Islamic Banks and Renewable Energy In MENA

As reported in an article titled “Tapping the Renewable Energy Market,” some Islamic banks are looking to support renewable energy including hydropower, solar and wind energy. Finance is a crucially important component of building a green infrastructure and this is even more true in the context of economic difficulty. Islamic lending institutions that create financial mechanisms will benefit the growth of renewable energy. In the Middle East and North Africa (MENA) solar power projects are driving major new investment. With projects like Abu Dhabi’s Masdar City and the German-led Desertec Industrial Initiative (DII) it is expected that the region will be able to export energy throughout the region and into Europe. The Shams Power Co. alone is partnering in a $600 million investment to build one of the world’s largest concentrated solar power (CSP) projects.

Sustainable water projects are also garnering interest from Islamic banks. One bank in particular diverted part of its real estate holdings into trade finance which led to the first Shari’ah-compliant water-focused investment strategy.

Through the UK-based Islamic investment bank Gatehouse Bank Plc people can now invest in sustainable-oriented companies that offer technology, products and services throughout the water industry. Ocean water desalination is another area which offers tremendous potential for growth. Saudi Arabia is planning to convert all of its seawater desalination plants to renewable energy by 2019. This could attract more than half a trillion dollars in private sector investment over the next five years. 

Recently, Islamic banking saw the release of a green sukuk for the financing of climate change investments and renewable energy projects. The Climate Bonds Initiative, the Clean Energy Business Council of MENA, and the Gulf Bond and Sukuk Association launched the Green Sukuk Working Group to help market and develop the best practices to promote the issuance of green Sukuk.

Bahrain-based Arcapita Bank, one of the first Islamic financiers to venture into the green market, it created a joint venture (JV) with Englefield Capital and RWE npower (formerly RWE Innogy) in 2004. In 2007 Arcapita divested its one-third share of JV Zephry Wind Power LLC saying that it had been one of the firm’s most profitable investments.

Islamic banking focused on cleantech like renewable energy could significantly contribute to regional sustainability and help to generate significant returns for investors.

(Block And News Agency / 24 July 2012)

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

Bank Muamalat Malaysia To Open Islamic Bank In China

Bank Muamalat Malaysia Bhd has teamed up with Bank of Shi Zui Shan of China to set up its first Islamic bank in China - in Ningxia Province, in two years, and develop and promote Islamic banking there.

Bank Muamalat's chief executive officer Mohd Redza Shah Abdul Wahid said the two banks will work together in setting up a framework for Islamic banking in China and aim to offer syariah-compliant products in Ningxia via a window at Bank of Shi Zui Shan's network of 23 branches.

(Reuters / 23 July 2012)

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

Oman: Ahlibank Plans Up To 10 Islamic Banking Branches In First Year

Ahlibank is planning to initially launch four branches under its Al Hilal Islamic Banking brand, with the bank planning to open up to ten branches over the following 12 months, according to a senior  official.

Speaking to Muscat Daily, Abdullah al Jabri, DGM and head of operations at Ahlibank, said that the bank will allocate RO20mn as initial capital for its Al Hilal window and the launch of more branches will depend on business opportunity and requirements.

He said, “We are ready to launch a minimum of four branches and we can open up to ten branches over the next one year.

“We are expecting to assign RO20mn as capital for the Islamic window subject to regulatory and shareholder approval. I think RO20mn capital is reasonable enough to support the business in its early stages.”

He said that Ahlibank, which aims to become a leading player in Islamic banking, will be looking to target a 15-20 per cent market share in the sector.

“We are determined to be a leading player in Islamic banking. Since all Islamic finance products are not going to be allowed in Oman, all the banks will be offering the same type of products.

“However, from our side we are ready to roll out all types of products because our strategic partner Ahli United Bank has experience in the GCC. So in terms of skillset and capability we are capable of introducing any Islamic product due to our partner's experience in other countries,” said Jabri.

Recently, Ahlibank launched a rights issue of 250mn shares to raise RO25mn to fund its Islamic banking operations and boost Tier I capital. The subscription to the rights issue ended on Sunday.

A bank press release said that it will hold an extraordinary general meeting (EGM) today at the Grand Hyatt Muscat, with topics ranging from Sharia supervisory board appointments and amendments to the bank's articles of association to be discussed prior to the launch of its Islamic banking service.

(Muscat Daily.Com / 23 July 2012)

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

Malaysia's pension reform may boost Islamic funds

* Malaysia liberalising pension market

* Govt sees 73 bln ringgit into private pensions by 2020

* Eight fund managers approved to offer products

* Product limit raised if it includes Islamic offerings

By Bernardo Vizcaino

SYDNEY, July 23 (Reuters) - Malaysians will have more room to allocate part of their retirement contributions to Islamic investments under sweeping government reforms to the pension system.

At present, the Employees Provident Fund (EPF) receives public pension contributions and invests the money. Some of that investment is in sharia-compliant areas such as sukuk and halal stocks, but contributors have limited scope to ensure the money is being used that way. A maximum 20 percent of savings can be placed through the EPF into a single mutual fund.

Under the new, voluntary Private Retirement Scheme (PRS), which will not replace the EPF but supplement it, contributors will be able to allocate money to a wide range of products offered by private-sector fund management firms. This will allow them, if they choose, to target sharia-compliant investment - potentially increasing the amount of money going into Islamic instruments.

The scheme's governing body which will oversee how the fund managers operate, the Private Pension Administrator (PPA), was officially launched last week.

"PRS will contribute towards the growth of Islamic fund products," Zakie Ahmad Shariff, board member of the PPA and chief executive of the Federation of Investment Managers Malaysia, told Reuters.

The initial rollout of 30 PRS products will include six Islamic funds, he added.

"Early adopters will have much to gain - especially for the Islamic players," said Mahadzir Ahmad, a wealth management consultant and an instructor at the Financial Planning Association of Malaysia.

GROWTH

As of March 31 the EPF managed assets worth 488.5 billion ringgit ($154 billion), according to company data. That is larger than the 435.36 billion ringgit of assets under management in Malaysia's entire fund management industry, according to securities commission data.

At least partly because of PRS, Malaysia's private pension industry is expected to grow to 73 billion ringgit by 2020 from effectively zero now, according to a report by the government's Economic Transformation Programme. The securities commission has a more modest but still sizeable estimate; in April last year, it said: "Over the next ten years, it is projected that assets under management in the private retirement scheme industry will grow to 30.9 billion ringgit."

Sharia-compliant funds have on average held 10.6 percent of total assets under management in Malaysian retail products over the last two years, according to Reuters calculations based on securities commission data.

If this ratio is maintained under the PRS scheme, Islamic funds could theoretically see inflows of 3.3 billion to 7.7 billion ringgit.

All eight of the approved PRS fund managers already have sharia-compliant retail products. They include some of the country's most established firms such as CIMB-Principal, AmInvestment and Public Mutual.

Firms will begin offering conventional products first but sharia-compliant products will soon follow, said Nancy Chow, director of marketing and strategic product development at AmIslamic Funds Management. AmInvestment plans to have an Islamic PRS, she said.

Hwang Investment Management will include sharia-compliant products in its PRS range, Steve Lim, chief product officer at Hwang Investment Management, said in a statement. "We foresee our investment in PRS to break even after three years."

PRODUCTS

Under PRS, fund managers will be required to offer a minimum of three "core" products catering to different investor risk profiles. A maximum of seven products can be launched under the scheme by a single PRS provider, but if it intends to offer both conventional and sharia-compliant options, it can offer up to 10, according to securities commission guidelines.

This could encourage fund managers to launch Islamic products to maximise their access to PRS money. The initial products will be available from September, the securities commission said.

Guidelines also allow for the outsourcing of the fund management function, which could open the door for boutique firms to tap into the sector without the need for established sales channels.

In order to encourage take-up in the PRS scheme, the government is offering incentives such as personal tax relief, tax deductions for employers on their contributions to the scheme, and tax exemption on income received by PRS fund management firms.

Some details of how the PRS scheme will work, and whether it will impact Malaysia's current retirement age of 55 years, are not clear, Ahmad said. "These details are not forthcoming yet."

The personal tax relief of up to 3,000 ringgit may need to be increased to make it enticing to higher income earners, he added. Without a significant tax benefit, "the take-up might not be as great.

(Reuters / 23 July 2012)

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

Central Bank of Bahrain (CBB)'s Sukuk Al-Salam securities oversubscribed

The Central Bank of Bahrain (CBB) announces that the monthly issue of the Sukuk Al-Salam Islamic securities for the BD18m issue, which carries a maturity of 91 days, has been oversubscribed by 188%.

The expected return on the issue, which begins on 25 July 2012 and matures on 24 October 2012, is 1.18%.

The securities are issued by the CBB on behalf of the Government of the Kingdom of Bahrain.

This is issue No. 135 of Sukuk Al-Salam securities.

he Central Bank of Bahrain ('CBB') is a public corporate entity established by the Central Bank of Bahrain and Financial Institutions Law 2006. It was created on 6th September 2006. 

The CBB is responsible for maintaining monetary and financial stability in the Kingdom of Bahrain. It is also the single integrated regulator of Bahrain's financial industry.

(Ameinfo.com / 23 July 2012)

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

Malaysia: Labuan on track to emerge as halal distribution hub

LABUAN: Labuan’s halal distribution hub will begin operations early next year and be on par with other halal centres in the Asian region.

Construction of phase one of the Kiamsam-based RM86 million project began in March 2009 and was nearing completion while the second phase would be implemented in stages and have numerous economic spin-offs especially to the small-and-medium entrepreneurs.

The hub, a collaborative initiative by Labuan Corporation, Marditech Corporation Sdn Bhd and the Ministry of Federal Territories and Urban Wellbeing, is managed by Labuan Halal Distribution Hub.

Once fully operational, the Labuan Halal Distribution Hub will be the centre of distribution for Malaysian halal products both for the domestic and international market. Labuan Corporation public relations officer Jah Murniwaty Markum told Bernama a comprehensive strategic plan has been put in place to ensure the hub was not left behind and would remain competitive.

The hub, sprawled over 40 hectares and mainly focused on the marine-based products, will house a warehouse complex, dry warehouse, cold room facilities and have in place a traceability system.

Jah Murniwaty said the global halal industry was worth RM300 billion and Malaysia assumed a significant role after having exported some RM35 billion worth of halal products last year.

“Our main exports markets for halal products are China, United States,  Singapore, Netherlands and Japan, and Middle-East countries.

“With the right strategy and marketing promotion, we are confident the Labuan halal distribution hub would compete on an equal platform and leaf-frog the role of local SMEs into the limelight.

The halal hub would assume an important role in determining that the quality of products adhere to high stringent standards to elevate Labuan to the global stage.

(Berneo Post Online / 23 July 2012)

LABUAN: Labuan’s halal distribution hub will begin operations early next year and be on par with other halal centres in the Asian region.

Construction of phase one of the Kiamsam-based RM86 million project began in March 2009 and was nearing completion while the second phase would be implemented in stages and have numerous economic spin-offs especially to the small-and-medium entrepreneurs.

The hub, a collaborative initiative by Labuan Corporation, Marditech Corporation Sdn Bhd and the Ministry of Federal Territories and Urban Wellbeing, is managed by Labuan Halal Distribution Hub.

Once fully operational, the Labuan Halal Distribution Hub will be the centre of distribution for Malaysian halal products both for the domestic and international market. Labuan Corporation public relations officer Jah Murniwaty Markum told Bernama a comprehensive strategic plan has been put in place to ensure the hub was not left behind and would remain competitive.

The hub, sprawled over 40 hectares and mainly focused on the marine-based products, will house a warehouse complex, dry warehouse, cold room facilities and have in place a traceability system.

Jah Murniwaty said the global halal industry was worth RM300 billion and Malaysia assumed a significant role after having exported some RM35 billion worth of halal products last year.

“Our main exports markets for halal products are China, United States,  Singapore, Netherlands and Japan, and Middle-East countries.

“With the right strategy and marketing promotion, we are confident the Labuan halal distribution hub would compete on an equal platform and leaf-frog the role of local SMEs into the limelight.

The halal hub would assume an important role in determining that the quality of products adhere to high stringent standards to elevate Labuan to the global stage.

(Berneo Post Online / 23 July 2012)

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

Malaysia: SME Bank to issue RM3bil (USD1bil) govenment-guaranteed sukuk

KUALA LUMPUR: SME Bank Bhd will issue a RM3 billion (USD1 billion) government-guaranteed Islamic Medium-Term Notes Programme (IMTN Programme) with tenure of up to 20 years for its syariah-compliant working capital requirements.

Its managing director, Datuk Mohd Radzif Mohd Yunus, said the first issuance of the IMTN programme would employ the wakalah structure, which was widely accepted in the Gulf Cooperation Council region.

"The sukuk programme will help us revamp our business model to support growth and empower small and medium enterprise (SME) ecosystem through our network and provide additional funds to assist more SMEs," he told reporters at the signing ceremony of the sukuk issuance here today.

Minister of Finance II Datuk Seri Ahmad Husni Hanadzlah witnessed the signing ceremony.

"The first tranche involves RM500 million for a tenure of seven to 10 years, while the second tranche will probably be issued by year-end or early next year," he said.

In line with the other recent government-guaranteed issuances, income tax payable by investors on the periodic distributions of the bank's sukuk would be remitted in full, Mohd Radzif said.

"The first tranche involving RM500 million for a tenure of seven to 10 years, while the second tranches will probably issue by year-end or early next year," he said.

The sukuk would probably yield 3.5 per cent, however, it still depend on a book-building exercise, said its corporate planning & strategy, vice president/head, Mohamad Sabir Mohamad Sabri.

The bank has appointed AmInvestment Bank Bhd, Kuwait Finance House (M) Bhd and Maybank Investment Bank Bhd as the joint lead arrangers and joint lead managers for the sukuk.

Earlier, SME Bank inked an agreement to set up a RM263 million 1-SME Rationalised Fund with the Ministry of Finance to facilitate and optimise the financing activity and accessibility by target groups.

Under the programme, 18 funds under the supervision of the Ministry of International Trade and Industry were rationalised into five groups managed by SME Bank.

Meanwhile, Husni also launched the SME Revitalisation Scheme (SRS), also known as the "2nd Chance Programme", to help viable but distressed SMEs secure additional financing for the ongoing business.

The scheme is to facilitate the restructuring and rescheduling of "participating financial institutions" financing and to extend additional financing facilities to viable SMEs with delinquent or impaired financing, subject to maximum aggregate financing amount of not more than RM5 million, inclusive new financing under the SRS.

"The initiatives that we are launching today will act as catalysts for the SME industry," Husni said. -BERNAMA
---Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com