Professional Documents
Culture Documents
Volume 12 Issue 11
DEALS banking industry will see
consolidation of players ASSET
MANAGEMENT
IFN Rapids ................................................... ..2 despite recent merger
Telekom Malaysia looking
IFN Reports: at either US dollar or euro fallout
for debut Sukuk depending International Bank of Itqan Capital distributes
Exciting Islamic finance opportunities
on pricing Azerbaijan conducts 3.5% cash dividends for
ahead for Japan IFN Global Trendswatch negotiations with customers REIF-II
Sharjah Islamic Bank sells
Indonesia ramps up Sukuk eort A new US$500 million Sukuk at a
final price of 110bps over
of IBA-Moscow on Islamic
financing services on the TAKAFUL
benchmark for Shariah compliant REITs of Asia midswaps 13th March Nigeria establishes
Pacific Gulf Finance of Saudi Arabia: Big KFH Research closes down advisory council for Takaful
The UAE to debut green-
insurance
plans ahead IFN Weekly Poll: Do oil prices energy Sukuk in the next Islamic Financial Services
few months Board to conduct seminar Dar Al Takaful targets
have an eect on Sukuk issuance? Turkeys SMEs with new product
PETRONAS sets price on financial inclusion
G20 chairmanship creates opportunities for guidance for Sukuk tranche through Islamic finance at
global Islamic banking community South Emirates Airline mandates
the end of March in Jakarta RATINGS
eight banks for upcoming Threadneedle Investments Fitch revises ratings
Korea making inroads into Islamic finance
UK Export Finance- acquires 2% stake in on seven Qatari banks;
Sovereign Sukuk: A potential shift towards guaranteed Sukuk Gatehouse Bank upgrades issuer default
green energy .............................................. 6 Research shows 50% of ratings of Islamic banks
Qatar International Islamic
Bank receives shareholder asset managers in the UK Islamic International
approval for QAR3 billion are ready to oer Islamic Rating Agency maintains
IFN Analysis: (US$823.4 million) capital- agriculture investments Turkeys ratings
Country analysis: Oshore centers.....................13
boosting Sukuk Irish government Malaysia Marine and
Masraf Al Rayan to debut acknowledges Islamic Heavy Engineering
Infrastructure financing: A palpable interest in
benchmark Sukuk before finance as potential Holdingss Sukuk program
Islamic finance................................................. 14 end of April lucrative area for receives final rating of AA-
development in its five-year IS
Shariah Pronouncement ........................ 15 Asia Brands issues unrated strategy
Islamic medium-term notes MARC assigns ratings to
Column: Daud speaks............................................ 16
of up to RM200 million Tatarstan focusing on Islamic facilities issued
IFN Country Correspondent: (US$54.02 million) in expanding ties with Iran by TSH Resourcess
nominal value through East Azerbaijan subsidiaries
Afghanistan; Hong Kong; Iran; Brunei; Saudi Province
Moodys confirms
Arabia ............................................................ 17
NEWS Morgan Lewis to use
Singapore as base for
PETRONASs US$1.25
Special Reports: billion Sukuk rating at A1
International Islamic further expansion in the
Trade Finance Corporation
MOVES
PETRONAS Global Sukuk ................................20 Southeast Asian region and
and Egyptian General to integrate Islamic finance
Much ado about Islamic finance .........................21
Petroleum Corporation practice in Dubai Bank Negara Malaysia
Islamic finance in Ukraine: A new reality..........23 sign US$3 billion petrol
IDB approves more than appoints two external
agreement
S&P Dow Jones Quarterly Islamic Market US$718 million for new members to its Monetary
Abu Dhabi Islamic Bank infrastructure development Policy Committee
Review .................................................................24
shortlisted for Citigroups projects in member CIMB makes key
Egyptian retail business countries appointments across its
Islamic Finance news ................................... 25 NBP Aitemaad targets 100 Moodys revises regional oces
Islamic banking branches structured finance
Deal Tracker ................................................. 31 Prime Bank names
by 2015 rating methodologies Touhidul Alam Khan as
REDmoney Indexes .................................... 32 Malaysian Islamic banking to incorporate new deputy managing director
assets grew by 12% in 2014, counterparty risk
Eurekahedge data ....................................... 34 Yousuf Al Rawahi joins
making up 25.6% of the assessment
Performance League Tables....................... 36 Ahlibank as deputy
countrys total banking Qatar Islamic Bank general manager
Events Diary................................................. 40 system assets expands network with new
branch in Medina Centrale AAOIFI names former
Company Index ........................................... 41 RAM Ratings optimistic
City minister as chairman of
that the Malaysian Islamic
Subscription Form ....................................... 41 board of trustees
Disclaimer: IFN invites leading practitioners and academics to contribute short reports each week. Whilst we have used our best
endeavors and eorts to ensure the accuracy of the contents we do not hold out or represent that the respective opinions are
accurate and therefore shall not be held responsible for any inaccuracies. Contents and copyright remain with REDmoney.
this year with interest from Indonesia Chart 1: Green bond issuance has exploded
especially ramping up as it works to
40
It looks like 30
40
Dubai might 25
30
expect a Malaysian 10 10
Until the
sector gains
scale and traction
their role will
necessarily be
limited, compared
to the potential
inluence that seeking good returns and diversification.
Purpose is a key dierentiating theme
on its sovereign credit, which could be
an easier path. Sovereign support for
sovereigns could here. this segment would be incredibly
important. There is no substitute for
have in developing Sovereign support the sovereign role in establishing scale
for a new market, he emphasized.
the market Last year, private firms issued around
a third of all green bonds including However, in the GCC, this role is often
the largest ever green bond in the world delegated to a quasi-sovereign or a
from GDF Suez, a US$3.5 billion issuance GRE could this be the case for green
Growth in the green bond market last in May 2014 linked to renewable energy Sukuk as well? When you look at the
year was driven by corporates, and and energy eciency projects. However, types of investments that are needed
this could also hold true for the green until the sector gains scale and traction in both the hydrocarbon importers and
Sukuk trend. In corporate terms, the their role will necessarily be limited, exporters, there is an uncanny confluence
desire to do good while doing well and compared to the potential influence that of interests between the investments
do well while doing good is becoming sovereigns could have in developing the sorely needed in the MENA region and
increasingly pervasive, confirmed market. the kinds of projects suitable for green
Kidney. Can you contribute to society Sukuk, he suggested.
whilst also getting a competitive return It would be dicult to hazard a guess
and meeting your fiduciary obligations? based on a small number of deals in the Supply and demand
If the answer is yes, then pension funds pipeline. Finding qualifying projects There is no question that demand for
and insurance funds and even retail with suitable cash flows that also achieve these types of products is growing
investors will see this as a very exciting sucient scale for a capital market exponentially. Investors representing
prospect; and I think we will see a lot issue can be challenging, although not over US$2 trillion in assets under
more purpose-related capital. impossible. You can imagine dedicated management (including Zurich Insurance
green project deals that Group, Barclays and Aviva) last
On top of that, as you get liquidity in could come in at September issued an investor statement
the market, this opens up enormous US$100 million on green bonds which committed
opportunities for innovation. This or even less, to growing the global market in the
is likely to drive private sector firms warned Grierty. financing of climate change solutions.
towards raising money on the bond In comparison if a Barclays also recently confirmed plans
market in order to make a social sovereign identified to invest GBP1 billion (US$1.48 billion)
contribution to justify their existence some major in green bonds by 2016; while Zurich
beyond just paying a standard coupon. components of its Insurance Group intends to invest US$2
We see some firms, some banks capital improvement billion in green bonds. Two insurance
now that do this specifically for sta program that qualify industry associations, the International
retention, said Kidney. We will start under the green Cooperative and Mutual Insurance
seeing this across the financial markets, criteria, it Federation and the International
and this will attract both socially could fund
responsible investors and people who are them based continued on page 5
There is a very There is a lot of potential for green well. Opportunity, opportunity,
Sukuk as a kind of wedge for Islamic opportunity!
billion
published their proposed eligibility
said Kidney. But at this stage we are criteria for bio-energy projects
looking at a US$1 trillion green bond
by 2018 market by 2020. That is spectacular
that qualify under the Climate
Bonds Standard. Assigned to
growth, and I think there is a very good formulate criteria to provide clear
chance we could see a green Sukuk and straightforward guidance
And the conditions are combining market of between US$10-20 billion
to create the correct conditions for for investors keen on bio-energy
by 2018 just under 10% of the total project(s), the working group will
issuance. The GCC sovereigns and
expected US$300 billion green issuance. submit its recommendation to the
their key companies enjoy access to
the international capital markets, Climate Bond Standards Board
both conventional and Islamic. They Huge potential for approval after a 60-day public
have substantial capital investment Looked at objectively, the potential for consultation period.
programs and intentions to redraw issuance across both the Gulf and Asia
their energy mix and reduce the carbon is vast and almost unlimited. Anyone As outlined by the proposed
footprint. Add on that several are aiming doing renewable energy investments, criteria, bio-energy projects
for leadership as financial centers, light transport, green buildings and more seeking a certification need to
prominently including Islamic finance, could theoretically issue. And there are a be certified under one of the
agreed Grierty. Hence, the conditions lot of high-rated corporates, sovereigns following standards: Roundtable
are right, and there is every reason to and GREs doing just that. for Sustainable Biomaterial, Round
believe a well structured green Sukuk Table Responsible Soy, Roundtable
with good cash flows and a good sponsor Abu Dhabi has announced a target of for Sustainable Palm Oil, Bonsucro
will be well received by the range of 7% of its energy capacity obtained from and Forest Stewardship Council.
Sukuk investors in the region and out renewable sources by 2020. In January Above that, at least 60% reduction
provided too that its properly priced. 2015, the Masdar Institute of Science in emissions comparing with local
and Technology released a UAE Wind baselines must be demonstrated for
It must be remembered that while the Atlas, similar to its previous Solar Atlas, biofuel projects and at least 70% for
potential is strong, there is not yet a to support investment in renewable solid biomass projects.
dedicated SRI investor base for Sukuk projects. The King Abdullah City for
The original version of this article, dated the 11th March, contained some inaccuracies. These have since been updated to reflect new
information received.
Indonesia Forum
22nd April 2015 - Shangri-La Hotel, Jakarta
IFN Global
Trendswatch
Whats been going on in the world this
week? LAUREN MCAUGHTRY brings
you an update of the most significant
economic, regional and global events,
issues and trends that have the
potential to aect the Islamic finance
industry.
India increases foreign investor Global Investment Trends and Outlook for Islamic
stake in insurance firms from 26%
to 49% could this be a Takaful Financial Markets
opportunity?
Topics to be discussed:
Key Growth Markets for Islamic Investments in 2015 Global Trends in Islamic Asset Management
Japanese equities hit 15-year high on Sector Focus: Global Investment Opportunities in the Asset Allocation Strategies and Cross Border Distribution
the back of strengthening US dollar Transportation Sector Is Crowdfunding the Next Big Thing in Islamic Investing?
and Abes monetary easing program Transaction Roundtable - The Battersea Power Station Sector Focus: Where is the Shariah-Compliant Real
as Japanese banks take increasing Redevelopment Project Estate Investment Market Headed?
steps towards the Islamic market. Interview: How will Economic and Geopolitical Events Sector Focus: What Investment Opportunities
Shape Investment Trends? Exist in Global Commodities?
The UK makes landmark decision
to join Chinas World Bank rival
the Asian Infrastructure Bank, in a
deal criticized by the US but which
could change up the power stakes in REGISTER FREE NOW at
Asia Pacific and significantly boost www.REDmoneyevents.com
development prospects across the
region.
Amount
regulator.
100 b
Natural progression
One thing to note about OJKs plan is that 50 b
US$13.43 billion
the authority is making corporate Sukuk
a key priority this year. Speaking to IFN, 0b
OJKs deputy commissioner I for banking Malaysia Indonesia
supervision, Dr Mulya Siregar, said: We Source: Islamic Banking Intelligence
are hoping to boost the Shariah capital
market through corporate Sukuk because
Chart 2: Five-year trend of Islamic banking assets growth in Indonesia and Malaysia
the market potential is significant.
200 b
Explaining that the country has been
gaining greater success with its regular 150 b
sovereign Sukuk issuance and seen
Amount
A much debated area among market Do oil prices have an eect on Sukuk issuance?
observers, IFN this week takes a look
0%
at the connection between plunging
0%
oil prices and Sukuk oerings. The
question that most are asking is now
9%
that oil prices are low and markets are More corporate issuances
uncertain, will we see more companies More sovereign issuances
turning to Sukuk? NABILAH ANNUAR Less corporate issuances
addresses this conundrum. 27% Less sovereign issuances
No eect
At the beginning of January 2015,
64%
according to data by NASDAQ, crude oil
brent was recorded at about US$62 per
barrel. Prices started plummeting mid-
January to below US$50 per barrel and
started climbing up again all through
February. In the first week of March,
markets saw a dip from a high of above Sukuk issuances are done in/out of
US$62 to what is now approximately
US$57 per barrel. It is an undeniable fact
Before Malaysia where issuers hail from various
industries, etc. The massive drop in oil
that the persisting volatility in oil prices
aects all kinds of businesses around
answering the price since last year has had a neutral
impact on the growth of the Sukuk
the world. This eect would most likely
cause at least a fraction of the market to
question, one would market thus far. We witnessed one of the
best years for [the] global Sukuk market
turn to Sukuk. need to take a step in 2014; based on what we are seeing
and hearing, 2015 will be an equally
The poll results portray varied opinions. back: approximately exciting year for the market as well.
Respondents are given the option to vote The drop in oil prices, according to Safri,
on whether it would increase or decrease 60% of yearly Sukuk will result in entities related to oil-
corporate and sovereign issuance, or if
issuances are done
businesses, including but not limited to
there is no such correlation between the oil companies and oil exporting nations,
in/out of Malaysia
two: 64% opine that this volatility would to explore options which may include
result in an increase in corporate Sukuk tapping the Sukuk market and scaling
where issuers
issuance; 27% believe that it would back on planned expenditures.
result in more oerings from sovereigns;
Luxembourg
Luxembourg remains to be a popular
Shariah investment destination. In 2014,
the Grand Duchy was awarded the IFN Ov
Best Fund Domicile. According to the
CSSF, total net assets of undertakings
for collective investment (UCI) and
specialized investment funds reached
EUR3.28 trillion (US$3.75 trillion) as at
the 31st January 2015. Over the last one
year, volume of net assets grew 24.89%.
Labuan IBFC
Malaysias Labuan International Business
Financial Center (Labuan IBFC),
regulated by Labuan Financial Services
Authority (Labuan FSA), continues
to actively push for the development
of Islamic finance. In early February,
Labuan FSA issued guidelines on the
establishment of Labuan international
Waqf foundation, which came into
eect the 1st March. The new framework Source: Jan Fichtner via academia.edu based on 2011 data
follows the centers Shariah resolution
Table 2: Labuan Islamic deposits and financing of non-bank customers in 2014
on Labuan captive Takaful in December
2014, which allowed for the Takaful Q1 Q2 Quarter-on-quarter change (%)
operation business model based on Total deposits 256.7 215.8 (15.9)
Tabarru and stipulated rules for re-
Total financing 770.5 797.5 3.5
Takaful arrangements.
Source: Labuan FSA (figures in US$ million)
This Fatwa is brought to you exclusively by IFN in collaboration with Dar Al Sharia Legal & Financial Consultancy-Dubai. The Fatwa
appearing in this space was obtained by Dar Al Sharia for issues faced by their clients and the documents stated in the Fatwa were
developed at Dar Al Sharia. This Fatwa was compiled by Dr Muhiuddin Ghazi.
www.daralsharia.com
Query:
The following query has been raised in order to get Shariah guidance.
Can an Islamic bank obtain cash deposit as security for a customers financial obligation towards the bank under various
financing facilities extended by the bank to the customer?
Pronouncement:
An Islamic bank can obtain dierent types of collaterals and securities in order to protect its right towards a customers
financial obligations in terms of various financing facilities extended by the bank to the customer. The following are some of
the examples:
In relation to lien on a customers account where adequate funds are available, it is important to note that the principle
governing lien in Shariah does not allow the Islamic bank to enjoy a benefit from the funds under lien without any
consideration in favor of the customer against such benefit.
Therefore, such lien is permissible in Shariah where the bank as a beneficiary does not use the funds under lien for its own
benefit and merely considers the same as security against certain facilities allowed by the bank to the customer.
In the case of an investment deposit account where the customers funds are utilized by the Islamic bank as Mudarib and the
actual profit is required to be distributed between the Islamic bank and the customer as per the pre-agreed ratio, the Islamic
bank does not get any extra financial benefit after getting the investment deposit amount under its lien. Therefore, the Islamic
bank is allowed by Shariah to get the investment deposit account under lien against certain financing facilities.
In the case of the bank getting the investment deposit account under its lien, the Islamic bank can block the account partially
or entirely, as per its requirement, until the settlement of relevant dues by the customer. The profit on investment of those
funds by the bank may become part of the lien if so required by the bank. However, the profit amount shall be the absolute
right of the customer pursuant to release of the lien by the bank.
Contrary to an investment deposit account, the funds kept under a current account are meant as a loan from the customer
to the bank and payable by the bank on the customers demand at any time. Such funds are utilized by the bank for its own
benefit, without any consideration being paid to the customer. Thus, it is not permissible for an Islamic bank to put the
current account funds of a customer under its lien against some facilities granted to the customer.
However, the lien is permissible if the Islamic bank and the customer agree to convert the current account funds into an
investment deposit account for the required lien period.
Daud speaks
In moving Islamic finance to the next demonstrate that we are indeed truly
level, a closer cooperation between
academia and industry will be required,
dierent. We need to
in my view. You have often heard me
both write and speak on the subject
Research will be absolutely vital to
achieve this eciently and eectively.
break out
of EPL (education, perception and
liquidity) but you may not have heard
However, this research must be done
in close collaboration with the industry.
of the current
Andrew Sheng comment frequently
on the fact that we have 19th
Indeed, industry must sponsor the
research and ensure that they set
pattern of linear
century institutions, with
a 20th century mindset,
the goals and desired outcomes
required. We need to marry
progression in
tackling 21st century the brilliant minds that exist Islamic inance and
problems!. Something among academia and research
has to change and the students, with the needs and start to use the tools
need is becoming very direction of the industry. The
urgent. research needs to be very at our disposal to
effect change
focused and up to the mark.
When all is said and In addition to that there needs
done, we need to break to be active engagement and
out of the current pattern communication between the
of linear progression researchers and the industry; may be turned and regulators may be
in Islamic finance and this is not just about the research encouraged to adapt and change to the
start to use the tools at our per se, but also about the very pressing needs of the 21st century.
disposal to eect change, practical and very real challenges
through the application of risk that the industry faces. Arguments Investment, application and support
sharing techniques, financial and the demonstration eect from the industry will be absolutely vital
inclusion and addressing need to be well formulated, for academic institutions to succeed.
the challenges of the well thought through, and Together we achieve more TEAM.
ever-increasing income articulated in a way that speaks
divide between the haves to the listening of the audience. There is much to do and not a moment to
and the have-nots. We need to In that way, politicians heads lose!
Course Highlights:
Essential Shariah contracts for Islamic Capital Markets activities
Key characteristics, uses and issues in Sukuk structuring
Analysis of the differences in Sukuk structures and applications
Case study discussion and practical exercises
www.REDmoneytraining.com | enquiry@redmoneytraining.com
DERIVATIVES
Suhaimi Zainul - Abidin, treasurer for Gulf-Asia Shariah
SAUDI ARABIA behalf of a client, an Arabic language Compliant Investment Association and advisor to 5Pillars
authorization letter must be signed LAW (EUROPE):
By Nabil A Issa Ayhan Baltaci, attorney at law, Bereket & Baltaci Law Firm
by one of the parties to the UCLR
registration application form, authorizing LAW (MIDDLE EAST)
The process of registering security Bishr Shiblaq, head of Dubai oce, Arendt &
specifically named individuals to submit Medernach
interests for secured lenders in
the application. Such an authorization LEASING:
the Kingdom of Saudi Arabia is a Prof Shahinaz Rashad Abdellatif, executive director,
letter must be authenticated at the Saudi Financial Services Institute, Egyptian Financial
presently evolving regime. Licensed Supervisory Authority.
Arabian Chamber of Commerce. The
financial institutions are currently MERGERS & ACQUISITIONS
UCLR registration application form Jamal Hijres, CEO, Cappinova Investment Bank
utilizing the Unified Center for
is available in English and Arabic.
Lien Registration (the UCLR) to MICROFINANCE (ASIA):
However, there have been many cases Dr Mahmood Ahmed, executive vice president and
register security over movables in the director training, Islami Bank Training and Research
of English language UCLR registration Academy
Kingdom. The implementation of this
application forms being submitted and MICROFINANCE (AFRICA):
registration mechanism remains in the Mansour Ndiaye, director of microfinance, Assistance and
subsequently rejected. It is therefore Consulting for Development
developmental and adjustment stage.
recommended to use the Arabic language PRIVATE BANKING & WEALTH MANAGEMENT:
Thomas Woods, product development, wealth
UCLR registration application form management, The Islamic Bank of Asia
The Saudi Commercial Pledge Law
(including a collateral description which PRIVATE EQUITY & VENTURE CAPITAL:
governs the taking of security over
is fully drafted in Arabic), and submitting Arshad Ahmed, partner, Elixir Capital
movable assets. The Implementing
such a UCLR registration application PROJECT & INFRASTRUCTURE FINANCE
Regulations of the Saudi Commercial Anthony Coleby, head of corporate commercial
form to the Saudi Arabian Chamber department, Said Al Shahry Law Oce (SASLO)
Pledge Law, as amended thereof,
of Commerce for authentication. With REAL ESTATE
mandate the establishment of, and Philip Churchill, founder partner, 90 North Real Estate
regard to any document submitted to the Partners
outline the legal framework for, the
Saudi Arabian Chamber of Commerce, REAL ESTATE (MIDDLE EAST):
UCLR under the control of the Ministry
the signatories to such a document must Yahya Abdulla, head of capital markets Middle East,
of Commerce and Industry. The Ministry Cushman & Wakefield
of course be pre-registered with the
of Commerce and Industry subsequently REGULATORY ISSUES (ASIA)
Saudi Arabian Chamber of Commerce as Intan Syah Ichsan , chief operating ocer, Samuel Aset
entered into an agreement with the Saudi Manajemen
the authorized signatories on behalf of
Arabian General Investment Authority REGULATORY ISSUES (MIDDLE EAST):
the relevant party. Mohammad Abdullah Malik Dewaya, head of Shariah
(SAGIA), and the UCLR was established compliance and audit, Maisarah Islamic Banking Services
in 2011 under the aegis of SAGIA, but RETAIL BANKING:
An area where there remains significant Chowdhury Shahed Akbar, Ocer, Southeast Bank,
only recently started registering pledges. Bangladesh.
uncertainty is whether the underlying RISK MANAGEMENT:
pledge agreements must be translated Hylmun Izhar, economist, Islamic Research and Training
Only certain assets may be registered at Institute, Islamic Development Bank Country
into Arabic and authenticated at the
the UCLR. The pledged asset must be: SECURITIES & SECURITIZATION:
Saudi Arabian Chamber of Commerce. Nidhi Bothra, executive vice president, Vinod Kothari
Consultants
This has, at times, been required by
1. owned and disposable by the pledgor STOCK BROKING & TRADING:
the UCLR. It is unclear whether the Athif Shukri, research analyst, Adl Capital
2. in existence, and not a future asset
UCLR will require this step for every
3. tradable, and STRUCTURED FINANCE:
registration application, as such a John Dewar, partner and head of Islamic finance, Milbank,
4. readily and clearly identifiable. Tweed, Hadley & McCloy
directive would have significant
SUKUK
implications. Anthony Coleby, head of corporate commercial
Under the Saudi Commercial Pledge department, Said Al Shahry Law Oce (SASLO)
Law and the Implementing Regulations, SYNDICATED FINANCE
The procedural requirements for Elina Khayrullina, investor relations manager, AK BARS
a creditor may be granted a pledge over
registering security with the UCLR Bank
movable assets in connection with a TAKAFUL & RE-TAKAFUL:
remain challenging, but as the
commercial debt. Dr Sutan Emir Hidayat, assistant professor and academic
established system becomes more advisor for Islamic finance, University College of Bahrain
utilized, institutional pressure will force TAKAFUL & RE-TAKAFUL (AFRICA):
All applicable registration forms are Uwaiz Jassat, acting head of Islamic banking, Absa Islamic
the development of transparent Banking
currently available at the UCLR, but the
guidelines. The UCLR has the potential TAKAFUL & RE-TAKAFUL (EUROPE):
procedural registration process remains Ezzedine Ghlamallah, director, Solutions Insurance and
to be, and is currently working toward Islamic Finance in France (SAAFI)
in the evolutionary phase. The practical
becoming, a valuable asset for secured TRADE FINANCE
and logistical steps which are required Anthony Coleby, head of corporate commercial
lenders in Saudi Arabia. department, Said Al Shahry Law Oce (SASLO)
have shifted over time and appear to still
TREASURY PRODUCTS:
be evolving.
Nabil Issa is a partner at King & Spalding, Nafith ALHersh Nazzal, certified financial & investment
advisor
Middle East & Islamic Finance Practice
While some procedures are being
Group, Dubai and Riyadh. He can be IFN Correspondents are experts in their respective fields
developed, a number of steps have and are selected by Islamic Finance news to contribute
contacted at nissa@kslaw.com. Nabil co- designated short sector reports. For more information
become clearly delineated. In order to about becoming an IFN Correspondent, please contact
authored this report with Yousef Farsakh, an sasikala.thiagaraja@redmoneygroup.com
submit a UCLR registration package on
associate with the law firm.
To date, Sukuk have been structured Sponsor rating* appe rating* rt
and sold as investment products where
investors have the perception that the
risk being taken is solely the risk of the
sponsor. In reality, however, some Sukuk In our view, PETRONASs Sukuk is any shortfall, which may arise under a
may have exposed investors to some structured with the necessary layers of total loss scenario, between insurance
risks that do not exist in conventional protection to insulate investors from proceeds and the acquisition price of
instruments. These risks have not been residual risks related to the underlying the assets. In our opinion, Sukukholders
uncovered so far due to the limited assets. Under the current terms and will not be exposed to residual asset
number of defaults in the Sukuk market. conditions of the Sukuk, the issuer risks but instead to the creditworthiness
The Sukuk market as a whole is still a will enter into a Wakalah agreement of PETRONAS, the sponsor of the
young and untested sector of the global with PETRONAS. The first leg of this transaction.
capital market. agreement will be an Ijarah (for at least
33% of the issued amount) and the The obligations of PETRONAS under
S&Ps role in this market is to second leg will be a Murabahah (for at the Sukuk terms and conditions are
provide investors and issuers with most 67% of the amount). Under the irrevocable and unconditional. Moreover,
its independent and objective credit Ijarah, PETRONAS Global Sukuk will they are expected to rank at the same
opinions based on transparent acquire beneficiary interests in several level as other unsubordinated obligations
methodology and rigorous analytical units of a refinery, located in the Malacca of PETRONAS. The sponsor will also
approach. S&P understands that some of region of Malaysia, from PETRONAS provide for the coverage of the costs
these risks relate to the principle of profit Penapisan (Melaka) (not rated), a wholly- related to the transaction for the benefit
and loss sharing in Islamic finance, which owned subsidiary of PETRONAS. The of the issuer.
requires participants in a transaction underlying assets for the Murabahah
to share not only the profits but also will be made of Shariah compliant The preliminary rating on the
the potential losses. We understand commodities. PETRONAS Sukuk is based on draft
that Shariah scholars over the past few documentation. Should final
years have requested a more stringent Periodic distributions of the Sukuk will documentation dier substantially from
application of this principle. Indeed, be covered through leasing charges, to the draft version, S&P could change its
the structures that are used today are be paid by PETRONAS in its capacity of rating on the Sukuk. S&P neither
dierent from the structures that were lessee, of the Ijarah assets. The principal structures Sukuk transactions nor
used a decade ago when the sponsor of the transaction will be covered through provides opinions with regards to
used to provide an unconditional the buy-back of the leasing assets at compliance of the proposed transaction
guarantee on the performance of the their acquisition price deflated by US$1 with Shariah nor provides any
Sukuk. Nevertheless, a higher profit/ million, which will be compensated by a recommendation to buy, hold or sell the
loss sharing could restrain the targeted US$1 million Murabahah mark up; and Sukuk.
investors base by excluding some fixed the buy-back of the Murabahah assets
income investors, and increase financing at their acquisition price. Under the Mohamed Damak is the global head of
costs compared with conventional Ijarah leg, a total loss event is possible. Islamic finance at Standard & Poors Ratings
products. However, PETRONAS has provided Services. He can be contacted at mohamed.
sucient contractual obligations to cover damak@standardandpoors.com.
ISLAMIC FINANCE on his or her balances when the monies Islamic banks are hesitant to take an
placed in the bank are used to fund an equity share or stake in the businesses
By Hussain Kureshi
asset. Inherently, modern banking is a of their borrowers, primarily because
system of money creation. Depositors their depositors are not keen to lose their
Taken in by the much advertised
are rewarded with a pre-agreed interest principal amounts. Even in a contract of
wonders of Islamic finance, I took a
rate, and deposits are guaranteed by diminishing Musharakah, where Islamic
voluntary separation scheme from my
shareholders capital. Returns generated banks co-own a house with a customer,
employers and moved with kith and kin
by the investing depositors funds are and the customer slowly buys out the
to complete a Masters degree in Islamic
shared between the bank and capital share of the bank in the house and in the
finance.
providers. interim period pays rent to the bank for
staying in the house, the Islamic bank
My findings were, however, far dierent
does not record the ownership of the
than the claims. Islam as a religion
encourages trade, and discourages It seems house on its balance sheet as this would
incur huge capital charges under a Basel
strange that
lending. Islam also encourages various
regime.
market participants to share in the risks
inherent in an economic system and
discourages situations where one party to a inancial system It seems strange that a financial system
based upon concepts of asset ownership
a contract is not exposed to risks whereas
a counterparty is exposed to risks. Thus, based upon should meet the requirements and
standards of a system based upon rules
the borrower-lender relationship is
interpreted as inequitable as a lender is concepts of asset based upon credit and debt. The modern
financial system oers greater rights to
paid (principal plus interest), whether the
borrowers underlying asset or economic
ownership should lenders than it does to equity holders
as the claims of the latter are ultimately
enterprise earns the money to pay the
installment or not.
meet the residual. Lenders enjoy considerable
requirements and
rights especially in priority of payments
and in fact certain investors prefer to
What I found intriguing is how principles
of lending and debt were to be integrated
into the fabric of a banking system based
standards of a be lenders rather than equity holders in
companies.
upon Islamic principles. Rewarding system based upon I found it all the more confusing that
capital or investment was only one of the
issues. How could capital be mobilized rules based upon a Sukuk which is meant to be an
ownership certificate can be treated as
from customers, and how could the
returns generated from mobilizing these credit and debt a fixed income, debt instrument oering
investors rights of either equity holders
funds be shared by the bank and the
or lenders.
capital providers?
Nevertheless, what is most interesting
The conventional banking model
Islamic banking is no dierent (at least in certain Islamic banking liability
oers a simple solution. Shareholders
in practice). Funds are mobilized using products is that customers actually
provide the necessary capital to set up
contracts of safekeeping (Wadiah), do not deposit money into a bank. In
the infrastructure of a bank. A certain
agency (Wakalah), lending (Qard) and contracts of commodity Murabahah,
amount of capital is placed in statutory
profit-sharing placements (Mudarabah). customers actually buy a commodity
reserves and with regulators, and the
Customers are communicated an (on an exchange) for a spot market
remainder is invested in liquid financial
indicative rate of return or referred to price and then sell the same to a bank
assets to maintain a liquidity reserve.
an Islamic banks historical payouts for a deferred credit price. The bank in
The capitals main purpose is to act as a
on current and savings accounts in the turn sells the commodity back to the
buer for unexpected losses. Funds are
form of gift payouts or Hibah. Lending exchange at spot market prices. Thus, the
mobilized using the concept of deposits
is circumvented by not oering loans bank actually gets the money from the
where banks mobilize funds from
but by selling assets on a deferred credit exchanges account held with the bank,
individuals, households, corporations
basis, or by leasing assets to customers. and not the customer directly. If the same
and governments. These funds are
Nevertheless, Islamic banking, like structure is used for an asset product,
then lent to borrowers. The magic of
conventional banking, is a credit-based the facility disbursal stage actually
the banking model, or the concept
system and all the fundamentals of credit is executed by the customer and the
of deposits is that the customer who
analysis applies to Islamic banking.
provides the funds experiences no impact continued...
Continued
commodity broker. the Kalash tribe reside (descendants of institutions and very few jobs are being
Greek origin; there is a Greek embassy created in this industry. Add to this
In the sequence of sale and purchase in the beautiful mountains as proof), I the role of shared services and Islamic
however, certain rather interesting bumped into a credit ocer from the banking windows hardly can hire more
opportunities of product development First MicroFinance Bank, another bank than 200 people.
emerge. A customer may buy a which functions primarily on ideological
commodity or asset in one currency (followers of Prince Karim Agha Khan) Islamic finance cannot remain a capital
and sell it to the bank in another. This and religious grounds in Pakistan. This markets baby for it to be meaningful
could mean depositing in US dollars and credit ocer braved a two-hour journey to a majority of Muslims who actually
getting returns in euros. The deferred which many would deem treacherous to do not even invest in capital markets
price in the second leg of the transaction the mountains, to merely have potential instruments. The focus needs to shift
can be calculated using a floating profit borrowers sign charge documents for to countries like Pakistan, Bangladesh,
rate, or developing a pre-agreed pricing loans of US$100 or equivalent to about and Indonesia to develop a brick and
mechanism such that a customer actually PKR10,000. Considerable eort for small mortar infrastructure across the depth
enjoys rights of a call option holder and sums. The focus of the First MicroFinance and breadth of these countries to bring
the bank enjoys certain rights of a put Bank was not the price of capital, but to the vast populations into the banking
option holder. This contract would be Bai whom capital was to be made available. folds. Brick and mortar branches create
Istijrar. Projects like fish farms and handicrafts jobs and financial mobility which itself
shops were financed so that the people of becomes a self-fulfilling prophecy. When
The discussion of Islamic finance is Kalash could become financially mobile. countries like Egypt, Syria, and Yemen
far from over, however, as a certain become stable, one can hope for a greater
approach to product development is role for Islamic banks.
needed such that new and innovative
products including hedging structures Islamic Even in the Takaful industry to date
inance
are oered to customers. Islamic shipments of oil from Muslim countries
finance should also be open to hybrid are covered by conventional insurance
instruments that have features in
common with debt and equity, but the cannot remain a policies instead of by Takaful. It is
alarming to understand that with more
rights of the instrument holders should
be clearly specified. capital markets than one billion of a population and
close to US$3 trillion of what is known
If Islamic finance is in any way meant baby for it to be as a Halal industry, Takaful operators of
various countries cannot combine their
to cater to the needs of Muslims, one
must also face certain realities. Close to
meaningful to a capital to make a multinational mega
Takaful company. At least the Kaabah
600 million Muslims live in Bangladesh,
Pakistan and Indonesia. About 60% of
majority of should be covered by a Takaful policy.
instruments
Islamic banks follow the same dictum of Islamic banking as the unique brand,
conventional banks when assessing the then standardization of products would
risks of financing in this sector. be unachievable.
If Islamic finance is going to make
It is hard to come up with data for headlines with Sukuk issuances alone, I certainly hope that as Malaysia
probability of default, as very few lets look at some facts. Many of these contributed to this eort of a cross-
companies in these sectors actually Sukuk are structured by the debt capital border financial system and as Dubai
maintain financial statements or audited markets departments of foreign banks makes eorts to become a hub for
books for any length of time to come up with a contribution from the Shariah inter-Islamic trade, we can see greater
with viable conclusions. How can Islamic advisors on the structuring of sale integration of markets and peoples across
banks steer away from the conventional and buy back or sale and lease back the Muslim world in the coming years.
methodologies to make this rather structures if not commodity Murabahah.
large population segment bankable? Much of the book running is done by the Hussain Kureshi is the head of mergers and
This need not be seen as an exercise in usual suspects such as Deutsche, Citi, acquisitions at Millennium Capital. He can
charity giving. I recall on a trip to Chitral, JPMorgan, etc. Very little in terms of be contacted at husseinkureshi@gmail.com.
Pakistan where a small community of revenue is trickling to Islamic financial
UKRAINE
By Roustam Vakhitov & Nariman
Kimsanov
Ukrainian
with Russia forced many Ukrainian sharing investments, as well as long-term
companies to search for new markets. leases, fit well into the domestic tax and
central and
Considering the consistent growth legal framework.
of the Muslim population across the
UNDERSTANDING,
DEVELOPING
& MARKETING
TAKAFUL
PRODUCTS
22nd 24th March 2015, DUBAI
This is a must-attend program for all those involved in, or preparing to be involved in Takaful. The course will suit those
working for Takaful operators, brokers, insurance companies, banks and consultancies.
www.REDmoneytraining.com | dubaicourse@redmoneygroup.com
DEALS
discussions with the Dubai Supreme a capital-boosting Sukuk which will
Council of Energy about the issuance of not be convertible into ordinary shares,
green Sukuk. Furthermore, Latham & reported The Peninsula Qatar. The Sukuk
Telekom Malaysia not opting Watkins also confirmed in the report that shall be eligible for inclusion as Addition
for ringgit Sukuk it is working with the CEBC, the Gulf Tier 1 Capital in accordance with Basel
MALAYSIA: Malaysias national Sukuk and Bond Association and the CBI III, in compliance with Qatar Central
telecommunications company, Telekom to promote green Sukuk. Banks regulations. Proceeds from the
Malaysia, will select between a US Sukuk are suggested to fund the banks
dollar-denominated issuance or a euro- PETRONAS sets Sukuk price new projects and expansion plans.
denominated issuance for its debut According to the report, Abdulbasit
Sukuk, depending on pricing, according guidance Ahmed Al Shaibei, QIIBs CEO said that
to Bloomberg. The firm seeks to raise MALAYSIA: PETRONAS has set price the bank would first issue QAR1 billion
US$750 million from the Sukuk as guidance levels for its five-year Sukuk (US$274.47 million) and gradually raise
part of a debt program to fund capital Wakalah oered at a yield of around more as and when the bank requires it.
requirements. 135bps over US Treasuries, according to
Bloomberg. The tranche is a part of its US Masraf Al Rayan eyes Sukuk
dollar bonds program.
SIB prices Sukuk QATAR: Masraf Al Rayan is looking
UAE: Sharjah Islamic Bank (SIB) has Bank of America Merrill Lynch, CIMB, to tap the Sukuk market this year with
priced its US$500 million five-year Citigroup, JPMorgan and Morgan a benchmark issuance, according to
Sukuk, reported Reuters. According Stanley are the active joint bookrunners, Reuters. The bank has reportedly invited
to the newswire, the paper was priced along with Deutsche Bank, HSBC, bankers to pitch for arranger roles for
at a spread of 110bps over midswaps Maybank and MUFG as passive the potential US dollar-denominated
with a profit rate of 2.84%. Receiving bookrunners. oering, expecting to raise funds before
approximately US$3 billion-worth of the 30th April 2015.
orders, the Sukuk was sold after a series
Emirates Airline names banks
of investor meetings in Asia and Europe. Anakku makes irst issuance
Abu Dhabi Islamic Bank, Al Hilal Bank, to arrange Sukuk
Dubai Islamic Bank, Emirates NBD, under Sukuk program
UAE: Emirates Airline has selected eight
HSBC, KFH Investment and Standard banks to arrange a Sukuk that will be MALAYSIA: Asia Brands in an
Chartered were the arrangers for the guaranteed by Britains export credit announcement to Bursa Malaysia
deal. agency, UK Export Finance, reported conveyed that Anakku, its subsidiary,
Reuters. These banks are: Citigroup, has made the first issuance of RM100
million (US$27.01 million) in nominal
UAE to debut green-energy HSBC, JPMorgan and National Bank
value under the Sukuk program. The
of Abu Dhabi as the joint structuring
Sukuk agents, with Abu Dhabi Islamic Bank, program allocates a tenor of up to 15
UAE: The UAE is expected to issue the Dubai Islamic Bank, Emirates NBD and years from the date of the first issue of
worlds first Sukuk aimed at financing Standard Chartered also acting as joint the Sukuk. Proceeds from the issuance
green energy projects this year, possibly lead managers. will be utilized for Shariah compliant
as early as April, reported local purposes only, which among others,
news portal, The National. London- will be to finance investment activities,
based Climate Bonds Initiative (CBI) QIIB gets approval for Sukuk capital expenditure, working capital
highlighted that they are looking to QATAR: Qatar International Islamic requirements, and other general
roll out up to two issuances in the UAE Bank (QIIB) has received the approval corporate purposes of the issuer and/or
in April. The countrys Clean Energy from its general assembly to raise up to its related companies.
Business Council (CEBC) has been in QAR3 billion (US$823.4 million) through
AFRICAS
products from the country over the next with Mashreq and Emirates NBD are
three years. reportedly bidding to buy Citis Egypt
consumer banking network. Citi has been
ITFC inances Egypts
petroleum industry ADIB eyes Citis Egypt leaving countries where it no longer has
a competitive edge, while UAE lenders
EGYPT: The International Islamic Trade business are expanding into nearby emerging
Finance Corporation (ITFC) and the EGYPT: Abu Dhabi Islamic Bank (ADIB) markets to boost earnings amid slower
Egyptian General Petroleum Corporation has been shortlisted as a buyer for growth at home.
have signed a US$3 billion agreement Citigroup (Citi)s Egypt retail business,
with Egypt agreeing to import petroleum reported The National. The bank, along
ASIA
the industry, while encouraging more subsidiary, IBA-Moscow. The bank has
Malaysians to secure the insurance identified Islamic instruments which
and Takaful protection that they need. meet the requirements of Russian
NBP Aitemaad plans Major components of the reforms were legislation (leasing, purchasing of
expansion the Life Insurance and Family Takaful equipment and real estate), and the circle
PAKISTAN: National Bank of Pakistans Framework and the New Motor Cover of potential partners among customers
Islamic banking unit, NBP Aitemaad, Framework. of the IBA-Moscow. It has also formed
plans to convert 15 of its parents the circle of potential investors (mainly
conventional branches every quarter, Consolidation still discussed private investment funds from Dubai).
with an objective of having 100 Aitemaad IBA-Moscow is set to provide US$20-
branches by the end of 2015, according to in Malaysia 30 million-worth of Islamic financing
the Pakistan Observer. The bank has been MALAYSIA: RAM Ratings in a statement facilities to its customers and has enough
expanding its Islamic banking operations to IFN said that it still sees consolidation reserves to provide such financing
since its inception in 2013 by opening potential for the Malaysian Islamic without violating existing covenants. If
new branches and converting existing banking industry as the smaller players needed, the bank can use the guarantees
branches. scale up in order to remain competitive. of its parent company.
We believe the creation of an Islamic
Malaysias Islamic market bank with greater financial clout and Changes at KFH in Malaysia
reach is still on the agenda, observes
share Wong Yin Ching, co-head of financial MALAYSIA: IFN understands that
MALAYSIA: According to Bank Negara institution ratings. According to the KFH (Kuwait Finance House) Research
Malaysia (BNM)s annual report, Islamic rating agency, although the plan to form has closed as a separate entity and the
banking assets in 2014 grew by 12% and an enlarged Islamic entity involving remnants moved in-house, with some
now account for 25.6% of the countrys CIMB Islamic Bank, RHB Islamic Bank activities terminated and a few key
total banking system assets. Foreign and Malaysian Building Society fell players remaining with a new research
currency assets increased to RM27.7 through this year, industry consolidation and innovation department within the
billion (US$7.47 billion), reflecting the continues to be widely discussed. main KFH institution.
growing importance of cross-border
transactions in Islamic finance, said the IBA meets potential Russian Jakarta to host IFSB seminar
central bank.
customers INDONESIA: The Islamic Financial
Services Board (IFSB) in a press release
In terms of insurance and Takaful, AZERBAIJAN: International Bank of announced that it is organizing an
reforms to promote competition, address Azerbaijan (IBA) conducted negotiations IFSB Seminar on Enhancing Financial
pricing distortions and improve value to with the customers of IBA-Moscow Inclusion through Islamic Finance on the
policyholders continued to be a priority Bank on Islamic financing services on 31st March 2015 in Jakarta. The seminar is
for the central bank. BNM conveyed the 13th March 2015, reported local news held in conjunction with the IFSB Annual
that the reforms would contribute portal ABC.AZ. The bank has reportedly Meetings and Side Events 2015, which
towards the long-term sustainability of made all necessary preparatory work to are hosted by Bank Indonesia.
open an Islamic window in its Russian
GLOBAL
rating methodologies for structured positive rating impact on structured
finance securities, to incorporate a new finance transactions. In the coming
counterparty risk assessment that it days, Moodys will issue separate
Tatarstan looking at stronger has introduced for banks as part of its announcements that will provide details on
Russian-Iranian ties revised bank rating methodology. The these implications, expecting to conclude
GLOBAL: Tatarstan is placing a special updates to the structured finance rating the majority of the structured finance
focus on expanding bilateral ties with methodologies will generally have a rating reviews in the first half of 2015.
Iran, through the latters East Azerbaijan
Province particularly in the economic,
technical and engineering fields,
according to Tatar president Rustam
Minnikhanov, reported Islamic Republic
News Agency.
MIDDLE EAST
coverage as well as robust pre-provision principal at the end of two years. The
earnings and capitalization. The Tier 1 said index includes companies such as
capital ratio of UAE banks stood at 16.2% Samsung, Hyundai, Petronas, LG, and
QIB opens new branch as at end-December 2014. MTN.
QATAR: Qatar Islamic Bank (QIB) has
launched a new branch at the Pearl-
Qatar, as part of its expansion strategy, Probable Qatari listings United Finance receives
according to a press release. The new QATAR: Qatar Exchanges CEO, Rashid another merger proposal
branch is located in Medina Centrale al-Mansoori expects to see the listing of OMAN: United Finance Company, which
City, Al Hamra Street, Gate 9, the town Barwa Bank and Qatar First Bank in 2015 is exploring a potential merger with
center of the Pearl-Qatar. subject to regulatory approval, reported Bank Nizwa, in an announcement to the
Reuters. The exchange is also said to be Muscat Securities Market has disclosed
working with the central bank to set up
BBK open to buying Shariah a market for corporate bonds in the next
that the company had received a letter
from Al Omaniya Financial Services
banks two years. expressing their interest in exploring the
BAHRAIN: Although BBK does not possibility of an acquisition or a merger
have any immediate plans to venture AAOIFI and IASB collaborates between the two entities. According
into the Shariah compliant banking to the statement, the matter has been
BAHRAIN: Following an initiative
sector, the bank is keen to consider communicated to the board of directors
taken by the Accounting and Auditing
acquiring Islamic banks if there are and further disclosure concerning this
Organization for Islamic Financial
feasible opportunities available, reported matter will be made as and when there
Institutions (AAOIFI) to strengthen
Gulf Daily News quoting BBK chairman are developments to report.
cooperation and integration with the
Murad Ali Murad.
International Accounting Standards
Board (IASB), the AAOIFI in a press Capital increase for Islamic
KFH-Bahrain now offering release announced that it is set to Holding Group
new service organize an outreach meeting with the
QATAR: The board of directors of Islamic
BAHRAIN: Kuwait Finance House IASB on the 9th April 2015 in Manama,
Bahrain. The outreach meeting will Holding Group in an announcement
Bahrain (KFH-Bahrain) in a press to the Qatar Stock Exchange has
release announced the launch of its discuss issues that Islamic financial
institutions may need to address in recommended to increase capital by 50%
wealth management service oering of the current capital to QAR60 million
new premium investment and asset applying IFRS 9 Financial Instrument (a
standard issued by the IASB that deals (US$16.46 million), distributed in six
management services which will focus on million shares, according to the nominal
a unique segment of customers. with, among others, classification and
measurement of financial assets) for their value of shares QAR10 (US$2.74) plus
financial reporting. bonus. The capital increase will be
UAE lending growth to slow determined in coordination with the
down ADIBs new investment
Ministry of Economy and Commerce
after the approval of the extraordinary
UAE: RAM in a statement said that it offering general assembly of shareholders.
expects loan growth of the UAE banking
sector to moderate to 6-7% from 8% in UAE: Abu Dhabi Islamic Bank (ADIB),
2014, if oil prices remain at current low in a press release has announced the Alizzs new credit card
levels. The ratings agency pointed out oering of a new 100% capital-protected OMAN: Alizz Islamic Bank and
that the second restructuring of Dubai note that gives investors exposure to MasterCard has launched the countrys
World debt; coupled with the completion emerging market equities. Available until first Shariah compliant World Elite
of Dubai Groups restructuring last year the 21st March 2015, the two-year Shariah MasterCard credit card, according to
removed some near-term uncertainties compliant note is specifically tailored for local paper Muscat Daily. The credit card
for UAE banks. RAM also added that risk-averse investors looking to diversify targets the evolving requirements of the
the persistently low oil prices will aect their portfolio with access to high-growth ultra-high-net-worth auent segment
sentiment, especially in the real estate economies. The note is linked to the in Oman and oers exclusive dining,
and equity markets, which could in performance of the Emerging Market traveling and shopping experiences to
turn lead to asset-quality issues. In the SGIXWES Index, which represents 75 cardholders, in addition to providing
event of a credit downturn, UAE banks of the most attractive Shariah stocks and access to prestigious venues and global
will be well buered by sound loan-loss protects the investor by repaying the events.
ASSET
Capital Market Authority and a member
Receive all the latest news via the No.1 Islamic nance based feed
of the Al-Baraka Banking Group, has
paid out 3.5% in cash dividends to
RESULTS
million) of investment revenues and value of the firms investment portfolio
others. accrued by 5.7% to SAR709 million
(US$188.97 million).
Bank Asya
TURKEY: Embattled Shariah compliant BIMB Holdings
Bank Asya has suered a net loss of MALAYSIA: BIMB Holdings, the parent Amlak Finance
TRY877 million (US$334.47 million) in of Bank Islam, in a statement to IFN UAE: Shariah compliant mortgage
2014 due to shrinking loans and deposits, confirmed that it realized a consolidated provider Amlak Finance realized a
reported Reuters. Loan loss provisions profit before Zakat and taxation of AED59 million (US$16.06 million) net
reached TRY1.45 billion (US$553 million) RM815.4 million (US$221.03 million) profit attributable to equity holders,
last year, almost half of which came in for the 12-month period ending the 31st according to a press release. Total assets
the final quarter. Bank Asya wrote o December 2014, 0.5% lower than the declined to AED7.3 billion (US$1.99
TRY943 million (US$359.65 million)- year before mainly due to the RM68.2 billion) last year, from almost AED16
worth of loans in 2014 while its loans million (US$18.49 million) financing billion (US$4.36 billion) in 2008.
and deposits declined 24% and 12% cost of Sukuk raised to partly fund the According to The National, Amlak
respectively in the last quarter. 49% equity acquisition in Bank Islam in Finance will resume the trading of its
December 2013. Bank Islam registered shares next month.
a pre-Zakat and tax profit of RM702.8
Alinma Tokio Marine
Company
million (US$190.5 million) in 2014, Ajman Bank
marking a 3.8% year-on-year growth.
UAE: Islamic financier Ajman Banks
SAUDI ARABIA: Alinma Tokio Marine
latest financial documents show that
Company in a bourse filing confirmed Alkhabeer Capital the bank made a net profit of AED71.4
a pre-Zakat net loss of SAR1.54 million
SAUDI ARABIA: Asset manager million (US$19.44 million) in 2014,
(US$410,467) for the month of February,
Alkhabeer Capital in a press release almost seven times more than the
with net loss before Zakat for the
reported a 2014 net income of SAR57.3 AED10.6 million (US$2.88 million) profit
first two months of the year reaching
million (US$15.27 million), 32.3% higher registered the year before. Total assets
SAR3.69 million (US$983,523). As a
than the previous year. Total assets under stood at AED11.23 billion (US$3.06
result, accumulated losses as at February
management grew 34% to SAR3.3 billion billion) for the 12-month period ending
2015 have reached SAR115.27 million
(US$879.54 million), while the market the 31st December 2014.
(US$30.72 million), or 57.64% of the
companys capital.
DFM
UAE: Dubai Financial Market (DFM)
according to a statement recorded a net
profit of AED759.3 million (US$206.67
million) for the year 2014, compared to
AED284.6 million (US$77.47 million)
in 2013. Total revenues increased 107%
INTERNATIONAL BEST PRACTICES & REGIONAL
year-on-year to AED936.7 million
(US$254.98 million) last year. The total
STANDARDS IN REGULATION, CORPORATE
revenue comprised of AED879.7 million
(US$239.46 million) of operational
GOVERNANCE, AML, SANCTIONS & COMPLIANCE
revenues and AED57 million (US$15.52
22nd 23rd March 2015, Dubai
RATINGS
from MHBs stand-alone rating based on
MARCs assessment on the likelihood of
moderate support from MHBs ultimate
Qatari banks ratings parent, PETRONAS.
upgraded
QATAR: Fitch in a recent statement TSHs Sukuk rated
upgraded the long-term issuer default
MALAYSIA: MARC in a statement has
ratings (IDR) of Commercial Bank of
accorded a rating of AAAIS(fg) to TSH
Qatar, Doha Bank, Qatar Islamic Bank,
Sukuk Musyarakah (TSH Musyarakah)s
Al Khalij Commercial Bank, Qatar
RM100 million (US$27.01 million)
International Islamic Bank and Ahli Bank
guaranteed Islamic medium-term notes
to A+ from A. Fitch also upgraded
program, with a stable outlook. The
Qatar National Banks long-term IDR to
armed rating and outlook are based
AA- from A+ and its short-term IDR to
on the unconditional and irrevocable
F1+ from F1. The outlooks on all the
financial guarantee insurance provided
long-term IDRs are stable.
by Danajamin Nasional which carries
MARCs financial strength rating of
Turkeys ratings reafirmed AAA/stable. TSH Musyarakah is
TURKEY: The Islamic International a special purpose funding vehicle
Rating Agency (IIRA) according to a incorporated to facilitate the issuance of
statement to IFN has rearmed the notes under the Sukuk Musharakah for
foreign currency sovereign ratings of its parent company, TSH Resources.
the Republic of Turkey at BBB-/A-3 and
the local currency sovereign ratings at The rating agency also accorded MARC-
Too many pieces
BBB/A-3. The ratings assigned to the
Republic are supported by sustained
1IS/AA-IS ratings to TSH Sukuk Ijarah
(TSH Ijarah)s RM100 million (US$27.01
in the puzzle?
fiscal discipline and ecient borrowing million) Sukuk Ijarah commercial papers Let IFN put it together for you.....
strategies which have translated into and RM300 million (US$81.03 million)
an improved debt profile which is Sukuk Ijarah medium-term notes
reflected in reduced sensitivity to foreign programs with a stable outlook. As at the
exchange and interest rate risks along 3rd March 2015, TSH Ijarah has RM240.0
with a lengthening maturity profile. million (US$64.83 million)-worth of
outstanding notes.
MHBs Sukuk program
receives rating PETRONASs Sukuk receives
MALAYSIA: MARC in a statement has rating
assigned a final rating of AA-IS with a MALAYSIA: Moodys in a statement
has assigned a definitive A1 rating to
SUBSCRIBE TO IFN TODAY
stable outlook on Malaysia Marine and
Heavy Engineering Holdings (MHB)s PETRONASs US$1.25 billion 2.71% www.IslamicFinanceNews.com
Sukuk Murabahah program of up to Sukuk due 2020, issued through
RM1 billion (US$270.11 million). The PETRONAS Global Sukuk. The outlook
rating incorporates a one-notch uplift on the ratings is stable.
MOVES
compliance ocer, according to a press manager head of branches, retail
release. In Indonesia, Tigor M Siahaan banking, according to Times of Oman.
has been nominated as president director Yousuf joins the bank with more than 20
Bank Negara Malaysia of CIMB Niaga, succeeding Arwin years of experience working in the retail
MALAYSIA: Bank Negara Malaysia has Rasyid who has expressed his intention banking sector and has worked with
appointed Dr Noor Azlan Ghazali and to retire. Bank Muscat and HSBC.
Dr Yeah Kim Leng as external members
of its Monetary Policy Committee for a
term of two years eective the 1st April Prime Bank AAOIFI
2015, the central bank announced on its BANGLADESH: Touhidul Alam BAHRAIN: AAOIFI has elected former
website. Khan informed IFN that he has joined Bahraini minister of housing, Shaikh
Prime Bank (which operates Hasanah Ebrahim Khalifa Al Khalifa as the
Islamic Banking) as its deputy managing chairman of its board of trustees and
CIMB Group director. Sheikh Saleh Abdulla Kamel, the
GLOBAL: CIMB Group, the parent president of Saudi Arabias Dallah
company of CIMB Islamic, has appointed
Eendy Shahul Hamid as CEO of Group Ahlibank Albaraka Group, as vice-chairman of
the trustee board, according to a press
Asset Management & Investments, OMAN: Yousuf Al Rawahi has been release.
and Kwan Keen Yew as group chief appointed as Ahlibanks deputy general
All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap
1600 1200
1410 1120
1220 1040
1030 960
840 880
650 800
Oct Nov Dec Jan Feb Mar Oct Nov Dec Jan Feb Mar
All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap
1300 1600
1140 1416
980 1232
820 1048
660 864
500 680
Oct Nov Dec Jan Feb Mar Oct Nov Dec Jan Feb Mar
All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap
1150 2250
1020 1960
890 1670
760 1380
630 1090
500 800
Oct Nov Dec Jan Feb Mar Oct Nov Dec Jan Feb Mar
2100
2020
1940
1860
1780
1700
Oct-2014 Nov-2014 Dec-2014 Jan-2015 Feb-2015 Mar-2015
REDmoney Global Shariah Index Series (All Cap) 6 Months REDmoney Global Shariah Index Series (Large Cap) 6 Months
REDmoney Asia ex. Japan REDmoney Global REDmoney Asia ex. Japan REDmoney Global
REDmoney Europe REDmoney MENA REDmoney Europe REDmoney MENA
REDmoney GCC REDmoney US REDmoney GCC REDmoney US
1400 1300
1230 1130
1060 960
890 790
720 620
550 450
Oct Nov Dec Jan Feb Mar Oct Nov Dec Jan Feb Mar
REDmoney Global Shariah Index Series (Medium Cap) 6 Months REDmoney Global Shariah Index Series (Small Cap) 6 Months
REDmoney Asia ex. Japan REDmoney Global REDmoney Asia ex. Japan REDmoney Global
REDmoney Europe REDmoney MENA REDmoney Europe REDmoney MENA
REDmoney GCC REDmoney US REDmoney GCC REDmoney US
2250 2000
1900 1700
1550 1400
1200 1100
850 800
500 500
Oct Nov Dec Jan Feb Mar Oct Nov Dec Jan Feb Mar
The REDmoney Global Shariah Index Series powered by IdealRatings consists of a rich subset of global listed equities that adhere to clearly
defined and transparent Shariah guidelines defined by Shariyah Review Bureau in Jeddah, Saudi Arabia.
The REDmoney Shariah Indexes provides Islamic investors with an accurate and Shariah-specific equity performance benchmark with optimized
compliance credibility due to the intensive research conducted to ensure that index constituents do not conflict with the defined Shariah
requirements.
IdealRatings is the leading provider of Shariah investment decision support tools to investors globally, including asset managers, brokers, index
providers, and banks to empower them to develop, manage and monitor Shariah investment products and Shariah compliant funds. IdealRatings
is headquartered in San Francisco, California. For more information about IdealRatings visit: www.idealratings.com
170
160
150
140
Index Values
130
120
110
100
90
80
70
May-11
Jan-05
Jan-10
Jul-02
Jul-07
Dec-99
Aug-12
Nov-13
Oct-03
Oct-08
Apr-01
Apr-06
Feb-15
Top 10 Yield-to-Date Returns for ALL Funds
Fund Fund Manager Performance Measure Fund Domicile
1 Al-Mubarak Pure Saudi Equity Arab National Bank 12.21 Saudi Arabia
6 AlAhli Saudi Trading Equity The National Commercial Bank 10.04 Saudi Arabia
7 Atlas Pension Islamic - Equity Sub Atlas Asset Management 9.59 Pakistan
Comprehensive data from Eurekahedge will now feature the overall top 10 global and regional funds based on a specific duration (yield to date, annualized returns,
monthly returns), Sharpe ratio as well as delve into specific asset classes in the global arena equity, fixed income, money market, commodity, global investing (which
would focus on funds investing with global mandate instead of a specific country or geographical region), fund of funds, real estate as well as the Sortino ratio. Each table
covering the duration, region, asset class and ratio will be featured on a five-week rotational basis.
Eurekahedge Islamic Fund Balanced Index over the last 5 years Eurekahedge Islamic Fund Balanced Index over the last 1 year
130 105
104
125
104
120 103
Percentage
Percentage
103
115
102
110 102
105 101
101
100
100
95 100
Mar-14
Nov-14
Oct-14
Mar-12
Apr-14
May-14
Feb-14
Feb-15
Sep-14
Jan-15
Jul-14
Nov-13
Dec-14
Oct-11
Apr-14
May-11
Aug-14
Jun-14
Feb-10
Feb-15
Sep-14
Jan-13
Jul-10
Dec-10
Aug-12
Jun-13
2 Meezan Tahauz Pension - Debt Sub Al Meezan Investment Management 5.13 Pakistan
3 Atlas Pension Islamic - Debt Sub Atlas Asset Management 4.89 Pakistan
2 AlManarah High Growth Portfolio The National Commercial Bank 1.28 Saudi Arabia
3 AlManarah Conservative Growth Portfolio The National Commercial Bank 0.83 Saudi Arabia
5 Al Yusr Mizan Multi Asset Saudi Hollandi Bank -2.90 Saudi Arabia
Contact Eurekahedge
To list your fund or update your fund information: islamicfunds@eurekahedge.com
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Disclaimer
Copyright Eurekahedge 2007, All Rights Reserved. You, the user, may freely use the data for internal purposes and may reproduce the index data provided that
reference to Eurekahedge is provided in your dissemination and/or reproduction. The information is provided on an as is basis and you assume and will bear all
risk or associated costs in its use, and neither Islamic Finance news, Eurekahedge nor its aliates provide any express or implied warranty or representations as to
originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for any purpose.
Top Managers of Sukuk 12 Months Sukuk Volume by Currency US$ (billion) 12 Months
Top Islamic Finance Related Project Finance Mandated Lead Top Islamic Finance Related Project Financing Legal Advisors
Arrangers 12 Months Ranking 12 Months
Mandated Lead Arranger US$ (million) No % Legal Advisor US$ (million) No %
1 National Commercial Bank 2,909 4 26.7 1 Allen & Overy 6,375 5 38.0
2 HSBC 648 2 6.0 2 Baker & McKenzie 3,220 3 19.2
3 Samba Capital & Investment 604 3 5.6
3 Linklaters 1,631 2 9.7
Management
4 Riyad Bank 588 3 5.4 4 Cliord Chance 1,626 4 9.7
5 Banque Saudi Fransi 574 3 5.3 5 Salans FMC SNR Denton Group 1,280 2 7.6
6 Al Rajhi Capital 486 3 4.5 6 Chadbourne & Parke 660 1 3.9
7 National Bank of Kuwait 290 1 2.7
7 White & Case 650 1 3.9
8 First Gulf Bank 281 2 2.6
8 Latham & Watkins 433 2 2.6
8 Union National Bank 281 2 2.6
10 Attijariwafa Bank 267 1 2.5 9 Norton Rose Fulbright 354 1 2.1
8 HSBC 483 3 5.0 24th Dec 2014 National Central Cooling - UAE 706
Tabreed
9 Noor Bank 475 3 4.9
7th Dec 2014 Utilities Development Kuwait 624
10 Banque Saudi Fransi 433 2 4.5
20th Jan 2015 Al-Waha Petrochemical Saudi Arabia 523
11 Emirates NBD 362 6 3.7
12 Al Hilal Bank 272 3 2.8 31st Jul 2014 Emirates Airlines UAE 425
14 Al Rajhi Capital 220 1 2.3 Top Islamic Finance Related Financing by Country 12 Months
16 Union National Bank 194 3 2.0 Nationality US$ (mln) No %
17 Saudi National Commercial Bank 171 1 1.8 1 UAE 4,663 13 48.2
17 Saudi Investment Bank 171 1 1.8 2 Saudi Arabia 3,467 4 35.8
17 Riyad Bank 171 1 1.8 3 Turkey 573 2 5.9
20 Commercial Bank of Dubai 167 2 1.7 4 Qatar 350 1 3.6
21 Ahli United Bank 145 2 1.5 5 India 272 1 2.8
22 Barwa Bank 139 3 1.4
6 Kuwait 261 1 2.7
23 Arab Banking Corporation 126 2 1.3
7 Indonesia 90 1 0.9
24 National Bank of Kuwait 87 1 0.9
24 Kuwait International Bank 87 1 0.9 Top Islamic Finance Related Financing by Sector 12 Months
26 Bank Islam Brunei Darussalam 58 1 0.6
Real Estate/Property
27 Commercial Bank International 25 1 0.3
Mining
28 Warba Bank 15 1 0.2
Professional Services
28 Bank Pan Indonesia 15 1 0.2
Finance
events training
APRIL 2015 MARCH 2015
19th 20th Shariah Audit for Islamic Kuala Lumpur,
1st IFN Investor Forum Dubai, UAE Investment & Capital Malaysia
Market Instruments
2nd IFN US Investor Forum Dubai, UAE
22nd 23rd International Best Practices Dubai, UAE
22 nd
IFN Indonesia Forum Jakarta, Indonesia & Regional Standards in
Regulation, Corporate
Governance, AML,
MAY 2015 Sanctions & Compliance
3rd IFN Qatar Forum Doha, Qatar 22nd 24th Understanding, Dubai, UAE
Developing & Marketing
25th 26th IFN Asia Forum Kuala Lumpur, Malaysia Takaful Products
10th IFN Europe Forum Luxembourg 29th 31st Islamic Law of Business Dubai, UAE
Transactions & Sharia`a
Governance
SEPTEMBER 2015
APRIL 2015
13th IFN Issuer Forum Dubai, UAE
19th 20th Shariah Compliance & Dubai, UAE
Audit for Islamic Banks
13th IFN Iran Forum Dubai, UAE
20th 22nd IFT: Structuring Sukuk & Kuala Lumpur,
OCTOBER 2015 Islamic Capital Markets Malaysia
Products
5th IFN Kuwait Forum Kuwait City
21st IFT: Recovery of Islamic Kuala Lumpur,
th
Finance Facilities Malaysia
27 IFN Egypt Forum Cairo, Egypt
26th 27th IFT: Legal & Dubai, UAE
NOVEMBER 2015 Documentation Issues
in Islamic Structured
17th IFN Turkey Forum Istanbul, Turkey Finance
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All rights reserved. No part of this publication may be reproduced, duplicated or copied by any means without the prior consent of the
holder of the copyright, requests for which should be addressed to the publisher. While every care is taken in the preparation of this
publication, no responsibility can be accepted for any errors, however caused.
AAOIFI 28,30 Dubai Supreme Council of Energy 1,12,25 Muscat Securities Market 28
Abu Dhabi Islamic Bank 25,26,28 EC Harris 14 Muttawar Omani Company 14
ACWA Power 3 Emirates NBD 25,26 NASDAQ 10
Afghan Chamber of Commerce 17 Fitch 30 Nasirs Solicitors & Notaries 17
Afghanistan International Bank 17 G20 11 National Bank of Abu Dhabi 1,25
Afghanistan Islamic Finance and Consulting Co17 G5 14 National Bank of Pakistan 26
Afghanistan Islamic Finance Company 17 Gatehouse Bank 27 National Commercial Bank 14
Ahlibank 14,30 Gulf Finance Corporation 9
Natixis 12
Ajman Bank 29 Gulf Finance KSA 9
NBP Aitemaad 26
Aktor 14 Gulf Sukuk and Bond Association 1,3,12,25
OJK 8
Al Hilal Bank 25 Hasanah Islamic Banking 30
Oxford Business Group 18
Al Hilal Islamic Banking Services 14 HSBC 1,25
Al Jaber Engineering 14 HSBC Holdings 12 PETRONAS 20,25,30
Al Khalij Commercial Bank 30 IBA-Moscow Bank 26 Prime Bank 30
Al Omaniya Financial Services 28 ICD 12 Qatar Central Bank 25
Alinma Tokio Marine Company 29 IDB 14,27 Qatar Exchange 28
Alizz Islamic Bank 28 IdealRatings 9 Qatar International Islamic Bank 25,30
Alkhabeer Capital 29 IFSB 26 Qatar Islamic Bank 11,28,30
Al-Maali 17 International Accounting Standards Board 28 Qatar National Bank 30
Amlak Finance 29 International Bank of Azerbaijan 26 Quantum Property 23
Anakku 25 International Cooperative and Mutual Insurance RAM 26,28
Arabesque 1 Federation 4 RHB Islamic Bank 26
Asia Brands 25 International Energy Agency 7 Ritz Property 14
Asian Infrastructure Bank 7 International Tax Associates 23 S&P 10,20
Aviva 4 Islami Bank Bangladesh 14 S&P Dow Jones Indices 24
Bank Albilad 14 Islamic Holding Group 28 Samba Financial Group 14
Bank Asya 29 Islamic International Rating Agency 30
Saturna 1
Bank Islam 29 Itqan Capital 28
Saudi Arabian Chamber of Commerce 19
Bank Islam Brunei Darussalam 18 Japan FSA 6
Saudi Basic Industries Corp 14
Bank Negara Malaysia 26,30 JP Morgan 25
Bank Nizwa 28 KFH Investment 25 Saudi British Bank 14
Bank of America Merrill Lynch 25 KFH Research 26 Saudi Kayan Petrochemical Company 14
Barclays 4 KFH-Bahrain 28 Securities and Exchange Organization 18
BBK 28 Khazanah Nasional 3 Securities Commission Malaysia 3
BIMB Holdings 29 King & Spalding 19 SEDCO Capital 1
Bioenergy Technical Working Group 5 Kuwait Finance House 26 Shariyah Review Bureau 27
Bursa Malaysia 25 Labuan FSA 13 Sharjah Islamic Bank 25
Central Bank of Afghanistan 17 Labuan IBFC 13 Stamford Law Corporation 27
CIMB 25 Larsen and Toubro 14 Standard Chartered Bank 12,25
CIMB Group Holdings 12,30 Latham & Watkins 1,5,12 Sumitomo Mitsui Banking Corporation 6
CIMB Islamic Bank 10,26 Malaysia Marine and Heavy Telekom Malaysia 25
CIMB Niaga 30 Engineering Holdings 30 Threadneedle Investment 27
Citigroup 12,25,26 Malaysian Building Society 26 TSH Resources 30
Clean Energy Business Council 1,12,25 MARC 30 UMOA Titres 12
Climate Bonds Initiative 1,12,25 Masdar Institute of Science and Technology 5
United Finance Company 28
Commercial Bank of Qatar 30 Mashreq 26
US Federal Reserve 7
CSSF 13 Masraf Al Rayan 25
Uyoun Al-Raed Commercial Company 14
Dallah Albaraka Group 30 MasterCard 28
Waad Holding Company 14
DanaInfra Nasional 14 Maybank 25
Dar Al Sharia Legal & Financial Consultancy 15 Millennium Capital 22 Woori Bank 11
Dar Al Takaful 29 Minerva 13 World Bank 1,7
Deutsche Bank 25 Mizuho Financial Group 6 YapiMerkeziInsaatVeSanayi 14
Doha Bank 30 Moodys 27 Zurich Insurance Group 4
Draznine Advisory 18 Morgan Stanley 25 ITFC 26
Dubai Financial Market 29 Morgan, Lewis & Bockius 27 Egytian General Petroleum Corporation 26
Dubai Islamic Bank 25 MUFG 6,25 Bank Indonesia 26
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