Nikkei Asian Review

#Indonesia's state banks seek to spark sharia sector via mergers

Indonesia's three state-owned banks will merge their sharia banking units to create one of the country's biggest lenders. Bank Rakyat Indonesia, Bank Mandiri and Bank Negara Indonesia have signed a conditional merger agreement for their Islamic banking units. The new bank will have combined assets of 207 trillion rupiah ($14 billion), making it the eighth-largest lender by assets in the country. The merger is slated to complete next year and is still subject to approval from regulators and shareholders. Indonesia is keen to position the country as the hub of the region's Islamic economy. The country's five-year master plan aims to increase the market share of Islamic financing in the country to 20% by 2024.

US startup PayJoy unlocks smartphone loans for Asia's unbanked

American startup PayJoy makes it easier for people without a bank account or credit profile to purchase a smartphone on installment. The phones and loans are provided by third parties. What PayJoy provides is proprietary software that locks the phone if payments are not made on time, making the device unusable. Once the missed installments are paid, the phone is unlocked and can be used as normal. According to PayJoy, its technology can do more than just put smartphones in users' hands. Customers' payment histories are reported back to local credit bureaus, which serves to build up credit profiles. PayJoy aims to expand in emerging markets such as Asia, particularly in India and Indonesia. In most markets, PayJoy partners up with local mobile makers, distributors and lending institutions. The company then takes a cut from every loan originated using its technology, a business model that lowers costs as well as risks for PayJoy.

BTMU provides $353m Islamic #loan to Malaysian Saudi Telecom unit

The Bank of Tokyo-Mitsubishi UFJ has provided an Islamic syndicated loan to the Malaysian affiliate of Saudi Telecom. The ringgit-based loan amount is about 41.7 billion yen ($353 million). BTMU is the first Japanese bank to act as an agent bank for a syndicated loan in Malaysia. The loan will be provided with HSBC and Standard Chartered Bank of the U.K. Japanese banks in Malaysia mostly provide loans to Japanese companies operating in the country. Now, BTMU aims to expand operations in the country through Islamic finance. BTMU has extended foreign-currency Islamic loans in Malaysia since 2008 and ringgit-based Islamic loans since 2014. The ratio of Islamic finance to total loans in Malaysia rose to about 30% at the end of 2017, from 17% at the end of 2009.

Malaysian Islamic banking to heat up as smaller lenders #merge

Malaysia Building Society (MBSB) is a step closer to becoming a full-fledged Islamic bank after the proposed acquisition of Asian Finance Bank (AFB). If the merger takes place, the tie-up between non-bank MBSB and AFB would create the country's second largest Islamic bank.

Business schools teach Islamic finance, and all are welcome

The world's growing Muslim population opens up near limitless potential for Islamic finance. However, the pool of talent is very limited at the moment. The International Center for Education in Islamic Finance (INCEIF) welcomes students from all over the world. Since its opening in 2006, half of the 1,300-plus graduates have been Malaysians, but the other half have been from over 70 countries. The list includes predominantly Muslim nations, like Indonesia, Pakistan and Somalia, but one does not have to be Muslim to enroll. Malaysian authorities are encouraging other educational endeavors, too. The Islamic Banking and Finance Institute Malaysia will launch two new programs offering professional certifications in Islamic finance. The two certifications, chartered Islamic banker and chartered takaful practitioner, are the equivalent of conventional financial qualifications.

Asia ripe for Islamic finance as #fintech comes to the fore

According to Zahid ur Rehman Khokher, secretary-general of the Islamic Financial Services Board (IFSB), the growth potential of Islamic finance in the Asian market is much bigger than might be expected. He emphasized the developing role of fintech within the sector and the IFSB's role in setting standards. He noted the importance of Islamic microfinance in addressing issues of financial inclusion and improving participation in the financial sector. With the range of new services that are emerging, Zahid feels that capacity building is the biggest challenge at the moment. He feels there is a need for developing human resources and appropriate expertise within central banks, Shariah boards, as well as in commercial financial institutions.

Abu Dhabi builds a '#fintech bridge' to Asia

Abu Dhabi is taking ambitious steps to tap into financial technology. The Abu Dhabi Global Market (ADGM) signed a cooperation deal with the Monetary Authority of Singapore. The goal of the arrangement is to spur financial entrepreneurship through mutual exchanges of fintech know-how. Last November the ADGM launched the FinTech Regulatory Laboratory, or RegLab, to provide a platform for foreign players to innovate. So far five companies have been selected to participate. Richard Teng, CEO of the emirate's Financial Services Regulatory Authority, said there was a clear trend toward cultivating sectors besides oil and the cooperation with Singapore is designed to make fintech the driving force of economic diversification. In his view, Asian financial companies have a big market in the Middle East to develop and explore business in wealth management, remittances and other fields.

Mizuho opens $300m Islamic #credit facility to Jeddah group

Mizuho Bank #Malaysia opened a $300 million credit facility to the Islamic Corporation for the Development of the Private Sector (ICD). The two-year deal will finance projects in the member countries of ICD. According to ICD Chief Executive Khaled Al Aboodi, the $300 million accounts for 24% of funding programs earmarked by ICD in 2017. He added that funds could be disbursed for hospitals in Gambia, manufacturing facilities in Tajikistan or trade finance in Maldives. For Mizuho Bank Malaysia, the deal marks its first cross-border bilateral Islamic facility based on the concept of Murabahah. The bank's deputy CEO, Shinichi Nishiyama, said lending to ICD will expose Mizuho Bank Malaysia indirectly to the markets in Islamic countries and they are looking forward to a long-term partnership with ICD.

Massive gold-backed #ETF certified as sharia compliant

US-based State Street Global Advisors announced that a huge exchange-traded fund for investment in gold has been certified as being sharia compliant. The question of whether ETFs themselves comply with Islamic law has not been addressed. The fund, called SPDR Gold Shares, is one of the world's largest ETFs, having a net asset balance of more than $30 billion. Managed and marketed by State Street Global, it is listed on the New York Stock Exchange. The World Gold Council paved the way for certification by asking the Accounting and Auditing Organization for Islamic Financial Institutions to determine criteria for gold trading. The AAOIFI announced standards for gold trading in December 2016. Joseph Cavatoni, who is in charge of ETFs at the World Gold Council, said the certification is an important step toward meeting demand for gold in the Islamic financial market.

#Indonesia looks to Islamic schools to spur Sharia banking

In an effort to boost the industry, Bank Indonesia has decided to work with Islamic boarding schools known as pesantren. Anwar Basori, Bank Indonesia's head of Islamic Finance and Economy, said there is a lot of potential in the 27,000 pesantren, which have about 3.6 million students. The central bank said it is finalizing a roadmap for the program under which it will work with the Religious Affairs Ministry to help the business units of pesantren to become financially independent. The schools operate in various business areas, including mini-markets and cattle farms, and provide extracurricular entrepreneurship and Islamic finance education to students. Anwar said that the roadmap would be implemented in early 2017, starting with a pilot project.

Islamic finance looks for a second wind

At a conference on Islamic finance in Singapore many experts warned that the industry depends too heavily on oil and gas for revenue. According to expert Rushdi Siddiqui the industry saw a 43% drop in sukuk issuance and he argued for the need to 'delink' Islamic finance from oil and gas. Other participants noted that the industry's growth is slowed by the 'perception price' that comes with political volatility in the Middle East and Malaysia.

Sharif helps Sharia banking to spread

Islamic banking is growing fast in predominantly Muslim Pakistan, thanks to the growing popularity of its Sharia compliant structure and a helping hand from the government of Prime Minister Nawaz Sharif. According to the State Bank of Pakistan most of Pakistan's conventional banks have now opened Sharia-compliant branches and many are working on full conversion to Islamic banking, which is growing at an annual rate double that of the country's Western-style banking sector. Pakistan's 250 million people are served by 22 local and foreign banks, five of which are Islamic. With a few exceptions almost all local and foreign conventional banks also offer Islamic financing services.

Indonesia Islamic finance miniscule, but growing rapidly: study

A report launched by Thomson Reuters on Friday -- called "Indonesia Islamic Finance: Prospects for Exponential Growth" -- says the country's shariah finance industry recorded 559 trillion rupiah ($42.3 billion) in assets as of 2014, merely 3% of the country's financial industry assets overall. However, while the total financial sector's assets grew by 42% during the 2010-2014 period, assets for shariah finance surged by 139%. Boosted by government infrastructure spending and road maps for development of shariah finance, Indonesia's Islamic finance sector is expected to record double growth over the next five years.

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