Yemen urges mindful zakat payment

With the approach of the holy month of Ramadan, the Yemeni government is stepping up measures to encourage zakat payment and prevent it from falling into the hands of extremist groups.

Yemen's cabinet in April reviewed a Ministry of Local Administration report on zakat funds collected over the past year and directed the Ministry of Information to broadcast educational programmes throughout the year via all audio and visual media outlets, urging citizens to pay zakat to the state.

The media and mosques play a pivotal role in spreading awareness about the necessity of paying zakat to the state, while scholars, mosque preachers and murshids (religious counsellors) take part in media programmes so the message can reach a larger audience, said Yasser Thabet, director general of zakat at the Ministry of Local Administration.

Raising awareness about this necessity is crucial in order to prevent the funds from going to al-Qaeda or other extremist groups, he said.

"This is where the role of the media, preachers, scholars and murshids comes into play in raising awareness among citizens about first, paying zakat, and [second], not being deceived by individuals who try to collect [zakat] for personal purposes, so these funds do not go to groups that carry out operations aimed at destroying the country," Thabet said.

The Ministry of Endowments and Guidance works throughout the year to raise awareness about the importance of paying zakat, and the necessity of paying it to the state, said Sheikh Jabri Ibrahim, director general of preaching and guidance at the ministry.

Scholars and murshids must direct citizens to pay zakat year-round, "because the payment of zakat is not confined to the month of Ramadan, as some might imagine", he told Al-Shorfa.

They can also use talk shows, programmes on satellite channels and local radio stations, as well as the written press, to spread this message, he added.

"Zakat is a means to develop society, not the other way around," Ibrahim said.

Some citizens may be reluctant to pay zakat to the state because they believe it does not disburse the proceeds as specified under sharia, said Mustafa Nasr, head of Yemen's Studies and Economic Media Centre.

"The National Dialogue Conference addressed this problem and approved the formation of an independent body charged with collecting zakat and disbursing the proceeds to the eight categories of beneficiaries specified by sharia," he said.

He said he hopes this would contribute to increasing zakat proceeds.

Nasr said he is confident that Yemeni merchants and citizens are determined that their zakat does not go to extremist groups.

Zakat revenue contributes to strengthening the economy because it is connected to goals such as justice, fairness, growth and stability, and plays a role in remedying economic problems, he said.

(Al-Shorfa.Com / 02 June 2014)

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Malaysia’s Bank Islam plans 1b ringgit sukuk for growth, acquisition

Kuala Lumpur: Malaysia’s Bank Islam plans to raise 1 billion ringgit ($311.24 million) by selling Islamic bonds to fund organic growth as well as a potential acquisition in Indonesia, two people involved in the sale told Reuters on Monday.

The country’s oldest and largest Islamic-only bank is wholly owned by BIMB Holdings Bhd, which last month said competition in the Islamic banking sector has narrowed profit margins and brought about the need to raise funds for growth.

Bank Islam aims to maintain the annual growth rate in the amount of money it lends at 20 to 25 per cent by selling in July 300 million ringgit worth of Murabahain under a 30-year sukuk programme, one of the people said.

The sale of the Basel-III compliant Tier 2 sukuk is awaiting approval from the central bank by next week ahead of the final green light from the Securities Commission, said the person who declined to be identified as the matter was not yet public.

Bank Islam then plans to raise another 300 million ringgit in 2016 for organic growth, that person said.

In addition, the bank aims to raise 400 million ringgit in 2015 to buy a business in neighbouring Indonesia, said the second person without identifying the target.

The bank is waiting for the outcome of Indonesia’s July presidential election before finalising acquisition plans, the person said.

Rivals Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd earn up to a third of their income in Indonesia thanks to rapid corporate loan growth there as well as increased custom from a burgeoning middle class.

Bank Islam earns all of its income at home, offering over 70 per cent of loans to retail consumers. The bank lent out a record 683 million ringgit last year, 21.7 percent more than the year prior, boosting net income by 5 per cent to 1.5 billion ringgit.

In Islamic deposits, the bank put its local market share at 16 per cent in 2013, behind Maybank and ahead of CIMB, Public Bank Bhd and AmIslamic Bank Bhd.

Last month, parent BIMB reported a 67 per cent rise in January-March net profit of 123.5 million ringgit, largely thanks to Bank Islam’s earnings.

BIMB completed the purchase this year of the 49 per cent of Bank Islam it did not already own from pilgrimage fund Tabung Haji and the Dubai Group for $884 million.

(Gulfnews.Com / 02 June 2014)

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Singapore: Sun shining on Islamic finance, says MAS chief

Islamic finance is developing rapidly but more work needs to be done if Singapore is to fully benefit from its growth.

As experts in the field gather here for the 5th World Islamic Banking Conference Asia, the consensus is one of promising prospects, but with gaps to plug.

"The sun is shining on Islamic finance," said Ravi Menon, Monetary Authority of Singapore managing director, in a keynote address.

The central banker highlighted three promising global developments for Islamic finance, which forbids the charging of interest. First, Islamic finance has grown at double digits last year, as it has for the previous five years, despite global economic uncertainties and market volatility. Global Islamic financial assets are estimated to have reached US$1.8 trillion by the end of last year, from US$1.5 trillion in 2012.

Second, global regulatory standards and best practices are being established for Islamic finance. Common standards are good for facilitating cross-border transactions, helping to address risks that are idiosyncratic to Islamic finance, such as Syariah non-compliance risk, he noted.

Third, more countries are catering to Islamic finance.

In Asia, Indonesia has set out to significantly grow its Islamic banking sector and develop its Islamic capital markets. India started introducing Islamic financial products and services last year.

There is growing cross-border sukuk or Islamic bonds issuance within Asia as well as between the Middle East and Asia.

"Singapore has benefited from this favourable global environment for Islamic finance," he said.

Singapore is the only non-Muslim-majority country among the top 15 countries for Islamic finance. Islamic assets under management have surged nearly fourfold over the last five years to US$3.5 billion in 2012. More than 40 per cent of the Islamic assets in Singapore are managed by the asset management industry.

Fifteen banks are involved in Islamic banking, double the number five years ago; they hold about a third of the Islamic assets in Singapore. The rest of Islamic assets are in outstanding sukuk and takaful or Islamic insurance.

Singapore has had nearly 30 sukuk issuances worth S$4.3 billion to-date, compared to seven in 2013.

And more funds continue to be established here, to meet demand from clients in Asia as well as from the Middle East. Several corporations have established sukuk programmes in Singapore to tap the market over the next few years, said Mr Menon.

Still, despite the impressive growth, industry players say Islamic finance here needs more depth - in a non-Muslim-majority environment, Islamic finance has yet to really take off.

Most Islamic banks tend to be retail-heavy, as seen in the more than 60 per cent retail weightage in Malaysia and 80 per cent in Indonesia, noted Syed Abdull Aziz Syed Kechik, OCBC Al-Amin Bank Berhad chief executive.

"This is invariably linked to a domestic centrism," he said.

"While organic growth remains a reality, the gap between Islamic banks on one side and conventional regional and global players on the other is widening. Bolder moves by Islamic banking players to expand via regional mergers and acquisitions would be the key to fast-tracking capacity and building scope," he said.

Other challenges include the lack of familiarity with Syariah structures, with Middle East investors and companies venturing offshore heading mainly to London.

According to Clifford Lee, DBS Bank's head of fixed income, much education still needs to be done on structuring Syariah-compliant deals.

"In the last 12 months, people I've spoken to say Islamic financing of a plane can't be done because it serves alcohol onboard; oddly enough, it could be done for the engine," said Mr Lee.

As for sukuk issuances in Singapore, companies which have done so in order to broaden their investor base have found that the benefits of diversification weren't obvious.

"Just making a bond Syariah-compliant does not mean there are investors tripping over themselves to get it," pointed out Mr Lee. Funds in the region may not also have the mandates to invest in these products.

As commercially driven entities, most banks would be wary of the added cost from ever-increasing regulatory requirements when investing capital into a nascent market that currently offers low prospects and has limited governmental support, said OCBC Al-Amin's Syed Abdull Aziz.

He suggested the government could do more to promote the sector. The government could consider the merits of developing a strategic plan with appropriate incentives for the key industry stakeholders, he said.

"This would help to nurture a comprehensive sizeable Islamic finance sector in Singapore, taking into consideration the long-term benefits of active participation in the Islamic finance channel within the context of the overall Asean integrated economic growth framework," said Syed Abdull Aziz.

Yeo Wico, Allen & Gledhill LLP partner, noted that due to the efforts of Singapore's regulators, there is a level playing field between Islamic finance and conventional finance.

"Singapore's attraction as an international finance centre in an economically vibrant region is key to the future growth of Islamic finance in Singapore," said Mr Yeo.

The Gulf Cooperation Council (GCC) region is transforming rapidly and Singapore companies should also seize opportunities there, said Zainul Abidin Rasheed, Singapore Ambassador to Kuwait and Foreign Minister's Special Envoy to the Middle East. The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Many may not be aware of the strong development and growth phase that the GCC is experiencing now. "The main cities of the GCC will be transformed, and Singapore should be part of this transformation," he said.

(BT Premium / 04 June 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