Latest from GIFC

Sunday, 25 December 2016

Islamic Banking Products and Challenges in Nigeria

In January 2012, the Central Bank of Nigeria granted Jaiz Bank an approval in principle to operate as a regional interest-free bank in northern Nigeria.  As a result of that, Jaiz bank became the first and the only full-fledged Islamic banking in Nigeria.  Islamic banking is based on the principles of profit and loss sharing.
Aliyu Abdullahi is an Abuja-based businessman who is into real estate and importing and selling of inverter generators. He is a beneficiary of Jaiz bank loan called contract financing.  He has been a customer of Jaiz Bank since 2013; he mentioned that he heard about Jaiz bank through advertisement and through Jaiz bank outreach to people through the mosque. Abdullahi is currently working on a project with Jaiz bank to develop their staff housing, and he got sixty million naira loan financing from Jaiz bank for his project.
“They fund the project and charge me money because it is a short term loan for duration of six months,” said Abdullahi. One thing that veered Abdullahi towards Islamic banking is the principles of profit and loss sharing which many clients like him perceived to be considerate. He said Jaiz bank opens door for him to do other things and also provided him with layers of extra transactions and offered him products ranging from home, auto and business financing, unlike the practice at conventional bank where Abdullahi says “customers are tied to the banking terms and conditions.”
According to Mr. Muhammed Nurul Islam, a manager at Jaiz bank, the bank offers what is called a mudaraba (profit- and loss-sharing deposit). And Jaiz bank does not finance any customer without a purpose; he  explain further that the primary means of Islamic finance are based on trading, and the bank trading activities are Sharia-compliant investments with the money deposited by customers. The customers and Jaiz bank share the risks and profits between them.
Moreover, Nurul Islam said  Jaiz bank does not charge interest, but the bank does make profit from helping customers to purchase a property by using what is called Ijara: ( lease to buy)  or Murabaha (cost-plus-sale)  scheme.  In accordance with an Ijara scheme, the bank makes money by charging the customer rent, however, with a Murabaha scheme; a price is agreed at the outset, which is often more than the market value.  They described this profit as a reward for the risk that the bank is undertaking.
Like any other Islamic banking, Jaiz bank is structured to retain a clearly differentiated status between shareholders capital and clients’ deposits in order to make sure profits are shared correctly. In 2012, Jaiz bank started with three branches namely in Abuja, Kaduna, and Kano. Aside Jaiz bank there are two international banks in Nigeria that also got license to operate a window of Islamic banking from the Central Bank of Nigeria, they are to conduct banking operations based on the system of Islamic Shariah law.  The banks are Stanbic IBTC Bank, and Sterling Bank Plc. They offered Islamic Finance Services and they are not full-fledged Islamic bank like Jaiz bank. The Central Bank of Nigeria recapitalization policy in 2004 required Deposit Money Banks minimum capital base of 25 billion naira required to obtain banking license to operate Islamic bank.
A new customer of Jaiz Bank is AbdulMuminu Shehu, a civil servant who works with the Federal Ministry of Works, in Abuja. Shehu opened an account with Jaiz bank in early June.  He got introduced to Jaiz bank through newspapers and billboards advertisements.
Shehu said he has a Jaiz bank debit card, and he is making use of Jaiz bank online services for his transactions. 
However, in the Jaiz bank provisions on the rules of Islamic finance, profit and loss also apply to foreign currency savings and the bank added that it is not responsible for foreign currency transaction exchange risks. 
According to the regulation of Central Bank of Nigeria, Islamic banking such as Jaiz must have an advisory committee to apply certain criteria of trustworthiness. The Bank’s Advisory Committee of Experts meticulously review the proposed products of Islamic bank to ensure they are Shariah compliance so that they will satisfy the overall objectives of Shariah in terms of bringing benefit and eliminating harm to the society as well as protecting the interest of all stakeholders.  Dr. Monzer Kahf, who is the Chairman Advisory Committee of Experts for Jaiz Bank, and also a professor of Islamic Finance at The Qatar Faculty of Islamic Studies under the umbrella of Hamad Bin Khalifa University, mentioned that the experts advised the bank on the contracts made from the Sharia point of view not from the commercial point of view. “We offer advice on the Shariah aspect.”  He said.
Dr. Kahf also said that according to the regulation of Central Bank of Nigeria, a member of the advisory committee of experts of Jaiz Bank or any other Islamic bank cannot be on the board of another Islamic bank or finance in Nigeria as an expert.  In essence, they cannot be an expert in more than one bank.
Dr. Kahf said under Jaiz Islamic banking arrangement a depositor becomes partner with the bank, and they shares liability together with the bank. He called the depositors dormant partners and they trust Islamic banking to deposit their money for them.  He said money is not an asset in Islam which is ethically permissible to earn a direct return.  Dr. Kahf continued that Islamic bank does not lend money in the real sense of it because there is no real lending in Islam. He said all “lenders” like Jaiz bank  obtain ownership interests in the assets  that they finance,  by obtaining an equity, or ownership , interest in a non-monetary asset enables the lender to also participate in the sharing of the risk.
One of the reasons why Isah Sani a taxi driver in Abuja transferred his money to Jaiz Bank about a year ago was because he thought their service was outstanding compared to conventional banks in Nigeria. “Jaiz bank is safer because of my experience with the First Bank via my branch at Mararaba,  I walked up to my branch ATM to withdraw my money, in fact; the machine sent an error signal to me including a receipt of payment while in reality I did not receive anything.  That is why I left the First Bank.”
Coming from a Muslim background has been an important reason why some felt they needed to open an Islamic bank account because it was a religious preference.   AbdulMuminu Shehu, a civil servant, said, “As a Muslim, I felt I needed to open an Islamic bank account and Jaiz been the first of its kind, I decided to take the opportunity of opening one.”
 According to Professor Ahmad Bello Dogarawa of the Department of Accounting at Ahmadu Bello University in Zaria, Islamic banking in Nigeria will prevent the ring of monopoly that conventional banks are enjoying in Nigeria, and it will, in turn, prevent banks from charging prohibitive interest rates as well as hidden charges.
Dogarawa who is also on the Jaiz bank Shariah advisory committee board of experts said Jaiz bank products are interest-free, and devoid of gambling and unacceptable risk, and are of benefit to investors and customers. Dogarawa discussed the untapped business potential in Nigeria that Islamic banking will generate. He cited the 2011 Central Bank of Nigeria report that said a total of 39.2 million adult Nigerians (46.3 percent) of Nigeria’s population were financially excluded in 2010.
The analysis revealed further that in 2010,  54.4 percent of the excluded population were women, 73.8 percent were younger than 45 years, while 34.0 percent had no formal education, and 80.4 percent resided in rural areas. Northern Nigeria is further disadvantaged, with 68 percent of adults excluded in both the North-East and North-West regions.  
As Dogarawa put it, “Financial exclusion is voluntary where non-users have access to financial products and or services but decide not to use them because they do not need them or because they do not want to use such services due to religious, cultural and other reasons.”
Dogarawa opined that voluntary exclusion due to religious belief has been a phenomenon among Muslims which constitute slightly more than 50 percent of Nigeria 170 million populations.  And he is of the view that Islamic banking has the potential to tap a large chunk of the savings and businesses belonging to Muslims and non- Muslims in the country who voluntarily exclude themselves from financial services due to religious and ethical reasons.
Certainly, Islamic banking also has appeal to students such as Aisha Abubakar who got introduced to Jaiz bank through her brother.  She said she gave up conventional bank and opened Jaiz Islamic bank account because she intends to use it for her future savings. Not all   Jaiz bank customers are Muslims, the bank also has some Christian customers, an anonymous Abuja-based businessman and a Christian customer of Jaiz bank who spoke for this interview said his friend car and mortgage were financed by the Jaiz bank. The anonymous Christian customer also explained why he decided to bank with Jaiz bank. “It is always better to bank with Jaiz and basically for some of us who wants to do business, although I am a Christian, when we came into the bank to see how the finance operations are being done and from our findings, we saw that all process are open not subject to terms and conditions. When Jaiz bank offers you its financial services, you know the time it is expiring, it made life easier.”
According to Jaiz bank financial disclosure in 2014,  Jaiz bank witnessed year of remarkable growth with total assets moving in double digits by about 24 percent from ( 33.9 billion naira) in 2013 to 42 billion naira in 2014 while total income increased by 220 percent.
One of the challenges for Islamic banking in Nigeria is to make sure they are not mixing funds meant for Islamic investment with interest based operation such as the electronic payment mandate for the production of the Permanent Voters Card that The Independent National Electoral Commission (INEC) paid to the contractor ACT Technologies Limited, in 2013 and 2014 through Jaiz bank and the conventional bank known as the First City Monument Bank.
According to Dogarawa, funds meant to be used for Shariah-compatible investments are expected not to be mixed with those of non-Islamic investments in order to satisfy the important principle of sanctity and moral purity of all transactions for Islamic financial institutions. “The Central Bank of Nigeria has clearly spelled out this requirement in its guidelines for non-interest financial institutions in Nigeria.  All the banks operating Islamic banking windows in Nigeria has the duty to ensure compliance with that requirement. However, studies have found that generally for conventional banks that operate Islamic banking window across the globe, adherence to this requirement is sometimes difficult.”
Regulatory challenges are another issue facing Islamic banking in Nigeria.  Banking regulations in Nigeria works on a market-driven model, and the institutional and legal framework for the banking system in Nigeria are structured in the line of the conventional financial system, and the enforcement of Islamic banking operations in the court of law would pose a problem without implementing Islamic laws in Nigerian legal system.
There are some misconception that Islamic banking believes in redistribution of wealth and income. But scholars like Dogarawa and Kahf explain that Islamic bank support wealth creation, enhancement, management and distribution. According to them, Islamic banks often extend benevolent loans called (Qardul Hassan) to deserving members of the society from deposits that are not meant for investment with the permission of depositors of such funds in order to facilitate wealth and income distribution. Islamic bank like Jaiz also encourage and remind Muslim investors and shareholders to give out what is called Zakat from their wealth. (Zakat is obligatory annual payment under Islamic law on certain kinds of property for charitable and religious purpose).
Finally, I wondered why Jaiz bank like most Islamic banks doesn’t have a woman on its advisory board of experts. And why are Jaiz bank directors that believe in the ethos and value system of Islam, interest-free banking are among the highest paid bankers in Nigeria?
 Some critics pointed out that Islamic banking only created a monetary world with claims on claims of assets rather than used money for production of physical assets. However, Dogarawa disagrees, “The modus operandi of Islamic banking knows that realism is a unique feature of Islamic banking. Islamic banks deal with real assets or products. On the contrary, conventional banks largely create debt and deal with fictitious, in-existent assets.”

Ademola Bello, the author of this article, lives in New York City. Salamatu Sule in Abuja also contributed reporting.
Source: Sahara Reporters/25 December 2016
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Saturday, 2 April 2016


Tehran—The Iranian Ministry of Finance issued IRR 5 trillion of four-year lease-based Sukuk on 16 March. Reuters reports that the bonds were sold through Iran Fara Bourse, Tehran’s over-the-counter market. The issue marks the first use by the Government of Iran of such bonds. Previously, in September 2015, another first had been notched up with the issuance of some $295 million in Islamic Treasury Bills on Iran Fara Bourse.

In a statement at the time, Amir Hamooni, CEO of Iran Fara Bourse commented, “Once sanctions are lifted by the early 2016, dollar or euro-denominated sukuk will be issued for an array of investors piled up to tap into Iran’s lucrative market.”

Deputy Economy Minister Shapour Mohammadi noted at the time that the Iranian Government is planning to continue issuing Islamic bonds, including T-bills. Reuters cites expectations that the Government will issue up to IRR 60 trillion in T-bills in 2016. “Banks could benefit from the debt market as a form of collateral, if the central bank gives its approval,” Mohammadi said last year. “We intend to introduce a law in 2016-17 to enable executive enterprises to accept these securities as credit or trade them at the bourse.

(Pakistan Observer / 31 March 2016)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Malaysia: Slower growth for insurance, takaful sectors, says RAM Ratings

KUALA LUMPUR: RAM Rating Services expects growth in the Malaysian insurance and takaful sectors to moderate in 2016 amid the challenging landscape and uncertainties in the financial markets.

The ratings agency said on Thursday against its GDP forecast of 4.4% for 2016, gross premiums were projected to expand about 5% for life insurance, 2%-3% for general insurance and 4%-5% for takaful contributions.

“Despite the likelihood of slower momentum in the near term, the industry’s mid to long-term outlook remains favourable given the low insurance penetration rate, rising consumer awareness and greater efforts in product innovation and distribution,” it said.

RAM Ratings said insurers and takaful operators’ capitalisation levels and reserves remained robust and the industry is supported by a sound and prudent regulatory framework. 

“Against this backdrop, we have maintained a stable outlook on the credit profiles of our rated insurers and takaful operators. 

“Over the next few years, the operating landscape will evolve with regulatory-driven liberalisation. The detariffication of motor and fire insurance – to be implemented in phases beginning this year – bodes well for the sector as premiums will gradually commensurate with underwriting,” it said. 

RAM Ratings said the life and family takaful sectors would see greater operational flexibility as initiatives under the Life Insurance and Family Takaful Framework were gradually implemented. 

It pointed out these reforms might result in some short-term uncertainty for insurers and takaful operators during the initial adjustment period but they would be positive for the long-term growth and efficiency of the industry. 

In 2015, insurers and takaful operators were not spared the fallout from slower economic growth and subdued consumer sentiment. 

To recap, gross premiums in the general insurance segment rose only 1.7% (2014: 6.5%) on-year to RM15bil. Life insurance premiums grew 5.4% (2014: 7.7%) to RM37.4bil. 

Although family takaful continued to expand at 8.0% (2014: 4.4%), growth in the general takaful segment eased to 6.0% (2014: 13.3%), ending the year with RM7.0bil and RM2.3bil of gross contributions, respectively. 

Overall, the sector’s profit ebbed 13.8% as benefits and claims as well as commissions and management expenses outpaced the increase in premiums/contributions and investment returns fell amid a volatile market. 

(The Star Online / 31 March 2016) 
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Thursday, 31 March 2016

SECP issues directive on life insurance, family takaful

ISLAMABAD (APP) – The Securities and Exchange Commission of Pakistan (SECP) issued a directive to life

insurance and family takaful sector on product illustrations through a Statutory Regulatory Order (SRO).

Life insurance and family takaful products are long-term financial protection and savings vehicle for the individual policyholders, a statement issued by the SECP said here on Wednesday.
These products are long-term in nature, typically ranging over 10 to 20 years. Life insurers use product illustration to describe the life insurance policy benefits for each future policy year.
Hence, the product illustration is an integral part of the overall sales process for life insurance and family takaful policies.
The existing Guidelines of 2009 brought about significant improvement in terms of standardization of formats and calculation methodologies.
However, certain subsequent developments in the life insurance market have made it necessary to upgrade the existing Guidelines into a directive, among most important, such as bringing enforceability to the requirements to be placed on insurers and compulsory use of Urdu in addition to English in order to enhance policyholders’ understanding.
Additionally, the proposed directive will be a landmark step towards using real, i.e inflation adjusted rate of returns in projection of savings products.
The new directive have also brought the investment performance document into the regulatory ambit.

The SECP believes that the new directive will enhance policyholders’ understanding about insurance products and appropriately deciding the amount of regular premiums required in relation to identified financial protection needs.
(Daily Pakistan / 30 March 2016)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Qatar International Islamic Bank plans Tier 1 Sukuk issue

The meeting delegated the bank’s board of directors' to decide the size of each issuance ,terms and conditions and issuance currency.

Doha-based Gulf Times quoted QIIB CEO Abdulbasit A al-Shaibei as saying the Sukuk would be issued before the end of April to boost the bank’s capital ratio. 
(C P I Financial / 30 March 2016)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Tuesday, 29 March 2016

Malaysia Building Society becoming Islamic after failed mergers

[KUALA LUMPUR] After two failed merger attempts with Islamic banks, Malaysia Building Society Bhd is opting to transform into a Shariah lender by itself.

MBSB has stopped offering conventional loans and sees more room for growth in Islamic services, chief executive officer Ahmad Zaini Othman said in an interview on Monday. The mortgage provider and consumer lender, whose net income plunged 75 per cent last year, ended discussions with Bank Muamalat Bhd in February after a proposal to combine with CIMB Group Holdings Bhd and RHB Capital Bhd was called off in Jan 2015.
"MBSB's plan is not surprising as many see Islamic finance as the way forward," said Badlisyah Abdul Ghani, president of the Chartered Institute of Islamic Finance Professionals in Kuala Lumpur and the former CEO of CIMB Islamic Bank Bhd.

"People are not only wanting banks to provide Islamic products but are demanding them." Malaysia, which pioneered Shariah finance in the 1980s, aims to have 40 per cent of its banking assets complying with the religion's ban on interest by 2020 from 26.8 per cent at the end of last year.
A global Islamic population that's expanding faster than non-Muslims is driving growth in Shariah-compliant finance, with Ernst & Young LLP predicting the industry's worldwide assets will double to US$3.4 trillion by 2018 from 2013.
'Right Move'
Around 85 per cent of MBSB's outstanding loans are already Shariah-compliant and credit growth this year should be around 6 per cent to 8 per cent, in line with the industry, Mr Ahmad Zaini said. The company isn't looking at any other mergers for now and will maintain its focus on government contracts, particularly in the development of affordable housing, he said.
"Sustaining asset growth, while maintaining low operational costs and product innovation shall be our medium-term plan."
MBSB is 65 per cent owned by Employees Provident Fund, Malaysia's largest pension fund. Its share price fell 39 per cent to RM1.34 over the past year and net income dropped to RM256.7 million (S$88 million) in 2015 from RM1.02 billion in 2014. The Kuala Lumpur-based company said in a Feb 24 filling to the stock exchange that the drop was due to higher allowances for impairment losses on loans.
MBSB had RM34.1 billion of loans outstanding at the end of 2015 and RM41.1 billion of assets, according to data compiled by Bloomberg, and is planning to raise as much as RM2 billion from a rights issue. The company is already in compliance with Malaysian financial reporting standards and is stepping up efforts to adhere to banking standards, Mr Ahmad Zaini said.
The yield on the MBSB's sukuk due December 2021 fell 10 basis points this year to 4.83 per cent, according prices compiled by Bloomberg. The company, which last sold Islamic bonds in October, doesn't have any plans to sell more debt at this point, Mr Ahmad Zaini said.
"MBSB is making the right move as it already has the Islamic infrastructure in place," said Mohamed Azahari Kamil, president SEGi University & Colleges in Selangor, who was formerly Asian Finance Bhd's CEO.
"There's still a lot of potential for MBSB to be involved in retail and corporate Shariah financing.

(Banking And Finance / 29 March 2016)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Jordan to issue Islamic sukuk worth JD250m

AMMAN — An issue of Islamic sukuk (bonds) worth around JD250 million is expected in the second quarter of 2016, Central Bank of Jordan Deputy Governor Maher Sheikh Hassan said on Monday.

“We have completed all the legal and the legislative measures for the issuance of the Islamic bonds. We are in the final stages of some more minor steps and we are then ready to conduct the sukuk issue any time,” Hassan told The Jordan Times on Monday.

An Islamic Sharia-compliant issuance totalling around JD150 million will be issued to cover the purchases of the National Electric Power Company, while another worth JD100 million will be conducted for the benefit of the Water Authority of Jordan.

“A company was registered for the purposes of the issuance of the Islamic bonds as required by law and we expect the issuance to take place in the second quarter of this year,” said the official.

In 2012, Parliament passed the Islamic Finance Sukuk Law to allow both public and private entities to issue Islamic bonds in dinars and in foreign currencies. In April this year, the government chose the Islamic Corporation for the Development of the Private Sector, an arm of the Jeddah-based Islamic Development Bank, to support the country’s debut for the planned domestic sukuk offering.  

(The Jordan Times / 28 March 2016)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Sunday, 27 March 2016

First Islamic banking center opened in Russia's Kazan

AhlulBayt News Agency - Russia's first center of partnership (Islamic) banking was opened today in Kazan. It will operate in full compliance with the principles of partnership funding, which are widely used in many countries of Southeast Asia and the Middle East.

The opening of the center was attended by the President of the Republic of Tatarstan, Rustam Minnikhanov, the first Deputy Chairman of the Bank of Russia, Alexei Simanovsky and the Mufti of the Spiritual Directorate of the Muslims of Tatarstan, Kamil Samigullin.

"We live in difficult times, difficult economic circumstances force us to look for new ways," the head of the republic said.

The center was opened in the framework of a cooperation agreement between the Spiritual Directorate of the Muslims of Tatarstan and Tatagroprombank, TASS reports.

The working group, which is headed by the first deputy chairman of the Central Bank, Alexei Simanovsky, drafted a "road map" for the development of partnership banking and related financial services in the Russian Federation in 2016-2017.

The center will conduct investment, leasing and trading activities. It will share financial risks with its clients.

The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA, Konstantin Korischenko, said in an interview with a correspondent of Vestnik Kavkaza that Islamic banking is very actively developing form of financing.

"The only difficulty in the Russian context is that the banking does not quite fit in with the Russian Civil Code. Since the principle of payment for repayment of resources does not correspond to the basic principle of Islamic finance, which proposes a joint profit from economic activities. So active discussions are under way if changes in Russian legislation are possible. There are even proposals for a regulatory change, but unfortunately the problem has not been solved yet," the expert said.

The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA recalled that there is only one kind of legislation in Russia, which is the legislation of the Russian Federation, which, unfortunately, does not support such a type of financing now. "So the problem is how legal contracts between the parties will be signed." So currently research and consulting functions of the center will be more in demand," Konstantin Korischenko concluded.

The president of the Association of Russian Banks, Garegin Tosunyan, expressed opinion that "every banking service is in demand here," so "we should welcome this practice." "This type of banking, in terms of the specifics of provided services, may be attractive for a particular group of customers," he said.

The expert also noted that such banks will not be radically different from the usual, but they will be characterized by "forms of specialization, in which preference is given to only investment programs and approaches, while putting a particular emphasis on the cultural and ethical aspects of business.

(ABNA / 27 March 2016)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Malaysia: Sime Darby raises RM2.2b from sukuk issue

KUALA LUMPUR, March 24 — Sime Darby Bhd has raised RM2.2 billion from the issue of a perpetual non-call 10-year subordinated sukuk to largely refinance its debt obligations.

President and Group Chief Executive Tan Sri Mohd Bakke Salleh said the perpetual sukuk was part of the company's deleveraging efforts and it is the first globally based on shariah principle of Wakalah.
“We are encouraged by the strong support shown by investors and this also indicates the market’s continued confidence in Sime Darby,” he said in a statement today.
The sukuk offering was over 1.8 times oversubscribed from its initial target, allowing Sime Darby to upsize and price the offering at the final yield of 5.65 per cent per annum.
As at mid-day break, Sime Darby's share price was four sen lower at RM7.95 with 471,500 units transacted.

( Malay Mail Online / 24 March 2016)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Saturday, 26 March 2016

Malaysia: Sime issues RM2.2bil sukuk

PETALING JAYA: In a move to manage its debts, Sime Darby Bhd has issued RM2.2bil in Islamic debt papers at a final yield of 5.65%, which is about 179 basis points above similar-tenure Malaysian Government Securities.

The plantation heavyweight has issued a sukuk wakalah offering with a 10-year perpetual non-call tenure, which it said has been oversubscribed by 1.8 times.
This is the first call of an RM3bil programme that has been assigned a rating of AAIS by Malaysian Rating Corp Bhd (MARC).
Sime Darby said that MARC has accorded 50% equity credit on the issuance, which fits well with the group’s deleveraging initiatives.
It told the exchange that the fund-raising exercise was to manage its gearing level.
Sime Darby said the issuance has received strong order book via a limited book-build, allowing the company to upsize and price the offering at the final yield of 5.65% per annum.
Proceeds raised from issuance under the sukuk programme will go towards refinancing the group’s debt obligations and working capital requirements, it said.
The sukuk is the largest perpetual sukuk issuance globally by a non-bank, the largest ringgit perpetual sukuk issuance so far, and the first perpetual sukuk globally based on the syariah principle of wakalah.
Sime Darby president and group chief executive Tan Sri Mohd Bakke Salleh said the perpetual sukuk “is part of our deleveraging efforts”.
“We are encouraged by the strong support shown by investors and this also indicates the market’s continued confidence in Sime Darby,” he said in a statement.
Maybank Investment Bank Bhd (Maybank IB), which is the principal adviser, lead arranger and lead manager for the sukuk programme, said its participation in the transaction was holistic, whereby it delivered complete and end-to-end solutions.
“It is our privilege to work with Sime Darby again and jointly introduce the innovative sukuk wakalah to the market.
“The innovative sukuk structure, the first of its kind for an issuance of this nature, will further enhance Malaysia’s position as a global Islamic financial hub, and is a testament to our leadership in the global sukuk space,” said Maybank Kim Eng Group and Maybank IB CEO John Chong in a separate statement. Sime Darby had been under pressure to reduce its gearing following the acquisition of New Britain Palm Oil Ltd for RM6bil in March 2015.
In August last year, StarBiz reported that Sime Darby was looking at a RM6bil rights issue.
However, the proposal reportedly did not have the blessings of Sime Darby’s controlling shareholder, Permodalan Nasional Bhd.
Earlier this month, Moody’s Investors Service downgraded Sime Darby’s issuer rating and debt rating on sukuk issued by the company’s unit Sime Darby Global Bhd to Baa1from A3 with a “negative” outlook on the ratings.
It had also downgraded the senior unsecured medium-term note programme rating of Sime Darby Global Bhd to (P)Baa1 from (P)A3.
It said the downgrade reflected the extended period of weakness in the company’s financial profile after delayed plans to reduce its debt, and deteriorating cash generation across its key business segments.

Last month, Standard & Poor’s Ratings lowered its long-term corporate credit rating on the conglomerate, downgrading it to BBB+ from A- with a negative outlook.
(The Star Online / 25 March 2016)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Malaysia: Takaful industry records growth in general and family sectors

KUALA LUMPUR: The Takaful industry recorded positive growth in both general and family takaful businesses in 2015, said the Malaysian Takaful Association (MTA).

Its chairman Ahmad Rizlan Azman said the general takaful business registered gross written contributions of RM2.3billion, an increase of 6.3 per cent over the same period in 2014.

Meanwhile, he said the family takaful business registered RM3.64 billion new business contributions in 2015, an increase of 3.9 per cent compared to 2014.

"The takaful industry is currently focused on the removal of Motor and Fire tariffs that is set to change the landscape of the general takaful industry seeing that these two classes combined make up the biggest component of the business," he said in his speech at the Takaful StarNite 2016 held at the Royale Chulan Hotel here today.

Currently in its sixth year running, the annual dinner and awards night was jointly-organised by MTA and Takaful practitioners in Malaysia to celebrate the achievements of the industry as well as the achievers who had performed outstandingly well last year.

The event was graced by the Sultan of Perak, Sultan Nazrin Muizzuddin Shah, the royal patron for Malaysia's Islamic Finance Initiative.

Ahmad Rizlan called on members to get acquainted with the new life Insurance and family takaful framework guideline, citing that it would become the new mantra for the industry as it requires improvement on efficiency and effectiveness of distribution channels and promote product innovation.

"Technology and innovation have fundamentally changed the way the businesses operate for many industries nowadays. I believe that the Takaful sector is no exception."

Ahmad Rizlan said the emergence of so-called online intermediaries or cyber agents in Malaysia, such as iMoney, Loanstreet, Ringgitplus and Insurance finder have set the scene in comparing and promoting financial products online.

"They are capable of explaining the complexity of Takaful in layman terms with greater ease using infographics and catchy articles.

"They provide facts and figures on how insurance and Takaful should be looked from customers' perspectives," he added

A total of 20 award categories were presented, including the Best Takaful Operator - Bancatakaful Business (HSBC Amanah Takaful (M) Bhd bagged the award), Best Takaful Operator - Agency Family Takaful Business (won by Prudential BSN Takaful Bhd), Best Bancatakaful Partners - Financial Institution (HSBC Amanah Takaful (M) Bhd), Best Takaful Operator General Takaful Business (Etiqa Takaful Bhd), Best Takaful Agency - Inter MTA member companies, Young Takaful Manager (Prudential BSN Takaful Bhd), and Corporate Social Responsibility (Etiqa Takaful Bhd).

(News Straits Times Online / 24 March 2016)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Thursday, 17 March 2016

Malaysia: Axiata US$500m Sukuk gets strong response

KUALA LUMPUR: Axiata Group Bhd’s 10-year US$500mil Sukuk received strong response with a final book of over US$900mil orders, it said.

The telco company said on Wednesday this was a bid-to-cover ratio of over 1.8 times, and a final yield of 4.357%.

“The bookbuilding exercise commenced with an initial price guidance of US Treasuries (“UST”) + 2.60% area. Demand for the Sukuk issuance led to a final price guidance of UST + 2.45% area ± 0.05% at Asian close/London mid with books in excess of US$1.4bil,” it said.
Axiata said the issuance attracted interest from a diverse group of Islamic as well as conventional investors, comprising asset management companies, financial institutions, insurance companies, and sovereign wealth funds, with participation from 64 accounts.

It said the Sukuk would be issued by its Malaysian-incorporated special purpose vehicle, Axiata SPV2 Bhd. 

The Sukuk Issuance is the third issuance under Axiata’s multi-currency Sukuk issuance programme with an aggregate nominal value of US$1.5bil (or its equivalent in other currencies), established on July 17, 2012. 

Proceeds of the Sukuk Issuance will be utilised to fund the proposed acquisition of Ncell Pvt. Ltd. 

The Sukuk issuance has been assigned ratings of Baa2 and BBB by Moody’s Investors Service Inc. and Standard & Poor’s Ratings Services, respectively.
The Sukuk issuance, which will be listed on Bursa Malaysia (under the Exempt Regime) and the Singapore Exchange Securities Trading Ltd, is structured based on the Shari'a principle of Wakala.

The underlying assets are 100% airtime vouchers, representing an entitlement to a specified number of airtime minutes on the mobile telecommunications network of subsidiaries of Axiata for on-net calls.
Axiata’s president  and group CEO Datuk Seri Jamaludin Ibrahim said, “The strong participation from international investors for this Sukuk issuance is validation of our solid fundamentals and we are pleased that investors are supportive of our aspirations as a regional telecommunications champion”. 
He added this Sukuk Issuance, the third drawdown off Axiata’s US$1.5bil multi-currency Sukuk issuance programme, continued to demonstrate Axiata’s ability to access the debt capital markets as it saw strong cross-border participation from a wide and diverse base of investors, with 71% from Asia, 11% from Europe and 18% from Middle East. 
“Charting a new benchmark, we have taken this opportunity to build Axiata’s curve with a 10-year issuance maturing in 2026, in line with our long-term strategy and growth plans. Axiata will continue to look towards opportunities in the capital markets to strengthen our capital base. 

“Through Ncell, Axiata will be entering the fast-growing brownfield market of Nepal with a controlling stake of its number one telecom operator. As a rare and opportunistic asset, 

“Ncell would be immediately accretive to Axiata’s financials when consolidated. At the same time, Axiata’s regional footprint will expand to a total of 10 countries in Asia, strengthening its position to further unlock shareholder returns and sustain long-term growth.” 

CIMB Bank (L) Limited, Deutsche Bank AG, Singapore Branch and HSBC Amanah Malaysia Bhd were the joint arrangers of the Sukuk programme.

CIMB, Deutsche Bank, The Hongkong and Shanghai Banking Corporation Ltd and HSBC Amanah were the joint lead managers and bookrunners for the Sukuk issuance.

(The Star Online / 16 March 2016)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:
Upcoming Events on Islamic Finance, Wealth Management, Business, Management, Motivational Alfalah Consulting, KL-Malaysia:


Register Online . Register Today

Islamic Financial Planning & Wealth Management by Ahmad Sanusi Husain