Oman: alizz islamic bank eyes 20 per cent market share in five years

Muscat: alizz islamic bank, which opened its RO40 million initial public offering on Saturday, is targeting to capture a 20 per cent market share in Islamic banking business and a 3.5 per cent of total banking assets in Oman within five years. 

The promoters of the bank are confident of a robust growth in demand for Islamic banking products due to several favourable factors like an unmet demand for Islamic banking services, low banking penetration levels, experience of stakeholders in Islamic banking, high level of (72 per cent of Omanis) bankable population, favourable economic policies and strong economic performance.

Growth in Islamic banking has outstripped conventional banking growth across Gulf Cooperation Council (GCC) markets and is now valued at around $300 billion by asset value. The promoters are confident that Oman will experience a similar growth in its new Islamic banking market and that alizz islamic bank is uniquely placed to become a market leader. 

"The Islamic banking assets constitute 26 per cent of total banking assets in the GCC region. Barring the UAE, growth of Islamic banks was much higher than conventional banks,- Jamal Darwiche, chief operating officer (designate) of alizz islamic bank, said, while addressing a press conference here yesterday.

The bank is committed to delivering comprehensive commercial and retail banking solutions to the people of Oman. It intends to roll out an innovative suite of Sharia-compliant products, delivered to market-leading standards and supported by exceptional customer service. The bank is also confident of making profit in the second year of operation.

Darwiche said the bank has identified a high quality commercial space in the financial district for headquarters and the flagship branch. The bank will see the feasibility of opening more branches in the coming months. 

alizz islamic bank is offering 40 per cent of its paid up capital equivalent to 400 million shares, each priced at 102 baisas, to Omanis and non-Omani investors. There are two categories of applicants -” the first category is those who subscribe between 1,000 and 100,000 shares and the second category is those who subscribe between 100,100 and 10 per cent of the share offer. 

"It has a strong underwriting back-up from leading Omani institutions, which gives us great comfort,- added Abdullah Al Hinai, Deputy General Manager -” Investment Banking & Financial Institutions, bank muscat. The issue, which is lead managed by bank muscat, is fully underwritten by bank muscat, ahli bank, BankDhofar, Bank Sohar, The Financial Corporation, United Securities and Gulf Baader Capital Markets. 

The promoters have already contributed RO61.2 million, representing 60 per cent of the paid up capital of RO100 million. The issue will close subscription on October 21. 

The bank is promoted by local and regional investors, who have a successful track record in Islamic banking and financial services. The promoters are Huriah Company (10 per cent), aabar Investments (20 per cent), First Energy Oman (15 per cent) and Tasameem Real Estate Company (15 per cent). 

Addressing the media, Ahmed Alkhonji of Huriah Company, said; "The large unmet demand for Islamic banking means that alizz islamic bank is uniquely placed to become a market leader for banking products. We are delighted to have aabar, First Energy Bank and Tasameem as our partners and the bank will benefit immensely from their considerable international experience.- 

Elaborating on the progress achieved by the promoters in launching operation so far, Darwiche said; "We have done few steps that keeps us on track to launch the bank operations.- The business model has been finalised and promoters' committee has also been constituted. 

The members of the promoters' committee, which is overseeing the formation of the bank, include Yeshwant Desai, a former CEO of bank muscat, Mohammed Badawy Al Husseiny, CEO of aabar Investments and Mohammed Ghanem, Acting CEO of Fist Energy Bank. 

(Times Of Oman / 24 Sep 2012)
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Ghana: Local SMEs Want Islamic Banks to Boost Business

Despite the policy by Bank of Ghana (BoG) not to license Islamic Banks to operate in the country, there are good reasons for the central bank to permit these no-interest-on-loans financial institutions, for which some players in the Small and Medium Enterprises (SMEs) sector and experts are urging BoG to rescind its decision.

Since the early 2000s, BoG has refused to give licences to Islamic Banks that approached it to do business in the country. Some attributed the central bank's stance to persistent lobbying by the commercial banks which stand to lose when Islamic Banks operate in Ghana.

Under the Islamic system of banking, a borrower only needs to repay the amount owed to the bank. The borrower can also choose to pay the lender a small amount of money to serve as a gratuity. Since Islamic Banks were introduced in Nigeria, many SMEs have been boosted with accessible and affordable credit. Several individuals have also accessed credit from these banks.

Now, in Ghana, some owners of SMEs, who will enjoy the interest-free credit facilities that Islamic Banks offer to expand their businesses, have renewed their calls on BoG to back down on its entrenched position and legalise the operations of these banks. And their calls have been supported by some forward-looking bankers and experts. One such expert is a financial analyst, John Gatsi, who has asked BoG to reconsider its policy and allow the introduction of Islamic Banking as happens in Nigeria. John Gatsi told Accra-based CitiFM that "interest rates are high and cost of doing business is also high and the cost of borrowing is not the best hence the call for the introduction of Islamic banking where there will be no interests."

Mr Gatsi said many people are calling for the introduction of Islamic Banking in the country as an alternative to the high interests charged by the commercial banks. He noted, however, that there are several obstacles which may affect the introduction of Islamic Banking because "you cannot introduce a new banking system into the conventional system without allowing the Central Bank to lenience the operations of such businesses. So as at the now, the Central Bank is not having any discussions with respect to Islamic banking."

He said there are advantages for financial intermediation when Islamic banking is introduced. "If you look at what the Muslims tell us, it means that without the presence of Islamic banking in the country, savings mobilization is hugely affected because there are a lot of Muslims based on their faith who do not have any dealings with the banking system even though they engage in productive economic activities", Mr. Gatsi said. Mr Gatsi urged the Muslim community in the country to set the tone for this discussion although they are doing a lot of underground work "but they need to bring the discussion to the national level."

Another expert who supports Islamic Banking is the Managing Director of Zenith Bank Ghana, Mr Daniel Asiedu. Mr Asiedu has revealed that Islamic Banking may be introduced to the public in future."If it is a product that has done well in other economies, why not, maybe it could do well." He stated that when it is convenient, Zenith Bank would introduce the interest-free banking in Ghana.

(All Africa / 24 Sep 2012)

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Malaysia Leads Way in Islamic Finance

Malaysia’s claims to being in the forefront of the internationalization of Islamic finance have been further strengthened by the attention given to the Global International Financial Forum (GIFF) held in Kuala Lumpur last week.

The third such gathering organized by the Bank Negara, it attracted not merely practitioners, academics and Islamic scholars discussing often highly technical subjects but Ali Babacan, the deputy prime minister of Turkey and a man who played a crucial role in the revival and modernization of Turkey’s economy after its 2001 crisis. 

Even after 10 years of government by a moderate Islamist party headed by Erdogan, only some 5 percent of Turkish financial assets are in the Islamic sector but the country recently made a significant contribution to the international sukuk (Islamic bond) market when it made a US$1.5 billion issue.

Turkey, out of deference to the state’s secular philosophy, does not even call its non-conventional system Islamic but refers to it as “participation” finance. It is a moot point whether this makes it more attractive to non-Muslims or less appealing to devout Muslims but it does attempt to get across the claimed benefit of Islamic finance, that borrower and lender share in what profits or losses emerge.

The engagement of Turkey, the most developed and democratic large Muslim-majority nation in the international Islamic finance arena, must give hope to those promoters who fear that the growth of the movement has been almost entirely due to the large surpluses of the oil rich Gulf states helped along by a Malaysia which has been the leader in developing a regulatory system and in providing consistent and timely interpretations of shariah law which can be applied to new issues and instruments.

In addition to Turkey, other important recent breakthroughs for sukuk market development include an issue by South Africa and issues denominated in non-dollar currencies, including the Singapore dollar and Chinese yuan. Kazkhastan has done a US dollar issue and even Ireland is considering one. Longer maturities are also now possible With oil rich Muslim countries still flush with cash, demand for sukuks appear to exceed supply and sukuk issues tied to specific projects are being promoted as a way to encourage issues by developing countries for infrastructure development.

Nonetheless it remains the case that this is a market in which the main issuer is Malaysia itself, which now accounts for over 50 percent of global outstanding issuance with Gulf countries accounting for most of the rest. To a large extent Malaysian buyers and issuers are captives – issuers being the Malaysian government or government-linked companies and buyers often being local pension and other funds. 

Malaysian issues do attract foreign interest, especially from the Gulf, and for now at least Malaysia’s stable currency and strong foreign reserves enable it to allow free trading of ringgit paper and hence promote the internationalization of the sukuk market. Total outstanding ringgit bonds are expected to top RM100 billion by the end of this year of which 60 percent are sukuk.

The role of Islamic products in Malaysia has been rising steadily and now account for about 22 percent of the overall financial system. But that success may be due partly to active encouragement – there is no official discrimination in favor of Islamic finance but Bank Negara is naturally keen to see its baby prosper – and partly to the ease with which major banks including the likes of HSBC are able to run parallel conventional and Islamic products. Thus many non-Muslims now also use Islamic banking and insurance vehicles.

Its expertise and training systems have made Malaysia the Asian center for international banks such as Citibank and HSBC from which to conduct their regional Islamic banking. However, though Islamic finance is likely to continue to grow faster than conventional finance it remains small on the global scale. 

Indeed, the biggest single Islamic finance system is found in Iran which accounts for 39 percent of the global total but is largely cut off from the outside world by sanctions. It seems that even in the world of Islamic brotherhood, the diktats of New York prevail over financial dealings with the Islamic republic. 

Plenty of other problems remain in the broader world of Islamic finance. One is the difficulty of liquidity management and the need to link it to specific contracts such as a commodity trade. Another is the development of frameworks for dealing with insolvency. Yet another is the creation of genuine demand in populous Islamic countries such as Pakistan and Indonesia.

For many, both users of Islamic finance and skeptical outsiders, many Islamic finance products appear simply to ape conventional finance. They use complex formulae which purport at least to tie all financial transactions to actual trade or investment. Money itself is not traded. Many Muslims see it as insufficiently different or moral to be worth worrying about. Other Muslims worry that it is insufficiently distinct and failing to provide products, other than shariah compliant equities, which genuinely rather than notionally link risk to reward.

However, the promoters of it can reasonably claim that its rules do at least prevent aping of the derivative products which have cost conventional banking so dearly, particularly in the west. Computer-driven fast trading of equities is also outside the bounds of what is acceptable under shariah law. And with the Asian crisis and various Malaysian bank rescues in recent memory, Malaysia appears to be taking a firm regulatory line with its own Islamic bankers as well as conventional ones. 

Whether Islamic finance elsewhere will prove in any way superior remain to be seen. At worst the imprimatur ofshariah compliance could fool the faithful more easily than conventional. But even well-known mainstream economists such as former IMF chief economist Kenneth Rogoff believe in its principles of being rooted in real transactions as opposed to conventional finance which has become too clever by half. So its rise has a way to run – at least unless and until oil and gas prices collapse and Gulf demand dries up.

(Asia Sentinel / 24 Sep 2012)

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GIFF 2012 Report: Global Takaful prospects

The global Takaful industry continued to demonstrate a strong growth rate in 2010 at rate of 22.9 per cent ($13.7 billion) as compared to previous year (in year 2009 growth rate stands at 17.7 per cent with total contribution value of $11.1 billion) according to the World Islamic Insurance Directory 2012. The Gulf Cooperation Council countries (GCC) market contributed $5.7 billion, Middle East (Non-Arab) at $5.3 billion and South East Asia (SEA) contributions stood at $1.9 billion.

Amongst the key markets, Malaysia, Indonesia and UAE achieved growth rates of over 24.0 per cent, whilst Saudi Arabia saw its gross contributions increase by 9.7 per cent. In 2010, growth in the GCC slowed to 16.3 per cent, from a CAGR of 44.7 per cent in 2004-2009, as the implementation of compulsory medical Takaful in Abu Dhabi and Saudi Arabia was completed earlier.

The report, presented at the Global Islamic Finance Forum in Kuala Lumpur, showed that Saudi Arabia remains by far the largest Takaful market after Iran, contributing $4.4 billion or 32.0 per cent of the industry at an average contribution per operator of $141.0 million. Malaysia grew 24.0 per cent to reach contributions of $1.4 billion at an average contribution per operator of $141.0 million. UAE ranked third with contributions of $818.0 million, growing at 28.0 per cent. Outside of GCC, Middle East (Non- Arab) and SEA, Sudan is the most significant market, with contributions totalling $363.4 million, growing by 7.0 per cent in 2010.

In terms of Takaful models applied, Wakalah-Mudharabah (hybrid model) remains one of the most widely applied models with at least nine countries adopting it. This is followed by (Wakalah with and without fee) and Mudharabah. The past few years has seen certain countries moving away from the latter model to the hybrid model which provide certain advantages over the other such as the upfront Wakalah fee which helps to incentivise Takaful agents to recruit more participants.

Standardisation of Takaful models applied is highly welcomed as it will facilitate cross border selling and making it easier for the customers to understand the product. Nevertheless, the emergence of different Takaful models across jurisdictions presents opportunities for greater understanding and acceptance as different jurisdiction may experience different impediments to implement certain practices.

The Takaful industry is facing strategic challenges as the market establishes itself. Significant investments are required to establish the Shari’ah board, develop technical expertise on Shari’ah compliance, train staff, create brand awareness among customers, as well as implementing the appropriate technology. To ensure the success and sustainability of the Takaful and ReTakaful industry, the companies will need to work with their respective national regulator to address impediments facing the industry. Despite all the challenges, Takaful is a viable alternative to conventional insurance and is expected record gross Takaful contribution of $17.2 billion by end of 2012.

Factors Supporting Takaful Growth

• Growing demand for Shari’ah-compliant products
• Abundant liquidity
• Increasing levels of foreign direct investment
• Growth of retakaful capacity
• Growth of high quality sukuk papers for takaful companies to invest in
• Increased awareness amongst consumers
• A more efficient distribution channel of takaful products
• Growth in other financing products such as housing financing which leads to increase in housing Takaful

(C.P.I Financial / 22 Sep 2012)

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Standard & Poor's (S&P) assigns 'BB' rating to Republic Of Turkey sukuk lease certs

Sept 21 - Standard & Poor's Ratings Services said today that it has assigned its 'BB' issue rating to the $1.5 billion Sukuk Lease Certificates due 2018, issued by Hazine Mustesarligi Varlik Kiralama Anonim Sirketi (the issuer), a special purpose vehicle (SPV) wholly owned by the Republic of Turkey (foreign currency BB/Stable/B).

The transaction raises funds of $1.5 billion in accordance with the Islamic principles of "ijara" (leasing). The assets underlying the lease are state-owned buildings and land in Turkey. Under the transaction, the state sells a pool of property assets to the issuer.

The issuer holds the assets in its own name and for the account and benefit of the certificate holders. The state is to act as servicing agent to maintain the assets. The issuer leases back the assets to the state, which will make regular rental payments to the issuer. These will be the basis for periodic distribution payments payable on the lease certificates. The rental payment obligation ranks pari passu with other unsecured and unsubordinated obligations of the state.

On maturity (dissolution), the state will purchase the lease assets from the issuer at the relevant exercise price, as specified in the purchase undertaking agreement. The purchase price in connection with this sale funds the dissolution amount that is payable to the certificate holders.

In our view, the two key rating factors underpinning the rating on the sukuk are the rental payments to be made by the state, which ensure payment of the periodic distribution amounts, and the obligation that the state has to repurchase the underlying assets, which ensures payment of the dissolution amount to certificate holders. The rating on the sukuk is equalized with our rating on the senior unsecured long-term foreign currency debt of Turkey. Standard & Poor's considers that Turkey has a strong incentive to consider the performance of the lease certificates to be as important as its conventional debt, because the rationale for the transaction is to raise funds in accordance with Islamic principles, rather than to separate the state's own obligations from those of the issuer.

(Reuters / 21 Sep 2012)Sept 21 - Standard & Poor's Ratings Services said today that it has assigned its 'BB' issue rating to the $1.5 billion Sukuk Lease Certificates due 2018, issued by Hazine Mustesarligi Varlik Kiralama Anonim Sirketi (the issuer), a special purpose vehicle (SPV) wholly owned by the Republic of Turkey (foreign currency BB/Stable/B).

The transaction raises funds of $1.5 billion in accordance with the Islamic principles of "ijara" (leasing). The assets underlying the lease are state-owned buildings and land in Turkey. Under the transaction, the state sells a pool of property assets to the issuer.

The issuer holds the assets in its own name and for the account and benefit of the certificate holders. The state is to act as servicing agent to maintain the assets. The issuer leases back the assets to the state, which will make regular rental payments to the issuer. These will be the basis for periodic distribution payments payable on the lease certificates. The rental payment obligation ranks pari passu with other unsecured and unsubordinated obligations of the state.

On maturity (dissolution), the state will purchase the lease assets from the issuer at the relevanSept 21 - Standard & Poor's Ratings Services said today that it has assigned its 'BB' issue rating to the $1.5 billion Sukuk Lease Certificates due 2018, issued by Hazine Mustesarligi Varlik Kiralama Anonim Sirketi (the issuer), a special purpose vehicle (SPV) wholly owned by the Republic of Turkey (foreign currency BB/Stable/B).

The transaction raises funds of $1.5 billion in accordance with the Islamic principles of "ijara" (leasing). The assets underlying the lease are state-owned buildings and land in Turkey. Under the transaction, the state sells a pool of property assets to the issuer.

The issuer holds the assets in its own name and for the account and benefit of the certificate holders. The state is to act as servicing agent to maintain the assets. The issuer leases back the assets to the state, which will make regular rental payments to the issuer. These will be the basis for periodic distribution payments payable on the lease certificates. The rental payment obligation ranks pari passu with other unsecured and unsubordinated obligations of the state.

On maturity (dissolution), the state will purchase the lease assets from the issuer at the relevant exercise price, as specified in the purchase undertaking agreement. The purchase price in connection with this sale funds the dissolution amount that is payable to the certificate holders.

In our view, the two key rating factors underpinning the rating on the sukuk are the rental payments to be made by the state, which ensure payment of the periodic distribution amounts, and the obligation that the state has to repurchase the underlying assets, which ensures payment of the dissolution amount to certificate holders. The rating on the sukuk is equalized with our rating on the senior unsecured long-term foreign currency debt of Turkey. Standard & Poor's considers that Turkey has a strong incentive to consider the performance of the lease certificates to be as important as its conventional debt, because the rationale for the transaction is to raise funds in accordance with Islamic principles, rather than to separate the state's own obligations from those of the issuer.

(Reuters / 21 Sep 2012)t exercise price, as specified in the purchase undertaking agreement. The purchase price in connection with this sale funds the dissolution amount that is payable to the certificate holders.

In our view, the two key rating factors underpinning the rating on the sukuk are the rental payments to be made by the state, which ensure payment of the periodic distribution amounts, and the obligation that the state has to repurchase the underlying assets, which ensures payment of the dissolution amount to certificate holders. The rating on the sukuk is equalized with our rating on the senior unsecured long-term foreign currency debt of Turkey. Standard & Poor's considers that Turkey has a strong incentive to consider the performance of the lease certificates to be as important as its conventional debt, because the rationale for the transaction is to raise funds in accordance with Islamic principles, rather than to separate the state's own obligations from those of the issuer.

(Reuters / 21 Sep 2012)

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Nigeria: Minister calls for increased awareness on Islamic banking

The minister made the call at a forum organised by ARIT consult and sponsored by Mutual Benefits Assurance Plc with the theme: developing Islamic financial institutions in Nigeria in Abuja.

Mr Ngama listed various challenges obstructing the growth of Islamic banking in Nigeria, noting that the banking system will position the country as the financial hub of Africa.

“It is on record that while most of the major financial institutions in Europe and America have been crashing, Islamic development banks has been given an AAA rating worldwide,” the minister said.

According to the Central Bank of Nigeria, Islamic banking has undergone steady progress in the last four decades globally.

The bank however said that progress can be recorded in Nigeria with the co-operation of more stakeholders in the industry.

To buttress this, the managing director of Jaiz Bank Plc, Nigeria’s first licenced Islamic bank, Mohammed Bintube said it has recorded tremendous success since it began operations in the country.

“Standards and Paul estimated that over the next four years the total assets that will be managed under Islamic Banking would grow as much as $4 trillion,” he said.

Organisers of the event however emphasize that Islamic banking is not established for Muslims alone but beneficial to all Nigerians.

The Managing Consultant of Arit consult, Mohammed Kari said the Islamic Bank has already confirmed that the majority of their subscribers and customers that open account with them are not Muslims.

“These are people who have understood the implications and the benefits. The benefits in comparison to the conventional system are huge,” he said.

The Group Managing Director of Mutual Benefits Assurance, Akin Ogunbiyi said the regulators should provide the enabling environment for Islamic banking to thrive in Nigeria.

According to stakeholders, the growth of Islamic banking as an alternative source of financing in Nigeria can boost the country’s chances of becoming the largest economy in Africa by 2013.

(Channels / 18 Sep 2012)

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Joint halal-Islamic finance sector will create a combined industry worth US$3.5 trillion

KUALA LUMPUR: An integration between the halal sector and Islamic finance will create a combined industry worth US$3.5 trillion as compared to US$2.35bil if they were to be developed independently of each other, said Edbiz Consulting Ltd United Kingdom chairman Dr Humayon Dar.

Speaking to delegates at the Global Islamic Finance Forum 2012 (GIFF), Dr Humayon said the actual combined amount of both halal industry and Islamic finance worked out to be US$2.35bil but the integration actually worth more at US$3.5bil due to the greater potential following the synergy.

GIFF 2012, themed “Internationalisation of Islamic Finance: Bridging Economies”, is hosted by Bank Negara.

“The halal industry will be looking for financial capital. Its size will become more noticeable if combined with Islamic banking,” he explained, citing that “one plus one is more than two”.

“These two industries have developed independently although the denominator is Muslims,” he said.

He also said that the combined sector should be regulated as the halal industry was not as highly regulated compared to Islamic banking. Halal products include food, pharmaceuticals and cosmetics.

“This would bring integrity to the halal industry and Islamic finance,” he added.

He suggested the Islamic finance sector to lead the regulation of the combined platform due to the nature of the industry, which had already been highly-regulated.

Thomas Reuters United States global director (Islamic finance) Rushdi Siddiqui said the focus of Islamic finance should be the products and services instead of the religion.

He proposed for the private sector to lead and fund the regulation while the government supported the initiative.

“Islamic finance has to fit into the existing regulatory environment and not the other way round,” he said.

The speakers also noted that different countries have different frameworks in terms of compliance. It is best for one to study the suitability of the model locally before deploying the framework.

Rushdi said indigenous authenticity was important to bring about financial inclusion.

“The world is looking for a new class of asset management ... information intermediation has to be efficient and the process is the most important,” he said.

KFH Research Ltd managing director and vice-chairman Baljeet Kaur Grewal noted that there was vast potential in takaful products, which currently accounted for only 0.8% of global Islamic assets.

Islamic banking contributed 80.9% to Islamic finance assets worldwide, sukuk 13.5% and Islamic funds 4.5%, she said.

(The Star Online 20 Sep 2012)

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