Nigeria Islamic Financing Key to Infrastructure Funding - Sanusi:

The Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, has described Islamic financing as an alternative source of financing that is capable of providing the much-needed funding to fix the huge infrastructure deficit in the country.

He called on other African countries to also tap into the opportunities provided by this form of financing to fund gave the state of infrastructure in the continent a facelift.

Speaking in Abuja at a conference titled: “Infrastructure Development through Alternative Funding (Islamic Finance) in Africa,” which was organised by the Metropolitan Skills Limited in collaboration with the Islamic Finance Institute of Southern Africa, Sanusi noted that if well developed, Islamic bonds otherwise known as Sukuk, could serve as a major financing alternative for governments. This, according to him could be seen in countries such as Saudi Arabia, United Arab Emirates, among others.

The central bank boss, who was represented by his Special Adviser on Non-Interest Banking, Dr. Bashir Aliyu Umar, said: "It is my belief that if properly structured, Islamic financing will complement government's efforts in infrastructure development."
On his part, the former Managing Director of Jaiz Bank, Mr. Mustapha Bintube, stressed that Islamic banking had come to stay in the country.
He said: "In Nigeria, many people told me it was not possible, but today, with a modest beginning, it is going to stay and it is going to make impact in the economy of this country."

The acting Managing Director of the bank, Mr. Usman Hassan, appealed to the federal government to speedily finalise the development of the framework for the issuance of Sukuk in the country.

He said this had become necessary given that "with Sukuk you cannot have failed projects and funds cannot be diverted."

(This Day Live / 26 June 2013)

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AfDB and IILM Strengthen Cooperation to Mobilize Resources On Islamic Finance Markets

The African Development Bank (AfDB) Operations Vice-president, Zondo Sakala and the CEO of the International Islamic Liquidity Management Corporation (IILM), Rifaat Abdelkarim, on 24 June 2013 in Tunis inked a Memorandum of Understanding (MoU), to build robust partnership to promote liquidity management. This MoU signing comes on the heels of the AfDB's new trust fund reform policy, shifting from bilateral to multi donor and thematic trust fund.

The MoU will offer some direct benefits to the AfDB and its Regional Member Countries (RMCs). These include mobilizing finance and diversifying AfDB's funding base using investment bonds, called 'Sukuk'. The benefits also include building knowledge and capacity in RMCs in the field of Islamic finance, especially in fragile states and transforming them into productive capital. The Bank will also use the 'Sukuk' to circumvent issues of debt sustainability in RMCs.

Vice-president Zondo Salaka urged the two parties to move fast and establish a joint AfDB-IILM technical team working group to go into details of the partnership. He also expressed the hope that through IILM, the Bank can explore working with member countries of IILM. "We hope this signing will follow with concrete actions on the ground," he stated.

Abdelkarim, for his part, said that the signing of "this MoU with the AfDB would enable the two institutions to join hands to enhance Africa's development." "I am proud and privileged to sign the MoU with the African Development Bank," he affirmed, adding that "the MOU would be followed by practical case for us to work together."

About International Islamic Liquidity Management Corporation

The International Islamic Liquidity Management Corporation (The IILM) was established on 25 October 2010 by central banks, monetary authorities and multilateral organizations. It has its headquarters in Kuala Lumpur, Malaysia. It aims to develop and issue short-term Shari'ah-compliant financial instruments to facilitate effective cross-border liquidity management for institutions that offer Islamic financial services (IIFS). By creating more liquid Shari'ah-compliant financial instruments for IIFS, the IILM will enhance cross-border investment flows, international linkages and financial stability.

The current members of the IILM Governing Board are the central banks and monetary agencies of Indonesia, Kuwait, Luxembourg, Malaysia, Mauritius, Nigeria, Qatar, Turkey, the United Arab Emirates and the Islamic Development Bank Group. Membership of the IILM is open to central banks, monetary authorities, financial regulatory authorities or government ministries or agencies that have regulatory oversight of finance or trade and commerce, and multilateral organizations.

(All Africa / 25 June 2013)

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Bahrain-based Islamic finance group eyes expansion

A Bahrain-based association which lobbies on behalf of Islamic finance says it plans to expand beyond the Gulf, so that it can shape rules and practices in new markets as they grow.

The General Council for Islamic Banks and Financial Institutions (CIBAFI), a non-profit organisation headquartered in Manama, has traditionally focused on neighbouring countries, which form a core market for the industry.

But Omar Hafiz, who took over last year as secretary-general of the body, said he was keen to enlarge its geographic scope while engaging national regulators more actively.

"We are trying to have a representative office in Tunisia, operating as a gateway to Africa, and also in Azerbaijan to reach central Asian countries," he told Reuters.

Founded in 1999 by the Jeddah-based Islamic Development Bank, CIBAFI has 114 member institutions, including Egypt's Faisal Islamic Bank, Kuwait Finance House and Bahrain-based Al Baraka Banking Group. Saudi-Arabia's National Commercial Bank joined last year.

The Saudi-born Hafiz, 62, said that for its long-term health, the industry should focus as much on improving the regulatory environment as increasing its size.

"It is not just a matter of licensing Islamic banks, but preparing a platform for success for Islamic banking," he said.

"We want to ensure competition between the conventional and Islamic banking industry is in its best shape, not inferior or second class, but on the same level."

Addressing a major weakness in Islamic finance, a lack of well-trained professionals, CIBAFI plans to expand its training and certification programmes, which are currently distributed through a network of over 30 agents in countries from Jordan to France.

"We hope to reach 50 agents by the end of 2014. Maybe our training centre can be a separate body - this is still in the development stage, it still needs two to three years to develop," Hafiz added.

The body also plans to hold forums in new markets for Islamic finance, including events in Morocco and Libya later this year.

One of CIBAFI's key messages is that Islamic windows - units of conventional banks which offer Islamic financial products and services - need to operate under clear rules to improve the perceptions of consumers.

"In some cases, conventional banks which offer Islamic windows or Islamic transactions are trying to pull the financial products towards their conventional ways of operation," Hafiz said, arguing this hindered consumers from distinguishing between conventional and Islamic products.

"It may be owned partially or totally by a conventional bank, but a full separation technically and legally should be shown to consumers."

This could improve the industry's appeal and eventually reduce the reliance on the Islamic window model in favour of full-fledged operations, Hafiz said.

(Arabian Business.Com / 25 June 2013)

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Islamic banking association launches index of bourse’s Sharia-compliant shares

Islamic banking experts have called on the Central Bank of Egypt to tailor its policies regarding Islamic banking services to be more in line with those of Islamic banks themselves.

The call came during the fourth annual conference of the Egyptian Islamic Finance Association, during which the association launched its index of shares compatible with Islamic law, measuring the performance of those shares traded on Egypt’s stock exchange by their compatibility with Sharia standards.

Muhammad Al-Beltagy, chairman of the association, said in a statements on Tuesday that such an index was not a new invention and has been used in a number of countries. The association would monitor the release and implementation of the index in accordance with the current circumstances of the market, after spending time reviewing the Quran and Sunnah. Experts in Islamic finance, including Hussain Hamed Hussan, chairman of the Board of Trustees for the Egyptian Islamic Finance Association, would also seek to cooperate with the IFA international investments firm before releasing the index.

Mustafa Ibrahim, forensic audit manager for the National Bank for Investment, said the index was unique in that it was founded upon Sharia standard number 21, released by the Accounting and Auditing Organisation for Islamic Financial Institutions, which spells out regulations related to the trading of securities. Most stock indexes deemed compatible with Islamic law throughout the Arab world are not rooted in this law.

He added that until now, many had been reluctant to invest in Egypt’s stock exchange, however the release of this latest index would encourage them to buy and rent stock.

Ibrahim reinforced the importance of promoting Islamic financing tools, either through banks or Islamic bonds, asking that the central bank moderate its policies and legislative instruments to align with Islamic banking standards.

Ahmed Ramzi, an economic researcher and member of the Egyptian Islamic Finance Association, stated that the index employed a number of Sharia law based restraints. The index chooses stocks that it seeks to participate in based on the activities of the specific company and the circumstances for its creation. Stock that employs more than 30% interest on net asset values, or more than half the value of participating stock groups during the financial period, will be deemed a violation of Islamic law. Interest on cash deposits cannot exceed more than 30% of net asset values, or more than half the value of participating stock groups during the financial period. The amount of gross revenue reaped as a result of participation in activities not in accordance with Islamic law could not exceed 5% of all company revenues. Upon learning of the existence of ownership of stock that is incompatible with Islamic law, companies must immediately do away with such stock. Notables, benefits and rights of stock may not exceed 30% of company assets (which include notables, benefits, rights, cash and debt).

Former prime minister Abd Al-Aziz Hagazi noted the importance of Islamic finance instruments, whether operated through banks or Islamic bonds, asking that the central bank alter its policies with regards to Islamic banking to make them more compatible with Islamic banks themselves.

Walid Higazi, secretary general of the Egyptian Islamic Finance Association, pointed to the legal and legislative importance of developing and spreading strong Islamic law foundations throughout Egypt, asking that the central bank amend Law 88 passed in 2003, and release a new law related to Islamic banking.

He stated that the country’s Islamic bonds law was a step in the right direction towards implementing a strong foundation for Islamic finance law, pointing out the necessity to pass additional legislation to strengthen Sharia law precepts in Egypt.

Kothar Al-Abja, an accounting professor and vice chairman of Beni Suef University, called on leading figures in the Islamic banking sector to help draft new Islamic finance laws. A positive legal environment is needed for Takaful insurance companies, he said, in addition to raising awareness of the activation of the country’s Islamic bonds law.

She further stated that it was necessary to increase the role of the Islamic endowments society, which estimated that “hundreds of billions in funds” have been squandered as a result of bad management. She further called on additional instruments and institutions to be activated and created to help gather Zakaat (charity) funds and administer them for the benefit of society.

(Egypt Daily News / 26 June 2013)

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Africa Needs Islamic Financing to Fund Infrastructure

Nigeria and other African countries need to tap into opportunities provided by Islamic financing to fund infrastructure on the continent, Governor of Central Bank of Nigeria, Sanusi Lamido Sanusi, has said.

The CBN governor said this yesterday in Abuja at a conference on infrastructure development through Alternative Funding (Islamic finance) in Africa.

The event was organized by the Metropolitan Skills Limited, Abuja in collaboration with the Islamic Finance Institute of South Africa.

Sanusi who was represented by his Special Adviser on Non-Interest Banking, Dr. Bashir Aliyu Umar, said Islamic bonds called Sukuk, if well developed can serve as a financing option for governments as is already evidenced in countries like Saudi Arabia, United Arab Emirates and others.

"It is my belief that if properly structured, Islamic bond will compliment government's efforts in infrastructure development," Sanusi said.

Also at the event, former Managing Director of Jaiz Bank, Mustapha Bintube, said Islamic banking has come to stay in Nigeria.

"In Nigeria, many people told me it was not possible but today, with a modest beginning, it is going to stay and it is going to make impact in the economy of this country," he said.

The acting Managing Director of Jaiz Bank, Usman Hassan, urged the federal government to conclude the development of the framework for the issuance of Sukuk in the country.

This is necessary because with Sukuk you cannot have failed projects and "cannot be diverted.

(All Africa / 26 June 2013)

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New legal set-up to pave way for syariah framework

KUALA LUMPUR: The new legal framework for Islamic banking and takaful, that will come into force this year, will pave the way for the development of an end-to-end Syariah-compliant regulatory framework for the conduct of Islamic financial operations, said Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz.

The new framework would provide clarity on the fundamental requirements of Syariah that must be adhered to for the contractual arrangements between the financial institution and the customer to remain enforceable, she said.“The framework also outlines the operational requirements for the effective application of Syariah principles in the conduct of Islamic financial institutions.“This aims to strengthen the risk management practices beyond the traditional credit, market and liquidity risks to also include inventory risk, ownership risk and Syariah compliance risk,” Zeti said at the opening of the Brunei Darussalam Islamic Investment Summit 2013.

The text of her speech titled, “Tapping and Expanding the Global Investment Opportunity in Asia’s Market”, was made available here today.

She said the legislation also provided for the resolution of Islamic financial institutions to be in line with distinctive elements of the relevant Islamic contracts, thus improving the legal and procedural aspects for the orderly resolution of Islamic financial institutions.

On the Islamic finance development, Zeti said the new wave of internationalisation for Islamic finance required increased collaboration across jurisdictions. — Bernama

to strengthen the international financial infrastructure of Islamic finance.“This is to ensure that the greater internationalisation of Islamic finance takes place in an environment of financial stability,” she added.

At the national level, Zeti said the first priority relates to trend for the domestic Islamic financial system to become more integrated, allowing for risks to be rapidly transmittal, across the financial system.“This requires the development of enhanced regulatory, supervisory and legal frameworks that are also adaptive and effective to the innovative dynamics and unique mix of risks in Islamic finance,” she said.

Zeti said the increased cross-border reach of Islamic finance has also underscored the importance of enhanced cross-border collaboration among the supervisory authorities.“Information-sharing and effective coordination among supervisors will enable a complete understanding of the entire risk spectrum of the risk taking activities undertaken across jurisdictions by the Islamic financial institutions,” she added.

Another key area is the evolution of the legal framework for Islamic finance to provide greater certainty and to build public confidence in the system as a whole, said Zeti.“This necessitates a legal framework that enforces end-to-end Syariah compliance in the Islamic financial services industry - through provisions and mechanisms that unambiguously define the conduct and governance of Islamic financial institutions,” she added.

Zeti also said with greater liberalisation, Islamic finance was increasingly supporting regional and international trade and investment flows, intermediating significant cross-border financial flows.“With its internationalisation, Islamic finance has become an increasingly more important channel for the efficient allocation of Asia’s surplus funds towards productive investments in the region,” she added.

Zeti also said efforts to strengthen the foundations for Islamic finance to ensure its continued resilience, amid the more challenging environment, must remain a priority going forward into the future.“Indeed, our commitment to act guided by this foresight will strengthen the prospect for Islamic finance to realise its potential in the region and beyond,” the governor added. 

(The Star Online / 21 June 2013)

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Cagamas Issues RM500 Million Three-month Islamic Commercial Papers

KUALA LUMPUR, June 25 (Bernama) -- Cagamas Bhd, the national mortgage corporation, has announced the issuance of RM500 million three-month Islamic Commercial Papers (ICPs).

In a statement Tuesday, Cagamas said the proceeds from the issuance will be used to fund the purchase of Islamic mortgages from the financial system.

Its president/chief executive officer, Chung Chee Leong, said a strong demand from diverse investor base comprising of financial institutions, insurance companies and fund managers has resulted in orders of over RM1 billion, representing an oversubscription rate in excess of two times.

"The ICPs were competitively-priced despite increased volatility in the bond market," he said.

He said the issue will increase Cagamas' total issuance for the year to RM1.6 million.

Since incorporation in 1986, Cagamas has cumulatively issued RM267.3 billion of conventional and sukuk.

(Bernama / 25 June 2013)

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