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Saturday, 2 March 2013

Standard Chartered, Saadiq look to grow SME business

KUCHING: Standard Chartered Bank Malaysia (Standard Chartered Malaysia) and its wholly-owned Islamic subsidiary bank Standard Chartered Saadiq Bhd (Saadiq) are looking to grow the small and medium enterprise (SME) banking sector as it is among the fastest growing segments in the country.

Standard Chartered Malaysia country head (Consumer Banking) Sonia Wedrychowicz noted that SME was the fastest growing customer segment in the country with a two digit growth rate every year.

“A lot of the innovations that we are bringing in from the conventional side are getting immediately reflected in the syariah-compliant SME products.
“For example, when you see advertising for just one CASA account we’ve introduced for the conventional side, we’ve got also an Islamic version immediately.

“The same is happening for SME as we’re just about to launch a great new value proposition which is going to be available for SMEs both on the conventional side as well as for Saadiq.

“Every new product, initiative, innovation and digital platform we’re trying to do at the same time for both ‘legs’ as we call them to have a full fledged proposition,” she said at a press conference after the launch of Saadiq’s first branch in Sarawak recently.

The country head, who is originally from Poland, described the SME development pace in Malaysia as being ‘amazing’, based on her observation of the number of SMEs blossoming here.
“Our branches are usually located in the middle of the SME centres so the opportunity is there. We’re trying to make sure that we’re the main bank for the customers.

“I’m happy to tell you that all of our products are very much based on the customers’ needs, so when we approach the customers, we want to be the main bank, from lending to deposits as well as to the investment needs of the customers.

“So, we are happy to the main bank for the majority of our customer base and we’re going to grow the business even more this year,” she stated.

Meanwhile, Saadiq chief executive officer Wasim Saifi (who is also global head of consumer banking) made a concurring observation on the Islamic side of banking in that SME sector remained one of the bank’s fastest growing segments on a global scale.

“A lot of the SME businesses are managed by the owners themselves and they are personally keen on Islamic finance. Therefore, they want to make sure that their businesses are also buying and taking syariah-compliant products.

“We’ve been able to complete the SME proposition in most of the markets by bringing in products from all sides, including the Islamic side: financing products, cash management products, electronic delivery products that we now have, the syariah-compliant Islamic platform for SMEs to deal with and all aspects of SME requirements,”
he said.

(Borneo Post Online / 23 Feb 2013)

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Malaysia: Exim Bank to beef up Islamic financing

KUALA LUMPUR: Export-Import Bank of Malaysia Bhd's (Exim Bank)Islamic financing contribution to total loans is targeted to increase to 30% within the next two years from 20% currently.
Managing director/chief executive officer Datuk Adissadikin Ali said the increase would be supported by higher loan disbursements, which was targeted to grow at least 30% annually until 2015.
“Last year, total loan disbursements surpassed 30% growth, year-on-year, to exceed RM3bil.
“In 2013, we are targeting RM5bil in loan disbursements, driven by demand from companies to expand business overseas amid slower domestic consumption,” he told reporters after the signing of an Islamic financing facility agreement between the bank and Dolphin Application Sdn Bhd yesterday.
Exim Bank chief business officer Md Harris Md Taib signed on behalf of the bank, while Dolphin Application was represented by managing director/chief executive officer Eric Low.
On the agreement, Adissadikin said Exim Bank would provide US$10mil (RM30.98mil) in Islamic financing facility to Dolphin Application to part finance the contract for the supply of an integrated automation system to palm oil millers in Indonesia.
Meanwhile, Low said the company was currently focusing on marketing its system to Indonesia and Malaysia, two of the world's major producers of crude palm oil and crude palm oil derivatives, after already exporting the system to 11 countries, including Thailand, Myanmar, India, Papua New Guinea and Latin America.
“The integrated solution developed by Dolphin Application provides palm oil millers with the productivity that will minimise the operation costs of the production,” he said. 

(The Star Online / 01 March 2013)

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Putting the faith back in finance

Today, we live in an environment where trust in financial institutions’ ability to bring capital to its most effective use has eroded. It would be an understatement to say that people have lost faith in finance. From the subprime mortgage debacle to the collapse of Lehman Brothers and the recent LIBOR fixing scandal, finance is a much derided industry. “Banker bashing” is all too common, with one particular financial institution even being referred to as a “giant vampire squid,” underlying people’s disgust towards the behavior of financial institutions and their focus on maximizing profits without any regard for the consequences.
Risk transfer and risk mitigation is the modus operandi of most financial institutions. This is particularly true in the case of debt financing, where the borrower or entrepreneur bears most of the risk while the investor expects to be compensated with a high interest rate while having security over the borrower’s assets in case of default. “Risk sharing” does not really register in most investors’ vocabulary.

Can a case be made for finance based on risk-sharing principles? One solution could be faith-based finance. Charging “usury” or “interest” is prohibited in all Abrahamic faiths, though there are varying definitions of what really constitutes usury among the different faiths and sects. In theory, both Judaism and Christianity are against exploitation through charging interest but formalized mechanisms and institutions to provide equitable alternatives to borrowers have not been established.
Alternatively, Islamic finance has established clear alternatives to the exploitative nature of charging interest. It goes a step beyond banning interest by also prohibiting speculation or investing in businesses which are deemed socially harmful (gambling, alcohol, weapons manufacturing, pornography, etc). Islamic finance emphasizes the concept of risk sharing, where the borrower and the financier work together to grow the business and share the profits. Being a relatively new phenomenon, the first Islamic financial institutions emerged in the 1970s in the Middle East and have now spread to major financial centers globally with over $1 trillion in assets. Even though it has achieved significant success, the industry has had its share of problems, with below par performance being the subject of great debate.
Despite these debates, one of the key successes of Islamic finance has been that the ethical nature of financing has attracted a considerable number of non-Muslim customers, as has been witnessed in Malaysia where over 50% of Islamic bank customers are non-Muslims.
Islamic finance shares much in common with impact investing in terms of its goals of poverty alleviation and equal wealth distribution. It should be a welcome addition to the impact investing landscape. Acumen Fund has already provided financing on a Musharakah (profit sharing) basis to one investee. Leveraging these Islamic modes of financing also has the potential to unlock large pools of capital from Muslim countries (where Islamic financial institutions and philanthropists are unable to make interest-based investments).
The success of Islamic finance and its acceptance with non-Muslims bodes well for the further development of socially responsible investing. Maintaining an ethical foundation while sharing risk between investor and entrepreneur will benefit all mankind, not just those of a particular faith.

(Ancumen Fund / 27 Feb 2013)

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Dubai plans central Islamic finance regulatory board

Dubai plans to set up a central sharia board to oversee all Islamic financial products used in the emirate, and will encourage government-linked entities to issue and list sukuk on the local bourse, senior officials said on Wednesday.
The government announced last month that it wanted to become a global centre for Islamic finance and other businesses based on Islamic principles. But it will face tough competition from established centres such as London and Malaysia, where trading of sukuk (Islamic bonds) is much more active.
"We follow international standards of Islamic economies and will be the world's number one centre for Islamic finance," Dubai's ruler Sheikh Mohammed bin Rashid al-Maktoum, who is also prime minister of the United Arab Emirates, told reporters on Wednesday.
Eissa Kazim, secretary-general of the committee leading Dubai's Islamic economy initiative, said: "We will harmonise all standards, structures and regulations through having a unified sharia board at a government level to oversee the industry."
Sharia boards are groups of scholars which rule on whether financial instruments and activities are religiously permissible. Most major Islamic banks and finance firms around the world have them; the rulings of different boards are sometimes inconsistent and the scholars are sometimes open to suggestions of conflicts of interest.
A government-level sharia board could reduce such confusion over standards in Dubai's Islamic finance industry, helping it attract business. With the prominent exception of Malaysia, few countries have a central board and other Gulf countries have followed a loose, decentralised model of regulation.
Having products in Dubai approved by a single entity could help to harmonise their structures, make it easier to create and list them on the bourse, and boost their appeal to investors.
"Unifying the sharia board will limit discrepancies between different structures and will boost confidence in our local market," said Hussain Al Qemzi, chief executive of Noor Islamic Bank.
New issues of sukuk jumped to about US$121bn worldwide in 2012, according to Thomson Reuters data, from around US$85bn in 2011. Dubai's share of this was relatively small and most of the emirate's issuers have listed their bonds and sukuk overseas, taking secondary market liquidity with them.
Almost US$9.2bn worth of sukuk is listed on the Dubai market, but US$7.5bn of sukuk issued from Dubai is listed internationally and around US$1.5bn is unlisted, said Kazim, who is also Dubai Financial Market's chief executive.
If 50 percent of total bond issuance from Dubai is Islamic and listed on the local bourse, "Dubai can easily top the list of Islamic financial centres," said Kazim.
Most debt issuers in Dubai are government-related entities which will definitely consider listing their sukuk locally, he added.
Last month Dubai Financial Market, which runs the emirate's securities market, published draft standards for sukuk with a consultation period that closes this Thursday.
(Arabian Business.Com / 27 Feb 2013)

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