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Thursday, 28 February 2019

Unit amanah Islam (Islamic unit trust) - PMB INVESTMENT





DANA-DANA PATUH SYARIAH PMB INVESTMENT 🇲🇾
● PMB INVESTMENT menguruskan 15 dana Patuh Syariah yang dilaburkan dalam pasaran Malaysia dan ASEAN.
● PMB INVESTMENT adalah syarikat pengurusan dana Islam (IFMC) dengan sejarah peniagaan selama 52 tahun, bermula sejak 1967.
● Boleh melabur secara Tunai atau Skim Pelaburan Ahli KWSP (akaun 1).
● Rekod pulangan lepas yang memuaskan dan potensi pulangan cemerlang untuk pelaburan jangka panjang, insya Allah.
☆☆☆☆☆
Jika berminat melabur dlm dana-dana patuh Syariah PMB INVESTMENT Berhad atau ingin menjadi perunding, sila hantarkan pesanan (whatsapp) ke www.wasap.my/60192348786/PMBinvestment dgn menulis:
Pelabur/Perunding_Nama_Umur_Lokasi
Contoh: Pelabur Ahmad Ali 30 KL
Ahmad Sanusi - Pengurus Agensi/Perunding
PMB Investment Berhad
(Ahli kumpulan Pelaburan MARA Berhad)
Kuala Lumpur
🌐 www.pmbinvest.com.my
Sejak 1967...52 tahun
"Pengalaman Kami. Keyakinan Anda"
*Prestasi lepas bukanlah jaminan prestasi masa depan sesuatu dana unit amanah 

Fitch Ratings: Better Performance by Indonesian Islamic Banks but Challenges Ahead


Fitch Ratings-Jakarta-27 February 2019: Fitch Ratings says the Indonesian sharia banking sector's financial performance considerably improved during 9M18, reflected in better asset quality, higher profitability and stronger capitalisation. However, further development of risk management and corporate governance standards is key to improving its competitiveness with conventional banks.

The sector's non-performing financing (NPF) ratio improved to 3.2% (2017: 3.9%), the narrowest gap to conventional banks (2.6%) since 2013. This was mainly due to write-offs of legacy problem assets at the four largest sharia banks, which account for over 50% of the sector's assets. The NPF ratio is based on financing overdue by more than 90 days. 


Profitability improved significantly, reflected in a higher return on assets of 1.5% (2017: 0.8%) owing mainly to lower credit costs as a result of better asset quality. Nevertheless, it remains lower than the conventional banks' average of around 2.0%.


The Islamic banks' total capital adequacy ratio (CAR) rose to 21.3% (2017: 17.9%), helped by better profitability and capital raisings, including IPOs, at a few of the larger banks. This brought the CAR level closer to the conventional banks' average of 22.8%. Liquidity appears manageable, with the sector's financing-to-deposits ratio at 87.4%. This is much lower than the conventional banks' 93.8%.


Fitch expects financing at Indonesia's Islamic banks to continue to increase in double digits in 2019, supported by the sector's improved capitalisation and ample liquidity. However, we expect funding costs and asset quality in the sector to be pressured by higher domestic interest rates, although such challenges should be manageable for most banks.


The Islamic banks' total capital adequacy ratio (CAR) rose to 21.3% (2017: 17.9%), helped by better profitability and capital raisings, including IPOs, at a few of the larger banks. This brought the CAR level closer to the conventional banks' average of 22.8%. Liquidity appears manageable, with the sector's financing-to-deposits ratio at 87.4%. This is much lower than the conventional banks' 93.8%.


Fitch expects financing at Indonesia's Islamic banks to continue to increase in double digits in 2019, supported by the sector's improved capitalisation and ample liquidity. However, we expect funding costs and asset quality in the sector to be pressured by higher domestic interest rates, although such challenges should be manageable for most banks.Indonesia has the largest number of Islamic banks in the world, with a total of 75 banks at end-2018 consisting of 14 Islamic banks, 20 Islamic bank units and 41 Waqf banks. Indonesia's financial regulator, OJK, aims to increase the diversity and availability of sharia-compliant products as part of efforts to enhance financial inclusion. 


In the capital markets, corporate sukuk issuance only accounts for around 4% of the total corporate debt capital market, well below conventional issuance. However, Fitch believes that there is significant growth potential as issuers seek to diversify their funding sources and investors gain greater familiarity with Islamic debt.


Source: Fitch Ratings-Jakarta-27 February 2019

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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
Pelaburan Unit Amanah Islam: www.unit-amanah-islam.blogspot.my

Sunday, 24 February 2019

4 dana PMB INVESTMENT mencatatkan year-to-date return seperti pada 20 Feb 2019 melebihi 7% (dlm 51 hari dari 1 Jan 2019)

Dana-dana patuh Syariah PMB INVESTMENT


4 dana PMB INVESTMENT mencatatkan year-to-date return seperti pada 20 Feb 2019 melebihi 7% (dlm 51 hari dari 1 Jan 2019).


PMB Dana Mutiara +7.85% 

PMB Shariah Small-Cap +7.79

PMB Shariah Mid-Cap +7.82

PMB Shariah TNB Employee +7.42


Alhamdulillah.


Jika berminat melabur atau menjadi perunding,

www.wasap.my/60192348786/PMBinvestment

Ahmad Sanusi | Pengurus Agensi

PMB INVESTMENT | KL

Thursday, 21 February 2019

Malaysia set to attract more demand for sukuk


BERNAMA (21 February  2019)
KUALA LUMPUR: Being the world’s biggest sukuk issuer, Malaysia is set to attract more demand for shariah-compliant bond worldwide via an initiative taken by the Qatar Financial Centre (QFC) to serve the US$2 trillion global Islamic finance market, said the Bond and Sukuk Information Exchange (BIX Malaysia).
BIX manager Ahmad Al Izham Izadin said there were huge opportunities for Malaysia to leverage this ambitious plan, serving not just Muslim countries but also non-Muslim countries seeking Islamic financing.
“By having this alliance too, other countries can actually take advantage of the demand from investors in Malaysia.
“(And) at the same time, we can also have more options by having other countries joining us in terms of investments… But, of course, we have to be careful of the currency,” he told Bernama on the sidelines of the Second Islamic Fintech Dialogue 2019 (IFD2019), here today.
In December last year, Qatar announced its initiative with Malaysia and Turkey to serve the global Islamic finance market from hubs in the three countries using common platforms and technology as it moved away its high dependence on the oil and gas sector.
Under the plan, QFC chief executive officer Yousef Mohamed Al Jaida was reported as saying that “Turkey would cover Islamic finance needs in Europe, Qatar would serve the greater Middle East and Malaysia would sell to Asia”.
As one of the leaders in the world’s biggest sukuk issuers, Malaysia commanded about 34 per cent of the global market as at 2018.
Echoing the QFC’s initiative, International Shari’ah Research Academy for Islamic Finance (ISRA) executive director Prof Dr Mohammad Akram Laldin said Malaysia was of the same view.
“Malaysia supports the initiative to have common standards with other financial hubs to instil confidence in Islamic finance. We need to be more committed to forge the standards in legality, taxation and governance of Islamic finance with as many nations,” he said.
Mohammad Akram highlighted that as at 2018, Malaysia remained one of the world’s biggest issuers of sukuk, or Shariah-compliant bonds, amounting to RM112.4 billion, adding that the value represented a third of the global market.
He recalled that Bank Negara Malaysia signed a memorandum of understanding with the regulatory authorities of Qatar and Dubai in 2007 to promote mutual cooperation.
Meanwhile Ahmad Al Izham, who was one of the panellists during a dialogue titled “Compete or collaborate”, said that there were not enough competition in the Malaysian business landscape to disrupt and making it more vibrant and promote a healthy competition.
“If you look at businesses abroad, there are so many startups coming in into the country to disrupt businesses, but not in Asia and Malaysia.
“There are some successful cases like Grab and this is the kind of disruption that we need to do in fintech,” he added.
The second edition of IFD2019 today saw the launch of the Finterra Waqf Chain, the first and only platform in the world that has specifically developed a blockchain-based solution to crowdfund waqf charity, Islamic investments and peer-to-peer lending.
Themed “Providing FinTech Insights to the Disruptors and the Disrupted”, the two-day conference focused on the mechanisms and instruments that were in place to support Islamic FinTech development and create new opportunities in the overall development of Islamic finance. — Bernama
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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
Pelaburan Unit Amanah Islam: www.unit-amanah-islam.blogspot.my

Wednesday, 20 February 2019

Kuwaiti Islamic Banks Show Resilient Asset Quality; Strong Liquidity



Fitch Ratings-London-20 February 2019: 

Fitch Ratings says in a new report that asset-quality metrics remain solid at Kuwaiti Islamic banks but concentration remains their biggest risk. Kuwaiti Islamic banks had a 38% market share of total banking system assets at end-1H18. Islamic banking activities are only undertaken by Islamic banks as the Central Bank of Kuwait (CBK) does not permit conventional banks to operate through Islamic windows. 


Impaired financing ratios have improved since the global financial crisis. The average impaired financing ratio remained stable in 1H18. Financing impairment charges (FICs)/average gross financing ratios fell in 1H18 due to better underwriting standards and as banks no longer needed to build high financing loss allowances. Islamic banks are typically more exposed to the real estate sector as they are allowed to establish non-financial real estate subsidiaries.


Operating profitability metrics have improved due to lower FICs and remain above conventional banks'. The net financing margin also remains above conventional banks' and improved slightly in 1H18, mainly due to Kuwait Finance House (KFH), which has significant high-margin non-Kuwaiti activities, particularly in Turkey. KFH is the largest Islamic bank in Kuwait, with 60% of Islamic and 26% of total banking sector financing. The discussed merger between KFH and Bahrain's Ahli United Bank would create one of the largest Islamic banks in the region.


The average Fitch-calculated gross financing/deposits ratio has been almost flat, benefitting from Islamic banks' strong retail franchises (particularly KFH and Boubyan). Term corporate-customer deposits are the main source of funding, which includes profit-sharing investment accounts (PSIAs). Deposit concentration remains high, except for KFH due to its high proportion of retail deposits. Islamic banks rely less on market funding. The CBK deposit guarantee covers Islamic banks including unrestricted PSIAs.


Fast financing growth has resulted in a reduction in capital ratios, which remain adequate for the banks' risk profiles. While the equity/assets ratio was 1.5% higher for conventional banks at end-1H18, Islamic banks tend to have higher regulatory capital ratios due to a 50% Alpha factor applied to risk-weighted assets to account for the loss-absorption capacity of PSIAs.



In 2018, the CBK Shariah Supervisory Governance instructions became effective, introducing best practice for Islamic banks. The CBK is working on a draft law to create a centralised sharia board to oversee Islamic banks. This is likely to increase standardisation and lead to greater market confidence. CBK regulations take account of Islamic banks' specificities, such as the Alpha factor and direct investment in real-estate.


In 2019 asset quality will remain sensitive to concentration risk and volatility in the real estate sector. Financing growth is expected to remain above that of conventional banks' in the mid-single digits as Islamic banks build their franchises and as Islamic banking is gaining momentum in Kuwait, in particular with retail customers.

(Fitch Ratings-London-20 February 2019)
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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
Pelaburan Unit Amanah Islam: www.unit-amanah-islam.blogspot.my

Tuesday, 19 February 2019

Sukuk issuance will spur Islamic finance industry


19 February 2019 (Standard Digital)

The Islamic finance (IF) industry in Kenya is considered relatively well developed. It ranks ahead of many African peers in terms of vibrancy and the potential for further growth.

With the growing number of the IF industry players locally, which include banks, insurance firms, cooperative societies and pension funds, the industry will boost Nairobi as the IF hub in the region.
However, there are still a number of issues that need to be addressed to sustain its growth momentum and for us to realise its full potential.
This includes the development of an enabling institutional and market-related infrastructure, the legal, regulatory, tax and human capacity matters that require special attention to overcome the barriers to the growth of the industry.
Lack of Shariah-compliant liquidity management options also continue to limit the performance of the industry and it’s time to scale up the industry through the issuance of Sovereign Sukuk.
Sukuk is considered to be one of the most innovative capital markets instruments that the Sovereign entities embrace in their bid to bolster their efforts to develop financial hubs, meet financing needs, diversify investor base and achieve financial inclusion.
Investor base
The issuance of Sukuk helps address liquidity management and balance sheet restructuring for the market players. The UK, Luxemburg, and Singapore have integrated Islamic finance in their financial systems to enable them to diversify their investor base and enhance their global competitiveness as financial hubs.
Sukuk is plural for ‘’Sakk’’ is considered an innovative and dynamic Shariah-compliant bond with features and benefits similar to conventional bonds. Accounting and Auditing Organisation for Islamic Financial Institutions defines Sukuk as ‘’certificates of equal value representing undivided shares in ownership of tangible assets, usufruct and services or in the ownership of the assets of a particular project or special investment activity’’.
It is appreciated that Sukuk strengthens the connection between the real sector and the financial sector of the economy on the basis of the underlying assets on which the funding is structured to generate returns for the bondholders.
The need to have a Special Purpose Vehicle (SPV) set up to serve as an intermediary in the issuance process must be conformed to as a standard practice. This means that governments cannot directly issue Sukuk without an SPV.
States keen on the issuance of sovereign Sukuk ought to have the necessary legal infrastructure in place for the establishment of the SPV.
Public assets
The administrative and operational aspects relating to the defined class of public assets in the execution of underlying transactions as well as the management of the SPV should be anchored in legal, regulatory and policy frameworks.
Different jurisdictions have so far issued Sovereign Sukuk. This is through innovative approaches that take into account their national values and cultural as well as religious sensitivities.
For example, the UK became the first western government to issue a sovereign Sukuk on the basis of provisions that recognise ‘alternative finance arrangements’ put in the Finance Act of 2008. This Act was complemented by the passing of the “Government Alternative Finance Arrangements Regulations” in 2014 which made provisions to support the establishment of SPV as the intermediary company for Sukuk issuance.
The involvement of SPV in the Sukuk transactions serves the interest of stakeholders in the employment of the assets that generate the required cash flow and also ensures compliance with the Shariah principles.
It also helps in safeguarding public interests and assets by facilitating the integrity of the transaction and compliance with contractual obligations as well as land laws that restrict financial transactions and other related engagements with private entities.
Kenya can leverage the partnership with the World Bank and other developments partners to boost our capacity to issue a sovereign Sukuk sooner than later.

by Jaafar Abdulkadir
-The writer is the Managing Director, Aqeel Consultancy Ltd


Source: Standard Digital (19 February 2019)
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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
Pelaburan Unit Amanah Islam: www.unit-amanah-islam.blogspot.my

Common standards needed to globalise Islamic finance



19 February 2019

KUALA LUMPUR: Malaysia supports Qatar Financial Centre’s proposal to have common platforms and technology with other nations to serve the US$2 trillion global Islamic finance market.

“Malaysia supports the initiative to have common standards with other financial hubs to instil confidence in Islamic finance,” said International Shari’ah Research Academy for Islamic Finance (ISRA) executive director Professor Dr Mohammad Akram Laldin.

He noted that Malaysia is a global pioneer in the capital markets, having established the first Islamic bank in 1983 and initiated the first Islamic insurer in 1984.

Malaysia continues to be one of the world's biggest issuers of sukuk, or Shariah-compliant bonds, amounting to RM112.4 billion as of December last year. This value represented a third of the global market.

He recalled that Bank Negara Malaysia had signed a memorandum of understanding with the regulatory authorities of Qatar and Dubai in 2007 to promote mutual cooperation.

For more than a decade, efforts to consolidate the fragmented global Islamic finance industry has not reached consensus. This is marred by regional rivalries and a lack of common standards.

“We need to be more committed to forge common standards in legality, taxation and governance of Islamic finance with as many nations,” said Akram told reporters on the sidelines of the Islamic Fintech Dialogue 2019 (IFD 2019) here today.

Akram was responding to a recent suggestion by Qatar Financial Centre chief executive officer Yousef Mohamed Al Jaida that three Muslim countries namely Qatar, Malaysia and Turkey can work together to globally raise the profile of Islamic financing.

“We have this vision that Turkey would cover Islamic finance needs in Europe, Qatar would serve the greater Middle East and Malaysia would sell to Asia,” QFC’s Yousef had reportedly said on the sidelines of the Doha Forum 2018 two months ago.

Currently, established financial hubs such as the London Stock Exchange is a global venue for the issuance of sukuk, while Hong Kong and Luxembourg have also made inroads but QFC believes the market should be led by Muslim countries.

Source: NST/Malaysia - 19.2.2019
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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
Pelaburan Unit Amanah Islam: www.unit-amanah-islam.blogspot.my

More firms turn to Islamic finance for development projects


19 February 2019
A growing number of organisations from outside the Middle East region are turning to Islamic finance and in particular to sukuk instruments to raise funds for infrastructure and development projects, according to a UAE-based investment banking expert.
The merits of Islamic finance are expected to allow the sector to grow into new geographies, says Zahid Aslam, managing director of investment banking at Dalma Capital Management. Aslam's comments come as the firm reports an almost one-third jump in enquiries regarding Sharia-compliant bond issuances from corporations outside of the GCC.
The news follows S&P Global Ratings predicting in January the global issuance of Sharia-compliant foreign and local currency bonds is expected to reach as much as $115bn this year.
"Examples include a refinery initiative in the CIS region and a scheme to help develop eco-tourism and sustainable farming in several African nations. We are also seeing interest from Malaysia, Indonesia and Pakistan.”
"It is our experience that sukuk-based solutions are establishing themselves as an increasingly attractive alternative for the funding of infrastructure and development projects," observed Aslam.
"For example, we are currently working with clients on a variety of ‘off-the-beaten path' projects, including a refinery initiative in the CIS region and a scheme to help develop eco-tourism and sustainable farming in several African nations. We are also seeing interest from Malaysia, Indonesia and Pakistan."
He continued: "I would suggest that there are five main drivers for this significant upward trend for sukuk-issuance to continue this year and beyond. First, lower oil prices - despite recent gains - have created a funding shortfall for many.
"Second, there is notable and mounting pressure on global liquidity. Third, the U.S. Federal Reserve's ongoing plans to slowly raise interest rates, making borrowing more expensive. And global regulation is becoming more Islamic finance-friendly.
"Finally, general awareness outside the GCC of the uses and benefits are becoming ever-more understood and valued. Dalma Capital, being a licensed and regulated asset manager and investment boutique with a network of institutions and accredited partners, provides all the necessary solutions for sukuk issuers and investors."
Zachary Cefaratti, CEO at Dalma Capital added: "There is growing evidence that potential borrowers who had never considered Islamic finance are better understanding the clear benefits of such solutions."
 The International Investment - 19 February 2019
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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
Pelaburan Unit Amanah Islam: www.unit-amanah-islam.blogspot.my

Southeast Asian nations seize opportunities in Islamic finance sector



19 February 2019 (Gulf Times)

The three predominantly Muslim countries out of ten in the Association of Southeast Asian Nations (Asean), namely Malaysia, Indonesia and Brunei, are on the way to form a new hub for Islamic finance and the wider halal industry through their current roadmaps to develop the sector.

Malaysia, which is already one of the countries with the largest Islamic finance industry globally, is currently moving towards the conclusion of its Financial Sector Blueprint 2011-2020 which aims at establishing the country as an international centre for Islamic finance. The country has built a highly developed and comprehensive Islamic financial system, supported by a robust regulatory and supervisory regime and a broad spectrum of ancillary services and increased liberalisation, which intensifies the internationalisation process, reinforced by more developed Islamic financial markets and financial infrastructure globally. 


In Malaysia, financing based on Islamic principles should reach 40% of total financing in 2020, up from 29% in 2010, underpinned by greater outreach and product innovation. The Islamic banking industry has expanded from 6% to 22% of the overall banking sector in terms of assets in the last decade, while the sukuk market now accounts for 55% of the debt securities market. The sector has also been supported by the creation of industry bodies such as the Islamic Banking & Finance Institute Malaysia, a one-stop Islamic finance reference centre for the industry and academia; the International Centre for Education in Islamic Finance, Malaysia’s global university of Islamic finance; the International Shariah Research Academy for Islamic Finance and a single reference body for Shariah matters, the Shariah Advisory Council of the country’s central bank. 


All this was augmented by a five-year Islamic fund and wealth management initiative, rolled out in 2017, as well as a liquid and broad range of product offerings.


Indonesia is this year reaching the end of the cycle of it Islamic finance roadmap 2017-2019 which has set clear policy directions and priority programmes such as strengthening and harmonising regulations and supervision in the sector; enhancing the quantity and quality of human resources and information technology; improving service quality and product diversity; and establishing a central Shariah committee for Islamic finance with representatives from the government, the financial supervisory authority and the central bank. Getting Islamic banks involved in the management of government funds and government-owned enterprise funds; setting guidelines for taxation, regulation and stress tests for Islamic finance institutions, and, in general, enhancing literacy in Islamic finance among the population and strengthen the positioning, differentiation and branding of Islamic banks are supporting the industry.


According to Muliaman Darmansyah Hadad, chairman of Indonesia’s Financial Services Authority, the roadmap – which is actually accompanied by two others for the Shariah capital market and the Shariah non-bank financial industry – should set the fundamentals to substantially increase the current market share of Islamic finance in Indonesia, which is still low at about 5% of assets, as well as increase the limited variety of products and reduce the lack of knowledge about Shariah-compliant finance.


The small nation of Brunei has also set itself ambitious goals for Islamic finance in its Financial Sector Blueprint 2016-2025 with a key focus on strengthening the country as an international Islamic finance hub with a more diverse foreign presence and a higher level of foreign participation in the domestic Islamic financial markets, particularly in sukuk and takaful. This involves the introduction of more innovative Shariah-compliant financial products and services that meet the more diverse global demands for Islamic finance solutions. 


The eventual aim is to leverage Brunei’s Islamic finance credentials by entering joint-ventures with international financial institutions such as fund management firms and takaful operators by providing an enabling environment for asset managers to bring Islamic funds from worldwide markets into Brunei for Shariah-compliant rating and management for further global distribution.


And Brunei is off to a good start. According to the Autoriti Monetari Brunei Darussalam, the country’s Islamic banking assets were valued at more than $11.2bn as per latest available figures in 2017, compared to $10.9bn in 2016. This marks 64% of the country’s total banking assets, maintaining Brunei’s rank as one of the top ten Islamic finance markets globally in terms of domestic market share.


Taking all three countries together, there is a target market for Islamic finance and a broader halal industry of a combined population of close to 300mn people, which is almost half the total population in Asean, underlining the opportunities the sector entails.


Source: Gulf Times - 19 February 2019

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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
Pelaburan Unit Amanah Islam: www.unit-amanah-islam.blogspot.my

Friday, 15 February 2019

Moody's expects gobal sovereign sukuk issuance to rise to US$100b in 2020


Moody’s (15 February 2019)

KUALA LUMPUR: Moody’s Investors Service Ltd expects total gross sovereign sukuk issuance, including short-term securities, will recover in 2019 and surpass its record-high volumes of US$93 billion (RM379 billion) reached in 2012, by 2020.
Moody’s vice-president and senior analyst Alexander Perjessy said the international rating agency projects global sovereign sukuk issuance to increase to US$87 billion in 2019 and rise towards US$100 billion in 2020, from US$78 billion in 2018.
“This recovery will be driven by a combination of various sovereigns’ commitments to further sukuk market development, higher sukuk refinancing needs and our expectations of higher budget deficits for the major sovereign sukuk issuers in 2019-2020,“ he said in a report themed “Sovereigns-Global: Sovereign Sukuk Issuance to Recover Amid Moderate Oil Prices and Higher Refinancing Needs” released today.
Perjessy said he expects gross sovereign issuance to also rise further in the medium term as the sukuk issued by Gulf Cooperation Council (GCC) governments begin to mature.
Global gross sovereign sukuk issuance declined 5% to US$78 billion in 2018, from US$82 billion in 2017.
Perjessy said Malaysia has by far the largest stock of outstanding long-term sovereign sukuk worth US$84 billion, followed by Indonesia (Baa2 stable) and Saudi Arabia (A1 stable), with around US$40 billion each.
“The three sovereigns and Qatar (Aa3 stable) have been the most active in promoting the market’s development,“ he said.
He said during 2015-2018, sukuk issues filled nearly 80% of Malaysia’s fiscal deficit financing needs, whereas they covered about a third of Qatar’s and Indonesia’s fiscal deficit and around 14% of Saudi Arabia’s.
Moving forward, Perjessy said Moody’s expects the three largest issuers – Malaysia, Saudi Arabia and Indonesia – to gradually increase their share of sukuk in fiscal deficit financing, further supporting the market’s growth prospects.
“In the medium term, gross issuance will rise further, particularly when GCC sukuk instruments issued after 2016 begin to mature in 2022 and beyond and are refinanced by issuing new sukuk instruments,“ he said.
He added that the Islamic Development Bank (IsDB, Aaa stable) remains by far the largest issuer among the supranationals, with more than US$16 billion of outstanding sukuk at the end of 2018.

Moody’s (15 February 2019)

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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
Pelaburan Unit Amanah Islam: www.unit-amanah-islam.blogspot.my

Tuesday, 12 February 2019

Indonesia Islamic bank sees sector taking off on halal


12 February 2019 (Bloomberg/Jakarta)

With demand for financial products conforming to Islamic principles soaring, Shariah banking in Indonesia is poised for a phase of rapid growth, according to the nation’s largest Islamic bank.
Shariah banking assets have broken out of the “5% market trap” that it was in for a long time thanks to a wave of halal lifestyle sweeping the world’s largest Muslim-majority country, said Toni Eko Boy Subari, president director of PT Bank Syariah Mandiri. The lender expects its financing to expand 11 to 12% this year, a second straight year of double-digit growth, he said.
Even with Muslims making up almost 90% of Indonesia’s 265mn population, Shariah financial products have struggled to gain much ground as conventional banks dominated the financial industry. That may be about to change as the government and central bank drive the promotion of Shariah banking and other financial instruments among the followers of Islam.
“Previously not many people knew what Islamic banking is, what the products are and what they can offer,’’ said Subari, whose bank is the country’s largest Islamic lender with more than 20% market share. “Various promotional Islamic activities have worked in our favour.”
Indonesia’s 182 Islamic banks and 20 Shariah business units had a combined 451.2tn rupiah ($32bn) of assets at the end of November, or about 5.7% of the total of the banking industry, data from the Financial Services Authority show. That’s only a fraction of the $2.1tn in Islamic finance worldwide in 2017.
Indonesia plans to make halal certification mandatory for all consumer products from October this year as it seeks a slice of the global halal economy that has tripled to $6.4tn in six years. The country’s halal food spending alone was $170bn in 2017, the highest among the top consuming nations including Turkey, Pakistan and Egypt, according to the State of the Global Islamic Economy Report.
As more Indonesians become aware of the halal products, they turn to Islamic banks to deposit their funds because of increased consciousness of the religious doctrine underpinning the two, Subari said in an interview. 
Syariah Mandiri’s customer deposits rose by 12.2% last year, accelerating from 11.4% in 2017, he said.
Syariah Mandiri, part of the state-owned PT Bank Mandiri, expects to benefit from a new rule that allows Shariah banks to manage civil servants’ payrolls, which may open up a pool of low-cost funds, Subari said. The bank plans to prioritise infrastructure, health and education for wholesale financing, while retaining its focus on retail and consumer sectors, he said.

12 February 2019 (Bloomberg/Jakarta)
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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
Pelaburan Unit Amanah Islam: www.unit-amanah-islam.blogspot.my

Monday, 11 February 2019

Identifying growth opportunities in Islamic finance


11 February 2019
Islamic finance is available in 56 countries through 1,389 sharia-compliant companies that have total assets under management (AUM) of $2.4 trillion, according to a 2018 study from Thomson Reuters.
In 2017, the market grew 11% and while recent expansion has been slower in core markets, such as the Gulf and south-east Asia, future trends are significantly rosier.
For example, Malaysia, the world’s largest market for sukuk (Islamic bonds), is now opening up to retail investors. The growing emergence of fintech is also leading to digital-only Islamic banks, robo-advisors and digital wealth management services.
This will see the industry make in-roads into areas including leasing finance for goods such as computers, factory equipment and motor vehicles.
Impediments to growth often relate to incomplete legal and regulatory frameworks, which are needed to create the optimum environment for Islamic finance.
Recent developments in countries including Indonesia, Malaysia and Brunei have sought to address the issue, in turn paving the way towards a more flexible future.
Malaysia’s Financial Sector Blueprint 2011-2020 was augmented by a five-year Islamic fund/wealth management initiative, rolled out in 2017, and is now well established.
Indonesia’s five-year roadmap for its own domestic Islamic banking industry includes new foreign ownership rules for Islamic banks and the requirement that conventional insurers spin off their takaful (Islamic insurance) operations.
In Brunei, the Monetary Authority of Brunei Darussalam’s financial sector blueprint (2016-2025) underscores that nation’s desire to facilitate further development of its Islamic finance industry.
While Islamic financial institutions are endeavouring to provide economically viable financing alternatives to the conventional global financial system, framed within the boundaries set by Sharia principles, it is worth noting that there are no underlying restrictions to their use in leasing finance.
For example, the core mechanisms in place need to ensure contracting parties share the risks of any venture amongst themselves, so if structured correctly, Islamic law allows for asset-based financing, more specifically known as Ijara.
Literally translated as ‘to give something on rent’ or ‘providing services and goods temporarily for a wage’ Ijara is a term contained within Fiqh (Islamic jurisprudence)
In the case of automobile Ijara, for example, the customer and car owner - typically a bank, as the lion’s share of the industry (71% of AUM) is accounted for by Islamic banks - enter into a rental agreement for a period agreed at the time of the contract.
The customer makes an initial security deposit, after which (when the lease period expires), they can either take ownership of the car via a separate sale transaction or return the car and take back the security deposit.
Similar flexibility in terms of credit requirements, contractual obligations and time frames offer scope to serve the growing market for vehicle subscription models. These are similar to products being rolled out by vehicle manufacturers and service providers throughout the world, even though those are not specifically designed to be Sharia-compliant.
Islamic finance and car leasing
Car leasing is allowed because the asset is defined at the outset in terms of who owns the vehicle, what the lease will cost and what the car will be worth at the end of the contract.
Other structures permitted include Murabaha, a cost, plus sale contract with a deferred payment term.
As Kosta Georgiadis, director, financial advisory, Deloitte Middle East, points out: “Another parallel that can be drawn is with that of a timeshare scheme for real estate, which is common in various parts of the world.
“Such a scheme may be Sharia compliant if there is a fair share in risk and return amongst the scheme owners and promoters, as well as if the underlying real estate assets are operating in a Sharia compliant manner.
“Usually such schemes are funded by equity only, which in nature is a Sharia-compliant financing mechanism. Although we have not witnessed such a scheme here in the Middle East for vehicle ownership/usage, we do not foresee Sharia compliance as an issue for shared vehicle ownership.”
A case in point is Volvo Car Leasing, rolled out in Malaysia in June 2018. That initiative, while not overtly Islamic finance-based, is structured in such a way that it would be compliant for Sharia purposes.
That is because at the end of the leasing agreement, which includes insurance, road tax, maintenance costs, as well as warranty, customers can either choose a new model to drive home, buy the car at market rate or simply return it to the supplier.
With ongoing initiatives in south-east Asia aimed at boosting Islamic finance, it is inevitable that opportunities will present themselves as the ecosystem continues to develop and expand.
First movers among the Islamic banks and other financial institutions are likely to be the biggest beneficiaries.
On the basis that vehicle subscription programmes are fully compliant with Sharia law, Europe may provide a useful pointer, going forward.
Putting this in context, by 2025-26, vehicle subscription programmes could account for nearly 10% of all new vehicle sales in the US and Europe, according to Frost & Sullivan, equivalent to 16 million vehicles and creating a business opportunity worth an estimated $100 billion.
Vehicle subscription services can readily exploit car sharing, rental, leasing, and outright purchase agreements, given their flexibility in terms of allowing customers to switch programmes and swap vehicles easily. Whether this particular form of flexibility will be inserted into the Islamic financing space in a significant way remains to be seen, however.
What is certain is that the market is destined for growth.
For example, when the Indonesian government launched the National Committee for Sharia Finance (KNKS) in 2017 as part of a strategic move to make the world’s most populous Muslim nation a global hub for the Islamic finance industry, the Indonesian Islamic finance space comprised 12 general Sharia banks, 22 Sharia business units of conventional banks, 58 takaful operators and 163 Sharia people’s credit banks.
With a population of more than 260 million that is 87% Muslim, there is a significant opportunity for growth.
Islamic Finance explained
Established in 1975 with the formation of the Islamic Development Bank, modern Islamic finance is, in relative terms, at the beginning of its lifecycle. However, the underlying financial principles of the industry remain unchanged since their origin over 1,400 years ago.
The framework of an Islamic financial system is based on elements of Sharia (the law of Islam) which governs Islamic societies. Sharia originates from two principal sources: the Quran and the teaching and practices of the Prophet Muhammad.
The fundamental concept of Islamic finance is that money has no intrinsic value and should only be used as a measure of worth. Sharia compliant investments are structured on the exchange of ownership in tangible assets or services with money acting simply as the payment mechanism to affect the transfer.
The taking or receiving of interest (Riba) is strictly prohibited as, under Sharia principles, money is not valuable in itself and no charge should be made for its use. Islamic financial principles also prohibit speculation (Gharar), precluding any involvement in gambling (Maysir) or extreme uncertainty. Any risk in a transaction must be shared between at least two parties, meaning that investors and entrepreneurs alike must bear the business risk for a share in the profit.
These principles of Islamic Finance mean that methods to undertake transactions differ from conventional finance.
Common Sharia-compliant instruments include:
  • Sukuk: Islamic type of bond representing the ownership by the Sukuk holders in the underlying asset.
  • Murabaha: Asset purchased by the bank and sold on to the customer with an agreed mark-up.
  • Ijara: Asset purchased by the bank and leased to the customer over a specified period.
  • Musharaka: Investment partnership in which profit-sharing terms are agreed in advance and losses are attributable to the sum invested. Similar to a joint venture arrangement.
  • Mudaraba: Partnership financing contract under which one party provides the labour whilst the other provides the capital.
  • Takaful: Mutual insurance.
Strict due diligence is needed to assess the viability of a business proposal before funding is agreed and any proposed venture must be certified as Sharia compliant by an expert (Scholar) of Islamic law. Certain investments deemed non-ethical or incompatible with Sharia law (Haram) are forbidden, including business related to alcohol, pork products, conventional financial services, gambling, pornography, weapons and defence.
Conversely, investment based on the core values of promoting social justice and the economic prosperity of the whole community is encouraged.
This is an extract from UK Excellence in Islamic Finance, published by the UK's Department for International Trade, Foreign & Commonwealth Office and HM Treasury.
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Pelaburan Unit Amanah Islam: www.unit-amanah-islam.blogspot.my
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