Al Baraka Banking Group to launch Islamic bank in France

French financial authorities demonstrate great interest in Islamic banking products entering their markets, says Al Baraka's CEO.

Al Baraka Banking Group's CEO, Adnan Ahmed Yousif has revealed plans to launch an Islamic bank in France, adding that the group has submitted its financial requirements and accounting standards to the French authorities.

In an interview with CNBC Arabiya in Dubai, Yousif explained that the French financial authorities have demonstrated major interest in having Islamic banking products enter its market, in light of the five million Muslims currently residing in France.

Speaking on the Group's performance, Yousif noted that in the first quarter of 2009, the bank recorded positive growth of four per cent in its budget, in addition to an increase in the number of branches, businesses, as well as credit and securities issuances.

Yousif also added that the number of the Group's offices will increase in 2009 from 280 at present, reaching 330 by the end of the year, and staff numbers will increase by 800 employees.

On the economic downturn's effects on the Group's operations, Yousif said that there were initial concerns about investing in certain markets and that these concerns have now been “eradicated”, especially in markets like Turkey, Algeria, Egypt and Jordan, which performed very well.

Al Baraka Banking Group has also begun introducing new products in the Turkish market including finance leasing, forward sale and manufacturing contracts (Salam and Istisna) and rent-to-own schemes, adding that demand for Islamic financial products has increased, especially in emerging markets and in some European markets.

Link: http://www.cpifinancial.net/v2/News.aspx?v=1&aid=2196&sec=Islamic%20Finance

Nigeria opens market for Islamic finance

LONDON: Within the next two years the Islamic finance sector in Nigeria will be "very vibrant" with huge opportunities in virtually every asset class, according to Mohammed Lawal Shuaibu, area manager of Diamond Bank, one of the largest in the country.

This follows the introduction of the Law Governing the Operation of Islamic Banks by the Central Bank of Nigeria in mid-March 2009 thus bringing the authorization of Islamic financial institutions on par with the same provisions relating to conventional banks. "Until last month some institutions were doing Islamic deals on an ad hoc basis. Now that the law has been passed, we will see a rapid growth of such products because the demand is there and the market has been bereft of Islamic products so the starting base is low," explains Shuaibu.

Some 65 percent of Nigeria's estimated 150 million population is Muslim. Thanks to the oil price windfall, there is huge disposable income in the country, albeit that the oil wealth is still largely concentrated in the hands of the elite few.

Africa as a continent has been slow to take to or attract Islamic finance at the same scale say as the GCC (Gulf Cooperation Council) countries, Turkey or Malaysia. South Africa was the first sub-Saharan African country, excluding Sudan, to start Islamic banking in earnest in the 1990s with the establishment of Albaraka Bank (SA), part of the Bahrain-based Albaraka Banking Group. Since then local banks such as First National, ABSA and Nedbank are all offering Islamic products; while asset managers such as Sanlam and Oasis Group are offering Shariah-compliant equity and pension products.

Kenya at the same time last year authorized two Islamic banks -- Gulf Arab Bank and First Community Bank following the introduction of an Islamic banking law. Egypt, Algeria, Tunisia, Senegal, Gambia and Djibouti have all got the odd one or two Islamic financial institutions, but in general they are ineffective because the regulatory and financial environment in which they operate are not friendly to Islamic finance. Sudan is the only country where Islamic banking is well established but the scale and scope is parochial and there has been evidence in the past of governments exploiting the sector for its own fiscal and monetary policy aims.

Nigeria, one of the richest and largest African economies was the exception in that Islamic finance like anything Islamic until recently remains a potentially sensitive issue. But in an era of globalization, as Shuaibu stresses, "If the UK can have Islamic banks, and the US and EU are contemplating similar institutions, why can't Nigeria have Islamic banking. We cannot afford to be left behind as a country?"

Diamond Bank, which is a fully-fledged commercial bank and is capitalized at 25 billion naira, is in the process of establishing a dedicated Islamic banking window, "since there is now a legal framework that governs Islamic banking."

The Central Bank of Nigeria has given another entity, Jaiz International, a temporary Islamic banking license on the condition that it would get full authorization if it gets the full capitalization of 25 billion naira, which according to Shuaibu, it has thus far failed to do.

The Central Bank of Nigeria has also set up a National Shariah Advisory Board for Islamic finance and is also in the process of convening an Islamic finance advisory group comprising market players and other interested parties to advise and deliberate issues relating to the sector.

Muhammadu Sani Jada, special assistant to Gov. Murtala H. Nyako of Adamawa State in the northeast, is similarly confident that "the federal government has opened the market for the Islamic finance industry. It is up to the investors, financial institutions and other interested parties to come and take up the challenge of establishing Islamic banking in Nigeria."

Jada sees huge potential for Islamic finance in the real economy in Nigeria especially in Adamawa State, which is the breadbasket of the country. "We are interested in investments and partnerships based on Musharaka and Mudaraba in order to accomplish people-oriented development projects and infrastructure. We are going to look at all the Islamic financing options."

The main problem for Nigeria is the perception of its country risk and the rampant corruption. Both Jada and Shuaibu stress, that no market is free of risk as the current financial crisis has proven. On the contrary, the Nigerian economy has improved tremendously over the last few years and return on investment in most sectors is very attractive. Nigeria, they stress, "is a goldmine for those who want to come in and have patience."

They urge any investors or Islamic banks interested in doing business in Nigeria to do their due diligence and tie-up with reputable local entities as a first step. But there is a further recourse to risk mitigation. The IDB (Islamic Development Bank) Group through its export credit and investment insurance entity ICIEC (Islamic Corporation for the Insurance of Investment and Export Credit), following discussions with Diamond Bank, is ready to provide country risk insurance for those who need extra comfort.

By Mushtak Parker

Link:

http://www.zawya.com/Story.cfm/sidZAWYA20090413031515/Nigeria%20opens%20market%20for%20Islamic%20finance

Islamic mega-bank prays for support

LONDON (Reuters) - Islamic finance is about to get its first mega bank if Sheikh Saleh Kamel has his way.

The billionaire chairman of Bahrain-based Al Baraka Banking Group is head of an alliance hoping to launch a $10 billion Islamic bank before year-end. He will have his work cut out. Islamic banks may have avoided the worst of U.S. sub-prime dross, but Islamic banking has risks of its own.

Islamic finance has enjoyed a benign decade. It has been growing at a 20 percent-odd clip since the turn of the century, with assets of $600 billion at the end of 2008. Moreover, Islamic banks avoided the complex collateralized debt polluting most western banks, thanks to Shar'ia restrictions on riba (interest).

Those western banks have been struggling to repair their ravaged balance sheets, with governments often the only (unwilling) investor.

Al Baraka itself has held back from IPO plans that have been in the offing for several years. But Adnan Youseff told a regional TV station this week that Sheikh Kamel is "accelerating the finalization process."

But investors are taking a risk if they assume that Islamic finance is a whole lot safer than its discredited western counterpart. After all, most Gulf banks are heavily exposed to real estate. As Spanish and Irish banks have found to their cost, it is little consolation to avoid complex U.S. sub-prime debt if you are hammered by a local property bust.

More generally, Islamic banks have yet to test the central tenet of Islamic banking-that depositors are co-investors who share in the risks that they take on. In practice, like U.S. money-market funds, they strain every sinew to ensure they don't "break the buck", or give customers back less than they deposited.

But big real-estate write-downs could mean that banks do not have enough to repay deposits in full. That would test depositors' loyalty. And many Islamic banks, like their western counterparts, have lent long. Therefore, if depositors turn away from their local banks, they could face a liquidity squeeze just as acute as when wholesale markets closed to western banks in August 2007.

After all, depositors do have a choice. There is already a mega-bank offering Islamic finance. It's been in the Middle East for more than a century. It's global. And it's about as safe as banks come. It's called HSBC.

-- At the time of publication, Margaret Doyle did not own any direct investments in securities mentioned in this article. She may be an owner indirectly as an investor in a fund.