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Monday, 26 October 2015

Islamic banking, solution to Nigeria’s economic woes

Muhammadu Sanusi II, the Emir of Kano, has urged the federal government to introduce Islamic banking across the country.


He said it would be another way to the economy amid the effect of the decline in oil prices.
Speaking in Kano during a workshop on non-interest capital organised on Monday, Sanusi said huge potentials abound in Islamic banking.
Pointing out that Britain, South Africa, Cote D’voire had adopted Islamic banking, he wondered why Nigeria had not taken advantage of the benefits in the system.
He commended the Osun state government for adopting non-interest free capital market, urging Kano to take the same step.
Sanusi thanked the Securities and Exchange Commission (SEC) for organising a sensitisation programme on Islamic banking, saying the timing was accurate.
Kano State Governor, Abdullahi Ganduje, emphasised the importance of an interest-free capital market in a place like Kano, an economic hub.
(Daily Post / 21 October 2015)
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Malaysia aims to boost Islamic finance with new initiatives in budget

Malaysia is hoping new incentives for "ethical" Islamic bonds and home loans will strengthen the country's sharia-compliant investment market and lure more private players to one of the world's largest Islamic financial sectors.


The government announced the new incentives in the 2016 budget which was delivered in parliament on Friday, as Prime Minister Najib Razak doled out populist incentives to shore up support.
The government originally introduced the concept of "ethical" sukuk to finance "sustainable and responsible investment" (SRI) in projects such as wind and solar power generation or affordable housing, in 2013.
Sovereign wealth fund Khazanah [KHAZA.UL] sold 100 million ringgit ($23.7 million) of SRI sukuk in May this year but so far there have been no other issues in the ethical sukuk market.
In Friday's budget, Najib said Malaysia would cut taxes on issuance costs of SRI sukuk, and also that sharia-compliant loan instruments would be given a 20 percent stamp duty exemption when they were used to finance home purchases.
Other initiatives for the Islamic finance sector will be announced later, Najib said without elaborating.
Malaysia, with a mostly Muslim population, has been at the forefront of innovation in Islamic finance but has largely relied on state-linked firms to launch new products, while participation from corporations has been sporadic.
Last year, $74.9 billion worth of sukuk were issued from Malaysia but only $13.5 billion came from corporate issuers, according to data from Zawya, a Thomson Reuters company.
Attracting private sector firms has become more important this year because the central bank has shifted away from selling its own sukuk, causing total global issuance to drop by about 40 percent.

Also, low oil and commodity prices mean Malaysia may be in for years of slower growth, making it harder for Islamic banks and insurers, which remain smaller than their conventional competitors, to invest in developing products and expertise to narrow the gap.
(Reuters / 25 October 2015)
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Tuesday, 20 October 2015

Islamic Banking: Panacea for dwindling Global economy

Emir of Kano, Mallam Muhammadu Sanusi II has described Islamic Banking as the only panacea for the dwindling global economy as it will impact positively on many developing economies.


Sanusi said Islamic banking was conceived to serve as a force of mediation in circumstances where the need for bridging the deficit of infrastructure was most needed, adding that non-interest capital market could only flourish with the Islamic banking becoming fully operational.

Speaking at a high level regional round table workshop on non-interest capital for the North West region market held in Kano on Monday, the former CBN governor said for decades the global financial system had suffered in the face of inconsistencies in the implementation of viable economic policies in line with the best global practice.

He affirmed that allowing Islamic banking to hold sway would go a long way towards discouraging the forces of artificial economic stagnation.


(This Day Live / 19 October 2015)

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Challenges ahead for Islamic finance as crude prices drop

The fast-growing Islamic finance industry is facing headwinds from the oil price plunge amid rapid regulatory changes, and lack of integration, Standard and Poor's Ratings Services said on Monday.


"We think Islamic finance growth will drop to single digits in 2016 from between 10 per cent and 15 per cent over the past decade," S&P said in a report. The ratings agency said that such rapid growth had seen the Islamic finance industry exceed an estimated $2 trillion in value.
"But we now think the industry faces challenges from the decline in oil prices, changes in the global regulatory framework for banks and insurance companies, and its own fragmented nature," said S&P global head of Islamic finance Mohamed Damak.
However, Islamic finance will have the impetus to continue progressing and maintain some growth, S&P said. "We expect the industry will be worth $3 trillion sometime in the next decade. Islamic finance stakeholders' efforts and the industry's contribution to development of the real economy will likely fuel growth," said Damak.
Governments in core markets see Islamic finance as a tool to maintain their investment spending, somewhat countering the negative impact of oil prices on their budgets, the report said.
It added that regulatory changes could help the industry in resolving issues related to the lack of liquidity management instruments and applying more stringently its principle of profit and loss sharing.
"Standardisation of documents and Shariah ruling could enhance industry integration and free stakeholders' capacity to focus on innovation. This development is capturing the interest of major financial institutions, such as the International Monetary Fund and the World Bank, and some advanced countries," S&P said.
Islamic finance is widely recognised as an attractive growth sector for the international financial industry. Islamic funds under management are forecast to grow from $60 billion currently to at least $77 billion by 2019, while research suggests that latent demand could reach $185 billion in the same period.
According to the Thomson Reuters study, world Islamic finance market is set to almost double by 2020 from the current $1.81 trillion to $3.25 trillion, led by banking and Takaful assets.
A recent study entitled "State of the Global Islamic Economy 2015-16" said commercial banking contributes to about $1.34 trillion, while $33.4 billion is contributed by takaful insurance, while sukuks contribute to about $295 billion of the world Islamic finance market.
"It is growing at about 10 per cent per annum, with the significant concentration of wealth in Islamic banking," said Mustafa Adel, acting head of Islamic finance at Thomson Reuters, adding that commercial banking assets is projected to reach $2.6 trillion by 2020.
(Khaleej Times / 20 October 2015)
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Friday, 16 October 2015

Malaysia Sukuk seen picking up

KUALA LUMPUR: Malaysia’s two biggest banks are predicting a pickup in the country’s Islamic bond sales as companies try to refinance debt before the Federal Reserve raises interest rates.


Forecasts that the Fed will keep interest rates lower for longer have given local businesses a bigger window to refinance, according to Malayan Banking Bhd and CIMB Group Holdings Bhd.

MMC Corp, a Kuala Lumpur-based infrastructure firm, started marketing RM1.5bil (US$361mil) of syariah-compliant bonds to refinance non-Islamic loans this month, said managing director Che Khalib Mohamad Noh.

A successful sale by MMC will push local-currency issuance this quarter to RM3bil, nearly half the RM7.2 bil total during the previous three months. An index of Malaysian corporate sukuk yields rated AA- has declined this month after rising the most since 2008 last quarter, while the ringgit posted its biggest surge in 17 years last week amid a rally in emerging-market assets.

“Now is a good time for corporates to tap the market,” said Nik Mukharriz Muhammad, a Kuala Lumpur-based fixed-income analyst at the investment-banking unit of CIMB, Malaysia’s second-biggest lender by assets. “Issuers will be able to get better pricing” before the Fed raises borrowing costs, he said.

Khazanah Nasional Bhd, Malaysia’s sovereign wealth fund, kicked off third-quarter sukuk sales with a RM1.5bil offer last week that’s set to be issued on Oct 19, according to people familiar with the matter who didn’t want to be named as the information isn’t public yet.

The notes due 2022 were sold to yield 4.57%. Jimah Power East Sdn Bhd, a unit of state- owned utility Tenaga Nasional Bhd, is planning a RM10bil Islamic bond sale this month, people familiar with the offer said.

MMC, which has power, ports and construction divisions, hired RHB Investment Bank Bhd as the lead arranger and manager. The offer has been rated AA-, the fourth-highest investment grade, by Malaysian Rating Corp. 

(The Star Online / 15 October 2015)
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Malaysia: Islamic banking players urged to expand overseas

KUALA LUMPUR: The domestic Islamic banking industry players should be brave enough to tap into foreign markets to expand their businesses and grow the industry, says Datuk Dr Mohd Daud Bakar, group executive chairman of Amanie Advisors, syariah advisory firm.


Daud said that companies were too afraid to face the potential risks in the foreign markets.

"They are too obsessed with their own success stories and tend to focus on setting up their businesses only in Malaysia. They should use their expertise to explore outside market.

"In this segment, we have the experts and many countries hope that we bring our capital as well as expertise to set up a Malaysian bank," he told Bernama.

He said Malaysia has the capability to set up banks and companies offering Islamic banking products and services as it is the third biggest Islamic banking industry player in the world after Iran and Saudi Arabia.

Unfortunately, Daud said, Malaysian bankers were not keen, for whatever reason, to go out.

"This is a big failure because they should diversify the risks.

"When you are already a hit in Malaysia, definitely you are able to survive overseas ... investing overseas would offer new exposure and bring back the money.

"If they have businesses outside the country such as Dubai, it can give them advantages in terms of income contribution despite the ringgit's depreciation as the overseas operations use the countries' currencies," he said.

On the company's expansion plan, he said, Amanie Advisors was looking to enter new markets, such as Nigeria, India and Gambia, to provide syariah products and services due to the anticipated strong demand in the next three years.

"We are going to Morocco next week to organise a national event, 'International Participative Finance Forum Casablanca 2015'.

"Our startegy is to focus on new markets as there are less competition compared with the established ones... we want to be more active in the new markets," he said.

The homegrown syariah advisory firm also aimed to be more visible and impactful in the global industry after it won the 'Award of Islamic Economy Knowledge Infrastructure' by Global Islamic Economy Summit last Monday in Dubai, he said.

"We take the award seriously because it went through a one-year process to announce the winner and we do battle with 10-15 global established firms which have their own success stories.

"In order to maintain our standard, we will motivate our people and take on new initiatives to show how impactful we are in the market," he said.

Amanie Advisors specialises in Islamic finance solutions. It offers a wide range of services including syariah advisory and consultancy, training and research and development for institutional and corporate clients.

(The Star Online / 15 October 2015)
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Wednesday, 14 October 2015

Malaysia Sukuk Refinancing Window Opening as Fed Wavers on Rates

Malaysia’s two biggest banks are predicting a pickup in the country’s Islamic bond sales as companies try to refinance debt before the Federal Reserve raises interest rates.


Forecasts that the Fed will keep interest rates lower for longer have given local businesses a bigger window to refinance, according to Malayan Banking Bhd. and CIMB Group Holdings Bhd. MMC Corp., a Kuala Lumpur-based infrastructure firm, started marketing 1.5 billion ringgit ($358 million) of Shariah-compliant bonds to refinance non-Islamic loans this month, said Managing Director Che Khalib Mohamad Noh.

A successful sale by MMC will push local-currency issuance this quarter to 3 billion ringgit, nearly half the 7.2 billion ringgit total during the previous three months. An index of Malaysian corporate sukuk yields rated AA- has declined this month after rising the most since 2008 last quarter, while the ringgit posted its biggest surge in 17 years last week amid a rally in emerging-market assets.
“Now is a good time for corporates to tap the market,” said Nik Mukharriz Muhammad, a Kuala Lumpur-based fixed-income analyst at the investment-banking unit of CIMB, Malaysia’s second-biggest lender by assets. “Issuers will be able to get better pricing” before the Fed raises borrowing costs, he said.

Khazanah Nasional Bhd., Malaysia’s sovereign wealth fund, kicked off third-quarter sukuk sales with a 1.5 billion ringgit offer last week that’s set to be issued on Oct. 19, according to people familiar with the matter who didn’t want to be named as the information isn’t public yet. The notes due 2022 were sold to yield 4.57 percent. Jimah Power East Sdn., a unit of state-owned utility Tenaga Nasional Bhd., is planning a 10 billion ringgit Islamic bond sale this month, people familiar with the offer said.

MMC, which has power, ports and construction divisions, hired RHB Investment Bank Bhd. as the lead arranger and manager. 

The offer has been rated AA-, the fourth-highest investment grade, by Malaysian Rating Corp.

The company, controlled by Malaysian billionaire Syed Mokhtar Al-Bukhary, has a market capitalization of 7 billion ringgit and is forecast to post a net income of 450.5 million ringgit in 2016, up from an estimated 384.8 billion ringgit in 2015, according to the average estimate of analysts surveyed by Bloomberg. Its share price has rebounded to 2.30 ringgit since closing at a six-year low of 1.57 ringgit on Aug. 24 and 25.

MMC’s port subsidiary Pelabuhan Tanjung Pelepas sold 310 million ringgit of six-year sukuk at a coupon rate of 4.36 percent in January 2014. The securities last yielded 4.12 percent on Aug. 7.

The average yield on Malaysia’s AA- rated corporate bonds due 2020 fell to 4.973 percent on Oct. 7 after climbing 18 basis points last quarter to 4.977 percent, the highest since January 2012, according to an index compiled by Bank Negara Malaysia. Theringgit surged 6.8 percent last week.

Liquidity Flush

While borrowing costs have gone up, they’re still at a “decent level,” said MMC Managing Director Che Khalib.

“Our earnings outlook has improved and we think that there’s a good chance that we will get a rating upgrade,” he said. “The market is flush with liquidity and there’s a shortage of good quality paper.”

Malaysian banking assets that comply with Islam’s ban on interest expanded by an annual average of 17 percent in the five years through 2014 to 625.2 billion ringgit. Corporate ringgit sukuk sales, including Khazanah’s but not MMC’s, are at 33.1 billion ringgit so far this year, 35 percent less than the same period of 2014. The 7.2 billion ringgit of issuance in the third quarter was the least since 2010.

Malaysia’s expanding Shariah banking assets and a lack of good quality sukuk will ensure demand for MMC’s offer, said CIMB’s Nik Mukharriz.

There are 11.4 billion ringgit of Shariah corporate notes and 5.5 billion ringgit of Islamic and conventional loans set to mature by the end of March, according to data compiled by Bloomberg, which companies may choose to refinance before the Fed raises rates.

“Despite the volatility seen in the current market, yields are still attractive for issuers considering a sukuk issuance,” said John Chong, chief executive officer at Maybank Investment Bank Bhd., a unit of Malaysia’s biggest lender. “We expect to see pipeline deals continue to roll out.

(Bloomberg Business / 13 October 2015)
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Tuesday, 13 October 2015

Nigeria Urged To Tap Islamic Financial Resources

The Lord Mayor of the City of London, Alderman Alan Yarrow has urged the country to consider all sources of finance as a means for attracting investment.


In particular the Mayor during a trip to Nigeria was keen to highlight the City of London as a leading centre for Islamic finance and stated Islamic finance can provide substantial investment for Nigeria. He added Islamic financing was currently marginally more expensive when compared to conventional finance but this difference was expected to reduce as volumes increase within the Islamic financial market. The Lord Mayor suggested the North of Nigeria would in particular benefit from Islamic financial products.
Yarrow who met with financial sector regulators and operators including the Securities and Exchange Commission, CBN, Jaiz Bank Lotus Capital among other, in Abuja last week, said London with six Islamic banks and another 20 lenders currently offering Islamic financial products and services had the capacity to help Nigeria to deepen its Islamic financial system.
He said, “We want our Nigerian friends and partners to see London as Nigeria’s international companion whatever type of expertise is required. From looking at Nigeria’s legal framework, to helping to up skill your young, dynamic and ambitious population, London has the expertise, the variety and the capacity to help. And most of all, we offer the willingness.
“Only a few months ago, UK’s Chancellor of the Exchequer – which is really the name of our Finance Minister – stood beside me and the Governor of the Bank of England and he spoke about the importance of Islamic finance.
(Leadership / 12 October 2015)
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Bank Sohar reports profits on Islamic banking

Oman’s Bank Sohar reports net profits of OMR 396,000 for the period to end-September 2015 on Islamic banking, against losses of OMR 238,000 for the period to end-September 2014. AT the same time the bank showed a 12.89 per cent decline in net profit on conventional banking to OMR 20.896 million. Overall net profit was down 10.35 per cent at OMR 21.292 million.


(C P I Financial / 12 October 2015)
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