Two Islamic banks looking to hire CEOs

By Habhajan Singh
At least one local Islamic bank and a foreign bank's Islamic subsidiary is headhunting for new heads while another Islamic bank had recently axed its former acting chief executive officer.

Maybank Islamic Bhd and HSBC Amanah Malaysia Bhd are looking for new top guns while it is understood that Kuwait Finance House (Malaysia) Bhd had just recently axed a top official who had been on a long suspension.

Maybank Islamic, the Islamic arm of Malayan Banking Bhd which badges itself as the largest Islamic banking player in Asia-Pacific, is already headhunting for a new CEO to replace Ibrahim Hassan who will be retiring soon, say industry sources.

At HSBC Amanah Malaysia, the Islamic subsidiary of the global banking group should also be on the lookout for a new head as its executive director and CEO, Musa Abdul Malek had opted for retirement, though it could not be confirmed if they are looking outside the group.

"With the dearth of talent, it would be interesting to see how they fill these and other vacancies at the Islamic bank," said one Islamic bank official, who also highlighted the impending entry of the Islamic megabanks.

At KFH Malaysia, it is understood the Kuwaiti-owned Islamic bank had recently axed its former deputy CEO, Ab Jabbar Ab Rahman, who was also at the point the bank's acting CEO, after a long suspension and a domestic inquiry. It is understood that another KFH Malaysia senior bank official had also been axed.

However, Ab Jabbar could not be reached to confirm the latest events at the Islamic bank which had been mired with allegations of mismanagement. At Press time, it could not be confirmed if Ab Jabbar and the other top official were terminated or simply asked to leave after their contracts lapsed.

On March 29, The Malaysian Reserve had reported KFH Malaysia's then new boss Jamelah Jamaluddin, who came on board just under two months earlier, had directed more than a dozen staff to go on leave pending internal investigations into "transactions and contractual arrangements that have been undertaken over the years".

In an email response back then, Jamelah said the bank was "taking a proactive approach and conducting a due diligence status audit, in light of the different and more challenging economic environment". She added: "This is aimed at obtaining an accurate picture of certain transactions and contractual arrangements that have been undertaken over the years. Some employees have taken leave to help facilitate the exercise and the bank will be guided by pragmatism and act accordingly as per the recommendations of the audit team conducting the due diligence status audit."

At KFH Malaysia, though, hiring is not the order of the day for the moment as the Islamic bank tries to recover lost ground after its recent debacle.

In November 2009, Rating Agency Malaysia had given it a negative outlook on the financial institution ratings due to the deterioration in the financial metrics of both the bank and its parents.

On Aug 3, Malaysian Rating Corp Bhd affirmed KFH Malaysia's long- and short-term financial institution ratings at AA+/MARC-1 while outlook on KFH's long-term rating was downgraded to negative from developing. Accordingly, it said KFH Malaysia's long-term rating outlook has been revised to negative from developing to reflect that of its parent.

(This story appeared in The Malaysian Reserve on 23 August 2010. 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)

Global sukuk issuance to reach US$30b in 2010

By Muin Abdul Majid

DUBAI, Aug 23 (Bernama) -- The global sukuk issuance is expected to reach US$30 billion in 2010, according to a report prepared by Kuwait Finance House (KFH) Research Ltd.
It said the 2010 sukuk market would be driven by the recovery in global economic activity, record low interest rates, continued sovereign fund raising to support economic growth as well as revival of private sector projects.

"More sovereign and corporate issuers are anticipated in 2010, which include potential debuts from Japan, Thailand, Turkey, United Kingdom and Russia," it noted.

According to the study, sovereign sukuk issuances in the first half of 2010 were expected to help revive the global sukuk market as they provided the necessary benchmark pricing for the private sector to gauge investor appetite this year.
The report said over the years, the sukuk market had grown to reach approximately US$100 billion and contributed 12 % of the total global Islamic finance assets in 2009.

KFH Research said in the first half of 2010, total sukuk issued globally was valued at US$16.5 billion, 116.3 % higher than the US$7.6 billion raised in first half of 2009.

By country, Malaysia continued to dominate the global sukuk market, contributing 60.5 % of the total value of sukuk issued in first half of 2010, it said. Saudi Arabia and Indonesia each trailed at 14.1 %.
By currency type, ringgit-denominated sukuk deals topped at 53.4 %, followed by US dollar deals at 10.3 % and Qatari riyal issues, at 8.3 %.

The report indicated that the long-term prospects for the sukuk market were expected to remain strong. This was based on the increasing popularity of syariah-compliant products, governments' support for Islamic finance, huge investment and financing requirements in the Gulf Cooperation Council (GCC) and Asia, and issuers' desire to tap investors from the Middle East and Muslim Asia.

"With a healthy array of sukuk in the pipeline, the market is attracting interest from an increasing number of issuers in Muslim and non-Muslim countries alike," it added. -- BERNAMA

Committee to enhance its legal framework

IN a move to position and strengthen its existing legal framework as ‘the Laws of Choice’ for Islamic financial transactions, Bank Negara Malaysia, the central bank, last week established a Law Harmonization Committee (LHC) comprising members from among key government stakeholders, including the Attorney General's Chambers as well as industry players and experienced Islamic finance legal practitioners, reports Arab News.

The report, authored by Mushtak Parker, goes on:

The LHC, which is chaired by Tun Abdul Hamid bin Mohamad, the former Chief Justice of Malaysia and a current member of the Shariah Advisory Council (SAC) of Bank Negara Malaysia (BNM), the Shariah authority of last resort for the Islamic finance industry, is engaging with the industry and general public for feedback on laws which require harmonization.

Muhammad bin Ibrahim, Deputy Governor of Bank Negara, revealed at the recent 21st Conference of Presidents of Law Associations in Asia (POLA) held in Kuala Lumpur that the establishment of the LHC “is also consistent with our objectives to create an enabling environment that facilitates and accommodates the development of the industry, a clear and efficient system that preserves that enforceability of Islamic financial contracts and a credible and reliable forum for settlement of legal disputes arising from Islamic financial transactions.”

There is a consensus that Malaysia’s Shariah framework is distinctively robust. Malaysia pioneered the centralized Shariah authority in the form of the consultative role of the Shariah Advisory Council of Bank Negara Malaysia and Securities Commission, complemented by the Shariah board of individual Islamic financial institutions.

This strategy has nurtured innovation whilst ensuring stability in the marketplace. It has also paved the way for other countries such as the UAE, Pakistan, Indonesia and Brunei to emulate the same centralized SAC model.

“This referral system,” maintained the deputy governor, “preserves the sanctity of Shariah rulings and the consistency in the interpretation and application of Shariah principles for Islamic finance transactions in Malaysia.”

Bloomberg: Afghanistan Opening First Shariah-Based Banks

By Khalid Qayum and Eltaf Najafizada

Aug. 19 (Bloomberg) -- Afghanistan plans to issue licenses for three Islamic banks, the first to offer a range of services that comply with religious law in a country where 99 percent of the population is Muslim.

Afghan United Bank, Ghazanfar Bank and Maiwand Bank are seeking permission to provide products that meet Shariah principles, said Aimal Hashoor, a central bank spokesman in Kabul. Now, seven local banks can offer Islamic services through dedicated tellers at branches, he said. The products are limited to Islamic loans, said Sayed Mahmood-ul-Hassan, chief executive officer of Afghan United Bank.

The government wants to expand Islamic finance to draw more assets into the financial system and help reduce the nation’s reliance on overseas aid for reconstruction following 30 years of war and insurgency, according to Hashoor. The country has received more than $32 billion in international aid since U.S.- led forces toppled the Taliban in 2001, he said.

“Afghanistan is a Muslim society and many people don’t want to use conventional banking,” Hashoor said in an interview on Aug. 15. “We want to bring all of the money that we have in businesses and with individuals into the economic cycle.”

The $23 billion economy has expanded an average 11.3 percent annually since 2004, according to the U.S. Department of State. Islamic finance would be popular with Afghans, who are “very religious” and often prefer cash transactions to interest-based banking, holding back the development of local businesses, according to Al Baraka Islamic Bank.

“Islamic banks can fill the vacuum as conventional banking is not fully developed in Afghanistan,” Kaleem Iqbal, a senior executive vice president at Al Baraka Islamic, a unit of Bahrain-based Al-Baraka Banking Group, said in an interview yesterday in Islamabad. “The government would be looking forward to participation by banks in its plans to sell sukuk.”

MAHB to decide on final sukuk proposal in 3 months

By Bhupinder Singh

Malaysia Airports Holdings Bhd (MAHB) will only know how much of the RM3.1 billion proposed sukuk issue it will take up to help finance the building of the new low-cost carrier terminal (LCCT) project when it has completed awarding all the contracts in the next two to three months.

The airport owner and operator's management indicated that it initially proposed a RM2.5 billion issue to finance the construction of the new LCCT or KLIA2 building but with a credit rating of AAA for the issue, its financial advisors said it could tap the markets for as much as RM3.1 billion without any deterioration to the rating.

Managing director Tan Sri Bashir Ahmad Abdul Majid said part of the money raised from the sukuk would also be used to repay/service its short-term borrowings while new projects like the US$350-400 million (RM1.11-RM1.26 billion) Male airport expansion in Maldives and the outcome of the bid for Prince Mohammed Abdulaziz Airport in Medina, Saudi Arabia, could have a barring on the issue size.

Meanwhile, the 17.77% rise in passenger movement to 27.74 million for the first-half of the year, however, was not able to offset rising staff costs and loss at associate company Sabiha Gokcen International Airport Ltd as MAHB's net profit fell 14% to RM132 million for the financial period ended June 30, 2010 as compared to RM153 million in the same period last year.

Revenue for the six-month period rose 11.4% to RM872.12 million driven by recovery in air travel demand and higher sales and profits from its retail operations and rental and royalty charges.

The management expects the second-half period to remain strong with tourist arrivals from the Middle East helping to sustain its aeronautical operations aided by more new carriers using airports operated by MAHB, according to Bashir Ahmad.

He expects passenger growth of 10-12% for the full year and good financial prospect for the second-half of the year due to sustained demand for its services and facilities. International passenger movement rose by 12.7% in the six-month period, outgrowing domestic movement which expanded by 9.78% partly due to the fact that international passenger arrivals to regional airports like Kota Kinabalu and Penang rose 43.7% as a result of more direct flights to these airports by various carriers, he said.

The company, he added, is seeking to attract another two carriers to have flights into the country by the end of the year, without giving any names. CFO Faizal Mansor said MAHB's balance sheet is healthy with its gearing level at 0.27 times, cashflows of about RM50-60 million a month while annual operational capital expenditure to stand at about RM200 million.

(This story, written by Bhupinder Singh, appeared in The Malaysian Reserve on August 18, 2010. 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)

Bloomberg: DIFC Investments’ Sukuk Rally ‘Gone Too Far’

Aug. 12 (Bloomberg) -- The two-month rally in DIFC Investments LLC’s Islamic bonds is ending on concern the Dubai state-controlled developer will struggle to meet payments on more than $3 billion of debt.

The notes that comply with Shariah law dropped for a third day yesterday to 79.15 cents on the dollar after surging almost 10 percent since the end of May, according to data compiled by Bloomberg. The securities need to fall at least 4 percent to 76 cents or below before they are attractive to buy, according to Zafar Nazim, a JPMorgan Chase & Co. analyst in London.

DIFC Investments, the owner of assets in the Dubai International Financial Centre, a tax-free zone, had its credit rating cut one level by Moody’s Investors Service on July 8 and its outlook reduced to negative this week by Standard & Poor’s, which cited about $3.1 billion of debt and “uncertainties” over the company’s plans to sell $1 billion of assets.

“The rally we have seen in DIFCI sukuk and other Dubai names has gone too far,” Abdul Kadir Hussain, chief executive officer in Dubai at Mashreq Capital DIFC Ltd., which manages $2 billion of mainly Persian Gulf assets, said in an interview on Aug. 10. “The source of that sukuk repayment is going to be asset sales. So, as much as there is uncertainty in their asset- sale plan, obviously there will be concern on their sukuk repayment capability.”

DIFC Investments posted a loss in 2009 after an $842.5 million profit in 2008 as it wrote down the value of properties. Real-estate prices in Dubai, the Persian Gulf’s financial hub, retreated more than 50 percent from their peak in 2008 as the global credit crisis led to a cut in mortgage lending and pushed companies to slow expansion, according to estimates from Colliers International.

Bloomberg: Standard Chartered Plans `Big Push' on Shariah Contracts

Standard Chartered Plc, the U.K. bank that earns most of its profit from emerging markets, plans to introduce Shariah-compliant contracts in Asia to hedge against changes in commodity prices, reports Bloomberg.

The products, which the London-based bank made available in the Persian Gulf in March, will allow buyers and sellers to agree on fixed or floating prices and make it easier for companies to protect themselves from volatility in goods such as sugar, rice, wheat and crude oil, Afaq Khan, chief executive officer of Standard Chartered’s Islamic banking unit in Dubai, said in an interview on Aug. 9.

“This year the big push is on commodity derivatives,” he said. “We will certainly be offering them in countries like Malaysia and Indonesia in due course. When there is sufficient demand we will go to the central banks to seek approval.”

Asia accounted for 68 percent of the total $7.8 billion of sukuk, or Islamic bonds, sold worldwide this year, according to data compiled by Bloomberg. Economic growth in developing Asia, including Malaysia and Indonesia, will accelerate to 9.2 percent in 2010 from 6.9 percent in 2009, according to estimates by the International Monetary Fund on July 7. Expansion in the Middle East was forecast at 4.5 percent, compared with 2.4 percent last year.

Malaysia is the world’s biggest market for Islamic bonds, while Indonesia has the largest Muslim population. Global sales of the securities have dropped 28 percent to $7.9 billion so far this year, Bloomberg data show.

Bloomberg: Repos for Sukuk Planned to Expand Shariah Market Trading

The International Islamic Financial Market, founded by the central banks of Bahrain, Indonesia and Malaysia, plans to create Shariah-compliant repurchase agreements to help Islamic banks manage funds and boost trading.

The IIFM, a Bahrain-based standards-setting body for Islamic markets, wants to introduce repos that don’t violate the religion’s ban on interest. It has proposed allowing third parties to act as intermediaries between buyers and sellers of sukuk used as collateral for short-term funds, reports Bloomberg (17 Aug 2010).

Regulators from Bahrain to Malaysia are trying to expand products available to Islamic banks and borrowers. The repurchase agreements recommended by the IIFM would use a profit rate, unlike non-Shariah repos, where traders post securities as collateral for cash and agree to buy them back at a specified price and date, earning or paying the difference as interest.

If “banks don’t have an option like an alternative repo tool, then their balance sheets remain tied up,” IIFM Chief Executivei Officer Ijlal Ahmed Alvi said in an Aug. 15 interview from Manama, Bahrain. “A repo tool would definitely help.”

Demand for services complying with Shariah law is increasing about 15 percent annually, according to the Kuala Lumpur-based Islamic Financial Services Board, another standards body for the industry, which oversees about $1 trillion of assets. Holdings may almost triple to $2.8 trillion by 2015, the IFSB estimates.

BIMB to swap listing status with Bank Islam

By Habhajan Singh

The listed status of BIMB Holdings Bhd, the entity controlling an Islamic bank and a takaful operator, may be "transferred" to its 51%-owned subsidiary Bank Islam Malaysia Bhd.

It is understood Lembaga Tabung Haji, which has a 51.47% stake in BIMB and another 9% direct stake in Bank Islam, is mulling at stripping the listing at the holding company level and passing it on to Bank Islam, which contributed a huge chunk to BIMB's revenue and operating profit.

"The matter has been raised at Tabung Haji's investment panel. The thinking is to collapse the listing direct to the Bank Islam level in recognition of its role as the main group revenue driver," one source told The Malaysian Reserve.

At the moment, BIMB holds a 65.22% stake in Syarikat Takaful Malaysia Bhd, which is also listed on Bursa Malaysia.

"The decision, if any, will come from the investment panel. It's a powerhouse when it comes to deciding Tabung Haji's investments," said another source familiar with the operations of the pilgrim fund.

The Tabung Haji investment panel, chaired by Eastern & Oriental Bhd chairman Datuk Azizan Abdul Rahman, include Malayan Banking Bhd president and CEO Datuk Seri Abdul Wahid Omar, legal firm Kadir Andri & Partners' Abdul Kadir Md Kassim and Shell Malaysia Trading Sdn Bhd former managing director Datuk Mohzani Abdul Wahab.

When contacted, BIMB said it was "not aware" on any transferring of the listing status by Tabung Haji. At press time, Tabung Haji had yet to response to queries from The Malaysian Reserve.

[FULL STORY IN THE MALAYSIAN RESERVE, 16 AUG 2010, or at epaper.themalaysianreserve.com]

PPZ spearheads pro-active zakat collection

The zakat collection body for the Federal Terriroties (FT) has been making inroads in its endeavour to allow Muslims to fulfil one of their religious obligations. The numbers speak for the this outfit.

From 1991 to 2009, the Pusat Pungutan Zakat (PPZ) MAIWP has collected a total of RM1.45 billion in zakat. This year, the zakat body entrusted with the collection of zakat, or tithe, in FT is targetting total collections of RM260 million. This works out to be a tageted increase of 26%.

What has made this possible for PPZ, which began operations in 1991 after being established by the Federal Territory Islamic Religious Council, better known locally by its Malay acronym MAIWP?

"I would say it is our pro-active approach. We don't wait for the people to come to us to paya zakat, we go to them," said PPZ general manager Mohd Rais Alias.

This, perhaps, sums up best the consistent growth in both the amount of zakat collected over the past few years and also the total number of people fulfilling their zakat obligations. "We made a total change in our approach some time ago," he added.

[FULL STORY IN THE MALAYSIAN RESERVE, 16 AUG 2010, or at epaper.themalaysianreserve.com]

Aussie Crescent looking for Malaysian Shariah-compliant partners

By Dalila Abu Bakar

Shariah-compliant wealth management firm Crescent Investments Australasia Pty Ltd is looking for Malaysian Shariah-compliant partners to tap the country's Islamic superannuation fund estimated at be twe en A$3 billion (RM8.49 billion) and A$6 billion.

Crescent chief executive officer, Chaaban Omran said the firm is talking to several local Islamic financial institutions in Kuala Lumpur for assistance in getting a superannuation licence to enable the firm to tap into the market.

The superannuation fund is similar to a pension fund with employees contributing a slice of their wages to be invested by the trustees of the pension fund in assets. About 400,000 Australian Muslims must contribute 9% of their wages towards the fund.

Omran said Crescent plans to create Australia's first Islamic superannuation fund. With a superannuation licence, the firm can manage the superannuation fund in a Shariah-compliant manner.

"We are looking for partners, Islamic asset management or finance companies. We feel that we can offer our own Shariah compliant superannuation funds.

"But, to offer Shariah compliant superannuation funds require a large injection of capital. We feel that our jointventure (JV) partner will be able to contribute to our debt capital," he said.

[FULL STORY IN THE MALAYSIAN RESERVE, 16 AUG 2010, or at epaper.themalaysianreserve.com]

Islamic courses to start at University of Bedfordshire

Two new courses are set to begin at the University of Bedfordshire in recognition of the increased in demand for Islamic financial products and services, reports BBC.

The courses will guide students through the principles of Islamic finance and the theory of Islamic commercial practice which is based on Shariah law

The university says that students choosing these courses, The Master of Science (MSc) in Islamic Banking and Finance and the Master of Laws (LLM) in Islamic Commercial Law, will benefit from growing employment opportunities in the West representing Muslim interests and in Muslim countries.

It quoted Tariq Khan from the university as saying: "We are based just outside London, the financial capital of the world, where there is a large demand for Islamic finance and banking products.

"Our international students, who are often from the Middle East, and who will return home to practise law, have also highlighted a need for a foundation in Islamic banking and finance laws."

Bank of London and the Middle East ‘doing very well’

BANK of London and the Middle East (BLME) expects its performance for the current financial year ending Dec 31, 2010, will be better than the previous year's.

"Our performance will be much better than last year's. We will be profitable for the whole year," said its chief executive officer Humphrey Percy (picture).

Percy said BLME is performing well and its business has been developing with more products being introduced into the market. Like other financial institutions, he noted BLME was affected by the global economic slowdown. Nevertheless, he said, the bank has been staging a good performance.

"Everybody is affected by the crisis. Because we are part of the financial market, we were affected by the crisis, but we are actually doing very well, our business is also developing," he said at the 7th annual Kuala Lumpur Islamic Finance Forum in Kuala Lumpur, last week.

BLME, the largest Islamic bank in United Kingdom, has five core business offerings — treasury, corporate banking, private banking, asset management and corporate advisory services. Percy said BLME has been developing more real asset funds and had recently launched its electronic foreign exchange platform and internet deposit account.

He said BLME will continue to develop other instruments which are utilised by banks, and corporate banking activities. Percy also said the United Kingdom government is still talking about the launch of a sukuk. "S&P forecast US$20 billion (RM62.9 billion) worth of sukuk issuance this year and expects to see US$130 million of corporate issuance in UK and Europe," he added.

He also said the International Islamic Financial Market (IIFM) has estimated that Shariah compliant assets will reach US$1 trillion in 2010. IIFM is the global standardisation body for the Islamic Capital & Money Market (ICMM) segment of the Islamic Financial Services Industry. It is a nonprofit international development institution supported by the central banks and government agencies of Bahrain, Brunei, Dubai, Indonesia, Malaysia, Saudi Arabia, Sudan, Pakistan as well as a number of regional and international financial institutions. The objective of IIFM is to take part in the establishment, development and promotion of the ICMM.

Commenting on investor sentiment, Percy sees cautious investment in low risk activities with low-medium yields. "There is a move from wealth preservation as an investor driver in 2008-2009 to wealth generation in 2010-2011," he added.

(This story, written by Dalila Abu Bakar, appeared in The Malaysian Reserve on August 9, 2010. 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)

Bahrain Regulator May Limit Scholars’ Role: Bloomberg

A Bahrain-based agency is proposing new rules for religious scholars involved in the $1 trillion Islamic finance market, aiming to reduce the risk of conflicts of interest or improper disclosure, reports Bloomberg (Aug 9, 2010).

The guidelines may address whether Shariah scholars can own shares in the institutions they serve and how many advisory boards they join, said Mohamad Nedal Alchaar, secretary-general of the Accounting & Auditing Organization for Islamic Financial Institutions, whose standards have been adopted in countries including the United Arab Emirates and Qatar.

“There’s a potential case for conflict of interest, and a case of information leakage or perhaps competition impact,” the newswire quoted Alchaar in a telephone interview in Kuala Lumpur. “We wanted to address the concerns in an unbiased manner. When the guideline is published it will be a bold move and it may cause a stir.”

The proposals underline concern that Islamic financial products, designed to comply with Shariah law to be acceptable to devout Muslims, may be overseen by scholars who have a financial interest in their issuance. Global standards are still developing in the industry, whose assets are forecast by the Kuala Lumpur-based Islamic Financial Services Board to almost triple to $2.8 trillion by 2015, the report added.

Asian Finance Bank looking for Indonesian partner

Qatar Islamic Bank (QIB), which owns 70% of Kuala Lumpur-based Asian Finance Bank (AFB), is exploring opportunities with a few local parties in Indonesia in a move to increase its presence in South-East Asia.

AFB chief executive officer Datuk Mohamed Azahari Kamil said the Islamic bank, through its representative office in Indonesia, has identified several candidates on behalf of QIB for that purpose.

However, he said, the right candidate for a merger or acquistion has not been finalised to realise the bank's expansion plan in the region. The right candidate, among other criteria, must be a complete Shariah-compliant bank. QIB is the Gulf state's biggest lender which complies with Islamic banking principles.

"We are exploring with potential candidates on behalf of QIB through our representative office in Jakarta. We will conduct the due diligence and then make recommendations to QIB if the fundamentals are right," he told The Malaysian Reserve in recent interview.

One Indonesian Islamic banking source told The Malaysian Reserve that AFB is looking at buying a bank and would later convert it to an Islamic bank.

When met recently in Kuala Lumpur, Bank Indonesia director Mulya E Siregar said to attract international investors and players in the Islamic banking industry, the Indonesian regulator is committed to create a conducive environment to attract new players, promoting strategic alliances with other institutions to improve reach and outreach of Islamic banking services, both domestic and international.

On the search for a partner, Mohamed Azahari said there is no specific target period for the bank to find the suitable candidate and it is an ongoing process. He said the merger or acquisition that would be undertaken by QIB will add value for the bank in Indonesia and will bridge the business relationship between the country and the Middle East.

"We want to add more value to the bank that we want to acquire in Indonesia. We believe we can do that through this strategic collaboration.

"Indonesia is the market that we are looking at to increase our presence in the region. AFB is suitable to supervise and coordinate the operations in Indonesia because of its presence in Kuala Lumpur," he said.

Mohamed Azahari also said AFB's Islamic banking business in Indonesia has been growing encouragingly since its representative office was set up in Jakarta early 2008. "Business has been good. We see a great potential growth in Indonesia with about 200 million Muslim population," Mohamed Azahari added.

He said the role of AFB representative office in Indonesia is to identify business opportunities in the country and the credit assessment process and funding is provided by AFB in Kuala Lumpur. "There are many Malaysian companies with projects in Indonesia. We support them. We are competitive in terms of pricing and structure," he said.

(This story, written by Dalila Abu Bakar, appeared in The Malaysian Reserve on August 9, 2010. 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)

KLIFF 2010 Essay Competition: The Winners

KLIFF 2010, one of the largest annual Islamic finance gatherings in the region, had again organised an essay writing competition.

IIUM's Aishath Muneeza and Dr Rusni Hassan took home the first prize with their entry titled 'Take it or Leave it! The Iniquitous Islamic Banking Documents'.

The second place went to Dr M. Shabri Abd. Majid and Dr Salina Binti Hj. Kassim (Islamic Finance & Economic Growth: The Malaysian Experience) while the third spot went to Zulkifli Hasan (The Effect Of Regulatory Framework To Shari’ah Governance Disclosure Practices).

For the full list, go here.

[Picture courtesy of KLIFF website]

MAHB plans RM3b sukuk to fund KLIA2

Malaysia Airports Holding Bhd (MAHB) has proposed to undertake a sukuk programmes up to RM3.1 billion to part finance the construction of its new terminal (KLIA 2) and to refinance its existing borrowings which were used for Shariah-compliant purposes as well as for MAHB’s Shariah-compliant general corporate purposes.

"The development of the new KLIA-2 is expected to cater for the operational and service needs of the fast growing low-cost carrier airlines in the country and is expected to contribute positively to the future earnings of the MAHB group," it said.

It said KLIA-2 is expected to be completed by the end of the first quarter of 2012.

CIMB Investment Bank Bhd and Citibank Bhd have been appointed as the joint principal advisers, joint lead arrangers and joint lead managers for the proposed sukuk programmes which combined Islamic commercial paper (ICP) programme and Islamic medium term note (IMTN) programme, with a sub-limit of RM1 billion nominal value for the ICP programme.

MAHB said the proposed sukuk programmes are expected to be implemented by the third quarter of this year and it would announce the detailed utilisation of the proceeds where required.

MAHB said the impact of the proposed sukuk programmes on the earnings of the MAHB group will depend on among others, the coupon or profit rate of the Sukuk.
The company said the ICP and the IMTN have been accorded a preliminary short-term rating of P1 and a preliminary long-term rating of AAA with stable outlook,respectively by RAM Rating Services Bhd.

The company added the proposed programmes, when issued, would increase the gearing of the MAHB group unless and to such extent where the proceeds from such issuances are used to refinance existing borrowings/financings.

The proposal is done through its wholly-owned subsidiary, Malaysia Airports Capital Bhd (MACB), a special-purpose vehicle set up as a wholly owned subsidiary of MAHB. MACB's income will be solely derived from the ijarah rental payable by MAHB, which will be used to service the issuer's debt obligations.

MAHB, 60% owned by state-owned investment firm Khazanah Nasional Bhd, is the exclusive 25-year concession holder that operates, manages and maintains Kuala Lumpur International Airport (KLIA).

The group also holds a separate 25-year concession to operate, manage and maintain all other Malaysian airports and short-take-off and landing ports with the exception of Senai International Airport in Johor.

(This story, written by Dalila Abu Bakar, appeared in The Malaysian Reserve on August 6, 2010. 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)

S Korean, Malaysian firms plan RM3.2b infra project

A South Korean manufacturing conglomerate and a privately-owned Malaysian firm are in the midst of setting up a joint-venture to build an infrastructure project worth more than US$1 billion for the Malaysian government deploying Islamic funds which will be raised by the Korean party.

The South Korean firm would provide its expertise in manufacturing technology and the funds needed for the project, said South Korean-based Shariah Finance Co Ltd director for overseas operations Robert Jung-Soo Ryu.

"The South Korean firm is not an Islamic based company but the funding for the whole project will be Islamic. The main financial adviser of this project, I believe, is also an Islamic bank. We are trying to partner with them also, to fund the project to distribute the risk between the banks," he said at the 7th Annual Kuala Lumpur Islamic Finance Forum (KLIFF) in Kuala Lumpur, yesterday

Ryu said a special purpose vehicle would undertake the infrastructure project to be built in Malaysia.

He said the Malaysian firm company which owns the project will hold 51% of the SPV while the Korean firm holds the rest.

"The Malaysian company is already in the industry, however, because of lacking of technology to meet the need of the government, they have approached us to find a right partner in Korea.

"One of the conglomerates in Korea is able to pursue it and join them in a consortium. They will be investing funds to create the joint venture and the facility to meet the needs of the Malaysian government. The Korean firm will bring in the manufacturing technology to undertake the project targeted for completion in 2015," he said.

Ryu, however, declined to reveal the identity of the two companies involved in the deal as discussions with Malaysia's high level government officials are currently underway.

He said the project would take off once the letter of intent (LOI) is ready, adding that they had a meeting high level government officials in Malaysia last week.

"We are looking at the LOI to be ready sometime towards end of this year, maybe November," he said.

On Islamic finance, he said it is developing slowly in South Korea which has a Muslim population of about 135,000 only.

However, the Islamic finance sector in the country is getting support from the government and indirectly from the national pension fund which is interested in investing in Islamic products.

He pointed out South Korea does not have an Islamic retail market and there are no plans to open any retail-related Islamic products in the country.
"We feel that it will be good if we can create Islamic products that non-Muslims also can enjoy," he said.

Ryu said South Korea is currently working on its first sukuk to finance the Jeju Island airport project which is expected to materialise between the middle and end of next year.

"We are working very hard with the government to finance this new airport project which has not passed the government level yet. The government has agreed that some of the funds should be raised in sukuk," he said.

He added no decision has been made on the type of sukuk for the Jeju Island project and the South Korean government is working with Kuala Lumpur-based Islamic finance consultants from Amanie Business Solutions Sdn Bhd, led by Dr. Mohd Daud Bakar, on the sukuk.

Dr Daud has been invited by the South Korean government in January 2011 to discuss details on structuring the sukuk and its timing, he added.

(This story, written by Dalila Abu Bakar, appeared in The Malaysian Reserve on August 5, 2010. 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)

Singapore Targets Sukuk as Khazanah Plans Sale - Bloomberg

Singapore is seeking to develop its Islamic finance market and attract investors as global growth in products that comply with Shariah law tops 20 percent annually, reports Bloomberg (August 03, 2010).

The report read: Islamic services in the island republic are “small and still emerging” and reflect the world trend, according to an e- mail statement on July 27 from the Monetary Authority of Singapore. “Greater depth and liquidity will in turn draw even more participants into using Islamic finance for their funding and investment needs. For the industry to grow further, we need more intermediaries, more products and more investors.”

Khazanah Nasional Bhd., Malaysia’s state investment company, may sell S$1.5 billion ($1.1 billion) of five- and 10-year sukuk, a person familiar with the matter said today. A “few companies” are looking to sell notes in Singapore that adhere to the religion’s ban on interest, the authority known as MAS said, without specifying the names, the report added.

Financial products that meet Shariah guidelines, which are typically backed by assets or cash flows, account for less than 5 percent of the total market worldwide, the MAS said. Globally, about $1 trillion is invested in Islamic products.

The government started a S$200 million sukuk issuance program in January 2009, which was set up to provide “regulatory assets” to institutions offering Islamic services, according to the MAS. Several portions have been sold so far and the debt was offered at similar yields to notes that don’t comply with the ban on interest, the central bank said.

Singapore’s Islamic finance industry “doesn’t have the critical mass but it is heading in the right direction,” Jonathan King, director at Singapore-based AEP Investment Management Ltd., which is 80 percent owned by Saudi Arabia’s Al- Rajhi Group, said in an interview yesterday. “We are encouraged by MAS’ pro-active strategy.”

The city state’s Muslim community is small relative to its Southeast Asian neighbors, accounting for 15 percent of a resident population of about 3.7 million, according to the central bank. In Malaysia, the proportion is 60 percent, the statistic department’s website shows, and 86 percent in Indonesia, according to U.S. government data.

Global sales of Islamic bonds have fallen 29 percent to $6.7 billion so far this year, compared with $20.2 billion in 2009. Malaysia, which accounts for more than 60 percent of the global sukuk market, sold $1.25 billion of notes in May, attracting orders for more than five times the debt initially offered.

MARC affirms KFH Malaysia rating, long term downgraded

Malaysian Rating Corp Bhd (MARC) affirmed Kuwait Finance House (Malaysia) Bhd (KFHMB) long and short term financial institution ratings at AA+/MARC-1 while outlook on KFH's long term rating downgraded to negative from developing.

Accordingly, it said KFHMB's long-term rating outlook has been revised to negative from developing to reflect that of its parent.

The affirmation of KFHMB’s ratings follows the affirmation of the long-term and short-term financial institution ratings of its parent, Kuwait Finance House K.S.C. at AAA/MARC-1, said MARC in a statement yesterday.

This rating announcement comes two months afyer KFHMB discontinuing in June the rating services by RAM Ratings in what it said was a measure to 'be in line with the rating practices' of its parent in Kuwait and cost rationalisation.

In November 2009, RAM had put a negative outlook on the financial institution ratings of KFH, based on the deterioration in the financial metrics of both the bank and its parents.

Around that time, KFHMB chief executive officer Jamelah Jamaluddin, who was appointed in February, had requested several of its staff to go on leave pending internal investigations into transactions and contractual arrangements undertaken over the years.

In the latest report, MARC said KFHMB’s dependence on parent support has risen as the bank’s intrinsic financial strength has been visibly affected by asset quality challenges.

The near term impact of the bank’s weakened asset quality and operating performance on its capital adequacy was buffered by an injection of additional capital by KFH.

Meanwhile, KFH’s affirmed ratings reflect its systemic importance to the Kuwaiti economy as the second largest bank in the country as well as indirect majority government ownership.

KFH, the parent bank of KFHMB, is the second largest bank in Kuwait in terms of asset and is also one of the largest Islamic banks in the world with an extensive reach across the Middle East and a presence in Southeast Asia through KFHMB.

KFH also experienced asset quality deterioration amidst the global financial crisis with its NPF ratio weakening to 12.6% in FY08 with bulk of the incremental NPF accounted for by credit exposure in the real estate and construction and financial services (mostly investment houses) sectors which were badly affected during the crisis.

Although a marginal improvement in gross NPF was seen in FY09, which resulted in a gross NPF ratio of 11.8%, MARC notes that this was largely a function of an enlarged financing book, as absolute NPF remained relatively unchanged during FY2009.

Although a marginal improvement in gross NPF was seen in FY2009, which resulted in a gross NPF ratio of 11.8%, MARC notes that it was largely a function of an enlarged financing book, as absolute NPF remained relatively unchanged during FY09.

Meanwhile, high loss allowances, coupled with lower financing and investment income, resulted in lower profitability with return on asset (ROA) declining to 0.66% in FY09 from 1.81% in FY2008. At the same time, total capital ratio declined to 15.2% at end-2009 from 21.7% in the previous year.

MARC noted KFH’s capital ratios remain within Kuwaiti banking standards and above minimum regulatory requirements. Noting the pressure on KFH’s stand-alone credit profile, MARC continues to draw comfort from the very high likelihood of sovereign support for the bank.

The absence of a sustained recovery in KFH’s financial performance or a weakening in support from the Kuwaiti government would trigger a downward revision of the parent bank’s ratings.

At the same time, any weakening in support from KFH towards the subsidiary KFHMB may result in a downward revision of the latter’s ratings.

(This story, written by Siti Radziah Hamzah, appeared in The Malaysian Reserve on August 4, 2010. 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)

Khazanah wins Parkway battle with S$3.5b bid

The two month long tussle between Khazanah Nasional Bhd and Fortis Healthcare Ltd to control Singapore-listed Parkway Holdings Ltd finally came to an end yesterday as Fortis accepted Khazanah's voluntary conditional general cash offer (VGO) and decided to divest all its holdings in Parkway.

The deal, costing the national investment arm S$3.5 billion as it upped the offer price to S$3.95 per share, is seen by some analyts as the higher end of Parkway's valuation, but one worth paying if it could extract value from the healthcare giant with more than 3,400 hospital beds in China, india and Malaysia.

The deal will see Fortis -- controlled by two billionaire Singh brothers, Malvinder Mohan Singh and Shivinder Singh -- walk away with a profit of S$116.7 million.
Yesterday, in a filing with the Singapore Exchange (SGX), Khazanah subsidiary Integrated Healthcare Holdings Ltd (IHH) announced a revision of its offer to a voluntary onditional general cash offer (VGO) for all of the shares in Parkway, topping its May 27 offer by 17 Singapore cents.

"Khazanah will be paying quite a high price earnings ratio of 45 times to 46 times based on her financial year 2010 estimate,” said DMG & Partners Research Lynette Tan on the new offer.

Nomura Securities Singapore analyst Lim Jit Soon said Khazanah is paying the upper end of the price at RM3.95 per share, but it is not a question of overpaying.
“It all depends on how much value the buyer can extract from the the deal,” he said.

(The Malaysian Reserve, July 27, 2010)

AIIMAN to launch sukuk fund for global investors

Asian Islamic Investment Management (AIIMAN) is working with a 'large investor' from the Middle East to launch a sukuk fund for the global market targeting Southeast Asian investors. AIIMAN chief executive officer Nor' Azamin Salleh said the investor would chip in up to US$20 million (RM64.5 million) in the fund with a total size of US$100 million.

He said the fund is waiting for the seed fund from the investor and that the timing of the fund launch depends on the market scenario in the Middle East.

"Investors today have little appetite for risk, preferring the relative safety of fixed income-type funds that offer relative safety, stability and regular income distributions compared to equity funds in general," he told The Malaysian Reserve in a recent interview. As such, the sukuk will most probably be a fixed income fund and compliant to the Shariah standards of the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

"We are working on a few ideas... more or less it will be a fixed income fund. The fund is for those who believe in Shariah principles as well as returns above the benchmark. It is for the global market with a focus on South East Asia," he said.

AIIMAN, 49% owned by Hwang-DBS (Malaysia) Bhd and the rest by Singapore’s DBS Asset Management Ltd, unveiled its first offshore themed fund, the HwangDBS AIIMAN A20 China Access Fund (A20) in March. Its first institutional offering, the HwangDBS AIIMAN Cash Plus Fund, was launched last year.

Nor' Azamin said the company is also busy getting some Middle Eastern investors to distribute its HwangDBS AIIMAN A20 China Access Fund, the world's first Shariahcompliant fund offering direct access into the highly restricted China's Ashares listed on the Shanghai and Shenzhen stock exchanges.

The US dollar-denominated fund will also be distributed to investors in the Asian regions, Middle-East and North South regions. Most of the efforts are focused on marketing the funds to clients in Singapore, Dubai and Bahrain, he said. AIIMAN, launched in November 2008, is currently managing about RM1.2 billion from its discretionary mandates and a total of five funds.

(This story, written by By Dalila Abu Bakar, appeared in The Malaysian Reserve on July 5, 2010. 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)

Maybank Islamic introduces Waqf

Maybank Islamic with the collaboration of Yayasan Waqaf Malaysia (YWM) launched Waqf, a structured community-giving initiative that allows its customers and the public to contribute to Waqf contribution through its payment channels. A memorandum of understanding between Maybank Islamic Bhd and YWM and the launching of Waqf last Friday puts Maybank Islamic as the first bank in the country to offer such a service.

"We are bringing the Waqf to a new level where we are giving the opportunity to our customers to give back to society and create a continuous charity for the future community," said Maybank Islamic chairman Datuk Seri Ismail Shahuddin. Maybank Islamic CEO Ibrahim Hassan said the Waqf service is open to all customers, Muslims and non-Muslims, who have accounts with Maybank to use available channels to transfer funds to YWM. Non-Maybank account holders can also transfer funds via cash or cheque to YWM via Maybank branches available throughout the country.

"We have about three million customers, and conservatively, we estimate in a range of 5% to 10% of our customers, both individual and business entities, would be interested in using our services to offer charity and donation to the Waqf services," Ibrahim told reporters during the launching ceremony.

On an annual basis, Maybank Islamic estimates RM2 million to RM3 million Wafq fund 'for a start'. After the funds are sent across to YWM account, Maybank Islamic will provide investment advisory services to YWM on how to invest the funds in the best possible manner, and to achieve the best returns.

"Immediately after this launching, we will be undertaking our road show together with YWM throughout the country in the various regions, whereby we will be offering briefing on Waqf to both our individual and business customers. "With this collaboration and the road show that we are undertaking, we are hoping to create a greater awareness and education to the public," he said.

(This story, written by John Gilbert, appeared in The Malaysian Reserve on July 5, 2010. 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)

BNM asking banks to provide rebate

By Habhajan Singh

Bank Negara Malaysia (BNM) is now asking banks to provide rebate for early settlement of financing based on Bai Bithaman Ajil (BBA), a move seen to protect the interest of consumers who have in the past been jolted by banks demanding the full price of the financing.

In another move, the central bank's Shariah Advisory Council (SAC) also decided that compensation may be imposed on late payment of financial obligation arising from exchange contracts like the BBA and hire purchase and also interest-free loans known as qard.

The issue of rebate, or ibra in Arabic, would be a welcome relieve for individual and corporations that have made avail the Islamic financing as it was previously left to the discretion of the banks.

"In line with the need to safeguard maslahah (public interest) and to ensure justice to the financiers and customers, Islamic banking institutions are obliged to grant ibra' to customers for early settlement of financing based on buy and sell contracts (such as bai' bithaman ajil or murabahah ).

"In order to eliminate uncertainties pertaining to customers' rights in receiving ibra' from Islamic banking institutions, the granting of ibra' must be included as a clause in the legal documentation of the financing," the SAC decided at its meeting on Jan 28, according to a BNM statement released yesterday.

It said SAC had decided that tawidh (compensation) may be imposed on late payment of financial obligation arising from exchange contracts (such as buy and sell and hire purchase) and qard (loan).

"Nevertheless, ta'widh may only be imposed upon the lapse of the repayment period agreed by both contracting parties. The amount of t a'widh received may be recognised as income by the seller/financier/creditor on the basis that it is imposed as compensation for actual loss incurred by the seller/financier/creditor," it said, adding that the rate will be determined by BNM.

On ibra, the SAC ruled: "In line with the need to safeguard maslahah (public interest) and to ensure justice to the financiers and customers, Islamic banking institutions are obliged to grant ibra' to customers for early settlement of financing based on buy and sell contracts (such as bai' bithaman ajil or murabahah ).

"In order to eliminate uncertainties pertaining to customers' rights in receiving ibra' from Islamic banking institutions, the granting of ibra' must be included as a clause in the legal documentation of the financing . The determination of ibra' formula will be standardised by Bank Negara Malaysia."

On April 19, The Malaysian Reserve reported on a recent High Court judgement that ruling that Islamic banks 'must grant' a rebate even if the BBA contract is silent on the issue when a default occurs.

The judgement, in four BBA cases heard together by High Court Judge Datuk Rohana Yusuf in Bank Islam Malaysia Bhd v Azhar Osman, brought to the fore an issue that has been a bone of contention for consumers making avail of Islamic home financing as Islamic banks deem rebate as discretionary. Consumers, on the other hand, would want more certainty in that matter.

(This story appeared in The Malaysian Reserve on June 28, 2010. 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)

CIMB Islamic sees more deals to be secured

The reviving sukuk market augurs well for Islamic banks involved in the debt capital market as more issuances are expected in the second half of the year. With sukuk market conditions improving better and faster in the international market than the conventional bond market, CIMB Islamic, a leading player in the global sukuk market sees more deals to be secured and done in the second half of this year.

Its CEO Badlisyah Abdul Ghani is confident as the bank has managed to secure deals even at the height of the recent sovereign credit crisis.

"The global financial crisis did not directly affect our businesses and has insignificant impact on activities in our domestic markets. Our global businesses were affected a little bit but we managed accordingly based on the situation. In fact, we successfully closed a sovereign sukuk deal for the Government of Malaysia at the height of the crisis," he said.

Despite the slowdown in the first part of the year, CIMB Islamic has to date done 37 sukuk issuances in the Malaysian market alone.

"We are comfortable with how the market is now. We expect more deals coming in the second half. We are confident that we will do well in the sukuk market as we have done in the past.

"In some years, we did less number of deals but bigger ticket size per deal, and in some years, we did more deals but smaller ticket size. So long as we maintain our leadership position in the market, we are quite happy," he told The Malaysian Reserve in an interview.

In sync with the bank's aspiration to become the world's valued global Islamic bank, CIMB Islamic is now enhancing its Islamic consumer banking value proposition not just in Malaysia but also in all markets that CIMB Group has a presence.

"Currently, CIMB is the fastest growing Islamic bank with assets growing at an average growth rate of 100% per annum. Our focus in building our infrastructure to better serve our customers has made us the biggest Islamic bank in the world by branch network with more than 800 branches across South-East Asia.

"Although our competitors have been in the market for far longer, since we started in 2003, we have grown from a very, very small player to become the second largest Islamic consumer bank in Malaysia and the biggest Islamic investment bank in the world,"he said. For the first quarter of this year, he said CIMB Islamic has secured the top position for Islamic financing for nonresidential property and is ranked at No 2 for Islamic financing for residential property.

"We believe our growth is attributable to our principle of meeting our customers' need with the best Shariahcompliant products and services and our intention of course is to be better at what we do in meeting the demands of customers in t he ma rke t s t h at we serve," he said.

Now that Malaysia business is fairly developed, he sees the bank expanding and entrenching itself as a leading Islamic bank across all market segments in South- East Asia in the next five years. This is in line with the overall CIMB Group's vision to be the most valued universal bank in the South-East Asia. In contributing towards this vision, CIMB Islamic has charted a five-year strategy for its overseas expansion so that it could edge its competitors and capture market shares in the markets where CIMB Group has presence.

For the immediate term, the bank wants to focus building up the business in South-East Asia, predominantly in Indonesia and Singapore.

Badlisyah said: "We are focusing in South-East Asia at this moment and although CIMB group has established a joint venture in Bahrain where we are also doing Islamic investment banking activities, the business there is mostly to bridge Middle East investor's foray into South-East Asia."

The Islamic banking group is aiming for a higher contribution from the bank's operations to the group's revenue for the current financial year from the 10% recorded in 2009. However, he said the CIMB group is also growing very fast and hence, the contribution rate from CIMB Islamic may remain at the same level in the short term. As far as revenue contribution by Islamic banking businesses outside of Malaysia is concerned, he said it is still insignificant and will continue to be so due to the relative newness and smallish size of the business.

(This story, written by By Dalila Abu Bakar, appeared in The Malaysian Reserve on June 28, 2010. 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)

Brighter outlook for sukuk market in the second half

The growth prospect of the sukuk market in Malaysia is expected to be better in the second half of this year compared to the first six months, said chief executive officer of CIMB Islamic Bank Bhd Badlisyah Abdul Ghani.

"In the first half, investors and issuers wanted to be sure of the direction of the market in general before making decisions. I think sanity as well as better colour on the market can be seen now. I see better prospect in the second half compared to the first half," he told The Malaysian Reserve in a recent interview.

Badlisyah said investors and issuers will tap the sukuk market at the right time in the second half of the year. "They (investors and issuers) are fairly cautious but it does not mean that they will not go into the market in the second half. It is always natural for them to take time to understand and appreciate the condition of the market before tapping it," he said.

According to reports, sales of ringgit sukuk have fallen by more than 40% in the past months of this year compared to that of last year due to the smaller number of infrastructure projects that were implemented in Malaysia during the period. "If you compare year-onyear, the first part of the year is weaker.

Although our sukuk market is fairly independent, investors and issuers will have to look at market development as a whole, not just in Malaysia but also what is happening in Europe and Dubai to decide on the appropriate course of action," he said.

Generally, Badlisyah is bullish on the growth prospects of the local sukuk market as the players and issuers are seen to be equally active in the market to meet the demand of the wide sukuk investor base. "We should have about the same level of sukuk issuance as we had last year, if not better," he said.

Badlisyah expects the sales of global Islamic bonds to reach US$25 bi l l ion (RM80.88 billion) this year, up 24% from last year. He said Malaysia will continue to dominate the global market accounting for 60% of the total. Badlisyah who has been at the helm of CIMB Islamic since 2002 said the global Islamic franchise of the CIMB Group hopes to continue as one of the biggest lead managers for sukuk globally as well as in Malaysia.

"CIMB Islamic has been at the top of the global and local sukuk lead manager table since the birth of the Isl ami c c api t a l ma rk e t industry. We want to remain that way and will continue to go the extra mile in bringing quality transactions to the market to achieve it. We have done 37 issuances so far this year. The number looks good and we hope to do more before year-end," he said.

(This story, written by By Dalila Abu Bakar, appeared in The Malaysian Reserve on June 28, 2010. 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)

Gulf states may have single Shariah council by 2013

Gulf Arab states may have a single Shariah board for the region’s Islamic financial institutions by 2013 to standardise the industry and increase services available to Muslims, a Shariah scholar said, reports Bloomberg (June 13, 2010).

A region-wide Shariah council is "not a far-fetched reality" since there is a pool of experts in the United Arab Emirates, said Hussain Hamed Hassan, head of Dubai Islamic Bank PJSC’s Shariah committee and chairman of the Shariah Coordination Committee of the Islamic Financial Institutions in the UAE. "It will happen, but it’s a question of time," he was quoted by the newswire.

The report added that regulators around the world, including Bahrain and Malaysia, are looking for ways to better evaluate risks of the Islamic banking industry and make products suitable for investors globally. Malaysia’s central bank is preparing a system that would enable cross-border transactions among Islamic financial institutions, Governor Zeti Akhtar Aziz said in May.

Islamic law, or Shariah, restricts investors to transactions based on the exchange of assets rather than money alone because interest payments are banned. Islamic products are reviewed and approved by a board of scholars and, without globally accepted standards, financial institutions and bond issuers rely on rulings by these scholars to offer services to devout Muslims.

"How can an industry progress when a bank in Sharjah cannot buy the sukuk issued by a bank in Dubai? The industry needs to have some stability in order for it to grow," said Hassan, who also serves on the Shariah board of the Bahrain-based Accounting & Auditing Organization for Islamic Financial Institutions, the report added.

Demand for Shariah-compliant products is increasing as the wealth of Muslims rises, spurred by export-led Asian economic growth and crude oil income in the Persian Gulf. Created in the 1970s, the Islamic finance industry’s assets may quadruple to US$2.8 trillion (RM9.2 trillion) by 2015 from about US$700 billion (RM2.3 trillion) in 2005, according to the Kuala Lumpurbased Islamic Financial Services Board.

Bank Islam Brunei signs IT pact with Silverlake sign

Bank Islam Brunei Darussalam (BIBD) has extended its strategic information technology (IT) partnership with Silverlake Sistem Sdn Bhd to further enhance the bank's operations and customer services through the provision of innovative financial solutions.

BIBD's acting managing director, Javed Ahmad, said the continuous relationship with Silverlake was in line with the bank's vision to introduce state-of-the-art financial services in Brunei.

"Together with Silverlake, we are upgrading our existing IT infrastructure and hope this transformation programme will be completed in 16 months," he told reporters after signing the agreement with Silverlake in Petaling Jaya yesterday.

The agreement involves a major upgrade of BIBD's system from the existing Silverlake Axis Integrated Islamic Banking Solution (SIIBS) Core Version 3 to Version 8.

In addition, the new system would house five new modules involving sale and case management, financing origination, enterprise collection, global payment and corporate banking systems. SIIBS is a suite of banking products designed to facilitate and automate syariahcompliant banking products.

"We want to further grow our business in Brunei by expanding our expertise in multiple areas and developing an innovative Islamic finance products to assist the country in realising its financial potential," Javed said.

Islamic banking currently represents 40% of the total banking sector growth in Brunei and the number is expected to grow to 55-60% over the next three-five years. He said BIBD's immediate target was to strengthen its operation in Brunei before expanding its business in South-East Asia.

"We have an aspiration to be in the region, including Malaysia. But at the moment, we will concentrate to grow our business in Brunei," he said.

BIBD is the largest banking provider in Brunei with a total assets of about RM12 billion. With more than 14 branches and 500 staff, the bank's strong business is in Islamic retail banking, contributing 70 per cent of its total revenue. — Bernama

(This story appeared in The Malaysian Reserve on June 2, 2010. 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)

CIMB applies for Thai Islamic licence

The central bank of Thailand has received about 10 applications to set up stand alone Islamic banks in the country, including one from Malaysia, said Islamic Bank of Thailand (IBT) president Dheerasak Suwannayos. The other applications are all from Middle East nations such as Kuwait, Qatar and United Arab Emirates. (The Malaysian Reserve, July 12, 2010, p1)