Wednesday, December 28, 2011

Strong appetite for Islamic finance products in Oman

MUSCAT: Omani consumers have expressed a strong appetite for Islamic finance with a rapid take-up of banking products expected within the first 12 months of being launched.

These are key findings published yesterday from Oman’s first independent market study, entitled ‘Islamic Finance in Oman – Sizing the retail market’.

The report was independently commissioned and published by IFAAS (Islamic Finance Advisory & Assurance Services), the international Islamic Finance consultancy.

The report, analyses the retail market for Islamic finance in Oman across all sectors of the financial market, including banking, finance and insurance. It examines the current behaviour of consumers and measures future market trends to gauge the real potential of Islamic finance in Oman.

The report fulfils the demand for empirical data that new and existing players need to develop their business plans using robust scientific information. Key findings from the report reveal: About 85 per cent of consumers in Oman expressed an interest in Islamic finance products, of which 59 per cent were very interested and 26 per cent quite interested. (Times News Service, 27 December 2011)

Wednesday, October 26, 2011

Goldman Follows HSBC, GE to Tap Muslim Wealth

Goldman Sachs Group Inc. is aiming to follow HSBC Holdings Plc and General Electric Co. to the Islamic bond market as the investment bank seeks to diversify sources of funding, reports Bloomberg (Oct 24, 2011).

Global sales of sukuk, or Islamic bonds, have jumped 48 percent so far this year to $18.8 billion from $12.7 billion in the year-earlier period, data compiled by Bloomberg show. Goldman Sachs’ $2 billion Islamic bond program was approved for listing on the Irish Stock Exchange by the Central Bank of Ireland last week.

"Since you are a new name in the market, everybody is interested, and as a debut issuer your chances of getting the deal done is higher than in currently stressed European or U.S. bond markets," Sergey Dergachev, who helps manage $8.5 billion of emerging-market debt at Union Investment Privatfonds in Frankfurt, said in an e-mailed response to the wire service.

HSBC Bank Middle East Ltd. in May sold $500 million of sukuk, or notes that comply with Islam’s ban on interest, while GE Capital Corp., a unit of General Electric Co., issued $500 million of Islamic bonds in 2009. Malaysia, the world’s largest market for Islamic bonds, and the Middle East are the main centers of the $1 trillion Islamic finance industry, it added.

CIMB Niaga plans to grow Islamic lending

PT Bank CIMB Niaga Tbk plans to grow its Islamic lending, micro-financing and rahn service and will continue to retain its position as the fifth largest bank in terms of third party deposits ans assets in the country, its president director Arwin Rasyid said in a press release (Oct 24, 2011).

"CIMB Niaga will continue to maintain a sound balance in all aspects to the business – corporate, commercial, retail and Islamic banking. We will invest in our infrastructure to bring quality banking solutions to our customers and stakeholders," he added.

The bank posted a 33% year-on-year in net profit to Rp2.38 trillion or Rp95.1 per share for the third quarter ended Sept 30, 2011 on the back of strong double digit loan growth to the commercial, corporate and retail market in Indonesia.

Network expansion has been aiding the growth in its business as it channel network has grown to 859 as at the end of September from 711 a year ago. Its Islamic banking business has grown to 23 branches from 21 last year as has its ATM network that stands at 1,645 machines as at the end of September. - The Malaysian Reserve (Oct 25, 2011)

5th Islamic Financial Intelligence Summit in KL

Noor Islamic Bank CEO Hussain Al-Qemzi is slated to be one of the speakers at the one-day fifth annual Islamic Financial Intelligence Summit in Kuala Lumpur on Nov 19. He will speak on 'Cross Border Opportunities in Asia: The Role of the Regulator'.

Participate at the function will get a dig into The Banker magazine's Top 500 Islamic Financial Institutions Report, now running into its fourth year.

The session on 'Harnessing the potential of Islamic funds' will feature three panelists: Amundi Islamic Malaysia MD Mohamad Damshal Awang Damit, Aberdeen Islamic Asset Management MD Gerald Ambrose and Islamic Wealth & Asset Management private consultant John Sandwick.

The event is organised by The Banker Magazine and Financial Times, and hosted by Bank Negara Malaysia (BNM).

Thursday, March 17, 2011

Malaysia: No to non-Muslim Syarie lawyers

By Reena Raj

KUALA LUMPUR: After a 10-month-long battle, a test case bid by a non-Muslim counsel to practise Syariah law came to a halt after it was rejected by the High Court here this morning.

High Court (Appellate and Special Powers) Judge Justice Rohana Yusuf, in dismissing the application by Victoria Jayaseele Martin, 48, said the admission of a Syariah lawyer was conditional upon the rule by the Federal Territory Islamic Religious Council, with the approval of the Yang di-Pertuan Agong.

She said the rules were to be made on procedure, qualifications and fees for admission of a Syariah lawyer.

The judge said Rule Eight of the Federal Constitution did not deprive Victoria of being an advocate and solicitor.

“In my view, the purposive rule of the requirement of a Muslim faith is necessary to ensure the effectiveness of legal representations.”

As the case involved an issue of public interest, Rohana also ruled all parties to bear their own cost.

On May 14 last year, Victoria was allowed to challenge the requirement that a Syariah lawyer in Federal Territory must be a Muslim and to compel the Federal Territory Islamic Religious Council to admit her as a Syariah lawyer.

The High Court (Appellate and Special Powers) judge at that time, Justice Mohd Zawawi Salleh, allowed Victoria’s application after dismissing preliminary objections raised by the Attorney-General’s Chambers through Senior Federal Counsel Nadia Hanim Mohd Tajuddin.

In a statement filed to support her application, Victoria had stated she possessed a Diploma in Syariah Law and Practice from the International Islamic University Malaysia, in addition to a University of London law degree.

She claimed the council, through the Syariah Lawyer Committee, had rejected her application to practise as a Syariah lawyer solely because she was not Muslim.

Victoria had said Section 59(1) of the Syariah Act provided that the council could admit any person having sufficient knowledge of Islamic law to be a Syariah lawyer to represent parties in any proceedings before the Syariah Court.

In her affidavit, she had said she applied to be admitted as a Syariah lawyer in Kuala Lumpur in February, 2006.

She claimed she did not get any response to her first application, causing her to re-apply on Aug 24, last year.

Victoria was represented by Ranjit Singh.

(The Malay Mail, Thursday, March 17th, 2011)

Tokio Marine sells Takaful interests

Tokio Marine is pulling out of its Takaful joint venture with Malaysian Islamic bank Hong Leong.

The Japanese insurer has gained regulatory approval to sell all of the shares it holds in Malaysia Takaful company, Hong Leong Tokio Marine Takaful Bhd, to Hong Leong Group.

A spokesperson from Tokio Marine said the parting of the ways came about with the realization by both parties that Tokio Marine and Hong Leong's Asian expansion strategies had begun to diverge.

Tokio Marine and Hong Leong "have come to agree amicably to dissolve their business alliance and pave their respective paths of development because of differences between Tokio Marine's Asian strategies and Hong Leong's strategies concentrated on Takaful, life and general insurance business in Malaysia," said Tokio Marine in a statement.

The two companies teamed up in 2006 with Hong Leong being the senior partner in the venture holding 65% of the stock.

A spokesperson from Tokio Marine's Dubai office told The Islamic Globe that he was unable to add anything further. Hong Leong Group did not respond to requests for comment.

(The Islamic Globe, 15 March 2011)

Merger of Al-Khaliji, Qatari bank

The proposed merger of Al-Khaliji Bank and the International Bank of Qatar is expected to be announced within two to three months, as reported in Qatar's English-language daily, The Peninsula (8 March 2011).

Al-Khaliji chairman and managing director Sheikh Hamad Faisal Thani al Thani told reporters after the bank's annual general meeting (AGM), “A merger is not easy and will take time but hopefully in two to three months we should be able to make an announcement on the merger.”

He said he believes the proposal would yield long-term benefits to shareholders by creating a more competitive, financially stronger and significantly larger organisation.

As soon as all required regulatory approvals are obtained, the proposal will be submitted for approval by shareholders. 

Zamani appointed as Bank Islam chairman

KUALA LUMPUR, Tuesday, [1 March 2011] – Bank Islam Malaysia Berhad (Bank Islam) announced today that former Bank Negara Malaysia (BNM) Deputy Governor Dato’ Zamani Abdul Ghani has been appointed chairman of the Bank effective today. [1 March, 2011].

Dato’ Zamani started his career with the Economics Department of BNM in 1971. He rose through the ranks to the position of among others, Deputy Director in the Treasury Operations Department, Director of the Bank Regulation Department, Director of the Insurance Regulation and Inspection

Department and later as BNM’s Deputy Governor. He was Special Adviser in Bank Negara Malaysia prior to his appointment to Bank Islam.

 During his tenure at BNM, he oversaw various departments responsible for the regulation and supervision of financial institutions, units combating abuses in, and of the financial system, as well as the Bank’s corporate, personnel, property, security and related services. The financial institutions he oversaw include both conventional and Islamic banks, insurance entities and development financial institutions.

(Statement dated March 1 from Bank Islam)

Wednesday, February 23, 2011

BNM sets end-June deadline for new Shariah framework

By Habhajan Singh & Farah Saad
Some Islamic banks and takaful operators may not meet the end-June deadline to comply with the requirements of the Shariah Governance Framework for the Islamic Financial Institutions, issued by Bank Negara Malaysia (BNM), which took effect on Jan 1.

It is understood that some Islamic financial institutions (IFIs) coming under the ambit of the framework issued in October 2010 are still behind the curve with the full implementation of the framework which includes establishing an "end-to-end Shariahcompliant control mechanism" for all aspects of their business operations to ensure that "all activities are Shariah-compliant".

"The central bank has paid a visit to some local IFIs to check on their preparedness for the framework," one industry source told The Malaysian Reserve.

BNM deputy director for Islamic banking and takaful department Rustam Mohd Idris told a forum discussing the framework in Kuala Lumpur on Monday that "our deadline is our deadline".

The document marks another key milestone in the development of Islamic finance in Malaysia and also another first for Malaysia in the global Islamic finance arena.

In the 50-page document, the central bank said it has developed the framework with "the primary objective of enhancing the role of the board, the Shariah Committee and the management in relation to Shariah matters, including enhancing the relevant key organs having the responsibility to execute the Shariah compliance and research functions aimed at the attainment of a Shariah-based operating environment".

The framework is applicable to all Islamic bank licensed under Islamic Banking Act 1983 (IBA), takaful and retakaful operators registered under the Takaful Act 1984 (TA), financial institutions licenced under the Banking and Financial Institutions Act 1989 (BAFIA) that participates in the Islamic banking scheme, and development financial institutions prescribed under the Development Financial Institutions Act 2002 (DFIA) that participates in the Islamic banking scheme.

"The new framework is more comprehensive and provide guidance on Shariah audit, Shariah review, Shariah risk management and Shariah research function," said Mohammad Faiz Azmi, who leads the PricewaterhouseCoopers Global Islamic Finance Team and is also the chairman of the Malaysian Accounting Standards Board.

Speaking at the forum on Monday, organised by ZI Shariah Advisory Sdn Bhd which is the Shariah arm of legal firm Zaid Ibrahim & Co, he said the framework also has "stricter requirements" in terms of qualification.

He said paper qualification was not mandatory in the old framework but the new framework requires that the majority of members in the Shariah Committee shall at least hold a bachelor's degree in Shariah from a recognised university.

The new framework replaces Guidelines on the Governance of Shariah Committee for IFIs issued in 2004.

At the same forum, International Shariah Research Academy for Islamic Finance (ISRA) senior researcher Prof Dr Ashraf Md Hashim pointed out that one of the special features of the new framework is the inclusion of a clause for succession planning for Shariah Committee members.

In section four of the framework, it states: "The IFI should develop a succession planning programme for the Shariah Committee members by identifying, hiring and nurturing new members with the view to entrusting them with greater responsibilities as and when appropriate."

The first objective of the new framework is to set out the expectations of BNM on IFIs' Shariah governance structures, processes and arrangements to ensure that all its operations and business activities are in accordance with Shariah.

It also intends to provide a "comprehensive guidance" to the board, Shariah Committee and management of IFIs in discharging its duties in matters relating to Shariah, and outlines the functions relating to Shariah review, Shariah audit, Shariah risk management and Shariah research istitutions are still behind the curve on full implementation of the framework which includes establishing an 'end-to-end Shariah-compliant control mechanism' for all aspects of their business operations.

(This story appeared in The Malaysian Reserve on 16 February 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)

New set-up ASAS to assist in Shariah matters soon

By Farah Saad
A NEWLY-ESTABLISHED Association of Shariah Advisors (ASAS) will begin operations within the next few months to assist Islamic financial institutions (IFIs) to ensure the effective implementation of Bank Negara Malaysia's (BNM) recently released Shariah Governance Framework (SGF).

"We have submitted the application to the Registrar of Societies to make it an official establishment and are now awaiting approval," said Prof Ashraf Md Hashim after a dialogue on the Shariah Governance Framework for Islamic Financial Institutions, in Kuala Lumpur on Monday.
Besides being a source of reference for IFIs on Shariah matters, ASAS will help maintain standards of competence and conduct of the Shariah advisory services in accordance with its code of conduct.

ASAS will also assist regulators and relevant authorities in the appointment of Shariah advisors. Currently, ASAS is operating as a pro-tem committee, chaired by Asst Prof Dr Aznan Hasan, assistant professor in Islamic Law and a member of the Shariah Advisory Council of Bank Negara Malaysia, and Ashraf himself as deputy chairman.
Pending the association's success in Malaysia, Dr Ashraf is optimistic the concept would catch on internationally, with Shariah advisors from around the world joining to form an international version of ASAS.
"We will start in Malaysia, while we are weighing out the pros and cons, before we go international. If it is done properly, other countries will follow," he said.

ASAS is considering a twotiered membership structure, where Shariah scholars can either be full members or associated members, Ashraf said.
He was speaking to The Malaysian Reserve after the dialogue hosted by ZI Shariah Advisory Services Sdn Bhd, the Shariah arm of law firm Zaid Ibrahim & Co's.
The event was held to discuss the on-going implementation of BNM's SGF. IFIs have till end-June months to ensure all their operations are in accordance with the framework.

[The Malaysian Reserve, 16 February 2011]

Launch of the Islamic Globe e-newspaper

DUBAI: The Islamic Globe, touted to be the world-first Islamic finance e-newspaper, was launched on Feb 16 by global publishing venture called Eaglemont Media.

It is a free weekly e-newspaper delivered to readers on a variety of digital platforms — from the iPad to the iPhone, Blackberry to Kindle, Android to Samsung Tablet as well as PDF.

The new e-newspaper is designed to look like an old fashioned newspaper from the 1950s — complete with yellowing paper and curled edges — to remind readers of a time when quality journalism was the most important part of the reading experience, according to a statement by its publisher.

"Much of the media that has addressed this market in the past has been filled with regurgitated press releases and advertiser-friendly PR (public relations). The Islamic Globe seeks to tell the truth with no bias and no slant," said its founder and editor Paul McNamara.

Anxiety over Qatar: It's 'wait and see' over in Malaysia

As Qatari markets are still reeling from its central bank's ban on Islamic banking windows, the Islamic finance industry in Malaysia watches the developments unfold with a measure of trepidation.

Earlier this month, Qatar Central Bank (QCB) issued a circular to convent ional banks with Islamic banking arms in the emirate to close their Islamic operations by end-2011.

Although, in general, Malaysian Islamic banks are not directly impacted by Qatar's announcement, the move took most market players by surprise. For now, though, the industry seems to have adopted a wait-and-see stance as the policy is implemented.

"There has not been clarification from QCB at this stage, so the industry will need to wait and see how QCB will implement this," Deloitte Corporate Advisory Services global Islamic finance leader Daud Vicary Abdullah told The Malaysian Reserve in a telephone interview.
He said QCB had earlier flagged a move in the direction, but had initially indicated that a maximum percentage of Islamic finance business was permissible at a conventional institution.
"The directive to shut it down came as a bit of a surprise," he said.

In a report posted on the website of law firm SNR Denton, it said the circular followed an earlier decision in August 2010 by the regulator requiring the assets of Islamic banking operations to be limited to 15% of a conventional bank’s total assets.
QCB's motives, according to the circular, is to ensure that conventional and Islamic banking operations become entirely segregated, in full compliance with Shariah principles.
To this end, a Malaysian-based lawyer believes that the Qatari regulators would have made the decision "upon due considerations".
"Islamic windows within a conventional banking set-up basically create a shadow-banking operation, ie the formation of a bank-within-a-bank, which makes it quite opaque for the regulators to supervise and monitor the bank's operations as well as the risks associated with it," said Madzlan Hussain, a partner and head of Islamic financial services practice at Zaid Ibrahim & Co.

Perhaps this was amongst the issues bothering the regulator's mind, he said.
In implementing the policy, Madzlan sees the year-end deadline given by the regulator for Islamic windows to wind down as 'challenging', as any such radical change requires the market to be adequately prepared with appropriate infrastructures.
"Here we are not only looking at the market readiness in terms of its human capital and financial capacity to adapt to such change, but quite importantly, whether the public themselves are ready to adapt to such change?" he said.

Reports have indicated Qatar's directive is a step towards emulating Malaysia's comprehensive Shariah framework for its Islamic banks.
Malaysia, which has adopted a dual financial system comprising conventional and Islamic systems under its new central bank laws, has in place an established regulatory and supervisory framework for standalone banks and subsidiaries offering Shariah-compliant products.
Most countries practicing Islamic finance do not yet have such legal framework in place. As such, major policy decisions such as the one made by Qatar should be approached cautiously, said one Islamic banker.
"Surely the regulator does not want to shock the market and cause it to destabilise. There is no one-size-fits-all answer to some of these issues; every policy decisions must take into consideration the specificities of each jurisdiction," the banker said.

(This story appeared in The Malaysian Reserve on 21 February 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)

Sunday, February 13, 2011

Qatar banks under pressure

Qatar's central bank has ordered commercial banks to close Islamic banking operations by the end of 2011. Image Credit: ReutersThe decision by the Qatar Central Bank to order conventional banks in the country to close their Islamic banking operations by the end of the year — without a detailed explanation — may be harmful to the financial services industry in the country and the region, reports Gulf News (February 13, 2011).

Many international and local conventional banks in Qatar have reportedly invested in setting up Islamic finance operations which they may now have to shut-down at some cost. But perhaps of greater concern is that by not immediately providing clear reasons for the step, the central bank has created uncertainty in the financial services industry in the country — which may deter further investment.

The shares of some Islamic-only banks listed in Qatar strengthened on the news of the ban, on the back of speculation that they would be able to pick up assets conventional institutions may be forced to sell cheaply. It is expected that shares in conventional banks in Qatar will remain under pressure until the issue is resolved.

And, although it might seem unfair, given the different national regulatory authorities, the uncertainty is likely to spread to the entire Islamic finance industry, which spans the region and the world. While the Gulf is an important centre for the global Islamic finance industry, those countries in Asia, among others, also trying to win market share, will be quick to take advantage of any regulatory uncertainty that will make investors look for new destinations.

The global financial crisis showed that Islamic banking is as vulnerable to sentiment and the state of the world economy as conventional banks. While it may be within their rights, governments must at all times institute regulations and policies with a restrained hand. Without a clear and stable operating environment, both Islamic and conventional banks will suffer.

Qatar Tells Conventional Lenders To Stop Islamic Ops

Qatar's central bank-Qatar's central bank has ordered conventional lenders operating in the gas-rich Gulf Arab state to shut down Islamic finance activities by the end of 2011, two bankers familiar with the situation said Sunday, in a move that could curb an important source of income for many banks, reports Zawya Dow Jones (Monday, Feb 07, 2011).The central bank earlier this month sent a memorandum to non-Islamic lenders operating in Qatar asking them to close their Islamic units without providing a reason for the decision, according to two senior banking officials, who reviewed the document. The move is seen to benefit the pure Islamic players such as Masraf Al RayanMasraf Al Rayan and Qatar Islamic Bank (QIB), whose shares rose 10% and 8.4% respectively, the report added.

"We expect banks to convert or restructure Islamic corporate loans into conventional loans, wind down or sell their Islamic loans," the report quoted Jaap Meijer, Dubai-based head of the banking team at AlembicHC research.
A Qatar central bankQatar central bank official, who declined to be named, confirmed that the memorandum was issued but declined to provide further details.

The report added:

Meijer said the biggest impact would be on Qatar National BankQatar National Bank, as 12% of its assets, 16% of its loans and 9% of its profits are derived from Islamic finance. QNBQNB's shares lost nearly 5%. Doha BankDoha Bank and Commercial Bank of Qatar would also be affected by the central bank move, he added.
"QIB could be key beneficiary as it currently has 50% market share in Islamic finance. If it captures just 50% of loans of the big three, this could boost loans by around 35%," Meijer said.
While analysts and bankers are assessing the impact of the central bank's decision, few can offer an explanation of the motive other than that the country's authorities want to separate the product offering of conventional banks and shariah-compliant lenders.
"We don't know the real reason, the picture is still unclear," one of the Qatar-based bankers said.