Crescent unveils first sharia-compliant fund

MUSLIM Australians will be able to stash their cash with today’s launch of Crescent Wealth’s first Islamic cash management trust, which hopes to attract up to $100 million during the next few years.

Crescent unveils first sharia-compliant fund

Managing director Talal Yassine said he expected much of the money to come from Australian mosques. “Islamic Australians and institutions have had little choice so far but to put their cash reserves in non-compliant cash trusts,” he said.

Funds will be passed to HSBC Amanah Malaysia Berhad, which is partnering the product with Crescent, and will be invested in Australian-dollar denominated Islamic term deposits.

Because paying interest is prohibited under Islamic law, the sharia-compliant trust instead pays a fixed profit, expected to be the equivalent of 3 per cent to 4 per cent a year.

The fixed return to Australian investors will stem from palm oil trading profits, where HSBC’s Malaysian subsidiary will bear the trading risk.

Crescent Wealth, which launched its first Australian equity fund last October, plans to launch other funds and wants to expand into superannuation.

“Australia’s Islamic community, about 500,000 strong, is relatively small compared to France’s or Britain’s but the compulsory saving system here makes it a potentially large market,” Mr Yassine said.

Crescent Wealth says sharia-compliant funds could attract about $6 billion of funds and potentially three times that by 2019.

Global assets in Islamic banking exceed $1 trillion, including about $60bn invested in equities according to Islamic law. Australia’s big four banks do not offer sharia-compliant retail products.

Crescent Wealth launched an Australian equity fund last year, which doesn’t invest in companies with excessive debt levels or that hoard cash. Investing in firms engaged in financial services, tobacco, alcohol, armaments or pornography is also ruled out.

An index of sharia-compliant Australian equities has fallen 9 per cent since it was established in August, a little more than the ASX/S&P 200.


Is it time for another Shariah ETF?

The concept of Islamic finance, banking and economics has gained tremendous popularity of late. It is appreciated and implemented not only in countries where Islam is the dominant religion, but also in non-Islamic nations. The basic premise of Islamic finance, banking and economics is based on ‘hygienic’ ways of doing business as prescribed by the Islamic Law or Shariah.

What is a Shariah Compliant financial product?

Shariah compliant financial product (mutual funds, ETFs etc) is an investment avenue that is fully compliant with the principles of Shariah Law.

Let’s have a look at some of the concepts and guidelines of this law. Islamic law basically divides actions into three broad categories. These are farz (compulsory), halal (permissible) and haram(prohibited). Shariah rules of doing business, therefore concentrates only on farz and halal but strictly excludes haram. Companies whose business involves interest on debt, gambling, alcohol, pork-related products, pornography or armaments are prohibited. Since interest on debt (Riba) is prohibited, it automatically implies that a conventional commercial bank fails to qualify as permissible business under the Shariah.

So does it mean that Islamic banks and financial institutions are charitable bodies that lend money without any expectation of income?

The answer is that a NOProfit sharing and fee-based financing is what drives the income streams of these banks. Fee-based financing can be the result of safe deposits, fund transfer, trade financing, property sales and purchases or handling investments. Profit sharing involves partnerships (in businesses funded by the banks) and sharing of profits and losses. This means that in order to comply, the creation of debt is not facilitated through direct lending and borrowing, but through sale or lease of a real asset which is expected to provide a regular cash flow stream for the bank.

Debt financing is indispensable for any company or economy. Even companies that qualify under Shariah and countries governed by the Shariah law, have to resort to debt financing. They do this by the issuance of special types of Islamic bonds. These are  bonds. These bonds do not consider interest to be the focus of any transaction. However, sukuk and ijara bonds signify ownership of assets which are tied up to a lease contract between the borrower and lender. These bonds (similarly to conventional bonds) are highly flexible and can be traded in the secondary market. Shariah also prevents a person from selling what the individual does not own; therefore Shariah compliant financial institutions abstain from short selling financial securities.

The demand for Shariah-compliant financial products is not limited to a particular community or a group of countries but involves participation of investors all around the world. Investment managers and fund managers worldwide are constantly looking for Shariah-compliant stocks in order to include them in their portfolio.

Mutual funds and exchange traded funds are also fast gaining popularity in this niche segment of the financial world and have constantly witnessed an increase in their assets under management. A recent study by Ernst and Young (Islamic Funds and Investment Report) shows that Islamic funds all across the globe witnessed 7% growth in their AUM as of 2011.

A number of Shariah-compliant mutual funds and exchange traded funds are being launched all around the world. The world’s leading stock market index provider Standard and Poor (S&P) has a wide range of Shariah investable and benchmark indexes to meet an array of investor needs. There are 15 Shariah-compliant Benchmark Indexes and 11 Tradeable Indexes, all of which bear testimony to the fact that Shariah-Compliant financial products have come of age.

Is it time for another Shariah ETF?

The portfolio of Shariah indexes comprises only of stocks of those companies whose businesses are in alignment with that of the Shariah law. Therefore it is prudent to note that the portfolio of the Shariah index would significantly differ from that of the broader market index. Heavyweight sectors such as financials will be ruled out of the portfolio of the Shariah-compliant Index.

So does this mean that investments in Shariah-compliant financial products will act as a perfect hedge against investments in traditional financial products during economic downturn when the market turns south?

Unfortunately, the answer is no. The broad-based S&P 500 Index and the S&P 500 Shariah index shows a correlation of 0.99 for a period of three years. The graph below shows the relative movement of the two indexes.


The S&P 500 Shariah Index includes stocks of companies whose businesses are in alignment with that of the Shariah law as well as fulfilling the following criteria on a 36 month average basis: 1) A Debt/ Market Value of Equity ratio of < 0.33, 2) Accounts receivable/ Market Value of Equity ratio < 0.49 and 3) (Cash +Interest Bearing securities)/ Market Value of Equity ratio <0.33.

The Shariah compliant financial products are flexible instruments which are open to investments across all investor classes, irrespective of their religious beliefs. Therefore, an ETF approach is always a better alternative for a targeted bet on any market index. Unfortunately, domestic investors cannot boast of many choices in this segment as far as exchange traded funds are concerned.

We would like to discuss a particular fund targeting this space which ceases to exist as of today due to lack of popularity. JETS Dow Jones Islamic Market International Index (JVS) intended to match the before-expenses price and yield performance of the Dow Jones Islamic Market International Titans 100 Index. The product intended to provide investors with an option to play the Shariah growth story. it also provided an exposure to Shariah-compliant companies. The ETF debuted in the year 2009 and held 94 securities in all with 31.91% of its assets in the top 10 holdings.

According to Brint Frith, the president and founder of Javelin (The fund managers), they “found it difficult to reach target investors through the marketing channels typically used by ETFs”. This clearly shows that the fund was targeted at a particular section of the community, rather than the public at large. It was probably the reason why the product failed.

The article does not intend to compare the ethical and the unethical. Neither does it intend to identify a better investment avenue. But it does aim to highlight Shariah-compliant investments as an asset, solely from a returns and coverage point of view without any geo-political comment. Nevertheless, given the growth and popularity ofShariah-compliant financial products, we can only infer that Shariah ETFs are to be looked out for.


The rise of Islam

The UK has 22 banks that offer Islamic products, far more than any other other country in the Western world.There has been much debate about the Arab Spring in the past 12 months, with the world’s eyes watching what this will mean for the rest of the globe.

At its very heart lies individual and societal freedoms, but what is particularly interesting is that it is likely to result in more democratically-elected Islamic governments with the promise of moral leadership and shares values. This in turn will result in much greater demand for Islamic finance and wealth management solutions.

The global Islamic finance industry is currently purported to be worth more than $1 trillion (£619bn). It is expected to continue to grow in line with the development and expansion of the financial markets generally with a growing number of new shariah-compliant stocks and sukuk – a financial certificate similar to a bond – and a general desire to assert a specific Islamic identity to social activities.

But while the term Islamic financial planning might conjure up images of the Gulf or north African regions, we believe the UK is, and will continue to play, a pivotal role in advancing the growth.

The UK is home to more than 2m Muslims and an leading financial centre. It offers great potential and currently boasts Islamic assets worth more than $19bn (£12bn).

The UK has 22 banks that offer Islamic finance products, far exceeding that of any other Western country. Many mainstream financial groups recognise the need to service Muslims’ financial requirements, as well as those of many non-Muslims whose investment principles are aligned with the ethics promoted by Islamic law.

The rise of islam


I believe that as Islamic finance expands and the range of products continues to broaden, there will be a growing demand for education and skills, where once again the UK institutions are leading the way.

Already the UK’s banks, sukuk issuance and exchange-traded products are supported by a sturdy infrastructure. This includes more than 25 major law firms and the largest four professional services’ firms in the country, while up to 10 universities and business schools offer qualifications in Islamic finance education.

Furthermore the UK’s Islamic finance sector recently received a major structural boost following the integration of the UK Islamic Finance Secretariat into TheCityUK, an independent body that promotes
UKIFS is the leading cross-sector body that assists with the promotion and development of Islamic finance.

The events of 2008, the financial crisis and the ensuing panic ‘destroyed’ trillions of dollars of wealth. Among the worst hit were retail investors and so-called tried and trusted investment wisdom failed to counter the crisis.



Cambodia Muslims dream of Islamic finance


SHAFAQNA (Shia International News Association) Aspiring to a better standard of living, Cambodia’s Muslims are dreaming of introducing the Islamic finance to the Buddhist country to lure investments from the Muslims-majority states in the Middle East and Asia.

“Most investors in the Middle East are certainly looking for Islamic-compliant business in countries that aren’t majority Muslim,” Ashraf Bin Md Hashim, head of consultancy at the International Shari’ah Research Academy for Islamic Finance, “This could open an Islamic banking window here.”

Speaking on the sidelines of Cambodia’s first conference on halal finance, hosted by Cambodian Intelligent Investor Organization, Hashim said the Islamic finance is almost nonexistent among Cambodia’s Muslims.

Cambodian Muslims hope that by introducing Islamic finance, already booming in Malaysia and Middle Eastern countries, they could dominate trade with those countries and attract investment from Islamic banks in the region.

This trade would help in improving living standards for Combodian Muslims, who generally have a lower standard of living than their Khmer countrymen.

“If we look at the Muslim population in Cambodia, we don’t have anything,” Hashim said.

“In business, we have to start from the bottom. We need more resources.”

Muslims make up around 2 percent of Cambodia’s 13 million populations, who are mainly Buddhists.

Cambodian Muslims are generally located in towns and rural fishing villages on the banks of the Tonle Sap and Mekong rivers and in Kampot Province in the south.

The majority of Cambodian Muslims belong to the ethnic group known as Cham– a reference to an ancient empire of warriors.

Islam forbids Muslims from receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Islamic Law

By introducing Islamic finance, Cambodia’s Muslims hope they would live closer to Islamic law.

“There’s a demand from the Muslim community here,” Cambodian Intelligent Investor Organisation CEO Sles Nazy told the Post.

“I have seen some problems because right now Muslims can’t follow Islamic law when they borrow money, even if they want to.”

According to Nazy, Islamic finance would most likely first appear in Cambodia in the form of microfinance that would not collect interest on loans.


Shari`ah-compliant microfinance would also invest small businesses and properties.

The Islamic finance is also expected to boost relations between Cham Muslims and the Middle East.

Muslim-run businesses in Cambodia could attract financing from Islamic banks in Southeast Asia if a better understanding of the practices was developed, said Sulaiman Muhammad, who imports halal food from Malaysia.

“Muslim companies in Cambodia are short on capital,” he said.

“If there was more Islamic finance here, Islamic banks in Malaysia might invest in our companies.”

Islamic banks have proved a success because of rules that forbid investing in collateralized debt obligations and other toxic assets that cause financial crises.

The Islamic banking system is being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.

Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.

A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.

Islamic Finance: Islamic Sukuk By Goldman Sachs Causes Debate

A controversial plan by Goldman Sachs to issue an Islamic bond has ignited a wider debate on whether conventional banks in the West should be allowed to engage in Islamic finance.

At a major conference of Islamic scholars and bankers in London this week, much of the public and private discussion was devoted to whether growing Western interest in Islamic finance could damage the industry by compromising its religious principles.

Some participants argued investment banks such as Goldman should be banned from issuing Islamic bonds, or sukuk, because the funds they raised could help to finance other parts of their business that did not comply with sharia or Islamic law.

“A conventional bank, with the exception of multilateral development banks like the World Bank and the Asian Development Bank, should not be allowed to issue sukuk,” said Badlisyah Abdul Ghani, chief executive of CIMB Islamic, the Islamic unit of CIMB Group, Malaysia’s second biggest bank.

“The basic principle of Islamic finance is that you should only finance activities that are consistent with sharia, and conventional rib (interest) is not,” he told Reuters on the sidelines of the Euromoney Islamic Finance Summit.

Other participants said the industry could not bar conventional banks and should focus instead on ensuring that each of their Islamic transactions complied with sharia law.

“The fact that these sukuk are issued by Goldman Sachs or by another Western bank really makes no difference whatsoever as far as judgement of sharia is concerned,” Mohamed Elgari, a prominent Islamic scholar, said during a panel discussion.

“An institution has no religion and therefore cannot be judged on religious grounds. Our judgement is always on the structure of the transaction, and whether it is permissible or not and had the necessary sharia requirements.”

The debate could affect Western access to a fast-growing area of the financial world. Estimated at over $100 billion, global sukuk issuance is still dwarfed by trillions of dollars worth of conventional bonds. But Western banks are becoming more involved in Islamic finance as its pool of wealthy, conservative investors from the Gulf and southeast Asia makes it a stable source of funds during the global financial crisis.

HSBC’s Middle East unit became the first Western bank to issue a sukuk last May with a $500 million, five-year Islamic bond. France’s Credit Agricole said last October it was considering whether to issue a sukuk.

Goldman’s sukuk became controversial partly because for many investors, the U.S. investment bank embodies aggressive, sophisticated Western financial engineering.

It announced in October that it planned to issue a sukuk worth as much as $2 billion based on murabaha, a structure that instead of interest, which is banned by Islamic principles, uses a cost-plus-profit arrangement to pay investors.

Some Islamic finance analysts questioned whether the underlying structure of the sukuk was really murabaha, and suggested Goldman might use the proceeds of its sukuk to fund interest-based banking activities.

They also said the sukuk might violate a ban against pure monetary speculation if it traded between investors on the Irish Stock Exchange, where it would be registered, at levels other than par value.

The controversy has put the top authorities of Islamic finance in a difficult position. Big Western banks such as Goldman could help the industry grow by providing trading liquidity, trained personnel and access to Western investors. But the credibility of the industry could suffer if it is perceived to be manipulated by Western institutions.

Asked about the participation of Western banks, a top official of one of the international bodies which sets standards for the industry replied: “That’s a tough question — there is a sharia-compliant issue.

“It requires a seriousness of purpose and respect of Islamic finance, and if those two are not there, I am not sure how they would participate,” said the official, declining to be named because of the sensitivity of the issue.

He noted that Malaysia’s central bank, for example, stipulated Islamic banking activities could only be transacted by a licensed Islamic bank. But he added that this should not exclude Western banks from all involvement in the industry.

“Western banks can certainly participate in terms of underwriting and helping in structuring the products.

Most participants at the conference said there was unlikely to be any sustained, concerted push within the industry to exclude conventional or Western banks from areas of Islamic finance. Some big Western banks, such as HSBC, already operate well-established Islamic arms offering a range of services.

Any attempt to exclude conventional banks could also be thwarted by the industry’s decentralised structure.

Bodies such as the Malaysia-based Islamic Financial Services Board and the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) set standards which they hope banks will follow, but they cannot impose rules; that is up to national regulators in each country.

Ultimately, therefore, the success of Islamic financial products offered by Western banks is likely to come down to whether investors choose to buy them. The Goldman case suggests they will.

Banking sources in the Gulf told Reuters this week that Goldman, which insists its planned sukuk obeys Islamic principles and will not be used to raise money for interest-based activities, was talking to potential Saudi Arabian buyers and was likely to have no problem in attracting enough demand.

A copy of the fatwa or Islamic ruling behind the Goldman sukuk, which was seen by Reuters, showed five sharia scholars had signed it. The AAOIFI’s guidelines stipulate that at least three scholars advising on a bond programme should approve it in writing before issuance.

However, the Goldman controversy could cause conventional banks to take more steps in future to allay potential concerns over whether they are following Islamic principles.

Aznan Hasan, one of the scholars who signed the Goldman fatwa, said there were no sharia-related problems with the sukuk. The intention to list on the Irish exchange is purely for tax purposes, he said. But he added that Goldman should consider more measures to address doubts.

“I personally think the issue now is what is the mechanism to ensure that it is not traded, and even if it is traded, that it’s traded at par, and they have to come up to us with a mechanism for that,” he told Reuters.

He said Goldman might issue an additional or complementary prospectus to address this aspect and describe how it would ensure proceeds of the sukuk were only used for sharia-compliant purposes. Goldman might also agree to issue a letter to its board of sharia scholars whenever it used the proceeds, or agree to quarterly audits, he added.

“If they can put all the mechanisms in there, then there shouldn’t be any problem,” said Hasan. “The murabaha is not a new one — there is nothing new in the structure.”

Another scholar, Sheikh Edam M. Ishaq, said the Goldman case might lead to institutional reforms in the industry and closer scrutiny of sukuk issues in general.

“There must be some regulatory body to monitor and ensure the compliance of these issues, otherwise sooner rather than later the attraction of sukuk as Islamic liquidity management instruments will lose a lot,” he said.

BLME Signs Islamic Banking Deal With Global Marine for Wind

Bank of London and The Middle East Plc, the London-based Islamic bank, signed a 14 million-pound ($22 million) deal to help Global Marine Systems Ltd. buy a vessel to install subsea power cables at offshore wind farms.

The leasing transaction with the Essex, England-based marine technology and engineering company is the Shariah- compliant bank’s first in the renewable energy industry, according to a statement from the bank.

The deal “allows us to contribute indirectly to the U.K.’s attempts to diversify its sources of energy,” Jervis Rhodes, head of corporate banking at BLME, said in the statement sent by e-mail yesterday.

Nations from the U.K. to Germany are installing wind turbines offshore to curb fossil-fuel emissions and meet targets for renewable power. The U.K. plans to reach 18 gigawatts of capacity from offshore wind parks by 2020 while Germany is targeting 10 gigawatts by then. Parks will be built further from shore in deeper waters as developers seek to industrialize the technology to bring down costs.

The barge, called Cable Enterprise, will install subsea power links that help transport power generated by the turbines for use by consumers. As an Islamic bank, the transactions and contracts BLME undertakes are Shariah compliant, or follow principles of Islamic law.

Forex trading 'haram', says National Fatwa Council

Council chairman Tan Sri Dr Abdul Shukor Husin said forex trading was against Islamic law and created confusion among Muslims.

“A study by the committee found that such trading involves currency speculation, which contradicts Islamic law.

“For that reason, the National Fatwa Council has decided that it is haram for Muslims to be engaged in such trading,” he told reporters after chairing the Council’s 98th conference here Wednesday.

Abdul Shukor said Muslims should not engage in forex trading as there are many doubts about it and it involves individuals using the Internet, with uncertain outcomes.

“Other forms of trading in foreign currencies, such as by money changers or between banks, are permissible, as they do not involve currency speculation or uncertain outcomes,” he said.

He said the meeting also ruled that it was permissible for Muslims to invest or save in the Premium Saving Certificate scheme managed by Bank Simpanan Nasional (BSN).

He said the decision was reached after the committee was satisfied with the briefing by the Bank Negara syariah panel on the scheme’s implementation.

“At first we had doubts about the scheme’s implementation, but we were satisfied after the trading system was changed into the Islamic concept of Mudharabah,” he said. – Bernama


TEXT-S&P report: Malaysia developing into a major islamic bond mkt



Feb 06 – As shaky prospects for the global economy continue, Malaysia’s bond market stands out by becoming the Islamic finance center for Asia with smart regulation and a growing ecosystem around Islamic finance, said Standard & Poor’s Ratings Services in a report today, titled “Development Of Malaysia’s Bond Market Is Still Assured Despite Global Turmoil.”

Approximately 70% of Malaysia’s domestic debt issuance is in the form of sukuks (financial certificates, similar to bonds, that are compliant with Islamic law), making it the world’s largest Islamic bond market with over 60% of global sukuk issuance originating from Malaysia (foreign currency A-/Stable/A-2; local currency A/Stable/A-1; ASEAN scale axAA+/axA-1).

“Policymakers in emerging markets view Malaysia as a poster child for bond market development, given that it’s now the fourth-largest bond market in Asia, after Japan, China, and South Korea,” said Surinder Kathpalia, managing director at Standard & Poor’s.

“Malaysia’s bond market has a strong infrastructure and a record of solid growth due to a transparent and predictable regulatory environment, the availability of independent credit research, the existence of ‘risk-free’ bonds of various tenors, and a bond pricing service,” Mr. Kathpalia said.

Standard & Poor’s maintains a strong outlook for Malaysia’s bond market, reflecting positive bond market developments, ongoing growth in Islamic finance, and steady macroeconomic fundamentals in the country.

Southeast Asian (ASEAN) local currency bond markets–including Malaysia’s–continued to bustle in 2011 with local currency bond issues, providing alternative funding and investment options for Asian issuers and investors when issuances in G3 currencies in Asia stalled.

“It wasn’t just ASEAN companies that tapped the markets, those in Hong Kong, India, and Korea also issued bonds in the region,” said Mr. Kathpalia.

ASEAN companies are likely to continue to seek alternative funding sources as those in G3 markets (U.S., Japan, and the eurozone) become harder and more expensive to tap, he added.

Islamic banking draft moots five-member Sharia board

MUSCAT: A five-member Sharia board, exclusive branches for window operation, clear cut segregation of conventional and Islamic banking with separate teams of people and accounts and a 12 per cent capital adequacy ratio are the main highlights of the Islamic Banking Draft Framework (IBRF) presented by the Central Bank of Oman before chief executives of banks in Oman.

CBO has organised a consultative meeting for top officials of banks on January 25 for presenting the draft Islamic banking rules, which the apex bank’s consultants Ernst & Young termed as a ‘unique model.’ The banking regulator is still working on the regulation, and may incorporate changes on the basis of feedbacks from banks, before announcing it. Ernst & Young has advised the CBO on fixing of lending limits, single borrower limit, writing of rule books, procedures for reporting structure for Islamic banks and formation of Sharia board.

Of the five-member Sharia board, three should be experienced Islamic scholars and two should be from relevant field, either a professional in Islamic law or Islamic accounting, chief executive officers of two leading banks, who attended the consultative meeting, told Times of Oman. CBO’s draft regulation also stipulates on separate branches for Islamic banking window operation of conventional banks.

“There needs to be a separate team of people for accounts, information technology, marketing and compliance for Islamic banking line of business. There is also a separate head for Islamic banking. However, the back office support can be common for conventional and Islamic banking.

The whole idea is to create a perception among general public that these are two distinctly different lines of business,” said a chief executive of a bank, who does not want to be named. The draft regulation also insists on a 12 per cent capital adequacy, with a minimum paid up capital of RO10 million for starting window operation.

Another major suggestion for window operation is that funds can be pumped into Islamic line of business by a conventional parent bank, but Islamic banking operation can not transfer money for using it in conventional banking. “This could create problems at the macro-level, at least initially.

For instance, if all banks put together transfer RO1 billion into Islamic banking initially and in case half of the total funds can not be deployed due to lack of demand for credit, then the money can not be transferred back to conventional line of business for effectively deploying in the financial system,” noted another CEO of a bank, who viewed it on a macro economic level.

Another major concern expressed by bankers is the lack of availability of Sharia scholars to become board members of Islamic banking. “Everybody is getting into Islamic banking now. We are talking about 30 Sharia scholars. It is difficult to get people with relevant experience and it is going to be a challenge.

Even the region does not have that many people. This is what we are discussing with the Central Bank of Oman,” noted the official. It is also not clear whether a Sharia scholar can be a member of two boards.

Bankers also expressed their concerns on segregating risk management for Islamic banking line of business from conventional banking. “At the end of the day, risk is the same whether it is Islamic banking line of business or conventional line of business. And therefore, it should be on the parent bank and not separate it for Islamic banking,” noted the banker.

Sources also noted that there will be severe competition, with the imminent entry of two Islamic banks.

Top Oman Islamic banks to float shares

Oman’s two Islamic banks will float 40 per cent of their shares by June, the Sultanate’s central bank executive president Hamood Sangour al-Zadjali said on Monday.

Both banks, which are currently under formation, were awarded sharia-compliant banking licences last year – Bank Nizwa in May and Al Izz in August – after the Sultanate reversed its position as the only Gulf state which did not allow banks to specifically offer products and services complying with Islamic law.

‘Bank Nizwa will issue an initial public offering of 40 per cent of its capital of RO150 million ($389.61 million), while Al Izz International Bank will issue 40 per cent of its RO100 million capital by June this year,’ Zadjali told reporters on the sidelines of an Islamic finance conference.

Bank Nizwa has picked Oman Arab Bank as the issue manager for its IPO, an Omani banking source said, speaking on condition of anonymity because the information is not public.Al Izz has not mandated anyone to lead its offering, the source added.

Conventional lenders are also allowed to establish Islamic banking windows in the non-Opec oil producer.Both Bank Muscat and National Bank of Oman have said they would do so, while Standard Chartered is considering whether to offer sharia-compliant services.