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

Monday, 30 December 2013

Growth of Malaysia's insurance, takaful sectors seen stable

KUALA LUMPUR: The growth of the insurance and takaful sectors for 2014 will remain stable amid domestic demand, said industry experts.
Takaful Malaysia group managing director Datuk Mohamed Hassan Kamil said strong growth prospects and improved risk management would lead to increased demand for insurance and takaful amongst the public at large.
He said the industry is anticipated to remain encouraging for both conventional and takaful operators through the introduction of new or enhanced and innovative products by insurance takaful companies.
“There is plenty of room for organic growth, given the fact that Malaysia still has low insurance penetration in both the conventional and takaful sectors.       
“In addition, we project a muted earnings growth outlook in certain areas of the local insurance and takaful industry arena that is likely to be impacted by investment de-risking and financial market volatility,” he told Bernama.
Regarding market players, he said the local insurance and takaful players are expected to utilise multiple distribution options available and develop alternative channels whilst strengthening their agency force to establish a solid foothold in the industry.
He said this will be supported by the implementation of strategic marketing and operating systems on top of competitive and cutting-edge products and services offered by respective industry players.
Hassan Kamil said despite the positive outlook, the industry will face diverse changes that were expected from the enforcement of the Risk-Based Capital (RBC) framework in 2014.       
“The RBC implementation might change the landscape of the takaful industry and the expected contribution growth is deemed to accelerate modestly, with fairly robust growth amongst takaful operators outpacing the conventional players,” he said.
Apart from that, both industries have been experiencing an influx of mergers and acquisitions (M&As) resulting in more foreign insurers tapping into the Malaysian insurance market, he said.
Amongst M&As this year were Khazanah Nasional Bhd’s partnership with Canadian-based Sun Life Financial Inc to acquire 98% of CIMB Aviva Assurance Bhd for RM1.8bil, and American International Assurance Bhd’s acquisition of ING’s insurance and takaful business in June 2013.
The industry has seen new players from Canada and the US coming into the Malaysian market, taking over the smaller local players.
“We have witnessed the emergence of financial solid players in the local insurance industry arena as a result of the M&A exercises.       
“The insurance and takaful industry in Malaysia remains encouraging for both life and general insurance and takaful despite moderating economic growth following the slowdown in major advanced countries,” Hassan Kamil said.
The persistent talent shortage, of professionals well versed in both principles, would be one of the main areas that need to be looked at critically in order to remain competitive in the industry, he said.
In addition, he said the rapid development of insurance and takaful industry has made it all the more difficult to recruit the right human capital needed for the various job functions. 
(The Star Online / 23 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia: Jeddah-based IDB plans to develop Islamic centre of excellence at Tun Razak exchange

KUALA LUMPUR: The Islamic Development Bank (IDB) is considering developing an Islamic Centre of Excellence at the Tun Razak Exchange in the Greater Kuala Lumpur here in three to five years, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said today.

He said the centre of excellence would provide services in Islamic finance and banking-related transactions.
The project would be developed in collaboration with the Malaysian government, he said.
"The Malaysian government has always viewed IDB not only as an international institution but also as a partner in charting our nation's growth," he said in his speech at the IDB High Level Regional Forum today.





(News Straits Times / 17 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Sunday, 29 December 2013

Why are sukuk sales set to soar in 2014?


Debut of Islamic bonds from governments and companies seeking to cut financing costs will drive sukuk sales next year, with issuance probably rebounding to a record, HSBC Holdings Plc (HSBA) said.

Growth will be boosted as borrowers follow governments from Dubai to Malaysia, which are seeking to promote Shariah-compliant bonds and become centers for Islamic finance, said Mohammed Dawood, global head of sukuk financing at HSBC, the bank that managed the most sukuk sales in 2013. The London-based lender is also working to introduce new instruments to help the securities compete with conventional bonds, he said.

Within the six-nation GCC, which includes the two biggest Arab economies of Saudi Arabia and the United Arab Emirates, $21.1 billion of sukuk have been sold this year, about the same as in 2012, data compiled by Bloomberg show.

The average yield on the Islamic bonds sold by GCC issuers was at 3.77 percent on Tuesday, according to HSBC/NASDAQ Dubai indexes. That compares with an average yield of 4.17 percent on non-Shariah-compliant bonds for council issuers, according to the data.

Possible volatility in global interest rates caused by a cut in monetary stimulus by the US may influence the timing of new issues, although the pool of Islamic liquidity remains “very strong,” Dawood said. It may also push issuers to use local currencies such as the Malaysian ringgit or the Saudi riyal, he said.

Islamic bond sales fell 9.5 percent in 2013 to $42 billion after reaching a record $46.4 billion last year, according to data compiled by Bloomberg, in a market dominated by repeat borrowers. About $60 billion of sukuk will be sold in 2014, primarily by Malaysia and the Gulf countries, Moody’s Investors Service said in a report last month.

“In 2014, we will see a shift to new issuers,” Dawood said from Dubai. “We will see a lot more coming out of Asia and a lot more issuance from outside of the traditional markets.”

Financial centers around the world have announced plans to sell Islamic bonds as part of efforts to grab a greater share of an industry whose assets will more than double to $2.7 trillion by 2017, according to PricewaterhouseCoopers LLP. Hong Kong, the world’s fifth-largest currency-trading center, said in November it will offer a debut sukuk to spur capital markets. In October, UK Prime Minister David Cameron said the country planned to sell Islamic notes.

 “You have more debt maturities in 2014, especially in Dubai, so this will drive issuance,” Montasser Khelifi, a Dubai-based senior manager for global markets at Quantum Investment Bank Ltd., said.

Issuers in the Gulf Cooperation Council have about $32 billion of bonds and syndicated loans maturing next year, according to data compiled by Bloomberg. Among the debt is a $500-million note from Dubai due in November while Abu Dhabi’s Tourism Development & Investment Co., which is building museums in the UAE capital, has to pay a $1 billion bond in July.

Dubai, one of seven sheikhdoms that make up the United Arab Emirates, said this year it’s seeking to become the capital of the global Islamic economy.

“The announcements that we have seen from the likes of Dubai and the region have really given the product a lot more awareness, particularly among international markets,” Dawood said. “That has led to a whole series of enquiries and interest from countries, from issuers who otherwise would be not so obvious targets for sukuk issuance.”

HSBC has helped manage 110 sales this year, giving it a 17 percent share of the global sukuk market, according to data compiled by Bloomberg. Kuala Lumpur’s CIMB Group Holdings Bhd (CIMB) and Malayan Banking Bhd (MAY), which mainly deal with sales in Malaysia, the largest sukuk market, were the second- and third-biggest, respectively. HSBC was a manager of the 15.2 billion riyals ($4.06 billion) issue of Saudi Arabia’s General Authority of Civil Aviation in September in the biggest sale of such securities this year, according to data compiled by Bloomberg.

“In 2014 you will see continued development toward new instruments,” Dawood said. We are “looking at what is available on the conventional product offering, looking to see how that can be structured for the Islamic market” such as the perpetual sukuk, he said.

Perpetual sukuk, which don’t mature, have grown in popularity since the first such issue in dollars by Abu Dhabi Islamic Bank PJSC in November 2012. Four perpetual sukuk have since been sold in the GCC as companies have used them to shore up capital without hurting their creditworthiness since the instruments are treated as equity on the balance sheet.



(Albawaba Business / 26 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Virtual, Islamic banking will drive growth: Oracle arm

Oracle Financial Services Software Ltd (formerly i-flex Solutions Ltd) feels the emergence of new age banks that rely on technological solutions, the growing base of Islamic banking and demand from the North American banking industry for technology will drive growth for the company.
Chet Kamat, MD and CEO of the Oracle subsidiary, said banks in North America have started to look up. They have begun to focus on investments beyond regulatory and compliance-type schemes and started looking at what they need to do for growth.
“A large US bank signed up with us to implement Flexcube as their international platform. They look at their own markets but they are also looking overseas. So we are seeing traction in North America. We are in talks with chairmen and CEOs of banks in Latin American countries such as Chile, Columbia, Bolivia and Mexico,” he told Business Line.
The growth of Islamic banking around the world too is becoming a big phenomenon, he sad. “It is not just a niche thing. It has got huge scope for technology solutions.”
According to him, Latin America didn't really get impacted in the same way as the rest of the world when it came to the financial services sector. Banks in this region are upgrading technology. “We've had a couple of banks going live with the technology that they signed up for a year or two ago,” he said.
“A large part of Western Europe is facing issues with respect to what I would call an ageing and shrinking population. At the same time they are over-banked, so they are asset-heavy. They have to focus on reducing their cost significantly and do more things through direct and virtual channels,” he said.
The emergence of virtual banks with no physical presence too is on the anvil, and this will drive business for technology solutions companies, according to Kamat.
Citing the example of Jibun Bank Corporation, he said the bank offers the entire lifecycle of services on a mobile phone, including account opening, deposits, payments and card loans.
New banks

He further said the new banks that would start business in India must differentiate in order to be competitive and attract customers from existing banks.

“The emergence of mobility and all of the technologies around that would also drive the business. You start a process on one channel but you want to finish it on another channel. You need technology for this,” he said.
The company’s Flexcube has more than 500 banks as customers in 137 countries around the world. It has 11,000 employees, with the bulk of them based in India and teams in Singapore, in the US, Greece, the UK and Chile.

(Business Line / 28 Dewc 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

11 reasons why Islamic finance is booming

1.Fast and Steady Growth

The Islamic financing industry is growing 50 per cent faster than conventional banking. As of 2011, the global asset value of the Islamic finance industry is estimated to be at US$1 trillion. The figure is expected to reach US$5 trillion over the next five years. Indeed, there is no stopping the fast growth of Islamic banking with Islamic banks setting up shop in countries under the Gulf Cooperation Council (GCC), Malaysia, the UK, and even in Africa along with many other regions.

2.Green Financing Platform

Islamic finance offers the ideal platform to boost ‘green financing’ and promote SRI (social responsibility investment). As syariah rules prohibit participation in businesses involving alcohol, pork, and gambling, Islamic banks only support businesses that adhere to ethical and moral nature values when it comes to investments.

3.Syariah-Compliant Products

Demand for syariah-compliant products continues to rise alongside a growing Muslim population. Muslims predicted to account for more than 25 per cent of the world population in 2013, growing twice as fast as the world’s non-Muslim population. Islamic banks address this group’s need and natural inclination to prefer syariah-compliant financial products.

4.Attracts Even Non-Muslim investors

Even non-Muslim investors see the potential for profit in Islamic banking. Islamic financial products, as a rule, carry lower risk investments while enabling them to earn a profit and—at the same time—diversify their portfolio to further reduce risk.

5.Global Indexing

Western investors can track the Islamic financing industry through international rating systems. When purchasing sukuk or Islamic bonds, they can easily assess the strengths, weaknesses, and risk of the bonds by simply referring to benchmarks that track the financial industry.

6.Oil-Wealthy GCC Adopting Islamic Finance

Countries belonging to the GCC want Syariah-compliant products for investment.
Those belonging to this group are some of the wealthiest countries in the world. As the economies of Europe and the US struggle to stabilise, GCC nations are well-funded and their needs well met by Islamic banks.

7.Streamlined and Simpler

Islamic financial products, though they might also come with their own set of complex rules, are far simpler to understand than their conventional counterparts. For one, they are stricter with contracts and as focused. Islamic financial institutions also have scholars that offer consumers guidance with every venture and proceeding. They follow strict principles that ensure every single transaction is carried out according to Syariah law.

8.‘No Crisis’ Zone

Islamic financing saw a 25 per cent increase in value of assets from 2007 to 2008, while most of the world’s economies battled the worst financial crisis. It is, thus, safe to say that investing in Islamic financing is a possible way to avert potential crises in the world economy.

9.Shared Responsibility

It is not against Islamic laws to accumulate wealth but all investors need to exercise awareness and shared responsibility for poverty in the world. Through the concept of zakat, or giving a portion of wealth to charity, Islamic finance aims to reduce economic disparity across the globe.

10.Thoughtful Decision-Making

Islamic investors avoid choices that cause harm to people and the environment. Through a thoughtful decision-making process, investors are able to make socially responsible choices that encourage investments that are good for the long-term.

11.Malaysia Catching Up

Malaysia’s Islamic assets reached US$65 billion in the financial year 2012/ 2013, reports the Ministry of Finance. National Islamic banking assets registered an average growth rate of 18 per cent to 20 per cent annually to reach US$ 65.6 billion. The government just invested in the development of human resources for the Islamic financing industry so as to ensure it catches up to the industry’s phenomenal growth.


(Borneo Post Online / 29 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Saturday, 28 December 2013

Use the Islamic banking system, CM tells Muslims

Kota Kinabalu: Non-Muslims' acceptance towards the Islamic Muamalah system (Islamic financial transactions) is a good sign, but Muslims will lose out if they themselves don't get involved, said Chief Minister Datuk Musa Aman.
He said according to research, 70 per cent of the deposits and Islamic banking customers consist entrepreneurs and non-Muslims.
Musa's speech was read by Local Government and Housing Assistant Minister, Datuk Haji Zakaria Haji Mohd Edris, at the Celik Muamalah Islam symposium at the Saadah hall, Wisma Muis, here.
The programme was organised by Malaysia Islamic Propagation Foundation (Yadim), Sabah Islamic Affairs Department (Jheains) and CIMB Islamic Bank.
Musa said Muslims should change their thoughts and habits.
"Muslims should be the main customers of the Muamalah system."
Musa urged Muslims to change from the conventional system to the Muamalah system, especially when it comes to loans such as personal loans, car loans and housing loans, among others.
The Islamic Banking system's success in Malaysia has led to its introduction in almost all conventional banks here and is accepted in the world.
"It gives a choice to Malaysians to choose whether they want the Islamic or conventional system.
"Although its products and services are based on syariah, it is accepted by customers, regardless of their race and religion," he said. Musa said he believed that syariah banks not only provide an alternative but also a healthy competition to the banking sector.
This will surely benefits customers in terms of having a more efficient service and at the same time, reduce management costs.
"I welcome programme like this because I believe they are able to show the beauty of Islam which should be adapted as people's way of life," he said.
He was pleased with the encouraging response received and hoped more banks and financial institutions will come forward and take part in the near future.
In relation to this, he also suggested that these programmes be adapted to other districts throughout Sabah so that it can be known by more people.
He said the State Government will always support Yadim, Jheains and Jakim in line with the leaders and people's aspirations.
Meanwhile, CIMB handed over RM240,000 to Yadim Sabah to build a five-door longhouse at Matunggong.
It is the Islamic bank's CSR programme to help Yadim's dakwah efforts.
(Daily Express / 25 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Migration to Islamic banking pays off for Dubai resident

Like many non-Muslim westerners, Eva Kernova converted to Islamic banking because that’s where some of the best rates and perks are to be found in the UAE today. And then, bit by bit, the former flight attendant warmed to a type of banking she found to be fairer and kinder than the conventional sort.

In Ms Kernova’s case, her impetus towards change began when she found herself in a jam this summer while moving to a new apartment in Dubai. She had just left her job at a local airline and needed Dh70,000 quickly in order to pay for her rent for the year in advance.

The local bank she was with, who she prefers not to name, wasn’t as forthcoming as she had hoped in providing the money, because she had just changed jobs and the bank wanted her to do at least six months in her new job before it would give her the loan.

In despair, she did not know what to do and feared that all banks would reject her request.

“I went to my bank and they said it was very complicated,” says Ms Kernova. “We have to wait for this, we have to wait for that. You expect a certain service and I didn’t get that. I was very disappointed and I felt quite low.

“I was not looking for a [new] bank at that point. I felt as if I was trapped a little bit. And then one day as I was driving, on the radio, there was an ad. Abu Dhabi Islamic Bank had a special offer until the end of June on loans.”
She didn’t know much about Islamic banking – the main difference of which from conventional banking is that it does not charge interest but instead makes customers pay a profit rate through various financial instruments. If a customer needs money to buy a house, for instance, an Islamic bank will buy the house and then sell it back to the client at an agreed price over a set time.

At that point, however, Ms Kernova wasn’t interested in the fine print. She was just keen to get the money she needed at a good rate as quickly as possible.

Yet once the issue was resolved and Adib gave her the loan, Ms Kernova found the perks, such as women-only banking services, to her taste as well. She even liked the colours of the bank’s credit cards .

And the more she found out about how Islamic banks strive to be more ethical than their conventional peers by avoiding certain businesses including those that deal with arms or alcohol, the happier she became with her choice. She now says she would never think about going back to a non-Islamic bank as long as she is living here.

Ms Kernova, who is from Slovakia and has a master’s degree in social work, was particularly gratified to find out that Islamic banks give up to 2 per cent of the bank’s profits to charity every year. That’s because after leaving her cabin crew job, which allowed her to see the world, she is in the process of starting a charity in Bangladesh along with an airline pilot to help children from the slums of Dhaka get a better education.

As well as the charitable aspect of Islamic banking, she says she liked being in sync with the local culture.





(The National / 27 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Friday, 27 December 2013

New trend: Islamic banking gaining ground globally

FAISALABAD: 
University of Agriculture Faisalabad (UAF) Vice Chancellor Dr Iqrar Ahmad Khan has said Islamic banking is gaining popularity across the globe as the volume of Islamic banking has touched $1.4 trillion.
He was speaking at an international symposium on Islamic banking in emerging economies arranged by the Institute of Business Management Sciences, University of Agriculture Faisalabad in collaboration with Meezan Bank and Dubai Islamic Bank.
Khan said the Islamic banking system was getting popular in European countries, stressing “Islam is a religion of peace and provides solutions to all problems facing the globe.”
He underscored the need of polishing the entrepreneurship skills of students as part of efforts to fight unemployment.
Speaking on the occasion, Faisalabad Chamber of Commerce and Industry President Suhail Bin Rashid said Faisalabad was the “second largest economic hub” of the country and it was necessary to increase awareness of Islamic banking.

(The Express Tribune / 27 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic Banks, Stuffed With Cash, Explore Partnerships in West

A noted Muslim law scholar, Yusuf DeLorenzo, recently pored through the books of Continental Rail, a business that runs freight trains up and down the East Coast.
Along with examining the company’s financial health, Mr. DeLorenzo sought to make sure that the rail cars didn’t transport pork, tobacco or alcohol. He was brought in by American investment bankers who want to take rail cars bought by Continental Rail and package their leases into a security. The investment is being built for banks that are run according to Islamic law, which, among other things, prohibits investments in those three commodities. If the cars are acceptable, or halal, the deal will be one of the first in the United States to be completed in compliance with Islamic law.
“It’s a new territory for all of us,” said John H. Marino Jr., chief executive of Continental Rail.
The deal is a sign of how banks that comply with Islamic law are making inroads into the global banking scene and how Western businesses are working to meet the expectations of those banks. The banks can’t find enough acceptable places to park their money, many industry insiders say, so investment bankers are scurrying to assemble deals.
Over the last 30 years, the Islamic financial sector has grown from virtually nothing to over $1.6 trillion in assets, according to data from the Global Islamic Financial Review, an industry publication. The financial crisis has only encouraged the growth. Industry assets grew 19 percent in 2011 and 20 percent in 2012, in contrast to the less than 10 percent growth at non-Islamic banks in most of the world.
Until recently, Islamic banks have largely put their money to work in the Middle East — or, if they invested in other parts of the world, in real estate. Real estate is among the most popular investments under Islamic law, also known as Shariah, because a deal can be structured that does not require interest payments, which are prohibited by Shariah. But as the banks grow larger they are looking for new, more diverse places to put their money.
The deal with Continental Rail is attractive because the rail cars will spin off lease payments, rather than interest, and can be bought in bulk. The cars are also in the United States, which will help bring geographic diversity to the bank portfolios. The deal was brokered by a newly created team at Taylor-DeJongh, a Washington investment bank, looking to bring money from Islamic banks to the United States.

“There is a gap between all the money coming in to Islamic banks and the deployment of that money into real economic assets,” said Sayd Farook, the global head of Islamic finance at Thomson Reuters. “A crazy amount of money has gone into their coffers and they need somewhere to invest it.”There are similar pushes around the world. A few non-Muslim African countries, including South Africa, have recently been talking about raising money using the Islamic financial instruments known as sukuk, which function much like bonds. Prime Minister David Cameron of Britain announced in late October that England planned to become the first European country to issue sukuk. The global bank Société Générale is preparing to raise money from Islamic banks in the coming months.

The first modern Islamic banks were founded in the 1970s, motivated by the Quran’s ban on riba, which has been interpreted as any fixed payment charged for money lending. Islamic banks have focused instead on putting their money into real assets and property, and sharing any resulting profits from the performance of an asset. Muslim mortgages, for instance, are structured so that the bank buys the house and then sells it to the occupant slowly over time. Stocks are generally considered acceptable as long as the companies issuing the stock adhere to Islamic law; casinos, banks and weapons companies are forbidden.
Islamic banks have religious scholars, like Mr. DeLorenzo, review their operations on a regular basis. Yet some Islamic scholars have criticized the banks for straying too far from the spirit of the Quran into the speculative realms of Wall Street. Sometimes it is hard to tell the difference between a Western investment and a Shariah one. For instance, an Islamic bank’s fixed-deposit account ties up a customer’s money for a set period of time, like a certificate of deposit. Instead of offering interest, the account offers a share of the profit from its investments. The “profit rate” of a one-year deposit currently is 1.9 percent at one major Middle Eastern bank.
There is a debate among Islamic scholars about what qualifies as halal. “The industry is going through soul-searching,” said Ayman A. Khaleq, a lawyer specializing in Islamic finance at the Morgan Lewis law firm in Dubai. “It’s far from settled.
But these problems have not stopped the flood of deposits into banks like the Sharjah Islamic Bank, which is named for the city in the United Arab Emirates where it is based. The bank has 24 branches, some of which offer separate spaces for female and male customers. From 2006 to 2012, deposits there almost tripled to about $3 billion.
Muhammed Ishaq, the head of the treasury division at Sharjah, said that the bank’s problem was not attracting money, it was figuring out what to do with it. “It’s not very easy when any financing needs to be backed by some kind of asset,” Mr. Ishaq said.
Real estate has been a very popular investment in the Islamic world, but when real estate was hit hard during the 2008 financial crisis, many investors were reminded of the need for more diverse portfolios. For many banks the answer is sukuk. Like bonds, sukuk make regular payments to investors. But unlike a bond, which is a money loan, sukuk are structured as investments in hard assets that generate payments.
The amount of sukuk sold each year has grown sixfold from 2006 to 2012, to some $133 billion, according to Thomson Reuters’s Islamic financial data service, Zawya. A joint venture between Dow Chemical and Saudi Arabia’s national oil company sold a $2 billion sukuk this year to raise money for an oil complex. But this is falling far short of the demand from banks. “There are serious supply-side bottlenecks,” said Ashar Nazim, head of Ernst & Young’s Global Islamic Banking Center.
Now there are several efforts to create more supply. The Bank of London and the Middle East was founded in London with Kuwaiti money to find these new investment opportunities. “They wanted a wider range of Islamic assets that could be originated away from the Middle East,” said Nigel Denison, the bank’s treasurer.
Yavar Moini, the former head of Islamic banking at Morgan Stanley, said he was establishing an operation in Dubai that would gather assets from around the world that can be packaged into sukuk, like Fannie Mae and Freddie Mac do in the United States with mortgages. Mr. Moini said that “it’s the absence of sufficient product or opportunities for Islamic investors that drives them into the conventional arena.”
In the United States there have been a few attempts at sukuk. In 2006, a Texas oil company sold a $166 million sukuk to finance oil exploration, but the company went bankrupt during the financial crisis. Then in 2009, General Electric issued a $500 million sukuk tied to aircraft leases.
Taylor-DeJongh, the 30-year old, energy-focused investment bank, is hoping to take advantage of the shortage. Ibrahim Mardam-Bey, who worked on the 2006 Texas sukuk, joined Taylor-DeJongh at the end of 2012 and has built a team of five bankers working on Islamic finance.
One deal would provide financing for private toll bridges. The other, which is further along, will bundle the rail cars managed by Continental Rail. The team has already signed a deal to buy 1,000 rail cars in Pennsylvania, and is looking to acquire 5,000 more.
Mr. Mardam-Bey said that some American businesses were hesitant to take money from Islamic banks, perhaps a byproduct of negative associations with Shariah since the Sept. 11 attacks. But in the Texas deal, and in many others, that tends to fade as the financial possibilities become clear.
“The borrower was a Texan wildcatter who couldn’t spell ‘sukuk,’ ” Mr. Mardam-Bey said. “But at the end of the day when I brought the check he didn’t care if I prayed to Allah. He just wanted the money.

(The New Work Times / 25 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Thursday, 26 December 2013

Hong Kong must attract Islamic finance to remain a global market

Peter Forsythe denounces Islamic banking practices as being "the work of global Islamists" ("No place for 'sukuk' bonds in HK market", November 22).
The adjective "Islamic" refers to rules of procedure (as "kosher" refers to Judaic procedures for food and is commonly patronised by Muslims overseas, not only by Jewish people). It is simply advertising to buyers that here is a product which is of a certain nature. The word "halal" would do just as well. The fundamental premise is that money not be allowed to grow by time alone, i.e., by interest. The lender must accept some risk in the venture being financed.
It also makes foreclosure on "pledged" assets somewhat difficult, and is in general more lenient towards the borrower than conventional debt.
Islamic financing tries to, or is at least designed to, link social benefits to purely monetary ambitions, which is hardly a bad thing in the "me-my" culture of today. Let us not denounce it just because it is associated with the current Western hype regarding Islam.
The ethos of Islamic financing is related to the concept of social justice, and is not limited to Islam: the Old Testament categorically forbids interest. Several Catholic popes have historically condemned the practice, as have Plato, Gautama Buddha, Moses, and Thomas Aquinas, among others.
Philosophy aside, on a fully practical note there is obviously a large population of Muslims worldwide, and therefore Islamic financing is seen by some banks and financial institutions as a good market (US$1.3 trillion by some estimates). Hong Kong is now trying to actively tap into this market, and very rightly so, in my opinion.
At 1.62 billion, Muslims are 23 per cent of the world's population, and more than 40 per cent of Southeast Asia's. As a global financial centre, without any doubt Hong Kong must try to attract this large and growing market. You can hardly be a global centre while ignoring a quarter of the world and almost half your largest neighbouring region.
Mr Forsythe is plainly fatuous in connecting Islamic financing to some global religious conspiracy. His labelling of Islamic financing as "inefficient" is hardly credible, especially in light of the "efficiencies" of Wall-Street-type banking practices as seen over the last few years.
(South China Morning Post / 07 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic wealth management: Adding value to financial services

GROWTH POTENTIAL: Malaysia can lead in Islamic wealth management, which is still in its infancy, just as we are world leaders in sukuk industry

ASEAN continues to be a very exciting region. The region has weathered through the 2008-09 financial and economic crises and we are coping well in dealing with the resulting economic fall-out.
The Asean region is expected to have sustainable economic growth of at least 5-6 per cent over the next decade, bringing wealth and prosperity to its 600 million population.
Anticipating this development, our regulatory authorities have identified wealth management, especially Islamic wealth management, as one of the major thrusts for Malaysia's financial services industry.
It is still in its infancy with various domestic banking groups dipping their toes, quietly gathering expertise and talent, to take on the challenges in developing their wealth management businesses.
It has been estimated that last year there were 780 ultra high net-worth Malaysians, each with a minimum of RM100 million of net assets, with collective wealth of RM330 billion.
Managing wealth at this level requires a very high degree of expertise. However, in this globalised, borderless cyber-connected world, one can manage funds from anywhere.
What is instrumental in providing "stickiness" are the personal relationships a high net worth individual develops with his or her advisers.
Malaysia began industrialising its economy some 30 years ago. Now, in this second decade of the 21st century, the founders of first generation wealth are looking for succession planning solutions.
It would be a loss to our economy if businesses of these families were broken-up because there was insufficient predeceased planning.
Yes, traditionally it may be a taboo to speak of these things, but we must be pragmatic in our ways of the world.
Kuala Lumpur has the infrastructure and expertise in the Islamic finance space to develop a strong competitive value proposition in syariah-compliant wealth management. Both the public and private sectors have worked very hard to develop the sukuk industry. Our present success is only too evident.
I believe we can devote just as much energy and resources, if not more, in building our future Islamic wealth management industry. In the early days of the sukuk industry, regulatory and taxation impediments were numerous, talent was sparse and the supporting syariah doctrines few, but we determinedly soldiered on.
Look where we are now -- seventy per cent of all sukuks in the world originated here in Kuala Lumpur. In the sukuk field, we hold supreme.
Malaysia's wealth management industry, targeted at both local and regional wealth, can bring numerous benefits to our financial services industry.
The industry's value chain is long, from acquisition of assets, to advisory and management services, in addition to legal, taxation and syariah advice, to trust and custodial services and, right at the end, distribution of the assets.
This value chain can be diced and divided across a number of enterprising businesses, each offering its specific value-added competency to the chain.
Labuan International Business and Financial Centre (Labuan IBFC) serves to complement our domestic offerings. After all, at the end of the day, there will be far more millionaires outside Malaysia then in.
Labuan IBFC offers a range of legal entities for the purpose of wealth management, from foundations to special trusts, both conventional and Islamic.
However, we do not want to come to a situation where even though the asset holding entities are from Labuan IBFC, the fee income, derived from accompanying advisory services across the aforesaid value chain, fall into foreign hands. As much as possible, these services should emanate from Malaysian advisers with international expertise.
It is for this reason that Labuan IBFC took the initiative to host, in association with the Financial Times, the Asean Wealth Management Summit today, followed by the Islamic Wealth Management Seminar tomorrow.
The summit, graciously officiated by Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah is the first major wealth management event ever held in Malaysia. We are proud of this fact.
Building this ecosystem is not easy but I can already see stirrings of interest. Let us build domestic collaborations and develop our international inter-linkages, to grow our domestic high-value wealth management industry.

(New Straits Times / 26 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia: Islamic wealth management needs to develop further

KUALA LUMPUR: Islamic wealth management is still new in Malaysia and needs to be developed further, said Professor Datuk Syed Othman AlHabshi, chief academic officer of INCEIF, the global University for Islamic Finance.
He said that only a few high net-worth individuals had embraced Islamic wealth management as they wanted their wealth to be well-managed by experts.
“Wealth management is not confined to only the rich but is also for the poor. We should not look at the wealth creation and accumulation aspects only, but also distribution and the taking care of the poor,” he said after speaking at the BNP Paribas-INCEIF Centre for Islamic Wealth Management’s inaugural colloquium.
Othman, who is also the centre’s chairman, added that people were still doing what they used to do in the conventional system to manage their wealth.
“Now with syariah compliance policy, there is more to it,” he said.
On waqaf (property put under a trustee’s care), he said that once set up it would be transferred to an Islamic council to be managed, but whether they had the expertise to manage the property was an issue as the property should not be idle and should benefit the beneficiary.
(The Star Online / 20 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Azerbaijan aims for Islamic banking law in 2014

Nov 26 (Reuters) - Azerbaijan's largest lender, International Bank of Azerbaijan (IBA), is working with national authorities on a draft Islamic banking law and a final version could be presented to parliament in 2014, a senior executive said.
Islamic finance has developed slowly in the former Soviet state, where an estimated 93 percent of the 9 million people are Muslim. But IBA's Islamic banking business is now growing strongly, which is encouraging authorities to take action.
"The main aim is legislation. The cabinet of ministers of Azerbaijan has already started the project together with the ministry of economic development and IBA," Behnam Gurbanzada, IBA's director of Islamic banking, told Reuters.
With strong state support, the draft legislation could be ready by May with a final version presented to parliament by the end of 2014, Gurbanzada said on the sidelines of the Global Islamic Economy Summit in Dubai.
"It covers banking, taxation...It covers some specific issues like civil law." Among other provisions, Islamic banking bans interest payments and pure monetary speculation, and the structures which it uses to achieve this can be expensive unless special tax arrangements are made.
IBA now offers sharia-compliant products through an Islamic window, but legislation would pave the way for a stand-alone Islamic banking unit, Gurbanzada added.
The bank, 50.2 percent owned by Azerbaijan's Ministry of Finance, holds 40 percent of banking assets in the country.
"By the end of 2013 we will reach $200 million of Islamic banking assets and with a goal for 2014 of around $300 million to $350 million," Gurbanzada said. The bank held $60 million of Islamic banking assets last December.

Next year, the lender plans to open four dedicated Islamic banking branches, Gurbanzada added. 
(Reuters / 26 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Wednesday, 25 December 2013

Best of 2013: Understanding SRI and Islamic Finance

Recent years have seen increasing interest in sustainable and responsible investing (SRI) and Islamic finance. In fact, growth in SRI assets has outpaced professionally managed assets as a whole, and more than 10% of the total assets under management in the United States are now invested following SRI practices. Similarly, according to a special report on Islamic finance in The Banker, a frequently cited resource in Islamic finance statistics, the compound annual growth rate in global Shari’a-complaint assets since 2006 remains in double digits at 16.02%. Nonetheless, many investment professionals still know little about SRI and Islamic finance.
Here are my top picks for content from the past year that help explain these topics.
Impact Investing Explained Simply and Clearly (Video): This was one of the most popular video interviews on our blog this year, and given how little investment professionals know about impact investing, it’s not surprising that readers were interested in this primer. Harry Hummels, an academic and a practitioner in impact investing, explains how impact investing is similar to and different from traditional investing.
Why Isn’t There More Collaboration between Islamic Finance and SRI?: Islamic finance and the forms of finance generally referred to as SRI have yet to actively collaborate with each other. It’s an opportunity that is waiting to be seized upon by industry leaders.
The Church of England as an Institutional Investor (Video): Did you know that the Church of England has a portfolio as large as GBP 8 billion? With so much money comes a lot of responsibility. The ethical expectations from the Church are much higher than for regular institutional investors. Edward Mason, secretary of the Church of England’s Ethical Investment Advisory Group, shares his views on how the Church of England reflects its moral values in its investments.
Enhanced ESG Disclosure and Long-Term Investing in Europe (Video): Steve Waygood, chief responsible investment officer at Aviva Investors, explains the European Commission’s adoption of a proposal to enhance transparency of environmental and social issues, and the implications for long-term investing.
Recommended Reading: The Best Books on Islamic Finance: A frequent question on the minds of those interested in learning about Islamic finance is, “What’s the best book that I should read?” To answer this question, I spoke with Rodney Wilson, a professor at the University of Durham and a well-known commentator on Islamic finance. His office seemed to have every known title on Islamic finance nicely stacked into his book shelves.
The Best Learning Resources on Corporate Governance: Robert A. G. Monks Shares His Picks: For whom is a corporation run? Is corporate governance a legal topic? An economic one? Or does it just boil down to ethics? CFA Institute interviewed Robert A. G. Monks, a pioneer of corporate governance, to get his picks for the best learning resources to help answer these important questions.
(Enterprising Invester / 25 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Top Sukuk Manager Sees New Issuers Aiding Sales: Islamic Finance

Debut Islamic bonds from governments and companies seeking to cut financing costs will drive sukuk sales next year, according to HSBC Holdings Plc (HSBA), with issuance probably rebounding to a record.
Growth will be boosted as borrowers follow governments from Dubai to Malaysia, which are seeking to promote Shariah-compliant bonds and become centers for Islamic finance, said Mohammed Dawood, global head of sukuk financing at HSBC, the bank that managed the most sukuk sales in 2013. The London-based lender is also working to introduce new instruments to help the securities compete with conventional bonds, he said by phone Dec. 22.
Islamic bond sales fell 9.5 percent in 2013 to $42 billion after reaching a record $46.4 billion last year, according to data compiled by Bloomberg, in a market dominated by repeat borrowers. About $60 billion of sukuk will be sold in 2014, primarily by Malaysia and the Gulf countries, Moody’s Investors Service said in a report last month.
“In 2014, we will see a shift to new issuers,” Dawood said from Dubai. “We will see a lot more coming out of Asia and a lot more issuance from outside of the traditional markets.”
Financial centers around the world have announced plans to sell Islamic bonds as part of efforts to grab a greater share of an industry whose assets will more than double to $2.7 trillion by 2017, according toPricewaterhouseCoopers LLP. Hong Kong, the world’s fifth-largest currency-trading center, said in November it will offer a debut sukuk to spur capital markets. In October, U.K. Prime Minister David Cameron said the country planned to sell Islamic notes.

Maturing Debt

“You have more debt maturities in 2014, especially in Dubai, so this will drive issuance,” Montasser Khelifi, a Dubai-based senior manager for global markets at Quantum Investment Bank Ltd., said by e-mail yesterday.
Issuers in the Gulf Cooperation Council have about $32 billion of bonds and syndicated loans maturing next year, according to data compiled by Bloomberg. Among the debt is a $500-million note from Dubai due in November while Abu Dhabi’s Tourism Development & Investment Co., which is building museums in the U.A.E. capital, has to pay a $1 billion bond in July.
Dubai, one of seven sheikhdoms that make up the United Arab Emirates, said this year it’s seeking to become the capital of the global Islamic economy.

Greater Awareness

“The announcements that we have seen from the likes of Dubai and the region have really given the product a lot more awareness, particularly among international markets,” Dawood said. “That has led to a whole series of enquiries and interest from countries, from issuers who otherwise would be not so obvious targets for sukuk issuance.”
HSBC has helped manage 110 sales this year, giving it a 17 percent share of the global sukuk market, according to data compiled by Bloomberg. Kuala Lumpur’s CIMB Group Holdings Bhd (CIMB) and Malayan Banking Bhd (MAY), which mainly deal with sales in Malaysia, the largest sukuk market, were the second- and third-biggest, respectively. HSBC was a manager of the 15.2 billion riyals ($4.06 billion) issue of Saudi Arabia’s General Authority of Civil Aviation in September in the biggest sale of such securities this year, according to data compiled by Bloomberg.
“In 2014 you will see continued development toward new instruments,” Dawood said. We are “looking at what is available on the conventional product offering, looking to see how that can be structured for the Islamic market” such as the perpetual sukuk, he said.

Growing Popularity

Perpetual sukuk, which don’t mature, have grown in popularity since the first such issue in dollars by Abu Dhabi Islamic Bank PJSC in November 2012. Four perpetual sukuk have since been sold in the GCC as companies have used them to shore up capital without hurting their creditworthiness since the instruments are treated as equity on the balance sheet.
Within the six-nation GCC, which includes the two biggest Arab economies of Saudi Arabia and the United Arab Emirates, $21.1 billion of sukuk have been sold this year, about the same as in 2012, data compiled by Bloomberg show.
Sukuk are designed to comply with Shariah law’s ban on interest. The average yield on the Islamic bonds sold by GCC issuers was at 3.77 percent yesterday, according to HSBC/NASDAQ Dubai indexes. That compares with an average yield of 4.17 percent on non-Shariah-compliant bonds for council issuers, according to the data.
Possible volatility in global interest rates caused by a cut in monetary stimulus by the U.S. may influence the timing of new issues, although the pool of Islamic liquidity remains “very strong,” Dawood said. It may also push issuers to use local currencies such as the Malaysian ringgit or the Saudi riyal, he said.
(Bloomberg News / 25 Dec 2013)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com