EGYPT: The National Bank for Development (NBD) has added two new Islamic offerings to its product line-up in its move to become a full-fledged Islamic bank by year-end. They are a EGP1,000 (US$182) Wakalah-based Sukuk and a personal finance product known as Yusr Murabaha. The one-year maturity Sukuk, which comes with a 7% and 7.5% yield, is targeted at firms and individuals. It can be added to the account of the client, who receives a monthly payment until the end of the Sukuk’s term, said NBD director of retail Amal el Said. Yusr Murabaha can be used to finance personal transactions from EGP10,000 (US$1,822) to EGP200,000 (US$36,440), with a repayment period of 12 to 60 months in equal monthly installments.

Lending a helping hand

LIBYA: The Islamic Corporation for the Development of the Private Sector (ICD), the private sector arm of the Islamic Development Bank, has signed an agreement with Libya’s National Council for Economic Development (NCED) to develop small- and medium-sized enterprises (SMEs). ICD CEO and general manager Khaled Mohammed Al-Aboodi said the program is currently limited to financing medium and large projects but will be extended to SMEs under the agreement. Under the fund, incubators will help create micro-enterprises.

Shariah status for funds

CANADA: The Islamic Finance Advisory Board has endorsed Bullion Management Group’s BMG BullionFund and BMG Gold BullionFund as Shariah compliant, after a thorough review of the prospectuses of both funds. The Toronto-based group is an investment company which specializes in precious metals bullion. BMG funds, which invest only in precious metals bullion, are considered interest-free investments, making them a viable option for Canadians looking for Shariah-compliant investment vehicles.

First Sukuk on the cards?

UK: A private healthcare organization plans to issue the first-ever Sukuk in the country, said Liquidity Management House (LMH) managing director Emad Al Monayea. He expects the issue to attract investors globally, primarily from the Middle East, disclosing that a “soft” road show had already taken place for the issuance. LMH, the lead arranger, said the firm aims to amass GBP50 million (US$76 million) through an Ijarah-based Sukuk as part of a wider project to raise up to GBP85 million (US$130 million). Al Monayea said: “We are targeting it as a private placing at the beginning and then it will be listed.”

Beneficial partnership

BELGIUM: Belgium is looking into the possibility of enlisting Brunei as its Southeast Asia partner for its Islamic venture capital, to enable it to establish a niche market in the Islamic finance sector, said Belgian and Wallonia Foreign Trade and Investment Mission member Marc Deschamps. He said the decision to delve in venture capital was because it is a part of conventional finance that is closest to Islamic principles.

Shariah-based PDA

UK: Bank of London and The Middle East (BLME) has launched its online Shariah compliant Premier Deposit Account (PDA), the first of its kind in the country. BLME’s PDA offers investors competitive returns on their investment when compared with other UK high street institutions’ deposit products. It pays profit upon maturity of the original agreement or on the anniversary of the investment, based on which comes first. Investors can obtain this account with a minimum investment of GBP50,000 (US$76,000).

Shariah trading platform

UK: The first Shariah compliant electronic trading platform — Ummah Securities Information Exchange (UMEX) — will be launched in May. It will be for Shariah compliant companies with a capital value of GBP20 million (US$31 million) and looking to raise 20% of their market value. The manager for the exchange is Halal Industries.

According to its chairman and CEO Mahesh Jayanarayan, UMEX will operate as a multilateral trading facility (MTF). MTFs are low-cost electronic trading platforms created after the Markets in Financial Instruments Directive opened up exchanges to competition. UMEX will be the only Shariah compliant MTF in Europe to help companies raise funds.

Wanted: Brainwaves

GLOBAL: A search is on for new ideas as business models for the Islamic microfinance industry. It comes in the form of a competition where the winner receives US$100,000 in grant funds to launch a pilot program of the proposed business.

The Consultative Group to Assist the Poor, Deutsche Bank, Grameen-Jameel and the Islamic Development Bank have jointly launched Islamic Microfinance Challenge 2010 which aims to generate sustainable, scalable and market-driven models.

They note that the fundamental challenge for the Islamic microfinance industry remains meeting client demand with affordable, authentic, profitable, and market-driven products.

The competition is open to the public, with a 3rd May deadline for submitting the initial applications. An independent panel of judges, consisting of leading experts in Islamic law, microfinance and commercial business, will consider submissions on the basis of originality, as well as the perceived profitability, sustainability, scalability and Shariah compliance of the business model and its products.

More exposure drafts

GLOBAL: The Islamic Financial Services Board (IFSB) Council has approved the issuance of exposure drafts of guidance notes in response to the increasing use of Commodity Murabahah Transactions (CMT). The proposed guidance notes relate to risk management and capital adequacy standards as well as on the practice of facilitating profit payouts to investment account holders. They aim to highlight the risks associated with CMT and guide supervisory authorities in assessing their implications on the regulatory capital requirements of institutions offering Islamic financial services. The documents will complement the existing IFSB Guiding Principles of Risk Management for IIFS (IFSB-1) and IFSB Capital Adequacy Standard (IFSB-2).

First standardized OTC derivatives

GLOBAL: The International Islamic Financial Market (IIFM) and the International Swaps and Derivatives Association (ISDA) have launched the first globally standardized over-the-counter derivatives based on Shariah principles. This is to help overcome the disadvantage that Islamic banks are seen to have in making cross-border investments as they cannot hedge against currency risks.

The contract, in the making for three years, is expected to pave the way for quicker and cheaper Islamic risk management and more frequent cross-currency transactions by offering a template accepted by Islamic scholars. The jointly developed contract is backed by banks such as Bahrain’s Arab Banking Corporation, Credit Agricole Corporate and Investment Bank and Standard Chartered Bank.

Big contributor

GLOBAL: The UAE accounted for a fifth of global Sukuk issuance which totaled US$19 billion last year. It also recorded the second highest Islamic loan volume in the Middle East with an excess of US$4 billion between February 2009 and February 2010, as compared to Saudi Arabia which accumulated US$5.6 billion in the same period.

Trust is the issue

GLOBAL: Shariah boards are being scrutinized in light of recent major defaults within the industry — among them The Investment Dar’s US$100 million Sukuk default last May which is now being claimed to be unIslamic.

This is mainly due to a lack of understanding by Shariah scholars on complex structures, and too little focus on their implementation. Jawad Ali, managing partner of the Middle East office of law firm King & Spalding based in Dubai, believes that while Shariah boards need to seek the reasons for the use of a certain Shariah compliant instrument and how it will be implemented in the relevant jurisdictions, there needs to be a certain level of trust between Shariah scholars, investors, bankers and lawyers that the structure is being implemented in an approved manner. “Shariah boards can’t police the implementation of structures. It is completely unreasonable to expect a Shariah board member to read every single page of a document. They have to trust that the implementation of the structure will not compromise its compliance” he said.

Sukuk talks

GLOBAL: Deutsche Bank is in talks to arrange Sukuk issues in Malaysia, Brunei, Indonesia and Pakistan as improving credit conditions bring issuers back to the market. Deutsche Bank International Islamic Banking CEO Jamzidi Khalid said this shows that there is high demand for Islamic assets from countries like Malaysia. He added that discussions are ongoing with Brunei and Indonesia (with some larger corporates and sovereigns) about issuing a dollar-denominated Sukuk or a local Sukuk issuance.

The factors that figure

GLOBAL: Bank Negara Malaysia governor Zeti Akhtar Aziz has highlighted three trends in the global financial system which she feels are set to become significantly more pronounced in the aftermath of the global financial crisis — the rapid growth of Islamic finance and its integration into the international financial system; the increasing significance of Asia in the global economy; and the extensive international regulatory reforms being envisaged by the international community.

In a recent speech, she said she is confident of the potential contribution of Islamic finance towards financial stability and sustained global growth, contending that the largely uninterrupted global growth of the sector has drawn significant interest from all quarters.

Derivatives in the pipeline

UK: Standard Chartered Bank plans to offer Shariah compliant hedging contracts using commodity derivatives to help companies and investors in the Middle East better manage risk. Dubai-based Standard Chartered Saadiq Bank CEO Afaq Khan said the derivatives are designed to cater to the need for risk management tools as the Islamic industry expands in size and coverage.

Sukuk report

GLOBAL: The International Islamic Financial Market (IIFM) has released the first edition of Sukuk Analysis 2001-2009 on its newly-developed website. Targeted at IIFM members and the larger Islamic finance industry, the report touches on the history and trend of Sukuk, specific case studies and recent developments in the international Sukuk market, said IIFM CEO Ijlal Ahmed Alvi.