The Qatar International Court and Dispute Resolution Centre (QICDRC) plans to extend its commercial court jurisdiction to Islamic finance through a model framework, which it is currently working on, its top executive said yesterday.
In an exclusive interview with the Qatar News Agency (QNA), QICDRC chief executive officer Robert Musgrove said, “We are currently looking at the possibility of resolving Islamic finance disputes by setting up a dispute resolution mechanism. We started a joint feasibility study with the QICCA (Qatar International Chamber of Commerce Arbitration) last month. With the increasing popularity of Islamic finance globally and specifically in the GCC, it would be ideal to have a mechanism in place to resolve disputes that would arise,” he said.
Shariah-compliant investments are rapidly gaining popularity in the $1.3tn global Islamic finance market, gaining 6.1% share from over 650 funds spread across the world.
Talking about the centre’s role Musgrove said, “We started as the Qatar Financial Centre Civil and Commercial Court as our initial jurisdiction focused on disputes coming out of the QFC (Qatar Financial Centre). We continue to be the commercial court for the QFC, but in May 2012 the Qatar Cabinet agreed to use the official name Qatar International Court.
“They also approved our overall trading name which is the Qatar International Court and Dispute Resolution Centre. These new titles allow us to demonstrate publicly the broader range of our work that covers court, arbitration and mediation, and that we are able to accept international commercial disputes from bodies outside the QFC,” Musgrove said.
Asked to elaborate on the QICDRC being described as a new-age court, Musgrove said, “The whole concept of a free floating international court and dispute resolution centre is an exciting prospect for Qatar and this region. Conventional systems such as courts and arbitration are essentially institutional both in nature and operation. The QICDRC is a new-age, market-driven court where businesses choose it to get results quickly unlike institutional courts.
“All courts have to be institutional to some degree. They have to be tethered to state mechanisms for their ultimate judicial authority, and their access to state negotiated enforcement protocols. Apart from that, there is much greater freedom in a court you have to choose to use, and this allows you to let market needs determine the types of dispute resolution services you offer.
“It is possible to do this and also to maintain the independence essential to the fair and effective functioning of a legal system. The development of the QICDRC is very much based on the most effective and efficient mechanism for resolving high-end commercial disputes. In order to achieve this you have to understand what your potential clients want,” Musgrove said.
On issues facing Qatar’s legal framework, Musgrove said, “To me the biggest issue is the ability to move at the same pace as commercial and social development. Legal systems are not renowned for keeping up with societal change, which means that the recognition of the need to develop an international commercial court was a major commitment in ensuring Qatar was prepared for the reform that was about to take place.
“Qatar is working at every level on the reform of its legal framework. We are a major part of that, ensuring that truly international standards can be applied in dispute resolution and legal infrastructure. For example, the Qatar Chamber (previously known as the Qatar International Chamber of Commerce) is working with a new senior team to develop effective arbitration for trade disputes.
“Qatar’s Arbitration Law is under Review, and I very much hope that something like the UNCITRAL (UN Commission on International Trade Law) model law emerges as a further commitment to international benchmark standards.
“The UN has shown great faith in Qatar by becoming a partner in the Rule of Law and Anti-Corruption Centre, that will provide both education to the region and also much needed support to the tireless efforts of the Attorney General, Dr Ali al-Marri, to ensure all business in Qatar is clean.
“We are also working with partners including the Legal and Judicial Studies Centre of the Ministry of Justice, Qatar University and the American Bar Association in developing a strategy for the future of judicial and legal education which should not only help develop international standards in judging and lawyering, but also set an example to the region,” Musgrove said.
Asked how the new court fits in with the Qatar National Vision 2030, he replied, “The Qatar National Vision 2030 lays down a path of developing international benchmark standards in all professions in Qatar. Our commitment is to set those standards for lawyers and judges, with Qatar setting an example not only to its neighbours, but ultimately to the world.”
(Gulf Times / 03 July 2012)
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Saturday, 14 July 2012
Tunisia’s Government is Working on Legislation to Facilitate Islamic Finance
Tunisia’s government is working to pave the way for Islamic finance so that it can gain a stronger foothold in Tunisia’s financial services sector.
The presence of Islamic finance in the Tunisian economic landscape is minimal, largely because of a legislative void that limits the scope of Islamic products such as sukuk, or Islamic bonds.
However, a comprehensive legislative system to govern Islamic finance is in the working, said Tunisian Finance Ministry Houcine Dimassi at the 11th Carthage Conference on the “Capacity of Insurance and Re-insurance Industry to Confront New and Important Risks.” Finance Ministry officials also confirmed to Tunisia Live that studies to evaluate the opportunities of Islamic finance in Tunisia have already taken place.
“We have to find a judicial framework to legalize [Islamic financial products] and to clarify the relation between [customer and bank agent] for the good functioning of these products and transactions,” said Wadi Mzid, a director of a bank agency and a specialist in Islamic finance.
The government has already shown a commitment to Islamic finance by creating a National Committee for Islamic Finance as well as six peripheral committees that regularly meet to write up an ad hoc piece of legislation on the matter, which will ultimately be presented to the Constituent Assembly.
Despite the attention that the government appears to be giving Islamic finance, Tunisians are still new to the concept of Islamic banks as the first one was only introduced to Tunisia in 2010 when the Zitouna Bank was established. The second closest example to Zitouna in Tunisia is Al Baraka, which was established in 1983, but only serves as an off-shore bank without performing any financial services within Tunisia.
Civil society groups such as the recently-created Council of Islamic Finance in Tunisia (COFIT) and the Tunisian Association of Islamic Economics (ASTECIS) could play a role in the awareness of Tunisians over Islamic finance, and promote successful experiences with Islamic finance in countries like Malaysia.
COFIT and ASTECIS, however, may have to do more than just create visibility for Islamic finance among Tunisians. A change in mentality may also be necessary, some suggest.
“We shouldn’t reject or accept the Islamic finance by following any ideology or political point of view we have to look at it from an economic angle,” said Mzid.
(Tinisialive / 14 July 2012)
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Friday, 13 July 2012
Best year yet for Gulf sukuk (Islamic bonds)
Qatar's sale of a US$4 billion (Dh14.69bn) sukuk has made this year the Arabian Gulf's best ever for sales of Islamic bonds - with five and a half months still to go until the end of the year.
Investment banks have funnelled cheap credit towards the Gulf in an effort to make up for declining fee income and maintain relationships with big corporate clients.
Gulf borrowers have raised $17.4bn this year, led by sovereign sukuk sales from Saudi Arabia, Qatar and Dubai, according to Bloomberg data.
That figure eclipses the $16.1bn raised in 2007, the next-highest year on record. In both years, a total of 23 deals took place.
Qatar's sukuk sale followed high levels of demand for other highly rated Gulf sovereign bonds and generated a huge order book, reported by Reuters to be in excess of $24bn.
"Globally, there's a scarcity of interesting assets to invest in," said Neil Miller, the global head of Islamic finance at KPMG. "Most of the demand is from regional investors, who are supporting their own jurisdiction … Investors are still bullish about the prospects for the region."
But the bigger numbers of sukuk sales also reflected a lack of access to other sources of finance, Mr Miller added.
Gulf borrowers raised $7.3bn in funding through Islamic bonds last year, the data shows, with deal volumes sapped as the effects of the Arab Spring reduced investor appetite for Middle Eastern assets and cash-strapped European banks proved hard to tap for funding.
Banks broke the impasse by raising funding for Islamic bond sales from large institutional investors in the Gulf and South East Asia that have been starved of Sharia-compliant assets in which to invest.
But the high levels of debt being issued have thrown a lifeline to investment bankers in Dubai who have seen mergers and acquisitions dwindle and equity markets all but dry up.
Syndicated loans to companies - formerly the most common method through which European banks funded projects in the region - have fallen to their lowest levels in a decade as a result of strained bank balance sheets.
Meanwhile, initial public offerings have struggled to get off the ground in the UAE as a result of poor liquidity on local markets.
At the same time, banks have competed hard for deals by undercutting each other on fees, leading them to increase the volume of sukuk sales to compromise.
"It's pretty competitive. There's not tons of deals around in the conventional markets, and a lot of the banks want to be in on the transactions. Their relationships have to be managed," said Debashis Dey, a partner at the law firm Clifford Chance. "They're going to try to stay in the market while the market's hot, which may mean undercutting each other on fees."
Investment banks may be using large sales from Gulf governments as loss leaders to ensure they can retain other business, analysts said.
Investment banks' fee income from deals across the Middle East during the first half of the year rose 5 per cent to $234.8 million, compared with the corresponding period a year earlier, according to data from Thomson Reuters.
But following the surge in debt sales, fees for bond and sukuk deals during the first half of this year more than doubled to $54.9m, compared with $25.1m during the same period last year.
The value of bonds and sukuk outstanding issued by borrowers in the UAE is at the highest level in the country's history, according to the Bank for International Settlements.
(The National / 13 July 2012)
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Thursday, 12 July 2012
Mortgage law to spur Islamic finance: Study
JEDDAH – Saudi Arabia’s approval of a landmark mortgage law this week after a delay of more than three years will give rise to Islamic funding and tackle some of the challenges in the real estate sector in the Kingdom, National Commercial Bank (NCB) said.
Although all income segments will be positively impacted from the enactment of a mortgage law, those within the affluent segment will have greater freedom to either finance the construction of their own houses or to invest in the housing sector, NCB noted.
In their present lending system, banks use various forms of financing but prefer the ijara scheme due to the lack of a mortgage law, it said in a study.
"The mortgage law would allow for greater use of Islamic financing schemes within mortgage lending such as murabaha, which would allow the buyer to retain ownership of an asset," said the study.
"The passing of the mortgage law is expected to help convince individuals and entities to enter the housing market in the country…however, the law clearly addresses solutions to the pent-up demand for housing by the middle to high income segment, but does not address the inherent supply shortage of affordable housing. Additionally, until precedence has been set, the enforcement and full applicability of the law will be unknown."
Additionally, mortgage securitization will allow originators of the loans to diversify their risk by enabling them to secure immediate liquidity for assets, it said.
"An increase in loan tenors, with the expectations of higher returns, would make the assets more attractive to the secondary market, especially for institutional investors such as GOSI and investment banks," NCB said.The report expected the Saudi housing sector, the largest in the Gulf, to start witnessing what it described as a measured development of an active secondary market, whereby mortgage lenders will be able to sell the assets on their balance sheets and utilize their capital more efficiently.
NCB noted that the lack of a mortgage law in the Kingdom in the previous years has hindered the potential growth in the housing sector leading many financial institutions and developers to maintain low risk portfolios. "While we expect the momentum to gradually shift towards the implementation of higher risky offerings by banks and developers, the immediate short-term behavior is to maintain cautious optimism by taking a wait and see approach," the study added.
"The mortgage law is one solution out of a few that will help address the housing market challenge. Recent developments including the housing related royal decrees and the partnerships between banks and the Real Estate Development Fund will provide much needed support," the study added.
(Saudy Gazette.Com.Sa / 12 July 2012)
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Wednesday, 11 July 2012
Moroccan consumer market ready for Islamic finance
The study was independently commissioned and published by IFAAS (Islamic Finance Advisory & Assurance Services). It sets out the market opportunities for financial institutions interested in developing an offering for the Moroccan consumer market. It provides a full analysis of the consumer demand for Islamic retail banking, finance and Takaful and measures the likely consumer response and take-up to such products.
The report analyses consumers’ current consumption of financial products and services and their attitudes towards conventional, interest-based retail finance. It then gauges their appetite for Shari’ah-compliant retail financial products. This includes their likelihood to take up Islamic loans and savings accounts, their price elasticity towards these products and their likely speed of response to the launch of such products. The subjects of Shari’ah compliance, distribution channels and preferred providers are also covered.
The report summarises its findings:
- The level of interest in Islamic financial products and services is very high, at over 90 per cent, within the general public in Morocco. The majority of consumers are dissatisfied with interest-based banking but, having no Halal options, find they are compelled to engage in conventional finance.
- Providing the technical Shari’ah compliance aspects are managed properly, Islamic finance poses a significant opportunity for financial institutions in the North African Kingdom.
- Following the introduction of an Islamic finance system, the Moroccan retail finance market will see a significant growth in the penetration of banking and finance products amongst consumers. Providers will see a marked shift away from conventional, interest-based, products and the current low banking penetration will change to a high of consumption of assets and liability products.
Commenting on the findings, Farrukh Raza, managing director, IFAAS said, “Islamic Finance in Morocco – Sizing the retail market is the first specialised independent report providing an insight in to the Moroccan consumer’s appetite for Islamic finance products and services. The findings from the report reveal that consumer interest in Islamic finance has the potential to be much bigger than currently expected. The challenge for decision makers is to ensure that their early critical decisions are based on accurate market information to ensure long term success. IFAAS’ report and findings have proved invaluable for many institutions considering their next move.
“Institutions are considering key questions such as whether to focus on customer retention or acquisition, which products to launch first, how to price their new products and how to distribute them. ‘Islamic Finance in Morocco – Sizing the retail market' contains these and other findings and offer a wealth of information that will help shape critical business decisions. It is helping businesses to plan their resources, design their communications and understand what is required to achieve a strong market share in this dynamic market.”
IFAAS commissioned a local research firm to undertake the quantitative survey. Random, face-to-face, street interviews were conducted on a weighted sample size of over 800 individuals, reflecting a true picture of the Moroccan consumer market. The target sample was composed of men and women aged 18 to 55 years, from a variety of socio-economic categories, living in urban and rural areas and consisted of both banked and unbanked groups of the population. In terms of geographical coverage, the study was conducted in towns and surrounding rural municipalities of Casablanca, Rabat, Marrakech, Agadir, Fez, Tangier and Oujda.
(C.P.I Financial / 10 June 2012)
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Pakistan: Demand to make Islamic banking mandatory
KARACHI:Addressing at a seminar on a case study on “A Blend of Contemporary and Religious Education”, held at the Korangi Association of Trade and Industry (KATI), Jamiatur Rasheed Education Director Abdul Aziz Raja said that under the banking ordinance Islamic banking in Pakistan should be mandatory.
Islamic banking in Pakistan is being practiced on the basis of supply and demand and not as mandatory by the government, said Raja.
He said that the Supreme Court should order enforcement of Islamic banking. “Islam is a complete code of life instead of traditions and rituals and gives a complete economic system”, said Raja adding that in order to implement Islamic banking and financial system only 5% work has been done in the country and the rest is yet to be done.
He said that Jamiatur Rasheed has introduced various courses on Islamic financial system and economic principles and offer graduate and post graduate courses on banking and finance, accounting, book-keeping, supply chain and marketing, etc. He invited the trade and industry’s representatives to visit the campus.
The KATI Chairman Ehteshamuddin said on this occasion that interest free banking is the need of the hour. He pointed out that interest free banking is being practiced in Japan and a few western countries while Pakistani businessmen are being charged double digit interest.
He said that at this juncture when religious institutions have forgotten modern and technical education, Jamiatur Rasheed which is imparting most modern education is an asset to the nation. He advised that like Jamiatur Rasheed other religious institutions should also impart technical and other modern education to their students.
All Karachi Industrial Alliance President Mian Zahid Hussain announced that a delegation of industrialists will visit Jamiatur Rasheed. Sardar Yasin Malik advised the religious institutions to also provide technical education to their students to that they could be able to compete with other people in the field.
Published in The Express Tribune, July 8th, 2012.
(The Express Tribune / 08 July 2012)
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Qatar Bank Consortium Closes $1 Billion Funding Deal on $1.65 Billion Doha Real State Project
When it comes to doing big real estate deals in the Mideast, there are few countries that can swing them as easily as Qatar, one of the smallest and wealthiest nations on the globe.
Bawabat Al Shamal Real Estate Co. (Basrec), a joint venture between Al-Futtaim Real Estate, Qatar Islamic Bank and Aqar Real Estate Development and Investment, has signed a QR3.7 billion ($1.01 billion U.S.) syndicated facility to fund the development of its Doha Festival City project.
Doha is the capital of Qatar whose population is 1.8 million. The country's land mass totals 11.437 kilometers or about 4,416 square miles, slightly smaller than Connecticut at 5,543 square miles.
(1 QAR = $0.2743 USD)
The QR6 billion ($1.65 billion U.S.) Doha Festival City is being developed by Basrec on a 433,847 square meter plot (4.7 million square feet or 108 acres). The plot will include 260,000 square meters of gross leasable area in retail space. The space will offer over 500 retail units which will include a large number of new brands to Qatar. (1 sq meter = 10.7639104 square feet).
The project will also boast of the first Ikea store in Qatar, and will feature an entertainment and leisure complex, automotive showrooms, international hotels and convention center.
In a news release, Marwan Shehadeh, the general manager of Basrec, said the 10-year facility was the largest Qatari private sector syndicated transaction completed to date
'We are pleased to announce this transaction as the agreement today is a key step on the road to developing this major project," Shehadeh said. "This financing will ensure the work on Doha Festival City will progress well and according to plan."
He added, "We are pleased to be working with such strong and committed banking partners. The signing of this transaction is a testimony to the confidence that our banking partners have in this distinguished and iconic project."
QInvest acted as financial advisor to Basrec and the sole bookrunner for the facility. Commercial Bank of Qatar (CBQ) and Barwa Bank took the mandate lead arranger (MLA) roles. CBQ, the original lender, also acted as the lead and documentation bank on the conventional tranche as well as the conventional facility agent.
Barwa Bank was the lead and agent bank on the Islamic tranche, also taking the role of Islamic Documentation Bank.
The MLAs were joined in the facility at lead arranger level, across the two tranches, by Ahli Bank, Doha Bank, International Bank of Qatar, Al Khalij Commercial Bank (al khaliji), Qatar International Islamic Bank and Qatar National Bank.
The development is located just north of downtown Doha on Al Shamal Road, one of the main arterial routes to the city center. This is the route that will eventually connect Doha with Bahrain via the Qatar-Bahrain Causeway.
International analysts are confident that with its strategic positioning, the super-regional complex is ideally equipped to meet the retail, hospitality and entertainment needs of not only Qatar, but also of neighboring countries.
In the first phase, the 32,000 square meter Ikea store will be completed by the first quarter of 2013, while the remaining components of Doha Festival City will be delivered in 2015.
In the release, Ahmad Meshari, the acting CEO of Qatar Islamic Bank, said his group was "pleased that our confidence in this project demonstrated by our investment is supported by Basrec's banking partners through this transaction. We are confident the project will have a positive impact on the local economy, reflecting our strong commitment to the economic development of Qatar.'
Andrew Stevens, the group CEO of Commercial Bank of Qatar said, 'We consider this as an important transaction for Qatar as a whole and CBQ is honored to be leading the banking group in partnering with Festival City to deliver on the iconic plans for this development.'
Barwa Bank CEO Steve Troop said, 'We value the relationship that we have built with Doha Festival City and believe that the management of the project has a strong history which complements our strategy to strengthen our portfolio. In this regard, we are pleased to be leading the Islamic tranche of the financing.'
Shahzad Shahbaz, the CEO of QInvest, said the success of the deal was a testament to the efforts of the teams involved in the project and the transaction.
QInvest has advised Basrec and its shareholders through a number of initiatives and we are pleased with the partnerships that have been brought together to develop Doha Festival City,' he added.
(World Property Channel / 10 July 2012)
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