Latest from GIFC

Sunday, 29 September 2019

(VIDEO) Buying a car or a house without interest - Jamal Badawi

PMB INVESTMENT, an Islamic fund management company (Islamic unit trust funds) - Malaysia


✅ 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 +60192348786 / dengan menulis:


Contoh: Pelabur Ahmad Ali 30 KL

Ahmad Sanusi - Pengurus Agensi Kumpulan (GAM)/Perunding
PMB Investment Berhad
(Ahli kumpulan Pelaburan MARA Berhad)
Kuala Lumpur 🇲🇾

Sejak 1967...52 tahun

"Pengalaman Kami. Keyakinan Anda"

 *Prestasi lepas bukanlah jaminan prestasi masa depan sesuatu dana unit amanah.

Friday, 27 September 2019

(VIDEO) Quranic verses on riba (usury/interest), Surah Baqarah: 275-281

(VIDEO) Dr. Monzer Kahf : What is Islamic banking?

(VIDEO) Shari'ah Considerations in Structuring Sukuk - Dr Asyraf Wajdi Dusuki

(VIDEO) Shariah Audit - Dr Zuriana Shafii

(VIDEO) The History and Evolution of Islamic Finance - Iqbal Khan

(VIDEO) Don't Let Riba Destroy Your Home The Dangers of Riba (Usury) - Dr. Muhammad Salah

(VIDEO) Blessings of Lawful Income - Mufti Ismail Menk

(VIDEO) Sukuk Market and Its Recent Developments - Prof. Mohamed Azmi Omar

(VIDEO) Islamic Endowment (Waqf) - Imam Ahmad Shqeirat

(VIDEO) The law of inheritance in the Qur'an - Mufti Ismail Menk

(VIDEO) Interest and Islamic Banking - Sheikh Bilal Philips

(VIDEO) Islamic Financial Planning & Wealth Management - An Interview with Ahmad Sanusi Husain by The Capital TV - Kuala Lumpur

(VIDEO) Introduction to Lariba Banking - Riba-Free (Interest-Free) Banking

(VIDEO) What Islam say about Riba (Interest/Usury) - Mufti Ismail Menk

(VIDEO) The Story of Ahmad Dawjee Dadabhoy & Wakf Properties (Islamic Endowment) in Malaysia

Thursday, 26 September 2019

UNICEF and the Islamic Development Bank launch first global Muslim philanthropy fund for children

UNICEF (26 September 2019)

NEW YORK, 26 September 2019 – UNICEF and the Islamic Development Bank (IsDB) today launched an innovative fund that will open new opportunities for Muslim philanthropy to reach the millions of children currently in need of humanitarian support and help achieve the Sustainable Development Goals (SDGs).  
The Global Muslim Philanthropy Fund for Children (GMPFC) is the first fund focused on Muslim giving to be launched by a United Nations organization together with a Multilateral Development Bank (MDB). The fund will enable multiple forms of Muslim philanthropy, including obligatory giving such as Zakat and voluntary giving such as Sadaqah donations and Waqf endowments, to contribute to emergency response and development programmes.
It is estimated that global annual Zakat contributions alone may reach up to US$600 billion, making this a significant potential source of sustainable funding to help achieve the SDGs. Seeking to raise US$250 million, the Fund will be administered by the IsDB and unite giving from private and public foundations, Zakat agencies and individuals.
Funding will be allocated to UNICEF and IsDB programmes in the 57 Member Countries of the Organisation of Islamic Cooperation (OIC) which have been identified as eligible to receive Muslim giving, uphold UNICEF core values and deliver the greatest strategic impact for children and young people. This will include support for children in education, health and nutrition, water and sanitation, early childhood development, protection and youth empowerment. 
As a lead investor to the Fund, Abdul Aziz Abdulla Al Ghurair, chairman of the Abdulla Al Ghurair Foundation for Education, today committed to contribute US $10 million to the Fund over a three-year period. This commitment will support refugee education programmes in the Middle East and North Africa region.
“Global humanitarian needs are at critical levels and rising,” said Dr. Bandar Hajjar, President of the Islamic Development Bank. “Nearly 184 million people, including 89 million children need humanitarian assistance in 2019. Children are especially vulnerable– they face the highest risk of violence, exploitation, disease and bear the brunt of climatic events, be they floods or droughts. That is why we need urgent and innovative solutions such as Islamic finance. We are proud to partner with UNICEF to develop this innovative, ethical and sustainable funding solution. Together we can provide help and assistance today and ensure a brighter tomorrow for those who need it the most– our children.”
“Every child has the right to survive and thrive, but conflicts and other emergencies continue to deny children the protection, health and futures they deserve,” said UNICEF Executive Director Henrietta Fore. “Emergency programmes in OIC countries account for two thirds of UNICEF’s humanitarian funding needs. This new partnership with IsDB will accelerate our efforts to reach the most vulnerable children with life-saving support and demonstrates the power of collective action to help every child attain every right.”
The GMPFC offers a coordinated and structured mechanism through which Muslim giving can respond to the children and young people who need it most. It benefits from UNICEF’s on-the-ground presence in all OIC member states and areas affected by emergencies, pooled resources and reduced costs, and programmes that have been pre-approved to absorb Muslim funding.
At the same time, the Fund will build on the decades-long experience and relationships of the Islamic Development Bank in its member countries to build financing partnerships at scale to support development. By working together holistically, UNICEF and the Islamic Development Bank aim to catalyze massive and long-term change benefiting all children in supported countries.
 “The Global Muslim Philanthropy Fund for Children is an important and much needed initiative in Islamic philanthropy and will have a meaningful impact for children and youth at the global level,” said Abdul Aziz Abdulla Al Ghurair. Through our investment in the Fund we help to ensure that refugee children are able to claim their right to a quality education.”
About Islamic Development Bank
The Islamic Development Bank (IsDB) is a AAA-rated multilateral development bank established in 1975 to support the economic development and social progress of its 57 member countries across four continents, touching the lives of 1 in 5 of the world’s population. It has an authorized capital of $140 billion. As at the end of 2018, the IsDB Group cumulative net approvals reached $138 billion, including $7 billion approved in 2018. IsDB is headquartered in Jeddah, Saudi Arabia, and has a field presence in Morocco, Egypt, Senegal, Nigeria, Turkey, Kazakhstan, Indonesia, Bangladesh and Malaysia, with new offices set to open in the UAE, Uganda and Suriname.
About the Partnership
The formal launch and signing of a charter between UNICEF and IsDB in New York follows a joint communique that was signed at IsDB’s 44th Annual Meeting, committing both organizations to the development of the Global Muslim Philanthropy Fund for Children.
The Islamic Development Bank (IsDB) and the United Nations Children’s Fund (UNICEF) have collaborated since 1976. IsDB and UNICEF signed a formal Memorandum of Understanding in 1989 and agreed a joint Strategic Partnership Framework in 2017.

Melaburlah dalam dana-dana patuh Syariah yang diurus oleh PMB INVESTMENT (syarikat pengurusan dana Islam)


● 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 +60192348786 / dengan menulis:


Contoh: Pelabur Ahmad Ali 30 KL

Ahmad Sanusi - Pengurus Agensi Kumpulan (GAM)/Perunding
PMB Investment Berhad
(Ahli kumpulan Pelaburan MARA Berhad)
Kuala Lumpur 🇲🇾

Sejak 1967...52 tahun

"Pengalaman Kami. Keyakinan Anda"

 *Prestasi lepas bukanlah jaminan prestasi masa depan sesuatu dana unit amanah.

Wednesday, 25 September 2019

Islamic finance is an opportunity for Africa – Moody’s

The Africa Report (25 September 2019)
The Islamic financial sector has great potential in Africa, where countries are looking to broaden their sources of financing.Moody’s published a report on 16 September that reveals Islamic finance is already progressing apace on the continent and has good prospects ahead of it, at least for the next 12 to 18 months. Most countries will need time to put the regulatory framework in place.
  • Islamic finance emerged on the continent in 2013.
  • All banking transactions and products are adapted to the principles of Sharia law (prohibition of interest, uncertainty, speculation, investment in sectors such as alcohol, tobacco, gambling, etc.).
  • It is based on the issuance and use of sukuks: debt securities that comply with the same Islamic principles.
  • Morocco’s issuance of $105m of sukuks between October and December 2018 was an initial success for the Cherifian kingdom, with the transaction 3.6 times oversubscribed by investors.
0.5% of the world’s sukuks

Sukuks continue to provide alternative funding sources for both African sovereigns and financial institutions, and issuance is supported by the increasing financing needs in Africa (especially for infrastructure projects) and global investors’ growing comfort with Islamic instruments,” the report says.
With $500m worth of sukuks issued in Africa over the past year, Moody’s points out that the continent accounts for only 0.5% of the world’s sukuks in circulation: Saudi Arabia and Malaysia are the main users, with $299bn and $134bn respectively.

Financial systems must adapt

“We expect that Africa’s large Muslim population, which is mainly unbanked or underserved, will continue to provide a solid foundation on which Islamic financial assets, and therefore profits, can grow rapidly,” say Moody’s analysts. They also cite the recent interest shown by Egypt, Algeria and Sudan in issuing sukuks in order to diversify their sources of financing.
Interested states still have to adapt their financial systems and legal constraints to the issuance of sukuks, and to identify projects that can serve as guarantees/support for these issuances.
The report highlights the “good resilience of Islamic banks despite a difficult operating environment in many African countries”, suggesting that sukuk issuances will continue to grow steadily and that these banks “will continue to perform well”.

South Africa and Nigeria benefit

The report cites three examples to illustrate this point: the South African Islamic bank Al Baraka, whose profits increased by 12.4% between January and June 2019 compared to the previous year; First National Bank (the third largest banking group in South Africa and the continent), where Islamic deposits have significantly contributed to its growth; and Sterling Bank (Nigeria), whose Islamic banking section has experienced a 24% growth in profits despite a 16% contraction in total assets in the Nigerian commercial banking segment.

Monday, 23 September 2019

Steady uptrend for Islamic finance in Pakistan: SBP

Gulf Times (23 September 2019

The Islamic banking and finance sector in Pakistan continues to be on an upward trajectory, with assets, deposits and the number of branches of Islamic banks all showing solid growth. According to the latest Islamic Banking Bulletin issued by the State Bank of Pakistan on September 13, assets of Pakistan’s Islamic banking industry stood at Rs2,992bn ($19.8bn) by June-end, 2019, a growth of 20.6% as compared to June-end, 2018. Similarly, overall deposits of Islamic banking customers witnessed growth of 18.8% in the period and reached Rs2,415bn ($15.4bn). This translates into a market share of Islamic banking assets and client deposits in the overall banking industry of 14.4% and 15.9%, respectively, by the end of June, 2019, as compared to 12.9% and 14.8%, respectively, a year ago. On a half-year basis, Islamic deposits have grown 21% through June 2019, outpacing the 11% compound annual growth rate of all other deposit types in the banking sector.

According to the bulletin, the network of Islamic banks currently consists of 22 institutions, including five fully-fledged Islamic banks and 17 conventional banks with standalone Islamic banking branches. Among the Islamic banks, the largest is Meezan Bank with 678 branches, followed by Bank Islami Pakistan with 218 branches, Dubai Islamic Bank Pakistan with 200 branches, AlBaraka Bank (Pakistan) with 183 branches and MCB Islamic Bank with 177 branches. The largest banks with standalone branches, so-called Islamic windows, are Faysal Bank, National Bank of Pakistan, Bank Alfalah, Allied Bank and United Bank. The entire branch network of Pakistan’s Islamic banking industry stood at 2,913 spread across 113 districts by June-end, 2019, as compared to 2,685 a year ago. More than 77% of the branches were concentrated in Punjab and Sindh provinces. The number of Islamic banking windows stood at 1,348.

But it is not only the sheer size of the industry which is an important measurement, but clearly also the profitability of the banks. Profit before tax of Islamic banks in Pakistan was recorded at slightly more than Rs32bn ($204mn) in the quarter ended June, 2019 compared to Rs15bn ($95.6mn) in the same quarter last year. Profitability ratios such as return-on-assets and return-on-equity before tax stood at 2.3% and 35.3%, respectively, by June-end, 2019, comparing favourably to industry figures of 1.6% and 21.3%, respectively. During the period under review, operating expense to gross income ratio witnessed further improvement and was recorded at 52.6%, compared to 54.7% in the previous quarter and lower than the industry total of 57.1%.

In terms of financing, the corporate sector accounted for a 73.5%-share in overall financing of Pakistan’s Islamic banking industry, followed by commodity financing with a share of 10.6% and consumer financing with 10.4%. The shares of small and medium enterprises financing and agriculture financing in overall financing stood at 3.7% and 0.5%, respectively. Sector-wise, production and transmission of energy retained the leading position at a share in overall Islamic financing of 17.9%, followed by the textile and individual financing sectors, both having had a respective share of 11.6% by June-end, 2019. The most popular financing types were diminishing musharaka, followed by musharaka and murabaha.

The report also noted that much of the growth in Pakistan’s Islamic banking industry came from new retail customers on a market were 79% of a 197mn-population are still unbanked.
“The potential for Islamic banking penetration (in Pakistan) is substantial,” Moody’s Investors Service said in a separate report, adding that “Islamic banking products are attracting previously unbanked customers, creating new business opportunities for banks to grow their deposit base and benefit from stronger profitability.”

The State Bank of Pakistan has now set a goal to increase Islamic assets to 20% from the current 14.4%, helped by lifting structural and regulatory barriers, increasing awareness for Shariah-compliant banking and regular sukuk issuances.

Friday, 20 September 2019

Constitutionality of Bank Negara Malaysia’s Shariah Council’s Rulings on issues affecting Islamic financial transactions

The Edge Court Judgement Report (20.9.2019)
CONSTITUTIONALITY of Bank Negara’s Shariah Council’s Rulings on issues affecting Islamic financial transactions
Sections 56 and 57 of the Central Bank of Malaysia Act 2009 (‘BNM Act’) require the Court and an arbitrator to refer a Shariah issue which has arisen in legal proceedings relating to Islamic financial business to the Shariah Advisory Council (‘SAC’) of Bank Negara Malaysia (‘BNM’) for a ruling. The ruling of the SAC is binding on the Court and the arbitrator.

The fundamental issue is whether Sections 56 and 57 of the BNM Act are unconstitutional for taking away the power of the judiciary to deliberate and decide on an issue in a dispute in Court by vesting the resolution of that issue with the SAC. This question confronted the Federal Court in JRI Resources Sdn Bhd v Kuwait Finance House Bhd. The serious importance raised by this issue in financial transactions based on Islamic principles inspired the Federal Court, for the first time in history, to convene a nine-judge panel, to deliberate upon the issue. Apart from the original parties involved in the litigation, BNM and the Association of Islamic Banking Institution of Malaysia (‘AIBIM’) intervened and actively participated in this case. BNM, AIBIM and the respondent, Kuwait Finance House Bhd (‘KFH’) defended the constitutionality of the statutory provisions.

Summary sketch of the facts
KFH had provided JRI Resources Sdn Bhd (‘JRI’) with an Islamic financing facility under the principle of ijarah (leasing) to fund the acquisition of vessels. In essence, KFH purchased the vessels from a third party at the request of JRI and KHF became the owner of the vessels. The vessels were then leased to JRI. Subsequently, KFH sued JRI in Court for outstanding lease payments.
JRI’s defence was that the vessels had failed to generate income due to KFH’s failure to carry out major maintenance works on the vessels. This, JRI claimed, was the responsibility of KFH as the owner of the vessels. KFH, on the other hand, claimed that pursuant to a clause in the Ijarah Facility Agreement (‘Relevant Clause’), it was JRI’s responsibility to undertake all major maintenance works in respect of the vessels. JRI argued that the Relevant Clause was against Islamic law and appointed a Shariah scholar, Dr. Azman Mohd Noor, to act as an expert witness in the Court proceedings. Dr. Azman’s expert opinion was that the Relevant Clause was not in compliance with Islamic law. KFH also provided expert evidence through its Shariah scholar, Dr. Aznan Hasan. Dr. Aznan agreed that the Relevant Clause was non-compliant with Islamic law but took the view that the non-compliance was immaterial and did not result in any invalidity. A Shariah question on the validity of the Relevant Clause from the Shariah perspective was therefore raised in the proceedings. The High Court referred the issue to the SAC under Sections 56 and 57 of the BNM Act. The SAC ruled in favour of KFH. The ruling was thus binding on the High Court, which then scheduled the case for trial.
Before the trial started, JRI applied to refer to the Federal Court for a determination on the constitutionality of Sections 56 and 57 under which the SAC had given its ruling. The nine-judge panel of the Federal Court was sharply divided in its decision with a five to four majority in favour of the constitutionality of the provisions.

Decision of the majority
The leading judgment of the majority was written by Justice Mohd Zawawi Salleh (Azahar Mohamed, Ahmad Maarop, Ramly Ali and Alizatul Khair Osman Khairuddin FCJJ concurring).
Justice Mohd Zawawi Salleh referred to Section 52 of the BNM Act, which sets out the functions of the SAC, one of which is to ‘ascertain the Islamic law on any financial matter and issue a ruling upon a reference made to it’. Accordingly, the learned Judge held that the SAC only ascertains the Shariah rules that may be in dispute between the parties and the SAC does not determine the ultimate outcome of the litigation and which rests with the Court. As such, the exercise by SAC of its power under ss 56 and 57, including the binding effect of its ruling on the Court, does not involve an exercise of judicial power and does not usurp any power of the judiciary.
Justice Azahar Mohamed (now, CJM) agreed, holding that the ascertainment of Islamic laws are a function or power delegated to the judicial branch and the SAC. In the words of the learned Judge, ‘the impugned provisions could not and did not trespass or intrude onto the judicial power; the provisions did not violate the doctrine of separation of powers’. The majority also justified the impugned provisions by drawing a comparison to the mandatory sentencing regime of the criminal law where it is the Parliament, not the Court, that fixes the punishment on a convicted person. Similarly, it was therefore proper for the Parliament to vest the function of ascertaining Islamic law in respect of Islamic banking to the SAC, which arguably is part of the executive, whose decision is binding on the Court.
Critically, the majority drew attention to the diverse opinions amongst Shariah scholars on any particular Shariah issue which had led to uncertainty in the Islamic finance industry. In disputes brought to Court, there had been several decisions where the Judges on one hand had disregarded the Shariah issues and on the other hand referred to the various sources of Islamic law on their own. Thus, it was important that measures be taken to promote consistent implementation of Shariah contractual principles. This is especially because members of the Judiciary are not trained in Shariah.
In upholding the legislation, Justice Zawawi held that the traditional notion of the principle of separation of powers that there are separate and distinct roles for the executive, the legislature and the judiciary has changed over time and that there are overlapping and blending of functions between the branches of the government to facilitate efficient operation of the government. Ultimately, the Federal Court, by a majority judgment, held that Sections 56 and 57 did not provide for the usurpation of the Court’s judicial function by the SAC.

‘… separation of powers of government has never existed in pure form except in political theory. In reality, there is an overlap and blending of functions, resulting in complementary activity by the different branches that makes absolute separation of powers impossible.’
Justice Zawawi Salleh

Decision of the minority
On the other hand,Richard Malanjum CJ (as he then was) wrote one of the dissenting judgments for the minority (David Wong, Zaharah Ibrahim and Idrus Harun FCJJ concurring).
The then CJ anchored his dissenting judgment on the principle of separation of powers between the executive branch of the Government and the Judiciary.
The then CJ accepted that there might be partial overlapping of functions. However, the overlaps have always been found between the legislative and the executive only. There is no overlapping with the Judiciary, which has ‘absolute independence’. Judicial powers cannot be conferred upon any other body which does not comply with the constitutional safeguards conferred upon the Judiciary.
Further, after accepting that judicial power is the power of the sovereign to decide controversies between subjects and between subjects and itself, it was nonetheless held that the resolution of questions of law arising from judicial proceedings is an exercise of judicial power. This, the then CJ observed, is an aspect of adjudication, not ascertainment of principles. The other aspect of adjudication is the resolution of rights and liabilities of parties in dispute.
In context, Sections 56 and 57, the SAC’s functions intrude in the midst of ongoing judicial proceedings. The intrusions involve determinations affecting rights and liabilities of parties who are before the Court and are not mere general pronouncements on policies applicable for the future. The SAC’s ruling cannot be challenged with any contrary expert evidence, nor reviewed by the High Court nor overturn on appeal. Thus, the rulings of the SAC are not subject to any check and balance mechanism. In this context, it was held that it is immaterial whether the label ascribed to SAC’s function, as held by the majority, is one of ‘ascertainment’ rather than determination. The true nature of the functions can only be discovered upon consideration of the substance and actual effect of the provisions.
Justice Wong Dak Wah CJSS rejected the argument that the impugned provisions ‘do not vest any judicial power on the SAC’, relying particularly on Article 121 of the Federal Constitution that endows judicial power exclusively in the Civil Courts. Although the learned Judge expressed doubt that the test for judicial powers can be simplified into checklist of factors, nonetheless held that applying the three basic elements of ‘adjudication, finality and enforceability’ to test the inherent nature of judicial power, the impugned provisions are unconstituitional. Accordingly, once the SAC had ruled on the Relevant Clause, there is nothing left for decision.

‘… the partial overlap between functions is confined to the spheres of legislative and executive powers … the justification … is to promote efficiency of government … In contrast, questions of judicial power occupy apart under the constitution due to its special nature. The absolute independence of the judiciary is the bulwark of the constitution against encroachment whether by the legislature or by the executive…
Based … on a proper understanding of the principle of separation of powers, [there] are some … basic tenants in relation to judicial powers …(i) judicial power cannot be removed from the judiciary; (ii) … judicial power cannot be conferred upon any other body which does not comply with the constitutional safeguards to ensure its independence; (iii) non-judicial powers cannot be conferred by another branch of the government onto the judiciary …
The legislative purpose behind the enactment of Sections 56 and 57 of the Central Bank of Malaysia Act 2009 is a commendable one … However, good legislative intentions do not excuse a constitutional transgression.’
Richard Malanjum CJ (as he then was)

Wednesday, 18 September 2019

Perak Transit (Malaysia) to raise RM500m via sukuk

The Edge Markets (18 September 2019)

KUALA LUMPUR (Sept 18): Perak Transit Bhd plans to raise up to RM500 million by establishing a sukuk murabahah programme to refinance the group’s bank borrowings.
The money will aslo be used to finance its capital expenditure and working capital requirements, the group said in a filing with Bursa Malaysia.
The programme will have a tenure of 15 years from the date of the first issuance of the sukuk, the group said.
It said United Overseas Bank (Malaysia) Bhd is the sole principal adviser, lead arranger, lead manager, and facility agent for the programme.
Perak Transit shares price closed unchanged at 21.5 sen, bringing it a market capitalisation of RM305.9 million.
The counter saw some 4.72 million shares traded. Over the past year, the counter has retreated 25.86% from 29 sen.

Thursday, 5 September 2019

Fitch Ratings: Saudi Islamic banking dominant; asset quality weakened and profitability improved

Saudi Arabia has the largest Islamic banks' financing base (78%) of any country that allows commercial banks to operate alongside Islamic banks
Fitch Ratings says profitability improved in 2018 at Saudi Islamic banks as these benefited from stronger growth opportunities but asset-quality challenges continued. Saudi Islamic banks remain well placed in the banking sector as they have the largest retail franchises, supporting a lower cost of funding and better asset quality. Saudi Arabia has the largest Islamic banks' financing base (78%) of any country that allows commercial banks to operate alongside Islamic banks.
For 2019, financing growth will remain relatively muted. Capital buffers and profitability will remain sufficient to absorb a mild deterioration in asset quality.

Impaired financing ratios jumped for both Islamic and conventional banks in 2018, particularly due to the contracting, retail and retail/wholesale trade sectors. However, the deterioration was less pronounced in Islamic banks owing to sound performance of retail lending, particularly at Al Rajhi, the largest Saudi retail bank. The average coverage ratio of impaired financing remained higher in Islamic banks, particularly due to high coverage at Al Rajhi. Islamic banks now also have lower financing impairment charges than conventional banks due to their lower proportion of corporate banking.

Islamic banks' performance improved in 2018 and remained above conventional banks'. Performance benefits from a lower cost of funding (due to stronger retail franchises and a higher share of non-profit-bearing deposits) and a higher proportion of retail financing.

Reliance on deposit funding is less pronounced at Islamic banks due to the National Commercial Bank (NCB; the country's largest bank), which has the most diversified funding profile of Saudi banks. Deposit concentration is high, except at Al Rajhi, which benefits from a granular retail deposit base. The Islamic banks' financings/deposits ratio reduced slightly in 2018 and is now in line with conventional banks'. Islamic banks benefit from the Ministry of Finance's Saudi riyal-denominated sukuk programme to help manage their liquidity.

Capital ratios have decreased due to high financing growth. Nevertheless, Islamic banks are well capitalised, with an average Fitch Core Capital ratio of 17.9% at end-2018. This was 23bp above conventional peers as Islamic banks have higher proportions of retail banking assets, which attract lower risk weightings. Lower off-balance-sheet activities also result in lower risk weightings.

Four of Saudi Arabia's 12 licensed commercial banks are fully sharia compliant, with the others providing a mix of sharia-compliant and conventional banking products and services. All banks are regulated by the Saudi Arabian Monetary Authority with the same disclosure requirements. Recent guidelines from The General Authority of Zakat and Tax for sharia-compliant financial products are broadly comparable with those of conventional banks, ensuring similar rules for all banks.

© Press Release 2019

Wednesday, 4 September 2019

Philippines revitalises Islamic banking to boost financial inclusion

International Investment (4 September 2019)

A new law announced this morning in the Philippines will seek to support the growth of Islamic finance, extending financial inclusivity to the country's minority Muslim population.
In a statement, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Republic Act No. 11439—officially named "An Act Providing for the Regulation and Organization of Islamic Banks"— "will unlock the full potential of Islamic financing in fostering inclusive economic growth."
"There are still segments of the population that is outside the conventional banking framework so implementing this Islamic Banking law to include into the mainstream banking framework will definitely provide for greater financial inclusion among the population," BSP Deputy Governor Diwa Guinigundo told local media.
"[New law] will unlock the full potential of Islamic financing in fostering inclusive economic growth"
Guinigundo also pointed out that Islamic Banking will help boost foreign direct investment inflows.
"I think even at the beginning of the Duterte administration, there were already queries coming from some jurisdictions whose population is mostly Islamic and therefore to the extent that some countries are interested in bringing their business here through Islamic means," he explained.
Around 10% of the Filipino population is Muslim, and most are located in the southern island group of Mindanao. The law comes after the Bangsamoro Autonomous Region, the country's sole Muslim-majority region, was established earlier this year.
Currently the Al-Amanah Islamic Investment Bank of the Philippines is the only Islamic lender operating in the country.
Under the new law, Islamic banks will be able to carry out the business in accordance with Shari'ah principles, in addition to the general powers granted to corporations. In line with this, Islamic banks may provide Shari'ah-compliant financing contracts and structures and undertake various investments in all transactions allowed by Shari'ah principles.
The legislation is also expected to pave the way for the entry of foreign Islamic banks into the Philippines. 
Islamic banking and finance can also be attractive to non-Muslims, particularly investors within or outside the Philippines who may be looking for new asset classes, instruments and products to diversify their portfolios, it said.
An Interagency Working Group on Islamic Banking and Finance has been constituted to develop a regulatory framework for Islamic banking.
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