Kuwaiti firm launches Islamic trade finance fund

Kuwait-based Asiya Investments has launched an Islamic trade finance fund with $20 million in seed capital, aiming to cater to small Asian manufacturers.

Asiya, whose largest shareholder is sovereign wealth fund Kuwait Investment Authority, aims to fill a gap left by Western banks that are scaling back their trade finance business, making credit scarce for small and medium-sized firms.

"We engage those companies that are already banked but whose credit lines are limited - we are complementing their financing," said Sulaiman Alireza, executive director of Asiya's investment management arm in Hong Kong.

Despite strong growth in Islamic finance globally over the last few years, the industry has neglected merchandise trade, leaving trade finance for conventional banks to dominate.

But conventional banks are retreating because of the world financial crisis and higher capital requirements under upcoming Basel III regulations, which could open up about 20 percent of the business to non-bank institutions, Alireza said.

Established as the Kuwait China Investment Co in 2005, Asiya estimates that current annual intra-Asia trade of $5 trillion could reach $20 trillion by 2020.

Asiya's Cayman-domiciled fund, soft-launched in December, offers short-term financing through murabaha contracts, where the fund buys and sells merchandise on behalf of the company and shares a portion of the profits.

"We use a murabaha structure with the underlying commodity serving as collateral. This is a standard, tried-and-tested murabaha structure," Alireza said.

Islamic institutions across the Gulf are working to diversify their money market transactions, so Asiya's product could appeal to some of them. It will have a higher yield than commodity murabaha contracts and better liquidity than sukuk, Alireza said.

Asiya's fund aims for a net return to investors of above 5.0 percent and it has $55 million worth of assets in the pipeline, with capacity for approximately $400 million, said Brian Luck, director of Asiya's advisory office in Dubai.

"Trade finance is not well known as an asset class...but the reality is there are not enough Islamic fixed income products available," Luck said. Plans include offering the trade finance product on a managed account basis, he added.

The firm identifies clients such as denim and latex manufacturers through its Singapore-based joint venture partner, EuroFin Asia.

(Al-Arabiya / 06 May 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

The top 10 Islamic fund houses by assets

Islamic assets have been on the rise, driven by greater issuance of sukuk, or Islamic bonds. Last year saw a new record for Islamic debt issuance globally, 77% of which emanated from Malaysia.

But while the global bond market stands at $100 trillion, the sukuk market is still tiny by comparison, at just $100 billion. It is this room for growth that industry participants are eager to capitalise on.

In our March edition,AsianInvestor launches its first ever ranking of sharia-compliant investment managers. According to our findings, the top 50 by AUM have combined assets of $72.9 billion, split fairly evenly between equities and fixed income/money market/sukuk, with the remaining 10% or less in Islamic private equity and other alternatives.

Malaysia has become the global hub for Islamic debt issuance and unsurprisingly there are four Malaysian fund houses in our top 10 by assets, followed by Saudi Arabia with three. Perhaps more surprisingly, a South African firm figures in the list (in fact, there are three in the top 50).

Zainan Izlan, executive director for Islamic capital markets at Malaysia's Securities Commission, notes that beyond Malaysia, Gulf Cooperation Council (GCC) nations are important centres.

But he adds that corporates from France to Japan can participate in this market. "Even if your domestic market does not have a big Muslim population, you can issue sukuk and offer it globally and it will be taken up," Izlan says.

As a snapshot, here we list the top 10 Islamic fund houses by assets. For a more in-depth look at the industry and for the full list of the top 50, please see AsianInvestor magazine's March edition.

(Asian Investor / 13 March 2013)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic funds going cross border with UCITs (Undertakings for Collective Investment in Transferable Securities)

Kuala Lumpur-based CIMB-Principal Islamic Asset Management (CIMB-Principal Islamic), a joint venture between the CIMB Group and Principal Global Investors (PGI), has set the stage for other Islamic fund managers in their bids to penetrate the overseas markets.

Its three UCITS-compliant Islamic equity funds – which it launched early this year and which invest in global emerging markets, the Asia-Pacific ex Japan and the Asean region, respectively – are designed for cross-border distribution within Asia.  

Demonstrating UCITS’ potential

They came after the Central Bank of Ireland, via a memorandum of understanding between itself and the Securities Commission Malaysia on November 4 2011, approved the establishment of the Dublin-based CIMB-Principal Islamic Asset Management (Ireland) Public Limited, a joint venture specifically designed to distribute Islamic UCITS funds globally. 

While the UCITS platform has been used to market Islamic funds to European investors, this is the first time it is being done in Europe. In a way, CIMB-Principal Islamic is paving the way for other fund managers to use this platform to market Islamic funds globally.

“We have opened the door for other Malaysia-based fund managers to establish a UCITS platform in Ireland,” says Datuk Noripah Kamso, chief executive of CIMB-Principal Islamic. “The UCITS funds were established to develop a visible performance track record and make it easier for global investors to place their money with CIMB-Principal Islamic. These funds are recognized beyond Europe and meet the needs of institutional and retail investors from many jurisdictions. This is an important step in the development of Malaysia as a centre for Islamic fund management.”

Targeting private banking clients

CIMB-Principal Islamic has been building their overseas networks for marketing Islamic funds.

It has launched marketing activities to Muslim investors in Germany where, Noripah says, there are 4.1 million Muslims, the bulk of them of Turkish descent.

Noripah shares that CIMB-Principal Islamic is dynamically marketing Shariah funds to private-banking clients based in Geneva as an alternative investment for diversification and risk management.

“The private bankers in Geneva that are serving Middle-Eastern investors have shown a keen interest. Following the Arab spring, they are pushed to understand what is being offered as an underlying in the whole story of Islamic investments, because there has been a flight to safety from GCC countries to Geneva and London,” Noripah says.

With the launch of its UCITS platform, CIMB-Principal Islamic is expected to strongly market its Islamic funds to European markets. Noripah explains that CIMB-Principal Islamic has crafted a business model for each different target market for building its Islamic funds business.

First, the institutional business – direct mandates from pension funds, sovereign wealth funds, takaful and central banks. Second, the high net worth business – targeting individual investors in GCC countries and family offices and, third, a part of the mass market.

“For that third market segment, we have to come out with a global fund platform – which is why we have launched the Islamic UCITS – but we cannot sell the funds all by ourselves, we have appointed other banks and fund distributors to reach farther,” Noripah says.

If the funds are authorized in one European Union (EU) member state, it can be distributed in any other EU member state without the need for any additional authorization. UCITS-compliant funds are distributed in a large number of countries, not just in Europe, but also the Americas, the Asia-Pacific, the Middle East and Africa.

The funds will eventually be registered and distributed in seven jurisdictions: the UK, Switzerland, Germany, Saudi Arabia, the United Arab Emirates, Bahrain, and Singapore.

Having the funds on this platform means that institutional and retail investors globally will be able to see CIMB-Principal Islamic’s asset management track record. If the funds do well, not only will this attract investment into those funds but institutional investors may also appoint CIMB-Principal Islamic to manage their discretionary mandates as well.  

(The Asset / 28 August 2012)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Ireland: Islamic fund sets up in Dublin

THE FIRST Malaysian funds promoter has set up in the Irish financial services sector with the arrival of the CIMB-Principal Islamic Asset Management in Ireland, according to the Irish Funds Industry Association.

The Malaysian company is setting up a range of investment schemes that can operate throughout the European Union, authorised from Ireland.

Pat Lardner, chief executive of the association, welcomed the establishment of Irish funds or Ucits (Undertakings for Collective Investment in Transferable Securities) by CIMB-Principal Islamic Asset Management.

Citing figures from accountancy firm PricewaterhouseCoopers saying that Ireland accounted for 20 per cent of Islamic finance outside of the Middle East, Mr Lardner said he hoped others would set up similar funds here.

Noripah Kamso, chief executive of the Malaysian company, said: “Ireland is right for us as we believe it will provide global flavour to our products and be the passport for international investors beyond Europe.”

Dublin was more cost-effective due to the company’s existing operations in Ireland, she said, and through the conventional funds operated by its shareholder, Principal Financial Group, in Dublin.

The Government has targeted Islamic finance as one of the key growth areas for the development of the financial services industry under plans to create 10,000 new jobs in the sector by 2016.

The funds association estimates that the value of funds under administration in Ireland reached €2 trillion recently, while Irish domiciled funds have also reached a record high, surpassing the €1 trillion mark for the first time.

Islamic finance applies Sharia, the moral code of the Islamic religion, to financial services. This prohibits charging interest and unethical investments.

(Irishtimes.Com / 28 August 2012)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Bangladesh: Islamic funds gain stronger foothold

Bangladesh can improve its weak infrastructures by utilising Islamic funds available globally, said a senior official of a foreign bank.

The country's stable economy can help attract more Islamic funds from international financiers, said Afaq Khan, chief executive officer (Islamic banking) of Standard Chartered Bank.

Khan was sharing his views on the prospects of Islamic banking in an interview with The Daily Star at Sonargaon Hotel recently.

“The total size of the world's Islamic funds is estimated at $1- $1.3 trillion, which is growing at 15-20 percent on average annually,” said Khan, who came to Dhaka to launch the bank's Shariah-based product Saadiq for its corporate clients in the country.

Most shariah-based financiers in the world are eager to invest in large infrastructure projects, he said. Bangladesh can attract these investors, thanks to a positive economic outlook of the country.

“All the ingredients are here to attract the Islamic financiers as you have a stable economy, stable regulations and fast economic growth,” said Khan.

The country needs to tell its success stories and future plans to the Islamic investment community globally, he added.

Standard Chartered Saadiq is ready to cooperate with the government in the processes of bringing in the Islamic investors to the country by utilising its global network, said Khan.

Islamic banking is now an issue of great interest for many, including the western non-Muslims, as the system remained almost unhurt during the global financial crisis, said the official.

Shariah-based banking is growing much faster than conventional banking, he said. Currently, the banking giant has Islamic banking operation in six countries -- Indonesia, Malaysia, UAE, Bahrain, Pakistan and Bangladesh.

Of the countries, Indonesia has the highest annual growth rate at 45 percent, followed by Bangladesh at 25-30 percent, said the 50-year-old official.

“Conventional banking is riskier than Islamic banking because it deals with debt trading and keeps itself involved in market speculations, which the European and American banks experienced,” he said.

“At present 19 percent of the industry assets and 16 percent of the industry deposits are Islamic. So, there is an accelerated demand for Islamic banking products in the market,” said Khan.

The London-based bank started its Islamic banking operation in Bangladesh in 2004 with consumer banking products under the bank's group branding Saadiq.

“Islamic banking operates in real economy. This banking has no room for gambling, speculation, excess leverage, or the greed for windfall profit,” said Khan.

He joined StanChart in 2003 with a mandate to launch the Islamic business division for the bank. Since then, he has been responsible for the strategic build-up of a global Islamic banking business covering retail, corporate and investment banking with a wider product capabilities and award winning solutions.

Khan, who has 22 years of banking experience, believes Bangladesh could be a big market for the Islamic banks. “Around 90 percent people here are Muslims. So, the country has an immense potential for the growth of Islamic banking.”

But he feels the business prospect would depend on diversification of products, services and adequate training of the officials.

"Saadiq" is the brand of this bank's Islamic banking, which has rolled out more than 250 products and solutions relating to consumer and wholesale banking.

An Islamic bank traditionally generates its profits from Sharia-compliant investment activities. This profit is shared back with the bank's customers at a pre-agreed ratio. An account holder is entitled to a share of these profits according to the funds he holds in his account.

Khan said Islamic banking differs from conventional banking, primarily because it does not look to charge or deliver interest.

In Islamic banking, profit is generated through investment and trading, said Khan, who did an MBA from the University of Western Illinois in the US.

The official said this return rate has to match the level of return provided by interest levels of conventional banking.

Islamic banking in Bangladesh continues to show strong growth since its launch in 1983.

At present, out of 47 banks, seven private commercial banks are operating as full-fledged Islamic banks. Besides, 16 conventional banks are engaged in Islamic banking, according to Bangladesh Bank's annual report for 2010-11.

The total deposits with Islamic banks and Islamic banking branches of the conventional banks stood at Tk 67,580 crore by the end of December 2010. This deposit accounts for 17.5 percent of the deposits with the total banking system, according to BB Data.

Total credit of the Islamic banks and the Islamic banking branches of the conventional banks stood at Tk 62,870 crore by the end of December 2010. This was 19.1 percent of the credit of the total banking system.

The global banking giant targets Bangladesh as one of the potential markets for its Islamic financial products and services.

As part of the move, the bank launched its Shariah-based wholesale banking product Saadiq for its corporate clients on August 2. Earlier the product was for retail customers only.

The Saadiq brand will offer a core comprehensive suite of products related to cash management, trade, term and working capital financing for corporate clients to fulfil their banking requirements in a Shariah compliant way.

(The Daily Star / 26 August 2012)

---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com