LANGUAGES

Entries in English and Malay (Bahasa Melayu)

Friday, 22 May 2015

Islamic finance & management events in Kuala Lumpur Malaysia


Date: 9-10 June 2015
Event: KL International Conference on Shariah & Legal Aspects of Islamic Finance 2015
Event site: www.shariah-legal-islamic-finance.blogspot.com
Register

Date: 15-16 June 2015
Event: KL International Conference on Islamic Wealth Management & Financial Planning
Event site: www.islamic-wealth-management.net
Register

Date: 18-19 August 2015
Event: KL International Conference on Islamic Finance
Event site: www.islamic-finance-conference.net
Register


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

Organizer: Alfalah Consulting
www.alfalahconsulting.com

Malaysia remains largest sukuk market

SINGAPORE: Despite the rapid growth of other sukuk markets, Malaysia remains the largest and most liquid, with a deep institutional investor base.

This is according to Moody’s Investors Service in its just-released Moody’s analysis report titled “Islamic Finance: 2015 Malaysian Sukuk Volumes Will Be Stable, Driven by Refinancing.”

Moody’s Global Head of Islamic Finance, Khalid Howladar said: “We expect total sukuk bond issuance in Malaysia to be at or slightly lower in 2015, when compared with the US$20bil (RM72bil) seen in 2014.

“This is, given Malaysia’s adherence to its policy of fiscal deficit reduction, against the backdrop of weak commodity prices and foreign exchange volatility.

“Malaysia’s declining share of global issuance reflects the increasing  internationalisation and diversity of Islamic capital markets.”

Simon Chen, a Moody’s vice president and senior analyst for the financial institutions group, said for Islamic banks in Malaysia, overall loans growth, including for Islamic financing, will slow slightly to between 8% and 9% in 2015 from 10% in 2014.

“This will reduce the banks’ need for new funding, because asset growth will moderate, due to the country’s slower economic growth,” he added.

Chen pointed out that at the same time, Islamic banks will continue to  apply sukuk in addressing the significant maturity mismatches between their assets and liabilities, and to improve liquidity management in the  context of Basel III.

Moody’s analysis is co-authored by Howladar, Chen, vice president and senior analyst for the sovereign risk group Christian de Guzman, assistant vice president and analyst Nidhi Dhruv, as well as associate analysts Vincent Tordo and Maisam Hasnain. Dhruv, Tordo and Hasnain are Islamic finance specialists in the corporate finance group.

The report said that in 2015, corporate sukuk issuance would remain dominated by Malaysian government-related issuers, as such issuers continued to tap and further deepen the Malaysian sukuk market.
 
It also said US$44bil (RM158.6bil) of Malaysian sukuk would mature in 2015-2017, with corporate and sovereign issuers needing to refinance almost 90% of the total amount. Financial institutions account for the remaining US$4.6bil (TM16.6bil).

Of the US$44bil, only about 6% is denominated in US dollars, with the rest in ringgit, highlighting the depth of the domestic market.

As for the Malaysian sukuk market in relation to the overall global sukuk market, the former’s share of volumes is declining.  At March 31, 2015, some 58% of the about US$308bil (RM1.11bil) of total sukuk outstanding were issued in Malaysia versus a 40% issuance share in 2014.

The remaining issuance is increasingly fragmented, reflecting increased  volumes from other Islamic markets, particularly the Arabian Gulf countries.

Moody’s expects this trend of increased volumes from other Islamic markets to continue.
Moody’s report pointed out while other sovereigns have been keen to support the growth of Islamic finance in their jurisdictions, it is unlikely over at least the next five years that any other market except perhaps Saudi Arabia will match the depth and breadth of Malaysia’s domestic sukuk market.

This is considering the lead gathered from over a decade of sustained issuance, and the extensive and coordinated policy support from Malaysia’s central bank and all other stakeholders in the country.

The report further highlighted that future growth in issuance in Malaysia would be driven by strong demand from local investors, coordinated and supportive policies from the Government for Islamic finance.

Other factors include the large and growing base of syariah-compliant corporates in Malaysia and global investors’ increasing familiarity and comfort with sukuk instruments and increasing appetite for Malaysian credit.

(The Star Online / 21 May 2015)
---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic Finance -- a Potent Tool to Address Most Pressing of Development Challenges

Even though it still remains a small share of the global financial system, Islamic finance industry has expanded rapidly, with annual growth rates of 10 to 15 percent over the past decade. And today, Shariah-compliant financial assets are estimated to be close to U.S. $2 trillion, compared to roughly U.S. $200 billion in the late 1990s. Many countries already have sizeable Islamic finance industries, including Bahrain, Brunei, Indonesia, Islamic Republic of Iran, Malaysia, Pakistan, Sudan, and the UAE. There is also a growing interest in Islamic finance from non-Muslim countries (for example, the United Kingdom, Hong Kong SAR, China, Luxembourg and South Africa), providing further evidence that this hitherto niche market has entered into the mainstream of global finance.
So, what is behind this success? Islamic finance principles adhere to best practices coming from common sense and that's what adds a special appeal to it. These distinct features characterize Islamic finance:
  • avoidance of debt and prohibition of "interest"
  • promotion of risk sharing, so that the relationship between the borrower and thelender is based on shared business risks and returns,
  • prohibition of contracts with high uncertainty and a requirement for full disclosure before, during and after the contract
  • a requirement that financial transactions be linked to real assets
  • promotion of socially responsible and ethical finance
Not only is Islamic finance gaining broader recognition in financial markets, it's also becoming a viable "alternative" source of funding to address pressing developmental challenges, eliminate extreme poverty and boost shared prosperity in developing and emerging economies. Why do I think Islamic finance has this potential?
First, Islamic finance can make significant contributions to economic development, given its direct link to physical assets and the real economy. The use of profit- and loss-sharing arrangements encourages the provision of financial support to productive enterprises that can increase output and generate jobs.

Second, by expanding the range and reach of financial products, Islamic finance could help improve financial access and foster the inclusion of those who are now deprived of financial services. Notably, Islamic finance emphasizes partnership-style financing, which could be useful in improving the access to finance for the poor and for small businesses.
Third, Islamic finance helps strengthen financial stability: there is some empirical evidence that Islamic financial institutions may be more resilient to unforeseen shocks, thereby contributing to overall financial stability.
In the World Bank, we recognize the cross-cutting relevance and importance of Islamic finance across a range of development solutions. The Finance and Markets Global Practice is expanding the use of Sharia-compliant modes of financing in World Bank Group operations, thereby delivering important benefits to our client countries. For example, recent operations in Egypt and Turkey have leveraged Sharia-compliant solutions to expand financing for small and medium scale enterprises through long-term Ijarah contracts (operating leases) to finance the acquisition of fixed assets as well as asset-backed Murabahah contracts (mark-up financing) for their working capital needs.
Despite its recent years of rapid growth and the obvious potential for development financing, we should recognize that Islamic finance is still in early stages of development. The industry will also need to address several challenges, such as establishing robust legal, accounting, regulatory and supervisory frameworks, improving risk management techniques, increasing the number of skilled Islamic finance professionals, and standardizing contract documentation and structures. As the World Bank Group continues to advance this agenda, we look forward to helping the industry at large and our client countries in particular to address these challenges. We are also expanding our efforts in promoting the systematic and sustained use of relevant knowledge of Islamic finance to raise awareness, build consensus and promote the worldwide use of Sharia-compliant financing instruments.

(Huff Post Impact / 21 May 2015)
---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Thursday, 21 May 2015

Khazanah to roll out first tranche of RM1b SRI sukuk

Khazanah Nasional Bhd will be rolling out the first tranche of RM100mil of its RM1bil sustainable and responsible investment sukuk (SRI sukuk) this year.
“We are looking at RM100mil to start with, but with an upside of RM150mil,” said Khazanah board of director and Yayasan AMIR chairman Raja Tan Sri Arshad Raja Tun Uda after the launch of the SRI sukuk yesterday.
The sukuk programme is the first of its kind and has been issued a preliminary AAArating by RAM Ratings Sdn Bhd.
The proceeds of the issuance will be channeled to Yayasan AMIR, a non-profit organisation initiated by Khazanah in 2010, to manage its cashflow for the deployment of the Trust Schools Programme for schools identified in 2015.
The first issuance will be used to roll out 20 schools under the Trust Schools Programme, in Kuala Lumpur, Johor and Sarawak.
Khazanah executive director and chief financial officer Mohd Izani Ghani targets to price the sukuk by mid-next week.
“Indicatively now, we are thinking of MGS (Malaysian Government Securities) seven-year plus 50 basis points, so indicatively 4.3%.
“Because of the uniqueness of the structure we are allowing some time for investors out there to go and seek approval,” said Izani.
Khazanah has already met a group of investors, including some financial institutions and foundations, as well as asset management companies.
“Generally they are all interested in giving back to society. It is a matter of time when they have to present to the committee for the investment,” he said.
He added that the SRI sukuk was dedicated for education only.
“At the beginning of every year, there’ll be an issuance for the schools roll out in that particular year.
“The structure is unique that can be applicable for any other initiatives, like affordable housing, healthcare, environment. It’s out there for people to adopt and use the structure that we have created,” he said.
The SRI sukuk has several key performance indicators, which will affect the returns from the sukuk investment.
“If the KPIs (key performance indicators) are not met, investors will get normal returns as per the launch date.
“If the KPIs are met, there is a mandatory step down in the yield, ie when the KPIs are met you are happy with gifting away the returns,” he said.
The “step-down” could range from 80 to 100 basis points, he added.
“We will sum up the final yield when we price the sukuk hopefully by mid next week,” said Izani.
Another feature of the SRI sukuk is that investors can decide to waive their principal anytime from the first day of the investment up to the seven years of the sukuk.
“If you feel that the KPIs are met and you feel like you want to give, just give notice to Khazanah, and we will manage the redemption at nominal value of RM1 and that’s effectively giving to the trust schools,” he said.
The investor will be granted a tax exemption by the Finance Ministry if the principal is waived.
Some of the KPIs include expansion of the trust schools, upskilling and training teachers as well as senior leaders of the schools, among others.
(The Star Online / 19 May 2015)
---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Getting Islamic Finance to Fulfill its Promise

What do the Olympic Village in London and the Burj Khalifa in Dubai have in common? The answer is Islamic financing, or financing under Islamic principles.
Though still accounting for a small share of the global financial industry, Islamic finance is one of its fastest-growing segments, and its potential is far from exhausted. Islamic banking institutions now operate in over 50 countries and account for more than 15 percent of market share in nearly a dozen of them. Iran and Sudan have a full-fledged Islamic financial sector, in addition to Bangladesh, Brunei, Kuwait, Malaysia, Qatar, Saudi Arabia, the United Arab Emirates, and Yemen. In addition, sukuk, the Islamic equivalent of bonds, are now being used in a number of countries, including by the governments of Hong Kong, Luxembourg, the UK, and South Africa. The total assets of the global Islamic finance industry stood at an estimated 1.8 trillion US dollars at the end of 2013, and this figure is growing.
What can it achieve?
The expanding reach of Islamic finance promises to carry a number of potential benefits. For example, Islamic financial institutions are less exposed to crisis because of their risk-sharing features. Islamic finance by design provides better risk management on the part of both financial institutions and their customers, as they share risks, speculation is prohibited, and financing is asset-based and thus fully collateralized. A depositor has the choice to be an investor in the bank and share profits and risks with it, or they can choose to simply place the money in the bank for safeguarding but without receiving any financial return.
Another advantage is that by offering a form of banking that is in compliance with Shari’a rules, Islamic finance can attract a large number of people into the banking system who have previously refrained for religious reasons. Moreover, in Islamic finance there is greater incentive for lending to small- and medium-sized enterprises (SMEs) because of the risk-sharing nature of the industry. And sukuk can be an interesting alternative to large-scale investments in infrastructure, through public–private partnerships (PPP), again boosting the environment for private sector activity and job creation in general.
But while growing in scope, there are challenges for the industry to develop in a safe and sound manner. The IMF examined some of these issues in a recently published Staff Discussion Note, trying to understand under what circumstances the potential of Islamic Finance can be realized.
I would focus here on the following three areas:
First, when it comes to financial stability, it is important to build on progress in setting standards to harmonize the regulation and supervision of Islamic finance and to protect its consumers. Basically, regulators need to approach this topic by first recognizing the unique features of Islamic banking. For example, regulators should clarify that customers who opt to be investors are treated as such, and enjoy more say in governance as well as greater transparency in the determination of their payouts.
Secondly, more countries need to follow the example of Bahrain, Malaysia and Qatar and issue government sukuk, which would provide a benchmark for sukuk to be issued by the corporate sector. This would help Islamic banks and central banks better manage liquidity. And, as this instrument is well-suited to financing infrastructure, increased sukuk issuance could help narrow the large gap for infrastructure financing. Countries such as Malaysia, Saudi Arabia and the United Arab Emirates are already tapping into this market to expand electric power, telecommunications and transportation infrastructure.
Finally, Islamic banking has yet to develop its equity-like financing to spur greater access for SMEs to finance. Equity financing is a key component, for instance, in making investments in start-up companies viable. To promote the development of an equity market under Islamic finance, it is important that the industry ensures the regulatory framework and tax policies in different countries do not discriminate against risk-sharing. Also, this type of financing requires that banks develop the capacity to assess economic projects and their stewards, and therefore it is of paramount importance to strengthen the overall financial infrastructure.
And what is the role for international financial institutions?
While some of these issues will need to be resolved over time for the industry to develop and fulfill its social mandate, our role in responding to this increased demand was to initially bring different players to the same table to openly discuss some of these issues, then to identify the hurdles and come up with a shared understanding of where the future of Islamic finance lies.
The IMF has long been involved in Islamic finance, and will continue to be, through policy advice, capacity building, and outreach. In addition to our Staff Discussion Note, we held a seminar on this topic during the IMF’s Spring Meetings. While there are still unanswered questions, one thing is certain: international financial institutions and standard setting bodies have an important role in advancing the industry in a sound and sustainable manner.What do the Olympic Village in London and the Burj Khalifa in Dubai have in common? The answer is Islamic financing, or financing under Islamic principles.
Though still accounting for a small share of the global financial industry, Islamic finance is one of its fastest-growing segments, and its potential is far from exhausted. Islamic banking institutions now operate in over 50 countries and account for more than 15 percent of market share in nearly a dozen of them. Iran and Sudan have a full-fledged Islamic financial sector, in addition to Bangladesh, Brunei, Kuwait, Malaysia, Qatar, Saudi Arabia, the United Arab Emirates, and Yemen. In addition, sukuk, the Islamic equivalent of bonds, are now being used in a number of countries, including by the governments of Hong Kong, Luxembourg, the UK, and South Africa. The total assets of the global Islamic finance industry stood at an estimated 1.8 trillion US dollars at the end of 2013, and this figure is growing.
What can it achieve?
The expanding reach of Islamic finance promises to carry a number of potential benefits. For example, Islamic financial institutions are less exposed to crisis because of their risk-sharing features. Islamic finance by design provides better risk management on the part of both financial institutions and their customers, as they share risks, speculation is prohibited, and financing is asset-based and thus fully collateralized. A depositor has the choice to be an investor in the bank and share profits and risks with it, or they can choose to simply place the money in the bank for safeguarding but without receiving any financial return.
Another advantage is that by offering a form of banking that is in compliance with Shari’a rules, Islamic finance can attract a large number of people into the banking system who have previously refrained for religious reasons. Moreover, in Islamic finance there is greater incentive for lending to small- and medium-sized enterprises (SMEs) because of the risk-sharing nature of the industry. And sukuk can be an interesting alternative to large-scale investments in infrastructure, through public–private partnerships (PPP), again boosting the environment for private sector activity and job creation in general.
But while growing in scope, there are challenges for the industry to develop in a safe and sound manner. The IMF examined some of these issues in a recently published Staff Discussion Note, trying to understand under what circumstances the potential of Islamic Finance can be realized.
I would focus here on the following three areas:
First, when it comes to financial stability, it is important to build on progress in setting standards to harmonize the regulation and supervision of Islamic finance and to protect its consumers. Basically, regulators need to approach this topic by first recognizing the unique features of Islamic banking. For example, regulators should clarify that customers who opt to be investors are treated as such, and enjoy more say in governance as well as greater transparency in the determination of their payouts.
Secondly, more countries need to follow the example of Bahrain, Malaysia and Qatar and issue government sukuk, which would provide a benchmark for sukuk to be issued by the corporate sector. This would help Islamic banks and central banks better manage liquidity. And, as this instrument is well-suited to financing infrastructure, increased sukuk issuance could help narrow the large gap for infrastructure financing. Countries such as Malaysia, Saudi Arabia and the United Arab Emirates are already tapping into this market to expand electric power, telecommunications and transportation infrastructure.
Finally, Islamic banking has yet to develop its equity-like financing to spur greater access for SMEs to finance. Equity financing is a key component, for instance, in making investments in start-up companies viable. To promote the development of an equity market under Islamic finance, it is important that the industry ensures the regulatory framework and tax policies in different countries do not discriminate against risk-sharing. Also, this type of financing requires that banks develop the capacity to assess economic projects and their stewards, and therefore it is of paramount importance to strengthen the overall financial infrastructure.
And what is the role for international financial institutions?
While some of these issues will need to be resolved over time for the industry to develop and fulfill its social mandate, our role in responding to this increased demand was to initially bring different players to the same table to openly discuss some of these issues, then to identify the hurdles and come up with a shared understanding of where the future of Islamic finance lies.
The IMF has long been involved in Islamic finance, and will continue to be, through policy advice, capacity building, and outreach. In addition to our Staff Discussion Note, we held a seminar on this topic during the IMF’s Spring Meetings. While there are still unanswered questions, one thing is certain: international financial institutions and standard setting bodies have an important role in advancing the industry in a sound and sustainable manner.
(Al-Asharq Al-Awsat / 20 May 2015)
---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Latest Posts

Upcoming Events on Islamic Finance, Wealth Management, Business, Management, Motivational

Alfalah Consulting's facebook

Followers