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Monday, 15 October 2012

Oman banks go for Islamic offerings

Dubai: Oman’s non-Islamic banks are set to gain permission this year to offer Shariah-compliant products as retail lending increases the most in three years.
The sultanate, which approved licences for two Islamic banks last year, will pass legislation in 2012 to allow banks to offer the services through “Islamic windows,” central bank executive president Hamud Sangur Al Zadjali said recently. The move may draw customers who had turned to banks in other five Gulf Cooperation Council (GCC) countries for retail loans that comply with Shariah’s ban on paying and receiving interest, according to Dubai-based Al Mal Capital.
Personal loans at Oman’s banks, which rely on consumer credit for more than 40 per cent of lending, jumped 22 per cent in the second quarter, the most since the same period in 2009, central bank data show. The same category grew 2.1 per cent in the UAE and 28 per cent in Saudi Arabia. A study released last year by the UK-based Islamic Finance Advisory & Assurance Services found that of the 86 per cent of Omanis who bank with non-Islamic lenders, 60 per cent are “bothered” by using products based on interest.
“Oman’s tradition and culture are very similar to neighbouring Gulf countries, therefore, we expect to see strong demand,” Tarek Qaqish, Al Mal’s deputy head of asset management, said by email on October 4. “Islamic financial institutions are becoming very competitive and provide attractive products that compete with conventional banks, and clients look for the best offer in the market.
BankMuscat SAOG, the country’s biggest bank by assets, is setting up an Islamic banking unit, known as Meethaq, and National Bank of Oman SAOG said in June its shareholders approved starting Islamic banking operations. Bank Nizwa, the nation’s first Islamic bank, made its trading debut on the Muscat bourse four months ago, while Alizz Islamic Bank is currently offering shares to investors. Oman has a population of about three million.
Catch up
“Oman has never had Islamic banking when Islamic banks have flourished in the GCC, so clearly and purely from a ‘making up for lost time’ perspective, they should do well,” Haissam Arabi, chief executive officer of Gulfmena Investments, said by email on October 4.
Still, new entrants into the Islamic finance market could face an uphill climb to vie with offerings from Shariah-compliant services at established banks, such as BankMuscat, Fitch Ratings said in a report on October 3.
“While there is demand for Islamic banking, and its growth across the Gulf region is likely to outpace that of conventional banking, recent experience from Qatar suggests that customers in Oman will opt to get these services from established banks,” the report said.
In Qatar, many customers switched bank to non-Islamic accounts when their banks were barred from continuing to offer Shariah-compliant services, Fitch said.
Oman, where banking industry assets grew 30 per cent in the two years to July, might sell its first Islamic bonds to boost the industry, Hilal Al Barwani, vice president of banking supervision at the central bank, said in January.
Sukuk issuances
“It’s a little bit too premature to expect a lot of sukuk issuances out of Oman in the short-term,” Abdul Qader Hussain, Dubai-based chief executive officer of Mashreq Capital DIFC Ltd., said by phone on October 1. “You need to get the Islamic products, the Islamic investors before you start issuing liabilities.”
Sales of sukuk in the GCC almost quadrupled to $18.5 billion (Dh67.95 billion) this year compared with the year-earlier period and global sales have already reached a record $37.6 billion, data compiled by Bloomberg show. The industry’s assets worldwide will double by 2015 to as much as $3 trillion, spurred by demand from the GCC and Malaysia, Standard & Poor’s said last month.
The yield on Dubai’s 6.396 per cent Islamic bonds due November 2014 declined 270 basis points this year to 2.88 per cent on October 5. The premium investors demand to hold the emirate’s notes over Malaysia’s 3.928 per cent sukuk maturing in June 2015 dropped 145 basis points this year to 142 points on October 5.
“Demand for Shariah-compliant products continues to increase across the Arab region and even internationally, and Oman is no different,” Al Mal’s Qaqish said.
(Gulf News.Com / 14 Oct 2012)

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Malaysia: Islamic banks urged to be sympathetic to house buyers

KUALA LUMPUR: Islamic banking players have been urged to be sympathetic to house buyers of abandoned projects and not burden them with debt as it may lead to bankruptcy.

Malaysian Muslim Consumers Association (PPIM) financial services monitoring bureau chief, Sheikh Abdul Kareem Said Khadaied said many house buyers face legal action filed by Islamic banking players demanding high payment for uncompleted houses.

Sheikh Abdul Kareem, who was the third panel member, said as an Islamic entity, banks should think of problems faced by Muslim consumers and the officers should discretion to help the house buyers.

PPIM activist Shirazdeen Adam Shah served as forum moderator with Bank Islam Malaysia Bhd sharia division head, Ustaz Mohd Nadzri Chik as second panel member and Bank Muamalat Malaysia Bhd former chief executive officer, Datuk Abdul Manap Abdul Wahab as fourth panel member.

First panel member was Dr Nuarrual Hilal Md Dahlan, director of Institute for Governance and Innovation Study, Universiti Utara Malaysia (UUM)
Nurrual said Bank Negara should improve Islamic banking to benefit consumers, especially buyers of houses in abandoned projects.

The government should compel all private developers to complete the houses and sell them by including warranty insurance to avoid problems.

He also urged consumers to buy from government developers like Syarikat Perumahan Nasional Berhad (SPNB) to avoid the risk of bankruptcy.

(Borneo Post Online / 15 Oct 2012)

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Solar Guys tap Islamic finance for 50MW Indonesia project

Queensland solar company The Solar Guys has tapped into the huge Islamic finance market to fund a 50MW solar PV project in Indonesia, the first in a series of projects under an agreement struck with the Indonesian government.
The Solar Guys are proposing to build 250MW of solar PV under a plan it has dubbed the “One Solar Watt Per Person” campaign. The target of 250MW translates into 250 million watts, which roughly equates to Indonesia’s population.
Dane Muldoon, the director of The Solar Guys international said the company will act as a EPC contractor to build the $120 million project – system design, procurement, installation supervision, project management and assistance with the ongoing operation over its life.
Mitabu Australia is handling the finance and the most significant part of the project may be the use of Islamic finance, or Sukuk, which is a form of long-term bond often used for infrastructure projects that are judged to be in the community’s best interest. Most of the investment is coming via the Middle East and Malaysia.
The companies say solar PV offers the lowest levelised cost of energy in many south-east asian countries, particularly when the cost of fossil fuels and associated infrastructure is taken into account.
Muldoon said each project had been guaranteed a power purchase agreement and would either displace dirty and expensive fossil fuel power generation (Indonesia faces high diesel costs which is why it also offers generous tariffs for geothermal installations) or bring reliable power to remote communities for the first time.”
Muldoon says the One Solar Watt per Person target was produced after meetings with Indonesia officials at an energy conference in Jakarta in July. Indonesia needs 25,000MW of new power sources in coming years, and vice president Boediono recently said he wants all of it to come from renewable energy. One quarter of its population current has no access to electricity.
“Ideally we’d like to do the same across Thailand, Malaysia, Vietnam, and (other South-East Asian countries),” Muldoon told RenewEconomy. “The One Solar Watt idea could end up being a very significant and beneficial program across Asia. It’s a simple yet big idea.”
Mitabu director Dr M Rusydi said the Sukuk financing mechanism treated the solar plant like an infrastructure project such as a toll road or water pipeline. “Many financiers view solar power as just a ‘green’ product,” he said in a statement. “We see solar power as being the fastest way to deliver the crucial clean energy infrastructure needed in countries like Indonesia.
(New Economy / 14 Oct 2012)

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