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Wednesday, 5 February 2014

Global sukuk market likely to expand again in 2014


Despite some headwinds, long-term prospects for the sukuk industry remain promising as regulators continue to build and strengthen their frameworks to minimize barriers in the market and deepen liquidity, Standard & Poor's Ratings Services (S&P) said in a report published Tuesday, "After a mixed 2013, the global sukuk market looks promising in 2014."

Malaysia already benefits from a broad sukuk investor base and liquid debt market. So the increased interest from issuers, notably in the Middle East and Asia, in tapping the Malaysian ringgit and dollar market should in our view continue over the next few years as Malaysia cements its leading position in the industry.

"After a slowdown in 2013, with sukuk volumes declining by 13 percent, we anticipate that the sukuk industry will expand again in 2014, partly driven by corporate and infrastructure issuers in the Gulf," said Standard & Poor's credit analyst Samira Mensah.

"What's more, total issuance will exceed $100 billion for the third year in a row if yields remain attractive for issuers. And, after weakening in 2013, we believe issuance could pick up again in Malaysia in 2014 as its investment program resumes," Mensah added.

Now that Malaysia is adopting private sector investment, we believe non-sovereign issuance could accelerate in 2014-2015, continuing the trend witnessed in 2013 at a global level.
The overview to the report also notes: We anticipate double-digit growth in issuance by Gulf corporate and infrastructure entities, due in part to large infrastructure financing needs.

Increasing private issuance could signal a change in the sukuk market characteristics.

Sovereign sukuk could be slowly emerging as an alternative to fund growth in African countries.

We believe a regulatory push is necessary to strengthen frameworks, lower barriers to entry, and deepen liquidity in the sukuk markets.



(Arab News / 05 Feb 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Wealth planning for Muslims

MUSLIM business owners who want to preserve their business to be passed on to the next generation should consider creating a foundation to avoid getting their wealth fragmented, an estate attorney says.
Abdul Aziz Hassan of Aziz Hassan and Co said establishing a foundation, in this case, a syariah-compliant one, will ensure that the owner has control over how the wealth is managed and that the wealth continues to be in the hands of the owner's loved ones.
The syariah counsel, who collaborates with Labuan International Business and Financial Centre (Labuan IBFC) on the latter's promotion of Islamic wealth management, particularly the setting-up of Islamic private foundations, said more often than not, Muslims have the perception that having a will is enough.
"A will is not a solution in terms of wealth distribution. A will has no effect if it is inconsistent with Faraid (Islamic inheritance laws) which states the wife gets one eighth of the assets and the balance of which two parts will go to the son and one part to the daughter."
He said business owners must decide during their lifetime on assets they want to distribute upon their demise and those they want to perpetually grow under a proper syariah-compliant succession planning so the wealth can benefit their families for generations.
Labuan IBFC foundations, which were launched in 2010, can be the mechanism to allow the preservation of the wealth of Muslim businesses for generations, said Abdul Aziz.
He said setting up a foundation allows the founder to have full control over who handles the assets, as well as how the assets are managed, dispersed and preserved for the future.
Labuan IBFC says a foundation can provide, among others, strong protection of the founder's assets against any creditor insolvency, divorce and customary inheritance claims.
It added that a Labuan IBFC Foundation is tax-efficient and flexible, shielded by numerous statutory firewalls and protected by the highest degree of confidentiality.
Abdul Aziz said the idea of setting up a private foundation is still a novelty concept among Muslim business owners and he expressed hope that the awareness will grow substantially in the years to come.
He noted that Malays who have benefited during the early years of the National Economic Policy must take action now if they want to preserve their wealth for next generations.
Having a foundation can address the issue of governance in the company, he said.
"Family governance is one that determines which family members can work in the business, what sort of dividend benefits given to them.
"This may include RM100,000 for children's education, RM50,000 for wedding expenses, RM10,000 for each new addition to the family.
"Such benefits can make the family members feel a sense of belonging to a clan, the pride of being part of the family, which is a strong pre-requisite to their commitment to ensure the family business continues to grow," explained Abdul Aziz.
The first step to preserving wealth and succession planning is to "transfer the shares to a holding company owned by the owner and place the shares under a foundation", he said adding that under such a structure, the wealth will not be affected by Faraid.
"We are not running away from Islamic laws. This is not against the syariah because this is being transferred during the owner's lifetime. But even if transferred after his death and it gets consent, that is also okay."
Abdul Aziz also suggested that Islamic foundations contribute some of the money generated through the foundation to a family waqf (an Islamic endowment) and to Islamic organisations or schools.
(Business Times / 03 Feb 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

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