Exploring opportunities in wake of credit crunch

CAPTION: Get the inside scoop from (clockwise from top left) Dheerasak, Badlisyah, Issam and Mohamad Nedal at the 5th International Islamic Finance Forum 2009 Asia

by Habhajan Singh
Opportunities for Islamic finance in the wake of the credit crunch and managing distressed assets will be among the topics discussed at an Islamic finance forum later this month that will see the presence of the Accounting and Auditing Organisation for Islamic Financial Institutions's (AAOIFI) key man.
AAOIFI secretary general Dr Mohamad Nedal Alchaar is scheduled to present a keynote address on the opportunities for Islamic finance in the wake of the credit crunch at the 5th International Islamic Finance Forum 2009 Asia that begins on June 29.
Among others, he will be discussing the impact of the financial crisis on Islamic finance and synergies between Islamic finance and conventional finance. He will also address the need to strengthen the Islamic finance infrastructure and systems.
AAOIFI is the Bahrain-based standard setting body active in developing and promoting Islamic accounting, auditing, and Shariah standards. It plays a crucial role in coming out with standards for Islamic financial institutions globally, though not all regulators around the world implement its pronoucements.
The two-day forum will also present an international case study on distressed assets or sellers for Islamic investments.
Rasameel Structured Finance vice chairman and chief executive officer Issam Zaid Al-Tawari will guide participants through the distressed asset market to search for potential for investors and to see if the assets can be managed in a Shariah-compliant manner. He will also be looking at the challenges and risk appetites faced when structuring Islamic funds for distressed assets. Headquartered in Kuwait, Rasameel's primary focus is providing a Shariah-compliant portfolio of predictable cashflow generating assets and securities in the form of asset securitisation to its clients invested in structured Islamic investment products.
On Feb 19, The Malaysian Reserve had reported that Malaysian Shariah advisory body Amanie Business Solutions Sdn Bhd, led by Dr Mohd Daud Bakar, was 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. This is another new innovation being injected into the fast growing field of Islamic finance.
According to the report, these fund managers, believed to have an estimated average fund size of US$500 million (RM1.83 billion), were keen on picking 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," Dr Mohd Daud was reported as saying.
Dr Mohd Daud, a Shariah scholar and chairman of Bank Negara Malaysia's Shariah Advisory Council, is also scheduled to speak on the risk return potential of derivatives and hedge funds in the Islamic finance market.
Other panelists for the event are CIMB Islamic Bank Bhd executive director & CEO Badlisyah Abdul Ghani, Deutsche Bank global head of Islamic distribution Salman Ashraf and Islamic Bank of Thailand (IBT) president Dheerasak Suwannayos, who will speak on the Thai experience of operating in a market with minimal Islamic finance infrastructure.
Neighbouring Thailand has made a number of moves to open the doors to Islamic finance, including setting up the IBT in 2003 with the Thai Finance Ministry as the largest shareholder with a 48.54% stake in the bank.
In February, it was also reported that Thailand was planning to ease taxation rules to support the development of an Islamic bond market that enables local companies and banks to tap new investors.
In the same month, the Stock Exchange of Thailand (SET) had announced plans to launch a Shariah 50 index early in the next quarter before going on a roadshow to the Middle East in the second half.
The index would combine 50 listed stocks, making up 47% of the SET's market capitalisation, that are compatible with Islamic law, according to media reports.

(This story appeared in The Malaysian Reserve on June 8, 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)