Malaysia Airports plans RM1bil sukuk

KUALA LUMPUR: The operator of Malaysia’s international airport plans to sell RM1bil of Islamic bonds to finance the construction of a budget terminal that’s costing more than initial estimates.

Malaysia Airports Holdings Bhd (MAHB) was considering selling sukuk without a set maturity to ensure its debt didn’t exceed shareholders’ funds, chief financial officer Faizal Mansor said in an interview from Sepang. The perpetual notes are treated as equity rather than debt on a company’s balance sheet.

Completion of the terminal is lagging behind the March 2012 deadline after work began in 2010. It had been delayed several times as plans became more ambitious, Aireen Omar, chief executive officer of AirAsia Bhd, the nation’s biggest low-cost carrier, said in an e-mailed statement in June. The building must be ready by April 30, 2014, acting Transport Minister Datuk Seri Hishammuddin Hussein told reporters on July 5.

“Originally, the cost for the budget terminal was RM3.1bil, and now, it’s estimated at RM4bil,” Faizal said.

The sale was part of a RM2.5bil Islamic bond programme, said two people familiar with the matter, who asked not to be named as the information was private. MAHB had hired HSBC Holdings Plc, Citigroup Inc, Malayan Banking Bhd and CIMB Group Holdings Bhd to arrange the offering, they added.

The company sold RM600mil of sukuk maturing in 2024 in December at a coupon rate of 4.15%. The notes last yielded 4.2%, prices from Bursa Malaysia show. MAHB’s debt totalled RM3.1bil, according to data compiled by Bloomberg.

“Investors may demand a higher yield, given current challenging market conditions and some concerns over the project delay,” said Michael Chang, head of fixed income at MCIS Zurich Insurance Bhd in Kuala Lumpur. “I would only consider buying when I get more details on the repayment profile.”

The debt is rated AAA, the highest investment grade at RAM Rating Services Bhd, the bigger of the country’s two credit assessors.

Sales of syariah-compliant notes from Malaysian companies dropped 64% in 2013 to RM21.8bil from a year earlier, after reaching an unprecedented RM95.8bil in 2012, data compiled showed.

(Business News / 16 Aug 2013)

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Zakat is central to Islam’s concept of humanity

Zakat (alms) is one of the five pillars of Islam. Its importance can be realized from the fact that in 82 verses of the Qur’an, Zakat is associated with prayer (Salah), such as: “Establish regular prayer and give Zakat; and obey Allah and His Messenger.” (Qur’an, 33:33)

If social justice and compassion to fellow humans who are disadvantaged is one of the central themes in the message of Allah to humanity, then it is no wonder that Zakat, like prayer and fasting, was also enjoined upon the people of the past messengers: “And We made them (descendants of Abraham) leaders, guiding by Our command, and We sent them inspiration to do good deeds, to establish regular Prayers and to practise Zakat; and they constantly served Us.” (Qur’an, 21:73)

The wisdom of giving Zakat:

It purifies your wealth as Allah Almighty says in the Qur’an: “Take alms from their wealth in order to purify them and sanctify them with it and pray for them.” (Qur’an, 9:103)

It reminds Muslims of the fact that whatever wealth they may possess is due to the blessings of Allah and as such it is to be spent according to the His commands.

Zakat functions as a social security for all. Those who have enough money today pay for what they have. If they need money tomorrow they will get what is necessary to help them live decently. Zakat payer pays his dues to Allah as an act of worship, a token of submission and an acknowledgment of gratitude. The receiver of Zakat receives it as a grant from Allah out of His bounty, a favor for which he is thankful to Allah.

Economically, Zakat is the best check against hoarding. Those who do not invest their wealth but prefer to save or hoard it would see their wealth dwindling year after year due to inflation etc. Zakat helps increase production and stimulates supply because it is a redistribution of income that enhances the demand by putting more real purchasing power in the hands of poor.

It keeps one away from sin and saves the giver from the moral ill arising from the love and greed of wealth.

Through Zakat, the poor are cared for, these include widows, orphans, the disabled, the needy and the destitute.

Zakat is the right of the poor. Zakat is not considered a favor that is given to the poor by the rich. It is the right of the poor on the wealth of the rich. Allah says: “(In their) wealth there is a known share for the beggars and the destitute” (Qur’an, 70:24-25)

Zakat, therefore, is unlike charity that is given to the needy voluntarily. Withholding Zakat is considered depriving the poor of their due share. Thus one who pays Zakat actually “purifies” his wealth by separating from it the portion that belongs to the poor.

Virtues of Zakat:

Allah says in the Qur’an: “The parable of those who spend their wealth in the way of Allah is that of a grain of corn. It grows seven ears and each ear has hundred grains. Allah increases manifold to whom He pleases.” (Qur’an, 2:261) :

The beloved Messenger of Allah (peace be upon him) is reported to have said about Zakat:

• Zakat is a (great and strong) bridge of Islam.

• If a man pays the Zakat due on his property, it causes its evil influence to vanish.

• Gains the pleasure of Allah.

• Increases wealth and protects from losses.

• Causes Allah’s forgiveness and blessings.

• Protection from the wrath of Allah and from a bad death.

• A shelter on the Day of Judgment.

• Security from seventy misfortunes.

Alqamah (may Allah be pleased with him) says that when a group of people visited the Prophet (peace be upon him) he said to them, “Verily you can make your Islam perfect by your payment of the Zakat due on your property.”

The Prophet (peace be upon him) said, “He who observes three things will taste the sweetness of Iman (faith): One who worships Allah alone and believes (from his heart) that there is no one to be worshipped but Allah and one who pays the Zakat on his property, willingly, every year. In Zakat on the animals, one should not give an aged animal or one suffering from itch or any other ailment, or an inferior one, but should give animals of average quality. Allah Almighty does not demand from you the best of your animals, nor does He command you to give animals of the worst quality.”

Do I have to give Zakat?

Zakat is obligatory on an adult sane Muslim who has wealth that reaches or exceeds a certain level called the nisab for a lunar year. (You may contact your local scholars about the exact amount of nisab in your local currency). Unlike tax, however, Zakat is an act of worship for which one receives reward from Allah Almighty.

Ignoring to pay Zakat, on the other hand, is a major sin.

How much do I have to give?

If you are in possession of money, gold, silver, stock in trade or shares that amount to more than the value of nisab (at current market rates) then you are obliged to pay Zakat. What amounts are owed by you should be deducted from the capital amount before Zakat is calculated. The rate of Zakat is 2.5%.

The Prophet (peace be upon him said: “The upper hand is better than the lower hand (i.e. he who gives in charity is better than him who takes it).” (Bukhari)

(Arab News / 14 Aug 2013)

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Malaysia: Kokitab To Invest RM6 Million In Two Islamic Pawnbroking Shops In Dungun, Kemaman

KUALA TERENGGANU, Aug 13 (Bernama) -- Koperasi Kakitangan Kerajaan Terengganu Berhad (Kokitab) will invest RM6 million to open two Islamic pawnbroking shops in Dungun and Kemaman, its Chairman Alias Mustafa said today.

He said they are now looking for strategically-located buildings to open the shops.

"We will be actively engaged in Islamic pawnbroking business as it is a profitable business. It is also a new source of revenue for us besides existing projects," he told Bernama.

Alias said Kokitab has been operating an Islamic pawnbroking shop in Kuala Terengganu town since last year and the outlet has been making good profit since the first year.

He said RM3 million was invested in that shop and the investment has benefited some 10,000 Kokitab members and non-members, particularly petty traders.

"Islamic pawnbroking business received good response from the people as the interest charged was very low vis-a-vis the conventional system," he said.

Alias said Kokitab was also actively involved in the property sector to build shophouses and residential homes for its members.

"If anyone wants to sell land, they can contact us. We will see the land and buy it if it is commercially viable to be developed," he said.

Currently, Kokitab has five units of four-storey buildings worth about RM4 million and the latest building to be built will be in Gong Badak.

"We will build eight units of four-storey buildings costing RM8 million," he said.

The buildings would be built early next year and would be sold at RM1.5 million a unit, he said.

Alias also said Kokitab made RM1.8 million profit last year, the highest in 10 years.

Of the total, RM1.2 million was paid out as dividend to members a week before the May 5 general election.

(National News Agency Of Malaysia / 13 Aug 2013)

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India: Rahman Khan urges Rahul to bring Islamic banking on 2014 agenda

NEW DELHI: Making perhaps the strongest-ever pitch for the introduction of Islamic banking , minority affairs minister Rahman Khan has told the Congress leadership that Muslims were increasingly viewing Centre's continuing resistance to the introduction of Shariah-compliant banking as interference in the affairs of the community. 

The minister said interest-free banking, better known as Islamic banking, would prove to be a boon by mobilizing vast capital from Muslims that can be used for welfare activities of the community while helping them to practice the religion as laid down by the tenets of Islam. 

Khan's request to Congress vice-president Rahul Gandhi, as part of welfare proposals to woo Muslims, marks a renewed as well as , possibly the strongest bid to lift the bar on Islamic banking that has riled community principals for some time. 

The RBI had earlier said that Islamic banking would require amendment to banking regulations since not charging or paying interest would violate present norms. 

Khan argued that Islamic banking could be done within the constitutional framework, with government needed to set up a separate "regulatory authority" to bring the proposal to life. 

Congress appears unlikely to accept the request but the lobbying is significant. Khan has called it part of future vision to renew the confidence of the key social group in the ruling party. He has flagged three steps - Islamic banking, mechanism to review terror cases against Muslim youth and making scholarships open-ended - as "new ideas" to woo Muslims. 

Adding urgency to the proposals, Khan suggested they be executed before the 2014 elections. 

Sources said Khan has submitted a detailed note to Rahul in which he suggested measures to step up the party's post-Sachar Muslim welfare agenda. The suggestions are his feedback from interaction with Muslim leaders, intellectuals and social activists, he said. 

According to the minister, Islam prohibits receipt or payment of interest, a reason why many countries have initiated financial institutions based on Shariah principles. He said while India has the second largest Muslim population in the world and guarantees freedom of religion, the bar on Islamic banking curtails this freedom for Muslims. 

"This (Islamic banking) will enable Muslims of India to invest their savings in accordance with their religious faith and the savings invested in such an institution will help in the economic development of the Muslim community in the country," the proposal said. 

(The Times Of India / 13 Aug 2013)

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Cleric advises Muslims to shun interest loan business

Those who engage in loans business with interest would be punished both on earth and hereafter by God.

Making this assetion was the guest lecturer at the fifth Year Anniversary of the Oyo East Local Government Hasbunnalah, a non-intrest Cooperative and Credit Society in  Kosobo, Oyo.

In a lecture entitled: ‘The practise of non-interest cooperatives societies in Nigeria, the guest lecturer who is the Chief Imam of Al-zunah Mosque, Owode, Oyo and the Amir “the Muslim congress TMC,” Alhaji Lukman that God abhors riba (interest) as the practice encourages exploitation, class distintion, fraud, callousness and poverty, among others.

To ensure eqal distribution of wealth in the society, non-interest loans should be encouraged by all.

Alhaji Lukman also commended the chairman of the society for acquiring 10 acres of land on Osogbo Road.

In his annual report, the Chairman of the Hasbunallah Adebayo Quadri highlighted the management achievements which included increase in membership population from 301 to 325, car loan to seven members, monthly provision of electrical gadgets on credits basis, purchase of photocopy and computer machines and purchased of 102 plots of land for members.

(Nigerian Tribune / 09 Aug 2013)

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Malaysia: Tall order but Takaful Ikhlas is up to the challenge

PETALING JAYA (Aug 12, 2013): Takaful Ikhlas Sdn Bhd, the Islamic insurance arm of MNRB Holdings Bhd, is eyeing to grow its total combined gross contributions by 20% to RM900 million for the current financial year ending March 31, 2014 (FY14) from about RM751 million a year ago.

Its president and CEO Ab Latiff Abu Bakar (pix) said the takaful operator is putting in strategies to improve its ranking a notch up in two years. Takaful Ikhlas' market share is currently at 12% based on gross contribution.

"For 2013, Takaful Ikhlas is looking at growing its business further as compared with previous financial year. The competition in the industry will be greater this year and the challenge is to find the right strategies and initiatives which can expand our business further through the various channels," he told SunBiz in a recent interview.

"It's a tall order but its all about the execution of the strategy and the monitoring of it."

The company is currently ranked third among takaful companies behind Etiqa Takaful Bhd and Syarikat Takaful Malaysia Bhd in terms of total gross contribution.

For FY13, Takaful Ikhlas posted an 8.05% increase in gross contribution. This was an improvement over the previous year when gross contribution dropped 8% to RM695 million from RM760 million in FY11.

For FY14, Ab Latiff said Takaful Ikhlas is looking at strengthening its distribution channels with main focus given to family agency.

"The strategies shall include looking at new area of penetration such as Gen Y and non-Muslim markets, equipping the distribution channels with the right tools through technology and developing the right products to suit the target market segments," he said.

Due to the growing competition of the takaful industry, the company is looking at a few new areas to venture, taking into consideration the aspect of the current social trend and shariah compliance products, on top of the market trend.

Takaful Ikhlas will be banking on its 3,500 family business agents to boost its family takaful business, regarded as a long term saving mechanism, to drive the company's growth and profitability further.

"We plan to introduce or improve our products range to appeal to a wider category of non-Muslim customers. Hence, in the next 12 months we target to rope in 300 non-Muslim agents from a very small base at the moment," he said.

Earlier this month, Takaful Ikhlas launched three regular premium investment linked products targeted especially to attract more non-Muslim agents.

Also in the plan is to boost its regular premium to account for 70% of total family contributions in three to four years from 45% currently.

"Regular premium stands at 45% of total family contribution. The strategy to increase the regular premium business lies mainly in increasing the productivity of the family agency force through the individual products," he said.

To reach the masses at a faster rate and within a short time frame, Ab Latiff said the company wants to expand into the corporate or group business which remains under-penetrated.

Asked how he plans to grow profit this year, he said: "Profit growth will be in line with the continued business growth through the multi-distribution channel, ensuring the right portfolio mix based on the right market segment. The overall expenses itself shall be monitored closely and business development expenses shall be tied to productive activities," he said.

For FY13, Takaful Ikhlas net profit was up 34.3% to RM18 million from RM13.4 million the previous year.
Takaful Ikhlas offers both family and general products. Family products consists mainly of ordinary, medical and investment-linked policies while general products comprises motor, fire, marine, aviation and transit and other miscellaneous classes.

The takaful operator currently has 13 branches throughout Malaysia and plans to set up three service centres in smaller towns.

(The Sun Daily / 12 Aug 2013)

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Malaysia: New regulations to boost for market takaful

An overhaul of Malaysia’s Islamic finance regulations is expected to increase take-up of sharia-compliant insurance (takaful) products, although the new rules could encourage smaller operators to join forces with more established rivals.

New legislation came into effect on June 30, along with parallel laws revamping the operations and regulation of the conventional financial sector. The new Islamic Financial Services Act (IFSA) replaces previous legislation enacted over the past 30 years, strengthening regulatory oversight and boosting industry transparency.

According to a statement from Bank Negara, the central bank, the new rules will provide “a comprehensive legal framework that is fully consistent with sharia in all aspects of regulation and supervision”.

Under the new act, religious advisers will be held legally accountable for financial products. They will also be subject to monetary penalties and could face imprisonment if found to be in breach of the laws.

In the takaful sector, the IFSA will require insurers to separate their life and non-life business lines. Firms that hold composite licences will need to divide their operations within five years.

The new rules are expected to help ensure the rights of takaful consumers, setting out disclosure requirements and mandating that insurers provide a minimum level of information to customers at each stage of the contract process.

“The IFSA will lead to greater consumer protection and subsequently greater confidence in takaful,” Mohamed Rafick, CEO of Munich RE Retakaful, told OBG in an interview in mid-July. “It will also hold takaful companies accountable for their pricing strategies by ensuring that risk funds are sustainable.”

The stringent pricing accountability could put pressure on smaller operators in the industry, Rafick added. They could also face challenges in meeting the new higher capital requirements that are specified by the IFSA.

While there are around a dozen takaful operators in the market, the sector is dominated by a few firms that, between them, account for about 90% of the estimated combined $6bn worth of assets held.

Some of the larger players have expressed interest in acquiring smaller outfits in the wake of the new regulations.

In July, Hassan Kamil, group managing director of Syarikat Takaful Malaysia, the second-largest Islamic insurer, told Reuters his company might be in the market to absorb smaller rivals. “If their portfolio is attractive, we could be buying up business,” he said.

However, analysts are confident that the new regulations will help the sector to expand.

Ahmad Rizlan Azman, CEO of Etiqa Takaful, said the improved regulatory environment, alongside growing public understanding of takaful products, would help the sector to develop into 2015 and beyond.

“Recent reports indicate that the Malaysian takaful industry is expected to grow by 20% per annum for the next two years as consumer acceptance grows and regulatory changes provide a stronger and more stable infrastructure for the shariah-compliant insurance industry,” he told a conference in Kuala Lumpur in late June.

However, the takaful sector still lacks the level of consumer acceptance required to underpin strong growth. Many products in the takaful range, as yet, have limited exposure in the Malaysian market. The penetration rate for life takaful stands at 13%, considerably lower than that of conventional life insurance, at 55%.

According to a recent survey commissioned by Swiss Re, about 30% of Muslims in Malaysia have a good understanding of takaful, while 16.5% hold policies. Though this is a far higher rate than in Indonesia, where only 5% of the population were found to be familiar with takaful and 1% choosing to hold the sharia-compliant product, the survey indicates that more work needs to be undertaken to boost penetration rates.

By tightening up the regulatory structure of its takaful segment, Malaysia will further bolster confidence in both the product and the broader Islamic financial sector and may well set the benchmark for other countries seeking to boost accountability and transparency in their own sharia-compliant markets.

(Oxford Business Group / 07 Aug 2013)

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