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Sunday, 22 November 2015

Islamic finance & management events in Kuala Lumpur Malaysia

Date: 24-25 November 2015
Event: KL International Conference on Islamic Finance
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Date: 8-9 December 2015
Event: KL International Conference on Shariah & Legal Aspects of Islamic Finance 2015
Event site:

Date: 21-22 December 2015
Event: KL International Conference on Islamic Wealth Management & Financial Planning
Event site:

To register or reserve a seat online, please go to:

Organizer: Alfalah Consulting

Turkish watchdog to revise Islamic banking regulations

The head of Turkey’s banking watchdog has pledged to revise the regulations governing the Islamic banking sector to increase the popularity of the sector in the country.

Mehmet Ali Akben, president of the Banking Regulation and Supervision Agency (BDDK), said there was a strong need for changes to the rules governing what are known as “participation banks” in Turkey.

“We are trying to readjust those rules,” he told an Islamic finance conference in Istanbul on Nov. 19. “We believe this system will shine on both a local and global scale in the coming years.”

He said there was a demand for a financial model working under non-interest-based rules and that the BDDK had launched a separate body to analyze how Islamic finance could be developed and popularized in Turkey.

Launch of sharia boards for Islamic banking 

Akben said the BDDK would launch the required regulations enabling the system to grow further in Turkey and to become exemplary around the world. 

“In this vein, should the sharia boards be under the direction of the BDDK? ... There have plans to launch these boards under the Association of the Participation Banks, but this issue could be reassessed to determine which option is best,” he said.  

 Talat Ulussever, chairman of the Borsa Istanbul exchange, called for a system in which members of the public could invest in major projects.

“We need to exert effort to establish financial structures in which Turkey’s big projects in areas such as energy, communication, defense and infrastructure will be financed by people as profit is shared by them,” he said.

Ulussever said the 2008 financial crisis showed that conventional finance could not absorb volatility in global markets.

“There is a recent survey by the OECD that indicates financing through credit has a negative affect while economies that prefer stock exchanges for their financing needs grow faster and sustainably,” he said.

(Daily News  22 November 2015)
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Turkey shows progress in developing Islamic finance

Experts who attended at a G20 conference on Islamic finance in Istanbul have pointed to Turkey's progress in developing the sector.
Aysegul Eksit, executive vice chair at the Capital Markets Board of Turkey, said that the Turkish government is hard at work to create better enabling conditions for Islamic finance.
Islamic lenders now account for about 5.3 percent of Turkish banks' total assets, and this is more than twice the level a decade ago, Eksit said.
The value of Islamic finance assets in Turkey was $51.2 billion in 2014, making the country the eighth in the world. Only about 3.6 percent of global sukuk issuance comes from Turkey, according to World Bank statistics.
Sukuk are instruments similar to bonds, but in which asset growth provides income as opposed to the collection of interest which is forbidden under Sharia law.
“The Turkish legal framework for the issuance of sukuk is in the process of completion. Laws passed in 2012 and 2013 have established the use of these instruments,” Eksit said.
But there are still legal obstacles to the development of the sukuk market in Turkey, Eksit pointed out.
“There are still tax-related issues that limit the development of sukuk in Turkey. But there is work currently underway at the Ministry of Finance to overcome these obstacles,” Eksit said.
For now, almost all sukuk issuance in Turkey is made by participation banks and the Turkish Treasury.
In 2014, the Treasury has also created the basis for a wider range of Islamic finance instruments, such as “Mudarabah”, or investment based on profit sharing; “Murabahah”, in which a buyer purchases from a seller at a fixed profit margin; “Musharakah”, which allows each party involved in a business to share in the profits and risks; and “Wakalah”, which refers to a type of Takaful insurance contract.
“Corporates still do not issue sukuk, although there is no legal obstacle to their doing so,” Eksit said.
There are four private Islamic banks operating in Turkey for many years: Albaraka Turk, Bank Asya, Kuveyt Turk, and Turkiye Finans.
The sector employs about 16,000 people, and is growing at about 32 percent per year, relatively faster than the rest of banks in Turkey.
But on Oct. 15, the Banking Regulation and Supervision Agency (BDDK) allowed state-owned Ziraat Bank to establish an Islamic banking branch, and this opened on May 29.
State-owned VakifBank has also received a license for Islamic finance operations in Turkey.
“This is a game changer,” commented Khalid Howladar, global head of Islamic Finance at credit agency Moody’s.
“The market in Turkey has been small, but the entrance of these large state-owned banks, with thousands of points of distribution among them, should be a major step into growing the market. The large banks are also likely to involve corporates in the market for the first time,” Howladar said.
Turkey also boasts four Sharia-compliant pension funds, although assets under management remain low by global standards -- total value of investment in individual Turkish pension system is at about $14 billion, according to OECD statistics.

But the entire pension sector has invested in sukuk in the past, and is expected to show a considerable interest in sukuk as the instrument and the market becomes more mature in Turkey, Eksit said.

(Anadolu Agency / 21 November 2015)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Thursday, 19 November 2015

Entrenching Sukuk into South African economy

It is anticipated that the South African taxation legislation governing the specific elements around Murabaha and Sukuk will be extended to cover listed companies, effective in January.
The government has followed through on their intention of ensuring Islamic financial arrangements accessibility to “other” entities (over and above just sovereign government itself and state-owned entities) to also allow for an alternate additional source to raise capital.
Over the last few years, the government has introduced Islamic compliant financial structures in stages. With the first of such introductions coming through in the Taxation Laws Amendment Act of 2010 – “the Act” that recognised for the first time arrangements like Diminishing Musharaka, Murabaha and Mudaraba as alternates to their conventional counterparts – these amendments were effected to enable banks to offer a Shari’ah compliant product.
In 2011 further amendments to the same act were effected, wherein Sukuk was introduced. However, issuance was limited to the sovereign government. Later on, effective from April 2015, Sukuk issuance was extended to state-owned entities.
The latest proposed amendment to the act regarding listed companies, which takes effect at the beginning of next year, will now almost complete the assortment of entities that would be allowed to offer and/or issue Islamic financial products.
Underlying potential
This is an impressive achievement for a minority Muslim country where only 2 percent of its citizens are adherents of the Islamic faith. Praise must certainly be heaped on the National Treasury for understanding the underlying potential of Islamic financial products. This potential was evident in the four times over-subscribed 2014 South African debut Sukuk issuance, recording the country’s lowest US dollar funding at levels not seen since 1994.
Listed corporates in South Africa have been following the developments regarding the Sukuk. They understand the impact that such previously unavailable financial instruments could have on their ability to raise funding. Judging by the level of interest and the kinds of questions Islamic bankers in South Africa have been getting, we will not be surprised by the associated positive developments that this amendment would have on the economy at large.
Indications are that the South African companies in the telecoms industry would probably be the first to issue corporate Sukuk. With the continual threat of power interruptions, South Africa’s dominant power supplier – state-owned entity Eskom – will issue Sukuk and have made their intentions public.
Furthermore, the extension of the news of the taxation amendments to Murabaha structures bodes particularly well for many financial institutions that have become reliant upon equity and commodity conduit Murabaha transactions, where clarity around taxation on the various legs of the transaction will allow for more robust and competitively priced deals.

This is an opportunity for investors looking to previously untapped markets with new prospects. South Africa is an emerging economy that is always looking for innovative alternatives. With South Africa being viewed as the gateway to Africa, viable Islamic finance options open opportunities both for investment within the country and for growth across its borders in neighbouring countries.
(Business Report / 18 November 2015)
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Islamic Investment Malaysia:

Turkey to boost use of Islamic finance

The Turkish government is seeking to increase the use of Islamic finance for state agencies, state-owned companies and the private sector, a senior treasury official has said.

“The lack of long-term financing is choking developing countries,” said Hakan Tokaş, the director-general for Foreign Economic Relations at the Undersecretariat of the Turkish Treasury, speaking at a G-20 meeting on Islamic finance in Istanbul on Nov. 18.

 “The government will continue to issue sukuk both in Turkish Lira and in foreign denominations. Turkish lira issuance will be aimed at the domestic market, while foreign-currency denominated sukuk will be issued on the international market,” Tokaş said.

Sukuk is an Islamic finance instrument that resembles a bond, but is based on asset growth rather than interest payments - forbidden under Muslim religious law.

“With this policy, which few governments currently undertake, Turkey hopes to set a benchmark for the acceptance of sukuk, and to broaden the investor base for the instrument,” Tokaş added.

“With Turkey, a regular borrower in sukuk, the instrument will gain access to new markets.”

Islamic finance to become ‘major source of long-term investments’

For Vahdettin Ertaş, chairman of the Capital Markets Board of Turkey (SPK), the country offers important opportunities for investment, particularly in the current challenging global climate.

“Islamic finance will become a major source for long-term investments,” Ertaş said, adding, “Because Islamic instruments are asset-based, and not debt-based, they manage risk well.”

Asset-based instruments are based on earnings from productive activity, as well as sharing risk and profit among investors.

“Islamic finance will play a vital role in Turkish infrastructure development,” Ertaş said. “The risk-sharing component is key. This will enable investors to control the complex challenges of large infrastructure projects more efficiently.”

Tokaş added Turkey now offers several financial structures for Islamic finance that are exempt from corporate tax. There are also no important restrictions on foreign participation, he added.

Zamir Iqbal, the head of the World Bank Global Islamic Finance Development Center, noted the Turkish presidency of the G-20 has helped to bring Islamic-finance development to the fore.

“The Turkish G-20 presidency has promoted a road map for development finance that has included Islamic finance,” Iqbal said.

“This has helped countries to take steps to improve the enabling environment for Islamic finance - regulatory, legal and fiscal - which need to be addressed if Islamic finance is to grow,” Iqbal said.

(Daily News / 19 November 2015)
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