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Sunday, 9 June 2013

Morocco to Enact Sukuk Law

Morocco is finalising the publication of a new securitisation law that will allow the state and companies to issue sukuk, the Islamic equivalent of bonds, and preparations for a corporate and a sovereign bond are already underway, according to Islamic finance experts.
Sukuk are Islamic financial certificates that represent undivided shares in the ownership of tangible assets. Global sukuk issuance increased by 64 percent last year to reach $138bn, according to Standard & Poor’s, the rating agency.
Only a few African countries such as Sudan and the Gambia have issued sovereign sukuk, according to S&P, but several have started considering the financial instruments, including South Africa, Egypt and Tunisia.
The introduction of sukuk in Morocco will pass through the reform of the country’s securitisation law, which was enacted in 2002 and amended in 2010 to broaden the range of eligible assets and allow institutions other than banks to use securitisation, according to Al-Khawarizmi Group, an independent Islamic finance consultancy that published a study on the potential of sukuk in Morocco in December 2012.
The Moroccan government submitted to the parliament a new a project of amendment of the securitisation law for the introduction of sukuk at the end of last year as part of a broader financial reform aimed at developing the role of securitisation in funding the economy, says Nouaman Al Aissami, head of the credit division at Morocco’s ministry of economy and finance. The law was adopted in January and will come into effect once it is published in country’s official gazette, which is expected to happen in the coming months after some related regulations are finalised.
Morocco became interested in sukuk after a moderate Islamist party won the majority of seats in the 2011 parliamentary elections, according to Fayçal Jamali, co-author of the Al-Khawarizmi Group study. “Also as a result of worsening economic conditions in Europe, which is Morocco’s traditional trading partner, the country wants to diversify its funding instruments and attract Middle Eastern investors,” he argues.
One Moroccan “large corporate” has already planned a $500m sukuk, which has been put on standby until the enactment of the law, according to Mr Jamali. A sovereign sukuk is also in preparation, he says.
(All Africa / 20 May 2013)

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Islamic financing grows in Pakistan

KARACHI: Pakistan’s Islamic financing industry achieved a modest increase in its market share over the last decade, underdeveloped Islamic capital and money markets still pose substantial challenges to the industry, a recent draft report issued by the State Bank of Pakistan (SBP) revealed.

The State Bank has formulated a draft for Islamic Banking Strategic Plan 2013-17 and identified a number of problems, impeding the growth of Islamic banking industry in the country.

The draft document casted concern over the limited ownership and belief in the utility of Islamic finance by the policymakers, saying that the country lacks consensus national policy and strategy for development of Islamic financing.

It said that the macroeconomic model is not aligned with the Islamic principles-conventional monetary and fiscal environment.

According to the draft, insufficient collaboration between the State Bank, government, Securities and Exchange Commission of Pakistan and the Federal Board of Revenue and division in the Shariah boards on the acceptability of the current Islamic banking paradigm are also acting as major weaknesses to the development of the Islamic banking and finance industry.

It said that Islamic banking industry will be encouraged to enhance its advance to deposit ratio by 60 percent in various sectors to achieve the underlying targets.

The SBP plans to increase the branch network of Islamic banks by 100 percent to 2,000 by 2017 with the aim to increase the Shariah-based banking in untapped areas across the country.

The number of branches will be added by Islamic banks and conventional bank’s Islamic divisions alike on the directives of the central bank. This will increase the market share of the Islamic banking industry up to 15 percent of the overall banking industry by 2017 from the current volume of 10 percent.

The penetration of Islamic banks will be increased in the rural areas to facilitate agriculture.The aim is to increase the agriculture credit through Shariah-based financing, which has been largely dominated by commercial banks and traditional ways of financing in the rural areas.

Similarly the Islamic banking industry will extend its financing to small enterprises by at least five percent of the overall financing to provide lending facilitates to small businesses and build their confidence over Shariah-based economy.This will not only flourish businesses of small entrepreneurs but will also improve the financial inclusion and documentation of the economy with the passage of time.

The strategic plan of the SBP also focuses on housing and construction industry with significant surge being planned to be targeted in the metropolis and small cities through Islamic banks on easy installments and relaxed terms and conditions.

The central bank plans to provide incentives to housing mechanism through the Islamic banking industry for low-cost Islamic financing, which will allow the middle and lower middle classes to fulfill their housing needs with easy loans.

(The International News / 08 June 2013)
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Lessons in Islamic finance for Korean banking professionals

Banking executives from Korean Federation of Banks recently participated in a training course on Islamic finance in collaboration with Qatar Central Bank (QCB). Ten executives from six organisations in Korea participated in the training. 

This was the first time that Korean banking professionals were given training in Islamic financing. It was intended to enhance the understanding of Islamic finance so that it could be applied in Korea.  

The training was part of an agreement signed by the Middle East-Korea Financial Co-operation delegation led by Kim Jong-hoon, head of the Korean National Action Plan Committee, and QCB last January. The agreement said QCB would provide training on Islamic finance to Korean bank officials.

The trainees had a deeper look at the financial industry in the Middle East, including Qatar, licensing systems, main principles of Islamic finance, basic contracts and case studies on Islamic financial products. They visited Qatar Islamic Bank, Qatar Financial Centre, Qatar Islamic Insurance Company, Barwa Bank, Masraf Al Rayan and others.

(Gulf Times / 08 June 2013)

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