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

Monday, 25 January 2016

After Ivory Coast sukuk, West Africa bloc signs SME fund deal

Jan 25 The central bank of West Africa's CFA-franc zone has signed an agreement with the private sector arm of the Islamic Development Bank to help finance small and medium-sized businesses through a $100 million Islamic fund.
The deal follows a debut 150 billion CFA francs ($247.5 million) Islamic bond issued by the Ivory Coast last month, the second such transaction in the eight-nation Economic and Monetary Union of West Africa (UEMOA).
The Jeddah-based Islamic Corporation for the Development of the Private Sector (ICD) will commit an intial $30 million for the SME fund and would help seek additional investors to increase its size to $100 million, a joint statement said.
UEMOA comprises Benin, Burkina Faso, Ivory Coast, Mali, Guinea-Bissau, Senegal, Niger and Togo. They share a regional central bank and the CFA franc currency, which is pegged to the euro.
Despite strong growth in the Middle East and Southeast Asia, Islamic finance has lagged in Africa, home to a quarter of the world's Muslims, presenting an opportunity for ICD which is exanding its activities across the region.
The Ivory Coast's sukuk, which was arranged by the ICD, saw a 38 percent allocation to investors from the Middle East region. In 2014, Senegal issued the region's first Islamic bond, a 100 billion CFA franc deal.
Niger has also signed up for a sukuk programme worth 150 billion CFA francs, although a timing has yet to be determined.

The central bank also committed to support SMEs by providing incentives to credit institutions, as well as developing complementary leasing and venture capital instruments. 

(Reuters / 24 January 2016)
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Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Muslim traders endorse Islamic banking system

COTABATO CITY, Maguindanao—Business leaders and stakeholders of the Autonomous Region in Muslim Mindanao and Central Mindanao have endorsed the establishment of an Islamic banking system, specifically one that prohibits the charging of high interest rates, a Basilan lawmaker said.
The proposal was indicated in House Bill No.5989 filed by Basilan Pary-list Rep. Sitti Djalia Turabin Hataman which was supported by Salem Glandour of Maybank Islamic Berhad in Malaysia and Amanah Islamic Bank executive Isdrro Sobrecarey.
Both businessmen cited the advantages of an Islamic banking system to operate in the Southern Philippines.
Hataman, wife of ARMM Gov. Mujiv Hataman, stressed that under her proposed Islamic banking law, “banks do not rely on high interest rates to sustain operation but push for moderate to socialized interest charge.”
The Basilan legislator said that based on Islam, the banking system prohibits usury or taking high interest on cash loans and cater mostly on the poor and moneyed traders.
Glandour explained that “while Islamic banking system offers low interest rates, it has no conflict with conventional and commercial banks.”

Hataman hailed the business leaders’ warm reception of her proposal and pledged to continue dialogues through roundtable discussions with other stakeholders.

(The Standard / 23 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

SABB Takaful reports almost 79 per cent slump in net profit

The company also cited, “Increase in G&A by 20.2 per cent which consist of increase in supervision and inspection cost accruals. Decrease in Fees and commission income by 49 per cent (due to decrease in profit share from Reinsurers) and decrease in investments income by 4.7 per cent. This is despite the marginal increase in NWP by 2.9 per cent, decrease in surrenders & maturities by 52.5 per cent, decrease in policy acquisition costs by 29 per cent.”
Operating transactions results showed a drop of 82.28 per cent to SAR 2.564 million. Gross written premiums rose 4.71 per cent to SAR 202.183 million. Earnings per share before Zakat and income tax fell from SAR 0.5 to SAR 0.11.
(C P I Financial / 19 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Monday, 18 January 2016

Malaysia CIMB Islamic launches universal family takaful haj product


KUALA LUMPUR: CIMB Islamic Bank on Tuesday launched Takaful Suria, its first universal family takaful haj product that combines elements of savings, protection and financial stability to assist Muslims in fulfilling their religious aspirations and obligations.

Developed exclusively by its bancatakaful partner, Sun Life Malaysia Takaful Bhd, the product provides an insured individual a lump sum of RM1,500 special payout after the third year to set up a Tabung Haji account or top up existing savings.

Sun Life chief executive officer Muhammad Fikri Mohamad Rawi said the product had a stabiliser that would give gradual returns unlike conventional insurance that was more exposed to market volatility.

"With Takaful Suria we can give that assurance on top of complementing the haj/umrah preparation for bank customers," he told reporters after the product launch on Tuesday.



Muhammad Fikri said the company's market share of the takaful industry in Malaysia stood at 8.6% in the third quarter of 2015.

Currently, the takaful insurance penetration rate in the country is at 13%, out of the 56% combined with conventional insurance.

The Government's targeted penetration rate is 75% by 2020.

"We expect the takaful industry penetration rate to grow to about 14% in 2015 and expect it to improve between 0.5% and 1% this year judging from the industry's growth trend in the past five years," said Muhammad Fikri.

CIMB Islamic Bank chief executive officer Rafe Haneef said that since the soft launch of the product in November 2015, it has closed 1,000 policies.

"The product also comes with a final benefit where the value of universal account will be paid at the end of the contract term.

"It also doubles the basic benefit which is payable in the event of death, total and permanent disability while performing haji/umrah," said Rafe.



(The Star Online / 12 January 2016) 
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Ivory Coast successfully issues largest West African sovereign sukuk

The Republic of Côte d’Ivoire, acting through the Ministry of Economy and Finance has closed an inaugural local currency, CFA 150 Billion (USD 244 million) Sukuk al-Ijara (“Sukuk”). The Islamic Corporation for the Development of the Private Sector (“ICD”), an arm of the Jeddah-based Islamic Development Bank, acted as the Lead Arranger. The sukuk with…
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(Business Day / 18 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Friday, 15 January 2016

Jury Out on Jokowi Committee as Indonesia Islamic Finance Stalls

The jury is out on whether a group helmed by President Joko Widodo can revive stalled growth in Indonesia’s Islamic finance industry.
The head of the world’s biggest Muslim population is chairing a new committee tasked with bringing fragmented regulations under one roof and taking action to spur the market, according to the Cabinet Secretariat. Shariah-compliant banking assets increased less than 1 percent in the first 10 months of 2015, compared with 6.8 percent overall.
“The fact that it’s being led by Jokowi demonstrates the seriousness,” said Raj Mohamad, managing director at Singapore-based consultancy Five Pillars Pte. “But as they say, the devil is in the details, as we have yet to see the blueprint.”
Indonesia’s ambition to rival Malaysia as a regional hub for finance catering to Muslims is being hindered by a lack of progress in scrapping double taxation on sukuk and a delay in creating an Islamic megabank. The success of the new oversight body may test Jokowi’s credentials after he faced opposition in parliament over reforms since taking office in 2014.
Financial products governed by religious tenets currently have to comply with the regulations of Bank Indonesia, the Financial Services Authority and the National Ulema Council of Shariah scholars. The heads of those institutions will also be part of the new committee, which will be charged with encouraging development, improving endowment mechanisms and raising public awareness, National Planning Minister Sofyan Djalil told reporters in Jakarta on Jan. 5.
Indonesia’s Islamic finance industry is slowing even after a five-year blueprint was unveiled in 2014 to strengthen the capital base of banks, improve the management of funds used for the annual pilgrimage to Mecca and increase the number of experts.
Assets rose 0.4 percent through October to 273 trillion rupiah ($19.7 billion), after increasing 12 percent in 2014, 24 percent in 2013 and 34 percent in 2012, data from the Financial Services Regulator show. That’s a far cry from Malaysia’s 672.6 billion ringgit ($152 billion).
“Islamic finance in Indonesia is still far short of the potential,” minister Djalil said. “What we need is synergy among the participants.”
The Southeast Asian nation is also susceptible to a global slowdown just like any other regional economy, making it more imperative that Indonesia boosts its Shariah-compliant industry. More than five years after the central bank asked the tax department to look into the issue of double taxation on sukuk, companies interested in selling such debt are still in limbo and offerings have to be considered on a case-by-case basis.
A plan to create an Islamic megabank by merging the Shariah units of PT Bank Mandiri, PT Bank Negara Indonesia, PT Bank Rakyat Indonesia and PT Bank Tabungan Negara has also been pushed back, with various officials touting different target dates to achieve it.
Financial Services Authority Director Dhani Gunawan Idat said last month that such an entity will be established in 2017.

“There are many areas that the committee will need to consider and attempt to address,” said Suhaimi Zainul-Abidin, a founding member of the Gulf Asia Shari’ah Compliant Investments Association in Singapore. “With President Jokowi chairing the committee and given the membership composition, it should be much easier for the different stakeholders to reach a consensus of what needs to be done, and to thereafter activate the appropriate levers to make things happen.

(Bloomberg Business / 12 January 2016) 
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

CESVIMAP advises Al Rajhi Takaful on accident claim management

A group of experts from CESVIMAP's Engineering and Appraisal Development Departments travelled to Riyadh, home to the headquarters of the Saudi insurance company, to study the features of the automobile insurance market in Saudi Arabia, and specifically of accident claims management. Al Rajhi Takaful is ranked the third largest automobile insurer in Saudi Arabia, with a premium volume of 242.2 million euros at the close of 2015.
Over the course of several days, CESVIMAP and Al Rajhi Takaful studied the company's appraisal activity and how it relates to the different actors involved in any automobile accident claim: the policyholder, the insurance company, repair shops and spare parts suppliers. After a detailed analysis, CESVIMAP has transmitted its know-how and international experience in after-sales in general, and in accident claims management in particular, to the insurance company.
CESVIMAP has prepared a dedicated report, giving details of strategies to improve efficiency and cost-effectiveness in the technical management of this type of claims, both in the company's own management procedures and within the definition of the framework of the relationship with repair shops. This analysis will allow the Saudi group to move forward in consolidating its leading position in the country, by offering it innovative systems for relationships with clients and suppliers, along with marketing strategies. 
(C P I Financial / 14 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic banking system gets nod of ARMM, Muslim business leaders

Cotabato City – Business leaders in the Autonomous Region in Muslim Mindanao (ARMM) and in Region 12 on Tuesday expressed optimism that an Islamic Banking System would be established soon in the country.
This positive outlook came after Anak Mindanao (Amin) Partylist Rep. Sitti Djalia Turabin-Hataman filed House Bill (HB) 5989 that is now being deliberated upon in the lower House.
Muslim and Christian business leaders in the region attended yesterday’s first roundtable discussion on HB 5989 here.
Anchored on Islam, the banking system would prohibit usury, or the imposition of exorbitant interests on cash loans, and cater mostly to the poor as well as traders.
(Manila Bulletin / 14 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Wednesday, 13 January 2016

Ivory Coast offers inaugural CFA 150 billion Sukuk

The Sukuk is an amortising Sukuk al-Ijara and is targeted at local banks and institutional investors. It mirrors the successful Senegal Sukuk that Hogan Lovells advised on in 2014.
Imran Mufti, Partner commented, "We were very pleased to work with the ICD team on this debut issuance for the Government of Côte d’Ivoire. Islamic financing is gaining pace in Africa and we expect to see more sukuk from African issuers in the near future."
Zaky Sow, Sukuk Project Manager for ICD added, "We are delighted to have brought this ground-breaking Sukuk to the market and to also introduce Islamic finance to Cote D'Ivoire. The Sukuk opens up a whole new stream of investment into the country, which will ultimately benefit the people. Having worked with Hogan Lovells' team on the Senegal Sukuk, we were confident that they would be able to provide us with a high quality service and expert advice combined with a deep understanding of the market."
Rahail Ali, Global Head of Islamic Finance commented, "There are tremendous possibilities for Sukuk in Africa, especially given the huge capital development anticipated in the continent."
Hogan Lovells' team was led by Global Head of Islamic Finance, Rahail Ali and Partner Imran Mufti. They were assisted by Partner Baptiste Gelpi, International Debt Capital Markets, Paris and Lina Bugaighis, Dubai.
(C P I Financial / 11 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Dr. Adnan Chilwan, Group CEO of Dubai Islamic Bank: Dubai is leading the revolution in Islamic banking

Since its inception, modern Islamic commercial banking has been intrinsically linked with the UAE. The formation of Dubai Islamic Bank over 40 years ago is widely regarded as the birth of the sector as it was the first financial institution to incorporate the principles of Islam into all of its practices. In the short span of time since then, the industry has rapidly established a firm foothold in the world of banking and finance and has steadily progressed from being a select ‘niche’ to a fast-growing ‘norm’.
The last financial crisis revealed the true value of this relatively nascent industry highlighting it as a transparent and fair system of banking for people, corporations, and governments alike. Islamic finance is now increasingly being recognised for its innovative and modern practices as well. Reflective of the industry’s success, global Islamic banking assets are expected to reach $1 trillion by the end of 2015, growing at a CAGR of 16 percent a year, according to EY. Indicative of the potential yet to be realised, the global industry profit pool is expected to exceed $30bn by 2020, as Sharia-compliant financing increases its share in emerging markets.
Looking to 2016 and beyond, innovation will continue to be critical for the ongoing development of the industry. For instance, efficiency can still be improved as Sharia-compliant institutions still lag behind their conventional counterparts, and are increasingly looking to embrace technological innovation in order to minimise operational costs as well as project a modern face of banking that would appeal to a younger generation of customers, which will be critical for ongoing growth.
Another area of development is the Islamic asset management sector, as the range of services available remains quite limited and there is a general lack of quality products in this space. To this end, Islamic investment instruments and securities related to savings and pension plans are also an area where significant progress can be made in order to appeal to a broader range of customers. Indicative of the untapped potential here, the total value of pension funds’ assets globally exceed $27 trillion, while those that are Sharia-compliant make up just 0.001 percent in spite of Muslims making up almost 25 percent of the world’s population.
(Arabian Business.Com  / 12 January 2015)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Sunday, 10 January 2016

Indonesia plans to sell dollar sukuk for sixth straight year


Jakarta: Indonesia plans to sell dollar Islamic bonds, kickstarting 2016’s sovereign issuance after the poorest showing for global annual offerings in five years.

The deadline for proposals is next week and selections for the arrangers will be made before the end of January, according to people familiar with the matter, who asked not to be identified because the process is private. No details on the size and maturity were given. Suminto, Islamic financing director at Indonesia’s Finance Ministry, couldn’t immediately comment.

It’s the sixth straight year the Southeast Asian nation will have sold Sharia-compliant debt overseas and coincides with waning risk appetite across world markets driven by a selloff in Chinese shares. The government plans to issue as much as $2 billion of global sukuk in 2016, Robert Pakpahan, director general for budget financing and risk management at the Finance Ministry, was citing as saying by Kontan in October.

“While it may not be the best time to issue, weighing against the risk of potentially higher dollar-funding conditions when the United States Federal Reserve tightens further, it could still be a better window of opportunity to tap the market now,” said Winson Phoon, a Kuala Lumpur-based fixed-income analyst at Maybank Investment Bank Bhd. “With some yield concession, I think there will be demand.”

The sovereign sold $2 billion of 10-year dollar Islamic notes in May last year at a coupon rate of 4.325 per cent and got $6.8 billion in orders. The securities were paying 4.84 percent on Friday, compared with 4.96 per cent at the end of 2015, data shows.



(Times Of Oman / 08 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Saturday, 9 January 2016

Islamic banking advances in Southeast Asia

In Malaysia, central bank data show the amount of outstanding Islamic loans grew 35 per cent from the beginning of 2014 to October 2015, while total loans expanded by 17 per cent.
Indonesians are less enthusiastic about Islamic banking but the sector still enjoys double-digit growth: Islamic loans increased by 13 per cent and total loans by 19 per cent respectively in the same period.

Islamic teachings forbid the charging of interest and investment in activities Muslims consider as sinful such as alcohol, tobacco and gambling. In response, Islamic financial institutions offer interest-free products and steer clear of un-Islamic industries.

A recent survey by FT Confidential Research, a Financial Times research service, found that 61 per cent of Indonesians and 73 per cent of Malaysians say that they either use Islamic banking services primarily or as often as conventional ones.

While religious obligation is the main driver behind the growth in Islamic banking, it is not the only one. The survey found that 60 per cent of those using Islamic banking services in Indonesia and Malaysia cited religious requirements as a factor.

Others were more interested by less divine incentives such as risk and cost. Islamic lending, for instance, puts a cap on effective interest rates — the so-called profit rate — while there is no legal or other imposed limit on interest rates under conventional lending.

Indeed, the appeal of Islamic banking can reach beyond the Muslim population. In the same survey, 13 per cent of Indonesian and 25 per cent of Malaysian Islamic banking customers were not Muslims.

But despite its broad appeal, Islamic banking still has only small market shares in the two countries.

At the end of the third quarter of last year, just 7 per cent of total loans worth $284bn in Indonesia and 27 per cent of loans worth $334bn in Malaysia were Islamic, according to Bank Indonesia and Bank Negara Malaysia, the central banks.

The market for Islamic banking is bigger in Malaysia than in Indonesia, even though Malaysia’s population is just 31m, compared with about 257m in Indonesia. One reason is the “soft infrastructure” installed by the Malaysian government to support the industry, including tax breaks and coherent regulation, since the 1980s. Indeed, Malaysia is a global centre of Islamic banking and finance, with 51 per cent of all outstanding sukuk (Islamic bonds) originated from the country in 2015.

Indonesia is playing catch-up, with various support systems still a work in progress. FT Confidential Research believes the long-term potential of Islamic finance in the country is immense and largely untapped.

About 88 per cent of Indonesians are Muslims, compared with about 61 per cent of Malaysians. The median age of Indonesians is just 29-years-old. Meanwhile, strong economic growth of 5 to 6 per cent for the past several years is enlarging the middle class.
Yet, Indonesians are severely underbanked compared to their regional neighbours. Only 36 per cent of adult Indonesians have a bank account, compared with 81 per cent in Malaysia, according to the World Bank.

Foreign banks are moving in. Large Malaysian banks with deep experience in Islamic finance such as Maybank and CIMB have set up in Jakarta and other big Indonesian cities as their home market saturates.

Emirates NBD, the largest banking group in the Middle East by assets, plans to acquire a stake in an Indonesian sharia-compliant bank to gain a foothold in the world’s most populous Muslim country. Other Gulf banks have expressed interest in doing the same, bypassing the competitive Malaysian market — usually the first Southeast Asian market for Middle Eastern banks.

(Emerging Markets / 08 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Friday, 8 January 2016

UAE emirate Sharjah plans sukuk issue in Q1 - sources

DUBAI, Jan 5 The emirate of Sharjah is planning to raise funds through a dollar-denominated Islamic bond, sources aware of the matter said on Tuesday, in what could be the first sovereign sukuk issuance from the Gulf region this year.
The sources said the issue would be of "benchmark size", traditionally understood to mean in excess of $500 million.
Six local and international banks have been mandated to arrange the sukuk including HSBC, which is leading the transaction, two of the sources said, speaking on condition of anonymity as the information isn't public.
The sovereign is aiming to issue the sukuk in the first quarter of the year and could announce investor meetings for the deal as early as this month, the sources added.
However, the diplomatic spat between Saudi Arabia and Iran could disrupt the timing of the issuance if it hits confidence among international investors.
An official at the department of finance in Sharjah, the third largest emirate of seven in the United Arab Emirates (UAE), declined to comment.
A successful offering could help Sharjah narrow its budget deficit and pave the way for other Gulf issuers to access the bond market.
As well as banks - seeking cash as local liquidity is squeezed - and companies, Gulf sovereigns are expected to make rare forays into international debt markets this year to cover budget shortfalls, including Qatar, Kuwait and Saudi Arabia.
Sharjah has coped comparatively well with low oil prices thanks to its diversified economy, according to credit ratings agency Standard & Poor's (S&P), which rates it as A.
In November, S&P said it expected Sharjah's government deficit to narrow towards 1 percent of GDP in 2018 from a peak of 2.7 percent in 2014. It added the calculations were made without access to Sharjah's GDP data, which is not made public.
Total expenditures in Sharjah's 2015 budget were forecast to be around 17.7 billion dirhams ($4.8 billion).
Sharjah's government budget is small relative to GDP, largely because the UAE federal budget covers a large share of public services in the emirate.

Any sukuk issue would be only its second ever offering after it sold a $750 million 10-year Islamic bond in 2014. The deal attracted significant interest from investors, who pledged orders worth 10 times its final size.
(Reuters / 05 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Summit to build sustainable and responsible finance ecosystem in emerging markets

Both ecosystems share many common challenges (e.g. the need to mainstream) and similar traits (e.g. strong risk management). A $2 trillion industry, Islamic finance has a strong footprint in emerging markets and appears to have reached a turning point in its global recognition, presenting an ideal opportunity to boost its appeal beyond its usual consumers. In parallel, practitioners in responsible finance are trying to shed the industry's reputation as a "niche" one and face a credibility issue with conventional finance in developed markets.
Even as Islamic finance has been able to demonstrate an ability to profitably implement a values-based approach, it aspires to develop a more positive and impact-driven approach, given its existing harmonized exclusionary screening approach. This should enable the industry to create a robust value proposition that incorporates universal values-based impact, good governance and environmental sustainability.
Moving towards these common principles can benefit from approaches used in developed markets by responsible investment institutions. RFI Foundation Chairperson of its Board of Trustees, Professor Datuk Rifaat Abdel Karim, noted "by promoting the shared principles that underlie the motivations for responsible finance, Islamic finance can play an instrumental role in expanding it, particularly in the emerging markets where Islamic finance has developed its deepest roots."
Prof. Datuk Abdel Karim continued, "Malaysia represents a particularly instructive case where regulatory bodies have supported convergence between Islamic finance and traditional responsible finance towards equitable, inclusive and sustainable economic development."
The Summit will focus on identifying ways that the industry, regulators, and other stakeholders can increase the footprint of responsible finance in emerging markets and make Islamic finance better integrated within the global responsible finance industry.
The Securities Commission's (SC) new Sukuk regulatory framework paved the way for the world first issuance of an SRI Sukūk by Khazanah Nasional, the sovereign investment arm of the Malaysian government, to fund educational investments with a structure that lowers finance cost if certain impact metrics are achieved. 
"Developing both global and domestic responsible finance markets that help investors integrate environmental, social and governance factors are crucial for expanding responsible finance in emerging markets," said Blake Goud, the CEO of RFI Foundation.
He continued, "I believe that Islamic finance has an important role--through capital markets, banking, insurance--in supporting inclusive economic development and Malaysia's efforts demonstrate how to make responsible finance industry more inclusive and globally integrated."
The Responsible Finance Summit will take place at Sasana Kijang, a renowned center for knowledge and learning excellence established by Bank Negara Malaysia.
(C P I Financial / 07 January 2015)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Wednesday, 6 January 2016

Prospects of Islamic banking in Pakistan

LONDON: 
A hallmark of Islamic banking and finance in 2015 has been the resilience of Islamic retail banks in the Gulf Cooperation Council (GCC) countries in the wake of historically low oil prices.

The year has proven to be a testing period for the global Islamic financial services industry, with the gradual exit of the likes of Islamic Bank of Asia in Singapore and the visible diminishing enthusiasm in Islamic banking and finance of global banks.
Pakistan ranks third in Islamic finance awards
Furthermore, Islamic asset management industry has also been slow in attracting new players from the western world. While the likes of Amana Growth Fund managed by Saturna Capital and Shariah-compliant funds by Azzad Asset Management have continued to excel, new players like Arabesque Asset Management, despite having some of the most impressive investment philosophies and methodologies, have yet to make a mark.
SEDCO Capital is another success story. It has shown great commitment to offer Shariah compliant funds with social responsibility in the heart of its investment philosophy.
However, other socially responsible Shariah compliant funds have not been as successful as the ones mentioned. For example, F&C Responsible Shariah Global Equity Fund’s assets under management (AUM) have shrunk from over $50 million in 2014 to $4.5 million at the end of October 2015.
There is some anecdotal evidence that sensitive investors prefer dealing with fund managers who manage only Shariah compliant funds and portfolios. Conventional fund managers managing compliant funds are fast going out of favour of Islamic investors. With this backdrop, Islamic asset management industry is poised for growth in Pakistan, where Islamic financial institutions adhere to Shariah standards more religiously than in many other countries.
This is consistent with what has for long happened in Islamic retail banking, which is dominated by full-fledged Islamic banks. Conventional banks offering Islamic financial services through dedicated Islamic branches or Islamic windows only feature marginally in Islamic retail banking.
There are certain exceptions to this general observation.
The likes of ADCB in the UAE and Bank Alfalah in Pakistan operate vibrant Islamic windows and close sources suggest that these banks are preparing for full-fledged subsidiary Islamic banks.
MCB Bank in Pakistan has already received a licence for full-fledged subsidiary Islamic banks and is in fact preparing for its full launch in 2016. On December 16, 2015, the board of directors of MCB Bank Limited approved the sale of the bank’s entire Islamic banking operation to its wholly-owned subsidiary MCB Islamic Bank Limited (MCBIBL) for Rs7.946 billion. The bank’s extraordinary general meeting to approve the transaction is scheduled for 8 January 2016.
While the global Islamic financial services industry continued to grow, it is the second consecutive year of single digit growth – 7.3% in 2015 – as opposed to 9.3% in the previous year. In fact, Islamic banking and finance has grown with a declining rate since 2013 when it grew by only 12.3%, compared with the 2012’s growth of 20.2%.
In this context, predictions by some industry observers and consultancy firms of the estimated size of the industry to reach $3.5 trillion seem to be exaggerated.
The Global Islamic Finance Report (GIFR) 2015 predicted that Islamic financial assets would reach $5.3 trillion by the end of 2020. However, in expectation of further slowdown in the growth of Islamic financial assets in the wake of low oil prices, continued social disorder and political conflict in some of the key IBF markets, Edbiz Consulting, the publisher of the report, has decided to revise future size estimates.
Situation in Pakistan
In Pakistan, however, Islamic banking has continued to grow, with share of Islamic banking assets in the national banking sector having grown to 11%. The industry is poised for further growth, as the fundamentals are right.
The State Bank of Pakistan, which commissioned Edbiz Consulting to conduct a survey ‘Knowledge, attitude and practices of Islamic banking in Pakistan’ in 2014, has confirmed time and again that there is an overwhelming and evenly distributed demand in the urban and rural areas of the country for Islamic banking.
Pakistan slips in WEF competitiveness rankings
According to Edbiz Consulting, the demand for Islamic banking is as high as 95% among the households at the retail level. “Demand stands at 73% among the businessmen,” according to the SBP survey, which is based on 9,000 households nationwide and includes banked and non-banked customers, and 1,000 corporates.
(The Express Tribune / 28 December 2015)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Egypt takaful industry set for 20% growth in 2016

Islamic insurance has been gaining ground in Egypt as customers seek out sharia-compliant products.

The takaful industry in Egypt is expected to growth around 20% in 2016 as more players enter the market to meet robust demand for Islamic insurance products and services, the chairman of the country's insurance watchdog said.
Abdel-Raouf Kotb, chairman of the Insurance Federation of Egypt (IFE), said that growth has also been fueled by the introduction of new products to meet customer needs, such as insurance against risks from political violence as well as credit insurance, which had proven popular especially after local banks expanded their lending policies.
"The micro insurance instrument is expected to be issued soon to insure the production tools of lower income segments against theft and fire. It also aims to bridge the micro enterprises funding gap in Egypt," Kotb told Zawya.
Takaful insurance companies accounted for 12% of Egypt's insurance market during the period from January to August 2015, compared with a share of 8.75% for the whole of 2014, according to a report issued by the Egyptian Financial Supervisory Authority ( EFSA ) last November.
EFSA said that premiums of new and existing life takaful insurance certificates rose 38.7% to USD 1 billion at the end of October 2015, compared with USD 900 million a year earlier. New and renewed issues of property insurance witnessed slight growth of 1.1% during the period to reach USD 639 million.
Kotb said the number of takaful companies in Egypt has risen to nine with the entry of Emirate Egyptian Takaful Life Insurance Co., a subsidiary of SALAMA (Islamic Arab Insurance Company), last year.
"Growth in the takaful insurance sector is due to the acceptance it enjoys from large segments of clients looking for products that comply with the rules of Shariah, as well as from the Islamic finance sector's expansion in Egypt."
"Premiums of takaful insurance on properties amounted to USD 62 million as of the end of June 2015, which represents about 15.4% of the total insurance premiums worth around USD 385 million during the same period," said Kotb, who is also managing director of Egyptian Saudi Insurance Home (ESIH).
MARKET EXPANSION
Kotb said the ESIH has been strengthening its financial position in anticipation of the market's expansion by raising its capital to EGP 120 million (USD 15.3 million) after a recent injection of EGP 20 million.
"The premiums of ESIH stood at EGP 190 million in 2015, registering an increase of 4% compared with the year before, which was EGP 182 million. The company is targeting a growth of 13% in its direct premiums in 2016, which amounts to EGP 215 million," he said.
ESIH's total investment portfolio grew 11.6% to EGP 432 million in 2015, up from EGP 387 million by the end of June 2014.
Established in 2003, ESIH is the first takaful insurance company in Egypt and is backed by Gulf Arab investors, with contributions from Saudi and Emirati investors in the company estimated at 86.5%.
According to the Egyptian Financial Supervisory Authority , overall investments of insurance companies and cooperative insurance societies amounted to USD 7 billion in 2015 distributed across various investment channels, namely fixed bank deposits (26.1%), treasury bonds and government securities (23.8%), securities for sale (18.2%) and loans against insurance documents (1.3%).
(Zawya / 05 January 2015)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Tuesday, 5 January 2016

Islamic finances face massive demand boom in Africa

Africa is expected to see a massive population boom, many of whom will grow up Islamic. As such, demand for Islamic products and services on the continent are expected to rise in the coming years. Financing projects through Islamic financial instruments has massive potential within the African region. One such instrument is sukuk, which is a form of bond between the issuer and issuee, whereby risks are shared, while no interest is charged on the issued amount. This is beneficial to projects that require long term financing.

The ‘Islamic economy’ refers to a wide range of commercial activities and geographies that span the world. Islamic derived Sharia-compliant bonds, halal food, travel and fashion all make up components of the wider global market that spans from Niger to the financial centres of Kuala Lumpur, which was valued at $3.6 trillion in 2013. The Islamic finance side of the equation was in 2014 valued at $1.8 trillion by BearingPoint, and is project to grow to $3 trillion by 2018.

Recent research by the Economist Intelligence Unit (EIU), a consultancy that provides business analysis for decision making, concerns itself with the value of Islamic financial propositions for both the Islamic and non-Islamic players in the Sub-Sahara African region. The EIU research report, titled ‘Mapping Africa’s Islamic economy’, was commissioned by the Dubai Chamber and used desk research and interviews with experts as its basis.

(Consultansy.UK / 04 January 2015)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

RAM Ratings reaffirms AA3/Stable rating of BGSM Management’s Sukuk for 2016

"Despite heightened competition, Maxis’ restructuring efforts and new product offerings are beginning to bear some fruits in its last three financial quarters ending September 2015. Maxis has regained its leadership in terms of subscribers base in the beginning of this year with 35.2 per cent of the total 37 million mobile subscribers as at end-September 2015. Maxis is also the largest mobile operator by revenue and profitability, commanding 37.5 per cent of the total RM17.14 billion of total revenue registered by incumbents and 41.1 per cent of cumulative MYR 7.71 billion of operating profit before depreciation, interest and tax (OPBDIT) for 9M 2015. Further, Maxis maintained its sturdy cashflow-generating ability, underpinned by its strong profitability, with an OPBDIT margin of 48 per cent in 9M FY 2015 – the highest among local peers.
"Given that the cellular telephony sector is saturated, with a mobile penetration rate of 144.8 per cent (end-June 2015), local telcos are expected to face continuous decelerating subscriber growth, increasing price competition and heavier spending on capex that could further compress their margins. Nonetheless, the mobile-broadband segment still has ample room for growth, in line with the current voice-to-data shift underscored by still-low household and population broadband penetration rates of 70.2 per cent and 68.3 per cent respectively.
"While Maxis had lifted its performance and market position in 2015, the sustainability of such progress remains to be seen, in view of the heightened competition in the sector. Going forward, Maxis will continue to prioritise capex which could reduce dividend payouts. We envisage BGSM Management (at group level) to register strong funds from operations debt coverage of 0.23-0.27 times between 2016 and 2018."

(C P I Financial / 03 January 2015)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Monday, 4 January 2016

RAM Ratings reaffirms AAA(fg) rating of Mydin’s Sukuk

Excluding the financial guarantee, Mydin Holdings’ stand-alone credit profile reflects its weak financial profile and the loss-making positions of its KR1MSAM’s Groceria and mall segments. The Group is also exposed to execution and construction risks in relation to its aggressive expansion, and the competitive environment of the local mass grocery retail sector.
On the other hand, Mydin Holdings credit profile is supported by its position as one of the largest locally owned grocery retailers, and as the only prominent player across all retail formats (i.e. hypermarket, emporium, mini-market). The Group has built an extensive presence, mainly in Peninsular Malaysia, with 272 outlets as at end-October 2015. The Group has also established a strong following among its targeted low-to-middle-income customers and carved a niche among Muslim consumers, by offering fully halal products and an array of goods manufactured by local players not typically carried by its foreign-owned competitors.
Notably, Mydin Holdings’ pre-tax profit doubled to MYR 29.37 million for FY Mar 2015 after a weak showing in the previous year (FY Mar 2014: MYR 14.40 million), driven by the better showing of its emporiums, mini markets and KR1M. The improvement of its mini-market and emporium segments were due the closure of unprofitable outlets, reduction in operating expenses following cost cutting efforts as well as better stock replenishment after rectifying its logistics and warehousing issues. Meanwhile, losses from KR1M narrowed, supported by subsidies. However, we note that the Group’s new mall and its venture into the premium-retail segment (via SAM’s Groceria) recorded increased losses in FY Mar 2015 amid poor performance of its new outlets.
In line with its expansion plans, Mydin Holdings’ borrowings had increased year-on-year from MYR 566.97 million to MYR 729.15 million as at end-FY Mar 2015. Correspondingly, its gearing ratio weakened to 1.47 times from 1.16 times. Including its operating lease commitments, Mydin Holdings’ adjusted gearing ratio stood at 2.60 times as at end-March 2015.
Looking ahead, Mydin Holdings remained focus on expanding in the hypermarket segment. “Factoring the required borrowings to fund its expansion, Mydin Holdings’ adjusted gearing is expected to stay elevated at about 2.5-2.8 times over the next few years,” says Kevin Lim, RAM’s Head of Consumer and Industrial Ratings. We remain concerned on the associated long gestation period for its new hypermarkets and the potential negative impact on its financial profile. “Mydin Holdings’ funds from operations debt cover is envisaged to stay depressed at around 0.1 times due to additional debt to fund expansion,” adds Lim.
(C P I Financial / 03 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

WGC draft on gold standard for Islamic finance

The World Gold Council is exploring the creation of a Shariah Standard on Gold, which will provide guidance from the Shariah perspective on the usage of gold in financial and investment transactions for Islamic financial institutions and participants.

The Standard also aims to increase transparency and harmonisation regarding the use of gold in various market practices. A draft of the Standard has been prepared for the Council by Amanie Advisors, a DIFC-based consultancy and training agency specializing in Islamic finance.

As the Islamic financial services market grows in size and importance, so does the need for a greater understanding of the intricate matters of Islamic financial services and the application of Shariah guidance. The Islamic financial services industry is also witnessing greater implementation of internationally recognised and standardised Islamic finnce guidance.

The World Gold Council is calling for interested parties active in Islamic financial services to submit their responses to the development of a Shariah Standard on Gold. The council says that it is vital for organisations active in Islamic financial services to play a role in the development of the Standard.

The council wants to create a Standard that meets the requirements of all active participants in the market. The Standard will enable organisations to work more efficiently in creating Shariah compliant gold products, it will enhance access to gold in the Islamic world and it will help to address the liquidity management issues currently facing the industry.

The deadline for feedback has been extended to 31st January 2016 due to requests for more time from industry participants. An Arabic version of the Standard will be available shortly, the council said on its website.


(Menafn.Com / 03 January 2016)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com