Thomson Reuters identifies Saudi Arabia as a key player in the Islamic asset management space

Initial findings of Global Islamic Asset Management Report 2014 based on global survey of investors and asset managers, AUMs in Saudi Arabia exceed USD 6 billion, accounting for 20% of the global market.

Thomson Reuters identifies Saudi Arabia as a key player in the Islamic asset management space

Thomson Reuters identifies Saudi Arabia as a key player in the Islamic asset management space

Riyadh, KSA – Thomson Reuters , the world’s leading provider of intelligent information for businesses and professionals, announced today the initial findings from its Global Islamic Asset Management Report 2014, prepared in collaboration with Lipper.

Earlier this year, Thomson Reuters launched the global Islamic asset management survey to gather market consensus on the state and direction of the global Islamic asset management sector. The survey targeted both investors and asset managers in order to present a fuller picture of the Islamic asset management space.

The report provides unique insights into the development of the sector, highlighting key milestones reached this year, critical challenges to growth, as well as proposed solutions to further develop the Islamic asset management sector.

Russell Haworth, Managing Director, Middle East & North Africa, Thomson Reuters , said: “The Islamic asset management space continues to lag behind in terms of growth compared to Islamic banking. Thomson Reuters is committed to building greater insight and analysis of the Islamic Finance sector overall, and Shar’iah complaint asset management is a critical component of that industry. This year’s report will act as an important benchmark for the industry as it continues to grow.”
Key findings include:

  • With Assets Under Management (AUMs) in Saudi Arabia exceeding USD 6 billion, the Kingdom accounts for 20% of the global market and is the second largest market for Islamic funds globally
  • Saudi Arabia is also the second largest hub for Islamic funds with over 163 domiciled funds
  • The number of funds has doubled since 2007 to 786 globally
  • 2013 saw the highest number of fund launches in four years; 20% of issuances were in Gulf countries, mainly due to a large number of Saudi funds launched during the year
  • Assets under management (AUM) of global funds stand at just over USD 62 billion, with mutual funds accounting for the bulk of this amount, with over USD 46 billion
  • However, AUMs have only increased marginally over the last few years, and declined by 1.7 percent in 2013
  • The sector is primarily retail driven, with only 20% of AUMs derived from institutional investors
  • The underdevelopment of takaful operators and pension funds in Islamic countries has a knock-on effect on the Islamic asset management space
  • Compulsory registration and preceding authorization of Islamic funds with the capital market authority in Saudi Arabia has led to smaller asset managers exiting the market.

Dr Sayd Farook, Global Head of Islamic Capital Markets for Thomson Reuters , said: “Attracting institutional investors is seen a key requirement for the growth and long-term sustainability of the Islamic asset management industry. Despites the lack of institutional participation, we see positive signs, such as the development of pension assets in Islamic countries. We estimate GCC pension assets to be USD 180 billion. Attracting a small portion of these could significantly increase assets under management for Islamic asset managers.”

“Saudi Arabia is a step ahead other GCC countries as asset managers adopt innovative strategies to increase their investor base. For example, this year SEDCO Capital is coming out with their first Islamic fund that will be compatible with socially responsible investment parameters. The fund will have environmental, social and corporate governance principals incorporated into the fund investment strategy, broadening its appeal to a new range of investors.”

The Islamic Asset Management Report 2014 will be launched at the Global Islamic Economy Summit, organised by Thomson Reuters and the Dubai Chamber of Commerce & Industry, on 25th & 26th November 2013 in Dubai, United Arab Emirates. For more information and to register for the event, please visit www.globalislamiceconomy.com.

About Thomson Reuters:

Thomson Reuters is the world’s leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial and risk, legal, tax and accounting, intellectual property and science and media markets, powered by the world’s most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs approximately 60,000 people and operates in over 100 countries. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, go to thomsonreuters.com

CONTACT
Tarek Fleihan
PR Manager, Middle East, Africa & Russia / CIS, Thomson Reuters
+97144536527
Email: [email protected]

© Press Release 2013

http://www.zawya.com/story/Thomson_Reuters_identifies_Saudi_Arabia_as_a_key_player_in_the_Islamic_asset_management_space-ZAWYA20131119093725/

Islamic finance and food sector need convergence

The two Sharia-compliant industries could work together for their mutual benefit
Dubai’s recently unveiled strategy to be the capital of the Islamic Economy brings with it a range of exciting opportunities as well as some interesting challenges.

Islamic finance and food sector need convergence

Islamic finance and food sector need convergence

Food and finance are the two most emergent opportunities. Islamic finance has excess liquidity and limited Sharia-compliant investment opportunities; the expanding Halal food sector is under-supplied and in need of capital. So what is stopping these two from working together for their mutual benefit?
Over the past decades, the Islamic finance and Halal food industries have developed in separate, isolated silos. Despite having common roots in the Quran, (and specifically even in the same chapter, Surat al Baqarah) there has been very little interaction between these two Sharia-compliant industries.
On the one hand, there are continued reports of excess liquidity in the Islamic finance sector, albeit mostly related to institutional funds that are looking for fixed-income investments opportunities. According to data from Thomson Reuters, Islamic finance assets reached $1.32 trillion (Dh4. 8 trillion) at the end of 2012; average growth over the past four years has been at 19 per cent and sukuk market is growing at 10 per cent.
Overall, growth is 50 per cent faster than conventional banking in many of the core markets and, yet, somehow there is the feeling that something is missing; engagement with the real economy has not been achieved.

Islamic finance and food sector need convergence

Islamic finance and food sector need convergence

The food sector, on the other hand, struggles to keep up with demand from increasingly aware Muslim consumers who are becoming more vocal in terms of what products they want, as well as what they do or don’t consider to be Halal.
Level of traction
One glaring difference between the two is in terms of engagement. Over 70 per cent of the Muslim world is still “un-banked” in any shape or form, let alone with an Islamic bank. Islamic finance does not have much traction with the average man in the street, and most would not be that familiar with the technical terms.
In the food sector, it is a totally different story. Not only is the average Muslim fully engaged with the Halal food market, they also have strong opinions about what constitutes Halal compliance. Indeed, the expansion of the food sector is driven from both the consumer and producer ends, as consumers become more aware and vocal, and producers look for new opportunities in increasing saturated markets.
Another point of divergence is that in the Islamic finance industry, Sharia scholars tolerate minor amounts of interest or impermissible income, and the investment can still be considered compliant. In the food sector, any minor trace of haram ingredient would be rejected out of hand by the overwhelming majority of Muslim consumers. While there is zero tolerance among informed consumers, there is, paradoxically, a considerable degree of tolerance of the prohibited among educated Islamic finance scholars.
The Islamic Finance industry is largely controlled by Muslims, by scholars and senior executives. Yet, the common complaint within the industry is that a high percentage (one bank CEO stated as much as 85 per cent) of Sharia-compliant funds get re-invested in the mainstream interest-based markets to earn the profit that is later returned to the investor as being “Sharia-compliant”.
In direct contrast, the Halal food industry is largely in the hands of non-Muslim controlled companies, and yet the majority of them are very aware and respectful of the need to be compliant, and will convert their production lines to being 100 per cent Halal in order to secure the trust of the consumers.
As these two sectors expand, we can expect to see more avenues of convergence over the course of time. Following the example of Saudi dairy giant Almarai, major corporations in the food, personal care and pharmaceutical sectors could issue sukuk for expansion, and at the same time increase their credibility in the Halal marketplace.

Job creation
Given the real employment shortage within the Arab world — it is estimated that 60 million jobs will be needed by 2020 — one would hope the increasing focus on the Islamic Economy will be a catalyst to create more overlap between the twin pillars of food and finance. However, until there is greater awareness by governments, more transparent regulatory frameworks in the food sector, and more adventurous capital in the finance sector, one suspects that the silos may remain in place for some time yet.
From the perspective of the Islamic economy, these two sectors clearly belong together, but it will take time and some imaginative, bold moves to bring them closer together.
One gets the feeling that when and where that happens, there will be a real engine of growth kicking into gear.
CREDIT: The writer is an advisor to Thomson Reuters on matters relating to the Islamic economy.

Thomson Reuters Islamic Interbank Rate Gains Ground for Islamic Finance Authenticity

Thomson Reuters announced the addition of leading Islamic scholars and bankers to the supervisory bodies of the Islamic Interbank Benchmark Rate, expanding geographic and community representation on both the IIBR Shariah Committee and Islamic Benchmark Committee.

According to Thomson Reuters, the new members, announced at the 8th Annual World Islamic Funds and Financial Markets Conference in Bahrain, add credence to IIBR as a viable alternative for pricing Islamic instruments and establishing Islamic finance authenticity.

Launched in November 2011 as the world’s first Islamic finance benchmark rate, IIBR is designed to provide an objective and dedicated indicator for the average expected return on Shariah-compliant short-term interbank funding and an alternative to the conventional interest-based benchmarks used for mainstream finance. Both the Shariah Committee and the Islamic Benchmark Committee jointly oversee the ongoing implementation and integrity of IIBR.

Retired Justice Muhammad Taqi Usmani, the globally-prominent Shariah scholar and chairman of the AAOIFI Shariah Supervisory Board, and Sheikh Dr. Akram Laldin, executive director of the International Shariah Research Academy now both join the IIBR Shariah Committee, with Justice Taqi Usmani taking the role of Chairman to continue the work of Sheikh Yusuf Talal Delorenzo who remains a committee member.

Thomson Reuters Islamic Interbank Rate Gains Ground for Islamic Finance Authenticity

“I strongly believe that IIBR is a step forward towards liberalising Islamic Finance from the dependence on conventional benchmarks which has been a point of criticism in Islamic finance,” said Sheikh Dr. Akram Laldin.

In addition, both Dr. Abbas Mirakhor, first chair of Islamic Finance at INCEIF, and Ismail E Dadabhoy, an independent Islamic Banker and ex-executive director and head of Islamic Finance at UBS, join the IIBR Islamic Benchmark Committee.

“The efforts of Thomson Reuters to initiate an analytic and pragmatic approach to designing a non-interest rate-based benchmark are commendable,” said Dr. Abbas Mirakhor. “Hopefully, this initiative will culminate in creating a true sector-driven benchmark for a system of finance that is based on sharing rather than transferring or shifting risk. IIBR is a promising and practical move in that direction.”

“I share Thomson Reuters commitment to aiding the development of the emerging international Islamic Finance industry and see that IIBR is part of new generation of tools and standards that will allow for new products, bring all-important transparency and therefore ease international business,” said Ismail E Dadabhoy.

Established in co-operation with the Islamic Development Bank, Accounting and Auditing Organisation for Islamic Financial Institutions, the Bahrain Association of Banks, Hawkamah Institute for Corporate Governance and a number of major Islamic banks, the IIBR uses the contributed rates of 16 Islamic banks to calculate the IIBR rate daily, harnessing Thomson Reuters global benchmark fixings infrastructure which is used to compile over 100 fixings around the world.

“The launch of the IIBR has captured the imagination of the key stakeholders in Islamic finance and the addition of Sh Taqi, Dr Abbas, Sh Laldin and Br Ismail demonstrates their belief in Thomson Reuters commitment and vision to grow, develop and bring authentic innovation to Islamic finance, helping the industry grow to $2 trillion in the next few years,” said Rushdi Siddiqui, global head of Islamic finance, Thomson Reuters. “IIBR remains a great example of collaboration; of an industry coming together to work towards a common objective – Islamic finance authenticity.”

URL:  http://finchannel.com/Main_News/Tech/109798_Thomson_Reuters_Islamic_Interbank_Rate_Gains_Ground_for_Islamic_Finance_Authenticity/

It is time to finance big ventures – Islamic Finance – Rushdi Siddiqui

Entrepreneurs must think beyond simple returns to depositors and shareholders

  • By Rushdi Siddiqui, Special to Gulf News
  • Published: 00:00 May 9, 2010
  • Gulf News

Dubai : The Islamic world profiled modalities of capitalism in the 8th and 9th centuries, but today’s Muslim countries’ Islamic financial hubs are missing something vital — addressing ‘have nots’ (micro-finance), and deploying the funds of ‘haves’ into Islamic venture capital (VC) funds.

Our focus is on the latter: interplay between risk capital and innovative ideas for strategic localised benefit. The Chairman of Malaysia’s Securities Commission, Zarinah Anwar, stated in a keynote speech in 2007, “…how can Malaysia distinguish itself in the emerging market venture capital pool? Our belief is that Islamic VC provides that distinguishing factor.’

Yes, VC is labour intensive requiring specialised skills, entails active risk capital as part of portfolio, and a long term play, much like Sukuk in held-to-maturity portfolio.

Islamic finance should now take a page from US President Barack Obama’s recent successful summit on entrepreneurship for Muslim countries and ‘walk the talk’ of venture capital beyond the present informal and infrequent ‘angel investing!’

Innovation

Patents are an indicator for innovation and knowledge-based economy. A 2006 article in DinarStandard titled “Intellectual Property Gaining Protection in the Muslim World” shows how Malaysia heads the list of Organisation of Islamic Conference (OIC) countries with 547 patents (granted in the US) during the 27 year period.

Putting it in perspective, Japan had 547,865 patents granted out of a total of 3,101,719 during the same period.

What can Islamic finance do to start closing the gap?

Where is Islamic VC in the Muslim world? There are some Islamic VC associations, but they have not really achieved much.

According to the Gulf Venture Capital Association website, its last event was held in March 2008, and even the weekly Islamic finance events have very little or no exposure dedicated to Islamic VC.

How many high profile funds and investments have been announced in information, technology and communication or bio-technology in the region?

The latest newsletter from VCBank (December, 2009), has more coverage on private equity in bank building to ease car-park congestion, hospital, etc., and less pure-play VC investments.

How many articles on Islamic VC on the internet?

Not many. Finally, there are more than 22 technology parks in the Middle East and North Africa (MENA) region, either operational or at building stage, but just real estate plays?

An opportunity exists for Islamic banks to deploy part of excessive proprietary risk capital to venture capital in financing some of the major concerns of the region: health care, desert farming with minimal water, alternative energy, carbon emissions, etc.

The challenge is finding and financing tomorrow’s technology which will have direct implication and application today.

The Western PE industry knows addresses of Gulf Cooperation Council (GCC) funding sources, sovereign wealth funds or high net worth individuals, but their venture captial counter-parts and early stage companies do not.

Now, if a meaningful public/private initiative is established, including the Islamic Development Bank (IDB) and Awqafs, and its size is $3-$5 billion Islamic venture capital fund, managed professionally for the above sectors, it should awaken VC stakeholders’ run to the region.

India Islamic finance

India, a country with 150 million Muslims, but encountering many political challenges in adopting retail Islamic finance, may be the ripest country in Middle East-North Africa-South Asia for Islamic venture capital. It has the right mixture of higher educational institutions, technology parks/culture, entrepreneurship, mature capital markets, regulations, etc. As Islamic finance looks for new markets and ideas, i.e, diversification, in the post credit crisis environment, Bangaluru may be a better opportunity than Sandhill Road in Silicon Valley.

To address the criticism of exporting capital and importing returns, the Islamic VC must have enabling preconditions to access the funds, including establishing operations locally, linking with local universities for research, government encouraging trials and the preferred exit should be a local stock exchange listing. Thus, a strategic infrastructure plan aligned with availability of funds.

As Islamic finance moves beyond the predominantly risk averse Murabaha, it must think about financing ventures beyond simple returns to depositors and shareholders.

In this manner, Islamic finance can actually lead conventional finance in the region for invention and innovation.

The writer is the Global Head of Islamic Finance, Thomson Reuters. Views expressed in this column are of the writer and cannot be attributed to his organisation.

http://gulfnews.com/business/markets/it-is-time-to-finance-big-ventures-1.624179

Islamic banks need to boost image

The only way sceptics will be convinced to use them is if brands are built up

  • By Rushdi Siddiqui, Special to Gulf News
  • Published: 00:00 April 25, 2010

What is the “elevator” pitch of Islamic finance to the non-Muslim and the sceptical Muslim? Why do news releases often become articles in Islamic finance?

Although, it is a 40-year phenomenon, has an Islamic bank broken in to the top 100 global brands, competing with Coca-Cola, Citibank, Google, etc? How about national or regional trusted brands?

What about an admired company to work for? Should Islamic banks be reaching for such “reachable” aspirations or continue attempting to win Islamic finance awards that appear every other month?

Perception is reality, and, for Islamic finance, the reality is it needs a better perception!

Public and media relations in Islamic finance have been tagged as an overhead or cost rather than being seen as an investment in the equity brand or goodwill.

Islamic finance operates in a conventional macro-environment, so is held hostage to external shocks and stresses.

The media, western or local, wants to know how these external shocks impact banks’ operations, (compliant equity) products, depositor confidence, inter-bank liquidity, etc, and a “no comment” or “we don’t have exposure to toxic assets,” may no longer be responsive enough.

Islamic banks have been accused by some of being product pushers, including pushing conventional products wrapped in an Islamic wrapper, hence, eroding its authenticity. This is ripe for a PR media campaign against loss of integrity.

During the GCC real estate boom, dedicated Islamic financial institutions like Gulf Finance House (GFH), Arcapita, Tamweel, Amlak, Investment Dar and others became recognised brands beyond their borders, but where are they now?

However, if we look at windows and subsidiaries, like HSBC Amanah, Citi-Islamic, Standard Chartered Saadiq, etc, such entities, probably under the guidance of an established parent’s policies, have better managed the message. Litmus test question: where would a recent college graduate, interested in Islamic finance, apply for a job?

Lessons

There may be some lessons for Islamic banks from the windows/subs of conventional banks, including building a savvy internal PR team by poaching competent communicators from reputable PR firms.

The local based PR firms probably have a good feel for the Islamic finance client needs and budgets. There are probably only a few Dubai-based agencies, Shamal Marketing, Hill & Knowlton, Asdaa and Financial Dynamics, that have an in-depth understanding of Islamic finance and how to manage an effective Islamic finance communications campaign. But that’s another article.

Islamic finance in the (selected) Muslim countries is like a Friday khutbha, preaching to the coverts. We hear about it being ethical (why not “green”) financing, does that imply everything else is unethical?

We hear about avoidance of bankruptcies and fiscal support during this crisis, but what about real estate exposure, corporate and retail and provisioning and ensuing confidence factor?

Now, what is the message for Islamic finance in the world’s biggest secular democracies like India (150 million Muslims) and the US (nine million Muslims), and Silk Road countries like China (20 million Muslims)?

How much do the external geo-political events and internal flare-ups impact the prospects for Islamic finance in these countries?

Are they looking at Islamic finance differently than Singapore, Hong Kong, Korea, Japan, the UK, Luxembourg, France, and Malta, countries that see themselves as Islamic finance hubs?

Public relations, as part of business development, may say a wholesale approach is better suited than a deposit taking retail strategy in such places, because of the lack of a level regulatory playing field and political sensitivities to external or internal events for the latter.

‘Smoke and mirrors’

What is the message to Muslims who view Islamic finance as “smoke and mirrors?”

If they see, for example, an Islamic mortgage with the same down payment, tenor, and profit rate as a conventional mortgage, a common conclusion is “what’s the difference?”

Implied in the comment is the unreasonable conclusion that an Islamic mortgage should be cheaper (why?) or that an Islamic bank should be operated on a non-profit basis. A more appropriate conclusion may be “there is no financial cost of being a Muslim,” ie, market pricing performance!

The real difference is what happens in case of a mortgage default due to hardship? Who will evict the mortgagee first, Islamic or conventional lender, as that should go to the ethical nature of the financial system.

PR is an integral part of Islamic finance, no different than the importance of a good marketing department, and Islamic banks need to think about building their brands and message in good and bad times, strategies across markets, and convincing the sceptics.

Finally, an open challenge to PR firms, is there a more appropriate name for Islamic finance that captures its brand essence?

The writer is the Global Head of Islamic Finance, Thomson Reuters. Views expressed in this column are of the writer and cannot be attributed to his organisation.

http://gulfnews.com/business/markets/islamic-banks-need-to-boost-image-1.617339