Asia

#Indonesia’s BNI Syariah to expand international banking services

Indonesia’s state-owned BNI Syariah plans to add overseas representative offices to run trade finance, and financial institutions and remittance services. The Islamic bank will leverage the branch offices of its parent company, Bank Negara Indonesia, in Singapore, Tokyo, Seoul, Hong Kong, London and New York. The bank can now expand its international banking services after it received a non-cash capital injection of 255 billion rupiah ($17.5 million) in March. This moved it up to Tier 3, for banks holding core capital of 5 trillion rupiah (around $342.5 million) to 30 trillion rupiah. The lender is also eyeing markets outside its current geographies, such as Malaysia, Saudi Arabia and Taiwan. Alongside expanding its international presence, the bank is mitigating downside risks by optimizing its digital banking channels.

#Thailand’s Islamic bank doubles branches; #Cambodia gets #takaful option

Islamic finance is making further foray in non-Muslim countries in Southeast Asia. The Islamic Bank of Thailand (branded as IBank) announced it will more than double its branches. Etiqa Insurance & Takaful, the insurance division of Malaysian banking group Maybank, has been granted an operation licence in Cambodia. IBank plans to add 60 more branches to its network to reach 100 outlets nationwide. The branch expansion aims not only at increasing the share of Muslim customers of Ibank and support Muslim career development by creating new banking jobs, but also at attracting foreign investors, particularly from the Middle East.

Hong Leong Islamic appoints Rusni Hassan as Shariah Committee chairman

Hong Leong Islamic Bank (HLISB) has appointed Professor Dr Rusni Hassan as the chairman of its Shariah Committee effective April 1, 2020. Rusni is a professor at the IIUM Institute of Islamic Banking and Finance and is an influential veteran in the Islamic finance and banking industry. Her works and contributions to Islamic finance have also been recognised internationally including being listed in the prestigious Top 10 Most Influential Women in Islamic Business and Finance 2019 and Top 50 Most Influential Women in Islamic Finance 2018 by Cambridge IFA.

#Bangladesh’s first digital crowd-funding platform Ekdesh launched

Bangladesh launched its first digital crowd-funding platform Ekdesh for raising funds and disbursing them as zakat or financial aid. Information and Communication Technology Division State Minister Zunaid Ahmed Palak inaugurated the platform via an online inauguration program. People of the country can donate to the prime minister’s relief fund, the Islamic Foundation, or other non-government organizations through this platform to help the poor people or small businesses. Several organizations like Brac, Bidyanondo Foundation, Center for Zakat Management, Centre for Rehabilitation of the Paralysed (CRP), and Sajida Foundation have already joined the platform.

#Indonesia to Roll Out Relief Fund for Banks to Ease Impacts from Pandemic

The Indonesian government has issued a regulation for the relief fund to the banking sector to cope with the financial impacts of the Covid-19 outbreak. The regulation states that the government may channel fund to the so-called participating banks. The participating banks will in turn pass the fund on to the “executing banks”, smaller banks who meet certain requirements. President Joko Widodo has earlier urged banks to loosen their terms on debtors and restructure loans as many are unable to repay in time amid massive job losses or salary cuts due to the outbreak.

SAJIDA Foundation combats Covid-19 as beacon of hope

Microfinance institution SAJIDA Foundation has rapidly diverted its resources and operations to tackle the pandemic from multiple frontiers. On the health front, one of its secondary-care hospitals have been dedicated to the treatment and isolation of Covid-19 patients, while the other has continued general medical services focusing particularly on maternal and child care. At the same time, nearly 2,000 field forces have reached 0.4 million microfinance members with life-saving information regarding the prevention and treatment of Covid-19. Mass awareness raising efforts have included leaflet distribution as well as household visits, while maintaining social distancing measures. SAJIDA’s members have also benefitted from a credit shield facility which supports members through loan outstanding waivers and cash benefits during emergencies.

Loan moratorium: Borrowers need to inform banks on consent, says finance minister

Malaysian borrowers who wish to continue with the six-month moratorium need to inform their respective banks of their consent via the banks’ designated platforms. Although the moratorium is automatic starting April 1, the borrowers’ consent is still legally required. Bank Negara Malaysia (BNM) said starting from May 1, bank customers with hire-purchase loans and fixed rate Islamic financing will receive a notification on the steps they must take to complete the deferment process under the six-month moratorium on loan and financing payments. Customers will be notified via SMS, email or registered mail from their banking institutions.

Islamic finance gaining stronger foothold in #China

As this year’s GDP growth of China is forecast to reach a 44-year low of just 2.5%, there is enough ongoing in the background to prepare for a post-coronavirus rebound. One such sector bustling with activity is Islamic finance which has grown in importance since China embarked on the program of the New Silk Road, officially known as Belt and Road Initiative (BRI). Expanding across Central and Western Asia and eventually the Middle East, the BRI leads through many Islamic economies and jurisdictions, so it is obviously advantageous for Islamic finance and halal trade to join and contribute to the BRI. There is also development of the sector within China itself. Malaysia’s Affin Islamic Bank together with Hong Kong-based Bank of East Asia has been looking into the opportunity of launching Islamic banking services in Urumqi, the capital of Xinjiang. China’s Ningxia and Xinjiang autonomous regions are home to a Muslim population of about 25mn.

RAM Ratings: #Takaful industry’s strong capitalisation sufficient to withstand headwinds

RAM Ratings Services has maintained its "stable" outlook on the Malaysian takaful industry for 2020 despite the economic slowdown. Its Financial Institution Ratings co-head Sophia Lee said the industry’s strong capitalisation is sufficient to withstand headwinds. In 2019, the family takaful’s new business contributions grew 25% to RM6.2 billion, an additional 13% from 2018, mainly driven by the MySalam initiative, the national health protection scheme. Excluding MySalam, growth was still commendable at an estimated 16%, anchored by credit-related takaful products and the employee benefits. Similarly, the general takaful industry expanded by a strong 20% in 2019, led primarily by the motor business.

#Indonesia’s national Islamic economy committee budget slashed, plans suspended as gov't focuses on COVID-19

Indonesia’s National Sharia Economy and Finance Committee (KNEKS) will suspend non-urgent programs this year after its budget was slashed by a third as the government allocates resources to fight COVID-19. The committee will conduct a series of webinars focused on the impact of COVID-19 on the Islamic economy. KNEKS will also engage Indonesians to participate more in Islamic social finance by promoting Shariah-compliant fintechs such as LinkAja Syariah. Indonesia’s government has set aside 405.1 trillion rupiah ($24.65 billion) out of the state budget as a support and stimulus package to help the economy. It has re-allocated and re-focused 95.5 trillion rupiah from ministries and other government institutions as part of efforts to fund the package.

RM100b corporate bonds, #sukuk issuances to be expected

The Securities Commission Malaysia (SC) is expecting up to RM100 billion worth of corporate bonds and sukuk issuance this year. The regulator said the Covid-19 outbreak and the resultant disruption on businesses have affected fundraising activities. Thus any non-payment of profit arising from the current challenging operating landscape is very likely due to credit rather than Shariah issues and would therefore be dealt with from a credit perspective. SC deputy CEO Datuk Zainal Izlan Zainal Abidin said that Malaysia continues to maintain its leadership in the Islamic capital markets (ICMs). The SC noted that ICM represented 63.57% of Malaysia’s capital market, with market size of RM2.04 trillion as of December 2019, an 8.23% growth over 2018. The SC added that the Islamic fund management industry also witnessed new and innovative investment product offerings. These include Islamic exchange-traded funds based on gold, SRI Islamic funds, as well as social and green sukuk.

#Malaysia’s BIMB Investment launches Shariah-ESG robo-advisor

BIMB Investment launched a robo-intelligence investing platform focused on sustainable and Shariah-ESG assets. BEST Invest will give investors access to a suite of BIMB Investment’s Shariah-ESG unit trust funds across asset classes including global equities, Asia Pacific equities, sukuk, and money market. BIMB Investment became an official signatory of the United Nations-supported Principles for Responsible Investment (UNPRI) in July last year. At the time, the company’s CEO said it had integrated more than 250 ESG metrics in its investment process since 2015. The new robo-advisor will allow users to either start investing for themselves or enable the system to identify and select the best investment methods. Investments start at 10 ringgit with a zero sales charge.

COVID-19: Indonesian banks face challenging time but hopes remain

The spread of COVID-19 is expected to hit Indonesian banks’ performance this year, but analysts remain hopeful that the industry will still be resilient. The Financial Services Authority (OJK) recorded gross non-performing loan (NPL) ratio at 2.79% in February, the highest level since May last year. Loan growth, meanwhile, stood at 5.93% in the month, reflecting the lowest expansion since November 2009, as demand plunged. The rise in bad loan ratio is also expected to increase pressure on banks’ profitability, even on Indonesian banks, which are considered to be some of the most profitable in the world. Although Moody’s expects bank profitability to decrease, vice president Alka Anbarasu also said Indonesian banks could still survive during the challenging climate as they could absorb the increase in credit costs.

Time to mobilise #zakat, retail #sukuk for Indonesia’s COVID-hit MSMEs – KNEKS official

An official of Indonesia’s National Committee for Islamic Economy and Finance (KNEKS) says that Islamic finance instruments and domestic retail sukuk are more sustainable financial support alternatives for COVID-hit MSMEs than loans from multilaterals. Indonesia’s government last week announced a 405.1 trillion rupiah ($24.65 billion) financial package to support households and businesses affected by the coronavirus pandemic. The potential of zakat in Indonesia is valued at around 286 trillion rupiah a year, according to the national zakat body BAZNAS. But actual collection is a far cry, at around only 9.5 trillion rupiah ($577.3 million) in 2019. On the possibility of a domestic retail sukuk, there are ongoing discussions on the instrument’s structure and mechanisms.

Islamic investments a more stable choice in uncertain times

According to Malaysian Principal Islamic Asset Management CEO Datuk Syed Mashafuddin Syed Badarudin, Islamic investments are less volatile than their conventional counterparts and may be a better choice for investors during times of uncertainty. He notes that the increased uncertainty from the coronavirus outbreak has led to financial market volatility not seen since the last global financial crisis. Asean countries, including Malaysia, have already cut policy rates in response to the turmoil. Based on real interest rates in the region, there is more room for rate cuts and this bodes well for bond prices. Badarudin expects that market conditions will continue to be volatile until some stability is seen regarding the virus situation. He expects Principal Islamic to increase its asset size this year despite the more challenging economy.

Maybank Islamic’s new Dubai branch sets out to attract Gulf investors to Southeast Asia

Maybank Islamic’s move into branch banking in the Middle East aims to attract Gulf investors to Southeast Asia. The Malaysian bank opened its first overseas branch at Dubai International Financial Centre (DIFC) in February. Maybank Islamic deputy CEO Nor Shahrizan Sulaiman said the new Dubai branch would serve as a the bank’s gateway not just to the UAE but to the wider GCC. The bank pursues further growth in Singapore and Indonesia, which it sees as home markets outside of Malaysia. The international business expansion is not new, as it has always been one of the focus areas of Maybank Islamic from early on. Maybank Islamic was granted a full Islamic banking licence from the Dubai Financial Services Authority last July, allowing it to open the DIFC branch. It replaces Maybank Islamic’s office in Bahrain, which has closed down.

Crowdfunding with Music Securities: A New Approach to Impact Investing

Impact investing activity in Asia has grown quickly, but it will be a challenge to maintain the pace of scaling due to the complex and widely heterogeneous landscape of the region. Crowdfunding has been identified as a potential solution to match the demands and risk appetite of investors to the needs of operators. A case study on Music Securities is used to highlight the key benefits and risks of such an impact investing model. Formulating appropriate and efficient policies and increasing awareness among investors will also be crucial in promoting impact investing activity.

Etiqa gives RM1mil to buy ventilators

Etiqa is contributing RM1mil for the purchase of ventilators through Mercy Malaysia’s Pandemic Fund to support strategic preparedness and response plan to the Covid-19 virus. This initiative will also help ensure all communities are well prepared, especially those with the weakest health systems. With the number of people infected with Covid-19 increasing in Malaysia, the number of ventilators available at designated hospitals will be insufficient to deal with the number of critical cases. Etiqa Insurance & Takaful Group CEO Kamaludin Ahmad feels obligated to help the country battle Covid-19 and hopes that this contribution will mean that no patient will have to be denied lifesaving care due to ventilator shortage.

Covid-19 fund amassed RM8.1m in donations

THE Covid-19 fund, launched by Malaysian Prime Minister Tan Sri Muhyiddin Yassin on March 11, received a RM5 million contribution yesterday. The donations came from Spanco Sdn (RM2 million), followed by DRB-Hicom, MMC Corp and YTL Corp who contributed RM1 million each. Property developer Titijaya Land has contributed 520,000 face masks for frontliners. With the above donations, the fund has amassed a total of RM8.13 million in contributions. The government has launched the Covid-19 fund to help affected Malaysians. Similarly, the Malaysian Department of Islamic Development has also launched another fund to help the Muslim communities affected by the outbreak. Separately, some Malaysians are criticising the setting up of funds and are calling on ministers to take pay cuts instead.

#Sukuk issuance stalls on subdued economy

Sukuk issuance could potentially take a hit this year, dragged by subdued economic growth. In 2018, when Malaysia’s GDP growth slowed to 4.7%, sukuk issuances fell by 2.6%. In 2019, when real GDP growth moderated further to 4.3%, sukuk issuances slipped by 2.3%. However, the current low interest-rate environment will prevent sukuk issuances from falling too significantly this year. According to Malaysia Rating Corp (MARC) chief economist Nor Zahidi Alias, the downside risk remains especially if the Covid-19 outbreak continues to be unmanageable and lockdown periods across global economies continue. Policymakers globally are using fiscal and monetary tools to soften the impact of the Covid-19 outbreak. The US Federal Reserve’s move to lower its benchmark to a near-zero rate prompted central banks across many sukuk active markets to cut their interest rates.

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