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Friday, 19 December 2014

Islamic finance & management events in Kuala Lumpur Malaysia

Date: 17-18 March 2015
Event: KL Conference on Islamic Finance
Event site:

Date: 21-22 April 2015
Event: KL Conference on Islamic Wealth Management
Event site:

Date: 9-10 June 2015
Event: KL Conference on Shariah & Legal Aspects of Islamic Finance 2015
Event site:

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

Organizer: Alfalah Consulting

Indonesia Project Sukuk Plan Sees Fivefold Rise

Indonesia is ramping up financing for new President Joko Widodo’s $439 billion development program, planning an almost fivefold increase in sales of project sukuk.
The government is seeking to raise 7.14 trillion rupiah ($568 million) from notes that will fund particular construction ventures next year, compared with 1.5 trillion rupiah this year, Suminto, Islamic financing director at the debt management office, said in a Dec. 12 interview in Jakarta. That will help finance its estimated spending of about 5,519 trillion rupiah from 2015 to 2019 to build roads, railways and power plants.
Indonesia is diversifying its sukuk to help increase Shariah-compliant banking assets as a share of the total from 4.7 percent, less than a fifth of Malaysia’s. The Southeast Asian nation can absorb the new supply as there’s not enough local Islamic investments to satisfy demand, so the currency’s 3 percent slide this year won’t deter buyers, according to Amanah Capital Group Ltd.
“We expect large portions of the sukuk to be subscribed by local Indonesian banks and institutions,” Abas A. Jalil, chief executive officer at Kuala Lumpur-based consultant Amanah Capital, said in an e-mail yesterday. “Sukuk investors always have long-term views in their investments and the weakening trend of the rupiah isn’t an isolated case.”

Plunging Rupiah

The currency dropped to a 16-year low this week as a slump in Russia’s ruble to a record sparked global financial turmoil. Russia is reeling under sanctions imposed by the U.S. and European Union for its invasion of Ukraine and a six-month, 47 percent drop in crude oil, cutting revenue for the world’s biggest energy exporter.
President Widodo’s development plan includes the construction of 30 dams, 33 hydroelectric power stations, 2,650 kilometers (1,647 miles) of roads, 15 airports and 3,258 kilometers of railroads in the provinces of Java, Sumatra and Kalimantan. Projects approved by the National Development Agency include a railway in Manggarai-Bekasi in Jakarta, the Cirebon-Kroya railway in West Java and a coal transporting railway in southern Sumatra, said Suminto, who like many Indonesians goes by one name, at the debt management office.
Indonesia, the world’s biggest Muslim nation, issues both project-based and project-financing sukuk. Suminto explained that funds raised from the former go toward the state budget and not a specific venture like the latter.

Diversifying Funding

The government sold 800 billion rupiah of project-financing sukuk in 2013, Suminto said. Worldwide sales of Islamic bonds climbed 6.3 percent to $45.3 billion this year, according to data compiled by Bloomberg. They totaled $43.1 billion in 2013 and a record $46.8 billion in 2012.
“Indonesia is looking to diversify its financing through various channels such as foreign currencies and Islamic financing to attract more varied investors,” Ezra Nazula, head of fixed income at PT Manulife Aset Manajemen Indonesia in Jakarta, said in a Dec. 15 e-mail. “More issuance would mean better liquidity overall and that would bring new investors and develop the Islamic finance industry.”
Indonesian bonds dropped 1.3 percent in the first three days of this week and the rupiah has fallen 0.9 percent since Dec. 12, a Bloomberg index shows. In the Islamic debt market, the yield on the nation’s 6 percent sukuk due in 2016 rose two basis points today to 7.55 percent and is up 19 basis points so far this week, according to data compiled by Bloomberg.

Growth Catalyst

The country needs to increase spending on building projects to 4.4 percent of gross domestic product by 2019 from the current 2.5 percent to avoid growth stagnation, according to a May report from the World Bank.
Southeast Asia’s biggest economy will expand 5.1 percent in 2014, the slowest pace since 2009, according to the median estimate of 29 economists in a Bloomberg survey. The nation’s current account has been in deficit for the past 12 quarters, making it vulnerable to capital outflows as the global turmoil deters risk-taking.
“Investors would see the new government’s initiatives to boost infrastructure as the catalyst for economic growth in the next five years,” Amanah Capital’s Abas said. “Local demand by Indonesian banks for government Shariah-compliant instruments shall remain strong.
(Bloomberg / 18 December 2014)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Thursday, 18 December 2014

Islamic banking in Oman likely to grow at double-digit rate

Islamic banking in Oman is expected to grow at double-digit rates as Sharia-compliant banking products increasingly gain acceptance and the government's plans to ease restrictions come to fruition.

Launched in 2012, Oman's nascent Islamic banking segment saw assets surge more than five-fold to OMR1.1 billion ($2.86 billion) at the end of the second quarter of 2014, according to a study by Thomson Reuters. 

The sector, which comprises two dedicated Sharia-compliant lenders and six commercial banks with registered Islamic banking windows, currently represents more than 4 per cent of Oman's total banking assets, but this may increase to 10 per cent by 2018 if the best-case scenario for asset growth is achieved. Under a base scenario, the study estimates Islamic banking assets could reach OMR5 billion ($13 billion) by 2018, a 7 per cent share of estimated total assets. 

Sharia-compliant tools
However, such a formidable growth rate may require further regulatory assistance according to the study published in October and carried out in conjunction with a number of Islamic financial agencies. In particular, it identified the need for Sharia-compliant liquidity management instruments to open up the interbank market. Regulations currently ban the use of commodity murabaha, a money market contract widely used elsewhere in the Gulf.

Hamood Sangour Al Zadjali, executive president of the Central Bank of Oman (CBO), said the government was moving to respond to market calls to relax some of the existing restrictions and had set up a taskforce to develop Sharia-compliant liquidity management tools. He added that the banks needed to expand their product range. 

However, new products bring challenges for the sector, said Lloyd Maddock, chief executive officer of ahlibank, a conventional lender that offers Islamic banking services, such as lack of product awareness and employee expertise. 

"Islamic banking is still in the early stages in Oman," he told OBG earlier in the year. "While there is considerable demand for Sharia-compliant products, primarily from retail borrowers, the sector faces challenges, including the training of bank employees and explaining the propositions to the populace."

Rise in assets
Despite growth in the sector, Islamic banks still need tools to help them manage their funds and ensure profitability. The two Sharia lenders, Alizz Islamic Bank and Bank Nizwa, announced increases in assets and earnings this year, but recorded overall losses. 

Alizz Islamic Bank said total income more than doubled in the nine months to September-end, while it posted an OMR4.4 million ($11.4 million) loss, which it attributed to high expenses in the period due to the opening of branches.  Bank Nizwa said assets in the 12 months to September-end rose 49 Islamic Bank to reach OMR257 million ($667 million) year-on-year, while the group's net loss decreased by 49 Islamic Bank in the same period.

However, conventional banks are starting to gain traction in the Islamic sector. The Islamic unit of Oman's largest lender, Bank Muscat, was the only operation to post profits in 2013, while its sharia-compliant unit will float the country's first sukuk, or Islamic bond, announced in October.  BankDhofar said its Islamic unit had moved into profit in the nine months ending September 30, albeit the slightest of profits at OMR10,000 ($26,000) profit, but still a significant turnaround from the OMR1.31 million ($3.38m) loss a year ago.

SMEs highlighted 
Within Islamic finance, lending to small and medium-sized enterprises (SMEs) is identified as a key sector for growth. According to some estimates, more than 90 per cent of all registered firms in the sultanate fall into the SME category, although their combined contribution to the economy is only 15 per cent. 

The central bank governor said SME lending has become an important focus for policymakers: "To encourage lending to SMEs, the prudential requirement for banks to lend to SMEs have also been relaxed in terms of general provisioning requirements and risk weightage," he told OBG. "Islamic banking entities, by their business philosophy itself, should find SME finance more attractive," he added. 

Jamil El Jaroudi, chief executive officer of Bank Nizwa, echoed this sentiment, noting that smaller enterprises represented a strong market for Islamic banking, calling for greater support of the SME sector. 

Government plans to bolster the SME sector, through incentivising small businesses to take part in major infrastructure programmes, means there may be a ready market for sharia lenders.  The Islamic finance sector will also benefit from overall growth in the banking sector, with credit growth set to rise as real estate and non-oil sectors gain momentum. With bank deposits and liquidity levels rising, lenders in Islamic and conventional banking will be well positioned to accommodate the increased demand for finance.

(Times Of Oman /17 December 2014)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

With Oil’s Slump, Gulf Nations Seen Turning to More Sukuk

The almost 50 percent plunge in oil this year is set to unleash a wave of Islamic bond sales as Gulf Cooperation Council nations seek to compensate for slumping revenues.
Sukuk issuance across the region in 2015 will surpass this year’s $14.8 billion, according to Emad Mostaque at Ecstrat Ltd. The 2014 figure is the lowest in three years, data compiled by Bloomberg show. The Gulf states may sell sukuk to help meet planned expenditure, including to fund infrastructure projects at home, said John Sfakianakis, Middle East Director at Ashmore Group Plc.
With Saudi Arabia and Qatar planning more than $700 billion of spendng during the next seven years, boosting sales of sukuk will help compensate for oil prices that are about 25 percent below the $80 a barrel the International Monetary Fund says governments in the region need to balance their budgets. The six-nation GCC includes four members of OPEC, which supplies 40 percent of the world’s oil.
“There will have to be a balance between spending and debt issuance in order to cover for a lot of the capital and current expenditures,” Sfakianakis said by phone from Riyadh on Dec. 16. “It’s reasonable to expect sovereign debt issuance to increase in 2015 across the board.”

Growing Pressure

Brent crude, used as a benchmark for more than half the world’s oil, fell 0.5 percent to $59.56 per barrel at 9:30 a.m. in London, the lowest on a closing basis in more than five years. It may decline to $50 a barrel in 2015, according to a Bloomberg survey of 17 analysts.
Islamic bonds from the GCC, which comply with the religion’s ban on interest, account for more than a quarter of all sales in a market worth about $310 billion, according to data compiled by Bloomberg. Dubai, Qatar and Bahrain are regular issuers.
“Sovereigns in the GCC may increasingly rely on sukuk as a means to support government funding at a time of decreasing oil revenue,” Jonathan Fried, capital markets partner at law firm Linklaters LLP in Dubai, said in an e-mail yesterday. Linklaters advised the Luxembourg government on its debut sukuk sale earlier this year. “There is an ever-growing demand for sukuk products in the GCC.”
That hasn’t stopped yields climbing as oil prices collapsed. The yield on Shariah-compliant bonds from the Middle East jumped 14 basis points last week, the steepest increase since August last year, according to JPMorgan Chase & Co. indexes. That compares with a 22 basis-point decline in the benchmark 10-year Treasury.

Susceptible to Oil

“In the short term, I don’t think there will be any noticeable impact on any of the governments’ strategies,” Thomas Christie, the head of fixed income at Prometheus Capital Finance Ltd., a Dubai-based investment advisory company, said by phone on Dec. 15. “If the oil price continues in the downward trend, in the long term, in the next five years,” there may be an impact to sales, he said.
Bahrain and Oman will be most susceptible to lower oil prices and are likely to issue sovereign debt to finance their fiscal deficits, according to a Moody’s Investors Service report last week. The ratings agency said earlier this year the sovereign sukuk market will reach about $30 billion globally in 2014, and it expects growth to continue in 2015.
Bahrain Mumtalakat Holding Co., the country’s sovereign wealth fund, sold a $600 million sukuk last month. Oman’s Central Bank head Hamud Sangur Al-Zadjali said in October the country may sell 200 million rials ($519 million) of Islamic bonds next year, its debut sale.
While “less resilient” GCC states with fewer fiscal buffers like Bahrain and Oman are likely to issue, “all of them should see an increase in sovereign debt issuance over the next year or two,” Ashmore’s Sfakianakis said.
(Bloomberg / 17 December 2014)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Monday, 15 December 2014

Follow Islamic finance path in reforming Islamic law, says scholar

Systematic Islamic law reform is possible, similar to the development and advancement achieved today in the field of Islamic finance, a forum was told today.
Asserting that Islamic law has been changing all along, University of British Columbia assistant professor of Islamic Law Dr Rumee Ahmed said it was no different from the Islamic finance sector, which would have been unrecognisable 50 years ago.
"This seems to violate lots of principles in the Islamic tradition and in the Quran and Sunnah.
"But Muslim scholars got together and redefined the terms of Islamic law so that today someone can have their Islamic credit card and feel they are operating in a world where using that card will help them achieve salvation," Rumee said, drawing laughter from the floor.
As such, he said that there was a need to look into Islamic law reform seriously, which should include the issues of amputation for the crime of theft and gender-based laws.
"There is nothing wrong with the Quran and the Sunnah but there is something different about the way we apply them today," he said at the public forum entitled Domestic Violence and the Islamic Tradition, held in Kuala Lumpur.
Rumee added that currently, gender was the biggest challenge to systematic Islamic legal reform because of the differences in gender-based Islamic law that covers prayer, inheritance, leadership, dress code, marriage and divorce among others.
He also said that while Islamic reform would sound wrong to the ears of some Muslims, the fact was it did not change the Quran or the Sunnah.
"Only the laws which were interpretations of the Quran and the Sunnah," he said.
"Muslims scholars get their legitimacy and authority from the fact that they uphold the law but they need us to help them uphold the law.
"The reality is Muslim scholars are representing less and less Muslims, nobody is listening to the ulama," he added.
Rumee said that the consensus was that laws enshrined today violated modern notions that Muslims hold about human dignity and human rights.
As such, he said that it was possible to come up with a different interpretation of the Quran and Sunnah as Muslim scholars have done it in the past.
He said that right now, the readings that are authoritative are very narrow readings of the Quran, the Sunnah and Islamic law, and do not represent the views of general Muslims.
As such, he hoped to come up with a new language where Muslims who are like-minded can get together and flesh out new arguments on Islamic law.
"If Muslims come together and have this shared language, they could push for new interpretations.
"The ulama represents this small strand, but they are strongly influenced by social factors. For example, the reason Islamic finance had such a big push is because there is money involved.
"And if Muslims are pushing at that same level that happened for finance and even slavery reform, they can gain authority by promoting certain interpretations," he said, adding that he was in the midst of coming up with an app where Muslims can propose law reforms.
Ratna Osman, executive director of Sisters in Islam, which is the forum organiser, said that while religious scholars refused to budge from Islamic tradition on issues pertaining to the relationship between husband and wife for example, they have broken away from tradition when it came to Islamic banking.
"We know that happened because the push was fueled by monetary gain.
"But whatever not related to 'Ringgit Malaysia', the ulama will say it cannot be changed.
"And so they stick to medieval definition when it comes to marriage, where the women are supposed to obey their husbands as he is their ticket to heaven. These things cannot change apparently," she said.
The second speaker, Dr Ayesha Chaudhry, University of British Columbia's assistant professor of Islamic studies and gender studies, said that Islam never says anything, adding it was Muslims that said things about Islam.
"Islam is not a person, you cannot go to lunch with Islam.
"Muslims are the ones saying many different things about Islam," she said.
Chaudhry added that while Islamic tradition was vast, complex and sophisticated on many other issues, it was not so when it came to issues related to gender.
"So we need to expand the way Muslims think about Islamic tradition to include the modern conversations.
"Because, if we expand the definition to include Islamic conversations, we add richness and complexity to the tradition in areas that was lacking in the pre-colonial period," she said.
She added that it was her opinion that progressive and reformist scholars were speaking authentically about Islam today.
Chaudhry also said that in Islamic tradition, the right of husbands to physically discpline their wives was considered a fundamental marital right.
She said there was authoritative dilemma in this area, however, where a traditionalist would say that it was ethically good to hit one's wife for disciplinary purposes while progressives and reformists argue that it was never good to hit one's wife, not even symbolically.
"Why can't Muslim scholars agree that it is categorically forbidden for husbands to hit their wives in any or all circumstances?
"I think that any law, be it  religious or secular, which preserves human dignity, is best," she said.
Meanwhile, Ratna said that SIS had come across many Muslim women who related to them how the religious authorities would tell them to be patient when they complained about domestic violence.
"These women were told by the Islamic Department that their husbands beat them because they were not good wives, so they were advised to speak to their husbands nicely if they wanted the beatings to stop." she said.
(The Malaysian Insider / 13 December 2014)
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