GIB sets up $1.1bn Malaysia sukuk programme

Gulf International Bank (GIB) has announced the establishment of a Malaysian ringgit 3.5 billion ($1.11 billion) Sukuk Al-Wakalah medium-term note (MTN) programme in Malaysia.

The Islamic MTN programme is based on the Shariah principle of Wakalah, said a bank statement.

CIMB Investment Bank Berhad and Standard Chartered Saadiq Berhad are the joint lead arrangers, while GIB Capital, GIB’s investment banking arm, is the international coordinator of the sukuk programme.

GIB sets up $1.1bn Malaysia sukuk programme

Malaysia-based RAM Ratings has assigned an indicative rating of AA1 to GIB’s Sukuk Programme, which will be conducted through a special purpose company, Gulf Sukuk I Company, said the statement.

The rating agency stated that GIB’s sukuk ratings “are underpinned by the strong financial support from its ultimate major shareholder—the government of the Kingdom of Saudi Arabia—which indirectly owns 97 per cent of the bank.

The ratings also give credence to the bank’s entrenched wholesale-banking franchise within the Gulf Cooperation Council region, robust capitalisation levels and healthy liquidity position.”

GIB chairman Jammaz bin Abdullah Al-Suhaimi said: “The sukuk programme represents a strategic move to tap into the ringgit market in an effort to diversify funding avenues and currencies for the bank.”

A high-level delegation from GIB has recently undertaken a two-day road show in Kuala Lumpur to introduce the MTN programme and the bank to Malaysian investors.

“The road show was very successful and included intensive investor presentations. We are very pleased with the interest shown by these investors and expect an issuance of sukuk in the near future when the market conditions are convenient,” said Dr Yahya A Alyahya, GIB chief executive officer.

He added: “GIB will continue to monitor the market in the future to access funding opportunities, and this sukuk programme will allow the bank to further diversify its funding base and improve the maturity profile of its liabilities.”

GIB is a leading bank in the Middle East with its principal focus on the GCC states. Its primary shareholder is the Public Investment Fund of Saudi Arabia. – Trade Arabia News Service



Islamic banks advised to distribute profit

Islamic banks to distribute the profit among shareholders and depositors alike and on the basis of Islamic principle of justice.

Speakers at the 1st Islamic Finance Expo and Conference said depositors hand over their savings to Islamic banks and it was their duty to give a fair return to depositors on their saving.

They advised Islamic banks to simplify housing loans to attract people who want to buy houses on the basis of Shariah financing. They warned the banks to avoid using ‘haram funds’ (forbidden money) for Islamic banking transactions. Forbidden funds cannot be converted into halal (permissible) funds through Islamic banking, they observed. Publicity Channel, State Bank of Pakistan (SBP) and Ernst and Young organized the event at Karachi Expo Centre on Saturday.

Islamic banking expert and Shariah advisor Mufti Rafi Usmaninoted said rate of return by the Islamic banks should be equal to inflation rate so that the value of their savings should not eroded.

He asked Islamic banks to simplify the procedures for housing loans, as the current process was very complicated. We are receiving scores of complaints as people are facing hardship in obtaining housing loans, he added.

Mufti Usmani said government should take steps to eliminate interest bearing banking system in the country and also advised business community to come towards Islamic banking. He lauded the role of SBP for the growth of Islamic banking in Pakistan.

Islamic banks advised to distribute profit

Vice Chancellor Ripha International University Islamabad, Dr Anis Ahmad suggested Islamic banks to give equal return to shareholders and depositors. It should be based on the principle of justice, he noted. He warned Islamic banks not to use illegal funds in Shariah banking as this money could not be used in the Additional director Islamic Banking Department, SBP Zulfiqar Ali Khokhhar said Islamic banking industry was growing an average rate of 30 percent since last 12 years. He said the share of Islamic banking in overall banking industry in Pakistan would rise from 8 percent to 12 percent in next two years.

CEO of Bank Islami, Hasan A Bilgrami said at least one Islamic bank would make its position among top five in Pakistan in next 5 to 10 years. My bank would double its branch network from 100 in next two years, he noted.

Chairman NBFI and Modaraba Association of Pakistan, Basheer Chowdhry said modarabas have maintained their profitability, assets and equity base despite liquidity crunch after global economic meltdown. He said 11 out of 26 modarabas have declared cash dividends last year ranging between 2 to 73 percent.


Islamic Bank of Britain's Sharia Supervisory Committee host UK's first 'Islamic Finance Question Time'

Islamic Bank of Britain plc ( IBB ), ( last week held an exclusive event, entitled Islamic Finance Question Time. The event, held on 23rdApril 2012, was an open, public Q&A session hosted by the Bank’s Sharia Scholars. Islamic Finance Question Time is the first event of its kind, and the only time a UK Islamic bank has given public access to the Sharia Scholars that form its Sharia Supervisory Committee (SSC).


Nizam Muhammed Saleh Yaqoobi, and Mufti Abdul Qadir Barkatulla. The SSC welcomed questions from the public about Islamic Finance in order to facilitate a lively debate. The aim of the event was to demystify Islamic finance and provide an insight into how it offers a faith-based alternative to conventional finance and banking.

Commenting on the event, Chairman of the IBB SSC, Sheikh Dr Abdul Sattar Abu Ghuddah said, “Islamic finance is as old as the religion of Islam itself. However, there is still a lot of misunderstanding around how it works and the need for Muslims to manage their finances in Sharia compliant manner. The IBB SSC hopes the Islamic Finance Question Time event has shed some light on the matter and gone some way to encouraging the further take-up of Sharia Finance amongst the Muslim community.”

Samir Alamad, Senior Manager, Sharia Compliance at IBB who works closely with the IBB SSC on a day to day basis, also commented, “The feedback from attendees of Islamic Finance Question Time has been very positive. The public welcomed the opportunity to engage with the IBB SSC so openly. The event is the first time a UK Islamic bank has given open access to its SSC, and this reflects the open and transparent way the Bank works with its customers.”

Over 150 guests attended the event, held at the Bloomsbury Hotel in London. Over 10 questions were put to the panel leading to a debate lasting over 1.5 hours. Of these questions, the following generated a lively and informed discussion amongst the panel and their guests:

Q1 Why don’t you use the rental market rate for your Home Purchase Plan product?

Islamic banks use BBR or LIBOR to price their products as these are the most accurate, widely accepted and consistent benchmarks for financing. This allows Islamic banks to meet the important Sharia criteria of avoiding uncertainty. If rental rates were to be used as a benchmark instead, there would be too much variation. Not only would this go against the Sharia it would also be more costly for the customer. Rental rates fluctuate across a wide spectrum depending on location, condition of the property and other aspects, e.g. rent charged for a property in London would be three or four times more expensive than a similar property in the North. Hence, the Islamic bank would end up offering many various rental rates which would not be practical. The customer would also be disadvantaged by having to pay more if the rental rate was to be used as a benchmark.

Importantly, basing the rental rates of HPPs on benchmarks such as LIBOR or BBR does not affect the actual contracts that the product is based on. The rent or lease agreement are not rendered Haram, or not compliant with Sharia. Established benchmarks such as BBR and LIBOR therefore play an important role. They allow the Bank to meet the Sharia requirements for a benchmark that is widely accepted, consistent, transparent and reliable which in turns eliminates any uncertainty around pricing.

An Islamic benchmark is currently being developed and this is a great step forward for the industry. Once established it will eliminate the confusion that exists over the use of BBR or LIBOR, as explained above.




Q2 Is it permissible under the Sharia to quote a profit rate for Fixed Term Deposit savings accounts?

It is important to clarify that this Sharia compliant savings product(s) is called ‘Fixed Term’ and not ‘fixed return’. It is usually offered under the Islamic principle of Wakala (an agency agreement). With this product, the Islamic bank provides an expected profit rate over a set period of time as a ‘target’ based on the investment activity it will undertake with the deposits. The ‘Fixed’ element relates to the length of time the bank will undertake the investment activity for the customer. For example, two years for the Two Year Fixed Term Deposit Account.

These savings products do not offer a fixed return, in the same way that conventional banks that pay interest, do. Under Sharia, the bank cannot guarantee a rate of return, because with investment there is always an element of risk.

However, Islamic banks mitigate this risk for the customer in many ways, so that the customer’s deposits and return do not suffer. Essentially, the bank monitors the investment activity, and its performance, very closely. If, at any time, it looks likely that the customer’s return may be less than the expected profit rate the bank will contact the client and offer them the option to close the account and take back the full deposit amount and the profit accrued up to that date. Alternatively, the customer can choose to carry on till the end of the term on the lower expected profit rate from that point.

This process is all in accordance with Sharia which encourages trade, and forbids Riba. Sharia also mandates that risk is part of all transactions and that these risks are managed responsibly to ensure the best possible outcome for all parties.

IBB is the UK’s only wholly Sharia compliant retail bank in the UK. It was formed in 2004 and has attracted over 50, 000 customers. The Bank offers the largest range of Sharia compliant retail financial products in the UK and these include current, savings and business banking accounts, Home Purchase Plans and Buy to Let Purchase Plans. IBB also works with carefully selected partners to offer Sharia compliant wealth management products and services.

In order to guarantee that the products and services from IBB are genuinely Sharia compliant, IBB has in place a panel of respected Sharia Scholars, called the Sharia Supervisory Committee (SSC). Their work is supported by a dedicated a Sharia Compliance Officer (SCO). Both the SCO and the SSC are trained experts in the interpretation of Islamic law and its application within modern day Islamic financial institutions. They both review every product and aspect of IBB ‘s business operations to ensure that Sharia compliance is always maintained.

About Islamic Bank of Britain
Islamic Bank of Britain plc (Bank) has pioneered Sharia compliant retail banking in the UK and has launched a wide range of products, including the Home Purchase Plan (the halal mortgage alternative) Current Accounts and Savings Accounts. The Bank was also the first to introduce Sharia compliant business banking to the UK, and now offers a wide range of institutional and business banking products and services, including Commercial Property Finance.

Several of the Bank’s products remain unique in the UK retail market.

The Bank is authorised and regulated by the Financial Services Authority and is a member of Financial Services Compensation Scheme. All products offered by the Bank are fully approved by the Bank’s Sharia Supervisory Committee (SSC).

Sharia compliant banking operates without the use of interest. The products that are offered are structured in a different way to those provided by conventional banks

Whilst the Bank offers products and services that are designed in accordance with Sharia principles, it is an inclusive Bank and welcomes customers of all faiths.

Interviews with Islamic Bank of Britain are available on request.


Alternative Finance

Nov 26, 2011 (LBO) – Sri Lanka’s Wealth Lanka Management (Pvt) Ltd, an investment house, and Al Tayseer Advisory Services Sdn. Bhd a Malaysia based consultancy has linked up to provide Islamic banking and bond market instruments, officials said.

The firm advices on Islamic banking and corporate finance and advisory services for specialist industries like steel, cement and cotton.

“We find Sri Lanka as an emerging market for Islamic finance with immense future growth potential,” Al Tayseer Advisors Services, chief executive and partner Fahd Hashim, told reporters in Colombo.

“Sri Lanka is the second fastest growing economy in Asia right now and growth is linked to public sector investment with imports of cement steel.”

Al Tayseer can help with setting up plants or acquiring them to supply commodities to Sri Lanka, Hashim said.

The firm was also working in Pakistan. Hashim said it was already advising a Pakistan based cement maker that is exporting to Sri Lanka. In addition to corporate finance the consultancy also advised in materials and energy efficiency and use of carbon credits.

Mangala Boyagoda, head of Wealth Lanka Management, a senior fixed income specialist in Sri Lanka said the new partnership could provide Shariah based bond market products to help create an interbank market in Islamic finance.

“You cannot develop Shariah banking without an interbank market,” Boyagoda said. “We are looking at the possibility of raising a Shariah government bond.”

Though several banks have Islamic finance units in the country, they have constraints in Treasury management due to lack of compliant products.

The partnership will also advice on setting up Islamic banking units or outsource such units for banks, finance companies and leasing firms, Hashim said.

Kerala dances round Islamic banking

Kerala Finance Minister K M Mani reveals plans for special counters to be opened in state treasuries to collect interest-free deposits, saying the state Government was ‘not against’ the idea of Islamic banking

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Despite Kerala’s apparent willingness to embrace Islamic finance, the Reserve Bank of India and the central Government has made it clear that Islamic banking may not be implemented under current legislation. The state legislature is, therefore, moving ahead with opening special counters in the state treasuries. Industries Minister P K Kunhalikutty said that the deposits mobilised would be invested in productive sectors. The returns made from such investments will be shared among the stakeholders.

Earlier in July, Kerala Chief Minister Oommen Chandy has offered full support to interest-free banking system based on the Islamic principles. “The Kerala government will extend full support and cooperation to the interest-free banking system so that it may be used for the development of the state and we will try to attain the central government’s approval for it”, he said while inaugurating a national seminar on Interest-free Institutional Mechanism for Banking, Finance and Insurance held in Thiruvananthapuram on 4 July 2011. Continue reading

Ignorance, Islamic banking, and Sanusi's NASS presentation

When one compares the meeting of the House of Representatives with the Central Bank of Nigeria (CBN) Governor on Islamic banking and N150,000 cash withdrawal limit introduced by the CBN and the United Kingdom’s Commons media committee hearing on the phone hacking scandal of Rupert Murdoch’s News of the World Corp, one easily understands that ignorance is a major factor responsible for the weakness of our democracy which continues to live in the nascent abyss.

At the said meeting, the law makers openly confessed their low level of awareness on both issues, particularly the cash withdrawal limit showing that very little research had been done ahead of the meeting.

Continue reading

Egypt’s Salafists to found their first Islamic bank

Egypt’s Salafist party, El-Nour, has called for the founding of its first bank in its first economic conference

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Egypt’s Salafist party, El-Nour, in it’s first economic conference, called for the founding of a bank on behalf of the party that aims to contribute to the Islamic banking sector.

The bank will be based on funding for small and medium enterprises as one of the quick keys to help the youth sector.

The participants agreed at the conference, which was held on Sunday 24 July under the title ‘Egypt’s economic revolution blooms’, on the need to establish an Islamic Chamber of Commerce as a mechanism for economic reform, as well as attempt to attract the high capital members of the party. Continue reading

Muslim leaders vow to defend Islamic banking

MUSLIM leaders in their hundreds, under the aegis of the Supreme Council for Shari’ah in Nigeria, in Kaduna, on Sunday, said they would defend Islamic banking in Nigeria with the last drop of their blood.

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They said since interest free banking was successfully practised in the United Kingdom (UK) and other Christian dominated countries, they would resist any attempt by the Christian Association of Nigeria (CAN) to frustrate the implementation of the banking system in Nigeria.

Speaking at a press conference shortly after their meeting at the Arewa House, Kaduna, the national president of the Supreme Council for Shari’ah in Nigeria (SCSN), Dr Ibrahim Datti Ahmed, warned that Muslims in the country would no longer keep quiet and allow others to blackmail the interest-free banking about to commence in September. Continue reading

Egypt Brothers Eye Islamic Finance Economy

CAIRO – Setting out the first glimpses of their financial policies, the Muslim Brotherhoood’s newly established Freedom and Justice Party is planning to focus on Islamic finance to revive Egypt’s economy.

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“Speculative instruments have caused great trouble for the Egyptian economy,” Abdel Hafez El Sawy, an economist for the Freedom and Justice political party, told Al Bawaba website on Monday, July 4.

Although Egypt is considered the birthplace of Islamic finance, its growth has lagged due to past corruption scandals.

Under toppled president Hosni Mubarak’s 30-year rule, the country sought to enforce a more secular financial system.

According to a 2009 report by consulting firm McKinsey, Islamic banking only accounts for 3 to 4 percent of Egypt’s $193 billion banking industry. That compares with 46 percent in the United Arab Emirates. Continue reading


Sri Lanka: Uncovering the Islamic Finance Framework By Muath Mubarak

With the end of the civil war in the country that had plagued the economy for more than three decades, it is high time Sri Lankans began thinking about the development of the nation. Sri Lanka has to grow like other developed countries within a short time by exploiting untapped opportunities.

The post-war period requires rapid development in all sectors of the economy, especially the banking and financial sector. Unfortunately, the sector has seen lackluster growth due to the global fi nancial crisis. The crisis however has led experts and economists alike to consider an alternative financial system.

As one of the fastest growing industries in the world today, Islamic finance is growing at 20%-25% a year, according to analysts and rating agencies. It is forecasted that the industry will hold assets totaling US$4trillion by 2012. In addition, seven of the top 10 conventional banks with an international presence have commenced Islamic banking. Continue reading