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Thursday, 13 December 2012

Sukuk issuance 'must be faster'

That is the view of Thomson Reuters global head of Islamic finance Rushdi Siddiqui.
"Malaysia has developed its sukuk market in a manner that an issue can be issued swiftly and that is something this region needs to be able to replicate," he said on the sidelines of the WIBC conference yesterday. "A key issue here is to come to the market faster."
He said that the sukuk market was currently where the eurobank market was in the 1960s and 1970s and it has to move forward and raise efficiency so that non-Islamic financial institutions will come to this market to raise money.
"The key issue is to make the market more efficient," he said. "At present the market is worth around $600 billion and is dominated by Malaysia.
"But in growing the market Malaysia has capacity constraints and there is a difference between growth and profitable growth in the market," he added.
He said that the market had traditionally been dominated by the real estate sector but it should look to other areas.
"The halal food industry is a $640bn market and this is an area currently funded through conventional finance that the industry should be looking at.
"That is a level of debt funding that could be replaced by sukuk because it is a truly asset-backed debt prospect."
Meanwhile. demand for sukuk is expected to almost double over the next four years, driven by strong growth in the Middle East and Asia and their spread to new markets, a Thomson Reuters report said. On average, investors expect to allocate $200 million into Islamic investments, or 50 per cent of their portfolios, next year, with sukuk representing 35pc to 40pc of this
(Gulf Daily News / 12 Dec 2012)

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Banks 'need to attract GCC wealth' to Islamic finance

There is a lot of wealth parked in the conventional space, especially in the GCC and banks must adopt innovative steps to wean customers away from the conventional banking towards Islamic finance, said a report.

Wealth management will be the next area of development for Islamic finance, but the availability of products and services for Muslim high net worth individuals is still limited, said a report in the Gulf Daily News, our sister publication.

"There is a lot of wealth parked in the conventional space, especially in the GCC," Standard Chartered Saadiq consumer banking global head Wasim Saifi said.

"This wealth could easily move into the Islamic space if customers can find a Sharia-compliant option that can provide them with a diversity of risk and manage it properly."

Banks would need to innovate to wean customers away from conventional banking towards Islamic finance.

"Islamic banking institutions haven't made much progress in tapping the unbanked sectors, so the challenge is converting conventional customers to the Islamic alternative," he said on the sidelines of the World Islamic Banking Conference 2012 at the Gulf Hotel.

Product innovation will also be along the lines of technology and channel reach to attract younger customers, who use such platforms for their banking and consumer needs.

"A young client will look at the social media and the challenge for Islamic finance is to use such platforms to promote the industry," said Mr Saifi.

Microfinance, which has been increasingly used in countries with large Muslim populations such as Bangladesh, has yet to take off.

"Microfinance is not an area that has been tapped by Islamic finance yet," he said.

"Bangladesh, where microfinance is very common through the initiatives of Professor Muhammad Yunus, is still interest-based and has not adopted the Islamic financial model.

"There haven't been enough efforts and microfinance institutions are still going after catching the low-hanging fruit rather than provide full Islamic financial services," he said.

Bahrain, which was one of the earliest countries to adopt Islamic finance, is well on the path of becoming a regional hub.

Customer needs in the Middle East and inclination to adopt Islamic finance are some of the factors that will determine its success.

(Arabia Wealth  / 13 Dec 2012)

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