Not enough law firms in Islamic finance

An analyst says that although Malaysian claims to be on of the biggest sukuk markets in the world, there are not more than a dozen lawyers in the country that can handle the transactions.

Not enough law firms in Islamic finance

Not enough law firms in Islamic finance

PETALING JAYA:

The legal fraternity in Malaysia should pay more attention to serving the Islamic finance industry, which is suffering a brain drain to more lucrative markets such as the Gulf Cooperation Countries, Zaid Ibrahim & Co head of Islamic Financial Services Practice Madzlan Hussain said.
The lack of law firms and lawyers involved in Islamic banking and finance in the country opens up opportunities for an enlargement of the playing field and calls for the right institutional programmes to produce the necessary manpower, said Madzlan.

“While we claim that we are one of the biggest sukuk markets in the world, there are not more than a dozen lawyers in the country that can handle sukuk transactions,” Madzlan said.

He said with the growth of the Islamic finance industry, legal fraternity should look at ways to encourage a greater segment of lawyers to join the sector with the right incentives.

“It is imperative that Malaysia create the right framework and incentive to ensure that there are sufficient qualified people in the industry, that is if Malaysia is to further impose its dominance as a leading international financial centre,” Madzlan said in an interview with The Malaysian Reserve.

He said while the legal infrastructure in the country for Islamic Finance is strong, there is still room for improvement. “We need to look at both the hardware and software of the legal framework and enhance it,” he said.

He said the hardware legal framework entails having suitable laws and framework which is adequate but the software entails having the right people to manage the software and there is a shortage resource in this area.
Malaysian regulators have set the bar higher for Islamic finance and takaful industry, preparing to release a brand new legal framework for Islamic finance in 2013.

The new legal framework is expected to further liberalise the industry, and will encourage more firms and lawyers to be involved in the legal aspects of the industry.

Malaysian Islamic finance regulators, such as the Islamic Finance Services Board, have also introduced new rules over the last two years, aiming at giving a boost to the Islamic finance sector, which Malaysia has set to become a new growth sector for the nation’s economy.

However, these plans will be hurt by the dearth of talents, and the lack of incentives for local law firms to be interested in the industry.

Mazdlan said the biggest challenge for the industry is having adequate human capital that can help Malaysia spur the growth of the industry.

“We have not done enough or fast enough towards creating adequate human capital in the industry,” he said.
“Malaysia has to invest sufficiently in education and training to create the right kind of people in the industry. We need to increase our investment in education and training,” he said.

He said the biggest challenge for Malaysia will be the internationalisation of the industry where we can create sufficient pool of talents not just for the country but also export our talents to other countries with Islamic jurisdictions.

“Right now our talents are being pitched and if we don’t replenish them sufficiently, than the dearth of talent pool in the industry can retard our progress towards becoming a successful Islamic hub in the world,” he said

http://www.freemalaysiatoday.com/category/business/2013/10/28/not-enough-law-firms-in-islamic-finance/

Islamic funds forum is a major success

Delegates and speakers from 25 countries took part in the eighth Annual World Islamic Funds and Financial Markets Conference which closed at the Gulf Hotel yesterday. “This has been by far the most international edition of this event that we have hosted so far and that is a reflection of the spread of Islamic finance from just the Muslim world to further afield,” said organiser MEGA Events managing director David McLean.

“We are not just talking about financial institutions here because what we saw this year was a strong representation from corporate entities who are turning from conventional finance to Islamic institutions when it comes to looking at ways to raise money.

“We have had leading institutions from as far apart as Ireland and Luxembourg taking part and a strong showing from Malaysia which has been dominating the sukuk market in recent years,” he added.

He said he believed the quality of speakers was again extremely high and the feedback he had so far was very positive.

“We are committed to bringing this conference back to Bahrain next year and we have already had a lot of delegates asking about how they can sign up for the ninth edition,” he added.

“Islamic finance may remain fairly small compared with conventional finance but it is a fast growing industry which is attracting more international interest across a wide range of financial service sectors.

“One of the fast growing sectors is Islamic insurance and because of that we will be launching a dedicated conference on takaful in Bahrain in October this year as well as returning with the World Islamic Banking Conference towards the end of the year,” he added.


Islamic funds forum is a major success

 

Islamic finance still has to achieve critical mass if it is to address problems of liquidity, according to KPMG Fakhro Bahrain partner “The sukuk market is definitely growing but it has yet to reach the necessary critical mass.

“The industry needs sukuk and interbank lending to meet its liquidity needs but unfortunately the bigger banks that have excess liquidity are not over keen to lend to smaller banks that do not have ratings.

“We will need to see more consolidation in the banking market and that is something that we are already seeing,” he added.

He said that while the sukuk market was expanding, almost 100 per cent of the issuance in 2011 was in Malaysia.

He added that the other problem the industry faced was a lack of standardisation on how banks deal with each other and on the issue of regulation.

“The industry is moving forward in developing standardisation but it is a slow process compared with the growth in the industry,” he said.

URL: http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=330533

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

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

S.Africa considers issuing Islamic bonds

JOHANNESBURG (Reuters) – South Africa’s National Treasury is considering issuing Islamic bonds to diversify its investor base and could have its first sukuk in the market as early as the next financial year if approved.

 

“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,” said Lungisa Fuzile, director general of the National Treasury, in a statement on Tuesday.

The National Treasury asked banks to submit proposals by the close of business on December 21 for the issuance of sukuks and short-listed bidders will be informed by January 20.

The successful bidder would advise the Treasury on structuring, managing, and coordinating issuance activities and drafting all required contracts

Treasury spokeswoman Bulelwa Boqwana said the finance ministry has been researching Islamic bonds since 2004.

“There has been ongoing appetite for the sukuk even before the roadshow,” said Boqwana, referring to an overseas trip by Treasury officials last week for a non-issue investor roadshow after the finance ministry released its 3-year fiscal framework in October.

“The Treasury started the research on the sukuk market as early as 2004 as part of our ongoing funding strategy,” she added.

On when the market could expect the first issue of sukuks, Boqwana said: “It is only after the budget that we get our funding strategy approved so this is in preparation for the next fiscal year.”

The Treasury will unveil its 2012/2013 budget in February.

Islamic banking is one of the world’s fastest growing financial sectors, according to industry estimates putting its annual growth at 15 to 20 percent.

Global issuance of sukuk — or Islamic compliant bonds — is likely to rise 60 percent, to above $22 billion in 2011, a Reuters poll showed.

http://af.reuters.com/article/investingNews/idAFJOE7B503V20111206?feedType=RSS&feedName=investingNews

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

UPDATE 1-UAE lender ADCB eyes benchmark Islamic bond – leads

DUBAI, Nov 14 (Reuters) – Abu Dhabi Commercial Bank has picked four banks for a potential Islamic bond, or sukuk, which could be launched this week, making it the second lender from the emirate currently eyeing a chunk of Islamic liquidity amid dicey global markets.

ADCB has picked itself as well as Bank of America, J.P. Morgan Chase and Standard Chartered as joint lead arrangers and bookrunners for a debut dollar-denominated sukuk, a document from arranging banks showed on Monday.

The sukuk is “expected to be launched during the week of 14th November subject to market conditions,” the document said.

Last week, Abu Dhabi Islamic Bank announced a series of roadshows kicking off in Kuala Lumpur on Nov. 17 and ending in London on Nov. 21.

ADCB is not planning any formal roadshows ahead of a potential sukuk issue, a source at an arranging bank told Reuters.

The bank has not issued an Islamic bond previously, but is a name familiar to investors in Malaysia, one of the world’s biggest Islamic finance markets, after it issued a 750 million ringgit conventional bond last year.

“It appears markets have come to the conclusion that the sukuk format is a better way forward for many local issuers looking to raise money,” said Nick Stadtmiller, fixed income analyst at Emirates NBD.

“Islamic institutions still have cash to deploy, and demand for Islamic-compliant assets still looks fairly strong.”

The sukuk market has also proved more resilient due to the profile of investors, who tend to hold the bonds to maturity, reducing the chance of big swings in secondary market prices triggered by shorter-term speculators bailing out of positions.

A note from Standard & Poor’s earlier this week rating the proposed notes said that ADCB was eyeing a five-year $750 million sukuk issue.

ADCB’s third-quarter net profit nearly doubled, beating analyst forecasts. Its shares are up over 40 percent this year.

The bank has a 500 million pound bond maturity due on Nov. 16, according to Thomson Reuters data, although the bank has the resources to meet this and the sukuk is more about taking advantage of an opportunity to print, the source at the arranger said.

http://www.reuters.com/article/2011/11/14/adcb-sukuk-idUSL5E7ME0BG20111114

Goldman sets up $2 bln Islamic bond programme

Oct 19 (Reuters) - Goldman Sachs has registered a $2 billion Islamic bond programme, providing further evidence of conventional borrowers looking to sharia-complaint funding sources as market volatility makes raising debt finance more difficult.
 

The investment bank has set up the Cayman Islands-registered Global Sukuk Company Limited special purpose vehicle to issue murabaha-structured sukuk, according to a base prospectus filed with the Irish Stock Exchange.

Murabaha is a cost-plus-profit arrangement which complies with Islamic law.

“In the current environment it is unsurprising to see borrowers turning to markets in which they believe liquidity is still available,” Chavan Bhogaita, head of markets strategy unit at National Bank of Abu Dhabi, said.

“(Goldman Sachs’ decision to tap sukuk) is simply a reflection of the very challenging environment in which we currently find ourselves, and the relative strength of the sukuk market at present given that we are seeing solid demand for assets in this space.”

The Islamic bond, which will be listed on the Irish bourse, could be denominated in UAE dirhams, U.S. dollars, Saudi riyals or Singapore dollars but a time frame for issuance was not provided.

The sukuk market has been largely resilient despite a global financial downturn that has dried up bond issuances.

HSBC’s Middle East unit became the first Western bank to issue a sukuk in May. The $500 million Islamic bond priced at 155 basis points above midswaps, carrying a maturity of five years.

Goldman does not have an established presence in the Islamic banking sector, unlike HSBC through its HSBC Amanah brand.

“Islamic investors are generally not comfortable providing funding for conventional banks unless it has a very large and dedicated Islamic business,” one Islamic banker said.

“You’ll find there are large Islamic investors that aren’t comfortable with it and tell us that they don’t want to see their money being used in a conventional business.”

Dar Al Istithmar Limited, which has offices in the U.K. and Dubai, is the sharia adviser of the programme.

http://www.reuters.com/article/2011/10/19/goldmansachs-sukuk-idUSL5E7LJ20V20111019