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Sunday, 12 May 2013

First Saudi Sukuk issuance in Malaysia by Al Bayan Group

The landmark Sukuk was issued via Al Bayan’s special-purpose vehicle incorporated in Malaysia, ABHC Sukuk Berhad.  Proceeds from the issuance, with tenure of three years, will be used by the Group primarily for repayment of existing debt obligations and expanding the Group’s core businesses as well as working capital requirements.
Commenting on the successful issuance of the Sukuk offering, Dr. Abdulrahman Al Hammad, CEO of Al Bayan, said, "Al Bayan's inaugural sukuk issuance in Malaysia is a significant landmark in the Group's evolution and growth story. We are proud of this achievement and look forward to further capitalising on the opportunities for raising Islamic capital available globally. We thank the Joint Lead Managers and all other involved parties for their support in making this transaction a resounding success.”
The Sukuk programme is structured under the Shari’ah principle of Wakalah and Ijarah. Hong Leong Islamic Bank Berhad (HLISB) and HSBC Amanah Malaysia Berhad (HBMS) are the Joint Principal Advisers and Joint Lead Arrangers of the Sukuk Programme. They are also the Joint Lead Managers, together with Kenanga Investment Bank Berhad (KIBB) and Al Hilal Bank as the Manager in the UAE. Guidance Financial Group acted as the Financial Adviser to Al Bayan.
"The Sukuk issuance of Al Bayan here in Malaysia will be another milestone for the country as a premier Islamic finance hub and to further position our Islamic capital market's standing on the global map. The joint efforts between Hong Leong Islamic Bank and the other Joint Lead Managers have made this issuance a success,” said Raja Teh Maimunah, Chief Executive Officer/Managing Director of HLISB. “We are pleased to lead another landmark Sukuk issuance with this debut issuance from the Kingdom of Saudi Arabia tapping the MYR debt markets, following the successful issuance from the Republic of Kazakhstan last year. This issuance marks another key milestone in further enhancing Malaysia’s position as a global Islamic finance hub”, said Rafe Haneef, Chief Executive Officer of HBMS.
Chay Wai Leong, Managing Director of KIBB, said, “Al Bayan’s issuance of Sukuk in the local bond market further testifies to the growing interest from foreign issuers towards Malaysia’s mature Sukuk framework and financial environment. We can expect to see more contributions from foreign issuers to the growth and diversity of our Islamic capital markets. We will continue to work with our associate, AlWasatah Capital based in Saudi Arabia, in bringing Saudi-based issuers to Malaysia.”
The Sukuk Programme has been assigned a long-term rating of AA3(s) by RAM Rating Services Bhd. Under a kafalah agreement in favour of ABHC Sukuk Berhad, Al Bayan shall provide an irrevocable and unconditional guarantee to the holders of the Sukuk. As such, the rating is based on the credit profile of the Group.
Saudi Gazette report Abdullah Al Rasheed, Chief Executive Officer of Wasatah Capital, as saying, “We believe that the success of the Al Bayan’s Sukuk should encourage more Saudi companies to seriously consider this funding source. We also believe that the presence of Kenanga Investment Bank in Malaysia and Wasatah Capital in Saudi Arabia brings a unique value proposition to Saudi companies interested in attracting Malaysian investors.

(C.P.I Financial / 08 May 2013)

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India: MPs send proposal to RBI for Islamic banking

The RBI is studying and examining the proposal for Islamic banking in the country which has been sent to them by some MPs, said RBI Governor D Subbarao on Thursday.

“What needs to be seen is how Islamic banking would be allowed as it does not allow taking and charging interest on which our banking system operates,” Subbarao said while addressing a press conference here.

“We have got to see that Islamic banking is not consistent with our current banking laws,” he said.

The Reserve Bank of India governor said charging interest is necessary to conduct banking operation in the country. “We only allow banks to take a credit risk under the law,” he said.

“If an institution or bank is under Islamic banking, it will have to come under the purview of Shariah regulation. It is not clear whether there can be two regulatory agencies — RBI as the banking regulator and Shariah court as a regulator for the Islamic banking,” he added.

Subbarao said the government has to determine whether they want to permit Islamic banking and “if so they have to enact a law that is consistent with Islamic banking.”
He said the RBI has asked the banks in Jammu and Kashmir to increase the credit-deposit ratio to 40 per cent from the present 36.5 per cent by the end of the current financial year to make sufficient credit available to the people.

“Enough credit avenues are not available to the people in the state,” he said.
The RBI governor said the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) is not applicable to the state due to Article 370.

 “But chief minister has said it will be enacted shortly in the state either in the Assembly or through an ordinance,” he added.

The SARFAESI Act empowers banks to dispose of assets of defaulting borrowers to recover loans from them without having to go through the time-consuming process of invoking such securities through a court of law.

Subbarao said RBI has completed investigations against the banks after a web portal Cobrapost exposed violation of prudential banking norms. Action will taken against them if they are found guilty, he said.

“We have done investigations and prepared an internal report. To take the investigations to its logical conclusion, firstly action will be taken against individual institutions which are involved in practices that are inconsistent with the banking regulation and prudential banking,” he said.

 Cobrapost in its expose alleged that money laundering and other wrong doings were being carried out by several public sector financial institutions, including the country’s largest bank State Bank of India and Life Insurance Corporation.

(Deccan Herald / 12 May 2013)

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Islamic banking effective for non-Muslim economies

KARACHI: Islamic banking is not merely for Muslims in terms of an interest-free transaction but it is also profitable even for the non-Muslims in economic terms, Daily Times learnt on Saturday.

Meezan Bank Executive Vice President and Head of Consumer Banking and Marketing Muhammad Raza said Islamic banking was launched primarily for Muslims but generally it is also beneficial even for non-Muslims as the representatives from some non-Muslim countries approached him to elaborate the Islamic banking financial model at the end of an International Conference on Housing Finance held in India last month.

He said he was called on the International Conference on Housing Finance on Housing - an engine for inclusive growth organised by National Housing Bank of India in New Delhi last month in which representatives from 12 countries had participated. There he presented Islamic house financing model developed by Meezan Bank. After the conference ended, participants from Nigeria, Japan and Afghanistan approached him, expressed their interest in Islamic banking model and asked to elaborate it to them. He said Meezan Bank has recently provided its advisory services to Sri Lanka.

“This is what we have developed and now is the time to share it with other people, in fact to export it,” he added. Afghanistan has also approached Meezan Bank to share the Islamic banking model, which has been presented to them and is now under consideration.

He cited an example, “United Kingdom has 32 percent Muslim population and is promoting London as an Islamic finance hub.” He said the only reason behind it is that they are aware of its benefits for the economy. “However, being a non-Muslim country they cannot implement it with the name Islamic banking so they would rename it and promote it as ethical banking.”

It points they have began to understand Islamic banking and are working on this, he added.

According to a recent estimate by Standard & Poor’s, the global market potential for Islamic banks is estimated at $4 trillion. The countries like Oman, Nigeria, Tanzania, Uganda and Maldives have opened their doors for Islamic finance and are encouraging new and existing financial institutions to offer Islamic financial services to their customers.

In Pakistan, Raza has estimated the Islamic banking share at 15 percent of overall banking industry by 2015, which now stands at approximately 10 percent. He said the annual growth rate has been 25 to 30 percent. To grow the share at a faster pace, Meezan Bank is also developing some new products for consumer financing like generator financing, motorcycle financing, teen and kid account, old age people account, etc to offer the benefits of Islamic banking to the masses. Branchless banking is also under consideration.

He said some Islamic scholars are the hurdles to some extent on the way to the survival of Islamic banking in Pakistan. “These are the people who are aware of the product but do not want to understand it deeply. By this, they misguide the people and even do not know they are turning people to approach conventional banks as people would have no option for banking after Islamic banking.

(Daily Times / 12 May 2013)

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