Islamic Development Bank to return to ringgit sukuk market

SARAJEVO May 5 The Islamic Development Bank (IDB) plans to sell local currency Islamic bonds (sukuk) in the Malaysian market this year after a three-year hiatus, the head of the Jeddah-based multilateral lender told Reuters.

The deal would be the fourth ringgit-denominated sukuk from the AAA-rated IDB, one of the largest issuers of sukuk alongside the governments of Malaysia, Indonesia and Qatar.

"It could be both, private and public placement," IDB president Ahmad Mohamed Ali said on the sidelines of an industry conference in Sarajevo, adding that specific size and timing of the deal would depend on market conditions.

"We have a very active cooperation and relationship with Malaysia and sometimes we need to have ringgit and we will act according to the needs and issue sukuk in ringgit."

The IDB board has approved the issuance of up to 400 million ringgit ($99.9 million) in sukuk this year, from a 1 billion ringgit programme listed on Bursa Malaysia in 2008.

It has raised a total of 700 million ringgit via three sukuk transactions since then, the latter a 5-year 300 million ringgit sukuk in July of 2013.

Last year, the IDB increased the ceiling of its flagship London-listed sukuk programme to $25 billion from $10 billion, aiming to expand its financing activities.

The bank, which operates to promote economic development in Muslim countries and communities, has 56 member countries and counts Saudi Arabia, Libya and Iran as its largest shareholders.

(Reuters / 04 May 2016)

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Use Zakat for human devt

Governor Abiola Ajimobi of Oyo State has urged Muslims to use the institution of Zakat to promote equitable redistribution of wealth and foster a sense of solidarity among Muslims.

 Ajimobi gave the advice recently during the annual distribution of Zakat by the Elders Consultative Forum of Supreme Council for Shariah in Nigeria, Oyo state chapter in Ibadan. 

The governor, who was represented at the event by Mr AbdulJelil Busari, PermanentSecretary, Oyo state Teaching Service Commission, said Zakat was considered by Muslims as an act of piety through which one expresses concern for the well-being of fellow Muslims.

 Ajimobi called on the Muslims and groups to address the effective, efficient collection and management of Zakat fund. 

He urged the forum to ensure that indigent Muslims have access to Zakat fund and other items and are managed in a sustainable way in order to get adequate reward from Allah. In his contribution, the Minister of Communication, Mr. Adebayo Shittu, said that poverty was too rampant among the Muslims because the rich among them were not paying Zakat. 

Shittu said that he was planning a poverty alleviation programme which was not politically motivated but aimed at assisting the less-privileged and would be done purposely for the sake of Allah.

(Vanguard / 06 May 2016)

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Malaysia: MAA sells takaful biz for RM394mil, declares special dividend of 35 sen

KUALA LUMPUR: MAA Group Bhd (MAAG) and Solidarity Group Holding BSC (Closed) are selling their combined 100% interest in MAA Takaful Bhd for RM525mil in cash to Zurich Insurance Co Ltd.

The financial services group told Bursa Malaysia that they had on Wednesday signed a conditional share purchase agreement with the Swiss insurance company.

MAAG, which owns 75% equity interest in MAA Takaful, will receive RM393.75mil for its stake.

MAAG and Solidarity had last week received the approval of the Finance Minister, vide a Bank Negara Malaysia letter dated April 27, for the proposed disposal.

Subsequent to the completion of the proposed disposal, the MAAG board proposes to declare an interim special dividend of 35 sen per MAAG share on an entitlement date to be determined and announced later.

The total amount under the proposed special dividend will be payable out of the disposal consideration.

The proposed special dividend will amount to about RM100.8mil computed based on the current issued and paid-up share capital of MAAG.

MAAG shares closed unchanged on Wednesday at RM1.06, with 1.127 million shares traded.

(The Star Online / 04 May 2016)

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Pakistan's Summit Bank eyes Burj Bank for Islamic banking entry

May 3 Summit Bank has received approval from Pakistan's central bank to conduct due diligence on Burj Bank, it said in a stock exchange filing, in the latest bid for the unlisted lender, which is seeking to boost capital through a stake sale.

The acquisition of a majority shareholding in Burj Bank would fit the long term strategy of Summit Bank, which is planning to convert its operations to conform to Islamic principles that include bans on interest and gambling.

Burj Bank, one of the country's five full-fledged Islamic banks, held 4.4 billion rupees ($42 million) in paid up capital as of December, compared with the regulatory minimum of 10 billion rupees.

Last month, Burj Bank said it had shortlisted three financial institutions to conduct due diligence on a non-exclusive basis. It also received an extension from the central bank to meet the mimimum capital requirement until June 30.

The Islamic lender has previously attracted interest from state-owned National Bank of Pakistan and MCB Bank Ltd , both conducting their own due diligence in 2014, but a sale has not materialised.

The largest shareholders of Burj Bank are Bahrain's Bank Alkhair with a 37.9 percent stake and the Jeddah-based Islamic Corporation for the Development of the Private Sector, which holds a 33.9 percent stake. 

(Reuters / 03 May 2016)

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3rd African Islamic Finance Summit" - Tanzania

Mr. Muhammad Zubair Mughal, Chief Executive Officer, AlHuda CIBE, while talking to the media said that increasing trend of Islamic finance events in Africa is evidence, that Africa is moving forward in this industry. This is quite a wrong conception that Islamic finance is only taking its roots in North African countries e.g. Tunisia, Morocco, and Algeria, etc., rather its potential exists in the whole of African continent. Islamic banking and finance is growing rapidly in Nigeria, Libya, South Africa, Kenya, and Morocco, while Egypt, Sudan, Tunisia have already taken good initiatives in the mentioned field. He said that there is also a rising trend of Islamic banking and finance in Senegal, Mauritania, Uganda, Tanzania, Ghana and Ethiopia.

Analyzing Islamic financial industry of Africa, he added that, according to estimates the total volume of Islamic finance in Africa is 78 Billion USD, which is less than 5% share of global Islamic finance industry. Out of that, Islamic Banking has 81% share, Islamic Fund 7 %, Sukuk 5 %, Takaful 6%, and Islamic microfinance has only 1% share in the African Islamic Finance Industry. While more than 96 Islamic banks, 29 Islamic Funds, 31 Islamic Microfinance Institutions and more than 41 Takaful companies are working over there.

He also emphasized that the increasing trend of poverty in Africa can be reduced by utilizing Islamic Microfinance methodology and the multilateral organizations e.g. African Development Bank, Islamic Development Bank, GIZ, IFAD and World Bank. These can play a pivotal role in this direction to achieve the goal of poverty alleviation and social development. Current economic conditions have further highlighted the need for Islamic banking and finance and African region would definitely take advantage of it.

It is to be noted that AlHuda Centre of Islamic Banking and Economics (CIBE) is an international organization, working for the promotion of Islamic banking and finance. It is working for education, training, advisory and consultancy with having footprints in UAE, South Africa, Uganda, Pakistan, Tanzania, Somali land, and Nigeria.

(Zawya / 03 May 2016)

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Back to News Zurich Insurance to acquire MAA’s takaful unit

Swiss insurer Zurich Insurance Group AG (Zurich Insurance) is set to wholly take over MAA (Malaysian Assurance Alliance) Takaful, after the deal received regulatory approval from Bank Negara Malaysia (BNM) – Malaysia’s central bank – Reuters reported on April 27.

The disposal of the 75% stake on the part of MAA Group Berhad (MAA Group) is subject to regulations under the Islamic Financial Services Act 2013 (IFSA), which stipulates that the transaction has to secure the prior approval of the Finance Minister, with the recommendation of BNM.

MAA Takaful is one of Malaysia’s 11 Islamic insurers. It was founded in February 2006 as a joint venture between MAA Group and Solidarity Company BSC(c) of Bahrain (Solidarity), both of which hold a 75% and 25% stake, respectively.

The deal to acquire MAA Takaful was first proposed in June last year, although the value of the transaction is undisclosed. On November 30, 2015, MAA Group, Solidarity and Zurich Insurance jointly submitted an application to enter into an agreement for the proposed disposals.  

This venture into Islamic insurance is said to allow for greater penetration into Zurich Insurance’s core markets in the Gulf and Southeast Asia, in addition to strengthening its presence in Bahrain, Qatar and the United Arab Emirates. It also marks the entry of Europe’s fifth-biggest insurer into the world’s second-largest Islamic insurance market.

An alternative to conventional insurance, takaful is based on the concept of mutuality, whereby members contribute money into a pooling system to guarantee each other against losses or damages.

Takaful-branded insurance is based on shariah principles, which prohibits elements of gambling, alcohol, interest and pure monetary speculation, all of which are outlawed under Islamic principles.

As of June 2015, MAA Takaful held 1.2 billion ringgit (US$306.1 million) in AUM, a 5% increase from a year earlier. Its parent company, MAA Group – which is listed on Malaysian bourse Bursa Malaysia – has been plagued with funding issues despite claiming to be relatively cash-rich, according to a report by local daily The Star.

MAA Group has been classified by Bursa Malaysia as a Practice Note 17/2005 (PN17) company since 2011, when it first disposed of its conventional insurance arm. Companies classified as PN17 are companies that are deemed to be under financial distress.

MAA Group had told The Star recently that its activities have been restricted by provisions under the IFSA due to its involvement in the takaful business, but a turnaround is expected soon with the disposal of its takaful unit.

Under its takaful business, the general takaful division recorded a 3.2% decrease in total gross earned contributions to reach 277.6 million ringgit for 2015, whereas the family takaful division registered a 31.8% decrease in total gross earned contributions amounting to 250.7 million ringgit.

(Asia Aset Management / 04 May 2016)

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CMA Oman's sukuk regulation aims to provide transparency

KUALA LUMPUR: Capital Market Authority of Oman (CMA Oman) recently issued new sukuk regulations that aim to provide clarity and transparency to market players, while providing protection to investors in sukuk transactions. 

At the forefront of the historical initiative is Kemal Rizadi Arbi, a Malaysian who is an adviser at CMA Oman as well as a member of the Oman government’s sukuk committee.

“It is to be noted that not all jurisdictions have specific and separate sukuk regulations, particularly in the Gulf Cooperation Council (GCC) countries, with many just having a conventional bond regulatory framework with some additions made on the syariah requirements. 

“In addition, it has been drafted to provide flexibilities and spur innovation in the market, among others introducing a new trust regulation and structure and allowing the issuance of a sukuk programme,” said Kemal in an email to Business Times recently. 

He said the issuance of the new sukuk regulation formed an integral part of the overall strategy of the Oman CMA to enable the capital market to play a vital role as a fund-raising platform for companies in the economic development of Oman, particularly in the fixed income market, where sukuk forms an important element to further develop Oman’s Islamic capital market.

“This new sukuk regulation will form a key milestone in the evolution of the sukuk market in Oman and hopefully boost sukuk issuances, particularly from private sector players in order to meet their development and funding needs, while diversifying the financing base and risk away from the traditional banking sector,” he said.

 Kemal said sukuk issuances would also provide an essential liquidity management instrument and investment avenue for both Islamic and conventional financial institutions, investment funds and takaful/insurance operators in Oman.

“Hence, it will not only provide a wider investor base for both conventional and syariah-compliant investors, but also attract the required foreign investments into the country via foreign investors. 

“We are confident that this new regulation will have a positive impact on Oman’s capital market and the economy,”

 he said. Kemal said within three years since the issuance of the Islamic Banking Regulatory Framework in December 2012 and the establishment of two Islamic banks and six Islamic windows, the Islamic financial market in Oman has seen the launch of the new Muscat Securities Market (MSM) Syariah Index with 30 syariah-compliant listed companies.

esides that, Oman has also seen the launch of three syariah-compliant investment funds, the first Oman sovereign sukuk and also the first corporate sukuk, and the establishment of two takaful operators, including the issuance of the new takaful law. 

“This is another important milestone and will lay the foundation to boost the development of the sukuk market and Islamic finance in Oman,”

he said. According to recent media reports, several Omani companies — including financial institutions, property developers and oil firms, are exploring the feasibility of floating sukuk issues, with the new regulation on syariah compliant bond instrument in place.

The Times of Oman said this was in line with global trends where GCC states, along with Malaysia, Indonesia, Turkey, Singapore, and Pakistan,

have issued US$11.1 billion (RM43 billion) worth of sukuk in the first three months of this year. 

“These countries are choosing to issue more of their debt as sukuk rather than conventional bonds. “These countries issued 39.3 percent of their debt as sukuk — the highest ratio of sukuk to conventional debt in eight years, based on data from Fitch Ratings,” it said.

(News Strait Times Online / 03 May 2016)

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