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Thursday, 5 June 2014

Malaysia’s Bank Islam plans 1b ringgit sukuk for growth, acquisition

Kuala Lumpur: Malaysia’s Bank Islam plans to raise 1 billion ringgit ($311.24 million) by selling Islamic bonds to fund organic growth as well as a potential acquisition in Indonesia, two people involved in the sale told Reuters on Monday.
The country’s oldest and largest Islamic-only bank is wholly owned by BIMB Holdings Bhd, which last month said competition in the Islamic banking sector has narrowed profit margins and brought about the need to raise funds for growth.
Bank Islam aims to maintain the annual growth rate in the amount of money it lends at 20 to 25 per cent by selling in July 300 million ringgit worth of Murabahain under a 30-year sukuk programme, one of the people said.
The sale of the Basel-III compliant Tier 2 sukuk is awaiting approval from the central bank by next week ahead of the final green light from the Securities Commission, said the person who declined to be identified as the matter was not yet public.
Bank Islam then plans to raise another 300 million ringgit in 2016 for organic growth, that person said.
In addition, the bank aims to raise 400 million ringgit in 2015 to buy a business in neighbouring Indonesia, said the second person without identifying the target.
The bank is waiting for the outcome of Indonesia’s July presidential election before finalising acquisition plans, the person said.
Rivals Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd earn up to a third of their income in Indonesia thanks to rapid corporate loan growth there as well as increased custom from a burgeoning middle class.
Bank Islam earns all of its income at home, offering over 70 per cent of loans to retail consumers. The bank lent out a record 683 million ringgit last year, 21.7 percent more than the year prior, boosting net income by 5 per cent to 1.5 billion ringgit.
In Islamic deposits, the bank put its local market share at 16 per cent in 2013, behind Maybank and ahead of CIMB, Public Bank Bhd and AmIslamic Bank Bhd.
Last month, parent BIMB reported a 67 per cent rise in January-March net profit of 123.5 million ringgit, largely thanks to Bank Islam’s earnings.
BIMB completed the purchase this year of the 49 per cent of Bank Islam it did not already own from pilgrimage fund Tabung Haji and the Dubai Group for $884 million.
(Gulfnews.Com / 02 June 2014)
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Singapore: Sun shining on Islamic finance, says MAS chief

Islamic finance is developing rapidly but more work needs to be done if Singapore is to fully benefit from its growth.
As experts in the field gather here for the 5th World Islamic Banking Conference Asia, the consensus is one of promising prospects, but with gaps to plug.
"The sun is shining on Islamic finance," said Ravi Menon, Monetary Authority of Singapore managing director, in a keynote address.
The central banker highlighted three promising global developments for Islamic finance, which forbids the charging of interest. First, Islamic finance has grown at double digits last year, as it has for the previous five years, despite global economic uncertainties and market volatility. Global Islamic financial assets are estimated to have reached US$1.8 trillion by the end of last year, from US$1.5 trillion in 2012.
Second, global regulatory standards and best practices are being established for Islamic finance. Common standards are good for facilitating cross-border transactions, helping to address risks that are idiosyncratic to Islamic finance, such as Syariah non-compliance risk, he noted.
Third, more countries are catering to Islamic finance.
In Asia, Indonesia has set out to significantly grow its Islamic banking sector and develop its Islamic capital markets. India started introducing Islamic financial products and services last year.
There is growing cross-border sukuk or Islamic bonds issuance within Asia as well as between the Middle East and Asia.
"Singapore has benefited from this favourable global environment for Islamic finance," he said.
Singapore is the only non-Muslim-majority country among the top 15 countries for Islamic finance. Islamic assets under management have surged nearly fourfold over the last five years to US$3.5 billion in 2012. More than 40 per cent of the Islamic assets in Singapore are managed by the asset management industry.
Fifteen banks are involved in Islamic banking, double the number five years ago; they hold about a third of the Islamic assets in Singapore. The rest of Islamic assets are in outstanding sukuk and takaful or Islamic insurance.
Singapore has had nearly 30 sukuk issuances worth S$4.3 billion to-date, compared to seven in 2013.
And more funds continue to be established here, to meet demand from clients in Asia as well as from the Middle East. Several corporations have established sukuk programmes in Singapore to tap the market over the next few years, said Mr Menon.
Still, despite the impressive growth, industry players say Islamic finance here needs more depth - in a non-Muslim-majority environment, Islamic finance has yet to really take off.
Most Islamic banks tend to be retail-heavy, as seen in the more than 60 per cent retail weightage in Malaysia and 80 per cent in Indonesia, noted Syed Abdull Aziz Syed Kechik, OCBC Al-Amin Bank Berhad chief executive.
"This is invariably linked to a domestic centrism," he said.
"While organic growth remains a reality, the gap between Islamic banks on one side and conventional regional and global players on the other is widening. Bolder moves by Islamic banking players to expand via regional mergers and acquisitions would be the key to fast-tracking capacity and building scope," he said.
Other challenges include the lack of familiarity with Syariah structures, with Middle East investors and companies venturing offshore heading mainly to London.
According to Clifford Lee, DBS Bank's head of fixed income, much education still needs to be done on structuring Syariah-compliant deals.
"In the last 12 months, people I've spoken to say Islamic financing of a plane can't be done because it serves alcohol onboard; oddly enough, it could be done for the engine," said Mr Lee.
As for sukuk issuances in Singapore, companies which have done so in order to broaden their investor base have found that the benefits of diversification weren't obvious.
"Just making a bond Syariah-compliant does not mean there are investors tripping over themselves to get it," pointed out Mr Lee. Funds in the region may not also have the mandates to invest in these products.
As commercially driven entities, most banks would be wary of the added cost from ever-increasing regulatory requirements when investing capital into a nascent market that currently offers low prospects and has limited governmental support, said OCBC Al-Amin's Syed Abdull Aziz.
He suggested the government could do more to promote the sector. The government could consider the merits of developing a strategic plan with appropriate incentives for the key industry stakeholders, he said.
"This would help to nurture a comprehensive sizeable Islamic finance sector in Singapore, taking into consideration the long-term benefits of active participation in the Islamic finance channel within the context of the overall Asean integrated economic growth framework," said Syed Abdull Aziz.
Yeo Wico, Allen & Gledhill LLP partner, noted that due to the efforts of Singapore's regulators, there is a level playing field between Islamic finance and conventional finance.
"Singapore's attraction as an international finance centre in an economically vibrant region is key to the future growth of Islamic finance in Singapore," said Mr Yeo.
The Gulf Cooperation Council (GCC) region is transforming rapidly and Singapore companies should also seize opportunities there, said Zainul Abidin Rasheed, Singapore Ambassador to Kuwait and Foreign Minister's Special Envoy to the Middle East. The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Many may not be aware of the strong development and growth phase that the GCC is experiencing now. "The main cities of the GCC will be transformed, and Singapore should be part of this transformation," he said.
(BT Premium / 04 June 2014)
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Wednesday, 4 June 2014

Emirates Zakat Fights Cancer

DUBAI – Reviving Islamic spirits of helping those in need, an Emirates-based organization is leading a fundraising campaign to collect Zakat, alms, for needy Muslim cancer patients in the rich gulf emirate.
“Zakat has been a tremendous source of hope for thousands of cancer patients in the UAE who need support to get through this life-changing illness,” the Friends of Cancer Patients Society (FoCP) founding member Ameerah Bin Karam told Gulf News on Monday, June 2.
“We are eternally grateful for the significant contributions received, and are appreciative of the concerned individuals and corporate houses for their generous donations to the zakat campaign, allowing us to save more lives.”
The new idea of using Zakat money was suggested by FoCP to provide funds for all major types of cancer.
The collected Zakat money will be allocated for treating patients of breast cancer, leukaemia, lung cancer, prostate and brain cancer.
The campaign also aims to provide funds for “medication – mainly chemotherapy and radiation costs, the cost of procedures done abroad, and the provision of prosthetic limbs and other medical equipment,” the NGO said.
To ensure the effectiveness of the initiative, patients will be reviewed and approved according to FoCP regulations and zakat rules.
Offering cancer-specific help to UAE residents for years, FoCP could provide funds for 169 patients in 2013.
The Emirati NGO has supported nearly one thousand cancer patients over the past 15 years.
Zakat, the third pillar of Islam, is obligatory upon every (capable) Muslim.
According to Islamic Shari`ah, a capable Muslim pays 2.5 percent mandatory payment and spend it to help the poor and the needy.
(On Islam / 03 June 2014)
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Bangladesh seeks sukuk rule amendments, sovereign issuance

Bangladesh's central bank is seeking to amend rules on its existing Islamic bond (sukuk) programme to broaden its use and allow for a sovereign issuance by the government, enhancing the prospects of Islamic finance in the country.
Bangladesh, a majority-Muslim country of 160 million, has developed Islamic finance with marginal regulatory support but a lack of Islamic capital market tools are limiting the industry's expansion.
A request for the amendments was now being considered by the finance ministry, which would allow sukuk to be used as a money market as well as a fiscal instrument, the Bangladesh central bank governor's spokesman A.F.M. Asaduzzaman told Reuters.
"Issuance of sukuk by the government is one of the major considerations in the proposed amendment," Asaduzzaman said.
The central bank has a small sukuk programme backed by legislation dating back to 2004, which issues short-term paper to help Islamic banks manage their liquidity, but a wide range of tenors is not available and there are no corporate sukuk.
The proposal comes after a report by the Malaysia-based Islamic Financial Services Board (IFSB) highlighted the need to develop sharia-compliant funding instruments such as sukuk in the south Asian country.
The IFSB report said a sharia-compliant lender of last resort facility and an Islamic deposit insurance should be developed in Bangladesh to support an Islamic finance industry which has doubled in size in the past four years.
The central bank is currently developing a lender of last resort framework for the entire banking sector which is expected by December of this year, with a sharia-compliant equivalent to be developed afterwards, Asaduzzaman said.
Islamic deposit insurance, however, was not under consideration with Islamic banks currently covered under the existing scheme managed by the central bank, he added.
The IFSB lists Bangladesh as one of a handful of countries where Islamic banking has systemic importance, an industry which follows religious principles such as a ban on interest and monetary speculation.

The country was gripped by political turmoil leading up to an election in January, with economic growth expected to slow to less than 6 percent in the financial year. In the previous year, the economy grew by 6 percent. 
(Reuters / 03 June 2014)
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Singapore sees bright prospects in Islamic finance

SINGAPORE: Singapore's prospects in Islamic finance look bright, with more funds establishing themselves here to tap the Islamic debt market, the Monetary Authority of Singapore's (MAS) top executive said on Tuesday (June 3).

"Singapore is the only non-Muslim majority country among the top 15 countries for Islamic finance," MAS Managing Director Ravi Menon said at the opening of the 5th World Islamic Banking Conference Asia Summit that is being held in the city-state.

"More funds continue to be established here, to meet demand from clients in Asia as well as from the Middle East, while several corporations have established sukuk programmes in Singapore to tap the market over the next few years," he added.

Sukuks are bond-like structures that comply with Islamic investment principles, which prohibit the charging or paying of interest.

Mr Toby O'Connor, the CEO of Islamic Bank of Asia said: "There is a lot of liquidity in the conventional space that the new Islamic products are competing with, but it's a huge opportunity. When you look at the wealth management space, there's a lot of liquidity coming into Singapore, a portion of that will go to Islamic finance, (and) when you look at sukuk, we've seen a number of issuances, programmes being set up".
Syed Abdull Aziz Syed Kechik, Director and CEO of OCBC Al-Amin Bank Berhad added, "Sukuk has arisen to become a key instrument for cross-border capital flows, driven by the ever-growing demand for Shariah-compliant investments that transcend borders. The sobering reality, however, remains that the current demand for sukuk outweighs supply about twice over".
Islamic finance has been growing by double-digits in recent years, making it one of the star performers in international finance. The industry has also become more international, as seen from recent sovereign Islamic bond issues by newcomers Britain and Hong Kong.

According to Mr Menon, global Islamic financial assets are estimated to have reached US$1.8 trillion by the end of 2013, up from US$1.5 trillion in 2012.

This is a sector that saw double digit growth last year, with more players jumping in to tap growing demand.
"As more countries cater for Islamic finance, the scope for cross-border Islamic finance increases. We are beginning to see more cross-border sukuk issuance within Asia as well as between the Middle East and Asia," he said.

In Singapore, Mr Menon said Islamic assets under management have surged nearly fourfold over the last five years.

There are now 15 banks in Singapore involved in Islamic banking, double the number five years ago. The city-state also had nearly 30 sukuk issuances to date, with seven in 2013 alone, he added.

However, Kuala Lumpur is currently the world leader in Islamic sukuk market, accounting for 60 percent of the global total.
To tap growing demand, Hong Kong and the UK have recently taken steps to facilitate sukuk issuance.
"These are very important initiatives from an Islamic finance perspective. When you have a sovereign taking the lead, you then have private sector also following suit. It would lead to other UK corporates looking to raise sukuks, (and then) lead to other corporates from other parts of the world looking to issue sukuks in London and similarly out of Hong Kong," said Mr Wasim Saifi, the Global Head of Islamic Banking in Consumer Banking and CEO of Standard Chartered Saadiq in Malaysia.
Industry players say the increase in trade flows between Asia and the Middle East as well as growing support for Islamic finance will provide significant opportunities. A key to tapping these opportunities lies in driving greater connectivity between the different markets.
According to the latest EY report, global Islamic banking assets are expected to grow to 3.4 trillion US dollars by 2018.
In particular, EY identified six rapid growth markets - Qatar, Indonesia, Saudi Arabia, Malaysia, UAE and Turkey (QISMUT).
The consultancy expects Islamic banking assets with commercial banks to grow at a compound annual growth rate of 19.7% over 2013-2018 across the QISMUT countries, to reach US$1.6 trillion by 2018.
(Channel News Asia / 03 June 2014)
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Tuesday, 3 June 2014

Imam Shafie: An outstanding scholar of fiqh


The Shafie school of thought is the second largest followed by Muslims worldwide. Muhammad Al-Shafie born in Gaza, Palestine is known as the ‘mujaddid’ (Arabic for revivalist) of the second century thanks to his prescription of the fundamentals of jurisprudence.

The Shafie school of thought is adhered to in southeast Egypt, Somalia, Indonesia, Thailand, Singapore, the Philippines, Yemen, Kurdistan and in Kerala in south India. His school of thought is also officially espoused by the governments of Malaysia and Brunei.

Shafie is a descendant of the Quraish tribe through the Prophet’s Hashemite family. Shafie was orphaned at an early age and was taken by his mother to Makkah, his ancestral town.

He soon developed a knack for mastering the most organic of Arabic literature and history, so he joined the Bedouin tribe of Huthail, who were renowned for their fine standards of Arabic literature, and wandered with them in the desert.

His memory was very sharp. He had memorized the Qur’an by the age of seven.

He later began studying “fiqh” (Islamic jurisprudence) and had covered the work of scholars at Makkah by the age of 20. Shafie then traveled to Madinah to learn from renowned scholars. He borrowed Imam Malik’s Al-Muwatta to read and memorized the entire work, which made him all the more eager to study under him.

He devoted himself fully to Imam Malik and served him for nine years up until his death in 179H. He was very fortunate to meet and learn from the eminent Iraqi scholar, Muhammad ibn Al-Hasan Al-Shaybani, a disciple of Imam Abu Hanifa, who had joined Imam Malik during the last three years of his life.



As such, Imam Shafie essentially emerged from the conjunction of two great schools of thought from both the Hijaz and Iraq.

The first group insisted on absolute reliance on the literal interpretation of the Hadith and the impermissibility of using reason as a means to derive Islamic law.

The other group, known as the “people of reason,” also believed in using Qur’an and Hadith to derive law, but also accepted reason as a source of law. 

Imam Shafie sought to reconcile the two philosophies and introduce a clear methodology for Islamic jurisprudence, known as usool ul-fiqh (Arabic for the fundamentals of jurisprudence), which was defined in his famous book, Al-Risala. In the book, Shafie outlined four main sources from which Islamic law can be derived.

These are the Qur’an, the prophetic Sunnah, ijmaa (consensus, practiced among early Muslims) and qiyas (analogical deduction).

Shafie’s contributions to the fundamental of Islamic jurisprudence were monumental.

He prevented the fraying of the study of fiqh into hundreds of different, competing schools by providing a general philosophy.

His followers codified his legal opinions, which were laid out in another book called “Kitab Al-Umm” after his death in 204H, culminating into the Shafie school of thought.

Today, this school of thought comes second after the Hanafi line of thought and is very popular in Egypt, Palestine, Syria, Yemen, East Africa, and Southeast Asia. In 187H, Shafie visited Syria, and from there, proceeded to Egypt, where he settled. As a student under Imam Malik, he was welcomed with great respect by the people and scholars of Egypt.

In 810 CE, Shafie went to Baghdad, where he would be surrounded by a large number of students who were eager to acquire knowledge of Islamic knowledge and practices from him. One important student there was Ahmad ibn Hanbal.

He would later learn that the new caliph of Baghdad, Al-Ma’mun, held some very unorthodox beliefs about Islam and was known to persecute anyone who disagreed with him.

As a result, in 814 CE., Imam Shafie made his final move, this time to Egypt, where he was able to refine his studies. Baghdad, Cairo and Hijaz were the main centers of Shafie’s activities and it was from these cities that his teachings spread in the ninth century CE.

During the time of Sultan Salahuddin, the Shafie school of thought was the most prominent in Egypt. In fact, the Al-Azhar imams remain Shafie to this day.

His school of thought is thoroughly studied at the Egyptian institution, along with the other three major Sunni schools.

During the course of his life, Shafie also suffered from political intrigues.
He was once sent as the judge of Jazan in Yemen, where he would then be accused of political involvement. In 184H, he was arrested and taken in chains to Baghdad, the seat of the Abbasid Empire.

However, when he met Caliph Harun Al-Rashid, Shafie gave an impassioned and eloquent defense, which had greatly impressed the caliph.

Not only was he released, but Al-Rashid insisted that he stay in Baghdad to help spread Islamic knowledge in the region. Shafie agreed and stayed away from politics. While in Iraq, he was reunited with Shaybani and learned more about the Hanafi school of thought.

He had never met Imam Abu Hanifa, but had great respect for the originator of the study of Islamic jurisprudence and his school of thought. In 199H, Shafie settled in Egypt, where he lived up until his death in 204H.

In Egypt, Shafie was able to edit off his legal opinions and finally organize the study of the fundamentals of Islamic jurisprudence.

Essentially, Shafie had learnt fiqh in Baghdad and memorized Prophetic sayings that were well known in Iraq, but not in Makkah and Madinah.

Shafie authored several books, the most well known of which is “Al-Umm,” which is a collection of his writings and lectures.

Several of his students also collected his writings, lectures and rulings in the form of various books and quoted him in their works.

“I wish people would learn what I have to give without it being attributed to me,” Shafie was quoted as saying.

“It is in this way that I will receive divine reward without praise.”
And it is with this that Imam Shafie became one of the highest-ranking scholars in the Islamic sciences. 
ABU TARIQ HIJAZI:  The writer is the author of several books on Islam.



(Arab News / 03 June 2014)
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Sukuk the missing link in Bangladesh Islamic finance sector

Bangladesh has developed a sizeable Islamic finance industry but a lack of sharia-compliant instruments such as sukuk is limiting further growth of the sector, a report by a standard-setting body found.
With a predominantly Muslim population of 160 million, Bangladesh has developed Islamic finance with only marginal regulatory adjustments; the industry has doubled in size in the past four years.
The central bank has a small short-term sukuk (Islamic bond) programme which issues six-month tenors to help Islamic banks manage their liquidity, but a wide range of tenors is not available and there are no corporate sukuk.
Sukuk would help to diversify funding sources and make up for the limited scope of the Islamic money market, but issuance of sukuk would require more specific rules, said the report by the Malaysia-based Islamic Financial Services Board (IFSB).
"The larger policy issue in Bangladesh is the adequacy and scope of the legal and regulatory framework in providing an appropriate enabling environment," it said.
Islamic banks, which follow religious principles such as a ban on interest payments, now represent 18.9 percent of total bank deposits in Bangladesh, the report said. Bank deposits, excluding interbank deposits, totalled 6.33 trillion taka ($82 billion) in March this year, according to the central bank.
The banks include Islami Bank Bangladesh Limited (IBBL) , set up in 1983 as the country's first Islamic bank and its largest privately owned commmercial bank.
But Islamic banks ran into liquidity constraints in 2010 when their combined advances-to-deposit ratio exceeded a ceiling set by the central bank, prompting the regulator to monitor their liquidity profiles to detect maturity mismatches.
This problem was addressed in 2011 when the central bank launched an Islamic interbank money market, but the dominant share of IBBL limits the market's efficiency, the report said.
"Its relative size may impact on the effectiveness of the interbank market, and the central bank should take a further look at this issue."
The central bank has set statutory liquidity requirements for Islamic banks at half of what is required for conventional banks, boosting their profitability but leaving the core issue of the money market's depth unaddressed.
"This privilege has the critical flipside that the instruments of Islamic banks for their liquidity risk management are very limited. In cases of sizeable and unexpected deposit withdrawals, Islamic banks may face a liquidity crunch."
The report also said a sharia-compliant lender-of-last- resort facility and Islamic deposit insurance should be developed by regulators.
The central bank, which did not respond to Reuters queries about its Islamic finance strategy, has said it plans to expand its short-term sukuk programme.

"Introduction of another similar instrument of three-month tenor for further facilitation is at the final stage," central bank governor Atiur Rahman said in a speech in April.
(Reuters / 02 June 2014)
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