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

Tuesday, 30 September 2014

Malaysia: Hong Kong to launch first sukuk this month, more sukuk issuances to come

KUALA LUMPUR, Sept 29 — Hong Kong is expected to see more sukuk issuances in the near future, following the launch of its first Islamic bond this month, says a Chinese banker. 
“Going forward, it is safe to say that there will be more sukuk issuances, such as renminbi-denominated ones in Hong Kong,” said Bank of China (Hong Kong) Deputy Chief Executive, Zhu Yanlai.
She added that while Malaysia is undeniably a leading Islamic financial centre, Hong Kong has spared no efforts to develop its Islamic finance as well.
“The efforts have paid off with the Hong Kong government issuing its first-ever sukuk under the Government Bonds Programme.
“This is also the first US dollar-denominated sukuk originated by an AAA-rated government,” Zhu said in a keynote address at the “Asean Fixed Income Summit”, hosted by Bank Negara Malaysia, here today.
Hong Kong will launch the pioneering sukuk to raise US$1 billion (RM3.27 billion) in the city’s latest effort to promote Islamic finance.
The five-year sukuk, oversubscribed by 3.7 times, will be listed in Hong Kong, Malaysia and Dubai.
Hong Kong is vying for a piece of the global Islamic finance business which is now worth US$1.3 trillion and expected to double by 2017.
Zhu, 59, a high-profile banker, joined Bank of China Hong Kong in 2001, having previously worked at Bank of China, Royal Bank of Canada and Nesbitt Burns, a wealth-management unit of the Bank of Montreal Group.
(The Malay Online / 29 September 2014)
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Japan bank unit in Malaysia keen to expand Islamic banking ops

PETALING JAYA: Bank of Tokyo-Mitsubishi UFJ (M) Bhd (BTMU Malaysia), which has issued the world’s first yen-denominated “Emas” sukuk, is expanding its Islamic banking operations in the country by eyeing more non-Japanese Malaysian firms, including government-linked companies (GLCs).
Its president and chief executive officer Naoki Nishida told StarBiz the bulk of its Islamic banking portfolio in Malaysia, including Malaysian corporates and GLCs, would continue to be one of the bank’s main focus as part of its move to strengthen its Islamic banking business.
Without disclosing the names of its GLC clients and the amount of BTMU Malaysia’s financing to this client segment, he said they were, among others, corporate entities with businesses in major economic sectors, including manufacturing, oil and gas, palm oil and infrastructure development.
According to Nishida, the bank’s Islamic banking portfolio is still in early development stages.
BTMU Malaysia is keen to grow its size due to the potential growth of the business in the country and neighbouring nations such as Indonesia.
He said the bank could use Malaysia as a springboard to expand its operations in Islamic banking in the region, and continue its collaboration with its counterparts in Indonesia, as Islamic banking there had huge potential.
The other region that BTMU Malaysia will continue to focus on would be the Gulf Cooperation Council, as this was also a natural area of focus.
BTMU Malaysia started its Islamic banking business in 2008 with the setting up of an international currency business unit, focusing on Islamic banking in international currencies.
The bank launched its inaugural sukuk under a multi-currency programme of US$500mil (RM1.62bil).
Its maiden issue comprised two tranches: a US dollar-denominated sukuk with an aggregate nominal amount of US$25mil (RM81.1mil), and a yen sukuk with an aggregate nominal amount of 2.5 billion yen (RM74.4mil).
Proceeds from the first issuances would be utilised for BTMU Malaysia’s Islamic banking business, general corporate purposes, refinancing and working capital requirements.
On future issuance of sukuk or bonds for financing, he said it would depend on market conditions and funding needs, adding that it may issue ringgit sukuk if the need arose.
BTMU Malaysia, together with CIMB Investment Bank Bhd and Mitsubishi UFJ Securities International plc, are the joint-lead arrangers and joint-lead managers for the multi-currency sukuk programme. CIMB Islamic Bank Bhd, meanwhile, is the syariah adviser for the programme.
(The Star Online / 26 September 2014)
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Sunday, 28 September 2014

Islamic Finance Gateway Daily Briefing

Thursday, Sep 25 - The Islamic Finance Gateway (IFG) Briefing, published from Sunday to Thursday, carries the latest market-moving news and data for institutions offering Islamic financial services. You can view the full IFG briefing via under IFG Briefings Subject. TOP STORIES Japan's BTMU to issue debut dollar, yen sukuk on Thursday
Bank of Tokyo-Mitsubishi UFJ (BTMU), Japan's largest lender, will issue Islamic bonds in two tranches under its debut multi-currency sukuk wakala programme in Malaysia, a statement on the Malaysian central bank's website said on Wednesday. - RTRS - Zawya Islamic Dubai Islamic Economy Development Centre to Launch State of the Global Islamic Economy Report 2014
The Dubai Islamic Economy Development Centre (DIEDC in partnership with Thomson Reuters have announced that State of the Global Islamic Economy Report 2014 will be launched in December 2014. The report will present new insights into the development of the Islamic economy, particularly focusing on key players, geographic trends, and the challenges and opportunities in each segment of the Islamic economy. - Press Release - Zawya Islamic ------------------------------------------------------------ The Islamic Finance Briefings cover all the latest news, data, quotes and industry announcements you need. They also include Islamic Interbank Benchmark Rates, major FX and equity market movements and indicators for all sharia-compliant asset classes. To subscribe to the IFG Briefings use this link: To subscribe to the IFG Community, use this link: We value your feedback, contact us at (Prepared by Tina Kwan) A service of Thomson Reuters and Zawya Islamic Finance Gateway. The contents of this Briefing are independently compiled by the Thomson Reuters and Zawya Islamic Finance Gateway Service, a business of the Global Growth and Operations Division. While material is drawn from Reuters News and other sources, Reuters has not participated in the selection of these articles.
(Yahoo News / 25 September 2014)
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Malaysia: After landmark sukuk, Japan's BTMU seeks to offer Islamic ringgit loans

KUALA LUMPUR, Sept 25 (Reuters) - Bank of Tokyo-Mitsubishi UFJ (BTMU), Japan's largest lender, hopes to secure a licence for its Malaysian unit to expand operations by providing Islamic loans in the local currency.
This would allow BTMU Malaysia, a wholly owned unit, to meet the needs of existing clients for Islamic loans in ringgit, the unit's chief executive Naoki Nishida told Reuters on Thursday.
He said the bank might obtain the licence next year and hoped to start such lending in the near future, though other issues such as accounting systems also needed to be resolved.
Nishida was speaking after BTMU earlier in the day became the first Japanese commercial bank to issue Islamic bonds, selling $25 million of sukuk in a U.S. dollar tranche and 2.5 billion yen ($22.9 million) in a yen tranche.
Its issue underlined growing interest in Islamic finance among big, international conventional banks. Goldman Sachs raised $500 million with its debut sale of sukuk earlier this month, while France's Societe Generale set up a sukuk programme in Malaysia this year.
Currently, BTMU's Islamic operations are only allowed to provide loans in currencies other than ringgit and they conduct nearly all transactions in U.S. dollars.
That is the reason why BTMU's first sukuk issue, part of a $500 million multi-currency sukuk programme established in Malaysia in June, was not denominated in ringgit.
"We did not choose ringgit because of the lack of ringgit assets on our books," said Nishida, noting that issuing ringgit sukuk at this stage would have entailed negative carry on the cost of funding.
BTMU Malaysia serves large Malaysian firms and government-linked companies, particularly those with operations abroad in the oil and gas, palm oil and real estate sectors.
BTMU was conservative with the size of its first sukuk issue, which was at the bottom of its target range of $50 million to $100 million.
The one-year sukuk were privately placed with a mix of local and foreign institutional investors, which the bank declined to name. Pricing details were not disclosed.
Nishida said it took time to explain to investors the structure of the sukuk wakala and the decision to issue in yen.
"With yen, there were additional explanations, additional questions," he said. "Although yen-denominated sukuk were new and not familiar to investors, we were able to find a certain amount of appetite."
Funds raised from the sukuk will go mainly towards growing BTMU's Islamic business in Malaysia and Saudi Arabia. It has also attracted business from Singapore, Brunei and Indonesia.
BTMU's $500 million Malaysian sukuk programme, which allows for issues with maturities of up to 10 years, is sufficient for the bank's current Islamic operations, which are still in an early stage of development, Nishida said.
The bank, a unit of the Mitsubishi UFJ Financial Group , will decide on the size and tenor of its next sukuk issue based on the level of anticipated loan growth, though it remains open to other methods of raising funds.
Nishida said BTMU had found it more expensive to issue sukuk than raising funds through options such as loans and conventional bonds, as it had to meet investors' targets for returns and the sukuk's prices were benchmarked to global bonds previously sold by the parent company. But this premium may shrink as the bank proceeds with more sukuk issues, he added.
He said BTMU would approach Japanese investors for its future issues, as part of its efforts to promote sukuk to companies from Japan. "We hope with our experience, more Japanese companies in Malaysia and Japan will consider issuing sukuk."
BTMU's programme is a boost to Malaysia's efforts to diversify its Islamic capital markets, which so far have been dominated by local-currency deals.
The wakala programme uses tangible assets and commodity-linked receivables from BTMU's Malaysian subsidiary to underpin transactions. Kuala Lumpur-based RAM Ratings assigned an AAA rating to the programme, which has the parent company as guarantor; CIMB Investment Bank and Mitsubishi UFJ Securities International advised on the deal.
(Yahoo News / 25 September 2014)
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Thursday, 25 September 2014

‘Takaful insurance not for Muslims alone’

The fast growing Islamic insurance package, Takaful, is not exclusively meant for Muslims, as it has been designed to cater for the needs of non-Muslims as well. 
This clarification was made by the founder of Takaful Insurance of Africa, Mr Hassan Bashir, who disclosed that the Kenya-based company’s products could bring fruitful possibilities to the doorsteps of non-Muslims as well as, not just for people of the Muslim faith.
Bashir made this known at a recent chat with the media where he also revealed that non-Muslims currently constituted about 15 per cent of the company’s customer base, adding that the figure was expected to increase as time passed.
“Our products are not exclusively for people of the Muslim faith. We can serve anyone, and we do. Initially, people thought it was only for Muslims, but now around 15% of our client base is non-Muslim and we are growing,” he stated.
Meanwhile, when giving an insight into what brought about the idea of Takaful insurance in the East African nation, and which has since spread to other countries including Nigeria, Bashir said the dream of Takaful was born because of the need to give insurance service to all categories of people.
“There was a need for the service. I have been involved in the insurance industry since 1997, and it was something that I had become aware of. For my MBA
I researched customer behaviour across the Kenyan insurance industry, and what came out was evidence of dissatisfaction and a need for honesty and ethics in the insurance products and services. I came across a lot of people who did not have insurance, or if they did they only had the basic statutory amount.
“They said that they did not feel comfortable with some aspects of insurance – that it did not accommodate their religious beliefs – and some people said they felt conventional insurance was a bit like gambling.
Takaful is a Sharia-based micro insurance package which primarily seeks to serve low-class people, especially those in the grassroots. They will be expected to enjoy insurance with small amounts of money. 
By virtue of the Takaful insurance contract, insurers and reinsurers are bound to share their underwriting profit and/or loss with the subscriber (the insured).  When a profit is made, a dividend is distributed among the policyholders. But when loss is reported, insurers and reinsurers are held to grant the policyholders, an interest free loan, and which they will recover from policyholders when underwriting returns back to profitability and the policyholder account is back in green.
(Nigerian Tribune / 22 September 2014)
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FIFA Rattles Qatari Sukuk Mired in Worst Month This Year

Prospects for the 2022 World Cup in Qatar are unsettling bond investors already rattled by political turmoil between the country and its neighbors, with its sukuk on course for its worst month in more than a year.
The yield on Qatar’s Islamic notes due January 2018 rose 19 basis points in September, on course for the biggest monthly increase since August 2013, according to data compiled by Bloomberg. The average yield for Middle East Shariah-compliant securities jumped 12 basis points in the period, JPMorgan Chase & Co. indexes show.
FIFA Executive Committee member Theo Zwanziger told Germany’s Bild this week that Qatar probably won’t host the world’s biggest soccer event in 2022 because of the summer heat. While Qatar dismissed his comments, it’s creating more market turbulence for the country, which has been at odds with Saudi Arabia and the United Arab Emirates over its support for the Muslim Brotherhood in the region.
“The political differences with its neighbors combined with uncertainty over the World Cup is affecting sentiment,” Thomas Christie, head of fixed income at Prometheus Capital Finance Ltd., said by phone from Dubai yesterday. “The bond will drop further if its neighbors continue to isolate Qatar and this FIFA situation isn’t resolved.”

Personal Remarks

Delia Fischer, a spokeswoman for Zurich-based FIFA, soccer’s global governing body, said “these were personal remarks made in his personal capacity and not as a FIFA representative.” A panel will meet next month and in February to discuss the scheduling of the event, not moving it to another country, she said.
Qatar in 2010 won the right to host the tournament during its summer and after the end of most major European leagues. The world’s biggest liquefied natural gas producer reiterated a promise to use technology to cool stadiums in a statement yesterday, as temperatures can reach 50 degrees Celsius (122 degrees Fahrenheit). In the run-up to the event, Qatar is spending $200 billion on roads, stadiums, a rail network and a new city.
“There’s a lot riding on this,” Montasser Khelifi, a senior manager for global markets at Quantum Investment Bank Ltd. in Dubai, said by phone yesterday. “The potential for economic growth outside of the hydrocarbon industry is linked to the World Cup.”

Negative News

Qatar’s World Cup woes coincide with the nation being isolated for its foreign policies toward political Islamists. Saudi Arabia and the United Arab Emirates have accused Qatar of threatening the region’s stability because of its support for the Muslim Brotherhood. Together with Bahrain they withdrew their ambassadors in March.
A Qatari diplomat denied Sept. 13 comments on Twitter by an official from the Egyptian section of the Brotherhood that Qatar had asked members of the Islamist group to leave the country. The diplomat said they were leaving on their own accord.
“It’s mostly negative news flow that’s affecting the sukuk,” Khelifi said. “The country’s fundamentals are still very strong.”
While Qatar’s economic growth will probably slow to 6 percent this year, according to the median estimate of 11 economists surveyed by Bloomberg, its higher than the 4.4 percent estimated for Saudi Arabia and 4.45 percent for the U.A.E., the Arab world’s two biggest economies. The nation’s benchmark stock index climbed to a record on Sept. 18.
“There’s no question that Qatar will repay the debt,” Christie said. “What it’s dealing with is a political issue and a series of public relations problems. These need to be resolved.
(Bloomberg / 24 September 2014)
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Wednesday, 24 September 2014

Malaysia Sales Gather Pace With Biggest Sukuk of 2014

The world’s biggest Islamic debt offering of 2014 from Malaysia’s sovereign wealth fund will push the nation’s sukuk sales beyond 50 billion ringgit ($15.4 billion) for only the second time in 16 years.
1Malaysia Development Bhd. plans to sell as much as 8.4 billion ringgit of the notes, adding to the 46.9 billion ringgit sold so far that’s almost double the amount a year earlier. After 2012’s record issuance of 95.8 billion ringgit, which was distorted by a local toll-road operator’s unprecedented 31 billion ringgit sale, CIMB Group Holdings Bhd. and Asian Finance Bank Bhd. see 100 billion ringgit as being achievable in the next few years.
Prime Minister Najib Razak’s $444 billion development program contributed 21.2 billion ringgit to the sukuk total this year, data compiled by Bloomberg show. Bank Negara Malaysia’s decision to keep the benchmark policy rate on hold last week will also encourage issuers to tap the market given the likelihood increases will follow, according to CIMB.
“The sukuk market in Malaysia is a lot more active this year because of ongoing infrastructure spending,” Mohd. Effendi Abdullah, head of Islamic markets at Kuala Lumpur-based AmInvestment Bank Bhd., the country’s third-biggest sukuk arranger, said in phone interview yesterday. “This momentum is expected to overflow into 2015 as more corporates from neighboring countries may also tap the ringgit sukuk market.”

Sales Forecasts

1MDB’s Islamic bonds are planned before year-end and will finance the construction of a 2,000 megawatt coal-fired power plant in the state of Negri Sembilan, south of Kuala Lumpur, said two people familiar with the matter who asked not to be named because the information hasn’t been made public. The sukuk will be sold by Jimah East Power Sdn., which is 70 percent owned by the sovereign wealth fund and 30 percent by Japan’s Mitsui & Co. Ltd.
CIMB Islamic Bank Bhd. is working on a number of deals worth about 10 billion ringgit, which could come to market before year-end, said Badlisyah Abdul Ghani, the chief executive officer at the Shariah-compliant unit of CIMB Group, this year’s biggest sukuk manager. Issuance in Malaysia could reach 70 billion ringgit in 2014, he said.
AmInvestment Bank is forecasting total sales of 60 billion ringgit to 70 billion ringgit this year. That would exceed 2013’s 49 billion ringgit, data compiled by Bloomberg dating back to 1999 shows. The debt pays returns on assets to comply with Islam’s ban on interest.

Rising Yields

Kuveyt Turk Kira Sertifikalari, a Turkish asset leasing company, plans to raise as much as 2 billion ringgit from sukuk, according to a bulletin published on the Capital Markets Board in Ankara in September. PT Adira Dinamika Multi Finance, Indonesia’s largest consumer lender, may issue as much as $150 million of Islamic notes in Malaysia, while Japan Bank of International Cooperation is also considering a ringgit sale.
“This has been a good year for sukuk, driven mainly by infrastructure spending,” CIMB’s Badlisyah said in a Sept. 19 phone interview in Kuala Lumpur. “Malaysia’s growth rate of 6.3 percent in the first half of 2014 is positive and will help spur further sukuk issuance for project development.”
Corporate and government borrowing costs are rising in Malaysia after the central bank increased the benchmark policy rate in July for the first time since 2011 before keeping it unchanged on Sept. 18. Eleven of 21 economists surveyed by Bloomberg predict Governor Zeti Aktar Aziz will raise borrowing costs again before year-end, while the remainder see no change.

‘Strong Pipeline’

Average yields on conventional five-year bonds sold by the nation’s AAA-rated companies climbed 25 basis points, or 0.25 percentage point, to 4.21 percent this year, according to a central bank index. They reached 4.29 percent on Aug. 14, the highest level since April 2010.
“We expect ringgit sukuk issuance to pick up in the fourth quarter, with a strong pipeline supply from the infrastructure and financial sectors,” Angus Salim Amran, the Kuala Lumpur-based head of financial markets at RHB Investment Bank Bhd., a unit of RHB Capital Bhd., said in an e-mail interview yesterday. “We expect this year’s sukuk issuance to be in line with last year.”
Malaysia, which pioneered Islamic finance 30 years ago, is the world’s biggest sukuk market and accounts for $178 billion of the $290 billion outstanding globally, according to a June 4 report from Moody’s Investors Service.
The Bloomberg-AIBIM Bursa Malaysia Corporate Sukuk Index, a benchmark that tracks the most-traded local-currency notes, gained 1.8 percent in 2014 to a record 106.99 after rising 2.8 percent in 2013.

‘Strong Possibility’

1MDB is turning to the ringgit-denominated bond market for only the third time since 2009 as it finances projects that are part of the government’s 10-year development program. The company, which is also building a new financial district in Kuala Lumpur, has outstanding debt of 30.6 billion ringgit, according to data compiled by Bloomberg.
The fund came under scrutiny in parliament last year after singling out Goldman Sachs Group Inc. to manage $6.5 billion of conventional bonds. The New York-based investment bank made about $500 million in commissions and trading gains for managing three sales of dollar notes, which opposition politicians said were excessive.
“While 1MDB’s planned sukuk is the biggest this year, there may be more such funding in the future given Malaysia’s development program and the expected infrastructure spending in Asia,” Mohamed Azahari Kamil, chief executive officer at Asian Finance Bank Bhd. in Kuala Lumpur, said in a phone interview yesterday. “There’s a strong possibility that issuance could reach 100 billion ringgit in the next few years.
(Bloomberg / 23 September 2014)
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Pakistan: Orix Leasing to tap Islamic finance market

KARACHI: Orix Leasing Pakistan Limited (OLPL) plans to tap the high growth Islamic finance market.
The company has chosen an innovative way to attain its objective. It has entered into a non-binding Memorandum of Understanding (MoU) with Standard Chartered Bank (Pakistan) Limited (SCBPL) with regard to a prospective merger/amalgamation of Standard Chartered Leasing Limited (SCLL), a subsidiary of SCBPL with and into OLPL or acquisition of SCBPL’s 86.45 per cent equity stake in SCLL.
The MoU further provides the acquisition of SCBPL’s 100pc stake in Standard Chartered Services of Pakistan (Private) Limited and acquisition of SCBPL’s 20pc stake in Standard Chartered Modaraba.
The Orix company Secretary Effat Assad went on to state: “This stake is held 10pc directly and 10pc indirectly through SCSPL”.
Yet he cautioned that there was no certainty that the MoU would result in a binding transaction.
“The transaction structure and implementation plan would be subject to: due diligence of SCLL, SCSPL and SCM by OLPL which would commence shortly,” the company secretary informed and added that the MoU would result in binding transaction also after all necessary regulatory clearance for the approved structure; execution of definitive transaction agreements and satisfaction of various conditions, including regulatory and corporate approvals contained in the definitive transaction agreements.
A source in the knowledge of the proposed deal said: “Orix Leasing which caters mainly to smaller cities and Small and Medium Enterprises (SMEs) is vying to get a piece of the action in Islamic finance market.”
He stated that it was a prudent move in many ways. “The SCBPL will add value to OLPL while the Standard Chartered Modaraba, being a multi-purpose modaraba, would give access to Orix in several Islamic instruments, such as Ijarah, Musharaka and others,” said this person, though he hastened to add that it must not be construed to mean that the current business of Orix Leasing is un-Islamic.
The proposed merger with SCBL owned leasing and Modaraba would provide Orix the opportunity to enter businesses that already has a ready network and professional staff, he argued and pointed out that Modaraba sector also enjoyed the benefit of zero tax when 90pc of the profit was distributed to the stakeholders.
The source, who asked not to be named for he was not authorised to speak for Orix or SCBPL, believed that the Standard Chartered Bank had decided to spinoff the Leasing and Modaraba so as to concentrate in the core business of banking.
The board of directors of Orix Leasing also announced results for the financial year ended June 30, 2014 posting profit after tax (PAT) at Rs516 million, translating into earning per share (eps) at Rs6.29. It represented a giant leap of 53pc from PAT at Rs338m and eps at Rs4.12 the previous year.
(Dawn.Com / 23 September 2014)
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Monday, 22 September 2014

Let’s not forget the voice of the Islamic banking customer

It is easy to get caught up in the endless debate over why Islamic finance has not readily embraced a centralised approach to developing common transaction structures, or why progress in the standardisation of documentation and processes at a global level has been so slow. Despite the good work of various organisations such as AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions), IFSB (Islamic Financial Services Board) and IIFM (International Islamic Financial Market), we still find most Islamic financial centers at differing stages of development. While the difficulty of attaining these goals cannot be underestimated, discussions on industry development tend to focus mainly on regulation and standardisation. Important as these are, I am left wondering what the role of the customer is in this whole process? Could the future of Islamic finance be better served by simply placing more focus on customer needs to drive innovation and growth? In other words, who should drive the growth of Islamic banking — the regulators or the customers?
Islamic banks operate under the governance of a Sharia board that serves to ensure customers are not misled in the compliance of their financial transactions, judged against approved standards. This means, development and innovation are primarily the domain of the bank and Sharia board, whereas, I believe, Islamic institutions would benefit by finding ways to be more inclusive of customers in this process, and being more flexible and proactive in finding solutions to their requirements. Flexibility does not mean compromising Sharia standards, but it does mean adopting a methodology to better understand financial requirements and improve response times, so that decisions can be made in a timely and efficient manner. It’s possible that this type of bottom-up approach based on customers’ needs could contribute to faster development of commonly accepted regulatory frameworks and standards.
Running a Treasury department means taking care of customers who are typically businesses or wealthy individuals, as well as managing the bank’s own financial needs. Each customer has a different level of willingness, or tolerance, to enter into Islamic financial transactions. Some bank in a Sharia compliant manner no matter what, while others will not compromise on cost or structure if it is not competitive with a conventional alternative. However working in this region I have come to understand that a great many would, all things being equal, prefer to be participating in Sharia compliant transactions. If the industry can bridge the gaps between customer needs and Islamic product offerings, growth and standardisation should follow.
We are living and working in a region that is undergoing strong economic growth and social development. Similarly, our customers’ financial needs and aspirations are developing and ever changing and many would like to fulfil their financial needs through products structured under Islamic rules. It is no stretch to imagine that the financial institutions which are able to understand this, and organise themselves accordingly, will be most likely to succeed. This organisation will include the responsibility to drive the necessary legal and regulatory changes, all derived from a basis of customer needs.
At Noor Bank we believe we have made a good start in the journey to improving the voice of the customer. We don’t expect to land the next jumbo-sized complex derivative transaction from the largest corporate clients, but are increasingly structuring more sophisticated transactions for customers. It is in the middle markets and SME segment where we are finding customers who have financial risks that they want to manage. It is only by having a relationship with these customers and listening to them that you can start to understand the type of Islamic structures that the market needs. On the investments side, we are also seeing a significant expansion in the type of products that customers are seeking exposure to. For customers that are adequately aware of the transactions they are entering, and have the appetite for the associated risks, there are many Sharia compliant options beyond a standard fixed-term wakalah or murabaha investment.
Equipped with a better understanding of customer needs and generating genuine customer demand, we are able to engage in the type of innovation that will contribute to the growth of the Islamic banking industry. As we satisfy customer requirements, we can also introduce the tools that will help to form standardisation across the industry. The adoption of the Tahawwut Master Agreement (TMA), developed by the International Islamic Financial Market (IIFM) to govern hedging transactions, is one such example. And as banks manage their own risks and balance sheet needs more effectively and efficiently, based on customer activity, this and similar tools will grow in acceptance and use.
There remains a great deal of work to be completed in forging a unified global Islamic banking industry, operating to commonly accepted standards. Banks and regulators are an important part of this development but we cannot ignore the needs of our customers in this process. Embracing their challenges and understanding their needs would help to accelerate the process of achieving common platforms and standardising products and agreements.
(Gulfnews.Com / 21 September 2014)
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Dubai: Global takaful contribution expected to reach $20b by 2017

Dubai: GCC’s gross takaful contribution is estimated to reach around $8.9 billion (Dh32.6 billion) in 2014 from an estimated $7.9 billion in 2013, according to EY’s [Ernst &Young] report, Global Takaful Insights 2014.
The report forecasts a continued double-digit growth momentum of the global takaful market of approximately 14 per cent from 2013 to 2016 and expects the industry to reach $20 billion by 2017. This is against a backdrop of continued buoyancy in the estimated $2 trillion global Islamic finance markets.
The Gulf Co-operation Council (GCC) countries and Association of Southeast Asian Nations (Asean) markets are likely to maintain their current growth path in the next five years, subject to their economic growth.
Within the Gulf region, Saudi Arabia accounts for the majority of the total gross takaful contribution at 77 per cent, followed by UAE, which accounts for 15 per cent. The rest of the Gulf countries account for just 8 per cent of gross takaful contributions.
Dubai: GCC’s gross takaful contribution is estimated to reach around $8.9 billion (Dh32.6 billion) in 2014 from an estimated $7.9 billion in 2013, according to EY’s [Ernst &Young] report, Global Takaful Insights 2014.
The report forecasts a continued double-digit growth momentum of the global takaful market of approximately 14 per cent from 2013 to 2016 and expects the industry to reach $20 billion by 2017. This is against a backdrop of continued buoyancy in the estimated $2 trillion global Islamic finance markets.
The Gulf Co-operation Council (GCC) countries and Association of Southeast Asian Nations (Asean) markets are likely to maintain their current growth path in the next five years, subject to their economic growth.
Within the Gulf region, Saudi Arabia accounts for the majority of the total gross takaful contribution at 77 per cent, followed by UAE, which accounts for 15 per cent. The rest of the Gulf countries account for just 8 per cent of gross takaful contributions.
(Gulfnews.Com / 14 September 2014)
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Friday, 19 September 2014

Insurance: Takaful is not just for Muslims -Hassan Bashir

Hassan Bashir, Founder of Takaful Insurance of Africa, says the Kenya-based company's products can bring possibilities to many and are not exclusively for people of the Muslim faith.
The Africa Report: Why did you launch Takaful Insurance of Africa in 2011?
What is the difference between conventional insurance and Takaful?There was a need for the service. I have been involved in the insurance industry since 1997, and it was something that I had become aware of. For my MBA I researched customer behaviour across the Kenyan insurance industry, and what came out was evidence of dissatisfaction and a need for honesty and ethics in the insurance products and services. I came across a lot of people who did not have insurance, or if they did they only had the basic statutory amount. They said that they did not feel comfortable with some aspects of insurance – that it did not accommodate their religious beliefs – and some people said they felt conventional insurance was a bit like gambling.
The big difference is that conventional insurance is a risk-transfer model, whereas takaful is a risk-sharing model. In the case of takaful, it's more like a joint fund, where the company and shareholders are paid a portion of the premiums. The risk remains partly shared and collectively based on all those taking part in the scheme. At the end of the insurance period there is a payout, not a 'no-claims bonus', more of a dividend.
Why did you choose Kenya, which has a relatively small Muslim population?
I started in Kenya because I am Kenyan. This is the market I know – and because I saw there was a gap in the market here. I agree there are bigger markets, like Nigeria or Ethiopia, but that means there is potential to grow. Six months ago we opened an office in Somalia. We have made expressions of interest in Uganda, Djibouti and Tanzania, so we have big plans.
Is takaful only for Muslims?
No, not at all. Our products are not exclusively for people of the Muslim faith. We can serve anyone, and we do. Initially, people thought it was only for Muslims, but now around 15% of our client base is non-Muslim and we are growing.
Are people put off Islamic finance solutions by negative connotations of Islamism? 
Some people in our community are ill-informed, it is true. I've been asked – directly to my face – "If someone defaults on payments, will their hands be chopped off?" People are only like this because they do not know all the information, so it is our job to educate them. There are sensitivities, which I can understand, but I believe economic development will help change minds. Extremism thrives in spaces where there is poverty and a lack of education, and where people are desperate and have nothing to do and no means of earning a livelihood. But I believe that Islamic finance can bring possibilities to many people by helping them get employment and access to finance. Look at what we are achieving with the index-based livestock takaful. We are continuously educating [pastoralists] so that they understand that the cover is in line with their religious sensitivities and this is to cushion them against the harsh weather so that they sustain their livelihoods despite the droughts that may occur from time to time. In the long run, this will answer the question you asked about the negative perceptions about Islamic finance.
Do you think Kenya will launch a sukuk this year?
I am not sure if it will be this year, but I have no doubt it will happen soon. Kenya wants to become an Islamic finance hub in the East and Central Africa region, and it is well placed to do so. ●
(The Africa Report / 18 September 2014)
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Indonesia preps Islamic pension rules as Islamic banking growth slows

Indonesia's capital market regulator is projecting a drop in the growth rate of Islamic banking assets and is developing an array of initiatives to boost the sector, including much-awaited rules governing Islamic pension funds.
Indonesia's financial services authority, Otoritas Jasa Keuangan (OJK), said in a report that it is preparing a five-year blueprint aimed at industry issues such as sector consolidation, a lack of scale and foreign ownership limits.
OJK said it was now preparing draft regulations for Islamic pension funds, after Indonesia's national sharia council issued a ruling approving the overall concept in November last year. It has been under study since 2009.
"There is demand from the public to participate. With this, it is hoped that the number of sharia products increase and the public's wish for a pension fund on the basis of sharia principles is fulfilled."
Countries such as Pakistan and Malaysia have made efforts to develop Islamic pension systems of their own, where fund managers screen their portfolios according to religious guidelines such as bans on tobacco, alcohol and gambling.
Under a "moderate" scenario, the OJK projects Islamic banking assets will grow by 14.4 percent in 2014, down from 24.2 percent in 2013 and 34 percent in 2012, although these figures would remain above those for conventional banks.
As of December, Indonesia's Islamic banking industry - which included full-fledged lenders, Islamic windows and Islamic rural banks - had a combined 248.1 trillion rupiah ($20.6 billion) in assets, or 4.9 percent of the country's total banking assets.
That means Indonesia, which has the world's biggest Muslim population, remains well below neighbouring Malaysia, where Islamic banks hold more than 20 percent of all banking assets.
The OJK said challenges faced by Islamic banks were mainly internal, rather than related to external pressures such as falling commodity prices or lower export demand, as the sector's foreign currency funding stood at about 5.9 percent.
In particular, competition for third-party funds is a factor affecting growth, given the small scale of Islamic banks which makes it difficult for them to compete with large-scale conventional banks in attracting liquidity, the OJK said.
Despite this, the sector welcomed its 12th full-fledged Islamic bank last year, Bank BTPN Syariah, which was spun-off from its parent Bank BTPN (BTPN.JK). The Islamic lender also absorbed conventional peer PT Bank Sahabat Purba Danarta.
The industry has also seen growth in other areas such as Islamic mutual funds: As of December, there were 65 Islamic mutual funds in the country which saw a 12.1 percent increase in assets in 2013.

In addition, there were 10 corporate Islamic bonds issued last year, worth a combined 2.2 trillion rupiah, with total sukuk outstanding representing 9.4 percent of total debt issuance.
(Reuters / 18 September 2014)
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Thursday, 18 September 2014

Pakistan: Helping the needy: Zakat, dowry assistance revised after 31 years

The Provincial Zakat Council has increased the monthly stipend for the needy after 31 years. The raise has been approved for nearly five million recipients of zakat in the province, The Express Tribune has learnt.
This includes dowry grants. The amount has been revised after 20 years. The amount has been raised by up to 100%.
The amount of zakat for a single person has been increased from Rs500 to Rs1,000.
The provincial government had earlier revised the dowry fund in 1994, announcing Rs10,000 for each deserving family. The amount has been raised to Rs20,000.
The eligibility of a family for the fund is determined by the Punjab Baitulmal and charity organisations operating under the Provincial Zakat Council.
The government will start paying the revised zakat and dowry funds from the next month.
The council has informed District Zakat Councils about the raise in the stipends.
A study of the official record revealed that zakat councils in all 36 districts have submitted 21 requests to the council over five years for raising the funds.
Some of the beneficiary families The Express Tribune spoke to said the government should have raised the amount by 500%.
Naseem Bibi, a daily wager, said she was happy with the raise in the dowry fund. “Although the government should have announced a raise of 400%, the current announcement is a welcome move,” she said.
Muzafargarh Zakat Officer Muhammad Adnan said he had received provincial government’s orders for the raise in funds. He said the district zakat office currently had for three months. “We have funds for July, August and September. The beneficiaries will be paid in line with the new directive,” he said.

(The Express Tribune / 14 September 2014)
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Goldman Learns From Debut Flop in Islamic Finance Market

Three years after its first foray into the Islamic capital markets ended without a sale, investors piled in to buy sukuk debt from Goldman Sachs Group Inc. (GS)yesterday as the bank joined the governments of Hong Kong and the U.K. in selling debut Shariah-compliant bonds this year.
The New York-based lender attracted bids for three times the $500 million of sukuk it sold yesterday, according to two people familiar with the deal, who asked not to be identified because the information is private. The five-year sukuk was priced to yield 90 basis points, or 0.9 percentage point, over the benchmark midswap rate, according to the people.
After failing to sell sukuk bonds in 2011 amid criticism the deal didn’t ensure debt would be traded at par, as required by Islamic law, Goldman adjusted the structure this time in a bid to appeal to more investors. The new issue is a Sukuk al Wakala, a Shariah-compliant format in which one party entrusts another to act on its behalf.
Islamic financial assets globally will double to $3.4 trillion in the five years through 2018, according to forecasts from Ernst & Young LLP. The U.K. became the first non-Muslim country to issue sovereign Islamic bonds in June with a sale that lured orders for 10 times the amount offered. Hong Kong raised $1 billion in a debut sukuk last week, with a bid-to-offer ratio of 4.7.

‘New Entrants’

“You’re starting to see a lot of new entrants coming into the sukuk market,” Damian White, a treasurer at Dubai-based Noor Bank, said in an interview yesterday. “The hope is that they will not be one-time visitors, and that it will encourage others.”
David Wells, a spokesman for Goldman in New York, declined to comment on the firm’s issuance of Islamic bonds.
The pricing “seems pretty aggressive at first glance, although we don’t see paper like this very often,” Ahmed Shehada, the Abu Dhabi-based head of advisory and institutions at NBAD Securities LLC, said by e-mail yesterday. “This will attract a different institutional base, mostly sovereign wealth funds and banks looking to manage liquidity and cash.”
Global sales of Islamic bonds have surged 39 percent this year to $33 billion, according to data compiled by Bloomberg, as investors have tapped the expanding pool of liquidity. Issuers from Malaysia are the biggest sellers of sukuk this year, having raised about $14 billion, according to data compiled by Bloomberg.
Abu Dhabi Islamic Bank PJSC (ADIB), National Bank of Abu Dhabi PJSC, Emirates NBD Capital Ltd. and NCB Capital also managed the offering, the people said. Standard & Poor’s rated the issue A-, the seventh-highest investment grade, it said in a statement this month.
(Bloomberg / 17 September 2014)
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Tuesday, 16 September 2014

Big gains to be had in insurance and takaful for SMEs

The wheel of fortune turned for Dubai when Sheikh Rashid bin Saeed Al Maktoum took over the reins in 1958. Dubai took its fledgling steps towards success with the dredging of the Deira Creek, which had seen rapid silting-up during the early 1950s limiting the number of vessels it could harbour. Construction work was completed in 1960.

The rest, as they say, is history. Dubai set about creating for itself a prime position on the global map.

Today, the UAE in general and specifically Dubai, has firmly established itself as the trading and logistical hub of the Middle East, bridging trade routes between the East and the West with the expansion of its ports infrastructure. The emirate is an undisputed destination of choice as Middle East headquarters for multinational companies across diverse sectors including technology, food and beverages, consumer goods, and electronics. Dubai also hosts leading manufacturing and financial institutions and outsourcing services providers.

Somewhere along the line, these multinational companies in their race to gain from economies of scale have forgotten the smaller players who have been the real drivers of growth and catapulted Dubai and the UAE to great heights.
Interestingly enough, even in today’s technology-driven world, the small and medium enterprises (SMEs) remain the growth engines of the economy.

According to the UAE Ministry of Economy, SMEs currently account for 92 per cent of the country’s total registered companies, 86 per cent of the workforce in the private sector and 40 per cent of the GDP.

Sadly, the insurance and takaful industries have proved least effective in terms of penetrating the SME sector with appropriate coverage leaving it vulnerable to loss and closure.

The situation is indeed ironic. A service industry that began as a practice which was started by small groups of traders is today offering them ill-suited coverage at disproportionate costs in the very region of its birth. We must perhaps pause to remember that Babylonian (Iraqi) traders were among the first to begin the culture of distributing risks as far back as the second millennium BC.

For takaful and insurance providers the push towards big-ticket corporates has been a natural choice – as they provide tastier fare in terms of marketing effort – preferring to clinch and service one big client rather than closing deals for and servicing a multitude of smaller clients.

However, choosing this easy way out has cost the insurance and takaful sector dearly — it has missed out on a core segment of clients.

There is a dire need to rectify the situation, and with some innovation and practical thinking, insurance op
erators could be opening up a new market while supporting the small businesses to manage their risks more effectively.
Such products could include tailored coverage options for each trade class, sensitive but relevant pricing, as well as flexible financial limits to ensure the provision of adequate cover right through the seasons. Ultimately sales and policy maintenance automation is central to value creation for both parties, so wordings will need to be clearly laid out and highly adaptable.

Takaful and insurance operators would also need to step away from the conventional methods for marketing their services to small traders. The campaign should prioritise ease of understanding of the decision-makers, while taking up as little of their time as possible.

Circumstances today demand that the takaful and insurance industries step up and stay true to their raison d’ĂȘtre – to protect the most crucial part of the economy. With the future vision placing significant emphasis on the establishment of a globally dominant Islamic financial services hub, takaful providers must strive harder to offer appropriate products to SME businesses.

(The National Business / 14 September 2014)
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