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Friday, 20 July 2012

Islamic Finance Goes Global

That landscape is changing. According to the World Wealth Report 2012, released by Capgemini and RBC Wealth Management, the Middle East was the only region where wealth increased among individuals of high net worth, who are often defined as those with $1 million in investable assets.
And while private bankers say that most of their clients are not trying yet to bank according to Shariah law, they say the market will evolve.
Islamic finance, which is becoming the more preferred mode of finance by many compared with conventional banking, is expected to be a global industry in three years, driven by its transparent and ethical business practices.
Dr Paul Temporal, an associate fellow at Said Business School at University of Oxford in the United Kingdom, said Islamic finance would continue to grow, especially when conventional banking continued to have issues around the world.
“Malaysia, in particular, is one of the world’s leaders in this area,” he told a press conference at the launch of a white paper entitled “The Next Billion, The Market Opportunity of the Muslim World”, which he co-wrote with Yusuf Hatia, Senior Vice President and Global Chair of Fleishman-Hillard Majlis.
Fleishman-Hillard Majlis is a newly-launched specialist offering by public relations company, Fleishman-Hillard International Communications, aimed to engage with the Muslim consumer market.
According to the report, the current global Muslim population estimated at 1.8 billion, would likely increase by 35 per cent to 2.2 billion in 2030, with 60 per cent residing in the Asia Pacific region and 20 per cent in the Middle East and North Africa.
Axiata Group Bhd. (6888.KU) Thursday said it plans to raise up to $1.5 billion by issuing multi-currency Islamic bonds to secure cheap long-term funds and improve capital efficiency.
Malaysia’s largest mobile telephone company by sales said in a statement to the stock exchange that it would be the first Asian telecommunications company to issue multiple currency Islamic bonds, or sukuk.
It didn’t specify which currencies, nor did it specify maturities or the number or size of tranches.
It called the issuance “strategic” as it would appeal to regional investors while also introducing the company to a diverse pool of investors across the Middle East and Europe, increasing its prospects for future fundraising.
Islamic financing differs from conventional financing in that it adheres to Shariah, or Islamic law, which prohibits the charging of interest and discourages speculation or benefiting at the expense of others.
Sukuks were first sold in 1990 by a Malaysian unit of Royal Dutch Shell PLC (RDSA.LN). They comply with Shariah by replacing coupons with payouts derived from tangible assets, such as leases or joint ventures.
Axiata plans to count air time vouchers–minutes on its mobile network–among its assets underlying the sukuk.
“Whilst Axiata has no immediate funding requirements, having the programme in place will enable the Group to remain nimble and able to move quickly in the event of any changes and demands of the marketplace,” Group Chief Financial Officer James Maclaurin said in the statement.
The sale will also support government efforts to position the Southeast Asian nation at the centre of global Islamic finance, President and Chief Executive Jamaludin Ibrahim said.
Malaysia accounted for 68.7% of the $84.4 billion worth of sukuk issued worldwide in 2011. Global sukuk issuance totaled $43.5 billion in January-March, 55% more than in the same period last year, and with Malaysia accounting for 71%.
Malaysia’s primary need for capital comes from large infrastructure projects, such as an urban rail transport project, under the government’s Economic Transformation Program. This initiative began in 2010 with the goal of turning the economy into a developed economy by 2020.
CIMB Bank Ltd., HSBC Amanah Malaysia Bhd. and Merrill Lynch (Singapore) Pte. Ltd. will be the joint lead arrangers for Axiata’s planned sukuk sale.

(Live Trading News / 19 July 2012)

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