All posts related to KL Conference on Islamic Wealth Management & Financial Planning 2018 - KLC-IWM-2018

Saturday, 30 November 2013

Islamic banking has great potential


Experts see bright future, say industry needs to be innovative and competitive to reap benefits 


Islamic banking is one of the fastest-growing segments in the world, but it needs to be innovative and competitive to realise the true growth potential in years to come, experts say. 

Addressing the fifth World Islamic Retail Banking Conference here on Tuesday, top executives of leading Islamic banks underlined the need to address the challenges being faced by the industry to increase its share in global banking industry.

“There is urgent need to develop Shariah regulatory framework to realise the true potential of Islamic retail banking,” said Adnan Yousif, president and chief executive of the Al Baraka Banking Group.

He delivered the keynote speech entitled “The Changing Retail Banking Landscape” and said the lack of awareness about Islamic banking products is one of the main challenges, which needs to be settled to promote the industry.

“The media can play an important role to develop awareness about Islamic banking industry,” he said, adding that Bahrain has already launched good initiatives including Islamic finance as a subject at the secondary level, colleges and universities.

Yousif also hailed Dubai’s recent initiatives to become a capital of Islamic economy and said local banks — Dubai Islamic Bank, Noor Islamic Bank, Mashreq and Al Hilal Bank, among others — are doing good to promote Islamic retail banking.

Criticising conventional banking, he said it is just compiling “toxic loans” or “bad debt”, which is not beneficiating the economy.

“I wish we could have a huge Islamic bank in the Arab world that could help develop big industries,” he said.

Asad Batla, head of the consumer banking division of Bank Nizwa and who was chairman for the first day of the conference, said Islamic banking industry is relatively new and “we need to give our best to promote this segment”. 

Abdulrahman Turki, general manager of retail banking at Bahrain Islamic Bank, said Islamic banking is doing good compared to conventional modes of business. However, he stressed the need to create awareness about Islamic banking through various channels to increase its share in the industry.

“We are one of the top Islamic banks operating in Bahrain with 14 branches and have launched couple of good initiatives to promote Islamic banking in the country through conferences and meetings,” he said.

The annual CEO roundtable, entitled “Developing Islamic Retail Banking, reaching to the retail target segments: Back to Basics”, highlighted the basic practices and the potential of immense opportunities that Islamic banking offers to the global retail banking sector.
Jordan Islamic Bank’s vice-chairman and CEO Musa A. Shihadeh explained the reasons why Islamic banks failed to build up the assets and said industry need to bring down the cost of funding to competitive levels.

Dr Jamil El Jaroudi, CEO of Bank Nizwa, said the industry is doing well and not piling up “toxic loans” like conventional banks.

Irfan Siddiqui, president and CEO of Meezan Bank, shared the success story of the bank and said about 70 per cent of customers are still untapped and there is huge potential to promote Islamic banking across the globe.

Wasim Saifi, CEO of Standard Chartered Saadiq Berhad and global head of Islamic Consumer Banking of Standard Chartered Bank, said Islamic banking should be high on bankers’ agenda to gain more share of the banking industry.

“Substantial opportunities exist in East and West Africa and the next decade is very important for the industry. Major Muslim countries need to realise the true potential of Islamic banking,” he said.

Sultan Choudhury, executive board director and managing director of the Islamic Bank of Britain, said the UK is a very integrated market for the banking industry and the bank more dependent on technology and Internet banking. He said non-Muslims are also strong customers for Islamic banking products.

Moinuddin Malim, CEO of Mashreq Al Islami, said Islamic banking has done a good job compared to conventional units, however the quality of service, education and innovasion are keys to promote the industry.

In his presentation John Chang, head of consumer banking at Noor Islamic Bank, enlightened the audience on how to achieve total organisational alignment. Renowned Shariah scholar Shaikh Nizam Yaquby acknowledged the queries of the participants during the annual open fatwa session, which was moderated by Professor Humayun Dar, chairman of Edbiz Corporation.

The other participating Shariah scholars and experts were Dr Muhammad Al Bashir Muhammad Al Amine, group head of Shariah at Bank Alkhair; Shaykh Haytham Tamim and Momin Hyat, Shariah scholar and manager of Shariah Governance and Compliance at Mashreq Al Islami.

R. Lakshmanan, chief executive of Sakana Holistic Housing Solutions, focused on the different models used to understand housing finance such as Ijara, Musharaka and Murabaha.

Tamas Erni, managing partner at Loxon Solutions, addressed the issues pertaining to credit risk origination through IT platforms in his presentation.

Imran Samee, head of the Consumer Banking Division at Bank Islam Brunei Darussalam, presented the Case Study Brunei on Islamic retail banking, emphasising on reposition, distribution and risk management issues.

The first day of the conference marked its closure with the networking reception, which also paved the way for the inauguration of the Global Islamic Finance Awards, which was hosted by WIRBC and organised by Edbiz Consultancy late on Tuesday.


(Khaleej Times / 27 Nov 2013)
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First Eurozone Islamic Bank Planned For Luxembourg

The Eurozone is to get its first Islamic bank after a consortium of Gulf businessmen and a UAE royal family announced an agreement to set up a new lender headquartered in Luxembourg.

Eurisbank will have a start-up capital of 60 million euros and is set to have branches in Paris, Brussels, The Netherlands and Frankfurt. The bank will offer services in retail, corporate and private banking.

The consortium – which also includes an unnamed bank – plans to launch the new lender in the fourth quarter of 2014.

Deloitte’s feasibility study of the bank demonstrated high return on investment, taking advantage of being the first Islamic lender to be based in the Eurozone.

The investors and Deloitte have concluded a meeting with the CSSF – Luxemburg’s Supervisory Authority – which has welcomed the idea and gave directions to prepare the documents required to obtain a banking license.

“As the worldwide Islamic finance industry moves from niche to critical mass while Europe is becoming an attractive and promising market that is not yet served by Shari’ah-compliant banking services, considerable potential exists for the expansion of Islamic Finance,” said Marco Lichtfous, partner in Deloitte Luxembourg.

“The global market for Islamic financial services is estimated at USD 1.8 trillion, and by opening new markets the numbers are set to grow significantly in the years ahead,” he added.

Deloitte and Excellencia Investment Management have been assigned to conduct all procedures and to finalise the establishment of Eurisbank.

“A large untapped customer base with more than 20 million Muslims in the EU represent a significant market growth potential for Islamic Finance, and with the strong support of the European governments and regulatory authorities of the Islamic Finance Model, the unification of the regulatory framework within the European Union is a significant advantage to serve Muslim and non-Muslim communities across Europe,” said Ammar Dabbour, Managing Partner in Excellencia Investment Management.

“With low penetration rates of Islamic banking products in Europe resulting from a lack of supply and the strong demand from Muslim clients for Shari’ah-compliant services which are not appropriately addressed by current banking offering, Eurisbank is devised to supply a much needed spectrum of services and products unique to their audience.

(Gulf Business / 26 Nov 2013)
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Islamic finance gains popularity across the globe

A flourishing industry
Islamic finance is gaining popularity across the globe and Islamic banking assets are expected to reach $1.4 trillion this year, according to a report.

The share of Islamic assets in core Muslim majority markets is steadily rising with Saudi Arabia’s reaching 49 per cent and various other markets expanding with double-digit growth, according to the report released by Thomson Reuters ahead of the Global Islamic Economy Summit, starting today in Dubai.

The existing Islamic finance market stands at an estimated $1.35 trillion in assets based on disclosed assets by all Islamic finance institutions — full Shariah-compliant as well as those with shariah windows — covering commercial banking, funds, sukuks, takaful and other segments.

The breakdown by category includes $985 billion for commercial banking, $251 billion for sukuks, $44 billion for Islamic funds and $26 billion for takaful, or insurance.

“This represents a very small proportion of the global financial assets, it is a fast growing segment rising at 15 per cent to 20 per cent a year in many of its core markets,” the report says.

In addition, an estimated $628 million of Islamic microfinance assets is also a growing segment although only representing about 0.8 per cent of the estimated total global microfinance market of $78 billion in 2011.

Globally, banking assets, excluding funds, insurance and other distinct segments, accounted for $123.7 trillion in assets in 2012. Current Islamic banking assets amount to $985 billion, comprising less than one per cent of global assets.

The gap between the potential and existing Islamic finance market remains large. Assuming an optimal scenario in core Islamic finance markets of countries of the Organisation of Islamic Cooperation, or OIC, the 2012 potential of the Islamic banking universe could reach $4,095 billion in assets within the OIC. The optimal scenario assumes full regulatory support for Islamic finance in OIC markets and a 100 per cent Islamic banking penetration with the proportionate Muslim demographic of OIC countries. 

Islamic microfinance
With a large segment of the global low-income population concentrated in Muslim majority countries, it is also estimated that 72 per cent of people living in Muslim-majority countries do not use formal financial services. This makes Islamic microfi-nance an important market given Islamic finance law sensitivities among all segments of the Muslim popula-tion.
The Islamic microfinance market is also a growing segment but with a huge gap relative to its potential. According to the study released by the Consultative Group to Assist the Poor, or CGAP, the estimated size of Islamic microfinance today is $628 million in managed assets, which is 0.8 per cent of the estimated total global microfinance market of $78 billion. Between 2006 and 2011, Islamic microfinance market has quadrupled, according to the CGAP study. 

Attracting global banks
Islamic finance has attracted the attention of global finance while becoming a major economic driver for the economies of Muslim-majority countries.

Global banks such as Deutsche Bank, HSBC, Standard Chartered and Citi have their investment banks serving as lead arrangers on sukuk issuances around the world.

“Many global banks have an Islamic window or separate Islamic banking subsidiaries, while the United Kingdom’s government has become the first non-Islamic country to announce a major sukuk issuance,” the Thomson Reuters study says.

UK Prime Minister David Cameron recently announced a £200 million sukuk to be issued in 2014. This issuance hopes to make England at par with other global leaders within the Islamic finance industry. It is also expected to strongly strengthen the domestic Islamic finance industry. The current legislation within the UK supports sukuk’s unique infrastructure and has resulted in over $34 billion in sukuk listings. In parallel, the London Stock Exchange will create an index to give a more accurate rating to sukuks.

Demand for sukuk
The demand for sukuk, or Islamic bonds, is expected to almost double in value over the next four years, driven by strong economic growth in the Middle East and Asia and their spread to new markets, according to a report by Thomson Reuters.

Global demand for sukuk is expected to reach $421 billion by 2016 from $240 billion in 2012, according to a Thomson Reuters survey of 169 investors and sukuk arrangers, mainly from the Gulf region and Asia, conducted in August and September.

According to Thomson Reuters, sukuk issuance in all currencies fell by more than a quarter to $79 billion during the first nine months of 2013 compared to $109 billion in a similar period a year ago. It attributed the decline to a rise in global credit spreads since May due to the prospect of US monetary tightening. However, the same report forecasts that sukuk issuance would resume rising rapidly next year, hitting $130 billion in 2014.

Dubai, which is facing stiff competition from London and Kuala Lumpur in attracting Islamic finance, has made a significant progress in sukuk listings this year and lifts the emirate’s leadership vision to become an international hub of Islamic economy. The emirate’s capital markets are expected to cross $16 billion sukuk listings by year-end. So far, nine sukuks worth approximately $13 billion are listed on Dubai’s exchanges this year, the third largest in the world, underlining the growing success of the “Dubai, the Capital of the Islamic Economy” initiative.

Referring to some potential upcoming sukuks, Thomson Reuters report said Tunisia has aimed to issue one billion dinars ($634 million) worth of Islamic bonds, the first time the country had used the developing sector to fund public borrowing.

“One billion dinars are to be available from the Islamic bonds by 2013 budget for the first time,” Finance Minister Slim Besbes told state radio. The issuance is now expected in February or March of 2014.

While the fall of the Muslim Brotherhood means less political support for Islamic finance development in Egypt, both economic pressure and strong consumer demand means the industry should continue to grow, albeit slowly. A planned major sovereign sukuk programme seems shelved for now but there is no official “no” either.

Pakistan’s Meezan Bank is planning to issue a $68.5 million sukuk for a telecommunications operator in the country. The Islamic bond will have a five- to 10-year maturity period.

France’s second-largest bank will also become the second bank in Europe to issue a sukuk and the first bank within the region to issue one in Asia. Societe Generale first sought the expertise of Hong Leong Islamic Bank before planning to issue the $300 million sukuk. The approval has been granted by the central bank and the funds are expected to be re-invested in the purchase of assets in Dubai, which also serves as the Socite Generale’s headquarters.

FWU AG Group, a Munich-based financial services company, recently issued a $55,000,000 sukuk — the first-ever sukuk issuance by a German corporate and the largest ever sukuk from a European corporate. This is also the first sukuk to utilise a computer software programme and intellectual property rights under an Ijara structure.

Moreover, Abu Dhabi Islamic Bank, or ADIB, attracted a spec-tacular order book of over $15 billion for the $1 billion perpetual sukuk, which has no maturity date. The bank can choose to repay the bond on certain dates from 2018 if it wishes. The hybrid sukuk was the first to be publicly issued by a bank to meet the Tier 1 capital requirement in Basel III global banking standards that will be phased in around the world over the next several years — although ADIB privately placed a $2 billion Tier 1 note in 2009.

Almarai became the first corporation in the Gulf to issue a hybrid sukuk worth $435 million. It enables Saudi food producer to diversify its funding sources to pursue its expansion strategy in a cost-effective way.

(Khaleej Times / 25 Nov 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Friday, 29 November 2013

Islamic Finance Report Cites Importance of Shariah Standards in Education

Ethica Institute of Islamic Finance, the Dubai-based global leader in Islamic finance certification believes that the options in Islamic finance education are only as good as their adherence to third-party standards.
Dubai, United Arab Emirates (PRWEB) November 29, 2013
“Where do I learn Islamic finance?” seems to be the question on everyone’s mind these days. With options ranging from short workshops to masters-level programs, students are spoiled for choice. With the spread of Islamic finance globally, the spread of Islamic finance education was sure to follow. The Global Islamic Finance Education research report from Yurizk helps individuals and institutions weigh their options.
Yurizk’s CEO Sadia Karim said, “Human capital development is a critical challenge for the Islamic finance industry and previously there was no comprehensive study that addresses the major issues and at the same time backs the insight with collective data. GIFE 2013 bridged that gap of information and brought critical insight into the challenges facing the Islamic finance industry in human resources development and the industry’s long term sustainability.”
Ethica Institute of Islamic Finance, the Dubai-based global leader in Islamic finance certification, believes that the options in Islamic finance education are only as good as their adherence to third-party standards: “Islamic finance is one of the few global industries in which one cying that it is actually Shariah compliant. The onus is on Islamic finance educators to ensuan get away with calling something ‘Shariah compliant’ without any independent third-party verifre that what they are teaching has been checked by an Islamic finance scholar as adhering to a globally accepted standard like AAOIFI.” Ethica was amongst the report's key contributors and submitted a section on the need for standardizing Islamic finance education.
As options for Islamic finance education grow, the prestige of institutions will likely be measured by their Shariah authenticity more than by any other factor. The Global Islamic Finance Education report gives students a sound starting point before committing to a program of study.
(Long Island Newsday / 28 Nov 2013)
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Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia: New ruling to maintain Muslim business legacy

PETALING JAYA: The Labuan International Business and Financial Centre (LIBFC) has cleared the regulatory requirements that will allow Muslim businesses to maintain the core wealth of the company under Islamic beneficiary laws.
Dr Mohd Daud Bakar, chairman of the Shariah Advisory Council for Bank Negara Malaysia and LIBFC, said a fatwa issued by the council in April has allowed the creation of trusts that will allow the family business to be preserved and passed down to ensuing generations in a non-disruptive way.
Traditionally, Islamic wealth is passed down the generations through a system called ‘faraid’, which allows for the wealth to be divided among beneficiaries.
Mohd Daud said by creating trusts, Muslim family businesses will survive after the death of the principal.
“Businesses that had been build over a period of time would not be dismantled as Muslims can create waqf or trust foundations that will prevent the dissolution of business empires or lead to the massive erosion of wealth,” he told The Malaysian Reserve in Kuala Lumpur yesterday.
Speaking on the sidelines of the Islamic Wealth Management forum, Mohd Daud said these trust funds will be professionally managed in LIBFC. “Muslim families are given the option to create a foundation that ensure that wealth will not be subject to ‘faraid’ upon death as the trustee can manage for the benefit of the beneficiaries,” he said.
Mohd Daud, however, said though the new ruling is subject to challenges in the Shariah courts, it is a way to allow high net worth Muslims a way to ensure that their legacy is not broken up.
The fatwa that was issued in March allows Muslims to equally distribute the assets to sons and daughters and addresses the uneven distribution under ‘faraid’ that is biased towards male heirs.
Also at the forum, former Chief Justice Zaki Azmi said Islamic finance was sparked off by the discovery of oil in the Middle East that resulted in the demand for banking system that is free from interest and other non-halal practices.
Zaki said the sudden rise in wealth of Arab countries created a need for Western banks to adopt Islamic-compliant systems in order to attract Arab money.
“These Muslims wanted to invest but do not want their money to be tainted by transactions which are based on interest and therefore haram.
The monies belonging to billionaire Muslim Arabs were mostly in the western financial institutions, which practise the Jewish banking system (interest or usury-based),” said Zaki.
Speaking at the Islamic Wealth Management Seminar in Kuala Lumpur yesterday, Zaki said when Arabs became reluctant to put their money in the western banks, because they will be tainted by haram or illicit dealings, the banks had to tailor the investments to make them halal.
“It began in Dubai, hence the beginning of Islamic financing,” Zaki said.
He said from this spark, other countries, notably Malaysia has spearheaded the move to allow Islamic banking to flourish.
“To avoid any challenge that the method of financing was not according to Shariah, a fatwa council was set up giving confidence to investors of the compliance of the products with halal principles,” Zaki added.
Islamic banking assets under management is anticipated to reach US$2 trillion (RM6.46 trillion) by 2014 globally, while Malaysian banks are the leading Islamic banks in the South-East Asian region.
(Free And Independent / 28 Nov 2013)
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Thursday, 28 November 2013

Halal Products Not Only For Muslims – Expert

It is a mistake to market Halal products to Muslims only and more must be done to increase their marketability, one expert has said at the Global Islamic Economy Summit.

In a passionate speech, which drew spontaneous rounds of applause from the packed audience in Dubai, Saleh Lootah, managing director of Al Islami Foods, argued for a single global Halal standard to help grow the market.

“Is Halal only for Muslims? This is what we have to change, our mindsets,” Lootah said.

“Halal products are not only for Muslims, as Islam is not only for Muslims – this is the problem.”
Lootah argued that poor food packaging as well as the taste of Halal products was not good enough and needed to be improved to help grow the market. He also said the media has not positively portrayed Halal products.

“We’ve got away with this so far [the packaging, the taste].We must deliver Halal to its best…and this is what we are trying to do, to position Halal in the right way.”

Halal food and lifestyle sector expenditure reached $1.62 trillion in 2012 and is forecast to hit $2.47 trillion by 2018.

Lootah argued that the lack of a universally recognised standard for Halal, and disagreement between regions over who has the better standard, was restricting market growth.

“We make it complicated for ourselves – the differing standards between regions. The best muftis [experts in Islamic law] are the consumers themselves. We have to let them decide,” he said.

“The lack of standardisation is the main issue hindering the growth of the Halal food sector.
“Adapting a common standard for Halal food is the first step to having a proper infrastructure in OIC [Organisation of Islamic Cooperation] countries.”

Lootah was joined on stage by Gerald Lawless, president and Group CEO of Jumeirah Group, who revealed the hotel chain is planning to do more to meet its customers’ religious and cultural needs.

“It’s important to know the food here [in Dubai] is Halal and is of the highest quality,” Lawless said.

“We need to be sensitive of our guests’ preferences around the world. In London during the summer time it is almost the Middle East. Some guests may want a Koran in their room and not a Bible.

“Dubai has huge opportunities in the Halal travel sector, especially from the GCC” he added.

(Gulf Business / 25 Nov 2013)
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Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Expo 2020 Win to Boost Dubai Sukuk on Spending: Islamic Finance

Dubai sales of Shariah-compliant debt are set to surge should the emirate win Expo 2020 as the sheikhdom finances the building of roads, railways and an airport expansion for the event.
The second-richest member of the United Arab Emirates is one of four cities competing for the world fair, which will be awarded today by the Bureau International des Expositions in Paris. A win would spur construction projects, higher government spending and more issuance, Hussain Al Qemzi, chief executive officer of Noor Islamic Bank, said in an interview at the Global Islamic Economy Summit in Dubai yesterday.
Dubai would spend almost 6 billion euros ($8.1 billion) on infrastructure projects ahead of the expo, Sheikh Ahmed bin Saeed Al Maktoum, head of Dubai’s Supreme Fiscal Committee and chairman of Emirates Airline, said Nov. 17. The sheikhdom set a three-year timetable to become the capital of the Islamic economy globally, and state-owned companies, including Emirates and the Dubai Electricity & Water Authority, have sold sukuk in 2013.
“The Expo would mean significant infrastructure spending,” Adnan Chilwan, CEO of Dubai Islamic Bank PJSC (DIB), said in an interview at the conference yesterday. “Raising funds would require the right financial structures and, in my mind, capital market transactions, bonds or sukuk will see a surge. The way the wind is blowing, sukuk may be the preferred route.”

‘More Credibility’

Sukuk issuance is set to jump from just over $51 billion this year to about $60 billion in 2014, Moody’s Investors Service said in a report dated yesterday. The yield on Dubai’s $650 million May 2022 bond has risen 49 basis points this year to 4.81 percent at 12:30 p.m. in Dubai, according to data compiled by Bloomberg. That compares with a 96 basis-point increase in 10-year Treasuries to 2.72 percent.
The emirate’s credit-default swaps, contracts for insuring its debt against default for five years, tumbled to 217 basis points yesterday from 445 at the end of 2011.
“If you look at Dubai’s CDS compared to what they were during the crisis they have substantially come down,” Chilwan said. “A win of the Expo would give Dubai more credibility and something to look forward to” which could further lower borrowing costs, he said.

Desert Venues

Winning the Expo could boost Dubai’s economic growth to 6.4 percent over the next three years, Barclays said in a research note yesterday.
The emirate will speed up plans for a 5 billion-dirham ($1.36 billion) expansion of the city’s metro network if it wins the bid, Dubai’s Roads & Transport Authority said in June. A new purpose-built exhibition center with themed pavilions will be constructed in the desert south of the city, according to Dubai’s bid website.
The potential increase in spending raises risks of further debt accumulation by Dubai entities, Barclays said. The emirate roiled global markets with a request to delay $25 billion of debt payments in 2009. Government-related companies including Dubai World Corp. and Nakheel PJSC were forced to re-negotiate with lenders.

Sao Paulo

Turkey’s Izmir, Russia’s Ekaterinburg, and Brazil’s Sao Paulo are also in the running to host the more than 160-year-old event. Confidence has been building in Dubai, where sukuk yields, particularly for real-estate developers, have fallen amid expectation of a win.
Emaar Properties PJSC (EMAAR), developer of the world’s tallest tower, saw yields on its $500 million sukuk due August 2016 tumble 88 basis points this year to 3.53 percent yesterday, according to data compiled by Bloomberg. The yield on Nakheel’s 4.27 billion-dirham sukuk due the same month slid 226 basis points, or 2.26 of a percentage point, to 7.01 percent.
“Expo is only part of the Dubai story,” Moinuddin Malim, chief executive officer of Mashreq Al Islami, said in a Nov. 25 interview at the conference in Dubai. “They have a very good master plan. Hopefully when they win the Expo, we will see that plan put through its paces.
(Bloomberg / 27 Nov 2013)
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Wednesday, 27 November 2013

Rising Tsunami Of Demand For Islamic Finance – Expert

Islamic finance provides banking with ethics and morals and is experiencing “a rising tsunami of demand” according to a panel of experts on the opening day of the Global Islamic Economy Summit.

Leaders from the Islamic finance world converged in Dubai on Sunday for the start of the two-day conference, the first time it is being hosted in the emirate.

“We are in the beginning, but we have so much room for growth and regulations and policy making is key in this progress,” said H.E. Eng. Mohammed Al Shehhi, undersecretary, UAE Ministry of Economy.

“Islamic finance is the future – not a single Islamic bank has been bankrupt, bailed out or affected by the financial crisis. We must build on it [Islamic banking] for future generations.

“The UAE has, with the initiative of H.H. Sheikh Mohammed, the potential to be the world capital for Islamic economy.”

V. Shankar, CEO of Standard Chartered in the UAE for the EMEA region, warned companies would be left behind if they are not prepared for the growth of Islamic banking.

“In the next 10 years, if you don’t have a strategy for Islamic finance you’re going to be in trouble,” he said.

“There is a rising tsunami of demand for Islamic finance. It doesn’t just appeal to Muslims but to all.

“Dubai of all cities in the world is well positioned to leverage this sector.”

Also on the panel was the RT Hon. Baroness Warsi, senior member of the UK’s Foreign and Commonwealth Office, who said the finance model shift from western to developing markets presented opportunities for Britain.

“Political stability plays an important role for the growth of all emerging countries,” Warsi said, as panel members discussed the positive economic affects parts of the GCC have felt as a result of the Arab Spring.

“I don’t see it [cities jostling to be world Islamic capital] as competition. I see it as Kuala Lumpur, Dubai, London and Bahrain all together.

“Islamic finance provides banking with ethics and morals…and it provides an opportunity to be economically engaged with five per cent of the UK Muslim population

(Gulf Business / 25 Nov 2013)
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Islamic finance body IILM expands sukuk primary dealers

Nov 26 (Reuters) - The Malaysia-based International Islamic Liquidity Management Corp (IILM) said it had expanded the number of primary dealers handling its Islamic bond programme to nine from seven, a step towards expanding cross-border trade in its sukuk.
In August the IILM, a consortium of central banks from Asia, the Middle East and Africa, conducted its first sukuk issue, selling $490 million of three-month paper.
The issue was designed to meet a shortage of highly liquid, investment-grade financial instruments which Islamic banks can trade to manage their short-term funding needs. This shortage has become a barrier to the further growth of Islamic finance.
On Tuesday, the IILM said it had conducted an auction to resissue the sukuk as they matured, at an average yield of 0.5571 percent. The reissue was fully subscribed.

Abu Dhabi Islamic Bank, AlBaraka Turk, CIMB Bank Bhd, Europe's KBL Private Bankers, Kuwait Finance House, Malayan Banking Bhd (Maybank) , National Bank of Abu Dhabi, Qatar National Bank and Standard Chartered Bank acted as primary dealers in the auction.
(Reuters / 26 Nov 2013)
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Sri Lanka’s Islamic Finance market tops Rs 300 billion

The Islamic Finance market has an estimated market of around Rs 300 billion and with the operation of current five commercial licensed banks, three finance companies and other institutions,Sri Lanka’s total deposit base is nearly Rs 35 billion and the total loan base is Rs 24.8 billion,a top financial analyst said.
To tap a huge market potential of this size there is certainly much room for development in the Sri Lankan industry such as new products, product developments and liquidity and integrating with the country’s development needs, Head of Credit MCSL Financial Services Limited Leonard Perera said.
“It is essential that we raise funds and investments from the international markets. We have to search for new markets, institutions and entrepreneurs to open out channels to bring in investments to the country. Therefore Islamic Finance would be an ideal fund generator in the international markets,”Perera told the Daily News Business.
He further said that Islamic finance was one key opportunity, which we can make use of to bring in funds via different agencies, countries and foreign currencies. Introducing new Shariah-compliant instruments and bringing in our own new products are important in expanding the Islamic finance industry in the country, he said. The expansion in the banking, finance and insurance sector will not only assist to build the economy, but also to build the nation collectively,” he said.
Perera said Islamic finance industry is an ideal solution to the Sri Lankan market in order to enhance its banking, finance and insurance with different products and investments because Islamic Finance is not only to Muslims but also for every person. During the recent past the country has made remarkable progress in the Islamic finance industry and still has a huge market potential, he said.
“Sri Lanka can grow in the Islamic finance has lot of potential, but it is important that the industry has a plan and grow steadily. The thrust has to build among the public in taking the industry to the next level could be done since it could be distinguished from traditional banking system where its main advantage is it is risk free, interest free in interest asset and service backed and contractual certainty,’’he said.
Sri Lanka is one of the few non Islamic countries that available this business has a lot of potential in the market it is one of the growing sectors in the world, he said. According to industry sources that Islamic Financial sector has evolved and grown to reach US$ 1.3 trillion with a growth of 15 percent, which operates in 42 countries including15 non Islamic countries including USA, UK, Canada, and Switzerland Australia are top end countries that operate this instrument, he said. Perera said that major banks such as HSBC, Standard Chartered Bank ABN Amro have dedicated Islamic Banking subsidiaries or Islamic Banking windows, he said.
In Sri Lanka the Banking Act No 30 of 1988 was amended in March 2005 to accommodate the concepts of Islamic banking is recognized by IMF, World Bank, Basel Committee premier global bank regulator and funding body, he added. 
(Daily News / 27 Nov 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Tuesday, 26 November 2013

Dubai races to become global Islamic finance hub

Dubai: A decade ago, Kuala Lumpur had the distinction of being the undisputed leader among the global Islamic finance hubs. The launch of Dubai International Financial Centre (DIFC) in 2004 marked the birth of a new hub in the Middle East.
Dubai’s ambition got a new boost in January this year when the government declared its intention to make the city the global capital of Islamic economy. The Emirate’s new plan comes from Shaikh Mohammad Bin Rashid Al Maktoum, Vice President of the UAE and Ruler of Dubai, and has the involvement of government departments at the highest level.
Dubai’s initiative has triggered a flurry of activity across major global financial centres, all working towards a strategy of getting a share of the Islamic finance pie. From early March UK initiated a global push to boost the prospects of London. Not to be left out, Malaysia is in the process of finetuning its regulations to get more overseas participation in its Islamic financial markets.
London has been nurturing its ambition of becoming the western hub of Islamic finance for some time. At the first World Islamic Forum outside the Muslim world in London in October, British Prime Minister David Cameron could not keep London’s plans discreet.
“I don’t just want London to be a great capital of Islamic finance in the Western world, I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world,” Cameron told the gathering of more than 1,800 political and business leaders dubbed as the ‘Davos of the Muslim world’.
Obviously, there are others who too want a share of this fast-growing segment of financial services business. Two weeks ago, Hong Kong declared its intention to sell its debut sukuk to spur the city’s development as an Islamic finance hub. “The territory will offer the (Islamic) notes under the Government Bond Programme,” Au King-Chi, permanent secretary for Financial Services and the Treasury, said in a statement published on the government’s website.The UK government has thrown its full weight behind London as a contender for the Islamic finance hub by announcing its intention to issue its first sovereign sukuk (Islamic bond). Of course, the story doesn’t end there with just London entering the fray and gradually usurping the throne from the current two strong contenders.
Hong Kong is certainly eyeing the global potential of Islamic finance, but its immediate focus is on its captive market — China. Analysts say Hong Kong is in a hurry to define its niches before Shanghai, China’s new financial centre, becomes a threat to its dominance in the region.
“Hong Kong is a gateway to greater China, so this (sukuk) issuance would be very well-watched. A single issuance won’t give any country the title of Islamic finance hub, but we are seeing more non-Islamic jurisdictions stepping into the fray, which bodes well for the industry.” said Raj Mohammad, managing director at Five Pillars Pte, a consulting company in Singapore.
Singapore’s ambition
Singapore has been nurturing the ambition of becoming a new regional centre for Islamic finance — in direct competition with Malaysia and Indonesia for global capital flows. As an international financial centre, Singapore is keen to play a role in Islamic finance by leveraging its capabilities and credentials in wealth management, project financing and trade financing. The government has undertaken several initiatives in areas such as taxation, capital markets, REITs, Takaful insurance, and Islamic equity indexes, in order to improve Singapore’s attractiveness for Islamic finance. DBS Bank took the lead in 2007 and launched the Islamic Bank of Asia to focus on corporate capital markets and private banking services.
“Singapore’s strategy is based on the understanding that it cannot be a truly global financial centre if it does not offer Islamic financial services. Proximity to Indonesia, a major market for Islamic finance and relatively smaller size of Singapore’s domestic market seem to be pushing it to seek a share in the Islamic finance,” said Ketan Shah, an analyst at Orion Financial Consulting in Hong Kong.
Over the past few decades after the Asian financial crisis, Malaysia has emerged the Islamic finance centre for Asia with smart regulation and a growing ecosystem around Islamic finance. Approximately 70 per cent of Malaysia’s domestic debt issuance is in the form of sukuks, making it the world’s largest Islamic bond market with more than 60 per cent of global sukuk issuance originating from Malaysia.

Alternatives to conventional financing
According to global rating agency Standard & Poor’s, issuers are likely to seek alternatives to conventional financing, given the uncertain outlook for global credit markets. Islamic finance is one such alternative. “Infrastructure projects are a logical fit for Islamic finance for two reasons — the Islamic finance market is growing and deepening; and Sharia (Islamic law) governs Islamic finance and is based on the concepts of asset-backing and shared business risk,” S&P said in a recent note.
“Malaysia’s role in creating a well-regulated market with significantly high number of issuance is well recognised in the industry. In that respect, all new centres will have a lot of catch up to do,” said Khalid Howladar, senior credit officer at Moody’s Investors Service.
Malaysia pioneered the use of Sharia-compliant sukuk bonds to fund infrastructure projects and is the leader in Islamic financing. The key issue for this market, in our view, is that a lack of standardisation constrains sukuk issuance. It also deprives the market of an organised structure to facilitate secondary trading and liquidity.
Malaysia has challenges, too. Corporate governance standards are moderate and the enforcement of governance practices could improve. Shareholder activism is limited and corporate scandals far too frequent. While the law provides for creditor protection, the process for enforcing legal claims can be protracted. These issues should be easy to fix, provided they are approached with vigour and zeal.
London is leveraging on its preeminent position a global financial centre for conventional finance. It believes that its global banking linkages and close association with traditional markets for Islamic financial services could be translated into emerging as a new global Islamic financial services hub. London has led in attracting issues by big international companies because of the massive size of its conventional financial markets and its globally respected legal system.
Strategically located in the oil-rich Gulf region, Dubai sees opportunities in becoming a global hub for Islamic finance starting with being a financial centre for Middle East, North Africa and sub-Saharan Africa. Dubai has already started its efforts in earnest to convince the regional issuers list their sukuk here. Analysts say Dubai won a victory this month when the Jeddah-based Islamic Development Bank, which has long operated sukuk issuance programmes in London and Kuala Lumpur, said it would set up a $10 billion programme on the Nasdaq Dubai exchange.
Besides Dubai, in the GCC there are at least three other cities such as Bahrain, Qatar and Riyadh that are angling for a share of Islamic financial services business but with limited success.
(Gulfnews.com / 24 Nov 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com