Don’t worry, be happy — it’s time to cheer up

The Islamic finance market is having arguably its best year ever. After a catalogue of breakthroughs, the industry has plenty to celebrate and every reason to look forward to an even better 2013. So why is it so downbeat? 

There was a oddly sombre mood at the Kuala Lumpur Islamic Finance Forum last week — odd because 2011’s event had been so upbeat and because the industry is enjoying such a successful 2012.

It may be that the approaching Malaysian elections have encouraged more introspection. Perhaps there was a bigger share of local attendees to the conference than last year. Or perhaps it was just because bankers were thinking about all the paperwork they still had to do ahead of fourth quarter reporting.

Whatever the reason, there was an eerie hush on day one of this year’s event — a sharp contrast to 2011’s rambunctious crowd. The difference was not lost on those chairing the discussions. Richard Thomas, CEO of Gatehouse, a London-based Islamic bank, kicked off the second morning by asking speakers to talk about what had made them happiest over the last year.

Game changers

They have plenty to choose from. Islamic finance in 2012 has witnessed a litany of game-changers — particularly in the international primary market. Turkey finally cast aside its secular misgivings and issued a benchmark-setting debut $1.5bn sukuk, while Qatar’s $4bn Islamic debut drew an unprecedented $26bn global book.

Malaysia, for its part, began the year with a record breaking MR19.6bn ($6.18bn) public sukuk from Plus Expressways, while the recent $1.5bn multi-currency sukuk programme from mobile phone company Axiata Group opened the door wide to Chinese investment in Malaysia with its inclusion of a well received Rmb1bn ($157.8m) debut dim sum note.

The Gulf has bounced back from the financial crisis, with Dubai’s storming market return via a $1.25bn sukuk that included five and 10-year tranches. Saudi Electricity Co also managed to push out investor trust to 10 years with its $1.75bn sukuk, which drew over $18bn of orders. Meanwhile, Islamic Development Bank issued $800bn of sukuk (its biggest deal since the crisis) at the tightest ever spreads of just 40bp over mid-swaps — converging on the levels of its better-known conventional development bank peers.

The sector is rapidly broadening, too, with new entrants lining up to join the ranks of international sukuk issuers. Post-revolutionary Egypt is closing in on laws that will allow it to issue a deal, while South Africa continues to work meticulously towards its own debut. Kazakhstan has gone further, issuing a MR240m ($76m) sovereign proxy bond into Malaysia through its Development Bank.

All of this has been accompanied by frenzied activity behind the scenes, with the industry making huge progress in areas such as regulation, tax law, indexing, Shariah standards, microfinance initiatives and human capital.

It's still too soon to say that 2012 will pass without a single blip — Dana Gas has a difficult looming sukuk maturity next week. But even a disastrous result there would be only a small cloud in an otherwise blue sky. Momentum is a precious commodity in the current market environment, and Islamic finance seems to have it in spades. In the interests of building a sound pipeline for 2013, it needs to get a little less bashful and a little more celebratory.

http://www.euroweek.com/Article/3107296/Dont-worry-be-happyits-time-to-cheer-up.html

Islamic finance thrives, amid global crisis

The global financial crisis has hurt most banks, but the Islamic banking sector is doing well. The Islamic finance sector is enjoying double-digit growth and proving to be a viable economic alternative.

The Islamic faith has over one and a half billion followers--a demographic searching for the right tools combining their beliefs with the best of capitalism.

Omar Sheikh, Exec. Board Member, Islamic Finance Council, said,"Against the backdrop of the seismic collapse of the conventional finance market and the moral bankruptcy that’s come out, people are more and more looking, these are people of all faiths or people of no faith for that matter, they’re more and more looking for an alternative, a stable alternative, an ethical alternative, an alternative that’s more socially aligned and Islamic finance can present that if its principles are truly applied."

Islamic finance-is governed by the basic principles of Islamic law or shariah-at its core-a ban on charging and receiving interest.

It prohibits investments in sectors considered harmful to society as gambling, pornography, alcohol and arms.

Sectors as technology, real estate and commodities as mining are halal.

Zahir Khurshid, head of products, Dubai Band, Emirates Islamic Bank, said,"All of the banks as well as investment banks that they have or anybody who wants to state or claim that this is shariah compliant will get the portfolio reviewed by their shariah advisors. So they will have a shariah board, they will have their shariah advisors or a set of advisors who will review the portfolio then they will give their declaration that yes these funds are they meet, they’re not contrary to any shariah principles."

The financial model is asset-based, Islamic banks aren’t allowed to engage in derivatives-doing away with speculation and volatility.

Mahvish Khan, Dubai, said,"According to Standard and Poors the $1 trillion global Islamic finance industry is set to grow by 20 percent from 2011 to 2015, doubling in size, an indication that many are putting their faith in Islamic finance."

Sukuks or Islamic bonds are also driving growth, Ernst and Young estimates sukuks will reach nearly 900 billion dollars of issuances over the next five years.

As Islamic finance grows in popularity-driven by wealthy Muslims-conventional banks are also joining in.

http://english.cntv.cn/program/newsupdate/20121026/106944.shtml

Islamic finance shall be ethic model for global banking: banker

 In order to avoid a repetition of the financial crisis' shocks, Islamic finance can be an ethical and sustainable business model in the global financial landscape, said Tirad Al Mahmoud, CEO of Abu Dhabi Islamic Bank (ADIB) Sunday.

Speaking on Bloomberg Television's inaugural episode named " Faith in Finance", Mahmoud said conventional banks shall endorse the principles of Islamic finance as a non-interest, non- conventional, ethical style of investing.

According to global auditing and consultancy firm Ernst and Young, there are 390 Islamic financial institutions worldwide, based in 75 countries. Islamic investments reach the mark of 1.2 trillion U.S. dollars, Ernst and Young estimated.

"There is enormous demand for ethical banking all over the world, especially in the aftermath of the global financial crisis. Global consumers do not want any more to lose their savings and sometimes even their pensions," said Mahmoud.

The global financial crisis, which started with the downfall of U.S. investment bank Lehman Brothers in September 2008, was mainly triggered by excessive high-yield lending, uncontrolled speculation and exploiting retail bank customers by putting their savings into risky investment vehicles.

ADIB, which is primarily active in retail and corporate banking, reported on Oct. 16 a group net profit for the nine-month period of 958.5 million dirhams (261.38 million U.S. dollars), representing an increase of 21 percent year-on-year.

Based on Islamic law or Shari'ah, Islamic banks are not allowed to lend money against interest, nor are Islamic funds allowed to speculate with money by buying and selling shares on the same day. Investing into firms which produce un-Islamic goods like alcohol, pork meat, entertainment products or weapons are also banned under Shari'ah.

Consistency of performance and not excessive outperformance shall be the ethical guidelines for global finance in the coming years, Mahmoud said.

"Shari'ah-inspired finance has brought discipline and high- ethical standards to banking," Mahmoud said, adding that "we make money in a way that is transparent and far from being excessive... We make money when the client is able to perform and honor his contracts."

"We don't have a monopoly over these values, but we see a real value to promote them in the best interest of the banking industry all over the world," said Mahmoud.

http://www.shanghaidaily.com/article/article_xinhua.asp?id=104217

Islamic Finance In Australia Part 3 - What's Stopping Islamic Finance Flourishing and What Must Be Done

If Australia's desire to become a regional financial services centre is to ever progress beyond just rhetoric, then we must come to terms with our location. On our door step sits the world's largest Muslim population with a growing demand for Islamic financial products and services.

Australia can rise to become an important Islamic finance hub in Asia Pacific but it requires urgent regulatory and tax reform.

It was two years ago that the Board of Taxation first alerted the Government to the challenges facing Islamic finance in Australia. The Board recommended a raft of regulatory reforms designed to make it easier for Islamic products to be approved and supervised.

While it was an encouraging start, since then the Government has sat on its hands, putting off making the necessary regulatory and tax changes....

http://www.mondaq.com/australia/x/203322/islamic+finance/Islamic+Finance+In+Australia+Part+3+Whats+Stopping+Islamic+Finance+Flourishing+and+What+Must+Be+Done

Lack Of Rules Hinders Islamic Financing

After 40 years of delays, the Philippines still faces hurdles in a renewed push to attract Shariah-compliant investors to Muslim Mindanao, its poorest region, according to Islamic lenders.

The Southeast Asian nation lacks regulations and talent to develop the market, said Kuala Lumpur-based Asian Finance Bank Bhd. and CIMB Group Holdings Bhd. Al-Amanah Islamic Investment Bank in Manila, the sole lender dedicated to the industry, was forced to postpone a sale of what would have been the country's first sukuk last year because it wasn't making a profit.

The government announced over the past month that it would draw up a list of Shariah-compliant stocks and revisit a plan to sell bonds complying with the Koran's ban on interest, after signing a peace treaty with rebels to end a four-decade insurgency in the resource rich south. Now is an opportune moment to promote legislation for Islamic finance, Treasurer Roberto Tan said in an Oct. 18 interview in Manila, adding that it would help integrate the Muslim community.

"What remains to be seen is whether the Philippines can develop a tax-friendly regulatory framework and muster the political will to raise awareness of the benefits of Islamic financing," Malek Khodr Temsah, vice president of treasury and investments at Albaraka Banking Group BSC in Bahrain, said in an Oct. 24 interview. President Benigno Aquino's commitment to "lay the groundwork to develop Islamic finance isn't in doubt," he said.

The Philippines has toyed with proposals to draft a Shariah finance bill since 1973 as it seeks development funds for the autonomous region of Mindanao, home to most of its five million Muslims. Idiosa B. Ursolino, Al-Amanah's senior vice president, said in an Oct. 24 e-mail that the bank has no immediate plan to sell sukuk even after it trimmed losses last year.

The government may consider selling Islamic bonds to raise cash for Mindanao, Finance Undersecretary Rosalia de Leon told reporters in Manila on Oct. 17.

Issuing sukuk may be more expensive than debt that doesn't comply with religious tenets. The yield on the Philippines 4 percent non-Shariah-compliant notes due in 2021 dropped 140 basis points, or 1.40 percentage points, to 2.33 percent from the year's high of 3.73 percent reached in January, according to data compiled by Bloomberg. That compares with record-low borrowing costs for global Islamic securities of 2.86 percent, the HSBC/Nasdaq Dubai US Dollar Sukuk Index shows.

Sergey Dergachev, a senior portfolio manager at Union Investment Privatfonds in Frankfurt, said he would buy a sukuk from the Philippines as sovereign Islamic bonds are rare and they would offer diversification. Albaraka's Temsah said he isn't interested as valuations aren't compelling.

"I would assume that a Philippine sukuk would be strongly supported by local banks and dedicated sukuk investors, making this deal very interesting," Dergachev said in an e-mailed reply to questions on Oct. 24.

Global issuance of Islamic bonds climbed 79 percent to a record $39.4 billion in 2012 from a year earlier, data compiled by Bloomberg show. The notes returned 8.5 percent this year, while debt in developing markets jumped 16.3 percent, according to separate prices on the HSBC/Nasdaq index and JPMorgan Chase & Co.'s EMBI Global Composite Index.

Average yields on sukuk have dropped 113 basis points this year, narrowing the spread with the London interbank offered rate by 91 basis points to 182 basis points as of Oct. 24, the HSBC/Nasdaq index shows.

The Southeast Asian nation will face challenges like all new countries looking to develop a Shariah market, according to Asian Finance Bank and CIMB Group Holdings.

It took Malaysia, a global hub for financing along religious guidelines, 30 years to develop into what it is today, Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank Bhd., a unit of CIMB Group, said in an Oct. 25 interview.

Al-Amanah was set up in 1973 by then President Ferdinand Marcos with a mandate to promote development in Mindanao through banking, financing and agricultural ventures in accordance with Shariah law, its website says.

The bank is undergoing a five-year rehabilitation plan that started in 2010 and is still looking for an investor expert in Shariah finance to purchase a stake, Senior Vice President Ursolino said. It has nine branches and plans to open 10 more in the next two years, subject to finding a buyer, she said, adding that it has assets of less than 1 billion pesos ($24.3 million).

"There's no notable growth in assets or improvement in deposits because of the limitations in Islamic investments," she said in the e-mail. "We hope there will be renewed interest in Islamic banking with the latest peace treaty. Al-Amanah can be an instrument to introduce economic development in the area following the Shariah principles."

President Aquino announced an agreement on Oct. 7 to create a "political entity" called Bangsamoro to replace the failed autonomous region set up in 1989. The talks with the Moro Islamic Liberation Front called for a 15-member committee to draft a new law that will need to be passed in Congress and approved by a local referendum.

The region has per capita gross domestic product of 26,000 pesos, the lowest among the 17 provinces and below the national average of 103,366 pesos, according to the government's National Statistical Coordination Board. Muslims account for 5 percent of the 103 million population, the U.S.-based Central Intelligence Agency estimates.

Finance Secretary Cesar Purisima said in February last year that the government was studying options for Islamic banking in Mindanao. Central bank Governor Amando Tetangco said in July of 2010 that the monetary authority was drafting a Shariah bill.

"The Philippines can successfully open up its Islamic finance market once it puts in a place a broader and deeper infrastructure framework," CIMB's Badlisyah said. "Mindanao is resource-rich, and when peace settles it would be a natural market that Islamic players would look at."

Al-Amanah is holding consultations with the stock market regulator, government agencies and the Asian Development Bank to compile standards for Islamic equities, Leo Quinitio, head of the exchange's capital markets development division, said in a Sept. 21 interview.

Shariah law bars investment in businesses deemed unethical such as those involved in gambling, pork, alcohol and pornography, as well as some entertainment establishments.

The Dow Jones Islamic Market World Index of companies that operate in accordance with Shariah law rose 9 percent this year, outpacing a 7.8 percent gain in the MSCI Asia Pacific Index.

"The Philippines has a long way to go," Mohamed Azahari Kamil, CEO of Asian Finance Bank, the Malaysian unit of Qatar Islamic Bank SAQ, said in an Oct. 25 interview. "How fast the Philippine government will be able to implement Shariah rules and the level of acceptance are some of the challenges that it will have to face."

http://ph.news.yahoo.com/lack-rules-hinders-islamic-financing-083352401--finance.html

Islamic Microfinance has solution of all issues relating to poverty: Zubair Mughal

Poverty has become a global problem. Due to the current Global Financial Crisis, even the Developed countries of world are also trying to fight against poverty whereas the solution of all the problems and issues related to poverty lies in Islamic Microfinance.

These thoughts were expressed by the Chief Executive Officer of AlHuda Centre of Islamic Banking and Economics, Mr. Zubair Mughal in an International Microfinance Conference which was held in Yogyakarta, the city of Indonesia.

The Conference was jointly organized by Government of Indonesia and World Bank. Delegates and experts from 30 different countries including Dr. Susilo Bambang Yudhoyono – President of Indonesia, Noble Prize Winner Dr. Muhammad Yunus – Founder Grameen Bank, Dr. Larry Reed – Director of Global Microcredit Summit Campaign, Mayada El. Zoghbhi – World Bank and 600 people participated in the conference.

Conference was inaugurated by the President of Indonesia – Dr. Susilo Bambang Yudhoyono whereas Ministers, Governors, Parliamentarians and Ambassadors of Indonesia have also participated in the conference. In the inaugural speech, President of Indonesia has declared Microfinance as an effective strategy for the eradication of poverty and by using this source; poverty has decreased in many countries including Indonesia.

While addressing to the ceremony, Dr. Muhammad Yunus explained that how Grameen Bank started social work for reducing poverty and fulfilled the needs of poor people by starting the social work instead of Charity and met their financial needs by giving them small loans and now finally they are useful civilians of society.

Government of Indonesia has specially invited Mr. Muhammad Zubair Mughal to speak on the topic of Islamic Microfinance. During his address, he said that recent research has proved that Islamic Microfinance is a good alternative for eradication of poverty from which both Muslims and Non- Muslims can get benefits.

He further said that in order to provide Islamic Microfinance to poor people, one should firstly determine the level of poverty of the poor so that relevant products of Islamic Microfinance may be used to remove the poverty.

He said that the people living in the underneath of poverty should be given products like Zakah Ushar, Sadqah so that they could come to the next level whereas the poor falling in the middle level of poverty should be given products like Musharakha, Mudarbah and Murabaha and poor living in the last stage of poverty must also be given Salam and Istisna in addition to Murabah and once poor crosses the line of poverty, they should be given the facility of Microtakaful (Islamic Insurance) for safety net so that they may not return to the darkness of poverty.

International experts and the audience of the conference highly appreciated Islamic Microfinance as a best solution for poverty alleviation and Mr. Muhammad Yunus has appreciated the efforts of Mr. Zubair Mughal for the promotion of Islamic Microfinance.

http://pakistannewswire.net/?p=49778

Capital Market Authority and Islamic Ministry unite to promote Islamic finance

The Maldives Capital Market Development Authority (CDMA) has signed a memorandum of understanding with the Ministry for Islamic Affairs to further develop an Islamic capital market in the country.

Among the most prominent details of the agreement was a joint commitment to establish the ‘Maldives Centre for Islamic Capital Market and Finance’.

“This is going to help in promoting the various services available in Islamic financial services under one organisation,” read a press release from the CDMA.

Other features of the arrangement include the scheduling of meetings between the CDMA’s Capital Market Shariah Advisory Committee and the Ministry’s Fiqh academy, a program of training events on the practice, and the ministry’s endorsement of Shariah advisors registered with the CDMA.

The CDMA is an independent body charged with regulating the capital market and the pension industry in the Maldives, with statutory powers to license brokers, asset managers, and investment advisors.

“The vision of CMDA is to develop an Islamic capital market parallel to the existing conventional capital market in Maldives,” reads the authority’s website.

The country’s first shariah-compliant bank opened just over 18 months ago, when the Maldives’ Islamic Bank (MIB) first began offering services to the public after what the company’s head described as strong demand.

MIB is part owned by the Ministry of Finance and Ministry (15 percent), with the remaining 85 percent owned by the Islamic Corporation for the Development of the Private Sector (ICD) – a Saudi based multilateral organisation designed to promote Islamic finance globally.

2011 also saw the first public offering for a Shariah compliant company on the Maldives Stock Exchange – Amana Takaful (Maldives) Plc – for which shares were oversubscribed, report the CDMA.

Amana Takaful offers Shariah compliant insurance services, including third party vehicle insurance, which became mandatory in the country earlier this month.

Director of Amana Takaful Osman Kassim explained at the time that Islamic finance was “a phenomenon worth 1.4 trillion and growing at a rate of 20 percent annually,” which functioned through the prohibition of riba, or interest.

“Taking a return without participating in the risk of the return is not allowed, be it 1 percent or 99 percent. Any additional revenue is riba,” he said. “Even if you give a loan and he gives a gift, and is not in the habit of giving a gift, that is also riba.”

Islamic finance in its current form emerged 40 years ago, Kassim explained, first in Egypt and the Arab Emirates.

“It promises to be a just system. Interest is oppression – the charging of something where nothing is due,” he said, noting that in the wake of the global financial crisis, “All major banks now have Islamic financing products, and the more adventurous have their own Sharia Councils.”

Islamic finance and financial products also differ from conventional services in that they abstain from ‘Maisir’ and ‘Gharar’ – speculative transactions – considered akin to gambling under Shariah.

Minivan News was unable to gain further comment from the Ministry of Islamic Affairs at the time of press.

http://minivannews.com/society/capital-market-authority-and-islamic-ministry-unite-to-promote-islamic-finance-46439