Noripah teaching Islamic finance at Drake University

By Habhajan Singh

Datuk Noripah Kamso, who played a key role in shaping the asset management business at CIMB Group Holdings Bhd, including setting up its Islamic asset management business, is now a regular feature at the US-based Drake University.

Since 2013, Noripah has been engaged by the Iowa university for Islamic finance-related programmes.

At the moment, Noripah is the global practitioner in resi- dence at the university’s Principal Financial Group Centre for Global Citizenship, where she handles one semester on the Islamic capital markets for an executive MBA programme. She also handles some under- graduate programmes.

“The students are brilliant. We cannot just do a smoke and mirrors or merely provide them some motherhood statements. They challenge you,” she tells The Malaysian Reserve when met at the Securities Commission Aidilfitri open house last Friday.

CAPTION: Noripah (centre) holding her book with Larry Zimpleman (right), the chairman of the PFG and his wife. Zimpleman wrote a foreword in the book authored by Noripah.

The Principal Financial Group Centre for Global Citizenship educates students to function effectively in differ- ent cultural contexts, and to see their own culture from the perspective of others, according to information on its website.

In 2011, the Principal Financial Group (PFG) provided a gift of US$2.5 million (RM9.55 million) in support of the centre, hence the addition of the corpo- ration’s name to the centre.

In Malaysia, PFG made its presence with its tie-up with the CIMB Group on the asset management front.

Aside from teaching, Noripah said she is also involved in mentoring students and pro- viding Islamic finance knowl- edge to the local community of Des Moines, the capital and most populous city in the US state of Iowa.

Noripah was the CEO of CIMB-Principal Islamic Asset Management Sdn Bhd from 2008 to 2012.
During this period, she had established a global platform for the firm to extend its reach to the UK, Europe, Gulf Coop- eration Council, Asia, the US and Australia, according to information on her LinkedIn profile.

Prior, she was the CEO of CIMB-Principal Asset Man- agement Bhd from 2004 to 2008.

She is the author of “Investing in Islamic Funds — A Practitioner’s Perspective” published by Wiley & Sons in 2013.

[This article first appeahttp://themalaysianreserve.com/new/story/noripah-teaching-islamic-finance-drake-universityred in The Malaysian Reserve on 27 July 2015]

Tunisian firms prepare to issue Islamic bonds - Reuters

Tunisian firms are preparing to issue Islamic bonds as the government finalises rules covering the sector, creating a new funding option for companies in an economy buffeted by labour unrest and militant attacks, reports Reuters dated 3 Aug 2015.

Islamic finance - which bars interest payments in accordance with Islamic, or sharia, law - accounts for just 2.5 percent of Tunisia's financial sector and was a low priority under autocratic leader Zine El-Abidine Ben Ali, who was toppled in 2011.

But successor governments have been seeking to develop the industry, partly as a way to gain access to pools of sharia-compliant capital in the wealthy Gulf.

With the encouragement of regulators, the country's first Islamic lender Banque Zitouna - founded in 2009 by Ben Ali's son-in-law - plans to open 100 branches over the next five years and El Wifack Leasing aims to become the country's third full-fledged Islamic bank by August.

The government is preparing to issue its first sovereign sukuk - Sharia-compliant bonds - this year and has worked out rules for the sector, Amel Azzouz, Tunisia's secretary of state in charge of international cooperation, said.

"We are now finalising an integrated legal framework dedicated solely to Islamic finance, to serve as a regulating mechanism," Azzouz said during the annual meeting of the Jeddah-based Islamic Development Bank Group, according to a transcript.

The IDB is helping to establish an Islamic microfinance institution in Tunisia, she said.

Mohamed Frad, board member at Tunis-based Best Lease, a commercial leasing firm, said finance ministry rules covering issuance of corporate sukuk were expected within months.

Best Lease aims to raise up to 30 million dinars ($15.6 million) to finance its growth, with Banque Zitouna and El Wifack Leasing also considering sukuk issues, said Frad, also general manager of United Gulf Financial Services North Africa, a Tunisian company which provides corporate finance services.

"A law exists but we need the practical rules. When this is done then these financial institutions will issue sukuk," said Frad, adding aggregate issuance of Tunisian corporate sukuk could initially reach 100-150 million Tunisian dinars ($51-$76 million).

"Before the end of the year, Zitouna and Best Lease will be able to issue."

Australia's Waratah Resources to launch Islamic commodities venture

Sydney-based Waratah Resources Limited plans to launch an Islamic commodities trading business as it shifts focus from Asian markets to the Middle East, the company said in a statement.

The move adds to a growing number of firms keen to tap into an Islamic finance market that is developing beyond its traditional homes in the Middle East and southeast Asia, reports Reuters (15 April 2015).

IN ITS ASX ANNOUNCEMENT DATED 14 APRIL 2015, THE COMPANY SAID:

WARATAH RESOURCES LIMITED AND AMANIE HOLDINGS LTD SIGN JOINT VENTURE AGREEMENT

Following the announcement on 31 March 2015, Waratah Resources Limited (ASX:WGO) (“Waratah” or “the Company”), is pleased to announce that it has signeda Joint Venture Agreement with Amanie Holdings Ltd (“Amanie”), a global Shariah advisory and investment group, for the purpose of funding its commodity trading business.

Under the terms of the Joint Venture Waratah and Amanie will form an incorporated Joint Venture vehicle to be known as Ausmal Synergy Limited, which will be domiciled in Labuan, Malaysia, to develop and integrate a commodities trading business. The parties will be equal shareholders in the new joint venture company and will each hold 50% of the issued shares in the new company.
Waratah and Amanie look forward to a long, enduring and mutually beneficial relationship together as they create a global commodity trading business.

Ben Kirkpatrick, Executive Chairman Waratah Resources commented:

“The Waratah team has worked very hard to get to this stage and I am pleased that we have been able to sign the Joint Venture Agreement with Amanie so soon after entering into the non‐binding letter of intent.
I look forward to working with Amanie and feel that Amanie’s in‐depth knowledge, experience and business network will be extremely beneficial as we continue to grow our global commodity trading business.
Our next goal is to secure funding arrangements with partners who have been introduced by our Shariah partners over the past few months, to provide the required capital for our Joint Venture vehicle, Ausmal Synergy Limited.”

ABOUT THE COMPANY

Waratah Resources Limited is an ASX Listed Company (ASX: WGO) that generates value for its shareholders by identifying and acquiring projects that have significant discovery and development potential. Waratah has two separate though synergized divisions: a commodities trading division which sources, manages and trades commodities from Indonesia to large scale end users throughout Asia, with a new focus on the Middle East; and a resource projects group which is discovering resources in iron ore, copper, gold and coal with a focus on Indonesia and Gabon in West Africa.

ABOUT AMANIE

Founded by Datuk Dr Mohd Daud Bakar, Amanie Holdings consists of companies that are building its capacity to accelerate the growth of Islamic finance industry globally. With a wide range of associated companies under its wing, Amanie is well placed to take Islamic finance to the next level. Currently the team from Amanie comprises of a number of professionals from diverse background (Shariah, investment banking, legal, economics, capital market, funds management) across offices in Melbourne, Dubai, Luxembourg, Kuala Lumpur, Astana, Cairo, Dublin, Muscat, Seoul, Tunis and Casablanca that focuses on Shariah structuring , corporate and capital advisory. Amanie’s uniqueness is its independence and relationship‐driven business focus. Amanie currently serves institutional, corporate and financial institutional clients.

THE REUTERS REPORT ADDED:

In September, Goldman Sachs raised $500 million in a debut sale of Islamic bonds, or sukuk, with proceeds of the deal to be used in its commodities business of J. Aron & Co.

Islamic commodity trading plays an important role in the sector as a source of short term funds for Islamic banks, which cannot use conventional interbank money markets because of Islam's ban on interest.

They have mainly used commodities from the London Metal Exchange to structure such short-term funding deals, typically through commodity murabaha contracts, a common sharia-compliant financing structure.

Islamic financing has struggled to get a foothold in Australia due in part to tax issues. Structures such as sukuk can attract double or even triple tax charges because they require multiple transfers of title of the underlying asset.

AN EARLIER ASX ANNOUNCEMENT BY WARATAH RESOURCES DATED 31 MARCH 2015:

WARATAH RESOURCES LIMITED AND AMANIE HOLDINGS LETTER OF INTENT

Waratah Resources Limited (ASX:WGO)(“Waratah” or “the Company”), announces that it has entered into a non‐binding letter of intent with Amanie Holdings (“Amanie”), a Global Shariah, boutique advisory house, to form a Joint Venture for the purpose of funding its commodity trading business.

Waratah is developing its presence in the commodity space and views the long term potential with Amanie very positively. The intention is for Amanie to assist in the provision of the necessary finance and other commercial relationships that will allow Waratah to rapidly expand its trading business.

Amanie is one of the global leaders in Shariah advisory and consultancy services, setting the standards in terms of performance, transparency and long term commitment to its business and clients.
Negotiations are underway with Shariah compliant institutions and foreign banks for the future funding of commodity transactions, undertaken by the Waratah and Amanie Joint Venture.

The parties intend to diligently work together to execute and complete a binding Joint Venture agreement that will contain, among other things, terms covering the following issues:

 Establishment of the Joint Venture vehicle;
 Voting rights in respect of the Joint Venture;
 Funding of the Joint Venture;
 The respective rights of the parties ‐ it is currently expected that each party will own 50% of the Joint Venture;
 Dispute resolution provisions; and
 Other terms normally associated with such agreements.

The parties anticipate that the Joint Venture documents will be agreed as soon as possible.

Waratah and Amanie look forward to a long, enduring and mutually beneficial relationship together as they create a global commodity trading business.

Dr Mohd Daud Bakar, Executive Chairman of Amanie Holdings commented:

“The Joint Venture is indeed a very exciting prospect for us at Amanie as it expands the reach of the Amanie Group into a business segment that we have always had a very high regard for and to do it with a reputable partner such as Waratah definitely adds more credence to this venture going forward”.

Ben Kirkpatrick, Executive Chairman Waratah Resources commented:

“We are pleased to update the market on this letter of intent and Joint Venture. We look forward to an enduring relationship with our Amanie colleagues, as together we build a truly global commodity trading house. The Board of Waratah has a diverse range of international business experience and coupled with Dr Daud and his exemplary team and their commercial acumen we have a most exciting future together”.

For further details or enquiries please contact:
Ben Kirkpatrick
Executive Chairman
Waratah Resources Ltd
T: (+61) 9232 6383
E: ben.kirkpatrick@waratahresources.com.au

Halimah Hussain/Megan Ray
Blytheweigh
T: (+44) 207 138 3204
E: Halimah.hussain@blytheweigh.com / megan.ray@blytheweigh.com

Norashikin joins CIMB-Principal Islamic as CEO

By Habhajan Singh

Bank Islam Malaysia Bhd (BIMB) treasury head Norashikin Mohd Kassim is now the CEO at CIMB-Principal Islamic Asset Management Sdn Bhd.

She becomes the third CEO of the Islamic asset manager since it began operating in June 2008.
CIMB-Principal Islamic is a 50:50 partnership between CIMB Group Holdings Bhd and Principal Global Investors, the institutional asset manage- ment arm of the US-based Principal Financial Group.

The outfit was an effort to spin off the Islamic institutional mandates earlier managed by CIMB-Principal Asset Management Bhd.

It is understood that Norashikin has begun her stint at CIMB-Principal Islamic immediately after the holidays for the Hari Raya Aidilfitri.

Norashikin, who was the BIMB treasury director, takes over from Ramlie Kamsari who held the position since December 2012.

Prior to that, the outfit was led by Datuk Noripah Kamso from 2008 to 2012, during which she had established a global platform for the firm to extend its reach to UK, Europe, Gulf Cooperation Council, Asia, USA and Australia, according to information on her LinkedIn profile. Noripah was earlier the CEO of CIMB-Principal Asset Management from 2004 to 2008.

In her career, Norashikin had managed a landmark 30-year sukuk issue for a government authority and also steered the launch of a number of innovative Islamic reasury instruments like the profit rate swap, cross currency swap, Islamic options and Islamic structured investments.

The only person currently listed under “management” at CIMB-Pincipal Islamic’s website is Michael Zorich, its CIO.

In that role, he oversees all Islamic equity and sukuk investments managed by CIMB-Principal Islamic and plays an active role in the management of all global sukuk portfolios, it added.

CIMB-Principal Islamic is one of the 20 licensed Islamic fund managers as at end-2014, with an Islamic assets under management (AUM) totalling RM110.6 billion.

CIMB-Principal Islamic, whose principal activities are to establish and manage unit trust fund and fund management businesses in accordance with shariah principles, had an AUM of RM7.57 billion at end-2013. The AUM for 2014 is not available.

[This article first appeared in The Malaysian Reserve on 27 July 2015]

Wealth management and investment account in Islamic finance

Banks have traditionally played the role of safe custodians of funds for people. This is an essential role to ensure that people have the discipline of saving their funds and planning for their future.

This traditional role of safe custodian faced a reality check during the 2008 financial crisis prompting state level bailouts of financial institutions which consequently resulted in massive reform measures to strengthen the regulation, supervision and risk management of the banking sector globally.

However, in the middle of the tightening regulations on banking, Islamic financial institutions should not lose sight of an important component of Islamic finance and that is the importance of wise financial planning and wealth management.

The necessity for planning has been well documented in human history. A nice story which is documented in the holy Quran goes as follows: “He (Yusuf) said: You shall sow for seven years continuously, then, what you reap leave it in its ear except a little of which you eat. Then, there shall come after that seven years of hardship which shall eat away all that you have beforehand laid up in store for them, except a little of what you shall have preserved. Then there will come after that a year in which people shall have rain and in which they shall press (grapes).” (Quran 12: 47-49).

The story goes that in ancient Egyptian society, the certainty of seven years of good harvest followed by seven years of draught was foretold by the Prophet Yusuf. Subsequently, the king of Egypt believed Yusuf’s interpretation of his dream and put Yusuf in charge of the state treasury. An action plan was executed and the society survived the hard times that came to pass. This clearly indicates that a person needs to work and earn a good living, manage their wealth, plan for the future and spend wisely.

From a Maqasid Al-Shariah point of view, the role of banking can be seen to support the Shariah objective of protection of wealth. As such, in the context of Islamic finance, we can hypothesise that the role of Islamic financial institutions is to develop products that allow for the people, Muslims or non-Muslims alike, to have a better life and civilisation through saving and investing while avoiding the prohibited Riba’ or usurious practices and other harmful and wasteful practices.

One of the first acts of instilling economic discipline by the Prophet Muhammad (pbuh) was to stop the practice of taking usury which was very prevalent during the Jahilliyah times. This was, wisely, done gradu- ally in four phases of the revelation of Quranic verses. This was essential because Riba’ or usury was and still remains among the core elements that destroyed civilisations.

Despite the prohibitions in Quranic revelations, the present global financial system continues to be deeply rooted in usury through the preva- lence of interest-linked debt-based transactions. It is today so deeply rooted in economic systems of nations such that even the tax system incentivises debt by way of tax deductibility for corporations, but such incentives are not accorded to returns from equity investments.

A McKinsey Global Institute report released in February 2015 highlighted that debt relative to gross domestic product (GDP) is now higher in most nations than it was before the 2008 global financial crisis. Since 2007, global debt has grown by US$57 tril- lion (RM217.17 trillion), raising the ratio of debt to GDP by 17%. Govern- ment debt continued to rise. So have household and corporate debt in many countries. These higher levels of debt threaten financial stability and pose a greater risk of a crisis.

On that score, Islamic finance needs to be careful not to allow its growth to be supported by overindul- gence of debt-based transactions. In its 2015 edition of the Islamic Financial Services Industry Stability Report, the Islamic Financial Services Board (IFSB) reported that the global Islamic financial services industry’s assets are estimated to be worth US$1.87 trillion, an impressive 17% compound annual growth rate over five years, yet the composition of “takaful contributions” and “Islamic fund assets” has largely remained stagnant year-on-year at only a touch above 5%.

The takaful and Islamic fund assets components are seen as the sub-sectors of the financial system where the focus of the products is towards financial planning and wealth crea- tion. The “banking assets” and “sukuk outstanding” assets ie which largely consist of debt-based instru- ments, form the remaining 95% of total Islamic finance industry’s assets.

It is due to this fact, that the intro- duction of guidelines on investment account by the Bank Negara Malaysia in March 2014, is an important deve- lopment in the present Islamic finance landscape. It allows an Islamic bank to offer an investment intermediation function towards wealth creation and wealth management. It offers an alter- native source of funds to businesses and entrepreneurs to fund the diverse financing needs of the economy. It also allows financial inclusion by capturing a wider segment of society to be involved in the financial sector and productive sectors of the real economy.

Syed Alwi is the executive VP, Corporate Services Division, at Bank Muamalat Malaysia Bhd. The views expressed here are entirely his own.

[This article by Syed Alwi Mohamed Sultan from Bank Muamalat Malaysia Bhd appeared under his column, Thoughts on Islamic Finance, in The Malaysian Reserve on 27 July 2015]

South Africa further amends Tax Laws for Islamic Instrument

By Naveed

In an amendment to tax laws, the South African government is looking to its listed corporates to build off its sovereign Sukuk issuance last year with the expanded inclusion of Islamic finance instruments within the tax regime.

In 2010, enactments were made in the Taxation Laws Amendment Act of 2010 recognising diminishing musharaka, mudaraba and murabaha as forms of Islamic finance equivalent to traditional finance entailing interest. Subsequently in 2011, the changes were made to the Act to introduce sukuk as another form of Islamic finance limited to Government.

A draft version of the Taxation Laws Amendment Bill, 2015 proposes that the current legislation in respect of murabaha and sukuk be extended to cover listed companies to come into operation on 1 January 2016

Some 1.5% of the population in South Africa is Muslim, though the updated tax laws are aimed more to attract inward foreign investment through capital looking for a Sharia compliant destination, rather than developing a domestic Islamic Banking sector.

South Africa issued its first Sovereign Sukuk in 2014 with a $500 million issuance priced at a profit rate of 3.90%. The issuance was described as “very though” by the Director of Debt Issuance and Management for the National Treasury Republic of South Africa, largely due to the learning curve involved. The South African Treasury has previously stated it may make further sukuk issuances in 2016.

SOURCE: South Africa further amends Tax Laws for Islamic Instruments by Naveed, 24 July 2015 

Book Review: Islamic Capital Markets

By Habhajan Singh

Malaysia has certainly made a mark in some aspects in Islamic capital markets (ICMs). Talk about sukuk, for example, and Malaysia is right at the top.

Now, a Malaysian-based institution has come up with a commendable work that will complement the ICM world.

International Shariah Research Academy for Islamic Finance (ISRA) has put together a team to produce the 758-page book entitled Islamic Capital Markets — Principles and Practices.

One glance and you would want to have the book on your desk, especially if you are involved in ICM. It is beautifully put together.

The ICM, as the book rightly points out, is an integral and greater part of the Islamic financial market, which compliments the whole system of Islamic finance. Aside from sukuk, some key ICM products include Shariah-compliant securities, Islamic unit trusts, Islamic real estate investment trusts (Islamic REITs) and Islamic exchange-traded funds (Islamic ETFs).

To dig deep into them, ISRA had banded an impressive galaxy of experts.

The book is the end product of some 60 writers and reviewers.

Many of them are familiar names in the industry. Kudos to the preparers.

You have the likes of Prof Dr Abbas Mirakhor, the holder of Islamic finance chair at the Malaysian-based International Centre for Education in Islamic Finance (INCEIF).

He had served 24 years at the International Monetary Fund, serving as its executive director before retiring in 2008, before joining INCEIF.

You also have people deeply engaged in the sector. Lawyer Madzlan Mohamad Hussain and banker Rafe Haneef are just two of the fine examples.

Madzlan is a partner and head of ZICO law firm’s Islamic financial services practice.

Rafe Haneef is the CEO at HSBC Amanah Malaysia Bhd.

The texbook combines both the conceptual framework which is based on Shariah principles and the various practices of the ICM operations discussed through exhibits

and case studies.

The 15 chapters cover five major parts: ICM overview, Shariah framework for ICM, general framework, ICM components and finally issues, challenges and future challenges.

Each chapter clearly outlines the learning outcomes. This is a handy guide as to what to expect. Each chapter also ends with a neat summary, a brief explanation of the key terms and concepts, a set of references, suggested further readings, multiple choice questions and a review of questions and problems. That would be handy for students, especially.

The book, co-published with the Securities Commission Malaysia, has a pleasing layout.

The book is certainly a neat, colourful and comprehensive work. It is a must-have item for anyone and everyone even remotely involved in the ICM world.

Original article entitled 'A Must-Have Item For Those Involved In ICM' appeared in The Malaysian Reserve (13 July 2015)

MALAYSIA: Islamic retail banking the next battle ground

By Habhajan Singh

One of the key battle grounds as Malaysia continues its push to deepen the Islamic finance sector is the take-up rate at the retail and household levels.

It is still deemed at the lower end, especially when compared to the Islamic capital markets (ICMs) in the country, according a country report on the sector recently released by the Jeddah-based Islamic Research and Training Institute (IRTI).

“For the lagging retail and household demands for Islamic financial products and services, changes embodied in the Islamic Financial Services Act (IFSA) 2013 are designed to privilege customer protection and financial inclusion, and move Islamic finance to become more risk-sharing, which is hoped to translate into public perception of Shariah-compliant products as more authentically Islamic and also ethical,” noted the report entitled Islamic Finance Country Report for Malaysia 2015.

Dr Azmi (middle) is flanked by (from left) IRTI economist Dr Hylmun Izhar, IDB acting director Kunrat Wirasubranta, IRTI senior economist Dr Turkhan Ali Abdul Manap and research division manager Dr Abdul Ghafar Ismail. (Pic by Habhajan Singh/TMR)

At end-2013, ICMs formed a 56.4% of the overall capital market but Islamic banking assets only reached 21% of total banking assets and takaful only made up a 10% of the whole insurance sector, the report noted.

“In our assessment, the takaful sector will be undergoing the most changes, and the sector has until 2018 to sort out the biggest policy change — separation of family and general takaful business lines,” the report added.

In Islamic banking, the report higlighted that the reclassification of deposits into principal-guaranteed Islamic deposits and nonguaranteed investment accounts was the biggest change for consumers and Islamic banks (IBs) alike.

It noted that it was part of Bank Negara Malaysia’s diversification strategies to expand the scope of the Islamic banking business in order to cater to a wider range of customers.

“We believe this change will increase transparency (because of additional prudential disclosure requirements for investment accounts) and inclusion, and encourage IBs to innovate new products,” it said.

The changes came under IFSA 2013, a comprehensive piece of legislation introduced by the central bank.

Under this new legislation, IBs were given the time till the middle of this year to fully segregate their deposits into either Islamic deposits or investment accounts.

In the past, IBs operating under the now-repealed Islamic Banking Act 1983 had deemed all monies accepted from customers — whether it was classified as deposit or investment products — as Islamic deposits.

“It also reflects a more risk-sharing approach to Islamic banking. This reclassification moves together with plans for the Investment Account Platform to serve small and medium enterprises.

“It is still too early to tell what the migration numbers to investment accounts would be like and this is one development that will be most closely watched,” the report added.

The country report is the fifth in its series and features Malaysia’s ongoing initiatives and prospects in transforming into a high-income economy and the contribution of Islamic finance in this endeavour.

“We intend to use the country report to position Islamic Development Bank (IDB) member countries to attract investment to those countries focusing on Islamic finance and Islamic economies,” IRTI DG Prof Datuk M Azmi Omar told The Malaysian Reserve.

IRTI is the research and training arm of the IDB.

IRTI was established in 1981 with the principal aim to undertake research, training and advisory activities in I sl a m ic e conom ic s a nd Islamic finance to facilitate the economic, financial and banking activities in IDB member countries to conform to Shariah.

[THE MALAYSIAN RESERVE, 6 July 2015]