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Friday, 9 March 2012

Islamic finance offers comprehensive and competitive solution

KUALA LUMPUR: In serving the needs of the real economy, Islamic finance offers a comprehensive and competitive solution in meeting funding and investment requirements of businesses, said Tan Sri Dr Zeti Akhtar Aziz, the Governor of Bank Negara Malaysia.

She also said that given its international outreach and dimension, and ability to provide a total financial solution, Islamic finance is now at the frontier in which it presents new opportunities to support the economy and overall financial stability. Zeti said this in a keynote address at the EU-Malaysia Chambers of Commerce and Industry’s (EUMCCI) Quarterly Financial Panel Discussion 2012.

“Despite the challenging global environment and the increased uncertainties, the Islamic finance industry has continued to experience a double-digit growth of 21 per cent, and total syariah-compliant assets have surpassed the US$1 trillion mark. There are now more than 600 Islamic financial institutions operating in more than 75 countries in both Muslim and non-Muslim jurisdictions.

“The emergence of new financial centres in Asia and the Middle East and their increased connectivity has strengthened the foundations for intra and inter-regional linkages in trade and investments,” she added.

Zeti said the now well-developed existing Islamic financial markets, including the sukuk and Islamic money markets, have been particularly instrumental in intermediating funds in the Islamic financial system.
“It is fast becoming an important platform for international fund raising and investment activities that are generating increased cross-border flows.

From an outstanding amount of US$33 billion in 2006, the sukuk market has expanded to US$180 billion as at end-2011.

“Malaysia’s supportive framework and process for sukuk origination and sukuk listing also facilitates the issuance process of ringgit or non-ringgit denominated sukuk in our market.

“Efforts to deepen the sukuk market have provided significant opportunities for participation in this market, with the size of the Malaysian sovereign and corporate sukuk outstanding growing three-fold, from a total of RM120 billion in 2005 to RM353 billion as at end-2011,” she added.

Zeti said key to the development of Islamic finance in Malaysia, has been its progressive internationalisation and the introduction of more innovative Shariah-compliant financial solutions, that meet the increasingly more complex and diverse international business requirements.

She also drew attention to the fact that Islamic finance, which was previously domestic-centric, is now increasingly providing financial solutions for cross-border trade and investment.
“Progressive liberalisation has facilitated the internationalisation of Islamic finance.

“This has been reinforced by the dynamic pace of innovation in Islamic finance that has widened the range of financial products and services,” she added.

Zeti said Islamic finance has thus become an increasingly important channel for the efficient allocation of funds across borders and the diversification of risks. — Bernama
(Bernama, 09  March2012)

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Green sukuks to drive finance for climate change investment projects

The Climate Bonds Initiative, the Clean Energy Business Council of the Middle East and North Africa and The Gulf Bond and Sukuk Association today announced they have launched a Green Sukuk Working Group. The group aims to channel market expertise to develop best practices and promote the issuance of sukuks for the financing of climate change investments and projects, such as renewable energy projects.

Green sukuks are Shari'ah compliant investment securities that finance projects meeting eligibility criteria developed by the International Climate Bond Standards scheme. The first meeting of the Green Sukuk Working Group was held last week in Dubai, United Arab Emirates.

Aaron Bielenberg of the Clean Energy Business Council said "There are a significant and growing number of projects, for example renewable energy in the Middle East, that are ideally suited to sukuk investors. This group will help investors more easily identify Shari'ah compliant, clean energy investment opportunities."

Nick Silver of the Climate Bonds Initiative said "There is an urgent need to mobilize finance for both renewable energy and climate adaptation projects in both the Middle East and in other developing Muslim countries such as Bangladesh and Pakistan. Green sukuks are ideally suited for the financing of many of these investments." 

Michael Grifferty of The Gulf Bond and Sukuk Association said, "Interest in both Shari'ah compliant and ethical investing is on the rise. Green sukuks can support this trend by expanding the range of available financial instruments. Green sukuks also support national development strategies by offering longer term finance for essential infrastructure."

The eligibility criteria in terms of climate change solutions are derived from the International Climate Bond Standards scheme, backed by a group of leading, global institutional investors and environmental Non-Government Organisations consisting of the California State Teachers' Retirement System (CalSTRS); the Natural Resources Defense Council; the California State Treasurers' Office; the Investor Group on Climate Change (IGCC); the Carbon Disclosure Project; and the Ceres Investor Network on Climate Risk (INCR). 

The scheme also has an industry working group that provides input into the formulation of eligibility criteria, with participation from organizations such as the International Finance Corporation (IFC), Standard & Poor's, Aviva Investors and KPMG. 

The Green Sukuk Working Group invites participation from other organisations interested in the potential of green sukuk financing.

(AmeInfo.Com /09 March 2012)

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