Monday, September 9, 2013

TMR: Amanie plans sukuk for Australian business

By Kazi Mahmood

Amanie Advisors Australia Pte Ltd, which is part of the Malaysian Amanie Advisors Group, has proposed to integrate Islamic finance into the Australian business environment as the country eyes more business opportunities from the Middle East region.

Amanie founder and group chairman Dr Mohd Daud Bakar said the company has proposed to raise multiple short-term sukuk to cover Australia’s manufacturing ecosystem as part of the strategy to win funds from the Gulf area.

“This is about the funding of the entire process of production from the mining of coal or the growing of seeds for plantation, up to the packaging and the exporting of the end products,” Dr Mohd Daud said.

He said one advantage of sukuk, for example, is that the paper can be created while the coal is being extracted because Islamic finance is based on real economic activities.

“We are looking at tangible assets, high quality of assets to be funded by Shariah-compliant process. In the case of electricity, we want to look beyond the independent power providers,” he said.

Dr Mohd Daud said the structures used in Islamic finance transactions mirror very closely the types of funding that are currently in demand in Australia, particular with respect to real economic activity which include leasing, financing of mining activities and farming.

Amanie Advisors Australia has recently obtained an Australian Financial Services Licence (AFSL) from the Australian Securities and Investment Commission, which is the financial markets regulator.

“We are offering a value proposition of the value chain which involves the entire ecosystem touching the real economic activities and funded by global Islamic investors,” Dr Mohd Daud said, adding that it was time to look at the value chain rather than the end of the road of the product.

The revolutionary idea will be a totally new way of approach in the Islamic finance industry, which seems to have been well accepted in Australia following Amanie’s launch of its Australian arm in the country.

Currently, Islamic finance tends to raise funds for the manufacturing processes in factories and funds projects that deal with the end products rather than the original sourcing of the raw materials and so on.

The idea involves funding from the whole value chain of any business, for examples electricity production. The company said it wanted to find out from where the electricity was being produced or sourced out. Is it from coal, the sun, water or waste products?

“The aim is to get involved from the coal mining process to the transformation of the coal into burn material and shipment of the coal to the buyers,” Dr Mohd Daud explained.

This process alone can be divided into several phases and it involves various funding processes in which Amanie can be involved in the funding through outsourcing from the Islamic finance and banking sector.

Amanie sees opportunities for its advisory services in many parts of the economy, particularly in natural resources investments.

It can obtain financing requirements from investment banks and Islamic banks, create the instrument and enlist the banks to arrange the finance and bring the transaction to the Islamic capital market.

The short-term sukuk will involve the banks in the value chain, reduce the dependency of farmers and producers from conventional or private funds though the risk is quite high but the third party acts as the underwriter.

“In the end, the banks and the Islamic finance agencies have to be more creative to make the structure strong enough to mitigate the risks,” he said.