Islamic banking may enter Morocco

Islamic banks may soon gain a foothold in Morocco. The move has been expected since the Justice and Development Party (PJD), advocates of Islamic finance, came to power.

The parliament is set to vote on the new draft banking law in September. The bill will include a special chapter dealing with Islamic banking, according to Central Bank Governor Abdellatif Jouahri.

The central bank has already received two foreign requests for permission to invest in the sector. The applications will be studied after the law is passed.

A day after Abdelilah Benkirane was officially appointed as prime minister by the king, he hosted the leader of Qatar's international Islamic bank. The head of government received proposals for two schemes: an Islamic bank and an Islamic insurance company.

Once the banks are set up, a national committee of ulemas will be created with the purpose of ensuring that bank transactions are conducted in line with the laws of Islam.

Under the concept of Islamic finance, loans cannot be a source of profit, and interest charges are banned. Lending cannot be used as a form of commerce. Money can be used as capital funding to support commerce but cannot be the object of commerce. The finance awarded by the bank therefore implies that the bank itself will share in both the profits and the losses.

The minister delegate responsible for the budget, Driss Azami El Idrissi of the PJD, appears optimistic. He stressed that Islamic banks have managed to inject financial dynamism into the countries where they are established.

According to economist Mohamed Cherrafi, Islamic banking can be a good alternative, provided that a certain amount of fiscal neutrality is ensured and double taxation removed.

Islamic finance has a promising future, given that the total amount of money circulating in the sector worldwide was estimated to reach around a trillion dollars last year, he said, which was 50% higher than in 2008 and 21% higher than in 2010.

The introduction of Islamic banking will encourage saving and increase the proportion of the population with bank accounts, according to sociologist Samira Kassimi.

"It's time to set up financial tools to meet the needs of all Moroccans," she said. "We have to instil a new spirit of economic competition which fits both their culture and religion."

While some people don't see the value of setting up Islamic banks, others are anxious to see them open.

Religion should not be used as the basis when considering banking products, opined managerial assistant Souad Bourji. The world has moved on, and the public must choose the products most suited to them, be they Islamic or traditional, she said.

Teacher Rabiae Chennaoui, who has been following developments in Islamic finance in Morocco for years, holds a different opinion. "My religious convictions do not allow me to take out a loan. And the alternative products being offered by the banks are too expensive. I'm waiting for Islamic banks to be set up so that I can put my plans into action," he said.

(Magharebia / 02 August 2012)

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Pakistan: Islamic banking evolving, spreading rapidly said ACCI

The Attock Chamber of Commerce and Industry (ACCI) said on Thursday that Islamic banking was fast spreading in the country and its growth rate was very impressive. "A decade back Pakistan had only one Islamic bank while now we have five Islamic banks and Islamic banking branches representing all the top ten conventional banks," ACCI President Tariq Mehmood said in a statement. 

Seventy five countries have recognised Islamic banking while major banks including HSBC, Citigroup, Deutsche Bank and Standard Chartered have Islamic banking branches or windows which prove success of Riba-free banking, he added. Over nine hundred Islamic banking branches in Pakistan speak of the confidence of the masses in the Islamic banking and the successful handling of regulator, he added. 

He said that the share of Islamic banks in the assets of all the banks can exceed ten per cent in the current fiscal if introduction of new products is focused. Tariq Mehmood asked the Islamic banks to exploit the full potential of interest-free banking, expand network, offer new products to reach to under-served sectors and un-banked population. 

Tariq Mehmood, who is also Director Pak-UK Business Council and Chairman FPCCI Committee on Health, said that Islamic banks should maintain the image of better risk managers which is necessary for depositor's confidence. 

The deposit base of Islamic banking has been expanding faster than general banking due to speedy and better returns which is a very healthy development, he maintained. Tariq asked Islamic banks to keep an eye on global strategies, remain Shariah compliant and find ways to improve rates of return to match inflation which will boost confidence of masses in Islamic banking. Islamic banks have remained unharmed during the global financial collapse which has also saved investments of masses, the business leader observed. 

(Business Recorder / 03 August 2012)

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Malaysia: Syariah focus for new fund

Bullish on the country’s economic resilience, CIMB Principal Asset Management Bhd (CIMB-Principal) has launched the CIMB Islamic Al-Azzam Equity Fund, a syariah-compliant equity fund which aims to achieve consistent capital growth over the medium to longterm period.

The open-ended fund will invest 70-98% of its net asset value in syariah-compliant Malaysian equities listed on Bursa Malaysia, made suitable for those seeking to have a portfolio of investments that adhere to syariah principles.

Deputy chief executive Munirah Khairuddin yesterday said: “We believe if we continue to invest in stocks with strong fundamentals that includes healthy cash flow, quality company balance sheets and strong dividend yields, the fund should be able to deliver consistent long-term capital gain.”

The fund investment focus will be on companies mainly in oil and gas, plantations and consumer discretionary sectors, she added.

With a minimum investment of RM500, even individual retail investors can have access to established companies such as Axiata, Tenaga Nasional Berhad, IOI Group and Digi, among others, said Munirah.

She said the fund managers believed these companies would exhibit above-average growth potentials relative to the industry peers despite a global slowdown.

Syariah-compliant unit trust funds continue to gain popularity even among non-Muslims, because the equity component of such funds can be less volatile and more defensive in nature, she added, as these elements help boost investors confidence when investing in the country.

“In recent months, markets have been receiving more funding for the Economic Transformation Programme and national budget programmes focused on economic growth,” she said, the country has attracted a fair bit of foreign funds, which seek a safe haven amidst current volatile Asian markets that has lifted Malaysia’s Price Earning Ratio premium contribution to the region to a high of 38%.

Additionally, the premium is also partly justified by the 11% higher Malaysian earnings per share growth contribution to the region.

The fund, with an approved fund size of 600 million units, is priced at 25 sen per unit during the initial offer period. It is distributed by CIMB Bank, CIMB Private Banking, CIMB Investment Bank Bhd – Retail Equities and CIMB Islamic Bank, with the initial offer period ending on Aug 21.

(The Malay Mail / 02 August 2012)

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Malaysia: Axiata plans airtime sukuk

KUALA LUMPUR: Malaysia's Axiata Group Bhd joins a growing number of companies using mobile-phone airtime to back Islamic transactions as Asian subscribers are forecast to dominate the global market in three years.

The nation's biggest telecommunications operator, with businesses in India, Indonesia and Sri Lanka, set up its first multi-currency sukuk programme worth US$1.5bil backed by telephone minutes, according to a July 19 stock exchange filing.

Emirates Telecommunications Corp, the sheikdom's largest phone company, established a US$1bil syariah-compliant debt plan supported by similar assets in November 2010.

Cellphone owners in Asia will account for about 65% of seven billion worldwide by 2015, according to a February report from Tokyo-based research company ROA Holdings Inc.

More Islamic bond issuers are using airtime as an asset class due to the limited pool of commodities such as land and property, Mohamad Akram Laldin, who sits on the Malaysian central bank's syariah advisory council, said in a July 30 interview.

“Airtime isn't physically tangible but its value, amount and quantity can be calculated and fixed, therefore it can be used as a syariah-compliant asset,” Abas A Jalil, chief executive officer of Amanah Capital Group Ltd, a consultancy company in Kuala Lumpur, said in a July 30 interview. “This is what we call innovation in Islamic finance, whereby more commercially viable products will be introduced in the future.”

Phone minutes are also used to underpin Islamic loans in Malaysia.IDOTTV Sdn Bhd, which helps arrange funding backed by airtime, expects sales of airtime vouchers to expand to RM150mil (US$48mil) per day by the end of the year from RM45mil now, based on talks with banks,chief operating officer El Hadj Azahari Pawan Teh said in an interview in Kuala Lumpur on Wednesday.

Syariah-compliant loans to individuals grew 27% to RM28.2bil in 2011 and reached RM29.2bil

this year as of June, according to central bank data.

IDOTTV uses mobile-phone minutes to back the loans in the same way crude palm oil facilitates trades based on the Islamic principle of Tawarruq, IDOTTV's Azahari said.

In Tawarruq personal financing, a client buys an item on credit from a bank on a deferred-payment basis and then sells it for cash to a third party. “Demand for airtime is expected to rise further as Islamic banks look to expand their deposits and credit card business using Tawarruq,” he said.

Record sukuk sales

Axiata, based in Kuala Lumpur, plans to issue Islamic bonds denominated in euros, U.S. dollars and the Singapore currency, giving the group wider access to a pool of investors including those in Asia, the Middle East and Europe, the company said in its stock exchange filing.

The sukuk program is rated BBB- by Standard & Poor's, the lowest investment grade, it said.

Sales of sukuk, which pay returns on assets to comply withIslam's ban on interest, are off to a record this year as average yields at an all-time low encourage companies to tap the market. Issuance climbed 65% to US$28.6bil, compared with the same period of 2011, according to data compiled by Bloomberg.

Average yields on sukuk fell 11 basis points, or 0.11 percentage point, this week to a record low of 3.17% and have declined 82 basis points this year, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index.

The difference between the average and the London interbank offered rate, or Libor, narrowed 17 basis points to 219 basis points and is down from 273 basis points at the end of last year. Malaysia's OSK-UOB Islamic Fund Management Bhd isn't interested in purchasing Axiata's Islamic bonds because the company considers securities backed by phone minutes as being less safe than debt underpinned by land and property, which can be sold off in the event of a default.

“Sukuk using airtime vouchers involves a lot more risks than asset-backed debt,” Chan Cheh Shin, who manages RM850mil as the head of Syariah-compliant bonds at Kuala Lumpur-based OSK-UOB, said in an interview on Wednesday. “I'm not keen on such sukuk.”

Islamic notes returned 6.3 % in 2012, according to the HSBC index, while debt in developing markets climbed 12.1%, JPMorgan Chase & Co's EMBI Global Composite Index shows.

The Bloomberg Malaysian Sukuk Ex-MYR Index, which tracks non-ringgit denominated sukuk listed in Malaysia rose 0.06 % to 109.08 this week. It gained 4.5% this year.

India, China, Indonesia, the Philippines and Vietnam will lead growth in mobile-phone users, according to ROA's report entitled Asian Mobile Market Forecast 2012-2015.

The number of subscribers in Malaysia will increase 8.8 % this year from about 40 million in 2011, the Kuala Lumpur office of US-based research company Frost & Sullivan predicted in a July 31 e-mailed statement. Other mobile-network operators may also consider phone airtime as an underlying asset for future Islamic bond offerings, especially if a property that could be used to back sukuk is already tied to a mortgage, according to Kuala Lumpur-based law firm Lee Hishammuddin Allen & Gledhill.

“It may especially appeal to telecommunications companies that face legal issues in using real estate or tangible assets for their sukuk,” Megat Hizaini Hassan, a partner and head of the Syariah-compliant finance practice at the company, said in an e-mail yesterday. “Legally it would be possible to use airtime as the asset for the underlying asset-transaction documents required for the Syariah structure.

(The Star Online / 03 August 2012)

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Securities Commission Malaysia: Sukuk outstanding at US$165.2bil, which was 2/3 of the total Sukuk outstanding globally

 KUALA LUMPUR: The total amount of bonds outstanding stood at RM941bil as at end-June 2012, reflecting the continued growth of the Malaysian bond market, the Securities Commission said.

It said on Thursday the amount included US$165.2bil in Sukuk outstanding, which was two-thirds of the total Sukuk outstanding globally of US$243.4bil.

In its scorecard, it said fund raising activities in Q2 of 2012 continued to be robust. The SC received 56 applications for equity related proposals and issuances of private debt securities (PDS) in Q2, three times the applications received in Q1 2012.

"A total of 42 or 75% were PDS applications, while the remaining 14 or 25% were for equity related proposals. Six applications for Main Market IPOs were received compared to two in Q1 2012. Two IPOs were approved in this quarter, namely Felda Global Ventures Holdings Bhdand IHH Healthcare Bhd," it said.

The SC said the number of approved PDS applications in Q2, 2012 rose to 24 from 16 in Q1 2012.

"The total amount of funds approved to be raised from ringgit-denominated PDS issues also increased by 4.9% to RM23.01bil in Q2, 2012 compared to RM21.94bil in Q1, 2012," it said.

The SC also said total corporate bond issuances reached RM66bil in H1 of 2012 compared with RM70bil for the whole of 2011. Included in the RM66bil was PLUS Bhd's issuance of RM30bil Sukuk, which was the single largest corporate Sukuk in the world.

"Given this trend, the SC expects to see two consecutive years of record level issuances which augurs well for the Malaysian bond market," it said.

(The Star Online / 02 August 2012)

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