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GLOBAL REVIEW  May 2010 |
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Sukuk issuances
to double The report added that government borrowers accounted for 87% of all first quarter Sukuk issues, driven by low interest rates and government-backed infrastructure projects. “About US$20 billion of Sukuk announced last year are expected to be issued in 2010, while another US$10 billion or more could potentially enter the pipeline,” said KFH Research senior analyst Tursina Yaacob. A “big chunk” of the Sukuk will come from Asia, helped by the revival of private sector projects and economic expansion. Second Sudanese Sukuk sale SUDAN: The country aims to raise US$300 million this year for development projects by selling Sukuk. The sale will mark the second time that Sudan is selling Sukuk, as it sold its first US$147 million sovereign Sukuk in 2008. Sudan had planned for the Islamic bond sale last year but it was forced to postpone the sale, given the global financial crisis, said Central Bank of Sudan governor Sabir Mohamed Hassan. Hassan said the country plans to sell the Sukuk at the end of the third quarter, but would not disclose the size of the Sukuk. Sudan is targeting Middle Eastern investors, as the US has imposed economic sanctions denying the country access to other international markets, said Hassan. Report released GLOBAL: The Islamic Financial Services Board, together with the Islamic Development Bank and the Islamic Research and Training Institute, has published a report called Islamic Finance: Global Financial Stability. The report touches on the intrinsic strength of the Islamic finance model, the state of the Islamic financial services industry and the challenges and strategies for strengthening financial stability in the Islamic financial services industry. It was produced by a task force on Islamic finance and global financial stability, which is headed by Bank Negara Malaysia governor Zeti Akhtar Aziz. Zeti is confident that the report will provide useful insights on Islamic finance and the important focus that needs to be given to financial stability in the rapidly changing international financial environment. Islamic financing for American city US: The Minneapolis city administration has partnered with the African Development Center to provide Islamic financing through an alternative finance program to Muslim business owners. It requires Muslim-owned businesses to pay a fixed rate of return, in a version of the 2% loans offered by the city’s department of community planning and economic development. So far, 38 such financing facilities have been provided to restaurants, retailers, as well as computer, clothing and bookstores, according to a report. Department official Bob Lind believed Minneapolis is the first US city to adopt Shariah compliant financing facility programs, which he sees as a model for others in the future. Milestone index SWEDEN: Informed Portfolio Management (IPM), an investment manager, has developed the first Shariah compliant portfolio based on the fundamental index methodology for Sedco Group, a private wealth management organization based in Saudi Arabia. The mandate is based on a global Shariah screened portfolio using FTSE Research Affiliates Fundamental Index (Rafi) Global Index weightings. Wealth management focus
According to a spokesperson from Bank Sarasin, until very recently there were no dedicated Islamic wealth management services, and the few that have emerged offer restricted services and products that fail to completely satisfy Islamic investors’ needs. “You have Islamic products that try to mimic the behavior of conventional instruments, but there is a shortage of products that are Islamic in spirit,” the bank’s head of Islamic finance Fares Mourad was quoted as saying. The report said Islamic succession planning is in need of an overhaul as it lacks mechanisms to ensure wealth preservation over generations. Under one roof UK: A group of the UK’s Islamic banks and government bodies has launched the UK Islamic Finance Secretariat, a lobby group to promote the industry’s development. Gatehouse Bank chief operating officer James Bagshawe said the main aim of the secretariat is to further the development of the Islamic finance industry. Bagshawe said the secretariat will also push for the issuance of the UK’s first sovereign Sukuk. Guidelines for Sukuk sales GLOBAL: International Islamic Financial Market (IIFM) may issue new global guidelines to facilitate the sale of Sukuk. IIFM CEO Ijlal Ahmed Alvi noted that at present, there is no single, cross-border, common benchmark for Sukuk. Alvi said this can be problematic as there would be no guidelines should a problem or a restructuring possibility emerge. Bank Negara Malaysia recently announced plans to issue standardized principles for Shariah compliant contracts such as those used in real estate and project financing to improve oversight. Asia to lead GLOBAL: BNP Paribas Investment Partners has decided to invest in sovereign Sukuk for a reliable and comparatively high yield returns. Emerging markets and Islamic investments director Rafael Dalmau said: “In this region, we prefer sovereign Sukuk issued by Malaysia and Indonesia which will help develop the Shariah finance market.” Malaysia and Indonesia issued US$19.1 billion worth of Sukuk last year, accounting for almost half of global Sukuk Islamic milestone NIGERIA: Al-Barakah Microfinance Bank, the first Islamic microfinance bank in the country, has begun operations. Chairman Abdul Hakeem Mobolaji said the bank was set up in response to the increasing demand for alternative microcredit products by the less fortunate. He also said the bank would provide succor and financial service in support of the government’s initiative to eliminate poverty in the country. Unified identity SUDAN: Al Baraka Bank (Sudan) has launched its new corporate identity as part of Al Baraka Banking Group’s ongoing strategy to operate under a unified name and corporate identity in all its markets. Group president and CEO Adnan Ahmed Yousif said Al Baraka Bank Sudan’s decision to adopt the unified corporate identity was good news as it was one of the important units in the group which operates in a key market. Significant agreement US: Bermuda has signed a double taxation agreement (DTA) with Bahrain that will assist Bermuda in fostering ties with Bahrain and the Middle East, which it feels is proving to be a rapidly expanding market for financial services, particularly Takaful, and Shariah investment funds. Retail banking in a rut GLOBAL: Islamic retail banking is in the Stone Age as many financial institutions fail to provide services that appeal to Muslim customers, the head of Islamic finance products at Barclays Capital and Barclays Wealth, Harris Irfan, has contended. He saw only a “handful of simple” products, such as savings accounts, Islamic loans and debit cards being made available to the world’s 1.6 billion Muslims, which meant they only get a fraction of what a conventional customer has access to. To resolve the issue, Irfan’s suggestion is that Islamic banks provide private equity, exchange-traded and mutual funds, along with flexible home products and retirement accounts, instead of just “take it or leave it, one-size fits all” products. “I want to see a financial supermarket,” he said. “There’s plenty more, but we’d be getting into the realms of the really sophisticated, such as hedge funds, and I don’t think that’s really fair to the retail industry.” Untapped potential CANADA: Both potential investors and customers who are keen on Islamic banking in Canada have been neglected by the country’s major banks, according to a report. Canada’s Muslim population is expected to double in the next 10 years, according to the Usury-Free Association of North America (UFANA), creating a consumer base of an estimated two million or 6% of the population. This in turn would lead to a rise in demand for Shariah compliant products and services. Lack of expertise US: Citi Private Bank (CPB) has highlighted the need for western real estate players to become more adept in dealing with Islamic finance procedures. The US-based bank pointed out in a report that western real estate players lack knowledge in terms of submitting their funds to the appropriate Shariah boards of scholars. CPB managing director Youssef Affany said these firms should brush up their knowledge on Islamic finance measures if they are to benefit from what he calls “pockets of excellence and pioneering investors” which include countries such as the UAE, Bahrain, Saudi Arabia, Pakistan and Malaysia. Looking good TURKEY: The Participation Banks Association of Turkey (TKBB) posted a 2009 full-year profit of TRY697 million (US$470 million) in 2009. Net income went up 11% to TRY700 million (US$472 million), while its total assets volume increased 34% Established in 2005, TKBB comprises Albaraka Turk, Bank Asya, Turkiye Finans and Kuveyt Turk. The Shariah factor GLOBAL: More banks in the Middle East may convert to Islamic finance in a bid to tap the rising demand for Shariah compliant products and to avoid the heavy investment required to launch new banks. Experts say that converting a bank is cheaper than launching a greenfield retail bank, but the costs associated with revamping the bank’s work flow; accounting and core banking systems are still high. Banking ties UK: Islamic banks in Malaysia and the UK have agreed to collaborate on enhancing cross-border transactions between both countries, according to the Association of Islamic Banking Institutions Malaysia. The decision was made at the end of the Malaysian-UK Islamic Treasurers Workshop, which was hosted by |
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GLOBAL: First-quarter Global Sukuk issuances more than doubled to US$4.67 billion from the same period a year ago, with Islamic bond sales predicted to climb by 50% to US$30 billion this year, according to a report by KFH research. 
SWITZERLAND: Islamic banks are failing to cater to clients’ wealth management and estate planning needs, pushing them to rely largely on traditional asset managers.