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Friday, 28 March 2008

Cagamas Signs Islamic Financing Facility With Bank Rakyat

KUALA LUMPUR, March 28 (Bernama) -- Cagamas Bhd expects to issue the first Islamic bonds under its Islamic financing facility arrangement with Bank Kerjasama Rakyat Malaysia Bhd next month, its president and chief executive officer Steven Choy said Friday.

With the agreement, the range of asset classes that can be sold or transferred to Cagamas is expanded to personal financing i-Aslah and pawnbroking ArRahnu/Az-Zahab.

This will provide Bank Rakyat and Islamic banking institutions with an avenue for asset/liability and risk management as well as an alternative source of funding.

"We will be issuing Islamic bonds out there to raise money in order to buy or purchase these assets from Bank Rakyat and other financial institutions. That's basically how it works," Choy told reporters after the signing ceremony with Bank Rakyat here.

"It's on the card and as and when Bank Rakyat requires," he said, adding that Cagamas has yet to finalise on the credit lines with Bank Rakyat.

Bank Rakyat is Cagamas' first participating institution in the sale/transfer of new asset classes, namely Rahn financing and Islamic personal financing.

"This is part of our initiative to increase the availability of Islamic finance instruments in line with the government's objective to increase the range of Islamic products available in the market," Choy said.

He said the new asset classes will enable Cagamas to expand its current business by offering more innovative and diverse Islamic products to Bank Rakyat and Islamic banking institutions apart from its existing Islamic house financing and hire purchase.

Since established in 1987, Cagamas, the second largest issuer of debts instruments after the government, has cumulatively issued RM210.9 billion of conventional and Islamic debt securities.

Choy said that half of the issuances were Islamic bonds.

Bank Rakyat's managing director Datuk Kamaruzaman Che Mat said the facility will provide an avenue for asset or liability and risk management as well as an alternative source of funding besides relying on deposits.

"It will give an additional source of fund plus for hedging purposes because this is fixed rate. Let's say three years or five years at a certain rate, which is a fixed rate. If there's any increase of rate in future, you can use this as a hedging instrument," he said.

Kamaruzaman said the bank will be able to give customers future financing at a more competitive rate when it has access to such funds.

As at end of last year, the bank's financing assets of pawnbroking ArRahnu/Az-Zahab was RM594.7 million while for i-Aslah, it stood at RM17 billion, he said.

On new products, Kamaruzaman said the bank has finalised its arrangement with MasterCard and expects to launch its Islamic credit card by July this year.

The bank also planned to launch a wealth management product this year, he added.

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
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