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Tuesday, 22 January 2013

Bank Muamalat Indonesia to Sell $73 Million in Sukuk Bonds

Shariah-compliant lender Bank Muamalat Indonesia plans to sell Rp 700 billion ($73 million) worth of sukuk Islamic bonds in the first half of 2013, of which the proceeds will be used for branch expansions. 

The bond sale is part of the lender’s plan to issue a total of Rp 1.5 trillion worth across several years. 

“Last year, we issued the first one, worth Rp 800 billion, that offers 10.21 percent yield,” Meitra N. Sari, the company’s corporate secretary, said on Friday. 

Shariah bonds comply with the Islamic teaching that bans interest, instead using asset returns to pay back investors. 

She said the proceeds from the bond sale will be used to help finance a branch office expansion. 

Currently, Bank Muamalat has about 500 branch offices and outlets across Indonesia. 

Meitra expected investor interest to remain strong this year after a successful sale last year. 

Last year, Bank Muamalat decided to increase the proceeds target from its Sukuk sale to Rp 800 billion from Rp 500 billion previously, after investors displayed strong interest. 

Bahana Securities, Danareksa Sekuritas and Indo Premier Securities were hired as the arrangers for the Sukuk sale. 

Bank Muamalat is also advancing its plans to sell shares to the public. Meitra said the company will use its December 2012 financial report in the prospectus for its initial public offering. 

Bank Muamalat is one of several lenders planning to tap the equity market for fresh funds to finance an expansion and strengthen capital structure. 

Sunarso, a commercial director of Bank Mandiri, the country’s largest lender by assets, said last year that the bank is considering an IPO in 2013 for its Islamic unit, Bank Syariah Mandiri. 

Bank Muamalat is 32.7 percent controlled by the Islamic Development Bank, 19.3 by Kuwait’s Boubyan Bank, 17.9 percent by Atwill Holdings, 6 percent by the National Bank of Kuwait and the rest by one of several smaller shareholders. 

There are 11 Shariah-compliant lenders operating in Indonesia, including Bank Syariah Mandiri and Bank Mega Syariah. Many mainstream banking operators have chosen to launch separate Shariah subsidiaries to tap into the growing market. 

Indonesia has the world’s largest Muslim population, with about 85 percent of people adhering to the faith. But development in Islamic financial instruments lags behind neighboring countries, especially Malaysia, which has become the center of Islamic finance in Asia.

(Jakarta Globe / 21 Jan 2013)

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Islamic finance - the Malaysian star!

While conventional banking continues to make headlines mainly for scandals, huge pay offs and bonuses, Islamic finance is growing by amazing 20 percent annually. It manages to attract non-Muslims worldwide as well as many countries have adopted and accepted this financial model. This phenomenon is also known to the people in the industry as “faith in finances”. 

With this enormous potential, it is clear that there is a huge economic benefit to be sought from it. Out of all the Muslim countries that tried to chase this market, Malaysia seems to lead the way in Islamic finance by leaps and bounds. More than one-fifth of its entire banking structure is in fact Shariah-compliant that in itself is quiet an important statement. Just to note and compare that the average for other Muslim countries is barely 12 percent and many times much less.

Shariah complaint

Malaysia excelled in providing the markets with innovative financial products which are Shariah-compliant. It came up with the world’s first-sought Islamic bonds known as “sukuk” when these were issued in 2002. Malaysia is, single handedly, responsible for the insurance of more than three-quarters of the global insurance with a value exceeding $80.5 billion. This dominant position made the Malaysians think deeply on how they can capitalize on this chance and expand in their position so they created the Islamic Financial Services Board which serves as the industry’s standard-setting body. 

Malaysia is far ahead of other competitors who were — and still are —involved with Islamic Finance like Turkey, Bahrain and the United Arab Emirates. Malaysia, however, dealt with this matter in a very strategic way for a relatively small country. It has a population that barely exceeds 30 million people with Muslims making up 60 percent of that number. The comparison with its large neighboring country, Indonesia, is fascinating. Indonesia, the world’s largest Muslim country with a population exceeding 220 million people, has only 4 percent of its financial products that ware Shariah-compliant.


Although size matters, and Gulf states — Saudi Arabia in particular — have huge Islamic banking portfolios, it is Malaysia by far which is the leader in the center of thoughts in Islamic finance. Malaysia realized early on that it cannot keep on competing strictly as an industrial hub with the strong competition from China, Korea and Vietnam so it decided to become a serious player in the financial-services sector, particular in Islamic Finance. 

Its central bank set up two institutions which played a huge role to impose a Malaysian dominance in this field. The first one is the International Centre for education in Islamic Finance (INCEIF). With its student body exceeding 2,000 and with a good experience collected over the years since it was established in 2005, it is today the world’s leading university for the study of Islamic Finance. It houses the international Shariah Research Academy, a very dynamic body producing progressive opinions. The second institution is the Islamic Banking and Finance Institute of Malaysia (IBFIM) which focuses on vocational training. 

(Al Arabia News / 22 Jan 2013)

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UK: Gatehouse Bank expands its global Islamic Finance capability with launch of its first Sterling sukuk

Gatehouse Bank, a leading Shariah compliant investment bank based in the City of London and regulated by the FSA, has issued its first real estate backed sukuk, paying a distribution of 3% per annum over a five year term.
Investors will earn a return by virtue of having pro-rata ownership of the sukuk assets, which comprise shares in a company which owns a 62,000 sq ft property in Basingstoke, in the south east of England. The property is leased to IT services giant Fujitsu Services Limited for an unexpired term of 68 years. The strong tenant profile offers further guarantee of the security of investment, and is likely to appeal to investors looking for security of income.
Rental payments from the tenant will be applied to fund payments to the sukuk holders on each periodic distribution date, and sukuk holders will have the option to redeem their investment on a quarterly basis which will enhance the liquidity for the sukuk. The sukuk issuance is fully guaranteed by Gatehouse Bank with investors assured a full return on their investment.

As Mr Abdulaziz AlDuweesh, Executive Vice President and Head of Wealth Management at Gatehouse Bank, explains: "Investors want to own an income-producing asset that offers a consistent annual return. As such, this is a highly liquid investment opportunity, particularly as the use of a sukuk instrument delivers an enhanced yield when compared with standard bank deposits. The quarterly redemption option creates a short term cash instrument of 3 months tenor with an annual yield of 3%. The global sukuk market is expected to reach USD 292 billion issuances by 2016, and our entry into the market comes at an exciting time for the bank as we seek to expand our products and services for the benefit of our clients."
The property, situated in the Viables Business Park in Basingstoke, just 29km from Central London, is located in a well established commercial centre with manufacturing, high-tech and office occupiers all in the vicinity. Set adjacent to major motorway networks and key infrastructure, with efficient rail links to Gatwick and Heathrow airports, the property is well positioned as a business location of choice.
Since its inception in 2008, Gatehouse Bank has established a global portfolio worth in excess of £1.25 billion, spread across Real Estate assets, capital investment, and term deposits. Gatehouse specialises in originating, structuring and funding investments in a Shariah compliant manner, and aims to develop its capital markets offering by originating real estate backed Sukuk issuances and other structured finance products.

(Zawya / 21 Jan 2013)

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