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Tuesday, 3 July 2012

Islamic Development Bank president meets ministers, discusses Islamic banking in India

MUMBAI: Islamic Development Bank Group's President Ahmad Mohamed Ali held discussions with several Ministers in the UPA on ways to popularise Islamic banking in the country. Mr Ali also met vice-president of India Mohammad Hamid AnsariPranab Mukherjee, minority affairs minister Salman Khurshid and minister of state for external affairs E. Ahmed during his visit to the country last week. 

During the meetings, Mr Ali highlighted Islamic Development Bank Group's (IDB) role in upgrading economic and social development of the Bank's member countries as well as Muslim communities in non-member countries. He touched upon ways for promoting social and economic cooperation between IDB Group and India's Muslim community on a number of grounds including development of Awqaf properties and their cost-effectiveness improvement, savings management for successful Hajj Pilgrimage experiences, education programs including connecting Quranic schools via distance learning technology and scholarships. 

IDB has so far supported 267 educational institutions in India with financial assistance amounting to $42.8 million as grants. It has also launched a scholarship program since 1983 to enable outstanding Indian students to pursue higher studies in universities in various science and engineering related disciplines. To date, the total number of beneficiaries in the scholarship Program in India stands at 3,819 - comprising 2,986 males and 833 females - out of whom 2,564 have graduated as medical doctors and engineers, a press note issued on behalf of IDB said. 

Also during his visit to India, the IDB Group President addressed the opening session of a conference on 'Hajj Pilgrimage Management' where he expressed IDB Group's readiness to cooperate with India so that the Indian Muslim community could benefit from the Malaysian experience in Hajj management by replicating Malaysia's "Tabung Haji" model.

(The Economic Times / 02 July 2012)

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Middle East and Asia to stoke sukuk growth

KUALA LUMPUR: Global sukuk market growth will likely stem from the Middle East and Asia as these burgeoning markets attract liquidity and provide opportunities for funding.
HSBC Amanah (M) Bhd chief executive officer Rafe Haneef said the financial unease in Europe would continue to deflect funds in the direction of the Middle East and Asia, where there are opportunities for funding growth through sukuk.
“The global liquidity pool is moving away from more risky markets to safer, more growth-oriented markets. So you will find that the liquidity will now chase asset growth in the Middle East and Asia,” he said after launching the HSBC Amanah City Centre branch at Wisma UOA II, Kuala Lumpur.
HSBC Amanah is the global Islamic financial services division of the HSBC Group.
He added that the liquidity shift to the Middle East and Asia had created a price tension.
“Pricing has become more attractive and people are going out to issuesukuk,” Rafe said, adding that there was market talk of mega projects in the pipeline being sukuk-funded.
“What we hear in the market is that there are bigger deals than the RM6bil coal-fired power plant project in Tanjung Bin,” he said adding that about RM3.2bil of the power plant had been funded through sukuk.
He said the mega projects would be in Malaysia as well as the Middle East. “There are significant developments in the Middle East and it is believed that all of them will be funded through sukuk.”
The global sukuk market size hit US$20.5bil for the first half of this year, up 36.7% from US$15bil as at June 2011.
The sukuk market is then on target to reach US$44bil at year-end, encouraged by more sukuk issuance for growing markets. It closed last year at US$37bil.
Rafe added: “(The sukuk market is) already around the halfway-mark. By year-end, it should be comfortably close to US$44bil.”
Moving forward, he said that HSBC hoped to maintain its 35% market share of the global sukuk market, which now amounted to almost US$7.2bil.
HSBC Malaysia would also be launching its Islamic overdraft facility this year, while it continues to refine its full suite of financial products.

(The Star Online / 03 July 2012)

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Takaful untapped potential ‘immense’

JEDDAH – The Takaful industry is currently concentrated in limited markets, segments and business lines. However, there is immense unrealized potential that can be achieved.Ernst & Young’s World Takaful Report 2011 forecast that the current takaful growth trends would suggest $12 billion in gross contributions by 2012.

Excluding Saudi cooperative contributions, total takaful contributions are expected to reach $7 billion by 2012 from $9.1 billion last year.

The results have been lower ($8.3 billion) due to industry slow down in core markets relative to the high growth rates seen in previous years, the report added.The anticipated compulsory medical insurance regulation in Dubai and other UAE emirates was not rolled out either. A sizable portion of Muslim populated countries are characterized by having low income/lower-middle income households (Indonesia, Pakistan, Bangladesh, Sudan). They are also characterized by having low insurance penetration rates. "This may be due, in part, to religious views towards conventional insurers but is also due to the unavailability of products suitable to the low income target market," it said.Micro takaful products can allow tapping into the large low income and lower middle income segments characterizing most Muslim populated countries. However, there is limited awareness of insurance products, savings and retirement plans in most Muslim majority countries, the report noted. The market is there for risk mitigation tools but traditional mechanisms are relied upon, it pointed out, and conventional distribution channels are being used to target the takaful market. Moreover, direct sales force, agencies, takaful partners have limited training on takaful and its unique selling proposition.Share of Islamic Finance in GCC and Malaysia is 25 percent and 22 percent whereas takaful market share is 15 percent and 10 percent respectively. 

Takaful as a predominantly retail driven in most markets, has at least 10 percent of the known Shariah-inclined market that they have not yet tapped. 

Corporate business is attracted through a value proposition based on the operators reputation, history, product suite, service standards, relationships and pricing. For takaful, the corporate customer segment has significant room for growth. The GCC takaful market predominantly comprises of general takaful business with family takaful accounting for as little as 5 percent in certain markets. With high disposable income average and low market penetration, the GCC presents potential for family takaful large Muslim markets such as Libya, Egypt, Bangladesh, Indonesia and Brunei are opening up to takaful. 

Besides, recent regime changes in MENA countries including Egypt, Libya and Tunisia have brought forward governments that are encouraging Islamic finance. Bangladesh, Brunei and Indonesia are emerging as important frontier markets for takaful, showing also healthy growth. India, China, Russia, Turkey and CIS countries have immense potential for takaful based on the size of their Muslim populations and the growth in their economies. Takaful has not been permitted and/or facilitated in these markets until now, the report added. Further, these markets hold considerable potential for takaful should there be encouragement from their governments. 

(Saudi Gazette / 03 July 2012)

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