Philippines: Bangko Sentral sees great potential for Islamic banking

The Bangko Sentral ng Pilipinas sees great potential for Islamic banks in the Philippines, especially in the Autonomous Region in Muslim Mindanao, which only has 20 banks across five provinces.

 

ARMM is a top source of fish and marine products and has large mineral deposits but conventional banking has been slow in coming to the region.

 

"This is an unfortunate state of affairs, considering that the ARMM is a resource-rich area with vast potential," BSP Governor Amando Tetangco Jr. said in his speech at the recent Islamic Banking Finance Workshop at the BSP.

 

"The latest available regional GDP data [2012] puts the real GDP growth in the ARMM at only 1.2 percent. But when we consider broader Mindanao, the number rises about sevenfold to 8.2 percent. This tells us that there is an enormous potential in the Mindanao region in general, and the ARMM in particular," he said.

 

Tetangco said although Islamic banking can also meet the banking needs of non-Muslim depositors, banks must also look at the market needs and opportunities in the millions of Muslims in the country.

 

He said the public must be provided with appropriate choices to suit their risk appetite and financial needs.

 

He said the regulatory and supervisory framework must bring about a level playing field for the Islamic banking system.

 

"In other words, the privileges that are available for conventional banks must also be available to Islamic banks.  In the same vein, the prudential requirements that cover conventional banks, must also apply to Islamic banks.  The design and implementation of standards, of course, would need to take into account, the particular characteristics of Islamic finance," he said.

 

He also said that the regulatory environment should encourage banks to come out with products and services to address the distinctive needs of Islamic finance.  He said Islamic financial players should be encouraged to introduce Islamic finance products.

 

Tetangco also said that since the BSP wants to promote more Islamic banks to operate alongside conventional banks, it is also looking at an open approach that will allow conventional banks to operate Islamic banking windows.

(GMA News Online / 16 March 2014)

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

Malaysia plans ethical sukuk guidelines as sector expands

KUALA LUMPUR, March 12 — Malaysia’s Securities Commission plans to introduce guidelines for the issuance of “socially responsible” sukuk, the regulator said today, in an expansion of the standards covering Islamic bonds.

Up to now, sukuk standards introduced by regulators and bodies of scholars around the world have focused on ensuring that the structures of the sukuk and the assets backing them comply with Islamic principles.

Malaysia’s initiative appears to go a step further by setting formal guidelines for the ways in which money raised by sukuk should be used.

The initiative, known as “SRI sukuk”, was announced by Prime Minister Najib Razak in his annual budget speech last October; he said funds raised by SRI sukuk would go towards “sustainable and responsible” investments.

The prime minister did not elaborate on how SRI sukuk would work, and the Securities Commission did not give any details. But the guidelines could attract to Malaysia issuers and investors from the West who are familiar with the concept of socially responsible investing but have yet to venture into the sukuk market.

The new standards may focus on ensuring that money raised is not spent in economic sectors banned by Islam, such as tobacco, gambling and banking based on interest payments. The SRI standards will not be compulsory; sukuk issuers can continue using their current formats.

In its 2013 annual report, the Securities Commission also said it would continue to encourage cross-border and multi-currency bond and sukuk issuance.

GROWTH

According to data released by the commission today, Malaysia retained its global lead in many areas of Islamic finance.

Malaysia accounted for 58.8 per cent of global sukuk outstanding and 69 per cent of sukuk issuance last year. It has been innovating with new sukuk formats: Malaysia became the first country in the region to see a sukuk issue designed to raise capital to meet global Basel III banking standards, and the second country to raise money by selling sukuk to retail buyers.

Last year the Malaysian regulator approved issuance of 49 local-currency sukuk worth a combined 99.1 billion ringgit up from 41 worth 71.1 billion in 2012.

Sukuk, while still dominated by short-term commercial paper and medium-term notes, accounted for two-thirds of total private debt securities issued in Malaysia last year.

Islamic assets under management in Malaysia grew 22.5 per cent last year to RM97.5 billion. There were 178 Islamic unit trusts as of December 2013 with RM42.82 billion in assets, up from 169 and 35.56 billion a year earlier.

In the wholesale fund sector, there were 52 Islamic wholesale funds holding RM16.43 billion of assets, up from 41 holding 16.22 billion.

Malaysia’s private retirement scheme (PRS), launched in mid-2012, posted a five-fold increase in Islamic assets under management and had 22,511 accounts at the end of last year.

A total of 17 Islamic PRS funds held RM79.52 million in assets as of December, up from nine with 14.45 million a year earlier. This represented roughly a quarter of all PRS assets.

(The Malay Mail Online.Com / 12 March 2014)

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

Philippines: Islamic banking and finance anyone?

This summary is not available. Please click here to view the post.

Experts stress interest-free banking

Muslim scholars should collaborate with bankers to eliminate interest from the banking system which should be fully in accordance with Islamic economic system, stressed Dr Yasin Mazhar Siddiqi Nadvi, an eminent Indian scholar.

Addressing the members of Faisalabad Chamber of Commerce and Industry, he said that the Muslims enjoy the same status being followers of Prophet Muhammad Peace be Upon Him but the businessmen have an edge and advantage as the custodian of the profession adopted by our Prophet Muhammad (PBUH).

Commenting on Islamic history, he quoted numerous examples and said that partnership and Mudaraba are Islamic modes of banking system but still there was need for further research to fine-tune the system in accordance with Islam and need of the era. He said that interest is not allowed in any religion. Even before Islam, it was prohibited but some tribes of Quresh practiced it for their own financial benefits. He said that religious scholars and bankers should sit together and discuss workable Islamic system to face the emerging challenges.

He said, “There is clear difference between profit and interest and we must have ability to understand this delicate difference coupled with the intention while making any transaction.” He also responded to questions and said that Indian scholars have recently given a “fatwa” justifying life insurance particularly in Indian scenario where the life of Muslims is in danger.

Earlier, in his welcome address, FCCI President Engineer Suhail Bin Rashid said that Islam is complete code of life which has potential to manage the international affairs with the fundamental of merit, justice and fair-play. He said that despite material developments by the West, the world is facing anarchy like situation and unluckily among most disturbed nations, Muslims are on the top. He said that members of FCCI are directly linked with trade and business and requested Dr Nadvi to throw light on Islamic banking system with special reference to Riba.

Earlier, Mufti Muhammad Tayyab introduced Indian scholar Dr Yasin Mazhar Siddiqui Nadvi and said that he is author of 50 books on Seerat written in Urdu, Arabic and English languages. He has also 500 research articles at his credit.

FOOD EXHIBITION: The food industry can fetch heavy revenue by promoting value addition and quality of packaging at par with international standards, said an expert.

University of Agriculture Vice Chancellor Dr Iqrar Ahmad inaugurated the Food Exhibition set up by the National Institute of Food Science and Technology. He was flanked by NIFSAT Director General Dr Masood  Sadiq Butt. At the exhibition, the students exhibited the skills in producing the different value-added food items.

The vice chancellor said that the value addition in the food industry was essential to compete with the rest of the world. He said that in the modern era, the world is changing rapidly because of technology advancement.

He urged the food experts to ensure the quality of food compatible to the international market. He was of the view that youth of the country was blessed with extreme potential that must be explored in order to give voice to their inner qualities. He appreciated the efforts made on the part of the students.

He announced that the best brains of the exhibition would be provided incubates at the Business Incubation Centre with funding so that they could launch their business.

He also advised them to come up with the innovative ideas that will make their practical life easier. Dr Masood Sadiq Butt said the NIFSAT was making efforts to produce skilled manpower in the food industry.

He said that the exhibition was aimed at providing the platform to the students to exhibit their skills and to create an environment of competition.

(The Nation  / 14 March 2014)

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

Oman Central Bank Says No Quick Introduction Of Islamic Instruments

The need for Islamic interbank tools is relatively acute in Oman because its Islamic banking regulations prohibit the use of commodity murabaha.

Islamic banks in Oman look set to wait many more months for access to additional sharia-compliant money market tools after the central bank ruled out introducing them until the government issues its first sovereign sukuk.

A viable interbank market could boost the profitability of Oman’s Islamic banks, which have so far mainly relied on wakala, which are sharia-compliant agency agreements, to manage their short-term funding needs.

Asked if the central bank would soon introduce its own Islamic instruments to broaden and deepen the market, central bank executive president Hamood Sangour al-Zadjali said on the sidelines of a financial conference in Kuwait on Wednesday:

“Not yet. We do not have anything planned about this. We are just waiting for the government to issue the sukuk, at the end of the year probably, but at the moment we are not planning any liquidity instruments because we have to set the framework for it.”

He added, “It is not straightforward. Islamic instruments, they have to be asset-based. As a central bank we do not have that much of assets to be in line. But we will see what is the experience of other countries, and if it is possible that we will be issuing instruments similar to CDs.”

The need for Islamic interbank tools is relatively acute in Oman because its Islamic banking regulations prohibit the use of commodity murabaha, a widely used money market contract favoured elsewhere in the Gulf.

Commodity murabaha is criticised by some sharia scholars as not being sufficiently based on real economic activity, a key principle in Islamic finance.

Last year Oman’s central bank granted Islamic banks a one-year relaxation of limits on the amount of foreign assets which they can hold, to give more time for Islamic financial instruments to be developed domestically.

Banks’ wakala network leaves them open to counterparty risk; an Islamic tool from the central bank would effectively remove that risk.

In addition to Oman’s two full-fledged Islamic institutions, Bank Nizwa and Al Izz Islamic Bank, several conventional banks have launched sharia-compliant products through Islamic windows, including Bank Sohar, Bank Dhofar, Bank Muscat, Ahli Bank and National Bank of Oman.

(Gulf Business / 17 March 2014)

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

Malaysia: Islamic banking growing at fast pace

KUALA LUMPUR: The Islamic banking industry in Malaysia is expected to achieve a market share of more than 25% of total banking assets in 2014, before it reaches 40% of the entire banking sector by 2020, Standard Chartered Saadiq Bhd (StanChart Saadiq) CEO Wasim Saifi said, adding that market demand and support from the government will drive the industry forward.

"As the (Islamic banking) industry grows further, you will see more and more people beginning to use Islamic banking services, while the government-linked companies and large corporations will also see the value of Islamic finance," Wasim told a press conference after launching the Saadiq-branded window at Standard Chartered Bank's main branch here yesterday.

Market demand could come from the corporate sector, small and medium enterprises (SMEs), as well as the retail customers, he said, while the industry will see growth across all market segments, including sukuk, personal finance, mortgages and corporate finance.

"Retail customers will be very important to the growth, but as the industry grows bigger and the product range wider, the corporate and SMEs will start using the Islamic banking service," said Wasim.

As for StanChart Saadiq, the Islamic banking subsidiary of Standard Chartered Bank Malaysia Bhd, it is tackling both retail customers as well as corporate clients, he said.

"For us, the bigger contribution still comes from retail customers, but the contribution of corporate clients is expected to grow substantially," he added.

Wasim said the Islamic banking industry in Malaysia is expected to grow by 18% annually from 2018. Thus far it has grown twice as fast as its conventional counterpart with a compounded annual revenue growth of 22%.

StanChart Saadiq has recorded a growth rate of 10% to 20% over the last two to three years, said Wasim, who is also the global head of Islamic consumer banking for Standard Chartered Group.

To date, the international banking group has set up Islamic banking units in seven countries, namely Kenya, the UAE, Bangladesh, Bahrain, Indonesia, Pakistan and Malaysia. The local business now contributes some 25% of the total Islamic banking assets under the group, Wasim said, adding that the banking group is exploring new market opportunities in the African region.

Currently, syariah-compliant solutions are offered at 10 StanChart Saadiq branches. Islamic banking windows have been introduced at eight StanChart branches in the Klang Valley and other parts of the country with plans to cover all 33 conventional branches over the next two years.

"This latest move to leverage our existing infrastructure is aimed at increasing our Islamic banking penetration especially in high traffic areas where the conventional branches are located. It complements our Saadiq branches very well as our main delivery channel," said Wasim.

Meanwhile, Standard Chartered Bank Malaysia country head of consumer banking Sonia Wedrychowicz-Horbatowska said the introduction of Islamic banking windows fits with the bank's overall consumer banking strategy in its aspiration to be the main bank for customers by enhancing their banking experiences.

"As it is, various innovations that we introduced in conventional banking have also been replicated in our syariah-compliant offerings," she said.

(The Sun Daily / 12 March 2014)

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

Dubai Islamic Bank eyes Kenya, Indonesia for expansion

Dubai Islamic Bank plans to expand its operations into Indonesia, Kenya and other African countries as it emerges from a period of consolidation, the bank's chief executive said.

The emirate's largest sharia-compliant lender, which currently makes some 95 percent of its revenue within the United Arab Emirates, says it is entering a growth phase domestically and internationally.

"We are exploring opportunities in Indonesia, Kenya and surrounding countries in Africa, the Indian subcontinent and the GCC (Gulf Cooperation Council)," Adnan Chilwan said in an interview late on Wednesday.

"We could acquire, set up a JV, establish a finance company or start a greenfield operation as long as we keep management control and operate under our brand."

Like many other banks in the UAE, the sharia-compliant lender saw its profits nosedive after Dubai's financial crisis erupted in 2009 and it was forced to set aside billions of dirhams (hundreds of millions of dollars) to cover bad loans.

The bank focused over the last few years on strengthening its balance sheet and reducing costs, and says it has now dealt with most of its bad loans. Last year DIB completed the takeover of Dubai-based mortgage lender Tamweel, in which it already held a majority stake, through a share swap.

DIB posted a 66 percent jump in fourth-quarter net profit to AED518m ($141m), beating analysts' forecasts, on the back of lower financing costs and impairment charges. Net profit for the full year increased 42 percent to AED1.72bn.

Chilwan, who was promoted to CEO in July last year, described Africa as virgin territory for Islamic finance. In Kenya, most estimates put the number of Muslims at only about 15 percent of the population of 40 million, but the financial regulator is preparing a ten-year capital markets development strategy that includes Islamic finance.

"Both consumer and wholesale opportunities are there, especially in the countries we are targeting and while the initial investments are not too intensive, the returns are extremely decent and more than acceptable in our line of work," Chilwan said, without giving details of his plans for Africa.

He added, however, that entry into one country would ease expansion into other countries around the region.

"Given a five-year scenario, we expect a decent franchise spread across these countries with stable and solid yields across all sectors."

However, Chilwan said the bank also expected strong growth in its domestic market, so the balance between local and international business would not change radically.

"We are pretty much skewed towards the domestic franchise with nearly 95 percent of the contribution coming from the UAE.

"With all the plans in place, we do not expect a dramatic change in the medium term, with international business perhaps getting at best 10 percent to 15 percent of the overall group numbers in about six to eight years."

The bank's liquidity position is strong so "there appears to be no current requirement to enter capital markets at this time," Chilwan added.

(Arabian Business.Com / 13 March 2014)

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