Latest from GIFC

Monday, 21 April 2014

Islamic finance & management events in Kuala Lumpur Malaysia in 2014

Date: 18-19 March 2014
Event: KL Conference on Islamic Wealth Management & Financial Planning
Event site:

Date: 22-23 April 2014
Event: KL Conference on Islamic Finance
Event site:

Date: 20-21 May 2014
Event: KL Conference on Shariah & Legal Aspects of Islamic Finance
Event site:

To register or reserve a seat online, please go to:

Organizer: Alfalah Consulting

Sukuk market dominated by local issuers

Dubai:Sukuk markets across the world operates as a collection of local markets as truly global issuance are relatively low according to data from Standard & Poor’s (S&P).

Over the past 10 years, local sukuk issuance in Malaysia and the countries in the Gulf Cooperation Council (GCC) region have helped fuel impressive growth in domestic sukuk issuance.
But out of the $117 billion in sukuk issued in 2013, only 16 per cent was truly international — that is, listed on major exchanges and generally issued in hard currencies.
“Most international issuances to date have originated in Malaysia or the GCC. Since 2001, S&P has seen only about 20 international sukuk from issuers domiciled outside these countries, for a total amount of around $10 billion,” said Mohammad Damak, an analyst with S&P.
Most international sukuk are listed on one or more of the international exchanges such as Irish Stock Exchange, Nasdaq Dubai, Singapore Stock Exchange, Bursa Malaysia, London Stock Exchange. If a sukuk is listed on a local/regional stock exchange, Standard & Poor’s Ratings Services classifies it as international if it is issued in foreign currency.
More than 40 per cent of worldwide issuance in 2013 was short-term sukuk issued in ringgit by just one issuer — the Central Bank of Malaysia. Most international issuances to date have originated from Malaysia or the GCC.
Despite the relatively low number of international sukuk issues interest from issuers outside these traditional markets has increased, chiefly because Sharia-compliance attracts deep-pocketed Middle Eastern and Asian investors.
“We understand that about half of sukuk investors invest in such instruments for religious reasons. We also estimate that about 60 per cent of investors in sukuk issued by entities domiciled outside the GCC and Malaysia were from the Middle East and Asia,” Damak said.
Data shows that in the case of sukuk issues from entities domiciled outside the GCC and Malaysia, a high proportion of investors for such international sukuk came from the Middle East and Asia. Of these investors 36 per cent were from the Middle East and 22 per cent from Asia. The remaining investors were mainly from Europe (16.8 per cent) or the US (12.3 per cent).
Sukuk are generally more expensive to issue than conventional bonds because they are priced at a premium. However, this premium does not seem to have acted as a serious brake on market development. In addition, the costs attached to structuring sukuk seem to us to be of secondary importance to large issuers.
We understand that a few issuers, particularly in the corporate or project finance space in the Gulf, have recently raised sukuk at a cost below that required to issue comparable conventional bonds. In our view, the reduced cost was underpinned by very strong demand for sukuk in a region where the amount issued remains small.
Yields on sukuk and conventional bonds with similar characteristics remain very strongly correlated, as shown by the synchronised moves of the yields on S&P Dow Jones Mena bonds and sukuk indices.
(Gulf News.Com / 20 April 2014)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

BSP in talks with Malaysia counterpart to craft Islamic banking framework for Philippines

Malaysia, home to the one of the world’s largest Muslim populations, has expressed interest in helping develop the Islamic banking industry in the Philippines, the Department of Finance said Sunday.

Finance Undersecretary Jose Emmanuel Reverente said the Bangko Sentral ng Pilipinas has been holding talks with Bank Negara, Malaysia’s central bank, regarding the creation of a framework for Islamic banking in the country.

"There has been strong interest from Malaysia in terms of assisting us develop a strong Islamic banking framework… We are working closely with them," he said.

In a forum held last March, BSP Governor Amando Tetangco Jr. lamented the scarcity of Islamic banks in the Philippines, particularly in the Autonomous Region in Muslim Mindanao (ARMM), despite the vast business opportunities available in the region.

At present, only 20 banks operate across five provinces in ARMM, with Al-Amanah bank being the only Islamic financial institution. The bank is a subsidiary of the Development Bank of the Philippines.

Malaysia, meanwhile, has 16 Islamic banks.

Reverente said the growth of Islamic banking industry in the Philippines has been stunted by the absence of a framework to guide the creation of laws that recognize the particular manner by which Muslims transact and do business.

Under traditional Islamic banking, loans to clients or customers must not carry interests. Because of this condition, Islamic banks in the Philippines serve more as an equity partner than a deposit-taking and lending institution, Reverente said.

This, in turn, puts the banks at a disadvantage when it comes to fulfilling tax obligations, he said.

The government earlier said it hopes to develop a market for the Islamic banking industry in preparation for the ASEAN economic integration in 2015.

(GMA News Online / 20 April 2014)
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Sunday, 20 April 2014

Kazakhstan and Bahrain to promote Islamic banking in Kazakhstan

Kazakhstan and Bahrain will be working to promote Islamic banking in Kazakhstan, reports, citing President Nazarbayev’s official website.

“The two sides have expressed their intention to promote Islamic banking in Kazakhstan. We are interested in Bahrain’s practices in this realm as the country is a major center of Islamic finances”, President Nazarbayev said following his talks with King of Bahrain Sheikh Hamad bin Isa bin Salman Al-Khalifa in Astana April 14.
The two sides condemned terrorism and extremism in all its manifestations, called to strengthen measures to counteract transnational and organized crime, illicit turnover of narcotic drugs and weapons, as well as to counteract other types of crimes posing threats to the global peace and stability.
Kazakhstan and Bahrain have agreed to place a priority emphasis on cooperation in investments, trade, agriculture, banking, and to further ties in education, culture and science. They have agreed to encourage interaction between universities and culture entities and facilitate exchange of students.

(Tengkri News / 15 April 2014)
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Global sukuk market down by 15.2 pcnt in 1Q14 - report

KUWAIT, April 18 (KUNA) -- The international sukuk market saw a modest volume of USD 31.1 billion in new sukuk issuances in the first quarter of 2014, according to a newly released report "Global Sukuk Report 1Q2014" by Kuwait Finance House Research Limited (KFHR).

This volume represents a drop of 15.2 percent as compared to the USD 36.73 billion in issuances during 4Q13 and 9.82 percent short of the USD 34.53 billion worth of issuances in 1Q13, it said.

The drop in issuance volume stems from a noteworthy slowdown in the GCC sukuk issuances in 1Q14, particularly in the month of March when the only GCC sukuks issued were the short-term liquidity management sukuks by the Central Bank of Bahrain, it said.

The volume of sukuk issuances in the GCC fell by 12.5 percent in 1Q14 as compared to the volume in 1Q13. Meanwhile, the commencement of tapering by the US Federal Reserve in its quantitative easing (QE) programme since January 2014 is another critical factor behind the decline in 1Q14's issuance volume, the report added.

The US Fed's tapering has led to higher funding costs for issuers, particularly in emerging markets, and this has potentially kept the issuers on hold to observe the market first.

Consistent with the trend over past several quarters, the primary sukuk market was led by sovereign and quasi-sovereign issuers who collectively accounted for 81 percent of the global primary sukuk market issuances in 1Q14.

Notably, the sovereign issuers accounted for 68.6 percent or USD 21.3 billion of the total issuances in 1Q14 and this is the highest absolute volume for the sovereign sector since 3Q12 when sovereign issuers had generated USD 25.6 billion in raised proceeds, the KFH report noted.

The corporate sukuk issuances share in 1Q14 declined to USD 5.7 billion which represents a 29.8 percent decrease in comparison to USD 8.1 billion volume during 1Q13 and a 57.1 percent decrease in comparison to the record USD 13.29 billion volume during 4Q13.

Among the notable jurisdictions issuing sukuk in 1Q14 included Maldives as a debutant issuer in the global sukuk market with an inaugural 10-year corporate sukuk issuance worth USD 3.9 million, it added.

(Kuwait News Agency / 18 April 2014)
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Saturday, 19 April 2014

Dubai Islamic Bank records Rs 211 million profit before tax

The Board of Directors of Dubai Islamic Bank Pakistan Limited (DIBPL) recently held a meeting to approve its financial statements for the year ended December 31, 2013. DIBPL is a fully owned subsidiary of Dubai Islamic Bank UAE, the world's first Islamic Bank. 

The year 2013 marked numerous achievements for DIBPL. On the financial side, the bank reported a year-end profit before provisioning of PKR 668 million and due to provisioning of PKR 456 million against non-performing Islamic Financing assets the bank now has a profit before tax of PKR 211 million. Furthermore, a 27 percent deposit growth was achieved in comparison to 2012, taking total deposits to PKR 68 billion in 2013. On the asset side, DIBPL's asset base rose by 26 percent in contrast to 2012 increasing the asset base to PKR 80 billion in 2013. The bank's investments grew substantially by 17 percent over the year, taking total investments to PKR 25 billion. 

From only 36 locations (36 branches) in October 2010, today DIBPL stands at 150 locations (125 branches and 25 branchless banking booths) in 40 cities across Pakistan. The bank added over 40,000 more customers in 2013, taking full customer base to over 140,000. As per the permission of State Bank of Pakistan, the bank is now to be considered MCR compliant. DIBPL enjoys a short-term credit rating of "A-1" and long-term credit rating of "A" with a "positive" outlook, indicating the bank's robust position in the industry. The bank continues to reaffirm its commitment to Pakistan with new branches and absolutely Halal and Sharia compliant new products and services. 

DIBPL intends to keep the momentum going for 2014 as well, aiming to take the branch network to 175 branches along with 50 branchless banking booths. This would enable an overall footprint of 225 outlets in 50 cities nation-wide. DIBPL continues to strive and expand its sphere of world class banking expertise in Retail, Corporate, Trade and Investment Banking services across Pakistan. 

The bank's endeavour since inception has been to provide a variety of unique and Sharia compliant products and services to all customers. In this respect, DIBPL has had first-mover advantage in a variety of banking services such as Banca Takaful, Branchless Banking and Cash Management Services. DIBPL is the first Islamic bank in Pakistan to offer Priority and Platinum Banking and the most extensive and innovative portfolio of Alternate Distribution Channels (ADCs) which includes VISA ATM/Debit Card, Internet Banking, SMS Banking, Phone Banking, Mobile Internet Banking, InterBank Fund Transfer and over 65 ATMs and CDMs across Pakistan.

(Business Recorder / 18 April 2014)
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This Islamic bank wants to get Britain building

BRITAIN could become the first truly global Islamic finance centre if the government sets its mind to attracting infrastructure investment, according to Gatehouse Bank’s chairman.

The sector holds plenty of promise – Fahed Faisal Boodai estimates the industry is worth $1.5 trillion, and the sector is growing at around 20 per cent per year.
Chancellor George Osborne is raising £200m with a sharia-compliant bond, a sukuk, and is trying to encourage investors to move to London.
Gatehouse Bank expects this bond issue to show the extent of pent up demand in Britain. The bank alone expects to buy £30m to £40m of the sukuk, and predicts bids for the debt to run into the billions of pounds.
But one sukuk is not enough by itself to bring a flood of Islamic investment into the wider UK.
In part the problem is finding investment opportunities which meet stringent sharia standards. This requires the return on investment to be based on a hard, tangible asset – for instance, a rental property, or industrial machinery.
This should be perfect for the British government which wants to find private investors to pump cash into infrastructure and construction.
But constantly shifting political aims mean it is difficult for investors to have any certainty of the long-term income flows from big projects.
“The UK is in the lead – support from the government puts Britain at the forefront, it is very good relative to other governments,” Boodai told City A.M.
But more certainty is needed if the government wants to unlock Islamic investment into infrastructure on the grand scale needed.
“We could invest in toll roads, in highways, in power generation, but only if the dynamics are right.”
“I have been at the UK embassy in Kuwait and Bahrain where UK Trade and Investment and the UK ambassador talk about it, but it takes so long to happen. We need a more proactive approach with an action plan and deadlines set, and you will see that commitment coming.”
But even the uncertainty of Britain’s policies will not stop the sector’s sustained growth, Boodai predicts.
Historic instability in the Middle East is one factor – for example, Kuwaitis sent increasing amounts of money abroad after the Iraqi invasion of 1990 hit the country’s wealthy hard.
And recent turmoil has also had an effect, with Boodai noting the Arab Spring has pushed investment into London.
As a result the bank yesterday opened a new office in Mayfair, giving its wealthy clients a West End base.
It comes as big banks sell off or slim down their own private banking arms, which has given the boutiques a chance to take on new customers.
“Since the financial crisis our clients are more interested in wealth preservation, and they want to know what they are buying,” Boodai said.
“The clients used to get reports from the big banks without a real relationship. Now there is an opportunity for banks that go back to the basics.”
On the other hand, that direct input from investors can create more work and difficulties for the bank.
When overseas investors put their money in London they often see prime property and other assets in the capital as the safest place for their funds.
If Gatehouse wants to invest elsewhere – 90 per cent of its UK projects are outside London – that means it has to try harder to convince the cautious backers.
“They see London is a strong city to preserve wealth, even in times of distress,” he said.
“We are trying to educate investors to move outside of London, and there should be an increased focus on encouraging them to put investment where it is needed around the UK.”
That could explain part of the reason Boodai is so keen for the government to push on with infrastructure development – guaranteed income streams are a lot easier to sell to customers.
“It has got to have the support of the government, we have to know the source of the cash flow.
(City A.M / 10 April 2014)
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Friday, 18 April 2014

GCC takaful industry set to stay on the path

Dubai: The takaful industry in the Gulf Cooperation Council (GCC) countries will maintain its growth path in the next five years, but competition, operational issues and lack of qualified talent continue to pose challenges, experts told Gulf News on Monday.

Takaful, an Islamic alternative to conventional insurance, has been growing at a double-digit rate and global premiums are forecast to expand from $4 billion (Dh14.7 billion) in 2007 to $20 billion in 2017. As of 2010, takaful premiums accounted for nearly half (43 per cent) of the GCC region’s composite premiums, compared to 31 per cent nearly a decade ago, or in 2005.
Industry experts who attended the 9th Annual World Takaful Conference (WTC 2014) in Dubai on Monday said the profitability of takaful companies has been threatened not just by competition but by the lack of a uniform regulation that will allow them to operate across different markets. The industry also needs to invest in qualified professionals that will help drive the takaful business forward.
Takaful operators are likely to continue to struggle in the next few years, although some will look at alternative customer segments and explore merger options. There is, however, potential for growth, especially in the area of family takaful and medical insurance in major markets like the UAE and Oman.
Speaking on the sidelines of the conference, Gautam Datta, chief executive officer of Al Madina Takaful, said the uptake of takaful products is still low compared to conventional insurance, as operators struggle to compete for bigger market share.
“They’re trying to balance the return on equity with the competition, with the volume [among other issues],” Datta told Gulf News. “What is required is focus and broad vision. The biggest challenge is the operational aspect of making it work. And that is not just a challenge for takaful but for any new entrant in the market.”
However, Datta said, the industry will continue to record double-digit growth in the short term. “The GCC takaful premiums as of 2012 were roughly about $1.7 billion if I take Saudi Arabia out,” he said. “The CAGR has been in the region of about 10 to 12 per cent and I think that would be maintained, if not increased, in the next few years because of the growth in medical in the UAE and Oman.”
Christian Gregorowicz, chief executive officer of Nextcare, said that with a price-driven market like the UAE, takaful companies need to rethink their strategies, come up with new products and strengthen their customer service to stand out, and if not, sustain their business.
“The industry is on a challenging path because it’s been trying to establish itself as an alternative to conventional [insurance],” Gregorowicz told Gulf News. “It’s facing tough competition on growing its market share and on making its profitability comparable to conventional industry.
“There is price competition, especially in the UAE. At the end of the day, everything is about price.”
Globally, the takaful sector is forecast to grow by 16 per cent annually in the coming years. David McLean, chief executive of WTC, said the projection indicates a ‘slight deceleration’ when compared to the average 22 per cent growth rate that the industry achieved between 2007 and 2011.
“Though the industry has achieved significant market share in its key markets, including the Kingdom of Saudi Arabia, Malaysia, Bahrain and the UAE, the acquisition of market share has not necessarily translated into sustainable profitability levels in many instances,” he said. “Financial performance, return on equity and the quality of growth remain key challenges for takaful operators in many markets.”
(Business Gneral / 18 April 2014)
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Some rich people fail to pay Zakat, scholars claim

If rich Saudi citizens had paid their Zakat (alms) regularly, there would not be a single poor family in the Kingdom, according to a number of Muslim scholars.

They told Makkah daily on Wednesday that there would be no poverty with the payment of Zakat, which is one of the pillars of Islam.

They noted that the number of the poor was increasing worldwide because of the world financial crisis and because of the greediness of businessmen who are monopolizing goods and commodities.

They said many wealthy people were not willing to reveal the size of their wealth because they were investing their money in bourses and investment companies.

Quoting statistical reports, the scholars said if Zakat was collected regularly it would lead to a turnover of more than SR60 billion a year.

According to Islamic law, all Muslims should pay annually 2.5 percent of their savings exceeding the cash value of 85 grams of gold as Zakat.

Zakat is also levied on gold, livestock, agricultural crops and other income at rates defined by the Shariah.

"If our wealthy men paid their Zakat in full, we will not have a single poor man in our country. Rather there will be a surplus of cash," said Saad Al-Otaibi, a member of the Supreme Judicial Institute.

He called for using accurate mechanisms to collect Zakat and said it must not be left as an option for wealthy people.

Al-Otaibi said many rich Saudis do not only abstain from paying Zakat but they do not also participate in any charity projects.

"You will only read their names in the lists of the richest people in the country," he added.

Ahmed Al-Mourie, a professor of the origins of religion at Umm Al-Qura University, said he was surprised that rich people would not pay Zakat, which is obligatory in Islam. "Wealthy people are not paying Zakat because they are greedy and have no fear of Allah," he said.

Al-Mourie said Zakat is a God-given right to the poor, so they should not be deprived of this.

Ali Al-Hakami, member of the Saudi Supreme Council of Scholars, said Zakat should be distributed in the country in which it was collected and, therefore, should not be sent to the poor in other countries.

He, however, said it is only permissible in extreme circumstances to send Zakat money to a nearby country if there are no poor people in the country where it is collected.

Mohammed Al-Suhaili, member of the National Society for Human Rights (NSHR), said the lack of rain in some Arab and Muslim countries was a punishment from God because they do not pay Zakat.

(Saudi Gazette / 17 April 2014)
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Thursday, 17 April 2014

Oman: Maisarah set to provide new Takaful service to customers

Muscat: Maisarah Islamic Banking Services, the Islamic window of BankDhofar continues to take the lead in providing customers with Sharia compliant financial solutions and services. Its latest offering is the result of a recent tie-up with Al Madina Takaful to organise Takaful coverage for its valued customers.

Present at the signing ceremony were Abdul Hakeem Omar Al Ojaili, Acting CEO, BankDhofar, Sohail Niazi, Chief Islamic Banking Officer, Maisarah, Jamsheed Hamza, Head of Retail Banking, Maisarah and Saleh Nasser Al Riyami, Director of Al Madina Takaful and Gautam Datta, CEO of Al Madina Takaful, along with other representatives from both companies.

"Our newly forged partnership with Al Madina Takaful is bound to increase options for financial assistance and protection that are Sharia compliant and offer alternatives to conventional insurance.
We have taken the opportunity to expand our Sharia compliant product offerings and will work closely with our partners to ensure satisfaction of our customers," said Abdul Hakeem Omar Al Ojaili.

"We are proud to be in partnership with Al Madina Takaful to provide protectionsolutions to our customers under theTakaful model. This is in line with our commitment to provide a range of best financial solutions toour customers," commented Sohail Niazi.

Under the agreement, Al Madina Takaful will be offering motor Takaful, credit life Takaful, property Takaful and contractor all risk Takaful to Maisarah customers. The tie-up makes Maisarah one of the first few banks to provide a fully Sharia compliant coverage to customers with these banking products.

 Maisarah will be working closely with Al Madina Takaful, the first Takaful provider in the market to come out with innovative Sharia compliant products that exceed customer expectation.

Al Madina Takaful is the first Islamic Takaful provider in Oman. It is the new trade name and brand of Al Madina Insurance Company, following the latter's conversion to Sharia compliant insurance. As Oman's first providers of Takaful, the company offers a range of market-leading products and services to help individuals and businesses.

"We are proud to sign this partnership with Maisarah Islamic Banking Services, one of the pioneers in Islamic Banking in the country. Al Madina Takaful, being the first Takaful provider in the country, will work closely with the bank to provide best of class Takaful products and services to our mutual customers. We will also partner together in spreading awareness in the community on the principles and values of Sharia compliant financial services in Oman", said Saleh Nasser Al Riyami, Director of Al Madina Takaful. 

(Times Of Oman / 16 April 2014)
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Wednesday, 16 April 2014

Hong Kong to issue sukuk of up to $1 billion after summer

Hong Kong's government plans to issue as much as US$1 billion worth of Islamic bonds later this year, a spokesperson for its central bank said, suggesting the territory's debut sukuk issue might be larger than initially expected.

Lawmakers in Hong Kong passed a bill last month that will allow the AAA-rated government to issue sukuk for the first time. A report by the territory's Legislative Council indicated the size would be around $500 million.
But a spokesperson for the Hong Kong Monetary Authority, responding in an email on Tuesday to questions from Reuters, said the preliminary plan was for a U.S. dollar-denominated issue of at least $500 million and maybe as much as $1 billion.
"The sukuk is expected to be launched after the summer holidays," the spokesperson said; this would imply an issue as soon as September.
Details of the plan are subject to confirmation but the sukuk are expected to have a maturity of five years or below and use the ijara structure, a common sale and lease-back format in Islamic finance, the spokesperson added.
The sukuk, aimed at international institutional investors such as central banks, sovereign wealth funds, and pension and other funds, would use state-owned properties in commercial premises as their underlying assets. They would be listed in Hong Kong and some other major Islamic centers, the HKMA said.
A debut sukuk from Hong Kong would boost its Islamic finance credentials and help position the territory as a gateway between mainland China and investors in the Gulf and southeast Asia, the two main centers for Islamic finance.

Other conventional banking centers are also seeking to burnish their Islamic credentials with debut sovereign sukuk issues. Prime Minister David Cameron said last year that Britain intended to issue sukuk worth around 200 million pounds ($335 million), while Luxembourg envisages a roughly 200 million euro($275 million) issue.
(Reuters / 15 April 2014)
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Pakistan: Islamic banking is thriving steadily

Tuesday, April 15, 2014 - Karachi—Islamic Banking Industry in Pakistan is growing significantly fastest throughout the country with overwhelmingly positive response of the general public towards after awareness and acceptance of Sharia compliant financing and its utility for their domestic and commercial purposes. Acting Governor State Bank of Pakistan Ashraf Wathra stated this recently while chairing the meeting with CEO Publicity Channel Naeem Quershi and Organizer Mehmood Tareen, Islamic Finance Expo and Conference (IFEC-2014).

Islamic Banking industry starting from almost a scratch in 2001 has acquired over 10 percent share in the country’s banks branch system with over 1300 branches across the country, Wathra said. The industry is growing at an impressive rate of over 30 percent annually for last 5 years and prospects of further strengthening of this growth momentum in the near future are very bright. He said the education and awareness of Islamic banking is vital for its growth in the country, which is paving the way towards economic activities and financial inclusion of economy in the long run.

The misconceptions related to Islamic Banking are prevailing in the society, which should be addressed to expedite the growth of Sharia compliant financing among the people of different walk of lives, Governor added. The role of seminars and conferences on Islamic Banking is indispensable for expansion of Islamic Banks and penetration of their services among the society, Wathra further said. Acting Governor appreciated the holding of third Islamic Finance Exhibition and Conference (IFEC-2014) and organizers continuous efforts in promoting Islamic banking in business community. He assured his support and participation in the event as chief guest.

Deputy Governor SBP, Saeed Ahmad Khan, also appreciated efforts of organizing committee for its persistent efforts for creating awareness of Sharia-based financing in the country, assembling all stakeholders at one platform to discuss future growth plan of Islamic Banking Industry. The organizing committee also met separately CEOs and President of different Banks including Hussain Lawai of Summit Bank, Sirajuddin Aziz of Habib Metro Bank, Nauman Dar of President HBL, Shafqaat Ahmed of Bank Albaraka and S M Munir, Vice Chairman MCB and CEO TDAP. They assured the committee their fully participation and collaboration for promoting Islamic banking through successful organization of the seminar and conference.

(Pakistan Observer / 15 April 2014)
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Tuesday, 15 April 2014

Gulf Finance House Plans Sukuk Issue

MANAMA: Gulf Finance House (GFH), Bahrain-based Islamic investment bank, plans to issue a sukuk or arrange new debt facilities of up to $500 million, it was announced yesterday.

The funds raised will be used to restructure the current liabilities, develop projects and for acquisitions of new businesses.

The announcement follows ordinary and extraordinary general meetings of the bank yesterday, with the board getting authorisation from shareholders to determine the final structure of the sukuk or the debt facilities.

GFH chairman Dr Ahmed Al Mutawa presided over the meetings, which saw approval of the board of directors' report on business activities for last year and the annual audited financial statements.

"Last year, we reported a net profit of $6.3 million, reduced operating cost by 20 per cent and successfully restructured debt," Dr Al Mutawa said.

"We also effectively executed our investment strategy, closing a number of transactions, while simultaneously making strong advances on maximising the value of our existing portfolio of companies and projects including preparing for a number of exits for the bank and our investors this year.

"The sum of these actions has resulted in increased market confidence in the bank, value creation and new and exciting opportunities, which we intend to develop over the coming months," he said.

Additionally, the shareholders approved the appointment of eight new members to the board for three years including Dr Al Mutawa, Mosobah Al Mutairy, Salah Nourideen, Faisal Abdulla Fouad, Bashar Mohammed Almutawa, Yousef Al Ghanim, Hafedh Fakher Mohammed and Khalid Al Khazraji. The auditors and the Sharia supervisory board have been reappointed for the year.
(Gulf Daily News / 15 April 2014)
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Hong Kong, Malaysia Spread The Word On Islamic Finance

On April 14, the Hong Kong Monetary Authority (HKMA) and Bank Negara Malaysia (BNM) held a joint Islamic finance conference in Hong Kong, to raise the level of interest in sukuk as a viable financing and investment instrument amongst the business and financial community in Hong Kong and Mainland China.

The conference saw regulators and market leaders in the Islamic finance field discuss a wide range of issues, from the latest trends in the global sukuk market to business opportunities for Islamic finance in Hong Kong, the practical issues in structuring sukuk and the Islamic market's investment appetite.
In his opening remarks, Peter Pang, Deputy Chief Executive of the HKMA, said: "With the tax framework for sukuk in place, Hong Kong's financial platform is ready for sukuk issuance. We highly welcome local and overseas entities to make use of Hong Kong's platform to issue sukuk."

He confirmed that, "to play a lead-off role for this market, we are working closely with the Hong Kong Government to prepare for the inaugural issuance of Government sukuk under the Government Bond Program and, thereby, promote the further development of the sukuk market in Hong Kong. We very much appreciate the close partnership we have established with Malaysia in developing Islamic finance and look forward to more co-operation opportunities in the future."

Muhammad Ibrahim, BNM's Deputy Governor, added that "this inaugural conference is set to mark a significant step to enhance collaboration and deepen financial linkages in Islamic finance between Malaysia and Hong Kong. We look forward to sharing our Islamic finance marketplace with Hong Kong in terms of expertise in structuring, managing and distributing sukuk, as well as providing advice on legal and Shariah matters."

He emphasized the importance of adopting international standards and best practices in new markets, with a proper governance framework to facilitate the execution of transactions and instill investors' confidence in the industry. Potential areas of collaboration between Hong Kong and Malaysia will therefore include the dual listing of sukuk, leveraging on Malaysia's Shariah governance framework and arbitration platform.

The conference followed the first meeting of the private-sector led Joint Forum on Islamic Finance between Hong Kong and Malaysia held in December 2013. Its next meeting will be held in Kuala Lumpur in the second half of this year.

Hong Kong's tax framework for sukuk, compared with conventional bonds, went into operation in July 2013. Amendments have given tax and stamp duty relief for transactions underpinning the structure of sukuk products, which cannot involve the payment or receipt of interest, and might, otherwise, attract additional profits or property tax exposures, or stamp duty charges.

It has not been intended that Hong Kong should confer special tax favors on sukuk, but that financial instruments of similar economic substance should be afforded similar tax treatment. On the other hand, Malaysia, which has established itself as the major Islamic financial hub in the region, has gone beyond the provision of a level playing field, and has established tax exemptions for income derived from Islamic financial products and structures.

(Global Tax News / 15 April 2014)

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Monday, 14 April 2014

Post-election Turkey bond rally revives sukuk market

The post-election rally in Turkish bonds is drawing companies back to sukuk issuance after an 11-month absence. Following almost a year of market turmoil, it is going to cost them more.

Turkiye Finans Katilim Bankasi, the nation’s most profitable Islamic lender, hired banks to arrange investor meetings before the planned sale of dollar-denominated Islamic debt, two people familiar with the matter said on Wednesday. The yield on the company’s sukuk due May 2018 dropped 45 basis points since Prime Minister Recep Tayyip Erdogan’s victory at March 30 local elections. It remains more than 60 basis points higher since it was sold on April 24 last year.

“The timing of the new sukuk is linked to the outcome of the municipal election,” Apostolos Bantis, a credit analyst at Commerzbank AG in London, said in e-mailed comments on Wednesday. “Borrowing costs are not going to be below the pre-May 2013 levels. Issuers, although initially reluctant to accept higher yields, will have to compromise.”

Turkish assets, battered since May when anti-government protests erupted in Istanbul, are bouncing back after a corruption scandal targeting Erdogan became public in December, prompting foreign investors to dump $2.8bn of the nation’s debt in the first quarter. Demand at a sale of 2023 government Eurobonds on April 8 was six times that offered. The lira has strengthened 13% since touching a record-low of 2.39 per dollar on January 27.
The bank plans to sell $500mn of five-year dollar debt, executive vice president Ali Guney said in a phone interview from Istanbul on Wednesday.

“We had thought that if there was a positive mood post-local elections and a recovery in risk perception, we’d go to the market and that scenario came true,” Guney said. “We are expecting high demand.”

Turkiye Finans, which is 66% owned by Jeddah-based National Commercial Bank, raised $500mn last April, paying a rate of 3.95% on the five-year Islamic debt. It received $1.9bn in bids for the sale.

Turkish two-year government notes yielded 10.06%, down from 10.79% on March 28, the biggest drop among 21 emerging markets tracked by Bloomberg. The lira sank 1% on Wednesday to 2.1174 per dollar.

Turkiye Finans posted 237mn liras ($112mn) profit in the third quarter last year, the highest among four Islamic lenders in the nation, according to data published on the Participation Banks Association of Turkey’s website.
Turkish markets plunged on December 17, when the graft probe targeting the government became public. Erdogan responded by purging the police force and judiciary, accusing the opposition of treason and blocking access to Twitter and YouTube. The death of a 15 year-old protester on March 11 set off the largest anti- government rallies since Turks took to the streets in May to protest the redevelopment of Istanbul’s Gezi Park.
“I am struggling to think of any positive developments over the past year,” Doug Bitcon, a Dubai-based fund manager at Rasmala Investment Bank Ltd, said by e-mail on Wednesday. “Political risk is higher. Interest rates are higher, which will lead to a slowdown in growth, and one would expect higher non-performing loans in the financial sector.”

Islamic bond sales fell to $10.4bn in the first three months of the year, the poorest first-quarter performance since 2011, as slower growth in China cast doubt on the global economic recovery and crises from Turkey to Ukraine roiled developing-nation assets.

Damac Real Estate Development sold $650mn of five-year notes on April 2 at a profit rate of 4.97%. Saudi Electricity Co issued $2.5bn of sukuk on April 1 paying 4% on 10-year securities and 5.5% on 30- year bonds.
“The market is facing a dearth of sukuk issuance after a lull in the first quarter, especially a sovereign investment- grade issue,” Asad Khan, head of commodity and fixed-income asset management at Al Rajhi Capital in Riyadh, said by e-mail on Wednesday. Turkiye Finans “is an affiliate of a strong Saudi bank. We will see good demand for this issue,” he said.

(Gulf Times / 12 April 2014)
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