Faizal to retire from Amana Bank - Sri Lanka

Senior banker Faizal Salieh will be retiring from the Amana Bank as well as from his post of Managing Director/CEO from 1 June 2014.

The Bank said a new CEO will be announced after obtaining the approval from the Central Bank.

Faizal counts for over three decades experience in conventional and development banking both in Sri Lanka and overseas.

He joined Amana Investments Ltd., in 2004 and led the company towards obtaining the banking license and the formation and launch of Amana Bank in 2011.

Previously he had served Grindlays Bank, ANZ Bank and National Development Bank and Sri Lanka’s first private sector housing bank, NDB Housing Bank of which he was the CEO and Director until 2004.

Faizal Salieh holds a Bachelor’s Degree in Economics with First Class Honours, a Master’s Degree in Business Administration and is a Fellow of the Institute of Certified Professional Managers in Sri Lanka.

http://www.ft.lk/2014/03/26/faizal-to-retire-from-amana-bank/

Islamic finance offers strong prospects for professional growth

Finance professionals looking for a change in their career might do well to consider working for an Islamic bank or financial services company. Analysts said there are many vacancies to fill within the industry, while attractive pay packages await the successful candidates.

It is estimated that by 2015, Islamic banks and financial services firms in the UAE will need to hire additional manpower for 8,000 positions, thanks to new products being introduced and the ongoing push to make Dubai the capital of the world’s $8 trillion (Dh29.4 trillion) Islamic economy in three years.

Likewise, the employee population in the sector is forecast to double, from around 10,000 to 20,000 workers. Across the globe, the need for more staff is even bigger, with several companies requiring a total of 50,000 new professionals next year.

Geetu Ahuja, head of GCC at the Chartered Institute of Management Accountants (Cima), which offers Islamic finance programmes, said the popular jobs and positions at the moment are certified Takaful specialists, specialist Sharia scholars and Islamic finance lawyers, among many others. Companies looking to hire new personnel include banks, financial consultancy firms and higher education institutions, such as universities.

His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister and Ruler of Dubai, earlier launched the initiative “Transforming Dubai into a global centre for Islamic sukuk.” Similar to conventional banking, Islamic finance offers products and services to both Muslim and non-Muslim savers, investors or borrowers, but the difference is that it follows the principles of Sharia, the moral code laid out in Quran.

Right skills set

While more jobs are and will be up for grabs within the industry, making a career change to the Islamic field may prove to be a difficult one, especially for those lacking the right skills sets. Financial institutions are often heard saying there is a serious scarcity of professionals with the required qualifications and experience.

“If you’re looking at this industry growing from over a trillion US dollars and is expected to grow by 2017 to about $2.67 trillion, you can imagine, if that is their vision, that they obviously need the right set of people and I don’t see an organisation having that kind of provision compromising on the skills set that could actually take them to that vision,” Ahuja told Gulf News.

According to the Workplace Planning Study by the Dubai International Academic City, half of the 60 GCC banks surveyed are having difficulty hiring graduates for entry-level positions. Another 23 per cent of the respondents said that filling mid-level roles is a problem, while only a small proportion (5 per cent) struggle to hire for senior roles.

Part of the problem is that there aren’t enough programmes that help groom professionals and fresh graduates into the kind of workers the industry needs.

“Universities and training providers must refine their programmes and courses to support the sector, equipping young talent with the level of specialism and sophistication required by employers,” Rashid Mahboob, senior vice president, customer excellence at Dubai Islamic Bank, earlier said at a forum in Dubai. “Similarly, employers must dedicate themselves to providing genuine on-the-job training.”

Jobseekers can also expect tough competition, as an increasing number of people, both Muslims and non-Muslims, is seeking a career in Islamic finance. “There are a number of professionals which we’re seeing growing by the day in terms of their interest in joining the industry,” said Ahuja.

Every religion

Looking at the database of students who have pursued Islamic finance qualification with Cima, Ahuja said almost every religion is represented.

“Getting into the industry is not more from a cultural aspect. You’d see a mix of them. When I walked into Islamic banks and institutions myself, I saw a good proportion of a mix of Muslims and non-Muslims,” she added.

The good news for unqualified jobseekers, though, is that they can increase their chances of landing a position by taking up academic certificate programmes designed for professionals seeking to pursue Islamic finance. At Cima, for example, anyone, regardless of their university degree or employment history, can obtain an Islamic finance qualification in less than a year.

“The qualifications are based on your pace. You can finish the qualification from one month to four months. It’s basically quite flexible. There are no time limits as such,” said Ahuja.

By Cleofe Maceda Senior Reporter

Gulf News 2014. All rights reserved.

http://www.zawya.com/story/Islamic_finance_offers_strong_prospects_for_professional_growth-GN_21032014_220309/

Focus on sustaining Islamic banking in Oman

Meethaq, the Islamic banking window of Bank Muscat, hosted a seminar in partnership with Thomson Reuters on 'Developing a Sustainable Islamic Banking Industry in Oman' on Sunday at the Bank Muscat head office.

H E Sheikh Abdullah al Salmi, executive president of the Capital Market Authority (CMA), presided over the seminar, which was attended by policy makers, Sharia scholars and representatives of the Islamic banking industry in Oman and the region, in the presence of AbdulRazak Ali Issa, chief executive, Bank Muscat.

The seminar highlighted steps to promote and sustain Islamic banking with quality products and services in Oman.

"The seminar echoes the Islamic banking industry's consolidation phase in Oman, focusing on investment opportunities and liquidity-management tools to achieve sustained growth in the coming period," H E Salmi said.

Speaking at the seminar, Sulaiman al Harthy, group general manager - Islamic banking, Bank Muscat, said, "The Islamic finance industry is growing very rapidly worldwide and this is a great opportunity for new Islamic banks, as well as conventional banks to come together and create an environment which should make all of us proud, balancing the Sharia law, Central Bank of Oman guidelines, public demands and expectations and the rule of law."

Dr Sayd Farook, global head - Islamic Capital Markets, Thomson Reuters, said, "The seminar deals with a very important and timely assessment of the future of Islamic banking and how Islamic financial institutions in Oman can grow in an increasingly competitive environment."

A session on the future of the Islamic banking industry covered the strong demand and retail market potential for Islamic banking in Oman, exploring the options of full conversion to Islamic banking rather than opening dedicated windows, how Islamic banks can differentiate themselves, and what customers are looking beyond Sharia compliance in Oman.

In another session on capturing the opportunity with sukuk as a catalyst for foreign investment in Oman, the seminar highlighted how sukuk can offer local investors and financial institutions added portfolio diversification and investment opportunities in the form of new asset classes, while issuers can benefit from increased liquidity by tapping into the growing demand for Sharia-compliant investment products.

Another important discussion centred on developing indigenous and innovative solutions for liquidity management in Oman's Islamic finance industry. The session explored new liquidity management products to fill the yield curve and liquidity management issues faced by the Islamic banking industry.

© Muscat Daily 2014

http://www.zawya.com/story/Focus_on_sustaining_Islamic_banking_in_Oman-ZAWYA20140324045956/

Islamic finance talent gap to reach 8,000 plus

Companies in the UAE will require a lot more than 8,000 new employees trained in Islamic finance next year as Dubai positions itself as the capital of the $8 trillion Islamic economy, a source from an institute told Gulf News.

The bulk of the additional manpower will be required by banks offering Sharia-compliant products and services. Recruiters in the UAE are already seeing a 50 per cent growth in demand for candidates with Islamic finance experience.

Many companies are currently looking to fill positions across all levels, from relationship management, project management to risk management and marketing.

Tahseen Consulting, a specialised advisor on strategic and organisational issues in the Arab world, recently projected that some $87 to $124 billion could potentially enter the Islamic banking system in the UAE next year, creating approximately 7,800 new positions.

“It’s quite a positive industry right now. The growth is showing a lot of positive movements, so hence there is a good potential or possibility of the number even going higher,” Geetu Ahuja, head of GCC at the Chartered Institute of Management Accountants (Cima), a provider of Islamic finance education, told Gulf News in an interview.

“The close to 8,000 projected manpower is only needed around Islamic finance banks, but if we’re looking at other institutions, there are a few more hundreds there itself which will be in demand by next year.”

The Gulf Cooperation Council (GCC) region is set to lead the expansion of the global Islamic finance industry, which is projected to post a double-digit growth by 2016. Estimates show that across the world, Islamic finance will need about 50,000 additional personnel by next year. Adnan Salam, principal consultant at Talent2, a recruitment specialist, said they have seen an increasing demand for Islamic finance professionals in the UAE and the wider GCC market, as conventional banks have been launching new Islamic products.

“At least 40 per cent of the overall roles we are currently working on within the banking and financial services team require Islamic finance qualified or experienced candidates. This is at least a 50 per cent increase compared to the same three-month period in 2013,” Salam told Gulf News.

“We are seeing positions that are in demand across all levels, predominantly within relationship management/sales, business analysis, project management, risk management — more specifically credit risk — and marketing, all related to Islamic finance.”

Analysts have said earlier that while the market is growing, there is a dearth of qualified personnel with Islamic banking skills. The Workforce Planning Study by Dubai International Academic City showed that 50 per cent of the GCC banks find it difficult to hire graduates for entry-level positions, while nearly a quarter (23 per cent) struggle to hire for mid-level roles.

Shailesh Dash, CEO of Al Masah Capital, said the talent shortage can be addressed by utilising the existing pool of professionals working in banks and financial services firms, and providing them with Islamic finance training.

“Instead of relying solely on some sort of certification to determine the authenticity of the professional’s Islamic finance knowledge, one could instead use existing finance [employees] and convert them to Islamic finance experts by giving them the requisite training,” Dash told Gulf News yesterday.

“This would be a far more efficient and quicker way to reduce the gap. By setting up a world-class system, the UAE not only fills a gap in the market, it also provides its national population another opportunity for gainful employment,” he added.

Dubai has announced plans to be the global capital of the Islamic economy, which includes Islamic finance, in the next three years.

By Cleofe Maceda Senior Reporter

Gulf News 2014. All rights reserved.

http://www.zawya.com/story/Islamic_finance_talent_gap_to_reach_8000_plus-GN_24032014_250361/

UK eyes closer ties with Qatar Islamic banks to develop sukuk market

Baroness Saeeda Warsi, Senior Minister of State at the Foreign & Commonwealth Office (UK) and Minister for Faith and Communities in the House of Lords, has held a meeting with Sheikh Dr Khalid bin Thani al-Thani, chairman of the board of directors of Ezdan Holding group, on various issues related to Islamic finance.

Also present was International Islamic CEO Abdulbasit Ahmed A al-Shaibei and the accompanying delegation. On the British side, the political consultant of Baroness Warsi attended the meeting.

Developments and changes in the field of Islamic finance and economy were addressed in the meeting and several issues related to Islamic exchange were also reviewed. The UK is considered as a major centre for Islamic exchange in Europe.

The deliberations shed light on the development of the international bonds market and Islamic economy systems in Britain in particular and Europe in general. The Qatari Islamic banks have extensive experience in this field, which will be beneficial to the development of Islamic exchange systems in Britain.

During the meeting, both parties stressed the importance of ensuring that all terms and conditions support and sponsor the success of Islamic exchange in line with the aspirations of investors who are increasingly relying on Islamic banking systems in various countries around the world. The meeting also highlighted the positive role of Qatar International Islamic Bank in establishing the first Islamic bank in Britain.

The meeting concluded that Britain is looking forward to establish close co-operation with Islamic banks to develop Islamic finance at an international level, given the available opportunities for development and common co-operation and the close relations between the finance and business communities in Qatar and Britain as well as the wish to benefit from development opportunities in the Islamic services field, noting that the largest Muslim community in Europe exists in Britain.

UK Prime Minister David Cameron recently said that London is the largest centre for Islamic finance outside the Islamic world. “But today, our ambition is to go further still.”

More than 20 banks in Britain provide Islamic exchange products; additionally, 49% of Islamic bonds worth $34bn were circulated in the London exchange in five years.

The British PM had also stated that the country wants to issue Islamic bonds. With this, Britain will become the first sovereign outside the Islamic world to issue an Islamic bond.

(GULF TIMES)

http://www.amilin.tv/news/uk-eyes-closer-ties-with-qatar-islamic-banks-to-develop-sukuk-market/

Islamic Social Finance Report 2014

The Islamic Research and Training Institute and Thomson Reuters present you with the maiden issue of Islamic Social Finance Report. As poverty continues to be the biggest moral challenge of the century Islamic social finance offers an alternative solution to meeting the needs of the poor. There is a growing realization that social finance rooted in philanthropy and not-for-profit behavior have neither been fully understood nor explored with regard to their potential to address some of the challenges associated with conventional microfinance. In this context, this report on flow of funds in the social sector assumes great significance. The Islamic social finance sector broadly comprises the traditional Islamic institutions based on philanthropy e.g. zakah, sadaqah and awqaf; those based on mutual cooperation e.g. qard and kafala; and also the contemporary Islamic not-for-profit microfinance institutions that use for-profit modes primarily to cover costs and sustain their operations. Unlike the mainstream Islamic financial services sector, there is inadequate research and documentation of practices pertaining to this sector. The report fills this gap.. In this year's report, we provide the historical trends, future challenges and prospects for the Islamic social finance sector in 7 countries in South and South-East Asia - Indonesia, India, Pakistan, Bangladesh, Malaysia, Singapore and Brunei Darussalam. We examine the broad regulatory and policy environment at the macro level as well as good and bad practices at the meso and micro levels to seek answers to the following questions as well as to encourage healthy deliberations around them: How much regulation is right for the Islamic social finance sector? Do stringent laws and over-regulation stifle the sector? How do we harmonize the different regulatory frameworks governing institutions based on religious and secular philanthropy, co-operation, not-for-profit and for-profit finance? How do we develop a unified and integrated framework for the Islamic social finance sector? What roles do supporting institutions, e.g. networks and associations, institutions of higher learning, trainers and consultants, developers of standards, play in the sector? How do we enhance transparency, accountability and governance in the sector? What's included? Overview of sector Poverty-related indicators Potential of Islamic social finance to meet the resource gap Regulatory and policy framework Institutional structure and supporting infrastructure Case studies of success stories and good practices Lessons and policy Implications To get the study please click here. Let me also invite you to share your views and opinions about how to improve its value further for our reader(s). Please email them to the IRTI Islamic Social Finance team Kind Regards, Islamic Finance Gateway Team Thomson Reuters

FDI likely to boost India's Islamic finance market

Foreign direct investment is likely to boost India's Islamic capital market in the coming years as participatory finance is gaining popularity in the country.
A Delhi-based Indian business group said it was seeking Islamic finance to establish a buffalo meat plant in Bihar at a total cost 265 million Indian rupees ($4.33 million).

"We hope the success of our project will encourage more entrepreneurs to carry out participatory ventures making use of interest-free funds available in India and the Middle East," said Shahid Ahmad, director of ABZ Agro Foods.

Speaking to Arab News, Ahmad highlighted the growing prospects for Islamic finance in India.

"Such ventures will help mobilize funds of those who do not want to deal with interest and will contribute to boosting the country's real economy," he said.

Asked why he opted for Islamic finance despite loan offers from several commercial banks, he said: "It was primarily because of my religious faith that prevents me from dealing with interest-based finance."
He emphasized that investors in the buffalo project would gain good profit, not less than 27 percent, much higher than interest received from bank deposits. "Shareholders in our project are considered our partners."

Ahmad said the project would benefit a lot of people in Bihar, especially the poor.

"It will also boost related industries such as transportation, packaging and animal farming," he added.
The government has offered to give a subsidy of Rs.53 million to support the project while developers are contributing Rs.52 million.

"We would like to mobilize the fund required for the project on a participatory basis through equity shares and foreign direct investment, which is permissible as per the Indian laws," Ahmad said.
The group is seeking funds from potential Saudi and Indian private investors, offering two million equity shares worth Rs.160 million to start the project.

He thanked the Jeddah-based Indian Forum for Interest-Free Banking (IFIB) for taking the initiative to promote the project among potential investors in the Kingdom.

V.K. Abdul Aziz, secretary-general of IFIB, said existing Indian laws allow entrepreneurs to make use of the huge Islamic funds.

"All religions, including Hinduism, Christianity and Islam have prohibited interest, even if it is one percent," he told Arab News.

He hoped that more businesses like ABZ Agro Foods would come forward to utilize untapped interest-free funds available from Muslim NRIs, and Gulf businessmen and businesswomen.

"We have got vast scope to mobilize funds from all over the Middle East to meet India's financial requirements to carry out its development and expansion projects," Aziz said.

"If this (buffalo) project is successfully implemented, it will enhance the reputation of Islamic finance and encourage more entrepreneurs to make use of this facility on a large scale," the IFIB official said, adding that all Indians would benefit from this participatory scheme.

Mohammed Shakir Qureshi, another director of ABZ, said financial experts have emphasized the project's feasibility and profitability.

Indian meat is very much in demand in world market. India accounts for 57 percent of the world's buffalo population.

"Only two to three percent of buffalo meat is currently processed and the industry is growing at an annual rate of 25 percent," he said. We'll get cheaper raw material and will be able to supply quality meat," he added.

© Arab News 2014
http://www.zawya.com/story/FDI_likely_to_boost_Indias_Islamic_finance_market-ZAWYA20140318035401/

Lenders urged to maintain optimal Islamic behaviour

KFH participates in Sharia Control workshop Kuwait Finance House (KFH), represented by the General Counsel Dr Anwar Al-Fuzaie, and the Executive Manager Shariaa Control Advisory Dr Adnan Al-Mola, has participated in the fourth workshop of Kuwait Center for Islamic Economy, with the presence of prestigious legal and economic figures. The workshop that aims at enhancing economic thought by linking among shariaa, economy and law in an integrated way, discussed important topics, of which Sharia Control Quality between Islamic Banks and Banks Converted to Islamic, and the Control Responsibilities in the Professional Ethics.

Al-Fuzaie submitted, in the fifth session of the workshop, a thesis about the control's responsibilities in both professionalism and ethics where he explained that Fatwa and Sharia Control entities shouldn't be limited to sharia control tasks of the financial actions that the Islamic financial institutions ink, but rather they should shoulder the responsibility of maintaining the optimal Islamic behavior in corporations commensurate with the honor of Islamic banking, especially in the fields of advertising and social activities. Moreover he underlined the role Sharia Control entities play in contributing in mentoring financial institutions giving the Islamic economy an honorable image.

Ethical
In addition, he said that when financial institutions follow the Islamic example, they insure the social responsibility and the ethical role in supporting science and scientists, helping the needy, developing the society and protecting the environment through Zakat, and charities. Meanwhile, Al-Mola tackled during the session the topic of shariaa control at Islamic banks and financial institutions, models and practices. He noted in his thesis that Fatwa and Shariaa Control is one of the most important administrations in the organizational structures at Islamic banks and financial institutions. He added that its mission represents the strategic depth and the distinguished characteristic of Islamic banking and businesses.

Al-Mola explained that Shariaa Control provides consultancies to all sectors and departments of the bank concerning developing shariaa-compliant products and services, not to mention it provides training courses for all employees in coordination with the bank's training and development activity. He highlighted also the role it plays in raising awareness among employees through awareness programs and making sure they are well educated in Islamic banking matters by Fatwa e-mail to employees along with periodical measurement of their sharia understanding level in coordination with the relevant departments.

http://www.zawya.com/story/Lenders_urged_to_maintain_optimal_Islamic_behaviour-ZAWYA20140319045316/

National Sharia board soon for Islamic banks

The formation of a national Sharia board for regulating Islamic banks and window operations of conventional banks will be completed soon, the country's central bank executive president Hamoud Sangour Al Zadjali told the media here yesterday.
"The regulation for the (high-level) Sharia board has been published in the gazette. Now, we are in the process of formulating the board, which will consist of five members selected by the Central Bank of Oman . The regulations are already out and now we have to nominate the members," added Al Zadjali, on the sidelines of Oman Economic Forum here yesterday. 

The members of the board will be Sharia scholars and some of them will be Omanis. "But we may need one or two experts from outside the country."

Presently, Islamic banks and window operations of conventional banks are governed by Sharia boards of individual Islamic institutions. 

Elaborating on the role of the national Sharia board, he said it is going to be a supervisory board, which will advise the Central Bank of Oman on the issues concerning Sharia compliant products. In fact, it is intended to be a reference point for Islamic financial institutions, if required.

"Also, they will look into any difference in opinion of the Sharia boards of Islamic banks or commercial banks' Islamic window operations," noted Al Zadjali. 

Sukuk issueThe central bank chief also noted that plans are afoot to issue sukuk by the government. "Also, within the central bank, we might be looking at the possibilities of creating some sort of instruments for managing excess liquidity with Islamic banks," he added.

While the central bank may issue short-term instruments, similar to certificates of deposits, to "manage the liquidity problems of banks, while sukuk will be floated by the government." 

Asked whether the present relaxation given to Islamic banks for deploying funds abroad will be extended beyond one year, he said the central bank would re-asses the market condition once the period gets over and take a decision accordingly. Two Islamic banks - Bank Nizwa and alizz islamic bank - have been given an exemption in ceiling on overseas investment due to lack of such instruments in local market. Apart from two full-fledged Islamic banks, six commercial banks have started window operations to offer Islamic banking products.

"We want Islamic banks to invest in the country, to finance the projects here, rather than just keep the money outside without benefiting the local economy with its liquidity. Islamic banks have to work hard to finance corporates and local projects."

The Oman Economic Forum was organised under the patronage of Darwish bin Ismail Al Balushi, Minister Responsible for Financial Affairs. 

The opening address was delivered by Dr. Ali bin Massoud bin Ali Al Sunaidy, Minister of Commerce and Industry and Deputy Chairman of the Supreme Council for Planning. Also, Myung Bak Lee, former president of South Korea was the keynote speaker at the conference, which was attended by top-level officials from both private and government sectors.

© Times of Oman 2014

http://www.zawya.com/story/National_Sharia_board_soon_for_Islamic_banks-ZAWYA20140319040151/?lok=040100140318

Africa and Nigeria have lost an Islamic finance champion. Who will lead now in Sub-Saharan Africa?

"By using-or abusing- the term 'failed bank' we are able to mask what is almost always a monumental fraud. But it is a deliberate act of prestidigitation." - Sanusi Lamido Sanusi

Sanusi Lamido Sanusi is outspoken by central banker standards; the quote above comes from a university convocation lecture in Nigeria in 2010 (PDF). The consensus opinion is that his ousting last month was a politically motivated result of his anti-corruption drive in Nigeria. His time at the Nigerian central bank--he was appointed in 2009 as the Nigerian banking system was on the verge of collapse--not only coincided with the stabilization of the banking system, but also the first tenuous steps towards allowing Islamic banking in Nigeria.

In the same speech where he lamented the use of 'failed bank', he said that "it should be possible to have international, national, regional, mono-line and specialised banks such as Islamic banks in the country" (emphasis added).

The first Islamic bank, Jaiz Bank, opened in 2012 and South Africa-based Standard Bank operates an Islamic window in Nigeria. On the capital markets side, the state of Osun issued the first Nigerian sukuk and other banks have expressed interest in Nigeria for expansion of their Islamic banking franchises.

Sanusi's Islamic finance ambitions for Nigeria and Africa

That international banks are interested in Islamic finance in Nigeria is not surprising because it is both one of the largest economies in Africa and home to one of the largest Muslim populations. The distribution of Muslims across Africa makes it challenging for an international bank to reach them because each country has different requirements for licensing an Islamic bank (if they even allow Islamic banks). Other markets with large Muslim populations like Sudan have smaller economies (its GDP is one-quarter of Nigeria's) and face greater challenges associated with conflict.

Nigeria has both a large Muslim population and a large economy, but because of the tension between the north and south of the country, which is divided largely along religious lines, the growth of Islamic banking in Nigeria has been controversial. In this process, Sanusi has played an active public role in supporting the growth of Islamic banking in the country. Last November, he advocated for Islamicfinance, saying: "Islamic finance has shown its potential in achieving financial inclusion in many economies by bringing in large under bank populations, especially Muslims into the urbanised financial sector," and went on to state that Islamic finance could contribute to transforming Nigeria into a major international financial centre. Before these pronouncements, in June last year he called out to Nigeria and other African countries to tap into Islamic finance to fund infrastructure on the continent.

In his absence the Islamic finance industry in Nigeria and Sub-Saharan Africa has lost a champion and while the sector will continue to develop, it will likely see an even slower rate of growth in Nigeria than it has since the market for Islamic finance opened, hence providing opportunities for other African nations. Two countries where there are recent developments are Kenya and South Africa.

Kenya and South Africa rising

In Kenya, the government is completing a 10-year strategy to develop its capital markets that includes significant plans for Islamic finance to be an integral part of this process even though Kenya's Muslim population accounts for only 15% of the population. The plan includes changes to existing regulations to facilitate Islamic banks, but in the long-term, Kenya's regulators will develop a separate system of regulating Islamic financial institutions, including through a centralized sharia board.

In South Africa, a country with a larger economy than Nigeria's but with a smaller Muslim population, there was an announcement at the end of February that its debut sukuk issuance was 'imminent'.

The developments in Kenya and South Africa are not happening in a vacuum and their moves to develop their Islamic finance sectors are in part due to finding ways to attract new sources of liquidity. In South Africa's case, the plans for a sukuk had been on the shelf for a long time, but were only revived recently as the storm of currency depreciation in the 'fragile five' economies (emerging markets with large current account deficits) made it more costly to refinance its existing government debt. The development in these markets will shift the center of Islamic finance in Africa towards the East and South, towards markets with lower potential for growth than Nigeria.

Other potential growth markets - Senegal, Niger, Guinea, Mauritania, Mali, Benin

The nexus of Islamic finance in Sub-Saharan Africa as it is viewed from the Islamic Corporation for the Development of the Private Sector (ICD, part of the Islamic Development Bank group) is farther West in the countries around Nigeria where the ICD owns Islamic banks in Senegal, Niger, Guinea and Mauritania and is planning to extend into Mali and Benin. Across these countries, there are 54 million Muslims, almost as many as Nigeria, but operating across six countries is more difficult than in one country.

Impact of slower Islamic finance growth in Nigeria on Africa

To unlock these other growth markets, there would be tremendous benefit to have a regional bank based in a large country like Nigeria to lead development into the other West African markets in a similar way to how Al Baraka Bank has led development in small markets for Islamic finance elsewhere in the world.

For this reason, Nigeria will remain a key market for Islamic finance in Sub-Saharan Africa and the early departure of Sanusi will likely slow the progress of Islamic banking in Nigeria and in West Africa as a whole. The repercussions of this slow development will have its own impact on developments in Kenya and South Africa because it will force them to become more reliant on domestic growth and capital from the GCC and Southeast Asia, rather than being able to develop more linkages of capital markets and flows of capital across the continent. The more distant external sources of capital are in demand in their own regions and in North Africa and there will be a much more limited supply of capital available for external investments in Africa.

It is not entirely possible to attribute future slower growth of Islamic finance across Africa solely on the replacement of Nigeria's central bank governor. Mr. Sanusi was, in any event, scheduled to have his term end in June. But, his replacement which was likely politically driven will limit his future ability to serve as an advocate to future central bank governors for greater development of Islamic finance in Nigeria and that will have an impact Africa-wide because Nigeria has the largest Muslim population in Sub-Saharan Africa and the second largest economy on the continent which provides a significant opportunity to be the center for Islamic finance in the region.

Chart 1: % of Muslims in Africa 2010 – Egypt, Nigeria, Algeria, Morocco, Sudan, and others
% of Muslims in Africa

Source: Pew Forum, "The Future of the Global Muslim Population" (report from 2011, data from 2010)

© Islamic Finance Gateway 2014

http://www.zawya.com/story/Africa_and_Nigeria_have_lost_an_Islamic_finance_champion_Who_will_lead_now_in_SubSaharan_Africa-ZAWYA20140313072723/

Capital markets to play a bigger role in financing in GCC

 Issuance of both conventional and Islamic (sukuk) bonds are expected to remain steady this year with sukuk gaining a larger share in the total capital market issuance in the region, according to rating agency Standard & Poor’s.

In 2003, total debt capital market issuance was close to $55 billion which was nearly 8 per cent higher compared to the previous year with most of the increase coming from sukuk issuance.

In 2014, analysts expect the total issuance to remain steady at around $58 billion, while sukuk dominating the regional capital market issuances.

Corporate and infrastructure issuers in the Gulf continue to benefit from positive economic fundamentals and strong appetite from regional and international investors for high credit quality paper.

“We believe corporate entities will remain innovative in their funding solutions, as UAE real estate company Majid Al Futtaim Holding’s issuance of perpetual hybrid securities last year shows,” said Standard & Poor’s credit analyst Karim Nassif.

The strong appetite for infrastructure issuance is demonstrated by the UAE-based Ruwais Power Co’s (Shuweihat 2) $850 million project financing and the Sadara Chemical Company’s 7.5 billion Saudi riyal (about $2 billion) sukuk issue.


Investor demand

“Strong investor demand has allowed issuers to tap markets at record low coupon rates and extend debt maturity profiles. This has helped improve their financial credit profiles,” said Tommy Trask, credit analyst with Standard & Poor’s.

Utility companies such as power and water companies are expected to tap the market this year along with transport sector entities such as airport developers and rail and road developers.

“While government-related entities [GREs] looking at diversifying their funding sources will be a major component of issuers on the market, we expect medium-size corporates to be the big game changers in the volume of issuance,” said Stuart Anderson, Managing Director & Regional Head Middle East of S&P.

A number of these companies that have new generation chief financial officers (CFOs) are favouring longer term unsecured funding sources to bank financing whose availability is largely a function of liquidity in the market.

Low interest rates, positive economic scenario, growing demand for Islamic asset classes, and the continued need for infrastructure investment in the GCC region are expected to fuel sukuk growth.

Analysts also expect the overall regulatory environment in the region and Basel III capital adequacy requirements for banks are likely to restrict their capability to provide longer-term funding to corporates.

The UAE has introduced caps on the market exposures of GREs. Given the tightened caps, banks’ appetite for new lending to governments and GREs is likely to drop.

“We expect banks to encourage borrowers that are rated, or could potentially be rated, ‘AA-’ or higher to issue bonds and sukuk rather than seek traditional loans,” said Trask.

By Babu Das Augustine Deputy Business Editor

Gulf News 2014. All rights reserved.

http://www.zawya.com/story/Capital_markets_to_play_a_bigger_role_in_financing_in_GCC-GN_17032014_180365/