Yusur Islamic Finance Blog

Potential for Islamic finance as Libya rebuilds

yusur — Mon, 05 Sep 2011 14:52:17 +0000

The speed at which events have taken place in Libya over the past month has taken the world by surprise: not least the country’s interim government. But as the National Transitional Council begin to set in motion their plan for reconstruction, it’s clear Islamic finance has the opportunity to play an important role.

A few Islamic products are already offered by the country’s Wadha bank, despite a skeptical Gaddafi regime which never implemented legal or regulatory frameworks to develop the industry. Now, it’s hoped the NTC will work with partners – for example, in Turkey – to develop this further.

It’s likely too that the volatile situation across the wider middle east region will offer potential for the growth of Islamic investment insurance, Takaful, and export credit. Islamic structured trade finance could also play an important role in the market as Libya rebuilds and develops. While the conflict is far from over, Islamic finance will undoubtedly be part of the country’s future.

Fitch re-thinks ratings for sukuk

yusur — Fri, 02 Sep 2011 15:53:59 +0000

Global ratings agency Fitch says it’s revising the way it rates Islamic bonds. While keen to emphasise the changes will not affect existing ratings, the new criteria will link ratings of asset-backed sukuk to those of the transaction’s originator.

Meanwhile the sukuk industry is picking up at the end of a particularly volatile summer. Trading volumes are up over 50% compared to this time last year, and currently stand at just over $15 billion.

Abu Dhabi’s First Gulf Bank issued a $650 million sukuk in July that was oversubscribed six times. Malaysia, too, continues to drive the market with a $2 billion offering last month. And plans for a $500 million sukuk are under way in Khazakhstan.

Islamic banking: Oman catches up

yusur — Sun, 28 Aug 2011 14:53:53 +0000

Oman’s central bank has given the go-ahead for two new Islamic banks in the space of three months.They’ll represent the country’s first two fully Islamic banks, firmly placing it on the Islamic finance radar.

Al-Izz International Bank will set up its operation some time next year, while Nizwa Bank, which was given approval from the CBO in May, is planning to open in the first half of 2012 with initial capital of around $400 million.

They’ll operate under standard Omani banking law, rather than separate jurisdiction for Islamic finance as practiced in Bahrain and the UAE; potentially, a set-up that could pose problems, but with the advantage of allowing banks to be set up quickly.

It’s hoped Oman’s traditional ties with East Africa and India will help strengthen the development of Islamic finance between the GCC and the wider world.

New Islamic finance diploma launched

yusur — Sun, 17 Jul 2011 21:56:41 +0000

Accountancy professionals are being offered a new qualification in Islamic finance – following the popularity of certificates like the Islamic finance MBA offered at institutions around the world.

The Chartered Institute of Management Accountants have launched an Advanced Diploma in Islamic Finance, in response to the industry’s rapid growth. It comes after CIMA’s certificate, launched four years ago, has become an industry standard in many parts of the world.

11% growth for Islamic banks in UAE

yusur — Thu, 07 Jul 2011 21:08:48 +0000

The eight Islamic banks operating in the UAE saw their assets increase by 11% last year, according to new figures from the Dubai chambers of commerce. Total assets across the country’s 260 Islamic bank branches stands at just over $73 billion.

It’s put the growth down to a continued recovery after the 2008 financial crisis, and steadily increasing incomes. Meanwhile, a survey across the UAE and Saudi Arabia has found Islamic institutions have become the banks of choice for younger members of the population. 34% of Emriati teenagers say their first choice for banking is Dubai Islamic Bank, followed by Abu Dhabi Islamic bank and the National Bank of Abu Dhabi. A similar preference for Islamic and local banks was recorded amongst young people in Saudi Arabia.

The positive growth in the region has been welcomed by the UAE’s central bank governor, who said the latest figures are “impressive”. But he’s issued a warning against complacency – highlighting short-term liquidity management as a particular concern at Islamic banks. He also repeated a – now familar – call for better co-ordination and standardisation of Sharia boards.

The rise and rise of Islamic trade finance

yusur — Mon, 13 Jun 2011 19:27:24 +0000

When it comes to Islamic finance, there’s plenty of talk about the two “fundamentals” of the industry: Islamic banking and Islamic bonds, or sukuk. Both have been enjoying a renaissance of late. But as financial instruments become more complex, the net is being cast wider - and bankers say Islamic trade finance now has the potential to become a key driver for growth in the future.

Conventional trade finance is behind up to 80 percent of the world’s commerce, and in Islamic countries it’s expected to be worth $4 trillion by next year. Now Islamic trade finance has become available it has the potential to grab 20 percent of that market, according to AAOIFI, the Accounting & Auditing Institution for Islamic Countries. It’s all down to the development of sharia-compliant hedging products, used to protect trade transactions.

As with many Islamic products, the sticking point is likely to be a perception that sharia-compliance is costly and time-consuming. But with ever-increasing trade among Muslim countries, banks would do well to tap into the potential of Islamic trade finance.

Gulf banks join forces for sharia compliance

yusur — Sun, 12 Jun 2011 19:28:26 +0000

Banks in the Gulf are close to creating a “super-board” of sharia scholars to advise on Islamic products across the region as a whole.

Initiated by Dubai, the process of putting together the United Sharia Board began two years ago and now has scholars from the UAE, Kuwait, Saudi Arabia and Qatar. The group has now published a set of 55 recommendations addressed to institutions and regulators across the GCC region in the hope of standardising corporate governance.

The need for improved regulation has been a bugbear of the industry for years, and it’s hoped the group will be able to overcome cross-border differences in Islamic interpretation which have hindered the development of standardised financial instruments.

But these difficulties mean it could still be a while before we see the United Sharia Board in charge across the Gulf; at an event this week Scholar Hussein Hamid Hassan told reporters “I think within five to 10 years we will have one sharia board for everyone.”

Gulf nations sign agreement with Ireland

yusur — Tue, 07 Jun 2011 21:07:16 +0000

In a boost for global Islamic finance, a group of Gulf nations has signed tax agreements with the Republic of Ireland as part of the country’s bid to develop the industry in Europe.

Saudi Arabia, Bahrain, Kuwait and the United Arab Emirates have all signed tax treaties with Ireland, a move expected to improve mutual economic interest and investment.

The government has also announced that Irish tax laws and regulations are fully sharia-compliant, in a bid to become “the home of Islamic finance in Europe”.

“Untapped potential” in microfinance

yusur — Wed, 25 May 2011 20:31:49 +0000

Microfinance – which usually takes the shape of financial services offered to low-income development projects – is growing rapidly as an industry and is often touted as a relatively untapped investment opportunity. But one aspect of this emerging market that’s not so well known is Islamic microfinance.

Sharia-compliant projects are already getting off the ground in parts of the Middle East and North Africa, but there are calls to expand regulatory frameworks to fully capitalise on the potential market. And research shows the recipients of microfinance are likely to pursue more profitable ventures if risk is shared in a sharia-compliant way.

Islamic banks and institutions already donate a proportion of profits to charity in accordance with sharia teaching – cultivating and expanding microfinance projects can only serve to further Islamic product development more widely.

Sukuk sees a big boost in Malaysia

yusur — Mon, 16 May 2011 11:28:14 +0000

Sukuk issuance in Malaysia has jumped 70 percent compared to last year – a big boost for Islamic finance in a country which has always been the main rival to Dubai when it comes to sharia-compliant bonds.

Across the world, Bloomberg say sukuk issuance is up from $4.4bn last year to $5.2bn during the same period in 2011 – slower growth than we’ve seen in the past but remaining significant.

It’s not just sukuk that are making the headlines. The first Islamic Reit – or real estate investment trust – has just been launched in Singapore and it’s had a lot of interest. Dubai launched its first sharia-compliant Reit late last year which has spurred investment into regional real-estate sectors. There’s more on Islamic Reit development in the Asia-Pacific region here.