Hong Leong to expand Islamic banking branches

By JASON NG
Hong Leong Bank Bhd (HLB), which posted a 19.5% net profit growth for its financial year ended June 30, 2008 (FY08), is looking to open up to five more standalone Islamic banking branches. Currently, it has only two full-fledged Islamic banking branches on top of over 180 HLB convent ional banking outlets nationwide operating as Islamic banking branches.
"We will further push new capabilities into Islamic insurance as well as create greater awareness and support the growth of key areas in Islamic wholesale and investment banking," said its group managing director and chief executive Yvonne Chia.
HLB posted a net profit increase of RM741.82 million compared to RM620.79 million a year earlier. Its revenue increased 14.14% to RM2.02 billion from RM1.77 billion in FY07 with net interest income surging 19% to RM1.38 billion while its Islamic banking sector income grew 11.1% to RM160 million.
-- The Malaysian Reserve, p9, Aug 27, 2008

Spore-based IBA to play an active role in Malaysia

By Habhajan Singh
The Islamic Bank of Asia (IB Asia), a unit of Singapore's DBS Bank, intends to play an active role in Malaysia, one of the key international hubs for Islamic finance.
The first Islamic bank to be established in Singapore will certainly play a role in neighbouring Malaysia as it was conceived as a regional bank, said its chief executive officer Vince Cook.
"We cannot be credible as a regional bank unless we are active in the most developed Islamic finance market in the region. So, we have to be active in Malaysia," he told The Malaysian Reserve in a recent interview.
However, he admitted that without a local licence, the bank's activities are limited, but it has "taken a number of equity-based opportunities", including when companies are looking for strategic partners or new business partners, or even new equity investors.
"This is something that we are very happy to do," he said.
IB Asia has the option of following the path taken by Unicorn International Islamic Bank Malaysia Bhd (Unicorn Malaysia), which became the first Islamic bank licensed under the Malaysia International Islamic Financial Centre (MIFC) initiative. It could also collaborate with local partners.
"We are now at the analysis stage," Cook said when asked to elaborate on the bank's plan for its operations in Malaysia. The unit of South-East Asia's biggest bank by assets has been an aggresive player on the Islamic finance front in this region since it was established in May 2007.
In May 2008, IB Asia announced that it had signed over 20 significant cross-border capital transactions worth more than US$500 billion (RM1.62 trillion) in its first year of business. IB Asia has committed US$200 million of deals in the first quarter (1Q) of 2008, DBS Group Holdings Ltd said in a statement. Among the deals inked are for it to act as the mandated lead-arranger in a US$250 million syndicated Mudaraba financing facility for Tamweel PJSC, a United Arab Emirates-based Islamic mortgage company.
Headquartered in Singapore, IB Asia is a joint venture between DBS Bank and 34 investors from families and industrial groups based in the Gulf Cooperation Council (GCC) countries. DBS holds a majority stake of 50% plus one share. The bank opened its representative office in Bahrain in conjunction with its first anniversary in June 2008.
Cook said the bank is now on focusing on building a robust platform in wealth management and structured product activities.
In its first year of operation, IB Asia focused on establishing itself in the wholesale financing markets and developed a platform of financing structures including trade finance and large-scale syndications. It also built a range of treasury services from the provision of foreign exchange to money market activities.
(The Malaysian Reserve, p32, Aug 25, 2008)

Indonesia’s sukuk spur

The Indonesian government’s first-ever Islamic bond sale later this month will administer a long-awaited jolt to the moribund Shariah financing sector in the world’s most populous Muslim nation, reports Dow Jones Newswires on Aug 17.
After years of planning, the Ministry of Finance on Aug 13 held meetings with institutional investors in the East Javanese capital of Surabaya and the resort city of Bandung and will kick off the main public roadshow Thursday in Jakarta, it said.
The wire service said the rupiah-denominated bond, set to price on August 26, is likely to be for around $1bn and will be followed by a similarly sized US dollar-denominated offering by mid November.
On the structure, it said the government’s upcoming deals will use the ijarah, or lease, structure backed by 18.37tn rupiahs (US$2bn) worth of land and buildings that the government has set aside.
On Aug 14, Rahmat Waluyanto, treasury director general at the ministry, told reporters that the government had not set the target return for the offering. Conventional treasury bonds with the same maturity will be used as a proxy to set the return on the paper, according to Reuters.
PT Mandiri Sekuritas, PT Trimegah Securities Tbk, and PT Danareksa Sekuritas were appointed as the selling agents for the domestic offering.
On July 18, newswires reported that the republic had postponed its first US dollar sukuk issuance to Nov 2008. Earlier, on June 30, The Malaysian Reserve reported that HSBC Amanah, through its Kuala Lumpur-based Islamic finance practice for the Asia Pacific, was in the running to play a leading role in Indonesia's proposed US$1 billion (RM3.26 billion) global sukuk issuance.

UK's Iqbal on takaful at IIUM

Aug 15 | 3-5pm | Venue: Am Bank II, Management Centre IIUM
Iqbal Asaria, a member of the Bank of England’s Governor’s working party set up to facilitate the introduction of Shariah-compliant financial products in the UK market, will today [Aug 15, 2008] give a talk on takaful/retaful at the International Islamic University Malaysia (IIUM). Iqbal, currently an associate at Afkar Consulting Ltd, UK, and Yasaar Ltd's head of European operations, was former Chair of the Business and Economics Committee of the Muslim Council of Britain (MCB) and had worked as an investment analyst in the City of London for several years.
The talk is part of the 18th ISLAMIC BANKING & FINANCE DISCUSSION SERIES organised by IIUM Institute of Islamic Banking and Finance (IIiBF).

Malaysia's ISRA to focus on market research

By Habhajan Singh & Halim Wahab
The International Shariah Research Academy for Islamic Finance (ISRA), a newly established body by Malaysia's central bank, will not become a standard-setting body, says its head Dr Mohamad Akram Laldin.
The research outfit funded and backed by an endowment from Bank Negara Malaysia (BNM) will conduct research concerning issues in the fast-growing field of Islamic finance and support existing local and international standard-setting bodies.
"If we have too many standard setting bodies, it may create confusion," its executive director Dr Mohamad Akram told The Malaysian Reserve in one of his first interviews.
On March 26, in a forward looking step to fortify the country's lead position in Islamic finance, the central bank announced the establishment of the ISRA to spearhead research in Shariah issues.
Its establishment marked yet another proactive measure from the central bank in the sector. The size of the global sukuk market, including sukuk denominanted in local currencies, stood at approximately US$82 billion (RM262.72 billion) as at end-2007.
On its statement, BNM said the ISRA will be part of the International Centre for Education in Islamic Finance (INCEIF), which would enable it to leverage on the university's existing infrastructure and facilities as well as tap into the knowledge, expertise and resources of the academic faculty and post graduate students. The move also comes as BNM, which supervises Islamic banks and takaful operators along with their conventional counterparts, attempts to raise the profile of the Malaysia International Islamic Financial Centre (MIFC) initiative that began in 2006.
Mohamad Akram said key early initiatives to be undertaken by the ISRA are bridging the perceived gap between the Shariah views of Malaysia and the Middle East, promoting new Shariah based products through innovation, inculcating a sharing culture among industry players and conducting market relevant research for Islamic finance. (The Malaysian Reserve, Aug 11, 2008)

(FOR FULL STORY AND INTERVIEW, PLEASE EMAIL: reserve.hab@gmail.com)

Furqan forum: Shariah boards should include various experts

By Habhajan Singh
Shariah boards of Islamic financial units must comprise experts from various related fields and not be confined to Shariah experts, says a former Shariah scholar.
Prof Dr Md Masum Billah, a former International Islamic University Malaysia scholar and now group executive chairman of Hong Kong-based Middle Eastern Business World, said that Shariah boards should allow financial institutions to integrate additional experts in the areas of politics, social and economics.
"Shariah is not only at the micro level but (should be practised) at the macro level as well," he told participants of an Islamic finance forum organised by Furqan Research in Kuala Lumpur yesterday.
In practice, most Islamic banks and takaful operators have Shariah boards to advise them on matters related to Shariah. These positions are held primarily by Shariah scholars with a good number of them coming from universities. In Malaysia, for example, the IIUM is a hunting ground for Islamic financial institutions looking for Shariah advisors.
One example is Dr Uzaimah Ibrahim, currently an Assistant Professor at IIUM's Ahmad Ibrahim Kuliyyah of Laws, who sits on the Shariah board of Hong Leong Islamic Bank Bhd (HLIB). She was one of the panelists at the forum.
HLIB's Shariah Advisory Committee (SAC) is chaired by Dr Ab Mumin Ab Ghani, from University Malaya. He currently heads the Department of Shariah and Management at the Academy of Islamic Studies.
The bank's board, according to information available on its website, holds monthly meetings where members review and comment on the principles, contracts and transactions relating to all proposals, applications and issues submitted by the bank.
HLIB said that it strives to ensure that the SAC understand the matters well so as to proper advices, rejections or approvals on the submissions.
Dr Mohammad Akram Laldin, executive director of International Shariah Research Academy for Islamic Finance (ISRA), said that the academy is attempting to bridge the gap between market practitioners and Shariah scholars.
"One thing that I would like to tell industry practitioners: don't hide anything from the Shariah board," he told the forum.
Dr Mohd Akram was making references to potential attempts to get the Shariah-compliant badge from scholars by withholding key information.
Some of the other panelists at the forum were IIUM's Prof Muhammad Aarif Zakaullah, Megat Hizaini Hassan from legal firm Zaid Ibrahim & Co and Prof Hashim Kamali from International Institute of Advanced Islamic Studies (IIAIS).
The key speaker at the forum was Prof John L Esposito, a professor of International Affairs and Islamic Studies at Georgetown University and author on numerous books on Islam, including Islam and Politics published in 1984.

Regional regulators at MIF2008

MIF 2008, the flagship programe of Red Money, starts on Monday (Aug 11) will gather a number of regional regulator chiefs. Besides regulars Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz and Securities Commission Malaysia chairman Datuk Zarinah Anwar, it has also attraced the participation of Securities and Futures Commission Hong Kong chief executive officer Martin Wheatley and Qatar Financial Centre managing director Desmond Holmes.
The 3-day programme will feature specific discussions for issuers, investors and equity players. One of the issues slated for discussion in Day One is the rise of potential new Islamic financial centers in Hong Kong and Singapore.

2008 Global Forum on Islamic Finance - KL

Aug 7 | Shangri La Hotel, Kuala Lumpur
Organised by Furqan Research, the forum is chaired by Prof Dr Malik Muhammad M Al-Awan, former chief academic officer & dean of the faculty at International Center for Education in Islamic Finance of Malaysia (INCEIF).
Besides the usual suspects, some names at the forum are:
* Prof Dr Mohammad Hashim Kamali (President/CEO of the International Institute of Advanced Islamic Studies, IIAIS)
* Sridharan Nair (Partner, PricewaterhouseCoopers, currenly lead of its insurance specialist group)
* Mohammad Izani Ghani (SVP, Khazanah Nasional, who has been instrumental in the issuance of landmark exchangeable sukuks for Khazanah).
The keynote address is by Prof Dr John L Esposito, Professor of Religion and International Affairs and of Islamic Studies at Georgetown University. He is the founding director of the Prince Alwaleed Bin Talal Center for Muslim-Christian Understanding in the Walsh School of Foreign Service.

Azahari goes to Asian Finance Bank?

By Habhajan Singh
Investment banker Datuk Mohamed Azahari Kamil is set to helm the Asian Finance Bank (AFB), a fully-fledged Islamic bank set-up by a foreign consortium in Malaysia, according to sources.
It is understood that the Islamic financial house, a unit of Qatar Islamic Bank SAQ (QIBK), has submitted Azahari's name to Bank Negara Malaysia (BNM) for approval.
Azahari was just recently apointed as the managing director and chief executive officer of AmanahRaya Investment Bank Ltd Labuan (ARIBL). Before the appointment on June 2, he was CEO/MD of AmanahRaya-JMF Asset Management (ARJMF), of which he is still a non-executive director. Its parent, Amanah Raya Bhd (ARB), is Malaysia's premier trustee company owned by the Minister of Finance Incorporated (MOF Inc).
The process to get regulatory approval began recently and could take up to three months, based on past approval processes overseen by the central bank. BNM supervises the banking industry, including the Islamic finance outfits. If cleared, it is understood that Azahari would take over as AFB's chief executive officer, a position recently vacated by Faisal Alshowaikh.
It is understood that Faisal, who was appointed the bank's CEO in July 2006, is joining an outfit in the Middle East.
"It would be a new venture for Azahari. His contacts and connections in the Middle East, which he has built over the years, will come in handy," said one banker, who had heard market rumours of Azahari's impending move to AFB.
Azahari should be somewhat familiar with AFB as ARIBL has been working with the bank since last year to set up the first Shariah-compliant shipping fund in Malaysia worth RM1 billion.
AFB is backed by a consortium of leading Middle Eastern financial institutions comprising Qatar Islamic Bank (70%), RUSD Investment Bank Inc of Saudi Arabia (20%) and Global Investment House of Kuwait (10%). It has an authorised capital of RM1 billion while its current paid-up capital is RM355 million.
The Islamic bank plans, in the long run, to offer a complete suite of Syariah-compliant products covering consumer, commercial (including small- and medium-enterprises and trade finance), corporate, treasury and investment banking. AFB is the third foreign Islamic Bank to start local operations after Saudi Arabiabased Al Rajhi Banking & Investment Corp (Malaysia) Bhd and Kuwait Finance House (Malaysia) Bhd.
With Faisal's absence, AFB chief operating officer Daud Vicary Abdullah is currently its acting CEO. Other key players in its management team are Ismail Aminuddin who heads its domestic banking, Balasubramaniam Veloosamy (internal audit), Azidy Daud (treasury) and Norazilla Md Tahir (finance).
Azahari is a chartered accountant by training with more than four decades experience in accounting and management consulting. He received his banking diploma from Institut Teknologi Mara (UiTM) in 1980 and subsequently obtained his BBA (Finance) from the Western Michigan University in 1982.
He then went on to secure his MBA (Finance) from the Central Michigan University in the US in 1984. Before joining JMF Asset Management Sdn Bhd in 1994, he had stints with PB Securities Sdn Bhd, Kimara Equities Sdn Bhd and Island and Peninsular Bhd.
He started his career with the Malaysian French Bank in 1984 as a credit and marketing officer after which he joined the Malaysian Industrial Development Finance Bhd in 1985 as a project officer.
(The Malaysian Reserve, Aug 4, 2008, p32)