New Islamic banks ready to open soon

Turkey has begun to open the doors to giving new banking licenses after the 2001 banking crisis, with no exception for interest-free Islamic banks, called participation banks.

Turkish Deputy Prime Minister Ali Babacan said at the Turkish Participation Banks Union’s annual meeting that it appeared the format of two participation banks would be clearer in a few months. The state-run banks, Ziraat Bank and Halkbank, will establish these two participation banks. “These banks should contribute to growing the participation banking sector, which is composed of very few players in Turkey,” Babacan said. As of now four banks have operated in the participation banking industry: Bank Asya, Turkiye Finans, Albaraka Turk and Kuveyt Turk. They constitute 5.3 percent of the Turkish banking industry. “More than 600 Islamic finance institutions are in the world right now and control over $1 trillion. This may seem big, but it constitutes just 1 percent of the entire finance industry... Participation banks should have a greater share in order to raise people’s access to more financing and to enable the finance sector to be more inclusive, which is also one of the biggest elements on the current agenda of the G-20,” Babacan said. The aim of the Participation Banks Association of Turkey is to triple the share of Islamic banking assets in Turkey by 2023.

http://www.turkishpress.com/news.asp?id=384978

Global Islamic Banking Valued At US$1.5 Trillion At End-March: El-Beltagy

The Chairman of Egyptian Islamic Finance Association, Dr. Mohamed El-Beltagy, has revealed that the volume of global Islamic banking has reached US$ 1.500 trillion at the end of last March, citing statistics from international financial institutions.

El-Beltagy expected Islamic banking to significantly grow in the upcoming period as many countries have started to invest in Sharia-compliant financial instruments such as sukuk (Islamic bonds).

The Egyptian Islamic Finance Association will organize a conference next month to discuss sukuk applications after approving the law and setting the executive regulation, he told Amwal Al Ghad.

The volume of Islamic banking in Egypt reached EGP 102 billion at the end of last January, accounting for 7.4% of the total volume of banking transactions in the country.

The volume of Islamic banking transactions rose 2.6% since the outbreak of 2011's revolution. Islamic deposits surged to EGP 83 billion at the end of last January, accounting for 7.6% of the total volume of deposits which reached EGP 1.113 billion at the end of last January, he added.

The volume of Islamic finances reached EGP 72 billion at the end of last January, accounting for 7.2% of the total volume of finances reached EGP 524 billion. 

http://masress.com/en/amwalalghaden/17249

Sukuk’s success is a matter of maturity

Islamic bonds have shown defensive quality while offering yield improvement

• A branch of Dubai Islamic Bank on Shaikh Zayed Road. Global sukuk issuance grew in 2012 for the fourth year running by 64 per cent to about $138 billion.

The suggestion can easily be made these days that sukuk as a borrowing and investing instrument is well and truly coming of age.

Certainly, there are many voices denoting that the Islamic variant on conventional fixed-income is establishing itself in the financial marketplace, tapping not only into the supposed relative safe-haven appeal of bond-related assets but also the regional and demographic drivers pertaining to the Sharia-compliant counterpart.

Notwithstanding that benchmark US Treasuries are beset by the vulnerability of the Fed’s quantitative easing strategy, there is a story behind the sukuk phenomenon that has gained traction.

As Malaysia’s starring role has faded somewhat this year in this respect, owing to the recent general election and surrounding political tensions, the Gulf seems by contrast to be straining at the leash.

As Michael Grifferty, President of the Gulf Bond and Sukuk Association, affirmed to me last week, “Supply is building, but still not quickly enough to keep up with demand in the region and elsewhere.”

Earlier this year Standard & Poor’s (S&P) documented the impressive global trend of last year, and predicted better things ahead, subject to the resolution of certain structural factors.

It told how sukuk has become mainstream, though still of modest dimension. Global issuance had grown for the fourth year running in 2012, by 64 per cent to about $138 billion. “We expect another strong few years,” the rating agency said. “Funding needs and infrastructural investments, combined with investor sentiment, are behind today’s momentum.”

In an update for Lancaster University’s Islamic Finance Bulletin last month, Paul-Henri Pruvost, analyst for S&P in Dubai, reiterated the message, despite the intervening uptick in bond yields, with the idea that “sukuk yields may now have reached a trough”.

Supportive GCC-Asian trade policies and the international search for yield will reinforce the attraction of GCC sukuk, he said, most notably to Asian investors. Cross-border transactions have grown, and the Malaysian ringitt has become a preferred currency, including for Gulf entities.

Banks needing to refinance existing debt and match the needs of corporate clients, particularly in project finance, will provide a further boost regionally, said S&P’s Pruvost. Sovereign and sovereign-related issuance will continue to shape the sukuk market, which will also see increased participation from frontier markets, notably in Africa.

Still, despite its greater acceptance, the future growth of the sukuk market might require assistance in terms of liquidity and price formation, he ventures. “Most sukuk globally are not listed and remain over-the-counter; and rated ones are the exception rather than the rule.” His pitch is that the industry must still answer questions as to Sharia interpretation, standardization of structures, and creditworthiness.

As for investors, economic research and strategy firm Arabia Monitor has offered “themes to ponder” from the experience of sukuk in recent years, noting that they have outperformed Mena conventional bonds this year to April.

Using detailed analysis, over the course of different market cycles and risk appetites, “sukuk have consistently showcased less volatile price movements than [have] emerging market bonds”.

The lesson from turbulent times is that “versatility pays”, and sukuk’s resilience is proven. Consequently, “we believe their performance offers opportunities under all market conditions, and especially in times of volatility.”

Clearly, sukuk are making a sizable impression, as doubtless will be restated at this week’s Islamic finance conference in Dubai, organized by Fleming Gulf.

As keynote speaker Harun Kapetanovic, adviser at Dubai’s Department of Economic Development, told me, “Islamic finance is consistently recording exponential growth figures. Strong sukuk growth in primary markets, with a globally diversified investor and issuer base, is one of the main drivers of [its] proliferation. This is testimony of the industry’s growing relevance in global financial markets.”

“Vibrant secondary markets will not only allow sukuk markets to develop further, but also play a key role in developing Islamic asset and fund management industries,” he asserts.

Given the apparent opportunities for market development, it’s no surprise that Dubai aspires to be at the forefront, whether by its institutions tapping international markets using sukuk structures, or the government seeking to furnish a welcoming, enabling environment.

The difference in sukuk in 2013

Sukuk issuance is down by some 20 per cent so far this year. Malaysia’s outturn declined by around one-third, year-on-year, through April. Yet the GCC’s was up 10 per cent.

The financial sector has been prominent, owing to the difficulty of raising capital from equity, and pending Basel III regulations, says Arabia Monitor. The Gulf’s pipeline, in the power & utilities sector especially, reflects robust government programmes and historically tight spreads, making financing “extremely attractive”.

As reported by Zawya, Paul Bateman, senior risk manager at Bank of London & Middle East, says that gently rising yields in sukuk this year have partly reflected the extension of durations as well as the use of subordinated issues.

“We are now seeing issuers easily place 10+ year paper in a market where a 5-year tenor used to be the norm,” itself a positive sign, he indicated.

Meanwhile, investors’ pursuit of yield has allowed banks to issue certificates benefiting capital adequacy ratios, such as Dubai Islamic Bank’s $1 billion perpetual sukuk in March, at 6.25 per cent, boosting Tier-1 capital.

http://gulfnews.com/business/markets/sukuk-s-success-is-a-matter-of-maturity-1.1181910

RBI will not oppose, if govt allows Islamic Banking

Governor Reserve Bank of India (RBI), Dr D. Subbarao today said RBI will not create any huddle, if Government of India allows Islamic Banking in the country.

Addressing a press conference here, after the conclusion of Central Board of Directors (CBD) meeting, the RBI Governor said that different Banks operating in the state will increase their Credit Deposit Ratio (CDR) from existing 36.5 percent to 40 percent so that more loans would be given to the people who require it.

The RBI Governor also said that Chief Minister Omar Abdullah has assured them that District Industrial Centers and Rural Self Employment Training Institutes will held the banks to give loans to the interested parties.

The RBI Governor maintained that they have received several proposals from various people including some member Parliaments that Islamic Banking should be started in the country and RBI is studying these proposals.

“Let me clear to you. It is not RBI, which is standing in the way of starting of Islamic Banking in the country. It is the government which has to determine, whether to allow the Islamic Banking or not,” he said.

Dr D Subbarao also said if the government allows the Islamic Banking, then they have to enact a new law. “Various people including some MPs gave us proposals. We are studying them. However, we are not any authority to take any decision. It is the government which has to take the decision,” he said.

He stated that RBI regulations and Sharia law cannot run simulations in the country. “Our banks are functioning under RBI regulations. They functions under rate of interest system. Under Sharia Law, there is no rate of interest system. Different countries have adopted the Sharia system, but India banking system is working under RBI regulations,” he said.

There is a growing demand by varous separatist parties, particularly Mirwaiz Umar Farooq That Islamic banking should be started in the state. But there was no response from the RBI and from the government. Mirwaiz demanded that Jammu and Kashmir being a Muslim majority state, there should be an Islamic banking system in the state.

The RBI Governor also said that they have set up a target that every house should have al least one bank account so that the family could benefit from the modern banking system.

“A population less than 20,000 to any village should have a banking facility. We are working on the target and we are hopeful that our banks will achieve the target,” he said.

He said that RBI is also trying to introduce plastic currency in the country and save expenses on paper currency.
“The RBI is introducing innovative measures. The printing paper currency is costly and costs us more and it has less life. Therefore, RBI is trying to introduce plastic money. We will introduce it on trial basis and see if it is successful,” He said.

He also said that plastic currency was introduced 15 years ago but that time people resisted and did not accept it. “But it is right time to introduce it.”

The RBI Government said for the last two days they conducted the central boad of directors meeting in Srinagar and held a meeting with Governor, N N Vohra, Chief Minister Omar Abdullah and JK Bank Chairman, Mushtaq Ahmad and others.

The others who were present in the board of directors meeting includes Kiran Karnik, Prof M.V. Rajeev Gowda, Y.H. Malegam, Prof Dipankar Gupta, Dr Najeeb Jung, dr Indira Rajaraman and Prof Damodar Acharya.

http://www.kashmirtimes.com/newsdet.aspx?q=16481

Finance Min injects 6 billion baht to support Islamic Bank

The Finance Ministry has approved a 6-billion-baht fund for recapitalization of the Islamic Bank of Thailand, of which the ministry is the major shareholder. 

According to the Islamic Bank managing director, the Finance Ministry has given the green light to a project aimed at reviving the bank after it has been plagued by the problem of non-performing loans (NPLs). Out of the 6-billion-baht rehabilitation fund, 3 billion will come from the ministry itself, and the rest from the Government Savings Bank and the Krung Thai Bank, which are shareholders of the Islamic Bank.

The director further revealed that the first allocation of 920 million baht under the rehabilitation scheme will be made to the Islamic Bank in June. However, the second batch of 3 billion baht has yet to be approved by the parliament and is subjected to parliamentary cuts, depending on the needs for money by other units.

http://www.pattayamail.com/business/finance-min-injects-6-billion-baht-to-support-islamic-bank-25839

2012 ‘was a banner year for sukuk in Kingdom’

Rafiza Ghazzali, chief financial officer of the Cagamas, Malaysian National Mortgage Corporation, is with Richard Banks, director, emerging markets of Euromoney at a session at the Eighth Euromoney Conference in Riyadh on Wednesday. 

Sukuk has become a global trend, with countries increasingly finding it instrumental to develop their economies. This was among the conclusions stressed at the Eighth Euromoney Conference that ended here yesterday.

The conference,which was opened by Finance Minister Ibrahim Al-Assaf, was attended by 1,200 senior financiers, business leaders and government officials. Housing Minister Shwaish Al-Duwaihy, Economy and Planning Minister Muhammed Al-Jasser and Abdullatif Al-Zayani also addressed the delegates at the inaugural ceremony.

More than 20 financial institutions including Bank Albilad, HSBC, Muscat Capital and Al-Rajhi Capital displayed their products and services at an exhibition that ran concurrently with the conference.

The panellists during the discussion highlighted the important role played by the stock exchange and sukuk in a nation's economy. They also observed the recovery of the global stock market reflected the economic recovery.

"The year 2012 was a banner year for sukuk, especially for the Kingdom," a speaker said.

In her speech, Rafiza Ghazzali,chief financial officer of the Cagamas-Malaysian National Mortgage Corporation, said her country was harnessing its state mortgage law to boost development in the real estate sector for the benefit of its economy. She pointed out that many of her country's economic policies reflected similarities of the Kingdom's economic efforts.

Ahmed Almeghames, secretary general of the Saudi organization for Certified Public Accountants, pledged that his department would work for the economic development of the country through its concerted efforts.

Paul Louis Gay, chief financial officer of Almarai, said: "Plans are under to turn the establishment into a global company, which will have its branches in Argentina, Ukraine and the United States." He pointed out that the organization would take a decision about globalization during the next three months. He added that such ventures would compel the organization to borrow funds from international banks. The company has long-term plans to expand its business to drinking water, ice cream and confectionery to boost healthy competitiveness in the local market.

Indicating a growth rate of 20 percent, he stated that the company intends investing some SR 6 billion in the next five years. The company, which has 120,000 milking cows and 20 million birds, will ensure food safety and security in all its products.

Abdullah Alsuwelimy, chief executive officer of Tadawul, said the stock exchange has plans to innovate new services to attract investors from the Gulf region. He said that last year, the Kingdom witnessed the issue of sukuk to the value of SR 15 billion, which was a record in the annals of the decade.

The market value of the Saudi financial market was SR 1.4 trillion at the end of 2012, up 10.19 percent compared to the market value recorded at the end of 2011.

Strategic plans helped open the market to foreigners on the recovery of the Saudi bourse in 2012 and pushed trading values to levels approaching SR 21 billion compared to the average values of trading going on between SR 5 billion and 6 billion during the current year.

http://www.arabnews.com/news/450931

Shariah Banking Market Share Reaches New Height

A sharia bank officer shows a flyers of Islamic Bonds during the Shariah Economy exhibition in Jakarta in this June 2011 file photo. (JG Photo/ Yudhi Sukma Wijaya)

The market share of Islamic lenders in Indonesia during the first quarter of 2013 reached nearly 5 percent for the first time ever, Bank Indonesia said on Wednesday.

The market share of Shariah-compliant banks in the first quarter was 4.9 percent, mainly from Rp 214.5 trillion in assets, an increase of 37.8 percent compared to the same period in 2012.

“It is a market share in the Shariah banking industry that has never happened before,” Bank Indonesia Deputy Governor Halim Alamsyah said during his opening speech at a discussion on Islamic banking at the State Enterprises Ministry.

Halim said the assets growth of Shariah banking is higher than conventional banking, which reached 16.8 percent year on year. Moreover, he said that the growth of Islamic banking within Indonesia exceeded the global rate, which averages 15 percent to 20 percent per year.

From the operational sector, the financing of Shariah banking is 70 percent to 80 percent dominated by lending to micro, small and medium enterprises. He added that the financing activity of Shariah banks is relatively active with funding and saving ratios above 90 percent.

Islamic lenders comply with the Shariah law that prohibits the receipt of interest payments, by instead receiving a pre-arranged percentage of revenue to repay a loan.

Bank Indonesia is targeting an increase of as much as 58 percent this year in banking assets that comply with Islam’s ban on interest. Currently, 4.6 percent of holdings in the country are Shariah-compliant, compared with around 20 percent in Malaysia, central bank data show. An expanding Islamic banking industry supports the issuance of sukuk as it creates more demand for the debt.

http://www.thejakartaglobe.com/business/shariah-banking-market-share-reaches-new-height/

Mega Islamic bank: Strengths, Weaknesses & Challenges

he first time talks about Mega Islamic Bank were started in late 2010, when Bank Negara  Malaysia (BNM) announced that it will issue two licenses for commencement of two mega banks. Issuance of licenses for Mega Islamic bank is part of the roadmap towards making Malaysia an Islamic Finance hub.

The idea behind this plan is to set-up a billion dollar Islamic Finance institution in the country which could lead the local banks and represent Malaysian Islamic finance market in Global environment. Mega Islamic bank would increase the international dimension of Islamic finance in Malaysian financial system, which will enhance Malaysia’s global economic and financial interlinking with other parts of globe, in particular with the emerging economies and Islamic Finance centers. Mega Islamic bank would also entail size and economies of scale. Mega Islamic bank would help to set a right benchmark for the market.

License to set up a Mega Islamic bank has been issued by the central bank on June 24^th, 2012, without naming the licensee. Initially the signal received by the public and other concerned parties was that the sponsors of Mega Islamic Bank would be foreign interested parties. Now BNM has also approached to the big public limited companies like Petronas and state pension fund Kumpulan Wang Amanah Pencen to make investment for setting-up the first Mega Islamic bank. Furthermore, BNM’s plan also involves in taking over Asian Finance Bank (AFB) (which is one of three foreign Islamic Banks in the country), and then converts it into Mega Islamic bank, which is a good idea as AFB has already established branches and business base.Buying of AFB will save the start-up time of the bank and the number of market players would not increase as well. Dr. Mahatir has shown his support for the proposal of  Mega Islamic bank being funded by the public companies, as he considers public company’s money as government money, and can be utilized the way government thinks that it would be better for country & general public.

In the view of an Industry practitioner, Islamic mega bank should start small and grow with the business growth. Capital should be added with the growth of assets, number of branches and as you expand beyond the local shores. Capital should be seen as function of business growth rather than putting the capital upfront.

There are already 17 Islamic banks operating in Malaysia, Which are deemed as too much with regards to Malaysia’s population of 28million. One view point is that opening of this new Mega Islamic bank would increase the competition as a whole, and this bank would have to compete with the big multinational banks like Citi bank, HSBC and Standard Chartered. That is why industry experts and analysts are of the view that the existing small local banks can be merged to make a bigger bank rather than opening a new one.

On the other it cannot be ignored that aside competition, this mega bank would also provide help and support to local banks. The target market of mega bank would not be restricted to local clientele but would be more focused on exploiting foreign avenues. Mega bank might also work as a harmonization point of standardization Islamic banking products beyond the borders of countries.

Setting-up of Islamic Mega bank is not a novel idea, as banking groups like Al-Rajhi group, Kuwait Finance House, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Al-Baraka group and Qatar Islamic Bank have already crossed the hallmark capital of US $1 billion. According to Union of Arab bank’s magazine, a Bahrain based Mega Islamic bank with the capital of $1 billion might also be launched by the end of this year. The main sponsors of the bank would be GCC based Islamic banks.

Commencing a Mega Islamic bank in Malaysia has its own strengths and weaknesses, but its inception has become inevitable in order for Malaysia to become Islamic financial hub. Now, it’s the duty of central bank to take into consideration the points raised by the financial industry experts and act for greater betterment of Malaysian and Islamic finance industry as a whole.

http://www.amilin.tv/amilin-news/mega-islamic-bank-strengths-weaknesses-challenges/

Bank Nizwa and INCEIF seals the deal

As training solutions for the Omani Islamic finance industry, Oman’s first committed Islamic bank, Bank Nizwa remains to be the frontrunner in the field of Islamic finance.A Memorandum of Understanding (MOU) between Bank Nizwa and INCEIF, The Global University of Islamic Finance has been signed at the Al Bustan Palace during the Oman Islamic Economic Forum (OIEF).

The OIEF is an idea borne by Amjaad Development and Bank Nizwa.

The forum focused on the topic of ‘The Islamic Economy: a Culture of Excellence’. The core purpose of this collaboration is to provide structured training and development efforts for Omani nationals across the Islamic Finance industry.

According to the President and CEO of INCEIF, Daud Vicary Abdullah, the INCEIF’s mission is to elevate and advance knowledge in Islamic Finance.

The mission is carried out by instigating thought-leadership and together with the new MOU it also aims to work towards gaining momentum in receiving industry players such as Bank Nizwa

INCEIF was initiated by Bank Negara Malaysia (Central Bank of Malaysia) in order to improve human capital for the global Islamic finance market.

INCEIF provides executive education, research, consulting and knowledge management services which are parallel to become a knowledge leader in Islamic Finance, in addition to its dedicated Islamic Finance academic programs.

This collaboration has also popped in at a convenient time as Bank Nizwa is presently leading the faith-based attitude of Islamic banking and is taking banking and economy of the Sultanate to new heights.

http://www.amilin.tv/news/bank-nizwa-and-inceif-seals-the-deal/

Turkey can profit from Islamic banking

As part of an initiative backed by the Islamist government, Ziraat Bank, the country's largest state-run lender, is working to set up a Shari’ah-compliant entity.

It comes less than a year after Ankara's debut sovereign Sukuk. In a country divided by the role of religion in public life, such an active promotion of Islamic finance would have been tough to imagine when Prime Minister Recep Tayyip Erdogan first came to power a decade ago. But times have changed.

Turkey already has four Islamic banks, known locally as participation banks, of which three are foreign-owned. The first was established almost three decades ago. But Shari’ah-compliant assets account for just 5 percent of total banking assets, far below the average of 25 per cent in the Gulf region, according to Ernst & Young.

Size is mostly the problem. Conventional deposit banks have 15 times more branches than Islamic institutions. Islamic banks in Turkey are also lagging in innovation compared to peers elsewhere in the Muslim world, bankers say.

The current push is motivated as much by pragmatic reasoning as by any spiritual desires. Stronger and larger Islamic banks could strengthen Turkey's financial position.

Domestically, they could lure funds out from under the mattress in the country's conservative and pious heartlands. That cash could help fund Turkey's GDP growth. The Islamic money would be less likely to disappear than inherently fickle foreign funding, which has driven the banks' average ratio of loans to deposits above 100 per cent.

Internationally, stronger Islamic banks would enable Turkey to attract more cash from the Gulf and Asia, where the appetite for Shari’ah-compliant products far outstrips the existing supply. For Turkey, which needs to fund a current account deficit of more than six per cent of GDP, diversifying its sources of finance to include this pool of captive capital makes sense.

The aim of the Participation Banks Association of Turkey is to triple the share of Islamic banking assets in the country by 2023. If more large players enter the Shari’ah-compliant market, that target could start to look modest.

CONTEXT NEWS

- Ziraat bank, Turkey's largest state-run lender, is planning to set up a separate Islamic Bank, General Manager Huseyin Aydin said on April 13.

- The announcement follows a report a month earlier in the Hurriyet Daily News which said that Deputy Prime Minister Ali Babacan had hinted that two state banks may offer interest-free services without giving any names.

- Turkish lender Halkbank will be the second bank to start offering sharia-compliant services under a new entity, according to two bankers familiar with the situation.

- Reuters: Turkey's Ziraat says working to set up Islamic bank

http://www.cpifinancial.net/news/post/20438/breakingviews-turkey-can-profit-from-islamic-banking

12 Year Old Girl Tells The SHEEPLE the Truth about ROTHSCHILD CORRUPT BANKERS and ECONOMY

12 Year Old Girl Tells The SHEEPLE the Truth about ROTHSCHILD CORRUPT BANKERS and ECONOMY

Kuwaiti official hails VP’s initiative ‘Dubai: Capital of Islamic Economy’

The initiative of Vice President and Prime Minister of the UAE and Ruler of Dubai His Highness Sheikh Mohammed Bin Rashid Al Maktoum to set up a comprehensive platform of Islamic economy products and services is crucial to finding a host that takes under its wings an industry valued at $4 trillions, Kuwait's Arab Planning Institute (API) chief said on Monday.

The initiative known as "Dubai: Capital of Islamic Economy" was announced in January 2013 by Sheikh Mohammad. It aims at further diversifying Dubai's economy and boosting Islamic economy; which stands at 11 per cent of world economy.

Kuwait News Agency quoted API's Director General as saying "Islamic economy is promising and fast-growing," at the end of a two-day conference on international Islamic Economics and China, held at Zayed University.

He further noted that Islamic economy is the only economy that truly benefits consumers since it does not seek profit or commercial exploitation.

"Choosing Dubai as the capital of Islamic economy mainly depends on the city's well-diversified economy and its ambitious growth fuelled by the robust performance of its core sectors including trade, retail, tourism, aviation, hospitality, financial services and logistics," Malallah continued.

This initiative seeks the development of Islamic financing tools, attraction of the biggest insurance companies to take Dubai as their headquarters, development of commercial standards for Islamic industries and guidelines for Halal food manufacturing and development of Islamic quality standards for Halal food approval.

Malallah noted that Kuwait is aware of this Islamic approach in economy. Kuwait Finance House, Bait Al Zakat (House of Alms) as well as other Islamic insurance bodies, are very involved in applying Islamic standards in their businesses.

''Kuwait's Arab Planning Institute is "very interested" in going into partnership with Dubai by giving the needed training and consultative support,'' he said.

International Conference on Islamic Economics and China tackled basics of Islamic financial co-operation between Arab states and China, opportunities and challenges of Islamic finance services in China, Islamic economics, world financial crises, Islamic finance and challenges of global development.

http://gulftoday.ae/portal/bc3b8a9e-8004-4660-bf6f-a17cf92e0209.aspx

First halal PE fund sees opportunities

As Europe remains mired in one of the biggest food fraud scandals in recent times, this side of the globe is seeing the world’s first private equity (PE) fund specialising in the halal industry being set up.

For Azka Capital Sdn Bhd executive director Darhim Dali Hashim, halal does not only reflect the practice of how foods are prepared but more importantly the integrity of ingredients used.

“A few years ago when there was a foot and mouth epidemic in Canada, a lot of people moved over to halal and went to halal butchers. There was a perception or understanding that halal beef or meat did not go through the same industrialised process which is one of the causes of mad cow disease and foot and mouth disease. So, that was a real opportunity,” he told The Edge Financial Daily in an exclusive interview.

Although he admitted that even halal products are subject to food fraud from time to time, cases of horse meat being found in beef products in Europe did present an opportunity for a push towards halal products.

The fund, which was launched by former prime minister Tun Abdullah Ahmad Badawi last month, aims to raise US$500 million (RM1.51 billion) over the next three years and will be going on a preliminary roadshow this month.

“For the first class of shares, about US$100 million will be issued, and the remainder will be offered over the next two to three years. Being a first time fund, if we raked in too little then we wouldn’t get any attention but we didn’t want to be too ambitious,” said Darhim.

The fund’s target companies will be from the entire halal supply chain but specifically meat and poultry, which “have the most resonance when it comes to Halal”, he said.

At the initial stage, Azka will be investing in target companies with an enterprise value of between US$5 million and US$20 million.

“We’re looking at enterprise values of roughly US$10 million as a benchmark to start off with, although we wouldn’t do too many at the US$20 million level. Also, we’re looking at anything from a 20% stake up to a controlling share,” said Darhim.

Meanwhile, the minimum investment for investors is US$1 million.

“Pension funds probably wouldn’t look at it but a family-run office would perhaps consider it as well as those who might see it as an alternative investment strategy,” said Darhim.

“Non-Islamic agnostic funds have actually come up and said ‘this looks interesting to me’. They’re looking at it from a commercial angle, from a growth angle and targeting emerging markets.

“Emerging funds that are looking for these kind of funds are interested but of course there is some education needed and we’re working on those leads already. So, these are our primary focus,” Darhim explained.  

He pointed out that the vast majority of halal food producers are from non-Muslim countries and owned by non-Muslim shareholders.

“So, we assume they take a very agnostic view, then surely it must be a lucrative sector, so why aren’t we as Muslim investors going into the sector?” he asked.

Essentially, the idea to set up a PE fund investing in companies which produced halal goods was first mooted after managing director Rushdi Siddiqui, through his capacity as Thomson Reuters Global head of Islamic Finance & OIC Countries, introduced the Socially Acceptable Market Investments Halal Food Index (SAMI) in 2011.

The SAMI comprises non-cyclical consumer companies involved in food processing, distribution, fishing, farming and other related activities.

Currently, the index has some 270 stocks from six sectors, from 15 Muslim countries, with nearly half of the companies from Malaysia.

The biggest Malaysian stocks on the SAMI include Sime Darby Bhd, Nestle (M) Bhd, and Genting Plantations Bhd. The index boasts a market capitalisation of some US$115 billion.

At present, stocks are confined to those which are based in Muslim majority countries but in the future will include those from OECD countries such as the UK, the US, Canada, Brazil, France, and the Netherlands.

“Before this, there was no such index. After SAMI was launched, halal for the very first time was an asset class on its own and in a way that is easy to understand,” he said.

“Now, we could bring both the halal industry and Islamic finance together — two industries based on the same values and principles of syariah but very different in development. Azka Capital is trying to bridge this gap,” he said.

This article first appeared in The Edge Financial Daily, on May 6, 2013.

http://my.news.yahoo.com/first-halal-pe-fund-sees-010006704.html

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, whose largest shareholder is sovereign wealth fund Kuwait Investment Authority, 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.

"We engage those companies that are already banked but whose credit lines are limited - we are complementing their financing," said Sulaiman Alireza, executive director of Asiya's investment management arm in Hong Kong.

Despite strong growth in Islamic finance globally over the last few years, the industry has neglected merchandise trade, leaving trade finance for conventional banks to dominate.

But conventional banks are retreating because of the world financial crisis and higher capital requirements under upcoming Basel III regulations, which could open up about 20 percent of the business to non-bank institutions, Alireza said.

Established as the Kuwait China Investment Co in 2005, Asiya estimates that current annual intra-Asia trade of $5 trillion could reach $20 trillion by 2020.

Asiya's Cayman-domiciled fund, soft-launched in December, offers short-term financing through murabaha contracts, where the fund buys and sells merchandise on behalf of the company and shares a portion of the profits.

"We use a murabaha structure with the underlying commodity serving as collateral. This is a standard, tried-and-tested murabaha structure," Alireza said.

Islamic institutions across the Gulf are working to diversify their money market transactions, so Asiya's product could appeal to some of them. It will have a higher yield than commodity murabaha contracts and better liquidity than sukuk, Alireza said.

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, said Brian Luck, director of Asiya's advisory office in Dubai.

"Trade finance is not well known as an asset class...but the reality is there are not enough Islamic fixed income products available," Luck said. Plans include offering the trade finance product on a managed account basis, he added.

The firm identifies clients such as denim and latex manufacturers through its Singapore-based joint venture partner, EuroFin Asia.

http://english.alarabiya.net/en/business/banking-and-finance/2013/05/06/Kuwait-firm-launches-Islamic-trade-finance-fund.html

Bonds, sukuk among ‘most attractive’ ways of funding, says Seetharaman

Seetharaman speaking at the Thomson Reuters conference in Doha yesterday.Bonds and sukuks are among the “most attractive” ways of funding more than $45bn projects planned in Qatar this year and $140bn projects planned in the upcoming years, Doha Bank Group CEO Dr R Seetharaman has said.

Speaking at a Thomson Reuters conference here yesterday, he said in 2012 Qatar issued sukuk worth $4bn and earlier, in 2011, Qatar came out with QR50bn bonds for local banks.

“QNB recently came up with a $1bn bond issue for a tenure of seven years. In March 2013, Qatar’s Central Bank issued QR1bn of local currency sukuk and QR3bn of local currency conventional bonds.”

Qatar has started Treasury bill trading since 2011 end and is working towards trading of bonds on Qatar exchange. According to recent IMF forecast, Qatar’s Government debt as a percentage of GDP is expected to come down from 34.9% in 2013 to 26.2% in 2018.

This may be on account of improvement in economic growth from diversification and steady borrowing levels. Qatar’s debt as a percentage of GDP is within reasonable levels when compared to similar levels of advanced economies. Qatar can leverage on its fiscal strength for economic diversification.

Both Government and private players are expected to tap the bond market as they participate in Qatar’s economic diversification. Hence bonds are an important source of funding to support Qatar’s economic diversification.

On spending trends in Qatar, he said: “According to National Development Strategy during 2011-2016, total gross domestic investment is expected to be about QR820bn, out of which government investment will be to the tune of QR347bn. Investment of  Qatari companies for next  five years is QR 130bn. Non hydrocarbon investment is also driven by Qatar government companies. Qatar’s budget for 2013/14 has a spending of QR210.6bn up 18% on the previous fiscal. This budget had an increased allocation for infrastructure spending as Qatar sets out to diversify its economy.

On trends in the GCC bond market, Seetharaman said: “Bonds issued in GCC exceed $18bn so far in 2013.  Out of global sukuk of $15bn in 2013, Islamic bonds close to $10bn pertain to GCC. Abu Dhabi, Dubai and Dubai Electricity and Water had issued conventional bonds in 2013. Saudi Sovereign and Investment Corporation of Dubai had issued sukuks in 2013. In recent years UAE banks such as Emirates NBD have tapped the Yuan bond market. National Bank of Abu Dhabi and Abu Dhabi Commercial Bank have tapped the ringgit bond market. Qatar petroleum tapped the yen bond market in 2012. The success of these bond issues indicate that Global investors have evidenced interested in GCC market.”

http://www.gulf-times.com/business/191/details/351645/bonds,-sukuk-among-%E2%80%98most-attractive%E2%80%99-ways-of-funding,-says--seetharaman

QCB chief to address role sukuk can play in managing liquidity

Sheikh Abdullah: Highlighting sukuk’s role.
HE the QCB Governor, Sheikh Abdullah bin Saoud al-Thani, in his capacity as Chairman of the Board of Islamic Financial Services Board (IFSB) and Chairman of the Governing Board of International Islamic Liquidity Management Corporation (IILM), will give a keynote address at the forthcoming London Sukuk Summit on the standards issued by the IFSB to facilitate the regulation and supervision of the Islamic Financial Services industry.

The event will be held at the Jumeirah Carlton Hotel, London on June 12 and 13.

He will also address the role that sukuk can play in facilitating the liquidity management for institutions that offer Islamic financial services. In providing this perspective, Sheikh Abdullah will draw on his capacity as Governor of the Qatar Central Bank and Chairman of Qatar Financial Centre (QFC).

Sheikh Abdullah recently stated that Islamic banks in Qatar had issued sukuk worth QR8bn by the end of the first quarter of 2013. QCB, he said, has issued sukuk worth QR39bn to help manage the liquidity of Islamic financial institutions to comply with Basel III norms. He also said sukuk issuances are likely to grow by 20% annually driven by high demand for Shariah compliant products and finances globally.

The total volume of investments of banks operating in Qatar in sukuks or Islamic bonds had reached QR47bn for the same period.

He further said sukuk and other Shariah compliant products are becoming increasingly popular amongst investors, particularly in Arab and Islamic countries.

Despite the international financial crisis, 2009 witnessed the issuance of $23bn worth of sukuk compared to $14bn in 2008 and with that the volume of international sukuk market increased from $111bn (in 2009) to $131bn in 2012.

http://www.gulf-times.com/business/191/details/351646/qcb-chief-to-address-role-sukuk-can-play-in-managing-liquidity