finans Bank, among other Islamic banks. The Fund also invests in sukuk. As of March 31, 2013, deposits from Turkiye Finans Bank represented approximately 13% of the Fund's holdings. Portfolio Manager Jamal Elbarmil recently highlighted the contribution of Turkey's Islamic banking sector to the Azzad Wise Capital Fund's first quarter results, stating that exposure to bank deposits from the four Turkish Participation Banks, including Turkiye Finans Bank, helped the Fund outperform its benchmark for the period.

Kuwaiti firm launches Islamic trade finance fund

Kuwait-based Asiya Investments has launched an Islamic trade finance fund with $20 million in seed capital, aiming to cater to small Asian manufacturers. Asiya aims to fill a gap left by Western banks that are scaling back their trade finance business, making credit scarce for small and medium-sized firms. Due to the world financial crisis and higher capital requirements under upcoming Basel III regulations, about 20 percent of the trade finance business could be opened up to non-bank institutions. Asiya's fund aims for a net return to investors of above 5.0 percent and it has $55 million worth of assets in the pipeline, with capacity for approximately $400 million. The firm identifies clients such as denim and latex manufacturers through its Singapore-based joint venture partner, EuroFin Asia.

Post-election hope for future of Islamic finance in the nation

As Malaysians welcome their newly elected and returned Members of Parliament as well as state assemblymen, there is hope that people develop a better understanding and acceptance regarding different aspects of Islamic finance. People might better understand the different financial institutions that are undertaking Islamic financial activities in the market. Moreover, they might stop accusing Islamic financial institutions in general of merely emulating and replicating the products and services of conventional financial institutions. Legislators play a significant role in creating the right platform for a more inclusive Islamic financial market and we have not communicated enough on their roles in making Islamic finance in Malaysia the best in the world all these years.

QIB CEO Bassel Gamal Says No More Need for Sukuk Issues

Qatar Islamic Bank is not expecting to issue more Islamic bonds before 2014, according to its Chief Executive Officer Bassel Gamal. The CEO said that there seems to be enough liquidity currently. Last October, it tapped the bond market with a US$750 million five year sukuk bond issue. This is part of the overall sukuk programme of the bank valued at US$1.5 billion. Gamal added that local currency sukuks would be expected to be issued in the coming years. He also said that many countries encourage local issuances of sukuk, such as Saudi Arabia and Malaysia.

Pilgrim Funds Give Indonesia Banks Booster Shot: Islamic Finance

Indonesia’s plan to shift 11 trillion rupiah ($1.1 billion) of pilgrim’s savings into Shariah- compliant lenders is a booster-shot that will help narrow the gap with neighboring Malaysia. Deposits set aside by those planning a Hajj visit to Mecca in Saudi Arabia will be shifted by the Ministry of Religious Affairs from non-Islamic banks within a year of announcing the policy. The funds are equivalent to 7.3 percent of the 150.8 trillion rupiah in savings at Islamic lenders, less than a sixth of Malaysia’s 310 billion ringgit ($102 billion). The entire Hajj fund totaled 55 trillion rupiah in March, with about 35 trillion rupiah invested in non-tradable sovereign sukuk and 9 trillion rupiah already placed at Islamic lenders.

Dubai and Abu Dhabi Financial Centers to be complementary

Industry experts and analysts said Abu Dhabi World Financial Market (ADWFM) and Dubai International Financial Centre (DIFC) will complement each other in attracting investments to the UAE. The focus of the ADWFM will be on energy, oil and gas, renewable energy, carbon credits and other new products, benefitting from the fragile recovery in the USA and European markets. Abu Dhabi will differentiate this centre in terms of capabilities in annual operational costs, prompting businesses from the region and from the EU and US to invest in the UAE market.Both DIFC and ADWFM will be housing regional headquarters for many of the world’s biggest banks and finance firms as well as energy companies. The ADWFM will have a positive impact on the UAE economy regarding per capita income and unemployment.

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