Turkey Hopes New Sukuk will Become Benchmark

Turkey’s Sept 18 sovereign sukuk issue could be a benchmark for future issuances and attract investors from the Middle East, says Deputy Prime Minister Babacan. The Islamic paper was five times oversubscribed

Turkey could see a flurry of Islamic bonds in the coming years, as the country’s landmark $1.5 billion sovereign sukuk on Sept. 18 set a benchmark for future issuances. 

The issue was oversubscribed by more than five times, with a yield of 2.8 percent and maturing in 2019, bringing in more than $8 billion. It was rated BB by Standard & Poor’s. Following the issue, bankers noted that $8 billion in demand was highly impressive for a first-time issue. 

The money received from the issue is expected to enter the Turkish Treasury’s coffers on Sept. 26. Some 58 percent of the issue was sold to Middle Eastern investors, 13 percent to European investors, 12 percent to Asian, 9 percent to Turkish and 8 percent to U.S. investors, according to Deputy Prime Minister Ali Babacan.

“We believe this is going to set a benchmark for the government and private sector. For this issuance, we have prepared the [adequate] legal framework and tax regime,” Babacan said in an address to the Global Islamic Finance Forum (GIFF) yesterday.

This marked the first sukuk issuance by the country and the first issuance outside of the Gulf Cooperation Council (GCC) and Southeast Asia. 

The Treasury issued the sukuk with the mediation of Citigroup, HSBC and Kuwait Finance House. Kuwait Finance House’s subsidiary Kuwait Türk, meanwhile, has two sukuk issues worth $100 million and $350 million, which are trading on the London Stock Exchange. 

“There is good room for growth in this sector, and I definitely believe it is something that will be utilized by the participation of both [Islamic] and conventional banks,” Babacan said.

Islamic banking assets

Babacan said the country’s four Islamic banks now accounted for 5.6 percent of Islamic banking assets, a growth of over five times since Islamic banking laws were introduced in 2005.

Turkey completed road shows for the issuance on Sept. 16, attracting investors from the Middle East, Asia, the United States and Europe. 

The Treasury’s dollar sukuk and the Turkish Lira sukuk within the next few weeks are both expected to trigger the private sector as well as provide Turkey with the opportunity to receive millions of dollars in funds from the Islamic world, a first for the country. Turkey, which has made a late but speedy entry into the $100 billion sukuk market is expected to be a key player in the near-future. 

Garanti Invest Strategist Tufan Cömert said that the Treasury was able to finance its external debt within the first six months of 2012 and would use the sukuk to finance its 2013 needs, translating to a lower Eurobond supply in 2013.

(Turkish Weekly / 24 Sep 2012)

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Takaful growth prospects diverge as countries choose different models

The business lines that predominate in these two regions are distinctly different, as are the sources of growth and the investment models. S&P anticipates the rapid rate of growth that the global Takaful market has seen so far will slow, given the stuttering global economy and the relative maturity of some of the larger Takaful markets.

Within this global growth pattern, it expects the GCC to continue to significantly grow faster than local and global conventional insurance, while Southeast Asia is likely to see constrained growth due to tightening regulatory requirements in Malaysia, its largest market.

In S&P’s view, the credit profile of Takaful insurers has improved over the past decade. Capitalization could be hampered in future by volatile investment markets and continued growth.

In a report published today (25 September), Standard & Poor's Ratings Services expressed its view that the growing need for insurance that complies with Shari’ah law means that the global Takaful sector is becoming an increasingly significant niche within the wider insurance industry. It expects to see generally strong growth in contributions, which act as premium income, and greater use of insurance in Islamic states.

Takaful has developed most in the Gulf Cooperation Council (GCC) region and southeast Asia, but individual countries in each region have taken different routes to develop the sector. Thus, the business lines that predominate in these two regions are distinctly different, as are the sources of growth and the investment models.

S&P remain concerned by widespread use of high-risk investment strategies by Takaful providers, and by the sector's lack of global standards in areas such as accounting standards and Shari’ah compliance. In its view, it is unclear how many of the companies involved will sustain their profitability over the longer term, particularly in the GCC region.

However, developments in Malaysia--the largest Takaful market in Southeast Asia--appear much more healthy and sustainable. They are supported by more-sophisticated regulatory oversight and the stronger investment profile of the industry, according to S&P.

(C.P.I Financial / 25 Sep 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Muamalat: From Quran and Hadith

QURAN

Alcoholic drink

They ask you concerning alcoholic drink and gambling. Say: "In them is a great sin, and (some) benefit for men, but the sin of them is greater than their benefit." And they ask you what they ought to spend. Say: "That which is beyond your needs." Thus Allah makes clear to you His Laws in order that you may give thought." 
(Quran, Al-Baqarah, 2: 219)

O you who believe! Intoxicants (all kinds of alcoholic drinks), and gambling, and Al-Ansab , and Al-Azlam (arrows for seeking luck or decision) are an abomination of Shaitan's (Satan) handiwork. So avoid (strictly all) that (abomination) in order that you may be successful. 
(Quran, Al-Maedah, 5:90)

Shaitan (Satan) wants only to excite enmity and hatred between you with intoxicants (alcoholic drinks) and gambling, and hinder you from the remembrance of Allah and from As-Salat (the prayer). So, will you not then abstain? [Quran, Al-Maedah, 5:91]

And obey Allah and the Messenger, and beware (of even coming near to drinking or gambling or Al-Ansab, or Al-Azlam, etc.) and fear Allah. Then if you turn away, you should know that it is Our Messenger's duty to convey (the Message) in the clearest way. 
[Quran, Al-Maedah, 5:92]

Gambling


They ask you concerning alcoholic drink and gambling. Say: "In them is a great sin, and (some) benefit for men, but the sin of them is greater than their benefit." And they ask you what they ought to spend. Say: "That which is beyond your needs." Thus Allah makes clear to you His Laws in order that you may give thought." 
(Quran, Al-Baqarah, 2: 219)

Riba

(1) Those who swallow down usury cannot arise except as one whom Shaitan has prostrated by (his) touch does rise. That is because they say, trading is only like usury; and Allah has allowed trading and forbidden usury. To whomsoever then the admonition has come from his Lord, then he desists, he shall have what has already passed, and his affair is in the hands of Allah; and whoever returns (to it)-- these arc the inmates of the fire; they shall abide in it. 

(Quran, Al-Baqarah, 2:275)

(2) Allah does not bless usury, and He causes charitable deeds to prosper, and Allah does not love any ungrateful sinner. (Quran, Al-Baqarah, 2:276)

(3) O you who believe! Be careful of (your duty to) Allah and relinquish what remains (due) from usury, if you are believers. (Quran, Al-Baqarah, 2:278)

(4) O you who believe! do not devour usury, making it double and redouble, and be careful of (your duty to) Allah, that you may be successful. (Quran, Ali-Imran, 3:130)

(5) And their taking usury though indeed they were forbidden it and their devouring the property of people falsely, and We have prepared for the unbelievers from among them a painful chastisement. (Quran, An-Nisa, 4:161)

(6) And whatever you lay out as usury, so that it may increase in the property of men, it shall not increase with Allah; and whatever you give in charity, desiring Allah's pleasure-- it is these (persons) that shall get manifold. (Quran, Ar-Room, 30:39)

Zakat

Truly those who believe, and do deeds of righteousness, and perform as-salat (prayer), and give zakat they will have their reward with their Lord. On them shall be no fear, nor shall they grieve. (Quran, Al-Baqarah, 2:277)

HADITH

General

Narrated Abu Huraira: The Prophet s.a.w said, "A time will come when one will not care how one gains one's money, legally or illegally." [Sahih Bukhari]

Bribery

Abdullah bin Amur who said:The Messenger of Allah (SAW) said: “Allah cursed the briber (rashi) and bribe-taker (murtashi).”

Ahmad narrated from Tawban who said: “The Messenger of Allah (SAW) cursed the briber, bribe-taker and the mediator meaning the one who walks between the two.” [Ahmad, Abu Dawud, Tirmidhi and ibn Majah]

The Prophet (peace be upon him) cursed the one who bribes and the one who takes bribe. [Sunan of Abu Dawood Hadith No. 1595 Narrated Abdullah ibn Amr ibn al-'As]

Buying & Selling

Hadith: It is not just for a man to sell his merchandise without disclosing its defects. It is proper for the vendor to tell the buyer of any defects of which he is aware. [Hadith of Ahmad Ibn Hanbal, on the authority of Wathilah]

It was narrated that Hakeem ibn Hizaam (may Allah be pleased with him) said: I came to the Messenger of Allah (blessings and peace of Allah be upon him) and said: A man may come to me wanting to buy something that I do not possess; should I buy it for him from the marketplace then sell it to him? He said: “Do not sell that which you do not possess.”

[Narrated by at-Tirmidhi, 1232; an-Nasaa’i, 4613; Abu Dawood, 3503, Ibn Maajah, 2187, Ahmad, 14887. Classed as saheeh by al-Albaani in Irwa’ al-Ghaleel, 1292]

A’isha (Allah be pleased with her) reported that Allah’s Messenger (may peace be upon him) bought some grain from a Jew on credit and gave him a coat-of- mail of his as a pledge. [Sahih Muslim, Chapter 45, Book 10, Number 3902]

Narrated 'Aisha (r.a): The Prophet (s.a.w) purchased food grains from a Jew on credit and mortgaged his iron armor to him.  [Sahih Bukhari - Book 34, Sale & Trade, No. 282]

"Do not sell the fruits until their good condition becomes evident." (Muslim)

Halal & Haram

The Prophet Muhammad (peace be upon him) said “That which is lawful is clear, and that which is unlawful is also quite clear. Between these two is that which is ambiguous, which most people do not know. One who avoids the doubtful safeguards his faith and his honor.” [Riyadh-us-Salaheen, Hadith 588]

Riba

The Apostle of Allah s.a.w cursed the one who accepted usury, the one who paid it, the witness to it, and the one who recorded it. [Hadith]

Narrated 'Aisha r.a: When the verses of Surah "Al-Baqarah" about the riba (usury) were revealed, the Prophet went to the mosque and recited them in front of the people and then banned the trade of alcohol. [Sahih Bukhari, Book 8, Hadith 449]

Sadaqah (Charity)

The Prophet Muhammad (peace be upon him) said: "Give charity without delay, for it stands in the way of calamity." [Tirmidhi, Hadith 589]

Narrated 'Adi bin Hatim heard the Prophet saying: "Save yourself from Hell-fire even by giving half a date-fruit in charity."  (Bukhari, Book 24, Hadith 498)

Zakat

Narrated Jarir bin Abdullah: I gave the pledge of allegiance to Allah's Apostle for the following: 1. offer prayers perfectly 2. pay the Zakat (obligatory charity) 3. and be sincere and true to every Muslim.  (Bukhari, Book 2, Hadith 54)

Narrated Ibn 'Umar: The Prophet ordered the people to pay zakat-ul-Fitr before going to the 'Id prayer.  (Bukhari, Book 25, Hadith 585)

Narrated Jabir bin 'Abdullah: I gave the pledge of allegiance to Allah's Apostle for offering the prayers perfectly paying the zakat and giving good advice to every Muslim.  (Bukhari, Book 50, Hadith 876)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com 

Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com 

Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Qatar Islamic Bank plans dollar-denominated sukuk

Qatar Islamic Bank plans to issue a dollar-denominated Islamic bond, or sukuk, under its recently approved $1.5 billion sukuk programme, lead arrangers said on Wednesday.

Deutsche Bank, HSBC, Standard Chartered and QInvest LLC are mandated for the sukuk, a document from the lead arrangers showed. No details were provided on the size of the issue.

Investor meetings will begin on Thursday in Kuala Lumpur and take in Singapore on Friday, before moving to Abu Dhabi and Dubai on Sept. 30. They will conclude in London on Oct. 1.

The board of QIB approved the sukuk programme earlier this month, paving the way for the first sale under it.

The lender last tapped global debt markets with a $750 million sukuk on the last day of September 2010. The paper was yielding 2.13 percent on the bid side at 0750 GMT, having initially priced two years ago at 3.856 percent. 

(Reuters / 25 Sep 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic investment bank in Egypt wants to buy brokerage

Cairo-based Ridge Islamic Capital is seeking to buy a local brokerage as part of its expansion plan, so that it can offer a full range of sharia-compliant financial services in the country, a company official told Reuters.

"We want to start providing sharia-compliant brokerage services during the fourth quarter of 2012," Ahmed Rizkallah, country manager of Ridge Islamic, told Reuters on Wednesday.

He said his firm was looking for an established brokerage with a solid reputation and a track record, but declined to name any possible targets or specify a potential deal size.

Despite Egypt's current economic troubles, prospects for Islamic finance in the country appear to have improved with last year's ousting of Hosni Mubarak's regime and the election in June this year of President Mohamed Mursi, the candidate of the Muslim Brotherhood.

Ridge Islamic plans to develop products in the areas of wealth management and pension funds, Rizkallah said.

Entering Egypt's takaful (Islamic insurance) market is also on the company's priority list, either through the purchase of an existing company or by applying for a licence, but this will not happen before the beginning of next year, he added.

Earlier this month the company said it would have $100 million available to place as capital or to invest in funds over the next two years.

Ridge Islamic was created this year through the acquisition by Dubai-based Ridge Solutions International Holdings of Egyptian asset management firm El Rashad Holding.

(Reuters / 26 Sep 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com