Jewelers find backers despite credit-crunch trend

Retailers, especially those in the booming gold and jewellery industry, are seeking huge loans to expand across the region, the borrowing surge comes even as banks shut up shop and shun lending to other sectors of the economy.

Pure Gold Jewelers, based in Dubai, is the latest retailer to enter into negotiations with lenders to help fund a rapid roll-out of new shops across the Gulf and India.

Firoz Merchant, the chairman and founder of Pure Gold, is looking to invest Dh1 billion (US$272 million) in new stores and factories during the next five years, and the company has entered into talks with a number of Islamic banks to help finance the expansion.

“We are getting Islamic finance, which is already in process with the banks,” he said. “Many banks have approached me in the last many days for financing. Opening 200 stores is about a Dh1bn investment, but I think that is a realistic figure. It’s not too much. It’s acceptable investment for a jeweller.”

Overall, lending by groups of banks is at its weakest level in the region since 2004.

Borrowers in Gulf countries have raised just $2.9bn of syndicated loans so far this year, which is an eight-year low, according to data from Bloomberg. The total compares with $3.89bn raised during the same period last year.

Banks are still wary of possible fallout from the euro-zone crisis and companies have instead been considering tapping the capital markets for finance.

“Despite the issues in other parts of the economy, some retail names are doing very well and banks recognize that,” said Mahin Dissanayake, a banking analyst at Fitch Ratings.

Retailers have enjoyed strong increases in sales in the past year as tourists visited the UAE and new stores and brands were launched. Banks are now considering financing those retailers looking to repeat their success in other parts of the Middle East and Asia.

“There’s 50 odd banks in the market and there’s very few sectors doing well, but obviously [retail] is doing pretty well,” said Mr. Dissanayake. “Banks are still very selective and are on the lookout for good opportunities – companies with good cash flow and a strong demand for products, like the gold segment.”

Last month, the jeweler Joyalukkas raised $100m in a syndicated loan from a consortium of banks to expand its network of stores.

Further underpinning the confidence in the sector, Dubai is looking to raise debt based on the future cash flows of the hugely successful Dubai Duty Free business, Reuters reported this week.

Meanwhile, Majid Al Futtaim, the conglomerate behind numerous malls and Carrefour in the Middle East, is also confident it can raise funds, recently establishing two financing programmes, a $2bn bond and a $1bn sukuk scheme.

“Everything depends on the performance, banks give money considering performance and our balance sheet is very strong,” said Mr. Merchant.

Pure Gold plans to expand in Saudi Arabia, Qatar, Bahrain, Jordan, Kuwait, and Morocco and heavily in India.

The company made Dh750m in revenues last year and Mr. Merchant hopes to increase sales to Dh1bn this year.

“The investment is in a safe place,” he said. “The investment has appreciation – gold and diamond prices are rising. That’s why I have more confidence in my business.”

Sharjah Islamic Bank's website wins Best Structure Award

Sharjah Islamic Bank has won recently the ‘Best Structure Award’ under the Islamic banks category and received a Certificate of Excellence by Pan Arab Web Awards 2012.

Pan Arab Web Awards was created to recognize excellence in web design, development and web ownership skills to showcase their creativity in a competition for the best website in the Pan Arab Region.

Sharjah Islamic Bank had been entered into the competition with many prominent banks from the region including Kuwait, Egypt, Jordan, Bahrain, Lebanon and Oman. The banks hope their participation will open up a gateway to the global banking community, and allow them to market their services globally and thus foster cooperation with international banks, increase employees’ knowledge and work capacity as well as build greater liaison with customers

Head of Retail Banking Group Jassem Al Bloushi said: “We are honoured to receive this award, which reflects the banks positive approach of keeping abreast of developments in technology aimed to project and promote our services to our clients, and ensuring we reach a wider audience. Development through technology is the future and businesses today are mainly conducted through computers and websites. Therefore we take our website very seriously continually updating it with latest information of our services and have structured it so it’s easy to access”.

He also said that winning the award has many benefits, the main one being that it will enhance the reputation of the bank and enable it to market its services to a more international arena.

The Competition is part of Pan Arab Web Awards Academy which is in association with AYNA, MICROSOFT, BSA and MSN and their aim is to promote banks and financial institution’s websites along with improving creativity in web design and web development in constructing a banking e-world that is easily accessible and delivers banking and financial services.

The competition aims to create a global proactive banking community that encourages communication and interaction in the banking finance sectors as well as providing advanced and latest data along with services to meet customers’ needs.

Sharjah Islamic Bank has been going from strength to strength; it was awarded the Sharjah Economic Excellence Award 2008 for the finance sector of large enterprises. In the same year it was awarded the Mohammed bin Rashid Al Maktoum Business Award organized by the Dubai Chamber of Commerce and Industry and also the Dubai Quality Award organized by Dubai Economic Development Department.

The bank’s most recent awards include being named “Best Islamic Bank in UAE” for the fifth consecutive year by Islamic Finance News; “Best Islamic Bank” in the UAE for 2010 by NY-based Global Finance magazine; “Best Islamic Bank in the UAE” by Asiamoney Magazine, and being named winner of the first-ever Pan-Arab EMEA Finance award for corporate social responsibility.

Islamic banks 'need mergers to fill in West gap'

Small and medium-sized Islamic banks may need to merge if they want to become bigger regional players capable of filling the funding hole left by shrinking Western banks, the head of Islamic finance at Deutsche Bank, told Reuters.

‘There are mismatch challenges,’ Salah Jaidah said on the sidelines of the Euromoney Islamic finance summit in London.

‘Their size, their appetite for long term funding, their ability to finance at competitive pricing. I see this as a big challenge and not happening already now,’ he added.

Most Islamic banks in the Middle East and North African region hold less than $13 billion in assets. Conventional banks, by comparison, hold an average of $38 billion in assets, a report by Ernst and Young estimated.

In the past, said Jaidah, it was the international banks which led oil and gas development and infrastructure projects in the region because they had the balance sheet, pricing mechanisms and appetite for long term funding.

Whilst Islamic banks might not immediately be able to face the challenge, Jaidah believes that within time they will be able to reposition themselves.

‘They might raise capital, might have more competitive prices and ultimately there might be some mergers between small-to-medium sized banks who want to become bigger players regionally.’

The GCC region has over 100 Islamic banks, ranging from Al Rajhi Bank of Saudi Arabia with a $25 billion market cap to small unlisted lenders, a Deutsche Bank report published in November said.

Deutsche Bank selected a list of potential winners which included Al Rajhi – the world’s largest Islamic bank – and Alinma bank in Saudia Arabia, AMMB Holdings in Malaysia and Bank Mandiri in Indonesia.

The idea of a so-called Islamic ‘mega-bank’ has already been touted in the region by Bahrain-based Al Baraka banking group .

Islamic finance prohibits the lending of money for interest and other activities such as speculation that violate religious principles.

Deutsche Bank, which first established a presence in the UAE in 1999, says that despite the current global economic turmoil there are still opportunities within the industry.

‘With the changes taking place in Mena region and our eagerness to reposition ourselves as a lead player within the industry, I expect that the portion of profit and earnings will be lucrative and will grow year after year,’ said Jaidah.

He sees encouraging signs from Oman, home to around 3 million Muslims, where the central bank last year reversed its secular stance on finance, allowing Islamic banks and subsidiaries to establish themselves in the country.

There might also be new geographic openings in North Africa, following the upheaval in the region and countries such as Turkey where the government plans its first-ever issue of Islamic bonds this year.

Globally, Islamic bond issuance rose to $23.3 billion last year from $13.9 billion in 2010, according to Thomson Reuters data.

On the corporate front, Deutsche Bank, which has advised on deals including Saudi Aramco Total Refining and Petrochemical Company’s (Satorp) $1 billion sukuk also sees more non-Islamic corporates tapping Islamic finance.

Mega Islamic bank may be launched in 2012

A long-awaited mega Islamic bank to be headquartered in Bahrain may be launched this year and $600 million of its $one billion capital will be contributed by Islamic banks in the Arab region, a senior banker has said.

The remaining capital will be subscribed by local sovereign wealth funds and other financial institutions and investors, said Adnan Youssef, chairman of the Beirut-based Union of Arab Banks (UAB).

Touted to be the world’s largest Shariah-compliant unit, the bank idea was first floated in 2009 but was delayed many times because of the repercussions of the 2008 global fiscal distress, Gulf debt default problems, the European Union debt crisis and the political unrest sweeping the Middle East.

Youssef, also CEO of the Manama-based Al Baraka Banking Group, had first said the bank would have a capital of $10 billion and would be a joint venture between regional Islamic banks and other investors.

“This bank will have a paid up capital of $one billion, of which $600 million will be subscribed by Islamic banks in the region and the rest by other financial institutions, including SWFs,” he told the UAB’s magazine.

“In order for us to enter the market with this project, we must first get the $600 subscription, which we expect before the end of 2012..…the remaining shares will also be floated before the end of the year.”

Demand for Islamic banking soared after the 2008 crisis and default problems and this has prompted several banks to set up Shariah-compliant units. Some banks have expanded existing units while others plan to launch such services.

Islam bans interest, investing in prohibited sectors and stipulates that risk and reward be shared among all those in the business venture.

Saudi Arabian businessman Sheikh Saleh Kamel, who owns Al Baraka, is behind the plan to create a giant Islamic bank to be owned by many Shariah-compliant.

Saudi Arabia’s Al-Rajhi group was the world’s largest Islamic bank at the end of 2010, controlled $49.2 billion in assets, nearly a fifth of the combined assets of the Arab region’s Islamic banks, according to UAB.

The Kuwait Finance House (KFH) came second by assets, which stood at $43.7 billion at the end of 2010 compared with $39 billion at the end of 2009.

Dubai Islamic Bank (DIB) was ranked third, with assets of about $24.5 billion, followed by Abu Dhabi Islamic Bank (ADIB), with around $20.5 billion.

Al-Baraka Group came fifth, with nearly $15.8 billion while Qatar Islamic Bank (QIB) controlled the sixth largest assets of $14.2 billion.

The report showed Al-Rajhi also had the largest capital of around $8.08 billion at the end of 2010. KFH came second with around $4.3 billion, followed by DIB with nearly $2.6 billion, QIB with $2.5 billion and ADIB with $2.2 billion.

Kingdom gaining more clout in Islamic finance

As Islamic finance/banking industry is growing at a sky rocketing growth rate of 12 percent – 15 percent per annum, Kuala Lumpur, Dubai, Bahrain and London are chomping at the bit to become the center of the industry, which currently boasts some $1 trillion in assets.

For the moment, Dubai holds the title of Islamic banking hub – but it could soon lose ground, both to traditional competitors like Bahrain, Kuala Lumpur or London or newcomers on the scene like Singapore.

But the country that really laid the foundation and basic infrastructure of Islamic Finance and paid billions of dollars by establishing the prestigious institutes like IDB, ICD and ITFC etc. and spending billions of dollars over last several decades and deserves to be global hub of Islamic finance and banking is Saudi Arabia.

Saudi Arabia, the Gulf’s largest economy and a G20 country, is the strongest and well-deserved contender for the title and has an edge. Its financial clout and the development of the King Abdullah Economic City strengthens the case.

“The only impediment is that it may not be the easiest place to obtain banking licenses especially now, given the plight of the banking industry in Bahrain and Dubai, but Saudi Arabia has always been very cautious.

The Saudi Arabian Monetary Agency (SAMA) guides and supervises the financial sector – that already made Saudi Arabia the safest haven in the world amid the current debt storm.It would be a shame to lose this lifetime opportunity in the presence of prestigious institute like IDB, ICD and ITFC being ideally based and headquartered in Jeddah.

These institutes have already produced scores of talented bankers (in Islamic finance) that are spread now in the entire region and beyond and serving the Islamic finance and banking industry.But this achievement wouldn’t be easy without full government support. With a strike of a degree, this industry could create thousands of jobs for Saudi men and women.

Dubai, despite its liberal policy and religious tolerance, has benefited from government support in creating a regional Islamic finance hub due to a favorable regulatory environment and strong domestic ties to Islam and Shariah.

It has more listed sukuk, than anywhere else.What’s more, Dubai is cosmopolitan and business-friendly enough to lure talent from far a field.The industry is not just limited to providing jobs to bankers but a lot of other support industry also flourishes like law offices, Shariah-complaint insurance companies, leasing and mortgage companies etc.

In the absence of any competition from countries like Saudi Arabia, Dubai will continue to be a major driver for Islamic finance in the near term, as it attempts to recycle the region’s petroleum wealth into real estate, tourism, technology and other anchors of a truly diversified economy.

Dubai’s attractions are many. In addition to glitzy and modern shopping malls, it boasts numerous free zones that allows for 100 percent foreign ownership, 100 percent repatriation of capital and profits, exemption from corporate tax and no import duties.

But its central role in Islamic finance isn’t assured over the long haul.The recent financial crises have severely dented Dubai’s reputation and its financial soundness.

The Islamic finance market, that was once a local affair, deeply rooted in the Gulf region only, is now spread in Far East and Europe and somewhat in the US while Africa still remains a virgin market, offering enormous potential and unlimited opportunities.

Appreciating the potential of this $ 1 trillion and growing industry (expected to reach $2 trillion by 2013), the British government had voiced its determination to issue a sukuk and asked its Finance Ministry to start working on necessary regulatory changes by next year while it issues licenses to Islamic banks.

It has to be noted that sukuk is a $30 billion global industry.In recent years, Islamic finance has grown rapidly across the world, conservatively estimated at 12 percent a year.Malaysia has been strong in the Far Eastern market for the past decade. But now, Asian countries – with tiny Muslim populations – are also looking to join this process.

Japan wants to be the first nation in the G-7 to issue a sovereign sukuk bond – that is, if Britain doesn’t get there first.Among cities outside the Muslim world, London is the strongest Islamic finance center and it leads race to be Shariah capital.

London will give Malaysia and Dubai and the rest of the Islamic world a run for its money, as London has all the strengths of a traditional financial center, from a solid infrastructure to a qualified pool of prospective employees.Singapore, also seeking to attract Islamic capital, has the same lures but to a lesser degree.

London is already enjoying some success as a focal point for international Shariah-compliant investors, with both corporations and countries listing sukuk bonds in Britain.London is also benefiting from New York’s relative indifference to Islamic finance, which removes from the race a traditional long-standing rival for global capital because America’s financial capital or political leadership has a narrower appetite for Islamic assets than other centers.

So far New York investors have shown an interest in Shariah-compliant equities, but not in Islamic bonds or Takaful, (Islamic insurance).Saudi Arabia deserves all credit for its tireless persuasion to make Islamic banking industry in the world.

Saudi Arabia’s task to introduce Islamic banks into conventional banking systems was challenging and tough. Islamic banking is steadily moving into an increasing number of conventional financial systems.It is expanding not only in nations with majority Muslim populations, but also in other countries where Muslims are a minority, such as the United Kingdom or Japan.

Similarly, countries like India, the Kyrgyz Republic, and Syria have recently granted, or are considering granting, licenses for Islamic banking activities.In fact, there are currently more than 300 Islamic financial institutions spread over 51 countries, plus well over 250 mutual funds that comply with Islamic principles.

This industry is currently experiencing growth rates of 22 percent per annum despite a tough investment climate – and this growth trend is expected to continue.This golden opportunity shouldn’t be missed simply because of arrogance or ignorance and this country should get what it rightly deserves.

GIB named best sukuk arranger

Bahrain-based Gulf International Bank (GIB) was recently named the “Best Sukuk Arranger” for the year 2011 by Dubai’s Islamic Business & Finance magazine.

According to the magazine, which conducted a survey of the world’s best Sukuk arrangers, nominees for the awards were short-listed from hundreds of top Islamic financial services providers and professionals.

Tens of thousands of votes were cast by the readers of the magazine and the registered users of its website.

The magazine distributed its annual Islamic banking awards to the winning banks during a ceremony held recently in Dubai.

GIB has developed considerable expertise in originating and placing regional Sukuk issuances in the GCC, a statement said.

GIB’s strength in this area originates from long standing relationships with regional issuers and investors, experience of structuring Shariah-compliant instruments and the ability to distribute transactions regionally, it added.

Dr Yahya Abdullah Alyahya, GIB’s chief executive officer, said: “We are pleased to receive this prestigious award that recognizes our leadership and achievements in the field of Sukuk arrangement and issuance.

We are committed to further strengthen GIB’s status as a leading investment bank in the GCC.”“This new award comes as an addition to other awards the Bank has received during the past 12 months.

This reflects GIB’s leadership and the market’s confidence in its capability to provide innovative debt and corporate advisory solutions,” he added.

BFX Appoints Ratings Intelligence as Shari’ah Advisor

The Bahrain Financial Exchange (BFX), the first multi-asset exchange in the Middle East and North Africa (MENA) region, today announced that it has appointed Ratings Intelligence Partners (RI) as its Shari’ah Advisor.

RI, one of the world’s leading organizations of its kind, will provide a number of important support services to the BFX leading up to its launch in October of this year; most notably, advisory services to the BFX to ensure the adherence of the BFX’s Murabaha platform to Islamic principles. RI will also develop a formal structured documentation process for the BFX’s Islamic products.

The Bahrain Financial Exchange (BFX)

Commenting on the announcement Arshad Khan, Managing Director and Chief Executive Officer of the BFX and the BFX Clearing and Depository Corporation, said: “We are extremely pleased to work with the most respected Shariah scholars in the development of the BFX’s Islamic products which will support best practices in the Islamic financial sector. Being in the MENA region, we view Shari’ah-compliant financial instruments as one of the key drivers to achieve our strategic growth plans. Through Ratings Intelligence consultancy services, we are confident that our offerings are in line with the high expectations of the discerning Islamic market.” Continue reading

Bermuda looks to Middle East for financial expansion and Islamic finance links

Bermuda finance and business sectors are looking to expand and regard Bahrain as a gateway into the Middle East’s financial markets, it is claimed.

President and chief executive officer of Bermuda’s Stock Exchange, Greg Wojciechowski, said that a recent visit to Bahrain had convinced him that the Gulf state offers Bermuda’s financial community a remarkable opportunity to develop commercial relationships thorough out the GCC region. During the visit, which also included Bermuda’s Minister of Finance, Paula Cox, delegates met with Bahrain’s top government and business leaders prior and attended the first Bahrain/Bermuda conference on Global Financial and Insurance Services.

Bermuda looks to Middle East for financial expansion

Wojciechowski said there were many areas of growth to be pursued in Bahrain which has recently signed a double taxation agreement with Bermuda. The agreement was the first of its kind Bermuda has signed with any country with provisions that makes it easier for Bermuda and Bahrain business leaders to cooperate in finance. He believes there will be positive developments in building business between the two economies sooner rather than later.  Bermuda, he said, could perhaps even look forward to seeing the listing of the first Islamic bond or sukuk on the BSX in the not too distant future. Possible areas of cooperation and development especially those related to listing mutual funds, asset management, hedge funds and the listing of Islamic financial instruments, were discussed, he added.

‘I believe an opportunity exists to build stronger ties between the two stock exchanges and I look forward to progressing our initial discussions. In Bermuda we are interested in listing sukuks from this region on our market,’ said Wojciechowski. ‘I feel strongly that Bermuda can act as a gateway to the North American and European markets for Bahrain’s Islamic financial expertise and, in turn, Bahrain can act as a gateway for Bermuda’s financial expertise in the Middle East and North Africa, he explained. ‘It is apparent to me that a relationship with The Bahrain Stock Exchange presents a special opportunity for joint co-operation, one which we hope to pursue. As a regulator, I was impressed to see the world class trading environment at the Bahrain Stock Exchange and I look forward to the opportunity of furthering my talks with my Bahrain counterparts,’ he added. The Bermuda Stock Exchange, established in 1971, has 700 issues listed and has a market capitalization of $200 billion.  BSX is a member of the International Organization of Securities Commission (IOSCO), the World Federation of Exchanges and other regional and international federations related to capital markets.