HUMAYON: Malaysia's Islamic banking needs a big push

Based on the data available on the growth and development of Islamic banking in different parts of the world and with the help of an extensive research undertaking to construct Islamic Finance Country Index (IFCI), this year’s GIFR predicts that by 2020 there will be at least six countries in the world where Islamic banking and finance (IBF) will attain a market share of no less than 50% of the total financial sector in their respective countries.



These six countries, in addition to the Islamic Republic of Iran and Sudan, claims to have fully-fledged Islamic financial systems already in place. It is almost certain that Brunei Darussalam, the Kingdom of Saudi Arabia, Kuwait, Qatar, Malaysia and the United Arab Emirates (UAE) will have their financial sectors dominated by IBF by 2020.



Brunei Darussalam will be the first country to witness the share of IBF in the domestic financial sector exceeding 50% by 2020. Almost 45% of retail banking in the country already fulfills basic Shariah requirements. More impetus is needed for the capital markets, which requires a little guidance and support from the Ministry of Finance.

Given its small and overwhelmingly religious population, it will not be surprising to see Brunei Darussalam emerge as a nation where the IBF share is greater than conventional ones.



Similarly, the Kingdom of Saudi Arabia will have its financial sector predominantly Shariah compliant by 2020 since it currently has over 55% of its retail banking as Shari’a compliant. It will have to streamline Islamic banking and finance with official recognition, by the Saudi Arabian Monetary Agency and the Capital Market Authority. If Brunei Darussalam has not already achieved the milestone, Saudi Arabia could be the first country to boast of having Islamised the bulk of banking and finance practice in the country.



Since the establishment of Kuwait Finance House (KFH) in 1977, Kuwait has been at the forefront of IBF. It is expected that it will still be ahead of Qatar in achie-ving the threshold of 50% share.

With the current market share at 35%, Kuwait’s IBF industry will have to grow by 7.14% annually for the next six years to achieve the milestone of 50% market share. Furthermore, its existing Islamic financial institutions will have to take over 3.15% market share from the conventional financial institutions during the same time period.



Qatar is another country with huge potential for growth in IBF. Unfortunately, the likelihood of IBF reaching the 50% threshold was adversely affected by the government’s decision to disallow conventional banks offering Islamic banking through window operations.



Malaysia is another country that has made tremendous progress in IBF. With strong support from the government and the central bank, Malaysia has certainly taught other countries how government patronage actually brings wider economic benefits to the country.



The weakest link, however, in this list of six countries is the UAE. Despite the government of UAE’s strong support for IBF, the country will be able to just make the 50% mark by the end of 2020.



This brings us to the million-dollar question: How would Malaysia achieve the 50% mark, given that its financial sector currently has only one-fourth of it as Shariah compliant?

According to GIFR research, IBF in Malaysia will have to grow by 16.67% on an annual basis in the next six years (green field growth) in addition to cannibalising 5.56% of the conventional business annually (brown field growth) in order for it to have an equal share of IBF in its financial sector. Is it something achievable?



The table suggests that this is not only achievable but possible as well. Most of the conventional financial institutions involved in IBF have a lot of capacity to further grow their Islamic business. If the likes of Malayan Banking Bhd and CIMB Group Holding Bhd give a big (yet gradual) push to IBF as part of their expansion strategy, it will contribute significantly towards achieving the target of 50% market share for IBF in Malaysia.



Furthermore, this is perhaps the time for the government to consider converting Cagamas into a fully-fledged Islamic financial institution, as almost 50% of its business is already Shariahcompliant.



Agro Bank is already scheduled to convert fully to Islamic. It is worth considering to fully Islamise other banks like SME Bank, MIDF Amanah Investment Bank and similar government-linked financial businesses? Given the track record of the Malaysian government, it will not be surprising to see such a development in the next six years.


Prof Humayon Dar is chairman of Edbiz Corp London and a visiting professor of Islamic Finance at Academy for Contemporary Islamic Studies, UiTM

[This article appeared in THE MALAYSIAN RESERVE, 24 Feb 2014 under the title 'Need to give a big push to Islamic banking and finance in Malaysia']

TMR: Stakeholders urged to explore trade financing

By Kazi Mahmood

Trade financing, one of the ready opportunities available for Islamic banks to tap, is among the many areas where the industry has not yet made its mark, said a report published by the Kuwait Finance House Research Ltd (KFHR).

However, one of the challenges to the Islamic trade financial sector is the readiness of the Islamic financial institutions to proactively develop products to meet the changing needs of the market players involved in global trade, the report said.

“By expanding this part of Islamic financial product, it will open up to wider sets of opportunities to Islamic finance eg the halal industry.” the report, entitled “Islamic Finance Outlook 2014” indicated.

The general preference of the Islamic banks is attributed to be a direct lending over trade financing, keeping transactions straightforward and simple, and they should move away from that by expanding into other areas of business.

According to the report, these are the sectors in which Islamic banking and finance could penetrate, as there are substantial market potential for industry suppliers to tap into. The sectors are:

• Infrastructure and government developmental plan in the Organisation of the Islamic Conference jurisdictions.

• Increasing participation of western financial centres to tap the industry and this will create a healthy competition and encourage greater innovation.

• Greater partnership among the regulatory and supervisory bodies to enhance regulatory frameworks for Islamic financial institutions.

• Low penetration rates of the various Islamic finance sectors in most jurisdictions.

• Strong support from various multilateral and international organisations.

• Increasing trends of cross-jurisdictions partnership and financial linkages to facilitate cross border financial activities of Islamic finance.

• Increasing awareness and familiarity among stakeholders on the value propositions of Islamic finance.

In order to be able to join these sectors, Islamic financial institutions need to demonstrate how Shariah-compliant products are economically feasible and competitive as per the conventional finance, in order to generate further growth and acceptance of the industry’s offerings.

Meanwhile the report noted that in 2013, of the top 10 largest sukuk issuances in terms of issue size for 2013, six of these sukuk were issued by non-Malaysian issuers domiciled outside Malaysia.

The increases in shares of other jurisdictions in 2013 were supported by some notable sukuk issuances in non-Malaysian domiciles.

In 2013, Malaysia once again led the primary market issuances with a 69% share of total issuances, followed by Saudi Arabia at 12%, United Arab Emirates (UAE) (6%), Indonesia (5%), and Turkey (3%).

In 2012, the respective shares of top primary sukuk market issuers were as follows: Malaysia 74%, Saudi Arabia 8%, UAE 4.7%, Indonesia 4.6%, Qatar 4.2% and Turkey 1.8%.

Compared to the previous year (2012), the share of Malaysia declined as a proportion of total issuances while those of others increased. The increases in the shares of other jurisdictions in 2013 were supported by some notable sukuk issuances in non-Malaysian domiciles.

Overall, Islamic finance in 2014, is set to experience another increased momentum, particularly in the sukuk market with the issuances by few sovereigns (eg) the UK and Luxembourg.

The Islamic banking sector is likely to witness a surge in demand underpinned by greater economic participation of Muslim nations as well as driven by stronger demand from the population towards Shariah-compliant or ethical financing solutions.

Instrumental roles played by multilateral organisations and regulatory bodies are expected to further benefit the Islamicbanking and takaful industry, especially to low-to-medium income customers as the financial inclusion objective has been strongly emphasised moving forward.

Thriving interest of key global/regional financial centres in developing Islamic finance, for instance London, Hong Kong, Singapore, Luxembourg, further adds weight to the strong prospects of Islamic finance as markets globally look for alternative sources of funding and investment avenues.

The industry will continue to grow, driven by both demand and supply factors, and further facilitated by government agencies and financial regulators. In the next few years, we foresee the industry’s focus into four key spectrums that will take the industry to greater heights, the report added.

[THE MALAYSIAN RESERVE, 10 Feb 2014]

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)

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)

Kuwait Finance House embarks on 5-year to strenghten ops plan

By Habhajan Singh

Kuwait Finance House (M) Bhd, which had recently directed a number of its staff to go on leave to pending internal investigations into 'transactions and contractual arrangements that have been undertaken over the years', has embarked on a five-year business plan to strengthen its operations in the country.

KFH Malaysia CEO Jamelah Jamaluddin told reporters yesterday that the plan would allow the Islamic banking unit to enhance its credit quality, lower non-performing financing, strengthen corporate investment banking and equity while looking at opportunities in retail business.

"Our due diligence audit is expected to take at least six weeks," she told a media briefing yesterday, reported Bernama, which acced that the audit aimed to obtain an accurate picture of certain transactions and contractual arrangements that have been undertaken over the years.

On April 29, The Malaysian Reserve reported the KFH Malaysia new boss, who came on board just under two months ago, has directed more than a dozen staff to go on leave pending the internal investigations.

In an email response, Jamelah told The Malaysian Reserve that the bank was "taking a proactive approach and conducting a due diligence status audit, in light of the different and more challenging economic environment". In that email, 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."

The Monday report also said that in a communication with staff on March 19, it was understood that Jamelah had asked a number of staff, including at least one head of department, to go on leave to enable the Kuwait-based Islamic banking unit to conduct its internal investigations.

In the briefing yesterday, Bernama also quoted her as saying: "We expect to experience modest business growth this year, not more than 10%," she said, adding that it registered 8% growth last year.
She said the bank would adopt KFH Kuwait's business model in order to sustain growth in terms of risk management and take full advantage of opportunities in the region, Bernama added.
On Friday, RAM Ratings said it had met with the senior management of KFH Malaysia to seek further clarification on the matter. The rating agency was made to understand that an "internal reorganisation exercise has been put in place to strengthen the Bank’s credit team and processes, with the intention of improving asset quality."

(This story appeared in The Malaysian Reserve on 2 April 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)

KFH probing previous contracts, transactions

By Habhajan Singh

Kuwait Finance House (Malaysia) Bhd new boss, who came on board just under two months ago, has 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 to queries from The Malaysian Reserve, KFH Malaysia CEO Jamelah Jamaluddin said the bank is "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."

In a communication with staff on March 19, it is understood that Jamelah had asked a number of staff, including at least one head of department, to go on leave to enable the Kuwait-based Islamic banking unit to conduct its internal investigations.

Exactly a week later, on Friday, RAM Rating Services Bhd had issued a note putting the bank on what it calls a 'negative rating watch' in connection to the "on-going due diligence status audit, which required senior credit personnel to be on leave pending the completion of this exercise."

"This event heightens concerns on the potential for further deterioration in the Bank’s asset quality and credit fundamentals," the local rating agency said.

On Friday, RAM Ratings said it had met with the senior management of KFH Malaysia to seek further clarification on the matter. The rating agency was made to understand that an "internal reorganisation exercise has been put in place to strengthen the Bank’s credit team and processes, with the intention of improving asset quality."

People familiar with the bank told The Malaysian Reserve that the latest management move is putting a strain on staff morale, with word on the ground that more suspensions could follow.

Jamelah returned to KFH Malaysia as the new boss effective Feb 9 after a stint of just over two years at RHB Islamic Bank Bhd. She was the KFH Malaysia deputy CEO, a position now held by Ab Jabar Ab Rahman, when she left to helm RHB Islamic in August 2007.

Ab Jabar was designated acting CEO when Datuk Salman K Younis left as KFH Malaysia MD/CEO on June 1, 2009. Salman, who spearheaded the establishment of KFH Malaysia in 2005, was asked to return to head office in Kuwait "to assume wider responsibilities", but continued to act as a director of the Kuwaiti bank's unit in Malaysia.

However, the latest KFH Malaysia website no longer carries his name as a director of the board, which is chaired by Shaheen Alghanem. Alghanem joined the board in March 2007 and was appointed as chairman five months later. The other Kuwaiti on board is Abdul Wahab Al-Rushood.

The three other directors, all Malaysians, are Islamic finance lawyer Mohamed Ismail Mohamed Shariff, former Mesdaq Bhd executive chairman Khairil Anuar Abdullah and former Island & Peninsular Bhd MD Dr Radzuan Abdul Rahman.

On the management side, some of the key executives at KFH Malaysia, according to information from its website, are Annis Sheikh Mohamed who heads its corporate and investment banking, Mohamed Iqbal Mohamed Iqbal (international business and treasury), Nawaf Menayekh (international distribution), Siti Mariam Mohd Desa (real estate advisory), Maimunah Alias (commercial banking), Wong Kee Poh (retail and consumer banking), Amin Siru Abdul Rahman (credit risk management) and James Chong Wai Choy (risk management).

On the financial front, the latest KFH Malaysia results available are for the first nine months for 2009, which shows it posted a net profit of RM4.62 million on the back of RM364.92 million in operating revenue, at the group level.

In a note for the financial results, KFH Malaysia had noted that notwithstanding the ‘more difficult operating environment, the Group and the Bank will continue to focus on its business growth strategies through new and competitive product offerings, products cross selling as well as exploring new business opportunities within the region and the Middle East, while remaining vigilant on the impact of the global economic crisis to its businesses and profitability’.

(This story appeared in The Malaysian Reserve on 29 March 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)

KFH Malaysia to grow retail banking biz

by Habhajan Singh
Kuwait Finance House (Malaysia) Bhd, the Islamic banking outfit which had created a niche in the area of corporate and investment banking since it began operations more than four years ago, is now giving retail banking a serious look.
The bank announced the move to grow its retail banking business at a recent meeting attended by branch and sales teams from all over Malaysia.
"Retail banking will be a key engine of growth for KFH Malaysia moving forward. We will steadily increase our retail banking product and services range to include others that will be sure to excite the market," said KFH Malaysia deputy chief executive officer Ab Jabar Ab Rahman.
This would mark a departure from the huge concentration in the area of investment banking, an area that is still expected to be a forte for the Kuwaiti-based bank in the near future, as it grows beyond its seven branches presently.
KFH Malaysia’s business model was almost similar to Asian Finance Bank Bhd, another Kuala Lumpur-based Islamic finance outfit controlled by parties from the Middle East. It, too, had gone strong into investment banking, with retail banking playing second fiddle.
However, another foreign Islamic banking player, Al Rajhi Banking & Investment Corporation (Malaysia) Bhd, had a totally different strategy. The Saudi Arabia banking unit had straight gone big into retail banking, making a splash onto the local scene with its aggressive branch opening campaign a few years ago.
KFH Malaysia commenced operations on Aug 8, 2005 and is a wholly-owned subsidiary of Kuwait Finance House KSC (KFH). The parent is billed as one of the world’s largest Islamic banking institutions with a diverse range of products and services, including full-scale corporate and investment banking, commercial banking, retail and consumer banking and asset management.

On the latest move, Ab Jabar (picture) said that retail and consumer banking will be playing a key role in 2010 and beyond.
"There is a growing demand for a ‘back to basics’ approach to bank products and services - our current range of retail deposit and financing products has always been simple and straightforward and that is appreciated by many," he said.
At the moment, KFH Malaysia offers a range of Islamic banking products and services which include deposits and investment accounts, home and personal financing as well as priority banking services to address the needs of mass affluent and high net-worth individuals who seek steady rate of returns on their investments.
For the first nine months for 2009, KFH Malaysia posted a net profit of RM4.62 million on the back of RM364.92 million in operating revenue, at the group level.
In a note for the financial results, KFH Malaysia had noted that notwithstanding the ‘more difficult operating environment, the Group and the Bank will continue to focus on its business growth strategies through new and competitive product offerings, products cross selling as well as exploring new business opportunities within the region and the Middle East, while remaining vigilant on the impact of the global economic crisis to its businesses and profitability’.

(This story appeared in The Malaysian Reserve on 4 Feb 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)

KFH scale down Singapore operations

by Habhajan Singh
Kuwait Finance House (KFH) has scaled down drastically its Singapore operations just over a year after opening the subsidiary to tap into the region’s fund management scene, sources say.
It is understood that the regional operations for the Islamic bank’s fund management act ivit ies in the island-state would be brought back to Kuala Lumpur and handled directly by Kuwait Finance House (Malaysia) Bhd. In May 2008, KFH Malaysia had announced that its wholly-owned subsidiary, Kuwait Finance House (Singapore) Pte Ltd that it had received the go ahead from the Monetary Authority of Singapore (MAS) to commence its fund management activities. It is understood that the Singapore operations, manned by about a dozen staff, had been reduced to just one staff.
"I think they have been a little impatient with the results from their Singapore operations. Perhaps they had expected a little too much, too soon," an executive at an Islamic bank told The Malaysian Reserve.

This is just one of the recent apparent bumps in the operations of the Kuwaitibased Islamic outfit. In mid-December 2009, KFH Malaysia had pulled out from a RM920 million deal to purchase 50% of Menara YNH from YNH Property Bhd’s unit.
In a statement on Dec 15, YNH had told the stock exchange that KFH Malaysia had informed it ‘in writing’ on that matter, and that it may seek damages from the Kuwait-based Islamic bank. In an emailed statement a day later, KFH Malaysia had said that that there was "no legally binding agreement between KFHMB and YNH Land Sdn Bhd." Explaining the rationale of the move, KFH Malaysia had informed its staff that KFH Asset Management Sdn Bhd (KFHAM), which was established in 2008, would "act as the strategic platform for the KFH Group for Asia Pacific".

In the memo, seen by The Malaysian Reserve, KFH Malaysia said: "As such, this consolidation exercise will affect the KFH Singapore office, since there is a duplication of business functions. We have had to make a painful decision in the employee and resource realignment in Singapore, and to minimise our workforce at the KFH Singapore office.
"The move is a necessary adjustment to ensure that our investments are tightly aligned with current and future revenue opportunities. The current environment requires that we continue to increase our efficiency. With the KFH Singapore decision, we optimise our employee deployment."
The bank also told its employees that the company had appointed a ‘reputable outplacement company’ to assist affected employees to find news jobs who, it added, were give ‘severance pay and other benefits’ which were ‘beyond the legal requirements’.

On the decision to eliminate jobs, the internal memo stated that it was ‘crucial’ to its ability to adjust the bank’s cost structure, so that we have the resources to drive future profitable growth’.
The memo, dated Dec 12, 2009, was signed by chairman Shaheen Al-Ghanem and acting CEO Ab Jabar Ab Rahman. In a statement when the Singapore subsidiary was established, Shaheen had said that the move the establishment of KFH operations in Singapore was a ‘testament of our commitment in the Asia-Pacific region’.

(This story appeared in The Malaysian Reserve on 18 Jan 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)

Kuwait Finance House unveils investment arm

By Sumathi Wong
Kuwait Finance House (Malaysia) Bhd yesterday unveiled its sister company, Liquidity Management House for Investment KSCC (Liquidity House) which aims to penetrate further into the Malaysian market.
Chairman and managing director of Liquidity Management House, Emad Al Monayea said that it currently has very strong communication relations with its sister companies, among which is Kuwait Finance House (Malaysia).
"I don't think there is a need to have a separate set up currently, but definitely within the medium term strategy. We cannot avoid having a physical business jointly with KFH Malaysia to have our own presence within the Malaysian market," said Emad.
Liquidity Management House is the investment company wholly-owned by Kuwait Finance House KSC and currently serves as its international investment arm. Currently based in Kuwait, it started operations in Sept 2008 with a capital of Kuwaiti Dinar of 100 million (RM1.22 billion) and is regulated by the Central Bank of Kuwait.
Its main objective is to be a principal player in the international sukuk market and the Shariah-compliant structured finance arena.
Together with Kuwait Finance House (M), it is also keen to capitalise on the opportunities that can be derived from the advanced and sophisticated local sukuk market, whereby investors from the Middle East and Gulf Cooperative Council countries could take advantage.
Emad also added that there would be more sukuk issuance this year compared to last year but not equaling the total sukuk issuance in 2007, where last year's total sukuk issuance was US$14 billion (RM49.4 billion).
He noted that it would issue sukuks of US$300 million to US$400 million in total and not limited to any country.
"There is a healthy appetite for it with a focus on solid corporates with proven track record, strong cash flow derived from operations and maintaining realistic assets to back up the structure that we develop," said Emad at the launch of the Liquidity House in Kuala Lumpur yesterday [June 9, 2009].
Meanwhile, Kuwait Finance House (M) deputy CEO Ab Jabar Ab Rahman views Liquidity House as an extension of the bank's corporate and investment banking division.
"With the complemetary efforts of Liquidity House, the KFH group is in an even stronger position to play a key role in the development of Islamic banking in Malaysia and the region."
Kuwait Finance House (M) has participated with Liquidity House recently in the syndicated Ijarah facility for Burgan Company for well drilling trading and maintenance for the purchase of four new oil rigs.

(This story appeared in The Malaysian Reserve on June 10, 2009. 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)

Salman leave KFH Malaysia

It's official. The ever-approachable and smiling Salman Younis will be leaving Kuwait Finance House Malaysia to head back for an assignment at mothership in Kuwait. Below is KFH's press statement.

Official Statement from Kuwait Finance House (Malaysia) Berhad

Kuala Lumpur, Malaysia, 1 April 2009. Dato’ K. Salman Younis on secondment from KFH-Kuwait has successfully spearheaded the establishment of KFHMB in 2005. Subsequently, he was appointed as the Bank’s Managing Director and Chief Executive Officer. With the growth and achievements of the Bank over the last three and a half years, Dato’ Salman will return to the Head Office in Kuwait to assume wider responsibilities. Dato’ Salman will relinquish his position as Chief Executive Officer of KFHMB officially on 1 June 2009, but will continue to serve on the Board of KFHMB.
With immediate effect, Mr Ab Jabar Ab Rahman, Deputy Chief Executive Officer will be Acting Chief Executive Officer of KFHMB. He has extensive experience in the banking sector, having been in the industry for 30 years. As one of the pioneers of KFHMB, Mr. Jabar joined the Bank as Director, Commercial banking, in July 2005. He was then promoted to Chief Officer in March 2007. His portfolio was widened to include Commercial, Retail and Consumer Banking, with his promotion to Country Head on 18 September 2007. Mr. Jabar was appointed Deputy Chief Executive Officer on 1 August 2008.

KFH MD believed to be stepping down: The Star

By YAP LENG KUEN
PETALING JAYA: Kuwait Finance House (KFH) Malaysia managing director and CEO Datuk Salman Younis is believed to be stepping down soon, apparently following a board meeting of the bank last week.
Sources said Salman, who was seconded from the bank’s headquarters in Kuwait to set up the Malaysian operations, will likely be assigned back to Kuwait.
Meanwhile, KFH Malaysia deputy CEO Ab Jabar Ab Rahman will be acting CEO as the hunt is on, possibly among local bankers, for a suitable head.
Contrary to market talk, the sources said KFH Malaysia was not downsizing.
But due to the difficult operating environment, it will be slowing down on expansion of new business in Malaysia, Salman had indicated in an interview early last month.
A pioneer among foreign Islamic banks in the country, KFH Malaysia had been slated to jointly develop property projects in Kuala Lumpur and Iskandar Malaysia.
Two weeks ago, Salman was quoted in a news report saying that real estate only formed less than 15% of its total investment portfolio. He had expressed his intention to diversify the bank’s investments into the healthcare and food industries.
In its December ratings outlook, RAM Ratings had maintained a stable outlook (AA2/P1) on the bank for which gross non-performing financing ratio stood at only 0.64% at the end of the third quarter of last year.
The bank recorded pre-tax profit of RM37.9mil for the same period compared with RM30.46mil in the previous corresponding period. For the 14 months of financial year 2005, KFH Malaysia had registered a pre-tax profit of just RM1.84mil.
Shareholders’ funds stood at RM1.09bil for the third quarter compared with RM747.16mil previously. (THE STAR, Wednesday April 1, 2009)

KFH: Less than 15% exposure to property

Although Kuwait Finance House (Malaysia) Bhd (KFH) gained prominence through its participation in some high profile property development projects, real estate only forms less than 15% of its total investment portfolio, reports Financial Dialy.
KFH managing director and chief executive officer Datuk Salman Younis said the group was in fact well diversified, and the impression that KFH's assets were concentrated on property investments was mainly due to them being involved in high profile commercial property projects in prime locations.
"In view of the slowdown in the property development sector, KFH now sees the opportunities to expand further into healthcare and food industries. We want to take the lead in supporting the domestic economy, particularly sectors that would benefit from the stimulus package,” Younis said during a briefing by Dow Jones Indexes on economic and Islamic finance outlook for Malaysia and the region here on Mar 17, the newspaper reported.
The report said some of the more prominent property investment and financing projects involving KFH include being a shareholder in the entity that is the master concessionaire and land developer for the Cultural Cluster of Medini in Iskandar Malaysia. KFH was also the joint lead arranger for a syndicated facility of up to RM250 million for Al-'Aqar KPJ REIT's acquisition of nine properties. In addition to financing facilities for property projects, KFH has lead arranged a syndicated US dollar financing facility for AirAsia Bhd to purchase three new A-320 aircraft from Airbus.

KFH slows down expansion

Islamic banking outfit Kuwait Finance House (KFH) will be slowing down the expansion of enw business in Malaysia owing to the more difficult operating environment at present, reports weekly The Edge.
Datuk Salman K Younis, managing director of KFH (Malaysia) Bhd and regional head for Asia Pacific, told the weekly in an email statement that factors such as higher cost funding have affected its profits and the 'viability' of some of its funding structures.
He told the weekly that as "Islamic banking is based on profit sharing, this requires due diligence, risk sharing and the standards of transparency and disclosure are definitely higher. Therefore, we have to be more stringent and prudent in our due diligence exercises."
Despite the slowdown in business, he report quoted Salman as saying that KFH will still be on the lookout for potential acquisitions, particularly small to medium companies in financial trouble.
"For the local ringgit market, the problem, if any, woudl be credit crunch as opposed to a liquidity crunch," he told the weekly.