First Gulf Bank To Set Up $1.07bn Sukuk In Malaysia

Funds from the programme will go toward expanding the bank's day-to day business.

Abu Dhabi’s First Gulf Bank, the third-largest bank by assets in the United Arab Emirates, will raise 3.5 billion ringgit ($1.07 billion) with Islamic bonds in Malaysia, according to a statement on Thursday by credit rating agency RAM Ratings.

The Islamic bond, or sukuk, program will be issued by the bank’s funding unit, FGB Sukuk Company II Ltd. RAM rated the program ‘AAA’ or Stable on the bank’s size and high likelihood of government support, as the Abu Dhabi ruling family owns 64 per cent of the firm.

First Gulf Bank follows numerous institutions to find funding in Malaysia’s sukuk market, the world’s largest. More than two-thirds of global sukuk issuance in the first half of 2013 took place in Malaysia, followed by Saudi Arabia and the UAE.

“The ratings also incorporate the bank’s excellent profitability, robust capitalisation, expanding franchise and moderate asset quality,” said RAM.

Funds from the programme will go toward expanding the bank’s day-to-day business. RAM did not indicate when the first issuance will take place.

(Gulf Business / 06 March 2014)

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Pakistan: Summit Bank launches Islamic banking

KARACHI: Summit Bank Limited has launched its Islamic Banking with setting up new branch in Karachi with a plan to convert overall banking operation from conventional to Sharia-compliant in the next three years.

 The bank has been established with Rs 1 billion equity in accordance of mandatory operations requirement of starting operations with the capital driven through non-interest source.

 Hussain Lawai, President and CEO of Summit Bank said that bank will convert its 4 branches into Islamic from conventional whereas it will add 15 new branches in the calendar years mainly in provincial capitals and big cities.

 These branches will play a crucial role in setting business strategy of the bank through providing experiences including issues and success in the Islamic banking.

 The bank will set its new direction through operations of its branches and rapidly convert its branches from conventional to Sharia-based.

 The bank’s management has first decided to open a window or division of Islamic Banking side by side with its conventional banking but it planned to full-fledge bank through migration of interest-based banking to Islamic banking, veteran banker.

 The Islam bank has been planned to grow with 20-30 percent annual rate which is possible though not challenging or impossible due to rising awareness of Islamic banking in the country.

 The growth of Islamic Banking is immense in Pakistan standing 30 percent annually as compared with conventional banking industry that standing at 10-12 percent per annum. Summit Bank is operating currently with 187 branches in the country. It is imparting its leading role bringing remittances inflows in Pakistan to be the six largest players in this business. Lawai said Summit Bank has increased its home remittances services with partners like Ufone, a cellular phone company, to be the six largest contributor of processing home remittances in the country. 

(Daily Times / 08 March 2014)

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Bahrain’s minister lauds Islamic banking growth in Pakistan

KARACHI: Shaikh Ebrahim Bin Khalifa Al-Khalifa, Bahrain’s Minister for Housing and Chairman Board of Directors Meezan Bank Ltd, has said that Pakistan has huge potential for project based financing in sectors including energy, health, food, pharmaceutical, housing for which Islamic banking industry has more suitable solutions. 

During a meeting of the senior officials of the State Bank of Pakistan the other day, Shaikh Ebrahim, who is also Chairman Board of Trustees Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), appreciated Pakistan’s pioneer position in Islamic banking and paid tribute to Mufti Taqi Usmani for his great contribution.

Shaikh Ebrahim held a meeting with Deputy Governor SBP Saeed Ahmad during which the deputy governor welcomed his Royal Highness. Shaikh Ebrahim while acknowledging the significant growth of Islamic banking in the country appreciated the role of SBP for establishing a conducive regulatory environment for the industry.

He emphasized that the Islamic banking industry needs to play a critical role in enhancing the financial penetration level in the country. He opined that continued research will lead the move from current Shariah compliant products to fully Shariah based products. While focusing on the fundamentals of Islamic banking, he was of the view that the Shariah complaint financial system should make the flow of money to all those sectors critical for the broad based growth of the economy. He stated that the local market of Pakistan has huge potential for project based financing in sectors including energy, health, food, pharmaceutical, housing for which Islamic banking industry has more suitable solutions. 

Deputy governor SBP appreciated the vision of his Royal Highness. He briefed the guest about various projects and schemes currently being under taken having great potential for local and foreign investors. He reassured SBP’s support for Islamic finance initiatives. The deputy governor SBP repeated the resolve of the present Government of Pakistan and the commitment of SBP in promoting Islamic finance in the country. He discussed SBP’s 5-year strategic plan for Islamic banking industry.

Saeed Ahmad said that SBP is considering options to provide a comprehensive facility for Islamic banks to channel their liquidity through Shariah compliant modes. After availability of this facility, Islamic banks will be restricted to channel their surplus funds to conventional banks, failing which regulatory penalty will be imposed. He emphasized that Islamic banks should increase their outreach to SMEs, agriculture and low cost housing sectors.

Deputy Governor also appreciated the work of AAOIFI and Shaikh Ebrahim Bin Khalifa Al-Khalifa’s instrumental efforts and his contribution for the promotion of Islamic banking and related accounting and technical matters. 

(Daily Times / 05 March 2014)

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Kenya plans framework for Islamic finance

NAIROBI — Kenya’s financial regulator has proposed a separate regulatory framework for Islamic financial institutions as part of a broad 10-year strategy designed to boost capital markets in east Africa’s biggest economy.

A draft of the strategy was circulated earlier this year and the plan is now in its final stages of preparation. It aims to promote more sophisticated financial services in Kenya such as asset management, venture capital, private placements and Islamic finance.

"It will be launched in coming weeks," a spokesman for Kenya’s Capital Markets Authority (CMA) told Reuters.

Sharia-compliant structures are seen as important to support funding of Kenya’s infrastructure projects, with the CMA dubbing Islamic finance a "priority". Most estimates put the number of Muslims in Kenya at only about 15% of the population of 40-million. But Islamic finance, which is also being developed by several other sub-Saharan countries in Africa such as Nigeria, could help Kenya attract investment from cash-rich Islamic funds in the Gulf and southeast Asia.

Islamic finance, which follows religious principles such as bans on interest and gambling, is offered by two full-fledged Islamic lenders in Kenya — Gulf African Bank and First Community Bank (FCB) — as well as the Islamic windows of several conventional banks. They will be joined this year by the country’s first retakaful (Islamic reinsurance) firm, as Kenya Reinsurance Corporation ventures into the sector, the CMA said in its draft plan. Takaful Insurance of Africa, the first full-fledged takaful company in the country, was launched in 2011.

The CMA has also approved Genghis Capital to operate an Islamic collective investment scheme, joining FCB Capital; the regulator has introduced rules allowing the creation of sharia-compliant real estate investment trusts.

In the short term, the CMA plans to create a regulatory framework of its own for Islamic capital markets, focusing on corporate governance, information disclosure, a policyholder compensation fund and responsible pricing.

In the long term, however, the CMA would engage the central bank and the national Treasury to develop a separate policy, legislative and regulatory framework for Islamic finance.

This would include creating and giving legal recognition to a single national sharia advisory board to set rules and policies for the entire industry — a centralised approach which mirrors regulation in countries such as Malaysia and Oman. The plan would also create an industry lobby group and work with standard-setting bodies such as the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions and the Malaysia-based Islamic Financial Services Board.

The CMA would seek help in developing Islamic finance from industry hubs in Malaysia and London. It has existing agreements with Malaysia’s regulator and a working relationship with the London Stock Exchange.

Last month, the central bank-owned Kenya School of Monetary Studies started offering courses related to Islamic finance. The central bank has been working with its Malaysian counterpart in an effort to offer sharia-compliant instruments such as Treasury bills.

(Business Day BDLive / 05 March 2014)

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Malaysia: Prasarana issues RM2 billion sukuk

KUALA LUMPUR- Syarikat Prasarana Negara Bhd has issued a RM2 billion in nominal value sukuk murabahah, comprising RM1.5 billion in nominal value of five-year tranche and RM500 million in nominal value of 10-year guaranteed by the government.

In a statement Tuesday, Prasarana said the sukuk carried a semi-annual profit rate of 4.08 per cent per annum for the five-year tranche and 4.67 per cent per annum for the 10-year tranche.

Prasarana said it would use the sukuk proceeds for its capital expenditure and general working capital purposes, which would be syariah-compliant.

The sukuk were offered through a one-day book-building process, it said.

The company said the five-year tranche received orders of up to RM1.71 billion, which represented a bid-to-cover ratio of 1.14 times.

The orders for the 10-year tranche grew to approximately RM1.775 billion, which represented a bid-to-cover ratio of 3.55 times, it said.

"The offering met with demand from a diverse range of investors and allocated to a mix of government agencies, financial institutions, fund managers, insurance companies and corporate accounts," it said.

Its Group Managing Director, Datuk Seri Shahril Mokhtar, said the sukuk marked another successful issuance undertaken by Prasarana, a testimony to Malaysia as a leader in the sukuk market, both locally and globally.

CIMB Investment Bank Bhd and Maybank Investment Bank Bhd (Maybank IB) are the joint lead arrangers for the sukuk programme and CIMB, Maybank IB together with Kenanga Investment Bank Bhd and RHB Investment Bank Bhd are the joint lead-managers and the joint bookrunners.

(Malaysia Hronicle / 04 March 2014)

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Turkey keen to grow Islamic finance: Borsa Istanbul chief

ISTANBUL – The global financial crisis has highlighted the potential for Islamic financial products, an industry which has achieved the rapid growth in the last decade, the head of the Istanbul Stock Exchange said on Monday.

Ibrahim Turhan, head of Borsa Istanbul claimed that the global Islamic finance industry`s assets were estimated to have reached $1.6 trillion in 2012, and that “structural problems” in international finance could be addressed by using Islamic banking practices.

Turan was speaking at a conference on Islamic finance organized by Borsa Istanbul with the collaboration of the World Bank, the Islamic Development Bank and the Turkish Central Bank, among others. Despite the industry’s growth Turan said that Islamic finance currently constitutes only 1.6 percent of total assets of world finance.

“Some structural problems of financial markets were uncovered in the global financial crisis. At this stage, the world financial market has rediscovered Islamic finance’s asset-based features and … thinks that the increasing gap between capital markets and real markets can be bridged in Islamic finance,” he said.

He also said that the Islamic finance industry`s assets are projected to amount to $6.5 trillion by 2020. Adding that 18 Islamic sukuk (bonds) worth $7.2 billion have been issued in Turkey since 2010, Turhan claimed that the country wanted to make Istanbul the most important center [in the non-interest financing field] of Western and Eastern Europe, the Middle East and North Africa. There are three indexes and four funds consistent with Islamic rules already operating on Borsa Istanbul and the World Bank opened a Global Center for Islamic Finance in Istanbul in October 2013.

Also speaking at the conference was the vice-president of Islamic Development Bank, Abdul Aziz Al Hinai who said: “The developing countries need to have new strategies after the US Federal Reserve decided to cut its controversial bond-buying program."

“Capital structure based on Islamic finance is much more stable than capital based on interest rates.”

Experts in Islamic finance have said that despite the positive developments, moving forward in the deteriorating global economic environment, added to a shortage of education and product awareness in some jurisdictions plus legal and tax issues are just some of the challenges facing Islamic banking.

(Turkishpress.Com / 04 March 2014)

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Morocco's Attijariwafa Bank looks to boost Islamic finance

Attijariwafa Bank, one of the biggest banks in North Africa, will boost its Islamic subsidiary as soon as the Islamic finance bill passes parliament, its managing director said.

Morocco's parliament has started to discuss a bill regulating Islamic banks and sukuk issues after months of delays, after the Islamist-led government adopted it last month.

Parliament's approval will be the last step before fully-fledged Islamic banks can be established in Morocco, whether they are subsidiaries of domestic banks or foreign owned, a measure which could bring in more Gulf Arab investment.

Attijariwafa bank, controlled by the royal family's investment holding company SNI, has been the only Moroccan bank to create an Islamic subsidiary since Morocco began allowing conventional banks to offer a limited set of Islamic financial services in 2010.

Last year the unit, Dar Assafaa, signed a deal enabling it to offer Islamic financial products to 42 percent of state employees ahead of the approval of the draft bill when foreign rivals could step in.

"In order to transform Dar Essafa into a participative bank, we will need to increase its capital by 150 million dirhams, and subsequent investments will depend on how the market develops," Attijariwafa bank's Managing Director Ismail Douiri told Reuters in an interview.

"We have a very competitive market, and Moroccans are too sensitive to product prices, so I don't expect a revolution in the Moroccan banking sector," he said.

He said banking activities would expand by only a few percentage points as Islamic finance was more expensive than conventional banking.

Islamic finance banks are called participative banks under the Moroccan legislation.

Moroccans seem to be attracted by participative finance, but it is almost impossible to have products with the same prices as the conventional finance, at least initially, Douiri said.

Standard and Poor's has estimated that if Islamic products were proposed at higher costs in North Africa, it would probably attract only limited demand.

Over the past few years, Morocco's banks have started to tap the low income banking segment which is by nature more sensitive to pricing, the agency said in a report last month.

"Attijariwafa Bank may seek a foreign partner for its Islamic subsidiary, but it is not a top priority. We are good as we are. If foreigners have more experience in Islamic finance, we have the advantage of knowing the North African market very well," Douiri said.

The bank posted a 4.8 percent drop in its first-half net profit to 2.2 billion dirhams, reflecting an economic slowdown and rising bad debts.

Douiri said financial results of full 2013 would confirm the first half trend.

"The results are coming out in the next few days. I cannot give more details, but bad loans seem steady at the second half of 2013, and would decrease in 2014," Douiri said.

(The Africa Report / 04 March 2014)

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