Latest from GIFC

Wednesday, 31 October 2007

National Bonds and Dubai Islamic Bank establish strategic partnership

National Bonds, the national savings scheme of the UAE, and Dubai Islamic Bank (DIB), entered into a strategic partnership via signing an agreement to expand the reach of marketing National Bonds. As per the agreement, DIB will now market National Bonds through its 45 local branches, making the saving scheme available to Dubai Islamic Bank customers within the UAE. A signing ceremony was held to mark the occasion on 31st October at Dubai Islamic Bank’s Head Office. The ceremony was attended by the Top Management of National Bonds and Dubai Islamic Bank. National Bonds is open to all nationalities. The partnership with Dubai Islamic Bank will increase the National Bonds network from more than 220 to more than 265 outlets in 2007.

Liberalized Saudi Market Augurs Well for Insurance

(MENAFN - Arab News) JEDDAH, 30 October 2007 � The Kingdom's newly liberalized insurance market has come under the spotlight at the 2nd Saudi Insurance Summit, which opened at the Jeddah Hilton yesterday.It is estimated that a market currently worth around $1.5 billion annually could soar to $8 billion within 10 years.Principles of Islamic insurance and Takaful structures are especially in focus at the summit being held at a time when the Kingdom's insurance industry is entering a new era of crucial importance, Ali A. Al-Subaihin, chairman of the summit, said in his opening remarks. "We see the impact of new insurance market regulations, licensing of new companies, floating of shares in the Saudi stock market, implementation of new compulsory insurance laws and increase of competition. And with these developments, a number of significant issues are arising," said Al-Subaihin, CEO of Tawuniya (formerly NCCI).Issues that are arising, according to him, are the impact of compulsory insurance laws, effect of the competitive environment on enhancing business practices, future of cooperative (Shariah-compliant) insurance and the main elements for setting the base for a strong and sophisticated insurance industry. The two-day summit is followed by a workshop tomorrow on bridging the insurance skills.More than 30 local, regional and international insurance and business experts and professionals are speaking or giving presentations over 20 sessions and four interactive panel discussions in the summit being held for the second year consecutively with the support of Jeddah Governor Prince Mishaal ibn Majed. The event is designed to tackle the current "hot topics" and present a realistic vision toward the future of the insurance industry in the Kingdom. Speakers said that the Takaful industry is growing rapidly worldwide with annual premiums already worth over $1.7 billion. Major international insurance companies including Allianz and Prudential are now entering the market, which already has dedicated Takaful companies. In a recent deal, Bank Aljazira has agreed to Prudential becoming the largest individual shareholder in a new venture hat will acquire the existing leader of the Saudi market � the Takaful Ta'awuni life insurance business of Bank Aljazira.The new Takaful Ta'awuni Life Insurance operation will be listed on the Saudi Stock Exchange (Tadawul). They are also undertaking a Saudi Arabian Monetary Agency licensing process with Prudential plc, their new joint venture partner for both the Kingdom and the Middle East-North Africa region. Allianz is also competing in the Saudi market through its joint venture with Banque Saudi Fransi, which was granted a license in December 2006 and Allianz Takaful was established this year in Bahrain. Allianz is also involved in Indonesia through Allianz Utama, its rapidly expanding subsidiary. "It is this most populous Muslim country that may in the long run offer the greatest potential for Takaful," a speaker said. Brad Bourland, chief economist, Jadwa Investment Company, explained how the ongoing macroeconomic conditions could impact the newly formed insurance companies and how to come to terms with the reality of being a publicly listed company in the Kingdom. "A healthy investment environment equates to a healthy insurance industry," he said. Development of medical malpractice insurance in the Kingdom in the context of the Shariah law and enactment of medical practitioners regulation was dealt with by Fahad A. Al-Hesni vice president, property and casualty, Tawuniya. There were also sessions on the emerging family Takaful market in the Kingdom with its opportunities and challenges and moving from minimum standards to best practice within the insurance industry. The opening up of the Kingdom's insurance sectors has injected hundreds of millions of dollars into the market with more to come through new company licensing and public offerings. All insurance companies operating in the Kingdom must obtain a license by March 2008 or cease operations. The capital requirements for gaining a license are $26.67 million for insurers and $53.33 million for reinsurers with an additional 10 percent statutory deposit. Companies are also obliged to float at least 25 percent of their shares on the Tadawul and meet other regulatory requirements before receiving a license. At present 18 companies have been licensed, with 24 more expecting to be granted approval. "The new laws have led many in the industry to forecast excellent growth in the non-life sector in the Kingdom with predictions of a $4 billion growth by 2009 being touted," said Deep Marwaha, senior conference manager of IIR Middle East, which has organized the summit. "Within this high growth market, the landscape is shifting dramatically,"

HSBC index tracks Islamic bonds

HSBC and the Dubai International Financial Exchange on Tuesday launched indices covering Middle Eastern bonds including Islamic bonds, or sukuk, that should boost the Gulf region as an international trading centre.
The HSBC/DIFX family of indices, covering more than 100 government and corporate securities, will include HSBC's first index tracking sukuk which should encourage the nascent secondary market in these securities.
It is a further indication of the growing maturity of capital markets in the Middle East, which have been underpinned by oil money that has boosted the Gulf economies and attracted investors from across the globe.
The creation of an index covering Islamic bonds in Dubai challenges London, Malaysia and Bahrain in the increasingly fierce race to become the world's leading centre for Islamic finance.
The Islamic Finance Information Service also released figures yesterday showing the strength of the Islamic bond market in spite of the summer credit crisis.
According to IFIS, the market grew threefold in the third quarter of this year - when many markets ground to a halt at the height of the credit crunch - with new issuance hitting $10.56bn compared with $3.48bn in the third quarter of 2006.
IFIS said the credit crunch did deter smaller issuers from launching bonds, with only 40 deals in the third quarter compared with 73 in the third quarter of 2006.
However, the size of the deals, which has pushed the market to an overall size of $92.8bn, according to IFIS, were much bigger as large issuing banks and companies pressed on with expansion and money-raising plans.
Firas Abi Ali, senior analyst at IFIS, said: "The oil money has kept the market going, although spreads are wider with issuers having to pay higher premiums to get bonds away."
The HSBC/DIFX indices are a vital development for the market as it will help attract conventional and Islamic investors to the region.
"Using our previous experience from the Asian Bond Index, we also want these indices to become the market standard," said Neil Foster, HSBC's head of global markets for the Middle East.
The DIFX is the largest platform for sukuk in the world, listing Islamic bonds worth almost $14bn.
To help grow Islamic finance further, both the DIFC and Bahrain are trying to standardise the industry's regulations.
The three indices and sub-indices will allow fund managers to value Middle Eastern debt holdings more accurately.
"The Middle East is now on the radar screen for investors and borrowers, but there are concerns about the perceived lack of liquidity and transparency in this market. These indexes will cover that missing link," said James Milligan, HSBC's head of fixed income trading in the Middle East. - (ET, 30 Oct 07)

Citi Islamic Investment Bank (CIB) appoints Usman Ahmed Chief Executive Officer

Citi announced the appointment of Usman Ahmed as Chief Executive Officer for Citi Islamic Investment Bank (CIIB) & Global Islamic Banking. Prior to this appointment, Usman was deputy CEO for Citi's Global Islamic Banking business since 2006, and has held various product and geographic coverage positions at Citi in London, Bahrain and Pakistan since joining the bank in 1996. Citi's Global Islamic Banking operations were established in 1981 in London, and in 1996 Citi became the first international financial institution to set up a separately capitalized Islamic Bank - the Citi Islamic Investment Bank. Since inception, Citi Islamic has player a pioneering and leading role in the development of Islamic Finance globally, having successfully arranged several billion dollars of Islamic transactions for issuers in the Middle East, Asia, Europe and Latin America. This includes the origination, structuring and distribution of numerous landmark Sukuk, syndications, project financings, Islamic advisory and investment products. Today, the bank is ranked as the leading bookrunner of international Islamic Finance transactions. Commenting on his new appointment, Usman said: 'I am delighted at the opportunity to lead the Citi Islamic franchise and look forward to a period of unprecedented growth in the industry and for Citi Islamic as we continue to innovate and offer Shari'a-compliant finance and investment solutions to our clients across the globe.' Mohammed Al-Shroogi, Managing Director for the Middle East, Chief Executive Officer for Citi in the UAE, and founding Chairman of the Citi Islamic Investment Bank, said: "Usman has built a solid team of Islamic Finance transactors to capitalize on opportunities in one of the fastest growing segments in the Middle East & Asia. We are proud to be a driving force behind the development of Islamic banking methods that meet the needs of diverse clientele worldwide." Citi has been in the Arab World for nearly 50 years and continues to view the region as critical to its global franchise. It is currently present in ten Arab countries including Egypt, UAE, Lebanon, Jordan, Tunisia, Morocco, Algeria, Bahrain, Qatar and Kuwait. - (AME, 31 Oct 07)
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Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

CIMB Islamic unfazed by foreign competition

PETALING JAYA: CIMB Islamic, which recently won the global award for Islamic Investment Bank of the Year, sees the emergence of foreign Islamic institutions in the country as a boon to its business.
Chief executive officer Badlisyah Abdul Ghani said competition from the foreign Islamic players was good as it helped keep the bank constantly on its toes and pushed it “to work better all the time''.
“The influx of foreign Islamic institutions does provide us with another competitive challenge but it does not add anything much to the already very competitive business environment that we are in.
“We see it more of a boon to us because it opens more opportunities to do business as the foreigners bring with them new ways of doing Islamic banking business,'' he told StarBiz in an interview. Badlisyah added the bank would strive to be a significant player and contributor to the development of the nascent industry.
On CIMB Islamic's expansion plans, he said the bank aspired to become the most valued Islamic universal bank in the world.
He said by virtue of being a member of the CIMB Group, the bank was already present in 12 countries, although the penetration of its Islamic banking and finance activities in these countries was still limited.
The bank plans to grow its business regionally by concentrating on South-East Asia as well as the Middle East.
Badlisyah said the regional expansion would be carried out concurrently with the strengthening of its position in the Malaysian Islamic financial market, particularly in the consumer banking sector.
“CIMB Islamic has been recognised as the world leader in Islamic investment banking since its inception in 2002. Now, we want to bring that expertise into the consumer banking sector so that we can serve our clients better.”
The award, which was given by the Banker magazine, a member publication of Britain's Financial Times Group, was the second consecutive one won by CIMB Islamic.
On the award, Badlisyah said: “It is a testimony of our success on two counts. First, this sees us maintaining our global leadership in Islamic investment banking solutions and second, successfully evolving into a full-fledged global Islamic universal banking franchise.”
He said CIMB Islamic was now a global force in the entire spectrum of banking and finance and not just confined to capital market activities.
On a personal note, Badlisyah said he was gratified to see that the group's efforts to put in place a strong franchise in Islamic investment banking in CIMB Group had been recognised.
“We are the sole Malaysian bank to have won this award and it serves to remind us that the best Islamic banking comes from here.
“It's very nice to have awards such as this from international outfits such as the Banker.
“We need to have more such acknowledgements from Malaysians and we hope this award also serves to remind them that the best Islamic bank comes from their own homeland.”
Editors of the Banker said CIMB Islamic was selected as it opened up a wide array of opportunities for its clients in the world’s diverse and evolving Islamic financial market via innovative products and services.
They also commended CIMB Islamic for the range of deals it had undertaken, given the maturity of its investment banking and capital markets business.
The award honours CIMB Islamic's achievements in the Islamic bond (sukuk) sector, Islamic equity markets and its role in Islamic asset management.
The bank’s dynamic expansion into Islamic derivatives and structured investment products were also considered for its selection.

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant/Speaker/Motivator : www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Swiss Entities Told To Utilise Islamic Banking

ZURICH (Switzerland), Oct 31 (Bernama) -- Zurich, with its distinction of being the world's premier financial centre, has been urged to leverage on Malaysia's well-developed Islamic financial services.International Trade and Industry Minister Datuk Seri Rafidah Aziz said Malaysia's Islamic financial services could provide Swiss entities the linkages through Islamic financing to support the increasing trade and investment flows between the Gulf States and the rest of the world.She told a seminar on business opportunities in Malaysia here Wednesday that Swiss entities could use Malaysian banks as a channel to access Islamic banking and financial markets in Asia and other parts of the world, especially in West Asia.They also could set up representative offices in Malaysia to tap one of the fastest growing financial service markets in the region, she said.Besides Islamic financing, Rafidah said Swiss companies should also take advantage of the Labuan International Offshore Financial Centre (IOFC) facilities to promote a range of quality offshore products and services.The services include banking, finance, fund management, insurance, capital market, offshore trust and leasing.A total of 5,800 offshore companies from over 80 countries are currently operating in Labuan, including 58 banks, 131 insurers, 21 trust companies and 33 capital markets.Rafidah said companies located in the IOFC were able to benefit from facilities and incentives offered such as competitive cost of operations, flexible tax structure and no exchange control on business profits, dividends, interests and royalty payments.In addition, she said, the financial institutions could also conduct non-ringgit Islamic financial activities and use the benefits under the prevailing tax and operational incentives provided in Labuan.A total of 46 Swiss companies have so far taken advantage of the facilities offered in the Labuan IOFC, including two banks, three insurance and insurance-related companies, 39 offshore trading companies and a fund manager.These companies include Credit Suisse, Labuan Branch; UBS AG, Labuan Branch; Haakon (Asia) Ltd; Swiss National Insurance Company, Labuan Branch; and Converium Ltd's Regional Reinsurance Branch Office.

Malaysia's Sukuk Makes Up 54 Pct Of Global Sukuk Mart

DUBAI, Oct 30 (Bernama) -- Malaysian ringgit denominated sukuk made up 54 percent or US$20.1 billion (US$1 = RM3.34) of the global sukuk market during the third quarter of this year, Emirates News Agency (WAM) reported, quoting the Islamic Finance Information Service (IFIS) report.The report stated that the global sukuk market maintained its climbing pattern during the quarter, with total sukuk issuance aggregating US$37.3 billion, a notable growth of 110.7 percent over the previous year.It also showed that sukuk listed on the Dubai International Financial Exchange (DIFX) and London Stock Exchange (LSE) amounted to US$16.14 billon and US$7.2 billion, respectively.The IFIS is the first professional strength information service designed to meet the unique requirements of Syariah compliant finance industry participants.HSBC Amanah topped the Overall (International Domestic) IFIS Bookrunners Sukuk League Table with total Sukuk issuance of US$3 billion as well as the International Sukuk Bookrunners Table valued at US$ 2.78 billion.Meanwhile, CIMB Islamic led the IFIS Domestic Bond Bookrunners League Table with Sukuk issuance aggregating US$1.97 billion.According to Firas Abi Ali, IFIS Senior Analyst, analysts at Fitch and UBS confirmed that some players in the Gulf Cooperation Council (GCC) who were planning to announce deals are waiting until next year.However, the analysts added that the major and biggest issuers in the region are not as affected by the sub-prime crisis due to the size of the issuer, the high liquidity in the market and the Government backing offered to many issuers.The IFIS has tracked over US$92.22 billion worth of Sukuk worldwide from 2000 todate.The IFIS report also highlighted Thailand's plan to issue its landmark Sovereign Sukuk issuance in 2008 to finance infrastructure projects which include electricity, road extensions and mass transportation projects in the Kingdom.According to WAM, the IFIS report said that the Thai Government is likely to mandate a Malaysian bank as a financial adviser to help structure the Sukuk.

New Zealand Lender offers mortgages for Muslims


A Christchurch mortgage lender has received a fatwa or Islamic religious ruling allowing it to offer specialist home ownership packages to the New Zealand Muslim community.
Louise Ledger – the director of independent lender Moorhouse Mortgages – said the ruling had been a first in terms of a "halal" package for the New Zealand market.
The structure of the loans meant Muslims could avoid having to make "forbidden" interest payments via the package's technical structure.
The Federation of Islamic Associations of New Zealand had run a major conference over the weekend in Auckland and had given Moorhouse Mortgages the OK or fatwa to offer the Manzil Islamic home ownership package.
Moorhouse Mortgages would now target 40,000 Muslims living throughout New Zealand, Ledger said.
"There was nothing in the finance market available, so it's a great opportunity to be able to definitely ... help a whole lot of New Zealanders achieve that idyllic dream of owning their own home.
"Over the last year we've had (the package). We've had lots of very keen interest in it but because we hadn't at that point received a fatwa, these local people were reluctant to take it up."
Manzil meant the product was halal – an Arabic term meaning "permissible". In New Zealand halal is most frequently used when referring to food that is permissible according to Islamic law.
Under Islamic law, the "payment of interest on money" or "received interest" was forbidden, she said.
The Manzil product allowed the purchase of a property, without the payment of interest on a loan. This was achieved through the use of a bond for the purchase of the house, and then the formation of a trust to buy the property on the buyer's behalf.
"(Then) they buy a licence to occupy ... with the right to purchase it outright at the end of 10 years."
The buyer also had the right to 90 per cent of any capital gain on a property during that 10 years.
Moorhouse Mortgages was being run alongside Ledger's main business, Global Home Loans – which had been set up with 50 per cent partner Maree Rae in 2000.
Global Home Loans, which funded home property loans as a retail fund provider in competition to the banks, would be a source of funds used in the Moorhouse Mortgages business, Ledger said.
Global Home Loans would also be the exclusive distributor of the Manzil package.
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Tuesday, 30 October 2007

Credit Suisse to expand Islamic banking products

Dubai : Credit Suisse said it is expanding its product portfolio to accommodate Sharia-focused investors and benefit from the burgeoning Islamic financing sector. The Swiss bank expects demand for investments that conform to Islamic principles will continue to grow in the Gulf and globally as a number of factors are drive the Islamic finance. "I have not witnessed a banking activity that has shown such sustained growth for two decades," said Fares Murad, global head of Credit Suisse Islamic investments. "There are many socio-political factors that are driving this growth. To say that Islamic finance is growing because of petro-dollars is simplistic," He even sees the possibility of the Islamic banking sector overtaking conventional banks in terms of assets in the region in the coming years. The possibility is there. Islamic banks in the region are very active and innovative and they are eager to grow," Murad told Gulf News. Industry sources estimate the Islamic finance sector to be around $400 billion globally. Half of the assets are located in the Gulf, 25 per cent in Southeast Asia and the rest distributed in other parts of the world. Demand Murad said his bank is responding to demands from clients for Sharia-compliant products that would exclude investment in interest-based assets or in businesses that produce or deal in alcohol, pork, gambling, weapons and entertainment. "We are active within the region and at our global platforms," he said. Credit Suisse launched its first Sharia-compliant fund earlier this month to raise an unspecified amount. The subscription period for the open-ended fund will close on March 30. Up to 20 per cent of the amount collected will be invested in emerging economies. - (GN, 29 Oct 07)

Monday, 29 October 2007

Zakat can help alleviate poverty

THE holy month of Ramadan has come to an end. People of some means looked to be more charitable than at other times of the year. They were seen distributing mainly petty cash and clothes among poor people as a way of discharging their religious obligation of zakat. But Bangladesh today is also a country where one comes across rather unwelcome spectacles of giving zakat. Stampedes are noted sometimes during the month of Ramzan and before the celebration of the Eid-ul-Fitr which cause tragic deaths of those who scramble in a frenzy to collect cheap cotton saris or lungis given away as zakat. Sad events like these should have galvanised national thinking about how far such individual demonstrations of charity would be welcome and whether better channeling of resources for charity should be devised and implemented.As it is, cash and clothes distributed by rich people during Ramzan and the Eid satisfy to some extent for a brief period basic consumption needs of poor people. This is not entirely without value but if the same resources could be mobilised under a single fund and then utilised to build shelters for homeless people, houses, hospitals, orphanages, skills training centres and industries to take care of the poor and help them to earn a livelihood, then the same could make a bigger and lasting dent in the poverty situation. Affluent Muslims should feel an obligation to carry out their religious duty of paying zakat. But they should pay the zakat in a manner to help the recipients to help themselves. In this way, the formidable problem of poverty in the predominantly Muslim countries can be effectively addressed.Policy planners in Bangladesh can think over the matter and motivate people to pay zakat more in an institutional form. The other aspect is paying it in proportion to one's surplus wealth as was ordained in the holy Quran. How many well-off people in Bangladesh actually discharge their zakat obligation in full? Very few indeed. Most of them pay zakat negligibly compared to what would be due from them from the estimation of their wealth. Thus, people should be urged to pay zakat not only in token amounts but in amounts they ought to. The Government at present runs a central zakat fund but its activities are very limited compared to the potential. However, it is believed that the size of the centrally operated zakat fund can become massive -- over time -- if resourceful people on a large scale can be motivated to send their zakat to it in right proportion to their wealth. The fund will have to be operated by persons with talent, vision and impeccable integrity of character. If such persons take up the responsibility of administering the fund, then it will prove to be a very powerful agent for poverty reduction and social transformation. - (TNN, 18 Oct 2007)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant/Speaker/Motivator : www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Sunday, 28 October 2007

Allianz Takaful operations launched in Bahrain

The Central Bank of Bahrain (CBB) and Germany’s Allianz Group announced the official launch of Allianz Takaful (Bahrain) operations, a wholly owned subsidiary of Allianz, the world’s second largest insurer and the largest in Europe.The CBB, earlier this year, granted a licence for the establishment of Allianz Takaful (Bahrain), which will undertake family takaful, with a focus on life insurance, investment-linked insurance as well as health and medical insurance. Allianz plans for Bahrain also include the proposed establishment of the company’s central office, which will monitor, support, guide and control the various insurance operations of Allianz throughout the Middle East and North Africa (MENA) region as well as in the Indian Subcontinent. Allianz has established the Middle East as its third major growth region, in addition to Asia Pacific and New Europe. Allianz is one of the world’s leading insurers and financial services providers. Founded in 1890, Allianz SE is now present in more than 70 countries with over 170,000 employees. The company, with total revenues of more than US$142.5 billion and a net income of more than US$10 billion in fiscal 2006, is also one of the world’s largest asset managers, with third-party assets of US$1.1 trillion billion under management at year-end 2006. “The CBB is delighted to welcome the Allianz Group to Bahrain and we look forward to a close working relationship with Allianz Takaful (Bahrain),” said Mr. Anwar Khalifa Al Sadah, Deputy Governor, at the CBB.Mr. Al Sadah will welcome tomorrow (25 October 2007) Dr Werner Zedelius, Member of the Board of Management at Allianz SE, the holding company of Allianz Group, and Mr. Sam Ghosh, the new Bahrain-based Regional Chief Executive Officer of Allianz. “The insurance business, in general, and takaful, in particular, is a developing business opportunity with tremendous potential throughout the MENA region,” said Mr. Al Sadah.“We, at the CBB, strive to ensure a conducive, business-friendly environment that not only protects the integrity of our financial sector but also enables CBB licensees to deliver the growing demand for financial services, including insurance and takaful.”The CBB is a strong advocate of and has an established policy of engaging the industry in the formulation of rules and regulations, he pointed out.“We consider cooperation between the CBB and our licensees of vital importance for the continued development of Bahrain as a premier international financial centre and we look forward to working with Allianz in Bahrain to develop the insurance and takaful industry,” said Mr. Al Sadah.Dr Zedelius said: “We see huge potential to realize profitable growth in the region. Customer demand for insurance and financial services in the Middle East is rising, and Allianz traditionally enjoys a very good reputation in the region. With the Middle East as our third major growth region, we will elevate our presence there to a new level and set the course for internal and external growth.” Mr. Ghosh added: “We are determined to grow in the life and health insurance business, where we want to expand throughout the region. In the property and casualty insurance business, rising wealth and huge development projects in the region offer great opportunities. In addition, we will further develop our takaful business, where Allianz can already build on business experience.”Mr. Abdul Rahman Al Baker, Executive Director, Financial Institutions Supervision, said there is a significant need for the insurance and takaful services in the MENA region, driven by robust economic growth, renewed Government investment in large infrastructure projects and strong private sector investment in real estate and other economic sectors. In addition, increasing public awareness and acceptance about the need for insurance is also contributing to the growing demand for insurance products, both conventional and Islamic, he said.“The CBB is confident that the entry of international players, such as Allianz, in the region’s insurance market will help unlock the insurance opportunity and develop the industry to its full potential,” said Mr. Al Baker.

Dubai Islamic Bank offers Islamic finance to investors in Dubai Sports City


Dubai Islamic Bank (DIB), first Islamic bank in the region to have incorporated the principles of Islam in all its practices, has signed a Memorandum of Understanding (MoU) with Dubai Sports City, the world’s first integrated city dedicated to sport. According to the MoU, DIB will provide Islamic financing facilities to meet the needs of prospective owners of villas and apartments at Dubai Sports City. DIB will offer Sharia-compliant financing schemes towards the purchase of apartments at Canal Residence West, a signature Riviera-style waterfront real estate development and villas at Dubai Sports City.

Mohammad Ameery, Senior Vice President, Retail and Business Banking Services, DIB, said, “We are delighted to sign this MoU with Dubai Sports City. The initiative comes in line with DIB’s vision to meet the requirements of customers who are seeking to acquire properties in Dubai Sports City, one of the region’s most significant real estate developments. DIB positions this latest development as part of its mission to develop innovative products and services at the core of our customer offerings. Real estate financing is a highly promising market segment, hence we have successfully developed and structured innovative financing deals to meet the requirements of major corporations and government bodies in the UAE and worldwide.”

The MoU with DIB allows for a greater number of people to be part of this unique real estate development. Dubai Sports City is a thoughtfully master planned community and a great care has been taken to ensure that every possible modern element will appeal to all of its residents. Throughout the construction process, Dubai Sports City is working closely with Bureau Veritas, a globally-recognized consultant, to provide a guarantee of quality and safety of the highest possible standards. In line with the MoU, DIB and Dubai Sports City will also exchange information in relation to the property market and other relevant information that will contribute to developing the local real estate sector. - (Gowealthy, 24 Oct 07)

Islamic bond market doubles to $22.4 bln amid debt crunch

DUBAI (Zawya Dow Jones) -- The value of Islamic bonds issued in the first nine months of the year doubled to $22.4 billion as the oil-rich Gulf Arab states helped the industry weather a storm in global debt markets, according to Zawya.com data.
Ijarah structured bonds, linked to a form of Islamic leasing agreement, accounted for 46% of all issuance over the same nine-month period, Zawya's Sukuk Monitor shows.
Pointing to a slow down, Zawya's data indicates that only eight of the total 81 sukuk issued in the first nine months, worth $1.3 billion, were closed since the current global market turmoil began.
It remains unclear to what extent Islamic debt markets have been hit by the global credit crunch that forced central banks to pump liquidity into the system and led to companies delaying debt plan, including Shariah-compliant bonds.
"Credit spreads are tightening again and we're cautiously optimistic," Arul Kandasamy, head of Islamic finance at Barclays Capital, told Zawya Dow Jones on Tuesday.
Bond market volatility and a slowdown in investor demand have already forced United Arab Emirates-based Dana Gas and DAE Aviation Holdings to put on hold debt issues worth $1.94 billion.
Saudi Basic Industries Corp. (2010.SA) was forced to lower the senior unsecured bond portion of its financing to buy GE Plastics to $1.5 billion from about $2.76 billion and raise the bank loan portion to about $6.6 billion from $5.4 billion because of the tightening in global credit markets.
Earlier in July, Abu Dhabi-based First Gulf Bank (ADS) postponed its $3.5 billion Eurobond program and Bahrain's Ithmaar Bank delayed a $300 million sale of five-year Islamic bonds.
National Bank of Abu Dhabi, the largest lender in the United Arab Emirates, plans to delay its $1.7 billion bond program until conditions improve in global debt markets, the company's chief executive told Zawya Dow Jones last month.
Barclay's Capital's Kandasamy expects the value of Islamic bonds issued this year to peak at $28 billion.
Sukuk Hubs
Bonds originating from the Arab Gulf states, which pump about a fifth of the world's oil, topped $14.5 billion for the nine-month period, representing almost two thirds of the global market, according to Zawya.com data.
The Zawya data shows that Bahrain remains the hub for Islamic finance in the Middle East, accounting for about a quarter of all global issuance.
The Gulf archipelago continues to shrug off competition from Dubai, which is seeking to become a top location for the region's financial industry.
The U.A.E., the second-largest Arab economy in the Middle East, attracts the largest Sukuk, accounting for 31% of the total value of issues in the first nine months of the year, according to Zawya.com.
"It's too early to say who will win," Geert Bossuyt, managing director of Middle East structured global markets at Deutsche Bank AG told Zawya Dow Jones. "There is only room for two financial centers in the region. One will be Riyadh in the future and the other either Bahrain or Dubai."
Islamic bonds, or sukuk, that comply with Muslim Sharia law are becoming a mainstay of financing in the Middle East where they are superseding conventional debt instruments as a major source of corporate funding.
International Monetary Fund Managing Director Rodrigo de Rato said on September 24 that the situation in credit markets is slowly returning to normal.

Investment Dar plans Sharia bourse

KUWAIT CITY: Kuwait's Investment Dar, the Islamic investor that bought into British car-maker Aston Martin, said yesterday it had applied for permission to open a stock market that complies with Sharia.
The exchange would be open to Kuwaiti and foreign companies that follow Islamic rules to cater for growing demand from the world's 1.2 billion Muslims for investments that comply with their beliefs.
"There is always a premium paid for those kind of companies," Investment Dar's chairman Adnan Al Musallam said.
"It's a big market.
"This will be attractive for a lot of companies," he said.
Islamic financial institutions manage more than $800bn, according to the Islamic Development Bank.
Dar has applied to the Kuwaiti government for permission to set up the market. Dar would be a founder member of the exchange, Musallam said.
Kuwait is overhauling its financial services sector and the government plans to set up a market regulator to try to compete with regional financial hubs such as Dubai and Bahrain.
Investment Dar wants to set up a British unit next year to offer advisory services for Gulf investors doing business in London, which the British government wants to turn into a centre of Islamic finance.
"The city has announced that they want to become the major centre for Islamic financing," he said.

Islamic banks 'are safe from credit crunch'

MANAMA: Islamic finance institutions have been protected from the global 'credit crunch' because the trading of subprime mortgages was against the principles of Sharia, according to an industry expert. Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) senior financial analyst Khairul Nizam said the effect of the crisis on the Islamic finance industry would be virtually nil.
"The exposure to the subprime market in the US is probably non-existent among the Islamic banks because mortgages are not supposed to be traded on Islamic principles. So the Islamic banks would have stayed away from these because of Sharia issues rather than credit issues," he said.
"On the liquidity side of things, I think, the 'liquidity crunch' or 'credit crunch' has not really affected the Islamic banks because the liquidity provided by their depositors and investors has not really been affected. That is because, I suppose, of the confidence that the investors or depositors have in the Islamic banks.
"We certainly have not seen anything on the scale of what has happened at Northern Rock. Most Islamic banks are still happy to lend to each other," he added.
AAOIFI is one of a number of Islamic finance bodies headquartered in Bahrain, and Mr Nizzam was not surprised by the findings of a recent report, which showed Bahrain had been able to "shrug off" competition from Dubai to establish itself as the main Middle East hub for Islamic finance.
New figures revealed the kingdom accounted for around a quarter of all sukuk issued globally in the first nine months of this year as the value of issued sukuk doubled to reach more than $22 billion in the same period.
"I think Bahrain is succeeding because of the depth of its market - meaning there are a lot of established and active Islamic banks in Bahrain. The Islamic banks in Bahrain have a longer history and greater experience," he said.
He explained how the industry standards designed by AAOIFI would foster further growth.
"There are two major types of standards that we do. One is accounting standards and the other is Sharia standards. Standards are important because they bring greater clarity to the financial performance of Islamic banks.
Mr Nizzam predicted further growth for the Islamic finance industry.
"The market is booming and we think that growth is going to be there for some time yet - a lot of forecasts have been made and 10 to 15pc growth for the next two to three years seems to be what people are looking for and think can be achieved," he said. - (TDN, 8 Oct 07)

Banks devise a range of sharia-compliant products

Alternative investment is viewed as relatively safe after the summer’s credit crisis


Investment banks are making as many of their structured product programs as possible sharia-compliant in a bid to attract Islamic and traditional fixed-income investors into a growing sector. The sub-prime fallout this summer has contributed to the surge in Islamic structured finance volume, because sharia-compliant products provide a relatively safe haven for investments.
The products have some of the same high returns of conventional structured products but with higher transparency of processing, and lower credit risk, because they trade only in physical commodities, not those whose price is derived from its credit rating, such as corporate bonds.
Making a product sharia-compliant involves ensuring a financial transaction or investment adheres to laws based on the Koran. An investor would not be allowed to profit from investments that derive profits from alcohol or cigarettes. And once a bank structures a product, a Muslim scholar specializing in sharia compliance checks and signs the transaction to make sure it adheres to Islamic financial laws.
An investment bank source said: “It is easier to make as many structured products as sharia-compliant as you can, because it is more efficient and turns over more transactions.”
Barclays, Deutsche Bank and HSBC are among the leaders in integrating their Islamic financing business into their mainstream investment pool. Folding sharia-compliant operations with other parts of their business has made it easier for banks to turn over large sharia-compliant trades.
Popular structured Islamic products like sukuks, which resemble traditional bonds, and murabahas – a contract of exchange on a physically owned commodity usually between two banks, such as a swap – and bilateral contracts from Islamic and non-Islamic investors are seeing a surge in sales. This has resulted in record benchmark transactions worth up to $2bn (€1.4bn) and $500m, respectively.
Nigel Denison, head of markets at the Bank of London and Middle East, said: “Large sukuk transactions above $500m are usually bought by a mixture of conventional and Islamic investors, rather than solely by investors seeking sharia-compliant investments. Islamic investors account for 30% to 40%.”
Sharia law forbids the payment of interest. A fundamental aspect of sharia compliance is that the investor can only profit from the ownership of an asset rather than receiving a return from a lump sum with an applied interest rate.
Since sharia compliance has to go through a rigorous process of documenting, it provides a higher level of transparency. Moreover, all trades involve the physical ownership of a commodity, for example sugar or wheat, and the investor, structurer, brokers and dealers are informed of every transactional detail throughout the process.
In July and August sukuks raised $7.6bn, exceeding this year’s first-quarter’s $4.5bn, according to the Islamic Finance Information Service. Walkers, a global off-shore law firm, recently worked on large sukuk programs, including a $1.5bn sukuk program, by NIG, part of the Royal Bank of Scotland group, and Gulf Finance House’s $1bn sharia-compliant structured funding program.
Robert Varley, a partner at Walkers’ Dubai office, said: “You can see the growth in Islamic structured finance by the size of the products. A few years ago, a typical corporate sukuk might be in the range of $100m; 12 months ago the region of $200m – $500m was normal, but only government or government-related sukuks went over that.
“Now we are seeing billion-dollar-plus corporate sukuk programs. Islamic structured finance has attracted a lot of interest from the conventional banking world, and the products clearly stand up to technical scrutiny like a conventional medium-term note program. It is a transparent, properly documented and watertight product.”
Barclays Capital has integrated sukuk inquiry and execution into its debt capital market program, including its medium-term notes, which allows a more regular and higher turnover of Islamic structured products.
Arul Kandasamy, head of Islamic finance at Barclays Capital, said: “We arrange sharia-compliant products, such as sukuks, by structuring a product under our traditional MTN program, which is fully integrated with our Islamic financing. We focus on convergence.
“We don’t just target Islamic investors, our sharia-compliant products are targeted at everyone. We make most of our regularly sold structured products sharia-compliant as most of these products can be replicated, such as bonds and convertible equity notes.”
In the wake of the sub-prime fallout, investment banks are targeting their catalog of sharia-compliant structured products at the traditional fixed-income network in addition to their traditional Islamic investors.
Denison said: “Following the credit crisis in the summer, investors are demanding much greater transparency particularly in structured transactions. By its nature Islamic finance provides this to a great degree, which is part of its appeal. Investors therefore know exactly what assets they own and what risks they are taking.”
Last week, Deutsche Bank and Dubai Islamic Bank issued a significantly large $500m “profit collar swap”. A typical transaction involves a commodity owner leveraging the price of their physical asset by widening the margin, and entering a contract with a counterparty who agrees to buy the commodity at that leveraged price. The “collar” provides a minimum and maximum return for the investor.
Meanwhile, sharia-compliant funds have enjoyed a surge in volume. Eurekahedge’s Islamic fund database, which contains more than 458 sharia-compliant funds, representing 95% of the market, reported assets under management in Islamic funds were hovering between $50bn and $70bn.
All of the funds are spread across equity, fixed income, real estate and private equity asset classes.
This may only be a small percentage of the overall fund market but much like the Islamic structured product market, it is expanding steadily, despite the credit market volatility.
Varley said: “Eventually, Islamic structured finance will no longer be seen as a novelty or niche arena but as a regular component in all global investment strategies, and of course this will be a very positive development.” - (FNUS, 16 Oct 07)
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Alfalah Consulting-Kuala Lumpur: www.alfalahconsulting.com 
Islamic Consultant & Trainer: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Bank Muamalat Launches Remittance Service

KUALA LUMPUR, Oct 27 (Bernama) -- Bank Muamalat Malaysia Bhd (BMMB) has teamed up with Bank Muamalat Indonesia (BMI) to provide remittance service between the two countries, known as 'Muamalat Kas Kilat-i' or mk2.BMMB chief executive officer, Datuk Abdul Manap Abd Wahab, said the service was targeted at students, workers and entrepreneurs."The potential market is huge as there are about two million Indonesian workers here," he told reporters after the launch of the service here today.Abdul Manap said BMMB and BMI would collaborate with the Indonesian embassy and Sekolah Indonesia Kuala Lumpur to promote the service."BMI will also attach its staff in BMMB branches to market the service."The service will be available at BMMB's Jalan Melaka branch from Nov 1 and other branches in the central region, including Seremban, on Nov 15," he said.Abdul Manap said under the service, the money remitted would be credited into beneficiary account at BMI, and the receivers and senders would get short message service notification."The money can be withdrawn at all automated teller machines and post offices in Indonesia. Each transaction will cost RM10," he said.Abdul Manap said this service would be replicated in other countries as well in the future such as Bangladesh, Myanmar and Nepal.He said the service would increase Bank Muamalat's foreign exchange revenue.

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant/Speaker/Motivator : www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Thursday, 25 October 2007

Malaysia plans to allow overseas lenders to set up stand-alone Islamic units

WASHINGTON: Malaysia plans to allow overseas lenders to set up stand-alone Islamic units in its latest bid to attract investment, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said.
The central bank would issue new licences “very soon” to those that have applied, Zeti said in an interview on Sunday.
HSBC Holdings Plc, the largest overseas bank offering Islamic financial services in Malaysia, said in May it planned to open a stand-alone unit.
Malaysia is vying to become a hub for Islamic finance and lure investors from the Middle East.
Prime Minister Datuk Seri Abdullah Ahmad Badawi in September said Malaysia planned to cut taxes on Islamic insurance companies and issue broker licences to Middle East investors.
Bank Negara gives tax breaks for Islamic products and in August relaxed rules to allow commercial and investment banks to conduct Islamic business transactions in foreign currencies.
HSBC Amanah, the bank's Islamic banking arm, has applied for a licence, managing director Mohamed Ross Mohd Din said in May.
“Many of these financial institutions have in fact indicated that they intend to make Malaysia their Islamic financial hub for the region,'' Zeti said. “This is a new phase that we are moving into.''
Malaysia didn't plan to give new Islamic banking licences to foreign lenders who were not already based in Malaysia, Zeti said. Bank Negara was also “very pleased'' with the current number of domestic banks and it had no plans for new policy to consolidate the industry, she said.
“We have the key players in our financial system and we are encouraging strategic alliances,'' in Islamic banking, Zeti said.
“There are many discussions in the pipeline. We believe they bring with them value-added combined with domestic knowledge of the conditions in Asia.''
Strategic alliances allowed faster growth because the local entities would have outreach in place in Malaysia, Zeti said.
Islamic banking assets in Malaysia increased 8% in the first six months of the year to RM143.7bil from RM133bil last year, accounting for 12% of total banking assets, the Ministry of Finance said. – (Bloomberg, 24 Oct 07)

Tuesday, 23 October 2007

SBP Governor sees prospects for Islamic Finance sustainability

WASHINGTON, Oct 22 (APP): Governor State Bank Dr Shamshad Akhtar has said there are promising prospects for sustainability of Islamic finance but stressed the need to address associated challenges concurrently while opportunities created by the discipline are exploited.

In a keynote address on “Islamic Finance in Southeast Asia: Local Practice, Global Impact” at Georgetown University, the SBP chief assessed that Islamic Finance now seems to be a reality and is on its way to be institutionalised, although at different levels in different countries.

The Western world, she noted, is also now selectively and cautiously positioning to invest in this system.

There are promising signs that Islamic Finance trends are sustainable.

Spread across 70 countries, Islamic Finance has grown to almost a trillion dollar industry. Despite its growth, given its current size and composition it is still a niche market in the overall global financial industry.

“Prospect for the industry are quite bright given strong demand for financial services from a large segment of about 1.4 billion Muslim populations and need to channel effectively rising foreign savings and high net worth individuals,” she stated.

Dr Akhtar said the growth, level, interest and motivation to promote this industry vary across the globe. The growth in Gulf Cooperation Council has been exceptional with Bahrain emerging as a main centre adopting and implementing Islamic banking regulation, being the first central bank to issue Sukuk and establishing centre for Islamic finance education, etc Iran and Sudan declared sometime back 100% conversion to Islamic banking.

Within South East Asia, Malaysia stands out with $31 billion Islamic banking assets, $1.7 billion Takaful industry and has the largest Islamic private debt market, which constitutes 45.5% of total Malaysia debt market. Other countries in South East Asia have smaller Islamic financial markets and Singapore has positioned to offer strong wealth management potential.

In South Asia, Pakistan stands out for its proactive and systematic stance to evolve Islamic finance industry, she added.

“In all these countries, assets of Islamic banking grew faster than the overall banking assets and scope and coverage of financial services extended to retail and consumer finance, private equity, structured products, insurance and project finance etc.”

Distinct from Islamic countries, is the interest of few global financial centres such as London that now provide policy and tax incentives to promote Islamic finance industry to attract funds from high net worth clients. Same motivation seems to have driven global banks such as HSBC, Standard Chartered, Deutsche Bank, Citibank etc to set up special hubs to structure Islamic finance products.

“In reality, while current hype in industry may be partially driven by availability of surpluses generated by oil revenues, Islamic banking is emerging as an alternative financing option that coexists alongside the conventional financial industry”.

“Moving from traditional Islamic products, now the industry is offering consumer financing for residential purposes and structuring financing vehicles for supporting infrastructure and housing finance projects etc.”
Continuing, she said, product innovation is emerging with several different types of hybrid Sukuks and other combination of structures which involve different forms of Musharikas with other products.

Notwithstanding these developments, increasing share of equity based credit products, such as Murabaha and Ijara, remain the dominant form of Islamic financing across the Islamic financing institution.

These trends are expected to persist and the industry is set to grow. Standard & Poor Services Rating Agency estimates that industry has potential to grow to $4 trillion over medium term.

She said exceptional growth in Islamic Finance, particularly since 2000, which has coincided with growth in oil revenues, has raised questions whether interest in Islamic Finance is one time phenomena and what are the future prospects and sustainability of the industry.

Dr Akhtar dilated on sustainability prospects and challenges facing Islamic Finance and concluded that encouraging developments and trends lend confidence that this industry has taken off.

“While the size of Islamic financial industry is still quite small as a proportion of the total world’s financial assets, the current growth trends and the investments in infrastructure in development of its Islamic Finance networks and its regulatory and supervisory systems, lend confidence that this industry has promising potential.”

She believed the sustainability of Islamic Finance would rest in how the international community builds on the momentum achieved thus far. This would require further deepening the efforts to enhance the legal and regulatory framework of Islamic finance consistent with the international practices; continued efforts to conform and align the structures and products in line with the Shariah principles would help Muslim population’s motivation to turn to this alternative

mechanism of financing; recognising that Islamic finance has perpetuated and changed the dynamics of cross border private capital flow this industry has great potential to augment the process of globalisation and financial integration, but this requires more cooperation and vigilance on the part of home and host regulators; launching aggressive effort to implement the evolving Islamic financial regulatory and supervisory standards and capturing the different types of risks associated with Islamic finance, while launching consumer protection frameworks; and promoting more financial diversification by encouraging financial innovation and Islamic capital market development.

Monday, 22 October 2007

Maybank Eyes RM300 Mln Deposits From New Islamic Product


KUALA LUMPUR, Oct 22 -- Malayan Banking Bhd (Maybank) expects to attract RM300 million in deposits from its newly-launched structured Islamic deposit, STRIDE-i.Maybank executive vice-president/head of Islamic banking, Ibrahim Hassan, said STRIDE-i would invest in copper and wheat, which would have potential upside earnings of up to 39.8 percent if held until its maturity date."We selected the commodities because they offer strategic opportunities, particularly in the world's leading emerging economies -- China and India."The two nations in recent years have seen tremendous demand for the two commodities where industrialisation and population growth are driving the demand for copper and wheat respectively," he said at the launch of the new product here today.On the choice of investing in copper and wheat, Ibrahim said the historical price performance of these two commodities has shown a progressive and distinctive uptrend.According to Brook Hunt and Associates Ltd 2007, these two countries are expected to absorb 41 percent of the world's copper supply in 2009 from 36 percent in 2006.They are estimated to use as much as 39 percent of the world's total wheat supply.Ibrahim said STRIDE-i has a four-year maturity tenure with 100 percent capital protection on the principal investment and would guarantee annual payment of 2.45 percent, or a return of 9.8 percent if held to the maturity."The minimum subscription is RM50,000 with subsequent investment in multiple of RM50,000 and above."The offer period begins today until Nov 4 and targeted at retail and corporate investors," he said.STRIDE-i is a syariah-compliant account based on the concept of Bithaman Ajil-Murabahah (BBA-Murabahah) and Waad.BBA-Murabahah is a concept pertaining to deferred "marked-up" of payment while Waad is a unilateral binding promise made by Maybank to its customers.Ibrahim said Maybank has identified Islamic wealth management as one of the areas of focus for its Islamic banking business."For the current financial year, the bank is targeting to raise at least RM600 million via syariah-compliant wealth management products."We will issue a series of STRIDE-i and other weatlh management products by year-end," he said.

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant/Speaker/Motivator : www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic banking products spark interest in Morocco


The launch of alternative banking products designed to be halal within Islam has sparked interest in Morocco. Many of Morocco's Muslims who refuse to use standard banking products have welcomed their arrival on the market, although no publicity campaign has been launched and details of the products have yet to be announced.

In response to high demand from the public, Morocco's central bank followed in the footsteps of Islamic banks around the world on October 1st, with its approval of Islamic products which offer a way around interest-bearing loans and other financial products forbidden in Islam. These so called "alternative products" include Ijarah, Musharakah and Murabahah.

Ijarah is a halal type of leasing contract between a lending institution and a customer. It can take the form of a simple lease agreement or be accompanied by a contract for the lessee to acquire the asset at the end of a fixed period.

Musharakah is a contract that enables lending institutions to help businesses finance themselves through the sale of stakes in a future or existing company. Both parties are liable for the value of their investment and each gains or loses a previously-agreed share of the profits or loses.

Murabahah enables people to acquire assets without taking out an interest-bearing loan. The bank purchases the asset and then resells it to the customer in instalments at an openly stated price, factoring in administrative costs and profit.

The new products have aroused little excitement in banks, who view them as competition to their traditional counterparts. "It's to be expected that the cost of alternative loans will be higher than that of ordinary ones," Economist Mohamed Berdai told Magharebia. "The banking lobby wants to be sure these products will not be competitive so that customers do not abandon ordinary loans. One of the ways this has been achieved is by setting short payment terms which put them beyond the reach of a lot of people."

Many Moroccans, however, are eager to learn more about the new products. Those who used to balk at the idea of taking out a bank loan for religious reasons regard the new products as a good solution. "I still don't really know much about the products that will be on offer, but at least they’re halal and will mean I can finally buy a home," said potential customer Abderrafia Tamachi.

Teacher Rabiaa Maliki is equally pleased. "My husband always refused to get a loan to buy a house. We can’t wait for the new schemes to come out."

Pointing to other Muslim countries, where Islamic banking products have garnered a large market share, the central bank predicts the new "alternative products" will be highly successful. Bank experts expect the true level of demand will emerge towards the end of the year.


(Magharebia, 21 Oct 07)

Friday, 19 October 2007

Malaysia may allow full foreign ownership of takaful (Islamic insurance) firms

KUALA LUMPUR (Thomson Financial, 19 Oct 07) - Malaysia may allow foreign players to set up wholly owned Islamic insurance companies or takaful
in a bid to cement its position as the region's leading Islamic financial hub, Deputy Finance Minister Awang Adek Hussin said Friday.
Awang Adek said as part of the government's efforts to boost growth in the Islamic financial markets, it may consider granting licenses to takaful operators, that are 100 percent foreign owned, to set up operations in Malaysia.
'We are willing to give licenses as we did for Islamic banks...the government will also consider Islamic insurance companies,' Awang Adek told reporters at a news conference.
Three foreign Islamic banks, including Gulf-based Kuwait Finance House and Saudi Arabia's Al Rajhi Bank, were granted licenses to operate 100 percent foreign-owned standalone Islamic banks in Malaysia since 2004.
Last year, the Malaysian central bank granted licenses to four foreign-local consortia to establish takaful services in Malaysia. But foreign shareholdings in these joint ventures are capped at 49 percent.
Awang Adek said as the global takaful industry is relatively small in comparison to the conventional insurance market, it may be more viable for foreign investors to participate in the local market through ventures with Malaysian partners.
'The more possible way is perhaps through joint ventures. I think this will be the future direction, where investors bring in capital and form tie-up with the Malaysian parties which have the expertise, to do takaful business here in Malaysia as well as overseas,' he said.
Syarikat Takaful Malaysia Bhd, the country's oldest takaful operator, said this month it has obtained the central bank's approval to start negotiations with Abu Dhabi-Kuwait-Malaysia Strategic Investment Corporation.
Takaful Malaysia managing director Hassan Kamil has said the company may partner with
investors from the Middle East and may sell a stake to potential investors.
The total assets of the takaful industry stood at 7.6 billion ringgit as of end-June, representing 6.3 percent of the asset size of the larger insurance industry.
(1 US dollar = 3.36 ringgit)

Banks devise a range of sharia-compliant products

Investment banks are making as many of their structured product programs as possible sharia-compliant in a bid to attract Islamic and traditional fixed-income investors into a growing sector.
The sub-prime fallout this summer has contributed to the surge in Islamic structured finance volume, because sharia-compliant products provide a relatively safe haven for investments.
The products have some of the same high returns of conventional structured products but with higher transparency of processing, and lower credit risk, because they trade only in physical commodities, not those whose price is derived from its credit rating, such as corporate bonds.
Making a product sharia-compliant involves ensuring a financial transaction or investment adheres to laws based on the Koran. An investor would not be allowed to profit from investments that derive profits from alcohol or cigarettes. And once a bank structures a product, a Muslim scholar specializing in sharia compliance checks and signs the transaction to make sure it adheres to Islamic financial laws.
An investment bank source said: “It is easier to make as many structured products as sharia-compliant as you can, because it is more efficient and turns over more transactions.”
Barclays, Deutsche Bank and HSBC are among the leaders in integrating their Islamic financing business into their mainstream investment pool. Folding sharia-compliant operations with other parts of their business has made it easier for banks to turn over large sharia-compliant trades.
Popular structured Islamic products like sukuks, which resemble traditional bonds, and murabahas – a contract of exchange on a physically owned commodity usually between two banks, such as a swap – and bilateral contracts from Islamic and non-Islamic investors are seeing a surge in sales. This has resulted in record benchmark transactions worth up to $2bn (€1.4bn) and $500m, respectively.
Nigel Denison, head of markets at the Bank of London and Middle East, said: “Large sukuk transactions above $500m are usually bought by a mixture of conventional and Islamic investors, rather than solely by investors seeking sharia-compliant investments. Islamic investors account for 30% to 40%.”
Sharia law forbids the payment of interest. A fundamental aspect of sharia compliance is that the investor can only profit from the ownership of an asset rather than receiving a return from a lump sum with an applied interest rate.
Since sharia compliance has to go through a rigorous process of documenting, it provides a higher level of transparency. Moreover, all trades involve the physical ownership of a commodity, for example sugar or wheat, and the investor, structurer, brokers and dealers are informed of every transactional detail throughout the process.
In July and August sukuks raised $7.6bn, exceeding this year’s first-quarter’s $4.5bn, according to the Islamic Finance Information Service. Walkers, a global off-shore law firm, recently worked on large sukuk programs, including a $1.5bn sukuk program, by NIG, part of the Royal Bank of Scotland group, and Gulf Finance House’s $1bn sharia-compliant structured funding program.
Robert Varley, a partner at Walkers’ Dubai office, said: “You can see the growth in Islamic structured finance by the size of the products. A few years ago, a typical corporate sukuk might be in the range of $100m; 12 months ago the region of $200m – $500m was normal, but only government or government-related sukuks went over that.
“Now we are seeing billion-dollar-plus corporate sukuk programs. Islamic structured finance has attracted a lot of interest from the conventional banking world, and the products clearly stand up to technical scrutiny like a conventional medium-term note program. It is a transparent, properly documented and watertight product.”
Barclays Capital has integrated sukuk inquiry and execution into its debt capital market program, including its medium-term notes, which allows a more regular and higher turnover of Islamic structured products.
Arul Kandasamy, head of Islamic finance at Barclays Capital, said: “We arrange sharia-compliant products, such as sukuks, by structuring a product under our traditional MTN program, which is fully integrated with our Islamic financing. We focus on convergence.
“We don’t just target Islamic investors, our sharia-compliant products are targeted at everyone. We make most of our regularly sold structured products sharia-compliant as most of these products can be replicated, such as bonds and convertible equity notes.”
In the wake of the sub-prime fallout, investment banks are targeting their catalog of sharia-compliant structured products at the traditional fixed-income network in addition to their traditional Islamic investors.
Denison said: “Following the credit crisis in the summer, investors are demanding much greater transparency particularly in structured transactions. By its nature Islamic finance provides this to a great degree, which is part of its appeal. Investors therefore know exactly what assets they own and what risks they are taking.”
Last week, Deutsche Bank and Dubai Islamic Bank issued a significantly large $500m “profit collar swap”. A typical transaction involves a commodity owner leveraging the price of their physical asset by widening the margin, and entering a contract with a counterparty who agrees to buy the commodity at that leveraged price. The “collar” provides a minimum and maximum return for the investor.
Meanwhile, sharia-compliant funds have enjoyed a surge in volume. Eurekahedge’s Islamic fund database, which contains more than 458 sharia-compliant funds, representing 95% of the market, reported assets under management in Islamic funds were hovering between $50bn and $70bn.
All of the funds are spread across equity, fixed income, real estate and private equity asset classes.
This may only be a small percentage of the overall fund market but much like the Islamic structured product market, it is expanding steadily, despite the credit market volatility.
Varley said: “Eventually, Islamic structured finance will no longer be seen as a novelty or niche arena but as a regular component in all global investment strategies, and of course this will be a very positive development.” -(FN, 19 Oct 07)
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Alfalah Consulting-Kuala Lumpur: www.alfalahconsulting.com 
Islamic Consultant & Trainer: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Emirates Islamic Bank announces its results for Q3 of 2007

Emirates Islamic Bank has announced the results of the third quarter of 2007, achieving a net profit of AED 144.4 million, compared to 77 million for the same period of 2006, with an impressive increase of 88%.The total income in Q3 2007 grew from AED 360 million in the third quarter of 2006 to AED 654 million reflecting a strong growth of 82%. At the end of September 2007, total assets increased by 34%, standing at AED 14 billion compared to AED 10.5 billion at the third quarter of last year. Customers’ accounts grew 31% to AED 12 billion, with an increase of AED 3 billion compared to September of last year. Shareholders’ Equity reached AED 1.2 billion at the end of the period, with an increase of 27% compared to the third quarter of 2006. Meanwhile, earnings per share have risen to 19%, from 10% in September 2006. Commenting on these results, Mr. Ibrahim Fayez Al Shamsi, CEO of Emirates Islamic Bank said: “Within a year we managed to grow our net profit by 88%. These results reflect the success of our strategic planning, continuous progress, and launching of new products. We have sustained the position of the Bank with the highest profit distribution on customers’ investment & saving accounts in UAE during the last three years. With our customers’ permanent trust, I believe we will achieve even better results in the coming period. Allah willing”.He also added: “In Q3 of 2007, Emirates Islamic Bank, along with other financial institutions, has led SUKUK issuance of USD 500 million and we will be announcing all details later this month”.
In addition to achieving these outstanding results, the management of the Bank has continued its strive to offer innovative products and services that cater to different customers’ needs.
Among Emirates Islamic Bank’s key initiative in the current year was the launch of Al Reem ladies banking, a specialised banking service designed to fulfil the unique banking and financial needs of ladies in UAE. In addition to being the First Bank in the UAE to launch Visa Infinite credit card and the first Islamic bank in the country to introduce an un-embossed MasterCard chip debit card, one of the latest innovations in the card industry.EndEmirates Islamic Bank opened its doors in October 2004 with a mission to provide consumers in the UAE with effective and innovative Shari’a-compliant financial solutions. The Bank offers a range of Shari'a compliant products and services conforming to the highest standards of Islamic finance and all its activities are overseen by a Shari'a board comprising several prestigious scholars of Islamic law. On the retail side, the bank has an array of products, such as a full range of credit cards including Visa Infinite Card; Manzili Home Finance, Intaleq Car Finance, and many other products. The bank has also launched Al Reem Ladies Banking, a specialized banking service designed to cater to the banking and financial needs of women in the regionThe bank also offers Ethmar Priority banking to suit the demands of the high-net-worth clients.Emirates Islamic Bank is very active on the Corporate Banking level, seeking exceptional investment opportunities in the local as well as the regional market. Within almost three years of its inception Emirates Islamic Bank has managed to position itself as one of leading financial players in the UAE’s banking sector. The bank’s rapid growth and success is mainly due to its continued successful launch of Shari’a compliant products, services and other key business initiatives.EIB is headquartered in Dubai and employs more than 800 staff. -(AB, 18 Oct 07)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant/Speaker/Motivator : www.ahmad-sanusi-husain.com 
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Islamic Assets To Grow 15-20 Pct Globally

KUALA LUMPUR, Oct 19 (Bernama) -- Islamic assets worldwide estimated to be worth over US$1 trillion (US$1=RM3.36) currently are projected to grow 15-20 percent annually, Deputy Minister of Finance Datuk Dr Awang Adek Hussin said Friday."The potential for sukuk financing is tremendous. Over the next five years, Asia is expected to spend US$1 trillion, while the requirement in the Middle East are estimated to be US$500 billion over the same period," he said at a seminar here entitled "Islamic Finance-Alternative Financial Instruments In Global Finance."The global significance of Islamic finance has grown considerably and is now practised in over 75 countries, Dr Awang Adek said.He said the growth was being driven by growing demand for syariah compliant financial services and transactions worldwide. Syariah-compliant assets of Islamic banks and Islamic window-based conventional banks have exceeded US$500 billion. The market capitalisation of the Dow Jones Islamic Index is now over US$10 trillion while the aggregate issuance of Islamic sovereign and private debt sukuk has surpassed the US$50 billion mark."In the midst of rapid development in the international Islamic financial markets, players are also looking towards building greater intermediation and linkages between Asia and Middle East regions," Dr Awang Adek said.This will expand inter-regional trade and cross border investments for mutual benefits and generate demand for financial instruments that conform to Islamic laws."Malaysia continues to play a significant role in the Islamic world at both the political and business levels," he said adding that the private sector will play its role in shaping the international direction and growth."We are one of the earliest to recognise the potential to create a financial system compatible with Islamic principles that provides an alternative to the conventional system," he said.As at end June 2007, the country's Islamic banking assets ammounted to RM143 billion. Islamic deposits totaled RM107.5 billion and Islamic financing R81.5 billion, he said."Takaful assets totalled RM7.6 billion or 6.2 percent of total assets of the insurance industry as at mid-June 2007," he said.He said Hong Kong was also planning to develop an Islamic bond market, seeking to tap Middle-Eastern and other Islamic investors eyeing opportunities in China.He said the Japan Bank for International Cooperation also planned to issue ringgit denominated sukuk soon, which would mark the first sovereign Islamic issue by a member of the Group of Eight (G8) leading industrial nations.

Malaysia: Islamic finance potentially the 'New Silk Road'

WASHINGTON: Islamic finance has the potential to become the “New Silk Road” that will enhance economic and financial linkages not only between Asia and the Middle East but also the rest of the world, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said yesterday.
Islamic finance can contribute towards the efficient mobilisation and allocation of funds across regions whereby “regions with surplus savings may channel funds to regions with deficit savings” to bring about global financial integration, she said.She cited the remarkable growth of the sukuk or Islamic bond market with an average annual growth rate of 40 per cent to meet massive funding requirements for infrastructure projects in emerging market economies.Following the Malaysian government’s issuance of the world’s first global sovereign sukuk in 2002, several countries have followed suit. She noted that the sukuk market has doubled in size to US$28 billion from a year ago, and 80 per cent of the sukuks issued were subscribed by conventional international investors.“There has also been significant demand for the sukuk spurred by high levels of surplus savings in Asia and the Middle East” and the growing search for higher returns and greater diversification of risks in the international financial system, she said.Dr Zeti was the keynote speaker at the “Islamic Finance in Southeast Asia: Local Practice, Global Impact” conference at Georgetown University here, organised by the National Bureau of Asian Research. She is also here to attend the annual World Bank and International Monetary Fund meetings.She said Islamic finance had recorded dramatic growth with a presence in more than 75 Muslim and non-Muslim countries five years after the creation of the Islamic Financial Services Board (IFSB), which formulates the international regulatory and prudential standards for Islamic finance.Zeti added that more than 300 Islamic banking institutions and international financial centres, including in London, Singapore and Hong Kong, are offering Islamic financial products and services, with total Islamic financial assets estimated at more than US$1 trillion - a five-fold increase over the past five years.According to her, three key elements are important to maintain the momentum for growth in the sector - a need for increased investment in research and development; training activities to meet the current shortage in the talent pool; and greater use of technology in Islamic finance. — Bernama

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Wednesday, 17 October 2007

HSBC sees speedy rise in demand for Islamic insurance products

BANGKOK: HSBC Holdings Plc said demand for its Islamic insurance products in Malaysia would rise “fast” as more young Muslims seek services that comply with religious law.
Some 75,000 customers have paid RM150mil in premiums to HSBC Amanah Takaful Malaysia Sdn Bhd, a bank joint venture, since it started operations in August last year, said chief executive officer Keith Driver.
“We expect to grow at a fast pace,” Driver said in an interview. “There is a great deal of opportunity there. We are looking at hundreds of thousands of Malaysians entering the economically active stage of their life.”
The venture was also studying opportunities to grow in Singapore and Saudi Arabia, he said. There’s demand for takaful in Asian countries including China, Indonesia and Brunei, he said. - (Bloomberg, 16 Oct 07 )

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant/Speaker/Motivator : www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Monday, 15 October 2007

Islamic finance has promising future

Islamic finance and banking industry have emerged as an alternate method of investment in the global market.The present pace of growth shows a very promising future for Islamic finance, Dr S Nazim Ali, Harvard Law School, Cambridge, Massachusetts USA, in an interview told Bahrain Tribune.Dr Nazim said that the development of the Islamic Finance (IF) industry would continue to be linked closely to the research pursued in its field.He said that there has been a significant increase in research in Islamic finance and economics, as seen in the growing number of publications in the field. Dr Nazim, who recently visited Royal University of Bahrain, said: "Prior to the 1970s there were no journals or magazines devoted to Islamic finance and economics, although quite a bit was written on the topic in the form of monographs and articles published in mainstream journals. When in the late 1940s and early 1950s authors introduced the concept of banking without interest, the majority of people considered it a novelty. It took almost thirty years to implement Islamic banking in practice.""In the past three decades there has been a rapid rise in the implementation of Islamic finance both in the East and the West, as more and more institutions develop products and offer services."The development of the Islamic Finance (IF) industry is closely linked to the research pursued in its field. As soon as new theories are generated by researchers, the industry picks them up and implements them. And as soon as the industry encounters new problems, they turn to the researchers to find a way to overcome them," he said. "A closer look at the relationship between research and the industry makes several trends apparent. Islamic finance and economics (IFE) is unique because of its interdisciplinary nature. The field stands at the intersection of economics, finance, religion, area studies, law, and sociology. Among the people who conduct research in this field are economists, who conduct empirical and theoretical studies that provide a solid foundation for the field. There are also financial professionals who address the practical problems faced by the field through case studies, product development, and business plans. There are Shariah scholars who provide the religious foundation based on established sources, such as the Quran, hadith, ijtihad, and the practices instituted by earlier scholars. They endeavor to translate and rationalise the long-standing practices into contemporary usage.He said: "There are also legal professionals who spend a great amount of time fitting financial contracts into the current legal frameworks. Because researchers come from such varied backgrounds, the ongoing research activities in the field are diverse, ranging from doctoral dissertations to articles published in popular journals to conference papers, and they deal with a vast array of subjects, from financial instruments all the way to the religious basis of Islamic banking. Institutional trends reveal the growth and development of different organisations that in turn reflect the various areas of knowledge deemed necessary for building and supporting the Islamic finance industry."He added: "While nations such as Pakistan and Malaysia are important centers of IFE research, the large volume of published work, particularly in the form of journal articles, comes from outside those regions. A closer look shows that the overwhelming majority of these journals stem from Europe (including the United Kingdom), which has nearly twice as many publications as the United States. Pakistan and Malaysia are respectively the third and fourth largest contributors, but remain far behind the United Kingdom in terms of sheer volume of publications. This situation is changing now that numerous magazines and journals exclusively devoted to Islamic finance news are being published in many different parts of the world. This new development has completely changed the landscape of the research output and is currently shifting the major publications centers toward the Middle East and Asia." - (Bahrain Tribune, 14 Oct 07)

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Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

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