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.

 

http://www.gulfbase.com/News/islamic-banks-need-mergers-to-fill-in-west-gap-/200578

Thomson Reuters, Crescent Wealth to launch Islamic Australia Index

Starting in early February, Thomson Reuters and Australia’s Crescent Wealth are jointly launching Islamic Australia Index – a research-based index that will offer local and international investors a tool to help invest in the Australian market in accordance with Islamic investment principles.

The initiative comes ahead of an expected government proposal to change tax guidelines to help open up the local market for Islamic investment products, though there remains some concern about the market’s growth potential.

Called the Thomson Reuters Crescent Wealth Islamic Australia Index, the measure will cover 143 stocks with combined market capitalisation of $160 billion. The companies are screened to ensure they adhere to sharia law.

Islamic finance prohibits the earning of interest, choosing to focus instead on the buying and selling of tangible assets such as property under the principles outlined within sharia law.Thomson and Crescent Wealth said in a joint statement.

“Creation of the index is a key step toward positioning Australia as an attractive destination for global Islamic investment funds. It is estimated Islamic banking assets globally now exceed $US1 trillion, and that there is $US50 billion in managed funds investing in equities according to Islamic principles.”

http://www.theaustralian.com.au/business/wall-street-journal/thomson-reuters-crescent-wealth-to-launch-islamic-australia-index/story-fnay3vxj-1226253579167

Banks drag Qatar to 3-mth low; UAE mkts end mixed

Financial stocks dragged down Qatar’s benchmark to its lowest close in nearly three months as investors sold-off on lower than expected cash dividends.

Shares in Qatar Islamic Bank (QIB) dipped 3.1 percent to their lowest since Nov 23. The lender posted a 32.6 percent drop in fourth-quarter net profit on Wednesday that missed analysts’ forecasts.The Gulf state’s second largest lender by market value proposed a 45 percent dividend distribution.

Doha Bank dropped 2.9 percent after its fourth-quarter profit jumped 49.4 percent but missed estimates. The board proposed a cash dividend of QR4.50 per share.

“Qatar has been losing ground because anticipations were high on dividend yield for the financial sector, which was proven to be the opposite,” said Marwan Shurrab, vice-president and chief trader at Gulfmena Investments.

“There is growth in the financial sector and hopefully the banking stocks will recover as people start looking forward to Q1 results which are still expected to be strong.”

Doha’s index ended 1.1 percent lower at 8,462 points, its lowest close since Oct. 25. The market extended losses to 3.6 percent so far this month, the worst performing Gulf market.Masraf Al Rayan fells 2.3 percent and Commercial Bank of Qatar declined 2.1 percent.

Elsewhere, UAE markets ended mixed with Dubai’s index halting two-days of gains, down 0.3 percent to 1,328 points.Dubai Financial Market, the only listed bourse in the Gulf, fell 3.4 percent. Bellwether Emaar Properties shed 0.4 percent and telecoms operator du dipped 1.4 percent.

The bourse hit an all-time low on Monday, extending a general downward trend since April 2011 as investors saw little improvement in performance of main representative sectors such as real estate and banking.

In Abu Dhabi, the index ticked up 0.2 percent to 2,337 points, up for a second session since Tuesday’s three-year low.Invest Bank climbed 6.3 percent, Abu Dhabi Islamic Bank gained 1.4 percent and Dana Gas advanced 2.7 percent.

In Oman, Renaissance Services tumbled to a three-year low as foreign investors sold on concerns over low freight spot rates.Shares in Renaissance, which has marine industry subsidiaries, were down 4.2 percent, slumping to their lowest since April 2009.The Baltic freight index was at $926, its lowest since early 2009.

“The negative sentiment is simply over-whelming on Renaissance,” said Vickneswaran Gowribalan, a Muscat-based fund manager. “The Baltic index may signal low freight spot rates for Renaissance in its short-term fleet.”

These concerns have spurred foreigners to dump Renaissance shares, he added.Oman’s index declined 0.3 percent to 5,581 points, its lowest level since Dec. 11.

http://www.arabianbusiness.com/banks-drag-qatar-3-mth-low-uae-mkts-end-mixed-441340.html

GFI Group appoints Neil Standen to head Swiss office

GFI Group has appointed Neil Standen as head of its recently opened Nyon office.

Julian Swain, Managing Director of GFI London says: “We are very pleased to have Neil Standen head our new office in Nyon. Neil’s experience and know-how will contribute greatly to the growth of the business conducted out of Switzerland. This is an area of great potential for us and a natural step in our growth strategy”.

Standen joined GFI Group in 2011. Before joining GFI, he worked in the Emerging Markets foreign exchange area of Tradition in London, setting up the broker’s Islamic Finance division. Prior to this, Standen spent 12 years at Collins Stewart Tullett Prebon, now Tullett Prebon, as head of their G10 forward foreign exchange in Europe, Africa and the Middle East.

The Nyon office focuses on brokering emerging market products including FX, FRAs, basis swaps, interest rate swaps and government bonds in CE3 currencies (Czech Koruna, Polish Zloty and Hungarian Forint), South African Rand and Turkish Lira. The office will also offer a service in listed products.

GFI has a significant footprint in the brokerage of currencies of emerging markets such as Russia and Latin America. The Switzerland office will further complement GFI’s participation in the Emerging Market sector at a global level. GFI Group has appointed Neil Standen as head of its recently opened Nyon office.

Julian Swain, Managing Director of GFI London says: “We are very pleased to have Neil Standen head our new office in Nyon. Neil’s experience and know-how will contribute greatly to the growth of the business conducted out of Switzerland. This is an area of great potential for us and a natural step in our growth strategy”.

Standen joined GFI Group in 2011. Before joining GFI, he worked in the Emerging Markets foreign exchange area of Tradition in London, setting up the broker’s Islamic Finance division. Prior to this, Standen spent 12 years at Collins Stewart Tullett Prebon, now Tullett Prebon, as head of their G10 forward foreign exchange in Europe, Africa and the Middle East.

The Nyon office focuses on brokering emerging market products including FX, FRAs, basis swaps, interest rate swaps and government bonds in CE3 currencies (Czech Koruna, Polish Zloty and Hungarian Forint), South African Rand and Turkish Lira. The office will also offer a service in listed products.

GFI has a significant footprint in the brokerage of currencies of emerging markets such as Russia and Latin America. The Switzerland office will further complement GFI’s participation in the Emerging Market sector at a global level.

http://www.hedgeweek.com/2012/01/09/160363/gfi-group-appoints-neil-standen-head-swiss-office

Strong appetite for Islamic finance products in Oman

MUSCAT: Omani consumers have expressed a strong appetite for Islamic finance with a rapid take-up of banking products expected within the first 12 months of being launched.

These are key findings published yesterday from Oman’s first independent market study, entitled ‘Islamic Finance in Oman – Sizing the retail market’.

The report was independently commissioned and published by IFAAS (Islamic Finance Advisory & Assurance Services), the international Islamic Finance consultancy.

The report, analyses the retail market for Islamic finance in Oman across all sectors of the financial market, including banking, finance and insurance. It examines the current behaviour of consumers and measures future market trends to gauge the real potential of Islamic finance in Oman.

The report fulfils the demand for empirical data that new and existing players need to develop their business plans using robust scientific information.

Key findings from the report reveal: About 85 per cent of consumers in Oman expressed an interest in Islamic finance products, of which 59 per cent were very interested and 26 per cent quite interested.

Nearly 70 per cent of consumers in Oman anticipate opening an Islamic savings account in the next 12 months with half (35 per cent) expecting to do so within three months of one becoming available.

About 77 per cent of consumers in Oman expect to take out Islamic financing (loans) within the next 1-2 years.

‘Islamic Finance in Oman – Sizing the retail market’ also found that currently 86 per cent of consumers in Oman have some kind of conventional banking products , of which 60 per cent declared to be ‘bothered’ about using products that are based on Riba (interest).

Strong potential

This further re-enforces the strong potential for retail Islamic finance in Oman, inferring that a high proportion of consumers engaging in financial activities are likely to switch to Shariah compliant alternatives when they become available. The report summarises its findings with several conclusions including:

The introduction of Islamic Finance in Oman is anticipated to change the country’s financial landscape over the next decade with far reaching positive effects for the overall economy.

The retail market will see a shift from conventional banking and a change in the savings behaviour leading to sizeable ‘new’ money.

Commenting on the findings, Farrukh Raza, managing director, IFAAS said, “The findings from ‘Islamic Finance in Oman – Sizing the retail market’ demonstrate that the growth from Islamic Finance has the potential to be bigger than currently expected.

The major challenge for decision makers is to ensure that their early critical decisions are based on accurate market information to ensure long term success. IFAAS’ report and findings have proved invaluable for many institutions considering their next move.

The introduction of Islamic Finance in Oman is anticipated to change the country’s financial landscape over the next decade with far reaching positive effects for the overall economy.
The retail market will see a shift from conventional banking and a change in the savings behaviour leading to sizeable ‘new’ money.

Commenting on the findings, Farrukh Raza, managing director, IFAAS said, “The findings from ‘Islamic Finance in Oman – Sizing the retail market’ demonstrate that the growth from Islamic Finance has the potential to be bigger than currently expected.

The major challenge for decision makers is to ensure that their early critical decisions are based on accurate market information to ensure long term success. IFAAS’ report and findings have proved invaluable for many institutions considering their next move.

http://www.timesofoman.com/innercat.asp?cat=&detail=53146&sec=news

Islamic bonds – SA makes its move A possible sukuk

In a move that could position SA at the forefront of the global Islamic Sharia law-compliant sukuk (bond) market, national treasury has called on banks to submit proposals for the issue by government of a sukuk.

“A sukuk would create a benchmark for other emerging markets and corporates,” says treasury spokesman Bulelwa Boqwana.

The nature of the possible sukuk has yet to be clarified and banks involved in the tendering process are not permitted to divulge any information.

But a sukuk would differ markedly from a conventional bond. Islamic Finance Resource, an information service, explains that in their purest form sukuk are ownership claims on physical assets.

A sukuk issue would be to domestic and foreign investors and its size dependent on government’s funding requirements, to be unveiled in the next national budget, says Boqwana. That it would be a success seems assured.

“There is a lot of local and foreign interest in it,” she says.

For SA, a sukuk issue would open the door to a source of foreign investment beyond traditional Western funding, finance minister Pravin Gordhan said in a recent speech. Though not on the vast scale of the Western funding machine, the sukuk market is significant, with new issues in 2010 of US$50bn, Ernst & Young (E&Y) says. Sukuk issues hit $63bn in the first nine months of 2011, according to research firm Zawya Sukuk Monitor.

Behind the sukuk market there is also the huge Islamic financial services asset base, which E&Y puts at $1trillion. Deutsche Bank predicts this total could rise to $1,8trillion by 2016 and drive a significant increase in the global sukuk market, which now accounts for a mere 1% of all bonds in issue.

For Gordhan’s strategy to establish SA as the hub for Islamic product development in Africa, a sukuk issue would be a big step forward. But SA cannot afford to drag its feet. Kenya, which has expressed similar ambitions in Africa’s Islamic finance market, aims to issue its first government sukuk in June 2012. A $500m issue is planned.

Also in the running is Nigeria, which is set to issue its first government sukuk within 18 months. Senegal has also expressed interest in tapping into the sukuk market.

http://www.fm.co.za/Article.aspx?id=161623

BSE and TASIS train business executives for Islamic banking & finance

Mumbai: Corporate executives and finance professionals learning and discussing financial business market issues in conference rooms at Bombay Stock Exchange (BSE), is a normal scene but what happened last week was unprecedented.

This time they were learning and discussing Islamic banking and finance at a program jointly organized by Taqwaa Advisory and Shariah Investment Solutions Pvt Ltd (TASIS) and BSE.

Training program on Islamic banking and finance held at BSE, Mumbai

TASIS and BSE organized the two-day program “Islamic banking, finance and capital market” (16-17 Dec.) for market professionals, fiancé and banking executives. The push might have come from growing Islamic banking and finance sector across continents.

Islamic banking and finance has reached the boundaries of more than 75 nations of the world, and many developed and secular nations including UK, USA, France, Germany, and Singapore are promoting this concept.

The robust performance of Islamic banking and finance sector during the recent financial downturn has added to its magnetism.

Western nations such as UK, are promoting Islamic finance with the slogan of “no favor but no discrimination”. Same way in India many institutions including some owned by government have showed interest to capitalize on this growing niche opportunity.

For example Kerala government owned KSIDC has started Al-Barakah Financial Services Ltd; GIC of India has started Islamic re-assurance scheme, SEBI has permeated several schemes explicitly adhering to the Islamic rules of investment, and Bombay Stock Exchange has started a Shariah index for share marketing.

The two-day program by TASIS and BSE was organized for finance professionals, fund managers, merchant bankers, corporate financial advisors, portfolios managers, and product development managers, finance marketing professionals, chartered accountants, stock brokers, wealth managers & AMCs. The program mainly focused on the following:

•        The basic concepts of tenets of Islamic banking and finance

•        The working of an Islamic bank

•        Islamic law relating to investment in the stock market

•        Screening processes of selecting shariah compliant stock

•        Islamic insurance

Program to train professionals for coming Islamic finance market

TCN spoke to Dr. Shariq Nisar, Director of TASIS, on the program and its purpose. The reason to organize this programme was that many business professionals were interested in knowing about Islamic finance, so by the way of this programme professionals will get aware of the Islamic finance, and also when Islamic banking is going to start in India and if the people are not aware of it then the chances of exploitation is very high. So to avert that kind of situation this programme is conducted, said Dr Nisar.

He says it is first kind of programme organized by the BSE for the professionals who want to learn about Islamic finance. He further says that majority of the professionals attending this programme are non-Muslims, and non-Muslims professionals are showing curiosity and interest in learning about Islamic finance, and how Islamic banking and insurance can function and also the Muslims who are attending this programme are seeing it from business operational point of view, and not in a religious way.

India needs Islamic finance for growth: Dr Shariq Nisar

Dr. Nisar says Islamic finance in India depends on two important aspects: First is the domestic demand; and the second is India’s position in the globalization of the financial sector, because domestically India is unable to generate enough capital largely because its major Muslim population is being discouraged to enter into the Indian market because of the perception of Haram, and globally the large number of global capital is getting generated from middle east or many other Islamic countries.

So if India wants to satisfy the demand of investment and capital it has to have an Islamic financial market both domestically and globally, and India will definitely be going to have a Islamic financial market very soon. The sooner India does it, the better for the nation and the whole economy, he ascertains.

Dr Shariq Nisar, Director, TASIS, giving market executives tips about Islamic banking and finance

He said the shariah index started by the BSE is just a one step. It is not the end. There is going to be much more research by the BSE and TASIS to certify many more shariah compliant products and the Islamic banking. He says Islamic finance is not just for the minority Muslim population in this country, but it is for the money.

The nations which have allowed Islamic finance were not lovers of Islam. For example France allowed Islamic finance but in the same month it banned hijab. Different countries and people are attracted towards Islamic finance for the need of money.

He said Islamic finance is all about the real economic activity, it doesn’t allow gambling with the money, in this way it can restrain economic downturn by promoting real economic activity and deterring people to gamble with money so it will be in the larger interest and welfare of the citizens of this country.

He says India is a country with huge Muslim population but still it is far behind in implementation of Islamic finance. Muslims in this country have money but they don’t know how to invest it financially, nor even banking professionals know as to how to guide their Muslim customers to invest in the commodity market.

So this type of programme is conducted by the BSE and TASIS to train the banking officials in the Islamic finance.

Young market executives on Islamic Finance

TCN also spoke to some of the finance professionals who were attending the programme.

Varsha Jalan is an employee of a law firm giving legal assistance in the finance related matters. She said reason for joining this programme is to develop her expertise in the growing Islamic financial market, and because it could be a good mode of finance in India.

Sumit Jalan and Yasmeen both belong to the banking profession. They said that Islamic finance has a good potential in India because of the large number of Muslim population which India possess, but at the same time they ascertain it should not be limited to a particular community because it is very viable and economical than other services, so every person should get avail of this service.

Finance executives Yasmeen, Sumit and Varsha attending the workshop on Islamic banking and finance held at BSE, Mumbai

Varsha says that the programme was informative, and she learned new and surprising things about the Islamic finance and about the tenets of Islam. She thinks Islamic finance is a good way for India to attract FDI because India is in need of money and for Middle East India is good alternative to the west.

Sumit and Yasmeen said that they learned many things about how the markets and MNCs work in Islamic countries and it was useful for them as they come from the banking sector, and it was good experience for them to learn about the core principles of Islamic finance.

Sumit says that to attract FDI in the banking sector you need to have knowledge of the environment which investors are looking forward for their investment, so the knowledge he gained will be useful for him in the future. Yasmeen said being a banker learning something new regarding to their profession was a pleasant experience for her.

http://twocircles.net/2011dec20/bse_and_tasis_train_business_executives_islamic_banking_finance.html

Baito Tower wins 3 awards in Nasser Al-Sabah for real estate excellence

Kuwait Finance House (KFH) Baitok Tower in Kuwait City won three awards from Sheikh Nasser Al-Sabah’s awards for real estate excellence in 2011.

The awards were granted to KFH for best management and best operation of smart towers, in addition to being best commercial market.

KFH AGM for Finanace Sector Emad Al-Thaqeb stated that this award underlines KFH’s pivotal role in the real estate field; especially in the fields of residential and investment real estate through setting up world-class shopping malls and markets.

He noted that the Real Estate Association formed an unbiased committee from engineering professors and representatives of some academic authorities, and that this committee shouldered its responsibility professionally.

He congratulated the winners and thanked the association for taking this initiative. He went on to say that this award is expected to improve quality of real estate projects and encourage the private sector to abide by international construction standards.

It is worth noting that Baitok Tower is located in Kuwait City next to KFH’s main office. The tower consists of 33 storeys and is 165 meters high. It also has four levels for car parking, and was built by Al-Modeer Al-Kuwaiti Holding Company.

Moreover, Al-Thaqeb stressed that KFH’s keenness to expand and develop the real estate market through offering Islamic financial solutions that help Kuwaiti families purchase the house of their dreams.

http://www.zawya.com/story.cfm/sidZAWYA20111215115537

OnIslam & News Agencies

CAPE TOWN – As Islamic finance grows by leaps and bounds, South Africa National Treasury has invited banks to provide help in structuring the issuance of the government’s first Islamic bonds or Sukuk, in both local and international markets.

“There is a great interest in the Sukuk market,” Treasury Director-General Lungisa Fuzile said in a statement cited by SouthAfrica.info website on Wednesday, December 7.

According to the Treasury, the banking institutions were urged to provide advisory services and in the structuring and issuance of a government Islamic bond.

“This is the first step towards meeting the growing appetite for government backed Shari`ah compliant investments,” Fuzile added.

The successful bidder will also help in structuring, managing as well as coordinating the issuance of sukuk in South Africa for the first time.

Moreover, they will be responsible for obtaining relevant regulatory approvals, as well as securing a listing for the bond both locally and internationally.

The successful bidder will also have to market the bond to investors, indicate underwriting and market-making appetite, facilitate the book building process and provide any additional services required to successfully launch the bond.

Like other forms of Islamic financing tools, sukuk do not receive or pay interest.

It typically operates through actual transactions such as profit-sharing or leasing.

Companies that have issued Islamic bonds make payments to investors using profits from the underlying business, instead of paying interest.

The Sukuk market has reached $111.9 billion in the eight years to 2008, according to the International Islamic Financial Market.

Islam forbids Muslims from usury, receiving or paying interest on loans.

Transactions by Islamic banks must be backed by real assets — not shady repackaged subprime mortgages and banks cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.

http://ww2.onislam.net/english/news/africa/454935-south-africa-mulls-islamic-bonds.html

Treasury considers Islamic bonds

The National Treasury has asked banks for proposals about a government Islamic bond — known as Sukuk — in the local and international markets.

“There is a great interest in the Sukuk market and this is the first step towards meeting the growing appetite for government-backed Shariah compliant investments,” Lungisa Fuzile, director-general of the National Treasury, said in a statement on Tuesday.

The Treasury invited banking institutions to submit proposals for providing advisory services for the structuring and issuing of Sukuk.

This was in line with its intention to diversify its funding and investor base.Sukuk refers to a financial certificate that conforms to Muslim strictures on the charging or paying of interest.

Interested service providers should submit proposals by the close of business on December 21 2011.Shortlisted bidders would be informed by January 20 2012, the Treasury said.

http://www.timeslive.co.za/politics/2011/12/06/treasury-considers-islamic-bonds