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Sunday, 30 December 2012

Tunisia to tap Sukuk market

Tunisia will be introducing its financial transactions to Sukuk for the first time next year alongside Egypt according to CIMB Group Holdings and OCBC Al-Amin Bank with the global sukuk sales tipped to surpass 2012 record of $46 billion in 2013. Sukuk has been attracting countries after the global economic crises took centre stage.
Countries have been using it more frequently in the Middle East and North Africa region and borrowing costs on Shariah-compliant debt have fallen 11.4% points to 2.82%since the end of 2008 as central banks in Europe, the U.S. and Japan pumped funds into their economies to spur growth. Tunisia, Egypt and Oman tapping the market for the first time has been received with positive reactions.
The head of international finance and capital markets at OCBC Al-Amin Bank based in Kuala Lumpur Alhami Mohd Abdan described “sukuk is an attractive channel to explore for those countries looking to expand funding sources,” and encouraged countries to adhere to it because “liquidity in the Islamic space is growing quite significantly.”
Governments in the Middle East and North Africa are tapping the Sukuk market as part of efforts to widen their funding sources after the European debt crises and demand in the sukuk market has been increasing with a growing pool of wealth seeking Shariah- compliant assets. Tunisia which has a sufficinent Muslim population will also use it as a mean of meeting their demands.
Shariah-compliant bonds sold on the international market returned 9.5% this year, compared with 7.2% in 2011, according to the HSBC/Nasdaq gauge. The difference between average yields on sukuk and the London interbank offered rate narrowed 94 basis points in 2012 to 179 basis points as of December 24 2012, according to HSBC.
(The North Africa Post / 27 Dec 2012)

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Malaysia: Islamic banking and finance to continue to grow in 2013

Islamic banking and finance is likely to continue its growth trajectory next year despite the outlook of a challenging year ahead and the slowdown in global economy.

The robust achievement recorded throughout the year coupled with the ‘safe-haven investment’ sentiment among investors will be the main reasons for the industry to remain favourable.

In the Economic Report 2012/2013 by the Ministry of Finance, the Islamic banking business was stated to have continued to expand in the first seven months of this year with total assets increasing 20.6 per cent to RM469.5 billion, representing 24.2 per cent of the country’s banking system’s assets.

In 2011, it expanded by 24.1 per cent to RM436.1 billion, reflecting 23.7 per cent of the total banking system assets.

RHB Islamic Bank Bhd managing director Abdul Rani Lebai Jaafar said Islamic finance in Malaysia was ready to move on to the next stage and compete more aggressively in the global financial market.

He said Islamic finance seemed to have been also equally accepted by both Muslims and non-Muslims due to continuous awareness programmes and customer experience.

He, however, said 2013 could be a challenging year as the issue of ‘funding versus financing’ has remained within the industry where the question of sourcing for funds to generate financing from very limited resources locally needs to be addressed.

Among the challenges would be the limited number of trained and knowledgeable Islamic bankers available in the market to cater for the growing segment.

Although several Islamic banking learning centres such as Islamic Banking and Finance Institute Malaysia (IBFIM) and International Center for Education in Islamic Finance (INCEIF), have been set up by the authorities and training programmes held for fresh graduates by the industry players to tackle the problem, more concerted efforts are needed, Abdul Rani said.

INCEIF chair of Islamic Finance Prof Dr Abbas Mirakhor said the authorities must have a strong commitment in a way that appeals to a pluralistic society to ensure progress for Islamic finance.

“It must be framed, communicated and explained to the society in a way that all segments of the society will understand its benefits and no segment is threatened by either the commitment or the progress,” he said, adding that innovation in products would be also important.

“Malaysia is seen to be in the driver’s seat when it comes to Islamic Banking.

Innovation is a key factor to push Islamic banking to a higher level.” Meanwhile, the new legal framework for Islamic banking and takaful, which is now at the final stages of the enactment process, would be one of the key drivers for the industry movement.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said the new law, which would be effective next year, would bring certainty to the legal and regulatory treatment of Islamic financial transactions by providing legal recognition to the contractual requirements in accordance with the Syariah.

“This provides a comprehensive legal environment under which effective risk and profit sharing activities can take place, encompassing all aspects of Islamic financial transactions,” she had said at the Islamic Development Bank Regional Lecture Series on Islamic Economics, Finance and Banking in Jakarta recently.

Abdul Rani said if the new act took effect next year, the outcome would further drive the Islamic finance into greater stability in the midst of continued innovations and globalisation of Islamic finance.

“The new act would potentially provide the industry greater legal certainties in conducting business given Islamic finance development has extended beyond borders; and has interlinkages with various segments of the financial market and real economy.”  On sukuk, RAM Rating Services Bhd Head of the Islamic Finance Ratings Zakariya Othman said Malaysia has built a successful track record as a hub for Islamic finance transactions given its strong legal and regulatory framework that provides a sound foundation.

This coupled with an increased demand for sukuk from investors has spurred the growth of the Malaysian sukuk market.

“Malaysia still dominates the market with a share of 74 per cent of global sukuk issuance as at end-September 2012 and the trend looks set to continue moving forward.

“The significant demand for sukuk has been spurred by the high levels of surplus savings and reserves in Asia, which will further boost the prospects of the burgeoning sukuk market in Malaysia,” Zakariya Othman said.
On the global outlook, Zeti said the vibrant private sector investment, coupled with ongoing government projects will support the growth of sukuk next year.

“We expect the sukuk market to continue to remain on its growth trajectory.”
Sukuk issuances in Malaysia amounted to RM219.4 billion during the first eight months of 2012 against RM120.7 billion in the corresponding period of 2011, contributed in part by the largest issuance to date of RM30.6 billion by Projek Lebuhraya Usahasama Bhd.

(Berneo Post Online / 27 Dec 2012)

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Oman: Bank Nizwa signs MoU for Islamic financial services

MUSCAT — Bank Nizwa, the first Islamic bank in the Sultanate of Oman, recently signed a Memorandum of Understanding (MoU) with Capitas Group International (CGI), a leading management firm specialising in Sharia compliant finance. Under the MoU, both firms will collaborate to create specialised financial platforms in the Sultanate by tapping into their combined skills and resources, brought forth by the alliance.

CGI is a Jeddah-based company formed in partnership with the Islamic Development Bank’s private sector arm, the Islamic Corporation for Development of the Private Sector (ICD). The company establishes financial services businesses to fill the unmet demand for Shari’a compliant finance in OIC member countries.

Commenting on the MoU, Dr Jamil el Jaroudi, CEO of Bank Nizwa said, “The MoU with CGI is in line with Bank Nizwa’s efforts to elevate the financial services industry in Oman. Through this strategic partnership we will jointly develop, launch and manage financial platforms and thus promote Islamic Banking and Shari’a compliant products that benefit the customers.

“With the recent Royal Decree in place Islamic finance is now a bonafide component of the Sultanate’s financial infrastructure. The strength of CGI is based on the expertise of its management team which has extensive experience in Sharia compliant finance. This strength is a critical component for the development of Islamic finance at this early stage in Oman.”

In the MoU, Bank Nizwa and CGI have laid down key primary goals, namely to launch a mono-line mortgage finance company and to create a housing development finance programme. “As the first Islamic Bank in Oman, Bank Nizwa is uniquely positioned to act on our main goals under the MoU. Working with the Bank’s trained staff and leveraging its sophisticated processes, CGI looks forward to deploying its expertise and assisting in the overall development of the Islamic finance sector in Oman. This includes leveraging the relationship with our partners, ICD,” stated Naveed Siddiqui, CEO of CGI.

Bank Nizwa is committed to serve the people of Oman by applying fair practices as laid down by the Sharia and by creating job opportunities. The signing of the MoU is aimed at the organic growth of the financial sector in the Sultanate. Bank Nizwa has a pool of knowledgeable and well-trained staff and its world-class software and internal systems are directed towards benefiting the valued customers. Hence the strategic alliance in consultation with each other will explore opportunities in the business sectors mentioned above and will assess their viability in the Sultanate of Oman.

The MoU is a reflection of Bank Nizwa’s efforts to provide quality financial services and comes at an opportune time as Bank Nizwa prepares for its opening.

The bank is in a state of readiness and will open its doors and offer Islamic banking products and solutions to the Sultanate by the beginning of 2013.

Having received the banking license from the Central Bank of Oman the Bank is currently undertaking a comprehensive internal test of its systems and processes, as a precursor to the public launch.

In addition to its work in Oman, CGI is active in several other OIC markets including Saudi Arabia, Morocco, and Tunisia. The Company's senior managers are experts in the field of real estate finance who have established leading Shari’a compliant financial services companies in the United States and Dubai and are now launching a national home finance company in Saudi Arabia. CGI has also held a key role in the structuring and setup of a SAR 1 billion SME Fund which is being sponsored by ICD and the Islamic Development Bank.

(Oman Daily Observer / 30 Dec 2012)

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