By T Vignesh
Delloite has set up its third Islamic Finance Centre of Excellence for the Asia Pacific region in Kuala Lumpur to help its International clients replicate the Malaysian success in Islamic Finance.
CEO Chaly Chee Keong said Malaysia is a good location because of its unique position as a major global player in the world of Islamic Finance and its geographical location offered opportunities to promote Islamic Finance to other countries in the region.
Chaly said the company has started to build a team between eight and ten professionals comprising auditors, financial advisors and those with banking background to be based in the Kuala Lumpur centre to continue recruiting more.
"The centre of excellence will be the core for people to understand more about Islamic Finance and all complexities around this product," Chaly told reporters in Kuala Lumpur yesterday.
He said many non-muslim countries such as Singapore, the UK, Japan and Hong Kong have also expressed their interest of becoming major players in the Islamic Finance Industry.
Islamic Leader of Deloitte South-East Asia, Eugene Wong, said there are so many factors such as the significant petrodollar running through the Middle East which has helped draw attention to the concept of interest free banking and finance to the centre stage.
He also said the recent subprime issue which brought the financial world to a crisis, has revealed that the guidelines of Shariah to insists on real assets seemed to be the shield of protection for the Islamic Institutions from going the way of their conventional counterparts.
Islamic Finance Specialist Daud Vicary Abdullah said the average growth rate of the global Shariah compliant assets over the past ten years is estimated to be 10-15% which is double the rate of the conventional market.
(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Tuesday, February 24, 2009
Thai SET to launch Shariah 50 index
The Stock Exchange of Thailand (SET) is planning to launch a Shariah 50 index early next quarter before going on a roadshow to the Middle East in the second half, reports a Thai newspaper.
The index would combine 50 listed stocks, making up 47% of the SET's market capitalisation, that are compatible with Islamic law, reports The Nation.
It quoted Santi Kiranand, head of market development, as saying that SET and FTSE have jointly developed the Shariah index while the selection of the 50 firms was performed by the Yasaar Committee.
The roadshow would touch down in Qatar, Dubai, the United Arab Emirates and Abu Dhabi, with the aim to attract petrodollars from the Middle East to the SET.
"Many countries in Asia have been active in launching Shariah indexes including Singapore, Hong Kong and Taiwan," Santi said. Just over two years ago, Bursa Malaysia Bhd (Bursa Malaysia), in collaboration with global index provider FTSE Group (FTSE) launched the FTSE Bursa Malaysia EMAS Shariah index on Jan 22, 2007.
The index was designed to provide investors with a broad benchmark for Shariah compliant investment for the Malaysian market. When launched two years ago, it took the constituents of the FTSE Bursa Malaysia EMAS Index, which has been free float weighted and liquidity screened, and overlays the Securities Commission's Shariah Advisory Council's (SAC) screening methodology to derive an 'investable and transparent' Shariah compliant index.
As at Nov 28, 2008, there were 855 Shariah compliant securities as determined by the Shariah Advisory Council (SAC) of the Securities Commission (SC). This represented 87% of the total listed securities or 64.3% of the market capitalisation on Bursa Malaysia.
In neighbouring Bangkok, the newspaper reported that at least two or three asset management companies have shown interest in launching funds investing in stocks in the Shariah index. One operation thought behind the launch of the fund is to position it as a product that asset management companies could use to draw funding from investors in the Middle East.
(This story appeared in The Malaysian Reserve on Feb 25, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
The index would combine 50 listed stocks, making up 47% of the SET's market capitalisation, that are compatible with Islamic law, reports The Nation.
It quoted Santi Kiranand, head of market development, as saying that SET and FTSE have jointly developed the Shariah index while the selection of the 50 firms was performed by the Yasaar Committee.
The roadshow would touch down in Qatar, Dubai, the United Arab Emirates and Abu Dhabi, with the aim to attract petrodollars from the Middle East to the SET.
"Many countries in Asia have been active in launching Shariah indexes including Singapore, Hong Kong and Taiwan," Santi said. Just over two years ago, Bursa Malaysia Bhd (Bursa Malaysia), in collaboration with global index provider FTSE Group (FTSE) launched the FTSE Bursa Malaysia EMAS Shariah index on Jan 22, 2007.
The index was designed to provide investors with a broad benchmark for Shariah compliant investment for the Malaysian market. When launched two years ago, it took the constituents of the FTSE Bursa Malaysia EMAS Index, which has been free float weighted and liquidity screened, and overlays the Securities Commission's Shariah Advisory Council's (SAC) screening methodology to derive an 'investable and transparent' Shariah compliant index.
As at Nov 28, 2008, there were 855 Shariah compliant securities as determined by the Shariah Advisory Council (SAC) of the Securities Commission (SC). This represented 87% of the total listed securities or 64.3% of the market capitalisation on Bursa Malaysia.
In neighbouring Bangkok, the newspaper reported that at least two or three asset management companies have shown interest in launching funds investing in stocks in the Shariah index. One operation thought behind the launch of the fund is to position it as a product that asset management companies could use to draw funding from investors in the Middle East.
(This story appeared in The Malaysian Reserve on Feb 25, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
First RM22m Islamic-themed hotel to be set up in Pantai Puteri, Melaka
Majlis Agama Islam Melaka (Maim) and Jabatan Wakaf, Zakat dan Haji (Jawhar) will set up the country's first Islamic-themed hotel costing RM22 million at Pantai Puteri in Tanjung Kling, Melaka. Minister in the Prime Minister's Department, Datuk Seri Dr Ahmad Zahid Hamidi, said the eight-storey hotel will be of three-star status with 99 rooms.
"The hotel based on Islamic concept will be a model of wakaf development for all state Islamic affairs councils, encouraging them to give attention to the commercial aspect," he told reporters at the hotel's ground-breaking ceremony in Tanjung Kling on Feb 23. Also present was MAIM deputy chairman Ghazale Mohamad, who represented Melaka Chief Minister Datuk Seri Mohd Ali Rustam.
Ahmad Zahid said under the Ninth Malaysia Plan, the federal government through Jawhar has allocated RM256.5 million for the development of wakaf land (trust property) nationwide.
"The Islamic-themed hotel is among the 19 projects being developed by Jawhar with the cooperation of Islamic affairs councils," he added. Ahmad Zahid said the hotel, to be managed jointly by Maim and Yayasan Wakaf Malaysia, will provide facilities, support services and food which meet Islamic requirements.
The hotel, he said, will have a multi-purpose hall, seminar room, office and surau with the first phase having started on Jan 15, 2009, and is due for completion on July 14, 2010. — Bernama
"The hotel based on Islamic concept will be a model of wakaf development for all state Islamic affairs councils, encouraging them to give attention to the commercial aspect," he told reporters at the hotel's ground-breaking ceremony in Tanjung Kling on Feb 23. Also present was MAIM deputy chairman Ghazale Mohamad, who represented Melaka Chief Minister Datuk Seri Mohd Ali Rustam.
Ahmad Zahid said under the Ninth Malaysia Plan, the federal government through Jawhar has allocated RM256.5 million for the development of wakaf land (trust property) nationwide.
"The Islamic-themed hotel is among the 19 projects being developed by Jawhar with the cooperation of Islamic affairs councils," he added. Ahmad Zahid said the hotel, to be managed jointly by Maim and Yayasan Wakaf Malaysia, will provide facilities, support services and food which meet Islamic requirements.
The hotel, he said, will have a multi-purpose hall, seminar room, office and surau with the first phase having started on Jan 15, 2009, and is due for completion on July 14, 2010. — Bernama
Monday, February 23, 2009
Amanie launches Shariah stock screening
By Habhajan Singh
Investment managers who need to select and monitor Shariah compliant stocks now have a new tool at their disposal.
Amanie Business Solution Sdn Bhd, a Malaysian-based Shariah advisory company, has launched a Shariah stock screening service that can be employed to screen stocks according to multiple methodologies and is not restricted to any one proprietary method of screening.
The service will target new entrants into the Islamic fund management industry. There is currently an influx of conventional fund managers managing Shariah funds as investors have shied away from investing in conventional funds in the wake of the global financial crisis, the company said in a statement.
The launch of the Amanie Screening was held at the end of the half-day seminar entitled "Potentials and Opportunties in Islamic Asset Management post-2008 Global Financial Crisis" organised by the company in Kuala Lumpur last Wednesday.
Amanie Screening aims to provide "the never before available element of flexibility" in terms of screening methodology used to allow clients to choose from a number of Shariah-complaint screening methodologies available in the market, the company said. It also caters for portfolio screening based on the specific needs of the client.
"We aim to provide the market with comprehensive and affordable information that will not be constrained by the adoption of any specific methodology as the core methodology for the screening of stocks," Amanie chief executive officer Dr Mohd Daud Bakar said.
At the moment, stock screening solutions are available from providers of stock indices that include the Dow Jones Islamic Market Indexes and the FTSE Global Islamic Index Series (GIIS). The GIIS, for example is presented as an equity benchmark index designed to track the performance of leading publicly traded companies whose activities are consistent with Shariah law. The Dow Jones, which first introduced an Islamic index in 1999, today has more than 70 indices that are "maintained based on a stringent and published methodology".
Islamic capital market consultant at Amanie Baiza Bain said, Amanie's stock screening service allows clients to go beyond indices provided by any one such provider. This screening is part and parcel of ensuring the transaction is in line with the requirements of Islamic finance.
When carrying out transactions, Islamic financial and capital market players need to ensure that they do not conflict with the conscience of Muslims and religion of Islam, including conducting activities that are free from usury (riba), gambling (maisir) and ambiguity (gharar), which are prohibited by Islam.
In Malaysia, the Securities Commission (SC) maintains a list of Shariah-compliant securities approved by its Shariah Advisory Council (SAC). Updated twice a year, the latest listing on Nov 28, 2008, includes 855 securities listed on Bursa Malaysia, including new entrants Equine Capital Bhd, Hap Seng Consolidated Bhd, Ho Wah Genting Bhd, IJM Land Bhd and Kian Joo Can Factory Bhd.
In classifying these securities, the SC gatheres information on the companies from various sources, such as the company's annual financial reports, responses to survey forms and through inquiries made to the company's management. The SC, through the SAC, continues to monitor the activities of all companies listed on Bursa Malaysia to determine their status from the Shariah perspective.
The SC guidelines state that companies will be classified as Shariah non-compliant securities if they are involved in activities like financial services based on riba (interest), gambling and gaming, manufacture or sale of non-halal products or related products and conventional insurance.
"We can also accommodate those who have a zero-tolerance for interest," said Bazia, referring to the interest tolerance of Kuwait Finance House (KFH). For securities under the SAC's radar, a 5% benchmark has been set when assessing the level of mixed contributions from activities that are clearly prohibited such as riba (interest-based companies like conventional banks), gambling, liquor and pork.
The SAC has set the benchmarks, based on ijtihad (reasoning from the source of Shariah by qualified Shariah scholars), to determine the tolerable level of mixed contributions from permissible and non-permissible activities towards the turnover and profit before tax of a company.
PHIOTOGRAPH: Mohd Daud (right) with participants at the Amanie Islamic asset management seminar (from left) Fajr Capital plc MD Mohamed Rafe Hanneef, Financial Technologies Group Middle East consultant Dr Zaha Rina Zahari and Failaka Advisor MD Mark Smyth
(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
HK plans tax rule changes to spur sukuk market
Hong Kong plans to change its tax rules to spur the development of an Islamic bond market in the city, the government's financial services chief said.
"We want to signal to the market that we are ready. The administration is putting in place tax neutrality measures to facilitate the development of Islamic finance," said Secretary for Financial Services and the Treasury, K C Chan at a conference in Hong Kong, reports Bloomberg.
The government is consulting with bankers and investors on required changes, Chan said, without giving a time frame for the regulatory revisions.
Hong Kong Chief Executive Donald Tsang in 2007 pledged to develop Hong Kong as a hub for Islamic finance, vying with rivals including Singapore and Japan for Muslim wealth, the report said.
Global sales of Islamic bonds, known as sukuk, soared 72% to US$31 billion (RM111.53 billion) in 2007 as Asian export earnings and Arab oil wealth boosted investor demand for the securities, according to data compiled by Bloomberg. Sales plunged to US$13.6 billion last year as the global credit crisis curbed appetite for all but the safest debt, the data show.
Sukuk are based on assets and pay a profit rate to investors instead of interest, which is banned by Shariah law, the report added.
In another repot, Dow Jones noted that Chan said the global financial crisis will slow the planned development of an Islamic bond market in the city, but said the government remains committed to the plan. "Given the contagious effects of the global financial crisis, it seems unavoidable that Islamic finance would slow its pace of development in the near term," Chan said at a forum in Hong Kong on Islamic finance.
"This notwithstanding, our commitment and confidence in developing Islamic finance remain strong," it qouted him as saying. Chan said the government is putting in place measures to address the tax disadvantages related to the issuance and transactions of Islamic bonds, or sukuk, to facilitate the development of Islamic finance in Hong Kong.
Dow Jones said Chan didn't elaborate, but the Financial Services and the Treasury Bureau said last year it planned to make Islamic bonds exempt from profits tax. Hong Kong doesn't impose tax on interest payments, but charges tax for profits earned, which would put Islamic bonds at a disadvantage, it added.
(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
"We want to signal to the market that we are ready. The administration is putting in place tax neutrality measures to facilitate the development of Islamic finance," said Secretary for Financial Services and the Treasury, K C Chan at a conference in Hong Kong, reports Bloomberg.
The government is consulting with bankers and investors on required changes, Chan said, without giving a time frame for the regulatory revisions.
Hong Kong Chief Executive Donald Tsang in 2007 pledged to develop Hong Kong as a hub for Islamic finance, vying with rivals including Singapore and Japan for Muslim wealth, the report said.
Global sales of Islamic bonds, known as sukuk, soared 72% to US$31 billion (RM111.53 billion) in 2007 as Asian export earnings and Arab oil wealth boosted investor demand for the securities, according to data compiled by Bloomberg. Sales plunged to US$13.6 billion last year as the global credit crisis curbed appetite for all but the safest debt, the data show.
Sukuk are based on assets and pay a profit rate to investors instead of interest, which is banned by Shariah law, the report added.
In another repot, Dow Jones noted that Chan said the global financial crisis will slow the planned development of an Islamic bond market in the city, but said the government remains committed to the plan. "Given the contagious effects of the global financial crisis, it seems unavoidable that Islamic finance would slow its pace of development in the near term," Chan said at a forum in Hong Kong on Islamic finance.
"This notwithstanding, our commitment and confidence in developing Islamic finance remain strong," it qouted him as saying. Chan said the government is putting in place measures to address the tax disadvantages related to the issuance and transactions of Islamic bonds, or sukuk, to facilitate the development of Islamic finance in Hong Kong.
Dow Jones said Chan didn't elaborate, but the Financial Services and the Treasury Bureau said last year it planned to make Islamic bonds exempt from profits tax. Hong Kong doesn't impose tax on interest payments, but charges tax for profits earned, which would put Islamic bonds at a disadvantage, it added.
(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
UK's Shariah banking still lacks awareness, skills and standardisation
By Habhajan Singh
The Islamic finance fraternity in the United Kingdom, which has been experiencing growth in the last five years, has to deal with areas of standardisation, awareness and skills to take the industry forward, according to a recent document from the UK Treasury.
The document also noted that the government would provide "support and encouragement where appropriate".
According to a December 2008 Treasury report entitled "The Development of Islamic Finance in the UK: The Government's Perspective", the role of the government in achieving this progress has been important, particularly through the removal of tax and regulatory barriers.
"The Treasury and the Financial Services Authority will continue to work towards creating a level tax and regulatory playing field between conventional and Islamic finance.
"Furthermore, the government will continue to keep the feasibility of issuing sovereign wholesale and retail Islamic finance products under review," the report added.
UK is home to a number of Islamic banks, including the European Islamic Investment Bank, Islamic Bank of Britain and Gatehouse Bank.
Being an international financial hub London is also seeing Islamic finance related events, like the 8th Annual Islamic Finance Summit which begins tomorrow in the city. The two-day seminar will look at at the possibility of providing European corporate institutions with Islamic liquidity and whether Islamic liquidity for European corporate institutions as the possible "next big driver" is merely wishful thinking.
In its document, the UK Treasury noted that "it is clear that much of the future work in developing the sector and removing barriers for growth in areas such as standardisation, awareness and skills, is necessary to take the industry forward, with the government providing support and encouragement where appropriate".
The document, containing a foreword from economic secretary to the Treasury Ian Pearson, also highlighted several areas that the government has identified for further progress.
These include collaboration between industry and international standard setting bodies to create a set of robust and accessible term-sheets for the main Islamic products. Another area is the collaboration among industry and community groups to raise awareness and knowledge about Islamic finance at the grass roots level.
The third area has been identified as collaboration between industry and trade bodies to highlight the UK's strength as a provider of education, training and skills in Islamic finance.
"Many of the remaining barriers will be addressed as the sector grows and develops. However, where there is a need for further intervention, the government stands ready to help," the document said.
The report also noted that the UK is now the leading centre for Islamic finance outside of the Gulf Cooperative Council and Malaysia.
"London and Birmingham now host the only stand-alone Islamic financial institutions in the EU. "UK consumers can now access a wide range of Shariah compliant retail financial products and services, which are regulated to the same standard as conventional financial products, conferring the same degree of consumer protection," it said.
On its regulatory approach, the document repeated what it had stated earlier that the government "will not champion Islamic finance over conventional finance, but will instead strive to create a level playing field between Islamic and conventional finance".
(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
'Islamically-correct' investors faring well
As credit markets have imploded, triggering a global economic crisis, Islamically correct investors have seen a change of fortune. The conservative principles this small group of devout Muslims clung to during the economic heyday has insulated them from the worst of the past year's suffering, according to a report from Scripps Howard News Service.
Their renunciation of the interest-based economy kept them away from investments in financial services companies, whose stocks have collapsed, and out of traditional mortgages, it added.
"There was a time two or three years ago that Islamic finance was considered simply too conservative. "Right now, many people are recognising that maybe it wasn't such a bad thing." it quoted Professor Ibrahim Warde, author of "Islamic Finance in the Global Economy" and an adjunct professor at the Fletcher School of Law and Diplomacy at Tufts University, as saying.
The report noted that the Dow Jones Islamic Market Indexes, which represent benchmarks for Islamically correct investment categories, have been outperforming their non-Islamically compliant counterparts by 3% to 4% in key indexes. The two Amana Income and Growth funds, the largest Islamic mutual funds in the country with US$1.2 billion (RM4.32 billion) in combined assets, have been outperforming the S&P 500 in the past year by 13% and 7%, respectively.
Bay Area residents who bought homes through an Islamically compliant lender in San Jose, the Ameen Housing Cooperative, don't have to worry whether their lender will work with them if they lose their jobs.
Islamic lenders are required to work in good faith with distressed borrowers to figure out ways to make payments manageable - and co-op leaders say they will, the report said.
Warde and other Islamic finance experts and investors caution that the crisis doesn't mean that Islamic finance is a better model than Western capitalism. They say Islamic finance, a system of ethical finance supported on an institutional level, provides unique insight into an economic meltdown created in part by financial practices forbidden by strict observance of Islam, it added.
"I don't think there's anything miraculous about Islamic finance, or that it's a panacea," Warde told the newswire. "But we can understand why Islamic banks did well in the current financial environment."
(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Their renunciation of the interest-based economy kept them away from investments in financial services companies, whose stocks have collapsed, and out of traditional mortgages, it added.
"There was a time two or three years ago that Islamic finance was considered simply too conservative. "Right now, many people are recognising that maybe it wasn't such a bad thing." it quoted Professor Ibrahim Warde, author of "Islamic Finance in the Global Economy" and an adjunct professor at the Fletcher School of Law and Diplomacy at Tufts University, as saying.
The report noted that the Dow Jones Islamic Market Indexes, which represent benchmarks for Islamically correct investment categories, have been outperforming their non-Islamically compliant counterparts by 3% to 4% in key indexes. The two Amana Income and Growth funds, the largest Islamic mutual funds in the country with US$1.2 billion (RM4.32 billion) in combined assets, have been outperforming the S&P 500 in the past year by 13% and 7%, respectively.
Bay Area residents who bought homes through an Islamically compliant lender in San Jose, the Ameen Housing Cooperative, don't have to worry whether their lender will work with them if they lose their jobs.
Islamic lenders are required to work in good faith with distressed borrowers to figure out ways to make payments manageable - and co-op leaders say they will, the report said.
Warde and other Islamic finance experts and investors caution that the crisis doesn't mean that Islamic finance is a better model than Western capitalism. They say Islamic finance, a system of ethical finance supported on an institutional level, provides unique insight into an economic meltdown created in part by financial practices forbidden by strict observance of Islam, it added.
"I don't think there's anything miraculous about Islamic finance, or that it's a panacea," Warde told the newswire. "But we can understand why Islamic banks did well in the current financial environment."
(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Islamic finance accelerates into motor policies
Motor insurance in line with the principles of Islamic finance is now being introduced in the United Kingdom and may be popular with motorists beyond the Muslim belt alone, according to a UK newspaper.
"First it was Islamic current accounts, then mortgages and investment funds, and now we have a motor insurance product that conforms to Islamic law, or Shariah.
"This move will be welcomed by many of the two million British Muslims looking to buy insurance cover aligned with their faith.
But it could also prove popular for non-Muslims who find the notion of an ethical or co-operative insurance product appealing," The Independent reported.
Unlike conventional insurance, where risk is transferred from the policyholder to the insurance company, halal (permissable) insurance, or takaful ("guaranteeing each other"), requires all participants to share risk equally, the newspaper reported. Instead of premiums, participants pay contributions which, as with ordinary insurance, are calculated on the presumed risk of the individual and how likely they are to claim. These contributions are then pooled in a takaful fund, which is invested in strictly halal activities.
There is also a Shariah Supervisory Committee, made up of Shariah scholars, to oversee all activities and to ensure that the whole process is consistent with Islamic principles, it noted.
Interestingly, according to the paper, once the fund has been used to pay for any valid claims, any surplus money is redistributed to participants at the end of the year in the form of discounted premiums, which come in addition to any no-claims bonuses.
"What is unique is the ethical nature of what we do," says Bradley Brandon-Cross, the chief executive of Salaam Halal Insurance. "It's a transparent process and the opportunity to get something back is attractive to customers, both Muslims and non-Muslims alike."
(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
"First it was Islamic current accounts, then mortgages and investment funds, and now we have a motor insurance product that conforms to Islamic law, or Shariah.
"This move will be welcomed by many of the two million British Muslims looking to buy insurance cover aligned with their faith.
But it could also prove popular for non-Muslims who find the notion of an ethical or co-operative insurance product appealing," The Independent reported.
Unlike conventional insurance, where risk is transferred from the policyholder to the insurance company, halal (permissable) insurance, or takaful ("guaranteeing each other"), requires all participants to share risk equally, the newspaper reported. Instead of premiums, participants pay contributions which, as with ordinary insurance, are calculated on the presumed risk of the individual and how likely they are to claim. These contributions are then pooled in a takaful fund, which is invested in strictly halal activities.
There is also a Shariah Supervisory Committee, made up of Shariah scholars, to oversee all activities and to ensure that the whole process is consistent with Islamic principles, it noted.
Interestingly, according to the paper, once the fund has been used to pay for any valid claims, any surplus money is redistributed to participants at the end of the year in the form of discounted premiums, which come in addition to any no-claims bonuses.
"What is unique is the ethical nature of what we do," says Bradley Brandon-Cross, the chief executive of Salaam Halal Insurance. "It's a transparent process and the opportunity to get something back is attractive to customers, both Muslims and non-Muslims alike."
(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
BIMB denies Bank Islam-Maybank Islamic merger talks
By Alfean Hardy
BIMB Holdings Bhd has categorically denied that it is in talks with Malayan Banking Bhd (Maybank) over a potential merger between its 51%-owned subsidiary, Bank Islam Malaysia Bhd (Bank Islam) and Maybank's Islamic banking unit, Maybank Islamic Bank Bhd.
Reports in the local media over the past couple of days have hinted that a possible merger, which would have created the largest Shariah bank in the region, was in the offing.
In a brief statement issued yesterday, BIMB said that it was not in discussion with Maybank over a potential merger between the two Islamic banks, which are the market leaders in the local Islamic banking sector.
"Although BIMB is open to considering potential strategic partnerships for Bank Islam to strengthen its Islamic banking business and market share, any steps to be taken would firstly require the relevant regulatory approvals," it added.
The bank has made no secret that it was looking for strategic partnerships or mergers.
On Tuesday, a newswire reported that several local Islamic bankers had said that Maybank's Islamic subsidiary wanted to take up stakes in Malaysia's second largest Islamic bank and that Dubai Group's Dubai Islamic Investment Group, which holds a 40% stake in Bank Islam, was keen to sell its stake to Maybank Islamic.
A Maybank spokesman was reported to have said the group was not currently in talks with the Dubai Group as had been speculated. Dubai Group, when approached, said it was a longterm strategic investor in Bank Islam.
"We are proud to be associated with the bank's impressive turnaround over the past two years and are confident of its potential to grow further. "We believe that Bank Islam is well positioned to capitalise on the opportunities presented by the rapid growth of Islamic finance," it added.
Another report in a local daily, citing sources, said the proposed merger had been put on hold at central bank level. It said Bank Negara Malaysia was keen on the idea but had requested both parties to take more time to study their capital base as well as to put their respective houses in order before considering any merger.
The report said, if the merger gets the green light, a special entity would be created to house the two parties, the Bank Islam brand name would likely be retained and that Bank Islam managing director Datuk Zukri Samat, who has been seen as instrumental in Bank Islam's turnaround, would be named the managing director of the new entity.
The report also said the Dubai Group would be asked to sell its stake in Bank Islam to Maybank Islamic and, in return, would be offered an Islamic banking licence, which would allow it to start its own local Shariah-compliant banking operations.
(This story appeared in The Malaysian Reserve on Feb 20, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
EonCap Islamic eyes 8% loan growth in 2009
EONCAP Islamic Bank Bhd is eyeing an 8% loan growth for the current year, despite the economic slowdown, said its chief executive officer and executive director, Fozia Amanulla, reports Bernama.
"The year is going to be tough but on the positive side, we expect an 8% loan growth," she said when asked on the outlook for the bank.
EonCap Islamic has deposits and financing worth RM4.3 billion and RM4.8 billion respectively, said its head of consumer banking Wan Hosni Kamal.
On the Skim Pembiayaan Peribadi Gratuiti and Skim Pembiayaan Peribadi Pesara Kerajaan launched yesterday, Fozia said the bank was confident of disbursing up to RM150 million or more by the end of the year. The two financing planning schemes that will allow retiring civil servants and government pensioners to plan ahead, was launced by the Second Finance Minister Tan Sri Nor Mohamed Yakcop in Kuala Lumpur, Feb 19.
"The year is going to be tough but on the positive side, we expect an 8% loan growth," she said when asked on the outlook for the bank.
EonCap Islamic has deposits and financing worth RM4.3 billion and RM4.8 billion respectively, said its head of consumer banking Wan Hosni Kamal.
On the Skim Pembiayaan Peribadi Gratuiti and Skim Pembiayaan Peribadi Pesara Kerajaan launched yesterday, Fozia said the bank was confident of disbursing up to RM150 million or more by the end of the year. The two financing planning schemes that will allow retiring civil servants and government pensioners to plan ahead, was launced by the Second Finance Minister Tan Sri Nor Mohamed Yakcop in Kuala Lumpur, Feb 19.
Airport Authority HK revives Islamic bond plan
Airport Authority Hong Kong, which runs Asia's third-busiest airfield, is reviving plans to sell Islamic bonds after the global credit crisis battered investors and curbed demand for Shariah compliant debt, reports Bloomberg.
"Unfortunately we were held back by market conditions," Treasurer Sam Kwok said at a conference in Hong Kong on Feb 18. "We are looking at embarking on another round of expansion and we will be needing some money. We hope to do something in this arena as soon as possible."
The report added that the authority planned to sell as much as US$1 billion of Islamic bonds with help from Citigroup Inc and HSBC Holdings Plc in Hong Kong's first sale of the securities, known as sukuk, the South China Morning Post reported in June.
"Unfortunately we were held back by market conditions," Treasurer Sam Kwok said at a conference in Hong Kong on Feb 18. "We are looking at embarking on another round of expansion and we will be needing some money. We hope to do something in this arena as soon as possible."
The report added that the authority planned to sell as much as US$1 billion of Islamic bonds with help from Citigroup Inc and HSBC Holdings Plc in Hong Kong's first sale of the securities, known as sukuk, the South China Morning Post reported in June.
Indonesia’s domestic sukuk to have 5-yr maturity or more
Indonesia's regular domestic sukuk issues will have a maturity of five years or more, the finance ministry said in a statement on Feb 18. The government expects to finance its higher budget deficit this year by capitalising on demand for Islamic compliant products in the world's most populous Muslim nation, reports Reuters.
The finance ministry has proposed a budget revision to the parliament, including a revision of the budget deficit to 2.6% of gross domestic product from 1%, allowing more room for spending needed to spur economic growth, the Jakarta report said.
"The regular, Shariah compliant bond will be issued with a fixed or floating rate, ijarah saleand-leaseback, with a medium to long term maturity, more than five years," the ministry said. "The denomination may be in rupiah or foreign currency". Indonesia has a huge domestic market for sharia products.
The finance ministry has proposed a budget revision to the parliament, including a revision of the budget deficit to 2.6% of gross domestic product from 1%, allowing more room for spending needed to spur economic growth, the Jakarta report said.
"The regular, Shariah compliant bond will be issued with a fixed or floating rate, ijarah saleand-leaseback, with a medium to long term maturity, more than five years," the ministry said. "The denomination may be in rupiah or foreign currency". Indonesia has a huge domestic market for sharia products.
Wednesday, February 18, 2009
US, Middle East investors keen on distressed assets
By Habhajan Singh
A Malaysian Shariah advisory body is advising a number of fund managers from the United States and the Middle East who are keen on managing distressed assets in a manner compliant with Shariah — another new innovation being injected into the fast growing field of Islamic finance.
These funds managers, believed to have an estimated average fund size of US$500 million (RM1.83 billion), are keen to pick up distressed assets, following the economic downturn, to form funds that will be used to tap Islamic investors.
"We've been approached to structure products to enable the fund managers to launch their funds. "They want to structure Islamic funds for distressed assets," said Amanie Business Solutions Sdn Bhd CEO Dr Mohd Daud Bakar.
Managing distressed assets via a mechanism in line with Shariah law is one of the latest developments in Islamic finance. In recent years, Islamic finance has caught the attention of global investors and has expanded into providing sophisticated financial products like private equity, project finance, origination and issuance of sukuk, as well as fund, asset and wealth management products.
"Due to the global crisis, we now have many distressed assets. Hence, this is a 'timely' product. Its not a product of all seasons," said Mohd Daud, who also chairs the Shariah Advisory Council of Bank Negara Malaysia (BNM).
These funds are new because of the time frame, and the Islamic finance fraternity has never had the chance to manage distressed funds, Mohd Daud said on the sidelines of the one-day seminar
"Potentials and opportunties in Islamic asset management post-2008 global financial crisis", organised by Amanie in Kuala Lumpur yesterday.
"The target market for the funds are Shariah-compliant investors. Hence, you have to ensure that the assets that go into the fund are Shariah compliant. We have to avoid hotels and some warehouses," he said.
"We have to screen the assets for them, put in the right structures and help advise cash management of the fund.
"The bottomline is, the money will go into assets that are perceived to be undervalued, in hopes that they will go up in value," Mohd Daud said.
He added that no local fund manager has approached them for the Islamic method to handle distressed assets.
"Once structured, I believe this product can be applied in Malaysia as well if investors are keen and well versed with properties," he said.
Fund managers are already on the prowl for such assets. On Feb 17, Reuters reported that US private equity manager Lone Star Funds, which forged deeper into distressed real estate as the credit crunch took hold in 2008, was raising another US$20 billion for troubled assets.
Half of the new cash will be earmarked for commercial real estate, including commercial mortgage-backed securities while the other portion will be invested in financial institutions and other distressed assets, including residential mortgages and corporate debt.
Yesterday, Amanie also launched its stock screening solutions targeted at the Islamic investment and financial community.
(This story appeared in The Malaysian Reserve on Feb 19, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Thai Islamic bank cuts bond target by 17%
BANGKOK • Islamic Bank of Thailand, the nation’s only commercial lender complying with Muslim Shariah law, cut the target for its first sale of Islamic bonds by 17% as the global credit crisis erodes investor wealth. State-owned Islamic Bank aims to sell US$500 million (RM1.8 billion) of so-called sukuk in the third quarter of this year in a bid to "pioneer this market for more state borrowings in the future," president Dheerasak Suwannayos told reporters in Bangkok yesterday.
Dheerasak on Sept 24 said the bank aimed to sell US$600 million of seven-year sukuk to Middle Eastern investors with "lots of money" to fund Thai public infrastructure projects.
The Monetary Authority of Singapore in January announced a program that will allow it to sell sukuk based on demand from financial institutions. — Bloomberg
Dheerasak on Sept 24 said the bank aimed to sell US$600 million of seven-year sukuk to Middle Eastern investors with "lots of money" to fund Thai public infrastructure projects.
The Monetary Authority of Singapore in January announced a program that will allow it to sell sukuk based on demand from financial institutions. — Bloomberg
Top Kuwait Islamic bank mulls Asia acquisitions
KUALA LUMPUR, Feb 17 (Reuters) - The Asian subsidiary of Kuwait's top Islamic bank is considering regional acquisitions and business alliances to boost its size as it eyes huge untapped markets such as China and Japan.
Kuwait Finance House (Malaysia) Bhd may buy into regional Islamic lenders in its quest to fill a gap in the industry for large banks, Managing Director K. Salman Younis said, adding that the bank had not yet identified any specific targets.
"The Islamic finance industry is fragmented; there are too many small players in the market," Younis said in an interview. "What is missing in the banking environment in Malaysia is the presence of a mega Islamic bank. If you have the size, you will be able to do all kinds of transactions."
The bank, a wholly-owned arm of Kuwait Finance House, started operations in Malaysia in 2005. It recently received a $300 million capital boost from its parent, bringing its paid-up capital to $500 million.
Islamic banking has become increasingly mainstream, funding Japanese car factories and helping plug shortfalls in government finances worldwide, but the industry lacks large, well capitalised banks, especially outside the Middle East.
Last month, the General Council of Islamic Banks and Financial Institutions said the world's largest sharia lender, with paid-up capital of $11 billion, would be launched by June.
In 2007, Kuwait Finance House Malaysia bid for RHB, Malaysia's No.4 lender, but lost out to the state pension fund.
"We would want enough equity in a bank which gives us management control," Younis said. "Outside of Malaysia, if we were to go and acquire, we would want a bank with at least a 70-100 branch network."
In Asia, Kuwait Finance Malaysia sees Islamic banking opportunities in Hong Kong, Thailand, India and Indonesia. It is also still interested in China, despite regulatory changes which had scuttled its earlier bid to launch an Islamic bond there.
Kuwait Finance House had earlier invested $275 million in a real estate project in China. Younis said the company was also in talks with institutions in Japan "on having some strategic alliance to do some deals together inside and outside of Japan."
In Australia, the bank is working with several lenders to develop an Islamic interbank market in the country.
"That is the objective: to activate the Islamic banking market even before we open a full bank there," Younis said.
The global economic downturn has hit Kuwait Finance Malaysia's business, although certain industries such as food, healthcare and oil and gas remain resilient, he said, adding that there were no plans to cut jobs in Malaysia. Reuters
Kuwait Finance House (Malaysia) Bhd may buy into regional Islamic lenders in its quest to fill a gap in the industry for large banks, Managing Director K. Salman Younis said, adding that the bank had not yet identified any specific targets.
"The Islamic finance industry is fragmented; there are too many small players in the market," Younis said in an interview. "What is missing in the banking environment in Malaysia is the presence of a mega Islamic bank. If you have the size, you will be able to do all kinds of transactions."
The bank, a wholly-owned arm of Kuwait Finance House, started operations in Malaysia in 2005. It recently received a $300 million capital boost from its parent, bringing its paid-up capital to $500 million.
Islamic banking has become increasingly mainstream, funding Japanese car factories and helping plug shortfalls in government finances worldwide, but the industry lacks large, well capitalised banks, especially outside the Middle East.
Last month, the General Council of Islamic Banks and Financial Institutions said the world's largest sharia lender, with paid-up capital of $11 billion, would be launched by June.
In 2007, Kuwait Finance House Malaysia bid for RHB, Malaysia's No.4 lender, but lost out to the state pension fund.
"We would want enough equity in a bank which gives us management control," Younis said. "Outside of Malaysia, if we were to go and acquire, we would want a bank with at least a 70-100 branch network."
In Asia, Kuwait Finance Malaysia sees Islamic banking opportunities in Hong Kong, Thailand, India and Indonesia. It is also still interested in China, despite regulatory changes which had scuttled its earlier bid to launch an Islamic bond there.
Kuwait Finance House had earlier invested $275 million in a real estate project in China. Younis said the company was also in talks with institutions in Japan "on having some strategic alliance to do some deals together inside and outside of Japan."
In Australia, the bank is working with several lenders to develop an Islamic interbank market in the country.
"That is the objective: to activate the Islamic banking market even before we open a full bank there," Younis said.
The global economic downturn has hit Kuwait Finance Malaysia's business, although certain industries such as food, healthcare and oil and gas remain resilient, he said, adding that there were no plans to cut jobs in Malaysia. Reuters
Top Kuwait Islamic bank mulls Asia acquisitions
KUALA LUMPUR, Feb 17 (Reuters) - The Asian subsidiary of Kuwait's top Islamic bank is considering regional acquisitions and business alliances to boost its size as it eyes huge untapped markets such as China and Japan.
Kuwait Finance House (Malaysia) Bhd may buy into regional Islamic lenders in its quest to fill a gap in the industry for large banks, Managing Director K. Salman Younis said, adding that the bank had not yet identified any specific targets.
"The Islamic finance industry is fragmented; there are too many small players in the market," Younis said in an interview. "What is missing in the banking environment in Malaysia is the presence of a mega Islamic bank. If you have the size, you will be able to do all kinds of transactions."
The bank, a wholly-owned arm of Kuwait Finance House, started operations in Malaysia in 2005. It recently received a $300 million capital boost from its parent, bringing its paid-up capital to $500 million.
Islamic banking has become increasingly mainstream, funding Japanese car factories and helping plug shortfalls in government finances worldwide, but the industry lacks large, well capitalised banks, especially outside the Middle East.
Last month, the General Council of Islamic Banks and Financial Institutions said the world's largest sharia lender, with paid-up capital of $11 billion, would be launched by June.
In 2007, Kuwait Finance House Malaysia bid for RHB, Malaysia's No.4 lender, but lost out to the state pension fund.
"We would want enough equity in a bank which gives us management control," Younis said. "Outside of Malaysia, if we were to go and acquire, we would want a bank with at least a 70-100 branch network."
In Asia, Kuwait Finance Malaysia sees Islamic banking opportunities in Hong Kong, Thailand, India and Indonesia. It is also still interested in China, despite regulatory changes which had scuttled its earlier bid to launch an Islamic bond there.
Kuwait Finance House had earlier invested $275 million in a real estate project in China. Younis said the company was also in talks with institutions in Japan "on having some strategic alliance to do some deals together inside and outside of Japan."
In Australia, the bank is working with several lenders to develop an Islamic interbank market in the country.
"That is the objective: to activate the Islamic banking market even before we open a full bank there," Younis said.
The global economic downturn has hit Kuwait Finance Malaysia's business, although certain industries such as food, healthcare and oil and gas remain resilient, he said, adding that there were no plans to cut jobs in Malaysia. Reuters
Kuwait Finance House (Malaysia) Bhd may buy into regional Islamic lenders in its quest to fill a gap in the industry for large banks, Managing Director K. Salman Younis said, adding that the bank had not yet identified any specific targets.
"The Islamic finance industry is fragmented; there are too many small players in the market," Younis said in an interview. "What is missing in the banking environment in Malaysia is the presence of a mega Islamic bank. If you have the size, you will be able to do all kinds of transactions."
The bank, a wholly-owned arm of Kuwait Finance House, started operations in Malaysia in 2005. It recently received a $300 million capital boost from its parent, bringing its paid-up capital to $500 million.
Islamic banking has become increasingly mainstream, funding Japanese car factories and helping plug shortfalls in government finances worldwide, but the industry lacks large, well capitalised banks, especially outside the Middle East.
Last month, the General Council of Islamic Banks and Financial Institutions said the world's largest sharia lender, with paid-up capital of $11 billion, would be launched by June.
In 2007, Kuwait Finance House Malaysia bid for RHB, Malaysia's No.4 lender, but lost out to the state pension fund.
"We would want enough equity in a bank which gives us management control," Younis said. "Outside of Malaysia, if we were to go and acquire, we would want a bank with at least a 70-100 branch network."
In Asia, Kuwait Finance Malaysia sees Islamic banking opportunities in Hong Kong, Thailand, India and Indonesia. It is also still interested in China, despite regulatory changes which had scuttled its earlier bid to launch an Islamic bond there.
Kuwait Finance House had earlier invested $275 million in a real estate project in China. Younis said the company was also in talks with institutions in Japan "on having some strategic alliance to do some deals together inside and outside of Japan."
In Australia, the bank is working with several lenders to develop an Islamic interbank market in the country.
"That is the objective: to activate the Islamic banking market even before we open a full bank there," Younis said.
The global economic downturn has hit Kuwait Finance Malaysia's business, although certain industries such as food, healthcare and oil and gas remain resilient, he said, adding that there were no plans to cut jobs in Malaysia. Reuters
Maybank not in talks with Dubai on Bank Islam stake
KUALA LUMPUR/DUBAI, Feb 17 (Reuters) - Malaysia's top lender, Maybank, said it was not in talks to buy a Dubai investor's stake in Bank Islam, a deal that would have created the largest sharia bank in the Asia-Pacific region.
Earlier on Tuesday, several Islamic bankers in Malaysia had said that Maybank's Islamic subsidiary wanted to acquire a stake in Bank Islam, the country's second-largest sharia lender.
Dubai Islamic Investment Group, which is part of Dubai Group, was interested in selling its 40 percent stake in unlisted Bank Islam to Maybank Islamic, the banking sources added.
However, when asked to comment on the possible acquisition, a Maybank spokesman told Reuters the group was "currently not in talks with Dubai Group, as speculated".
Approached to comment on whether it was selling its stake, Dubai Group said that it "is a long-term strategic investor" in Bank Islam.
"We are proud to be associated with the bank's impressive turnaround over the past two years and are confident of its potential to grow further," the group said in a statement. "We believe that Bank Islam is well positioned to capitalise on the opportunities presented by the rapid growth of Islamic finance."
Maybank Islamic is the biggest Islamic bank in Malaysia, which has one of the world's most developed Islamic financial industries, thanks to a vast sharia bond market and a well established regulatory framework.
Talk of a Maybank Islamic-Bank Islam merger came as several other banks in the rapidly growing sector are also seeking acquisition opportunities to boost their size -- although a sharply slowing global economy could put a brake on expansion plans.
Kuwait Finance House Malaysia, a subsidiary of Kuwait's top Islamic bank, and Islamic Bank of Asia, which is backed by Singapore's DBS, have said they are on the lookout for acquisition opportunities in the region.
"This matter comes under the purview of the shareholders, and in view of this, I am in no position to give you any response," Bank Islam Managing Director Zukri Samat said in a statement when asked to comment on talk of the shareholding change.
Zukri had said in January that the lender, a subsidiary of Malaysian financial group BIMB Holdings Bhd, had identified a potential domestic merger or acquisition partner although it needed regulatory approval for talks.
Maybank Islamic acting chief executive Ibrahim Hassan declined to comment. (Reporting by Liau Y-Sing in Kuala Lumpur and John Irish in Dubai; Editing by David Chance and Simon Jessop) REUTERS
Earlier on Tuesday, several Islamic bankers in Malaysia had said that Maybank's Islamic subsidiary wanted to acquire a stake in Bank Islam, the country's second-largest sharia lender.
Dubai Islamic Investment Group, which is part of Dubai Group, was interested in selling its 40 percent stake in unlisted Bank Islam to Maybank Islamic, the banking sources added.
However, when asked to comment on the possible acquisition, a Maybank spokesman told Reuters the group was "currently not in talks with Dubai Group, as speculated".
Approached to comment on whether it was selling its stake, Dubai Group said that it "is a long-term strategic investor" in Bank Islam.
"We are proud to be associated with the bank's impressive turnaround over the past two years and are confident of its potential to grow further," the group said in a statement. "We believe that Bank Islam is well positioned to capitalise on the opportunities presented by the rapid growth of Islamic finance."
Maybank Islamic is the biggest Islamic bank in Malaysia, which has one of the world's most developed Islamic financial industries, thanks to a vast sharia bond market and a well established regulatory framework.
Talk of a Maybank Islamic-Bank Islam merger came as several other banks in the rapidly growing sector are also seeking acquisition opportunities to boost their size -- although a sharply slowing global economy could put a brake on expansion plans.
Kuwait Finance House Malaysia, a subsidiary of Kuwait's top Islamic bank, and Islamic Bank of Asia, which is backed by Singapore's DBS, have said they are on the lookout for acquisition opportunities in the region.
"This matter comes under the purview of the shareholders, and in view of this, I am in no position to give you any response," Bank Islam Managing Director Zukri Samat said in a statement when asked to comment on talk of the shareholding change.
Zukri had said in January that the lender, a subsidiary of Malaysian financial group BIMB Holdings Bhd, had identified a potential domestic merger or acquisition partner although it needed regulatory approval for talks.
Maybank Islamic acting chief executive Ibrahim Hassan declined to comment. (Reporting by Liau Y-Sing in Kuala Lumpur and John Irish in Dubai; Editing by David Chance and Simon Jessop) REUTERS
Norton Rose City trio set for Mideast switch
Norton Rose is set to relocate three of its London partners to the Middle East in a significant boost to the firm's finance practice in the region, reports LegalWeek.com.
The firm’s global head of Islamic finance, Neil D Miller, is set to transfer to the Dubai office, while corporate finance partner Alan Bainbridge and asset finance partner Emma Giddings will both move to Abu Dhabi. All three are expected to make the switch by the end of next month, it said.
United Arab Emirates managing partner Campbell Steedman said: "Notwithstanding the downturn in the international markets, from which the Middle East has not been isolated, we continue to have a strong, established business in the region, and look forward to the arrival of Bainbridge, Giddings and Miller — all of whom have strong existing practices in the region."
The firm’s global head of Islamic finance, Neil D Miller, is set to transfer to the Dubai office, while corporate finance partner Alan Bainbridge and asset finance partner Emma Giddings will both move to Abu Dhabi. All three are expected to make the switch by the end of next month, it said.
United Arab Emirates managing partner Campbell Steedman said: "Notwithstanding the downturn in the international markets, from which the Middle East has not been isolated, we continue to have a strong, established business in the region, and look forward to the arrival of Bainbridge, Giddings and Miller — all of whom have strong existing practices in the region."
Sunday, February 15, 2009
Alternative mode to Islamic home financing
By Dzuljastri Abdul Razak
A Canadian-based cooperative is looking at forging a working relationship with a Malaysian cooperative to develop the musharakah mutanaqisah (diminishing partnership) mode for home financing. The initiative, discussed at a recent conference organised by the IIUM Institute of Islamic Banking and Finance (IIiBF), could possibly bring forward another venue for Islamic finance financing via the coperative movement. Dzuljastri Abdul Razak, a senior academic fellow at International Islamic University Malaysia's (IIUM) Kulliyah of Economics and Management Sciences discusses the issue.
In October 2008, a seminar was organised jointly between IIUM Institute of Islamic Banking and Finance (IIiBF), Angkatan Koperasi Kebangsaan Malaysia Bhd (ANGKASA) and Ansar Co-Operative Corporation, Toronto, Canada, to study an alternative mode of Islamic home financing known as Musharakah Mutanaqisah or Diminishing Partnership from the cooperative perspective. In this concept, a member and cooperative are partners and purchased the house jointly. As joint owners, they share profit between them based on rental rates, which can be changed during the period of financing.
The member purchases the cooperative's share to own equity in the house. The international Shariah scholars are consensus on the permissibility of the Diminishing Partnership compared to the practice of Bai Bithaman Ajil (BBA), which is shun by the Middle Eastern Shariah scholars as not meeting the true spirit of Islam and promoting the well being of the society.
The current mode of home financing provided by financial institutions is based on debt financing using interest rate as its pricing mechanism. Even in the existing Islamic banking system the BBA or deferred installment sales home financing facility is based on debt although the bank charges a profit rate.
However, the current benchmark used is still based on interest rate. There are criticisms on the implementation of BBA home financing due to its high pricing, early settlement or when the customers defaulted. This is because the bank capitalises profit upfront in its selling price for the entire tenure, thus making its operations to be very rigid. Furthermore banks will only rebate its profit at its own discretion. Nonetheless, in conventional financing, banks do not capitalised interest rate upfront, which makes it cheaper than BBA home financing during period of low interest. Example of the operations of Diminishing Partnership in home financing for cooperatives.
Step 1: Member signs Sales and Purchase agreement with the developer to purchase the house. As an example, say the cost is RM200,000. Member pays the initial deposit (e.g. 10%) of the purchase price.
Step 2: The member then applies from the cooperative Musharakah Mutanaqisah home financing for the balance of 90% of the cost of house amounting RM180,000. The cooperative will approve the application and issue letter of offer for a joint purchase of house with the member from the developer and cooperative to pay the developer the balance of the purchase price.
Step 3: Member and cooperative signs "Musharakah Mutanaqisah joint ownership agreement" which contains the following details: (i) Cooperative will pay the balance of purchase price of RM 180,000; (ii) Member and cooperative agrees to purchase the house based on Musharakah Mutanaqisah.
Step 4: Cooperative will issue an undertaking to the developer to pay the balance (90% or RM180,000) to the developer. Cooperative will pay the developer progressively based on the the percentage of completion of the house.
Step 5: On completion of the property, the cooperative will rent the house to the member based on monthly rental e.g. RM1,000. The member will also make payment on the cost of purchasing the house by buying the 90% equity (share) owned by the bank e.g. RM289. Hence, the total monthly installment to be made by member will be RM1,289.
(This article appeared in The Malaysian Reserve on Feb 16, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Indian money managers warm up to Shariah banking as cash flow dries up
Money managers in India have begun launching Shariah-compliant funds, hoping to tap the country's large Muslim population, the world's third-biggest after Indonesia and Pakistan. The push toward the new funds comes in the wake of dwindling cash flows into more traditional investment channels, which have been hit by a stock market slump and slowing economic growth, reports Reuters.
In January, the report said the portfolio management services unit of HSBC's Indian fund arm started offering a Shariah product, and recently Mumbai-based Benchmark Asset Management launched India's first exchange-traded Shariah fund. "There is a need gap... for investment products that are Shariah-compliant," said Vikramaaditya, chief executive of HSBC Asset Management. Zafar Sareshwala, chief executive of Mumbai-based Islamic brokerage Parsoli, said Shariah-compliant funds could easily raise US$1 billion from millions of potential Muslim investors.
In January, the report said the portfolio management services unit of HSBC's Indian fund arm started offering a Shariah product, and recently Mumbai-based Benchmark Asset Management launched India's first exchange-traded Shariah fund. "There is a need gap... for investment products that are Shariah-compliant," said Vikramaaditya, chief executive of HSBC Asset Management. Zafar Sareshwala, chief executive of Mumbai-based Islamic brokerage Parsoli, said Shariah-compliant funds could easily raise US$1 billion from millions of potential Muslim investors.
Singapore Islamic bank seeks Asia, Gulf growth
The Islamic Bank of Asia, backed by South-East Asia's top lender, is on the hunt for acquisition opportunities in Malaysia and Indonesia to gain a foothold in the populous Muslim retail markets, reports Reuters.
Islamic banks are turning to retail consumer demand for growth as the explosive rise of the Shariah bond market slows markedly amid the global credit crisis. Rising demand for ethical investments and growing interest by non-Muslims in Islamic finance have also turned the retail business into a potential major growth market.
Singapore-based Islamic Bank of Asia is considering various options to enter Malaysia and Indonesia, including taking a stake in banks in these countries, said the lender's chief executive Vince Cook, the report said.
"Singapore presents a very good platform for wholesale and crossborder business and both Indonesia and Malaysia would complement that by giving us the ability to build a very sizeable retail business," Cook told Reuters in a telephone interview. "In Malaysia, sometime during this year we will certainly have decided exactly how we want to proceed. We've surveyed the existing institutions...there hasn't been one as of yet that sort of become clearly the preferred target."
Islamic banks are turning to retail consumer demand for growth as the explosive rise of the Shariah bond market slows markedly amid the global credit crisis. Rising demand for ethical investments and growing interest by non-Muslims in Islamic finance have also turned the retail business into a potential major growth market.
Singapore-based Islamic Bank of Asia is considering various options to enter Malaysia and Indonesia, including taking a stake in banks in these countries, said the lender's chief executive Vince Cook, the report said.
"Singapore presents a very good platform for wholesale and crossborder business and both Indonesia and Malaysia would complement that by giving us the ability to build a very sizeable retail business," Cook told Reuters in a telephone interview. "In Malaysia, sometime during this year we will certainly have decided exactly how we want to proceed. We've surveyed the existing institutions...there hasn't been one as of yet that sort of become clearly the preferred target."
OSK Investment tops MARC sukuk list
OSK Investment Bank Bhd came out tops in terms of value for Islamic bonds issued in 2008 by Malaysian Rating Corporation Bhd (MARC).
In the local rating agency's Lead Manager Table for 2008, OSK Investment lead the other players with an issue of RM800 million. It is followed by Maybank Investment Bank Bhd (RM720 million) and MIDF Amanah Investment Bank Bhd (RM615 million).
In terms of the number of Islamic issues, the rating agency said MIDF Amanah Investment Bank, Maybank Investment Bank and OCBC Bank Bhd achieved first, second and third placing, respectively.
On the whole for last year, MARC said it completed ratings of 43 bonds with a combined value of RM27.4 billion, of which 33 bonds with a total value of RM17 billion were issued, including Islamic papers worth RM3.15 billion.
In the local rating agency's Lead Manager Table for 2008, OSK Investment lead the other players with an issue of RM800 million. It is followed by Maybank Investment Bank Bhd (RM720 million) and MIDF Amanah Investment Bank Bhd (RM615 million).
In terms of the number of Islamic issues, the rating agency said MIDF Amanah Investment Bank, Maybank Investment Bank and OCBC Bank Bhd achieved first, second and third placing, respectively.
On the whole for last year, MARC said it completed ratings of 43 bonds with a combined value of RM27.4 billion, of which 33 bonds with a total value of RM17 billion were issued, including Islamic papers worth RM3.15 billion.
KFH Malaysia gets RM1b capital boost
Islamic bank Kuwait Finance House Malaysia said last Friday it has received a US$300 million (RM1.08 billion) capital injection from its parent. That leaves the bank, a subsidiary of Kuwait Finance House, Kuwait's biggest Islamic lender, with paid-up capital of US$500 million. "The strong liquidity and capital position enables us to look at and seriously evaluate various investment opportunities in Malaysia and within the region," KFH Malaysia managing director K Salman Younis said in a statement.
Bank Islam to market products in Indonesia
By JASON NG
Bank Islam Trust Company (Labuan) Ltd (BTL) is looking to market Shariah-compliant products to high net worth individuals in Indonesia, the most populous Muslim majority nation in the world.
A memorandum of understanding (MOU) was signed on Tuesday between BTL, a wholly-owned unit of Bank Islam Malaysia Bhd, and Bank Muamalat Indonesia, the first Islamic lender to work towards promotion of Islamic trust products in Indonesia.
"This MOU will enable BTL and Bank Muamalat to consult each other as we share our technical expertise and knowledge to form a platform and establish distribution channels as well as provide and exchange information," said BTL chairman Zahari Idris at the signing ceremony in Kuala Lumpur.
There are about three million customers of Bank Muamalat, of which 10% are classified as high net worth individuals, or prime customers, with savings above 1 billion rupiah (RM302,352), according to the Indonesian lender director Andi Buchari. The two Islamic lenders are expected to sign a formal agreement end of this year.
At the beginning, the two parties will form joint working committee with the aim of distributing the first product within the next six months, Zahari said. Among the range of Islamic trust products to be introduced are, such as Hibah, Gift, Waqf, will writing and estate administration services. "We won't rule out joint product development in the future," Zahari added.
Bank Muamalat, with assets exceeding 13 trillion rupiah (RM302 million ) as of December 2008, presently operates 230 branches nationwide in Indonesia and is represesented by another 3,800 outlets through its collaboration with Indonesian post offices.
The collaboration marks Bank Islam's first foray into Indonesia and will give both BTL and Bank Islam a brand presence in the 250 million population country immediately, Zahari said.
"For a start, it will give the Bank Islam group immediate access to the relatively untapped market for Shariah-based financial products and services," he added.
(This story appeared in The Malaysian Reserve on Feb 13, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Wednesday, February 11, 2009
Takaful Malaysia, HP in RM12m deal
By Habhajan Singh
Syarikat Takaful Malaysia Bhd (STMB) hopes its RM12 million contract with Hewlett-Packard (HP) for information technology (IT) infrastructure operation management services would address some of its operational woes that have been a drag to the 25-year old takaful operator.
HP, the world's largest technology company, would basically take charge of STMB's IT needs under a three-year contract to enhance its service deliveries and ensure faster go-to-market capabilities.
Prior to this, STMB group managing director Datuk Mohamed Hassan Md Kamil said the takaful operator had been facing numerous issues pertaining to IT, including down time and not being able to revert to a customer in time.
"I must admit we didn't do it very well," he told a press conference in Kuala Lumpur on Tuesday after the signing ceremony with HP Malaysia.
"Moving forward, we will not be faced with such issues," he said.
Present at the signing ceremony were HP Malaysia managing director TF Chong, STMB chairman Tan Sri Dr Hadenan Abdul Jalil and HP Malaysia country services sales director Balvinder Brar.
In a joint statement, STMB said the tie-up with HP is part of the takaful operator's strategy to establish itself as the country’s leading takaful operator and a key player in the local insurance scene.
It added that the contract will also enable STMB to focus on its core competency of delivering insurance services to exceed customer expectations and ultimately further improve business productivity and efficiency.
To ensure increased efficiency, Mohamed Hassan said STMB has put in a 'very specific service level agreements' in the contract with HP Malaysia.
The IT services contract seeks to effectively manage STMB's IT infrastructure operations which includes its helpdesk and desktop management and network and server management. The deal will also involve multi-vendor management for STMB which will help reduce its operating costs, the companies said.
Mohamed Hassan said the RM12 million investment intends to capitalise on HP's expertise in managing IT infrastructure and that this would enable STMB to align their IT cost with actual usage thus enhancing service levels to STMB's business and improving the utilisation of computing resources.
"Today's business success largely depends on leveraging IT. Streamlining the IT environment and making sure IT functions and business processes are carefully aligned to support business strategies will enable a company to increase flexibility and adaptability to market changes and challenges," said Chong.
BIMB Holdings Bhd (BIMB), which also controls Bank Islam Malaysia Bhd, owns a 67.89% stake in STMB which is listed on Bursa Malaysia. STMB holds 56% of PT Syarikat Takaful Indonesia.
(This story appeared in The Malaysian Reserve on Feb 12, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
MASB: Reporting standards for Islamic lenders in the pipeline
By Habhajan Singh
The finance and business community has till Monday to comment on a draft statement designed to underscore financial reporting for Islamic financial institutions, which among others, affirms that Malaysian Accounting Standards Board (MASB)-approved accounting standards shall apply to Shariah compliant financial transactions and events, unless there is a Shariah prohibition.
Another key statement in the draft is the pronouncement that financial reporting from an Islamic perspective may not necessarily be issued in the form of an approved accounting standard but may be issued in the form of other technical pronouncements.
The draft statement of principles entitled 'Financial Reporting from an Islamic Perspective' is a 95-page document containing the draft statement and five key appendices.
"It's akin to AAOIFI's statement. Once converted into a policy statement, it would underlie future MASB pronouncements on financial reporting from an Islamic perspective," said a banker from an Islamic bank.
AAOIFI, or the Accounting and Auditing Organisation for Islamic Financial Institutions, is a Bahrain-based standard setting body that is active in developing and promoting Islamic accounting, auditing, and Shariah standards.
To date, MASB has only released one set of accounting standards for Islamic financial institutions (IFIs), with a number of other standards still being drafted.
As the name suggests, the maiden 'MASB Standard i-1: Presentation of financial statements of Islamic financial institutions', lays the foundation for the presentation and disclosure of financial stataments of IFIs. In addition, it provides guidelines for the structure, and basis of the contents of financial statements to ensure conformity with Shariah requirements.
In the financial reporting from an Islamic Perspective draft statement, MASB said it has intended to "communicate to the public board's approach and deliberations on financial reporting from an Islamic perspective". MASB has posed six key questions in the draft, including whether there is a need for such documentation in the first place.
Another question is whether pronouncements on financial reporting from an Islamic perspective need to be in the form of approved accounting standards, or take the form of other technical pronouncements.
Other questions in the draft are as follows:
* Whether Shariah compliant financial transactions and events can be satisfactorily accounted for by MASB approved accounting standards?
* It may be possible that in rare instances, MASB approved accounting standards may not satisfactorily account for a particular Shariah compliant financial transaction or event.
* Are you aware of any such instances? What would they be?
* Do you agree that pronouncements on financial reporting from an Islamic perspective should be applicable to entities under the purview of the Financial Reporting Act 1997 [amended 2004], and not just Islamic financial institutions or 'Islamic entities'?
The appendices in the 95-page document provide an overview of financial reporting from an Islamic perspective, an assessment of assertions in the samework, an explanation of issues in the development of the statement, a commentary on substance over form from a Shariah perspective, and a summary by the Shariah Advisory Council of Bank Negara Malaysia (BNM).
(This story appeared in The Malaysian Reserve on Feb 11, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
The finance and business community has till Monday to comment on a draft statement designed to underscore financial reporting for Islamic financial institutions, which among others, affirms that Malaysian Accounting Standards Board (MASB)-approved accounting standards shall apply to Shariah compliant financial transactions and events, unless there is a Shariah prohibition.
Another key statement in the draft is the pronouncement that financial reporting from an Islamic perspective may not necessarily be issued in the form of an approved accounting standard but may be issued in the form of other technical pronouncements.
The draft statement of principles entitled 'Financial Reporting from an Islamic Perspective' is a 95-page document containing the draft statement and five key appendices.
"It's akin to AAOIFI's statement. Once converted into a policy statement, it would underlie future MASB pronouncements on financial reporting from an Islamic perspective," said a banker from an Islamic bank.
AAOIFI, or the Accounting and Auditing Organisation for Islamic Financial Institutions, is a Bahrain-based standard setting body that is active in developing and promoting Islamic accounting, auditing, and Shariah standards.
To date, MASB has only released one set of accounting standards for Islamic financial institutions (IFIs), with a number of other standards still being drafted.
As the name suggests, the maiden 'MASB Standard i-1: Presentation of financial statements of Islamic financial institutions', lays the foundation for the presentation and disclosure of financial stataments of IFIs. In addition, it provides guidelines for the structure, and basis of the contents of financial statements to ensure conformity with Shariah requirements.
In the financial reporting from an Islamic Perspective draft statement, MASB said it has intended to "communicate to the public board's approach and deliberations on financial reporting from an Islamic perspective". MASB has posed six key questions in the draft, including whether there is a need for such documentation in the first place.
Another question is whether pronouncements on financial reporting from an Islamic perspective need to be in the form of approved accounting standards, or take the form of other technical pronouncements.
Other questions in the draft are as follows:
* Whether Shariah compliant financial transactions and events can be satisfactorily accounted for by MASB approved accounting standards?
* It may be possible that in rare instances, MASB approved accounting standards may not satisfactorily account for a particular Shariah compliant financial transaction or event.
* Are you aware of any such instances? What would they be?
* Do you agree that pronouncements on financial reporting from an Islamic perspective should be applicable to entities under the purview of the Financial Reporting Act 1997 [amended 2004], and not just Islamic financial institutions or 'Islamic entities'?
The appendices in the 95-page document provide an overview of financial reporting from an Islamic perspective, an assessment of assertions in the samework, an explanation of issues in the development of the statement, a commentary on substance over form from a Shariah perspective, and a summary by the Shariah Advisory Council of Bank Negara Malaysia (BNM).
(This story appeared in The Malaysian Reserve on Feb 11, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Citibank: The Islamic alternative to investment
By Alfean Hardy
The twin calamities of the global financial crisis and the Bernie Madoff scandal, where even respected names like HSBC, the Royal Bank of Scotland and BNP Paribas got burnt, have made the idea of investments more of a nightmare than a dream. There is a possible solution, though, for investors looking for a safe haven to park their ringgit, reniminbi, roubles and US dollars — Shariah-compliant structured investment products.
According to Citi’s Asia Pacific markets, regional Islamic structuring head Ahmad Shahriman Mohd Shariff, investor protection is an integral part of any Islamic investment product.
Speaking to The Malaysian Reserve in Kuala Lumpur last week, Ahmad Shahriman said the Shariah guidelines on what were investable were specifically clear.
"No interest, no elements of speculation or game of chance, no investments in what are deemed harmful to man, and no uncertainty, with all contracts made clear and people must know what they are getting into," he said.
"The bottomline is Islamic finance is focused on investing in activities that are deemed beneficial to man while at the same time protecting one’s wealth," he added. Ahmad Shahriman said Islamic products, and Islamic structured products in particular, carry with them a lot of built-in advantages.
"One of the key advantages of Shariah-compliant products is an extra layer of oversight, the Shariah oversight, which is beneficial regardless of whether you're Muslim or non-Muslim," he said.
"Among the key principles of Shariah are the avoidance of speculation, excessive risk and uncertainty. The Shariah oversight will ensure that these principles are adhered to in the transaction that you're entering into, and must be reflective in how the products are sold and documented.
"So, the banks have to prove to the Shariah scholars that, in any Islamic product offered, all the principles of Shariah are maintained.
"Investors effectively have an extra set of eyes looking at the product in order to make sure they're protected," he added.
Ahmad Shahriman said another advantage was the avoidance of excessive risk. "This is reflected in the avoidance of leverage.
In investments containing elements of leverage, a worst case scenario could result in investors potentially losing all or even more than the money they've invested," he said.
"(In Shariah-compliant products) you have this set of oversight that reduces the risks in the products. "Is it perfect? No, I'm not saying it's the solution to all the problems that we're having in finance, but, if you're talking about advantages, it's always good to have a different set of people looking at protecting your interests," he added.
Citibank, said Ahmad Shahriman, has had a commitment to Islamic finance that has spanned about three decades and its Malaysian operations have become an important part of the group's global Islamic finance strategy in going forward. High net worth individuals (HNWI) looking for Islamic structured investment products, he said, stood to benefit from the group's total experience and exposure to the Islamic finance sector.
"We can offer them tailored solutions," he said. "Unlike the retail market, in the high net worth market, the clients are sophisticated enough to know what they want."
"They want from us things that will help them make an investment view and then how to execute that investment view. We have the product platforms for them to execute their view in a Shariah-compliant manner.
"We can support you with the research, the investment ideas and tell you what's happening in the market and. Once you've decided what you want to do, we can help structure and execute it for you," he added.
Ahmad Shahriman said HNWIs looking to become clients with Citibank had an advantage in the bank's need to protect its name when it comes to being Shariah-compliant.
"So, we highlight our transparency and Shariah-compliance to the point where we go the extra mile to ensure our Shariah-compliance," he said. "Also, for any products that we do, while the end client may be dealing with our team in Malaysia, they're actually getting assistance from people working in Singapore, Hong Kong, Dubai and London," he added.
(This story appeared in The Malaysian Reserve on Feb 11, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Thursday, February 5, 2009
London summit to discuss Islamic liquidity for Europe
By Habhajan Singh
The possibility of providing European corporate institutions with Islamic liquidity is one of the topics to be discussed at the two day 8th Annual Islamic Finance Summit in London beginning Feb 24.
The seminar will discuss whether Islamic liquidity for European corporate institutions of the possible 'next big driver' is merely wishful thinking.
The topic would attract the attention of Islamic financial institutions, including players from the Middle East and Malaysia, as the sector is still thriving in Europe, with a number of major European banks perceiving it as a profitable opportunity to generate new business.
London is already home to a number of Islamic banks, including the European Islamic Investment Bank, Islamic Bank of Britain and Gatehouse Bank.
Qatar Islamic Bank general manager from investment banking and development group Jean-Marc Riegel will speak on the topic of 'Financing European acquisitions with Islamic funding — a short-term phenomenon or a long term structural shift?'.
Some of the other issues to be deliberated are funding strategies of GCC private equity houses in view of the credit crunch, a practical assesment of sukuk deal structures and fatwas following the AAOIFI ruling, and liquidifying Islamic money markets and finding viable alternatives to commodity murabaha.
One of the key speakers at the seminar is David Testa, chief executive officer of Gatehouse Bank which was established in May 2007 and received authorisation from the Financial Services Authority (FSA) to act as a Shariahcompliant wholesale investment bank in the United Kingdom in April 2008. Gatehouse is a subsidiary of Kuwaiti investment company The Securities House KSCC.
Some of the other industry executives expected to take part in the two day seminar are Saad Zaman, deputy CEO of Dubai Islamic Bank subsidiary DIB Capital and HSBC Amanah global CEO Mukhtar Hussain.
Among the Malaysian industry players expected to take part are CIMB Islamic Bank CEO Badlisyah Abdul Ghani and Fajr Capital managing director Rafe Haneef.
Bank Negara Malaysia (BNM) governor Tan Sri Dr Zeti Akhtar Aziz is scheduled to touch on the response to the global credit crunch and the future role of Islamic finance.
Central Bank of Lebanon first vice governor and chairman of Islamic banking Dr Ahmad Jachi will deliberate on the regulation and supervision of Islamic banking and finance in Lebanon.
Central Bank of Bahrain executive director for banking supervision Khalid Hamad will look at issues with regards to the road map to Basel II.
On the second day, the annual open fatwa and Shariah audience discussion will involve a number of Shariah scholars, including Sheikh Hussain Hamed Hassan, Dr Mohamed A Elgari, Sheikh Nizam Yaquby, Dr Muhammad Imran Ashraf Usmani, Sheikh Esam M Ishaq and Mufti Abdul Kadir Barkatulla.
Malaysians scholars at the forum include International Shariah Research Academy for Islamic Finance (ISRA) executive director Dr Mohamad Akram Laldin, International Institute of Islamic Finance's (IIIF) Dr Mohd Daud Bakar and Maybank Investment Bank shariah scholar Dr Aznan Hasan.
(This story appeared in The Malaysian Reserve on Feb 6, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Pacific Mutual launches new Islamic fund
Pacific Mutual Fund Bhd, the fund management arm of PacificMas Bhd, today launched the Pacific Protected Islamic Cash Fund.
In a statement in Kuala Lumpur yesterday [Feb 5, 2009], it said the fund aimed to provide capital protection as well as constant, steady returns comparable to Shariah based deposits with licensed financial institutions.
"The investment is ideal for investors with a conservative risk profile and who are seeking regular and decent returns from a relatively safe investment which complies with Shariah requirements," it said.
Pacific Mutual's chief executive officer, Michael Auyeung, said corporate investors could benefit from the advantages of principal preservation, regular income and easy access to their cash whenever they needed them.
"Corporate investors can also benefit from the tax exemption on returns from investments in Islamic money market instrument via the fund," he said.
Auyeung said the fund aimed to generate regular income by investing predominantly in a highly conservative portfolio of shortterm Shariah based deposits and Islamic money market instruments issued by licensed financial institutions that carry a minimum credit rating of 'A2' by RAM Rating Services Bhd or an equivalent local or foreign rating agency.
The fund is open only to individuals with total net personal assets exceeding RM3 million, corporations exceeding RM10 million, unit trust schemes and pension funds. — Bernama
(This story appeared in The Malaysian Reserve on Feb 6, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
In a statement in Kuala Lumpur yesterday [Feb 5, 2009], it said the fund aimed to provide capital protection as well as constant, steady returns comparable to Shariah based deposits with licensed financial institutions.
"The investment is ideal for investors with a conservative risk profile and who are seeking regular and decent returns from a relatively safe investment which complies with Shariah requirements," it said.
Pacific Mutual's chief executive officer, Michael Auyeung, said corporate investors could benefit from the advantages of principal preservation, regular income and easy access to their cash whenever they needed them.
"Corporate investors can also benefit from the tax exemption on returns from investments in Islamic money market instrument via the fund," he said.
Auyeung said the fund aimed to generate regular income by investing predominantly in a highly conservative portfolio of shortterm Shariah based deposits and Islamic money market instruments issued by licensed financial institutions that carry a minimum credit rating of 'A2' by RAM Rating Services Bhd or an equivalent local or foreign rating agency.
The fund is open only to individuals with total net personal assets exceeding RM3 million, corporations exceeding RM10 million, unit trust schemes and pension funds. — Bernama
(This story appeared in The Malaysian Reserve on Feb 6, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Wednesday, February 4, 2009
Asian Finance Bank says no let-up in lending
By Isabele Francis
Asian Finance Bank Bhd (AFB) is not slowing down on its lending to companies here, aiming to double its loan size to about RM500 million by year-end from RM250 million currently.
AFB CEO Datuk Mohamed Azahari Kamil said it is building a 'good' loan portfolio for infrastructure and oil and gas development in the Middle East, especially in Abu Dhabi and Qatar.
He said the bank had already made a headstart with active talks initiated with four to five Malaysian publiclisted companies to fund their businesses in the Middle East
"My credit meetings are held every week (to appraise loans). Its important for us to be responsible lenders in this current market," he told reporters after the signing of a RM8.8 million financing facility with AWC Facility Solutions Bhd's 51% owned Nexaldes Sdn Bhd in Subang Jaya on Tuesday.
Azahari said the companies have appointed AFB as their financial advisor, and the parties are still finalising details on the size and structure of the financing. He said the companies are mostly from the oil and gas and infrastructure sectors that are planning to undertake projects in Abu Dhabi and Qatar. "The economy is still robust given the right sector.
AFB is looking at their counter parties that are credible," he added. Azahari said it is also important for these local companies to identify synergistic partners based in the Gulf countries.
"There is good potential growth and success if its done with local partners."
On a separate matter, he said AFB is also looking to scale down its proposed aviation fund to RM500 million from RM1 billion initially due to 'difficult valuations' and volatile yields against the backdrop of an uncertain economic condition.
Asian Finance Bank Bhd (AFB) is not slowing down on its lending to companies here, aiming to double its loan size to about RM500 million by year-end from RM250 million currently.
AFB CEO Datuk Mohamed Azahari Kamil said it is building a 'good' loan portfolio for infrastructure and oil and gas development in the Middle East, especially in Abu Dhabi and Qatar.
He said the bank had already made a headstart with active talks initiated with four to five Malaysian publiclisted companies to fund their businesses in the Middle East
"My credit meetings are held every week (to appraise loans). Its important for us to be responsible lenders in this current market," he told reporters after the signing of a RM8.8 million financing facility with AWC Facility Solutions Bhd's 51% owned Nexaldes Sdn Bhd in Subang Jaya on Tuesday.
Azahari said the companies have appointed AFB as their financial advisor, and the parties are still finalising details on the size and structure of the financing. He said the companies are mostly from the oil and gas and infrastructure sectors that are planning to undertake projects in Abu Dhabi and Qatar. "The economy is still robust given the right sector.
AFB is looking at their counter parties that are credible," he added. Azahari said it is also important for these local companies to identify synergistic partners based in the Gulf countries.
"There is good potential growth and success if its done with local partners."
On a separate matter, he said AFB is also looking to scale down its proposed aviation fund to RM500 million from RM1 billion initially due to 'difficult valuations' and volatile yields against the backdrop of an uncertain economic condition.
PLUS plans RM1b sukuk sales to pay debt, fund projects
PLUS Expressways Bhd, Malaysia's largest toll-road operator, plans to sell RM1 billion of Islamic bonds to help repay maturing debt and finance expansion projects, reports Bloomberg. Bank Islam Malaysia Bhd. and CIMB Islamic Bank Bhd. will help sell the Shariah- compl iant bonds, known as sukuk, said PLUS managing director Noorizah Abd Hamid, adding that sukuk will have maturities of at least five years.
The company aims to raise RM350 million "in the coming months" to refinance a loan maturing in June and to borrow another RM200 million in the second half of the year to fund a road project in Indonesia, she told the newswire.
The report added that PLUS favors Islamic over conventional debt so it can remain in the Dow Jones Islamic Index of Shariah — compliant companies.
The company aims to raise RM350 million "in the coming months" to refinance a loan maturing in June and to borrow another RM200 million in the second half of the year to fund a road project in Indonesia, she told the newswire.
The report added that PLUS favors Islamic over conventional debt so it can remain in the Dow Jones Islamic Index of Shariah — compliant companies.
Dubai Islamic Bank teams up with Hawkamah
By Habhajan Singh
Dubai Islamic Bank (DIB), the world's first Islamic bank, recently signed a "founding member's" agreement with a regional corporate governance outfit to show its commitment towards strengthening its corporate governance standards.
Hawkamah Institute, an autonomous association of corporate governance practitioners, regulators and institutions, is an international association with a primary mandate to develop corporate governance best practices in the Middle East region.
Launched in February 2006, Hawkamah is working to create a system of governance that promotes institution building, corporate sector reform, good governance, market development and increased investment and growth across the region.
DIB's corporate governance standards are clear, consistent and fully in line with international best practice, said a statement released by the Dubai-based bank which also operates in Pakistan and Sudan.
"Corporate governance plays a critical role in the development of modern businesses as it enhances investor confidence and helps in developing the capital markets of the region," said Hawkamah executive director Dr Nasser Saidi (left, in picture) in the statement.
He said that Islamic finance has experienced unprecedented growth so far, but the enactment and implementation of well defined corporate governance structures is essential if trust and confidence is to be maintained.
DIB chairman Mohammed Ibrahim Al Shaibani said Islamic financial institutions (IFIs), by their very nature, have a responsibility to enact precautionary and prudential measures that are specific to their unique structure.
In the statement, DIB chief executive officer Abdulla Hamli said the recent growth within the Islamic banking sector has been unprecedented, and the players are now seeking new and innovative ways to implement the necessary checks and balances to maintain customer, stakeholder and shareholder confidence.
"The Shariah Supervisory Board has become an indispensable aspect of our corporate governance and will be well paired with the objectives of Hawkamah, which aims to ensure these standards are being met to better protect all those associated with the bank," he said.
Conventional governance standards seek to address the separation of ownership and management by ensuring that actions of the management are kept inline with the interests of shareholders and stakeholders, the bank said.
(This story appeared in The Malaysian Reserve on Feb 4, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
MAA Takaful eyes RM30m annual sales
By Lee Cherng Wee
MAA Takaful Bhd is aiming to achieve RM30 million in annual sales with its newly launched SmartMedic 100 medical insurance policy.
"We are targeting 2,000 policies a month. We already have 1,600 policies submitted in the first 10 days after the launch," MAA Takaful's head of business development Saiful Nizam Esahak told The Malaysian Reserve.
Launched a month ago, SmartMedic 100 is the first basic medical plan in the market that hands out RM5,000 for funeral expenses for all causes of death.
"Another difference is the higher hospital room and board benefit at a minimum of RM150 per day for up to 200 days a year. We are giving this due to the rising hospital fees and medical expenses," said Saiful.
Under the lowest plan, SmartMedic 100 provides a minimum coverage of RM50,000 a year with a lifetime limit of RM150,000. The plan requires male policy holders aged between six and 15 years to pay an annual premium of RM387. "The policy expires when the policy holder is 80 years old. As a takaful company, we have a surplus sharing of 50:50 upon expiry, if there is any surplus left," said Saiful.
MAA Takaful's panel of hospitals includes 78 private hospitals and all government hospitals. It also engages a third party managed care organisation to handle hospital admission, issue medical cards and manage claims on behalf of policyholders.
Currently, MAA Takaful has 11,000 registered agents but only 5,000 are active. Saiful hopes the new product will activate the remaining 6,000 agents and help recruit new ones.
Saiful believes that the current economic downturn will benefit SmartMedic 100 as customers switch to protectionbased insurance.
"Due to the economic slowdown, people will refrain from buying investment type of policies and go back to the protection type," he said.
(This story appeared in The Malaysian Reserve on Feb 3, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
MAA Takaful Bhd is aiming to achieve RM30 million in annual sales with its newly launched SmartMedic 100 medical insurance policy.
"We are targeting 2,000 policies a month. We already have 1,600 policies submitted in the first 10 days after the launch," MAA Takaful's head of business development Saiful Nizam Esahak told The Malaysian Reserve.
Launched a month ago, SmartMedic 100 is the first basic medical plan in the market that hands out RM5,000 for funeral expenses for all causes of death.
"Another difference is the higher hospital room and board benefit at a minimum of RM150 per day for up to 200 days a year. We are giving this due to the rising hospital fees and medical expenses," said Saiful.
Under the lowest plan, SmartMedic 100 provides a minimum coverage of RM50,000 a year with a lifetime limit of RM150,000. The plan requires male policy holders aged between six and 15 years to pay an annual premium of RM387. "The policy expires when the policy holder is 80 years old. As a takaful company, we have a surplus sharing of 50:50 upon expiry, if there is any surplus left," said Saiful.
MAA Takaful's panel of hospitals includes 78 private hospitals and all government hospitals. It also engages a third party managed care organisation to handle hospital admission, issue medical cards and manage claims on behalf of policyholders.
Currently, MAA Takaful has 11,000 registered agents but only 5,000 are active. Saiful hopes the new product will activate the remaining 6,000 agents and help recruit new ones.
Saiful believes that the current economic downturn will benefit SmartMedic 100 as customers switch to protectionbased insurance.
"Due to the economic slowdown, people will refrain from buying investment type of policies and go back to the protection type," he said.
(This story appeared in The Malaysian Reserve on Feb 3, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
Monday, February 2, 2009
Al Rajhi Malaysia to raise capital to RM1b
By Habhajan Singh
Al Rajhi Banking & Investment Corporation (Malaysia) Bhd (Al Rajhi Malaysia), the first overseas subsidiary of Saudi Arabia's largest bank, has increased its paid up capital to RM1 billion from RM600 million, in a move to continue with its expansion plans.
Al Rajhi Malaysia CEO Ahmed Rehman said Saudi regulators had last week given the green light to its parent bank to inject an additional RM400 million in capital into its Malaysian operation, which is now 19 branchstrong.
"As we are growing aggresively, we need the capital to support that balance sheet," Ahmed said. He added that RM1 billion in capital for an Islamic bank is "pretty decent" in this region.
With the latest capital injection, Al Rajhi Malaysia will be able to maintain its growth path after launching a flurry of branch expansions and an aggressive advert ising campaign when it began operations here in 2006.
"We have built up a minimum scale of the balance sheet. It has grown fairly aggresively," Ahmed added.
For the financial year ended Dec 31, 2007, Al Rajhi Malaysia's assets totalled RM2.5 billion, up from RM291 million the year before.
As at the end of the first three months of 2008, the bank's total assets stood at RM3.8 billion.
"Our 2008 numbers are not out yet, but you can expect us to double that figure (of total assets). It has gone fairly geomatrically in terms of growth in a short period of time.
"It is important to grow geomatrically as you need a certain amount of scale to be able to conduct your business and have a certain amount of reach. We have arrived at that," Ahmed said.
The bank's total asset size still has much catching up to do when compared to Maybank Islamic Bhd. Maybank Islamic, the nation's largest Islamic bank, was set-up in January last year, but had begun operations via its Islamic window since the 1990s.
For the financial year ended June 30, 2008, the Malayan Banking Bhd subsidiary had RM26.9 billion in total assets.
For the first three quarters ended Sept 30, 2008, Al Rajhi Malaysia reported a net loss of RM52.69 million but had already posted a total net income of RM37.04 million.
(This story appeared in The Malaysian Reserve on Feb 3, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)
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