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Wednesday, 11 June 2014

It is early days for Islamic finance in Kazakhstan

Baku, Azerbaijan, June 9

By Elena Kosolapova- Trend: It's still very early days for Islamic finance in Kazakhstan, and there are some important roadblocks to remove to enable its gradual growth, Standard & Poor's Ratings Services said in a credit FAQ "Islamic Finance Slowly Unfolds in Kazakhstan" published on June 9.

"We think product offering is insufficient, market demand is still to be estimated, and the industry needs regulatory fine-tuning," said Standard & Poor's credit analyst Mohamed Damak.

With total assets of less than $200 million at year-end 2013, by the estimate, Kazakhstan's Islamic finance is still embryonic. One Islamic bank is active, and the agency understands that a few other Sharia compliant finance companies have established very small operations as Islamic finance players.

"We think that the potential of Islamic finance will closely hinge on banks' ability to offer competitive products compared with conventional finance products," S&P said.

In S&P's view, there is room for some improvement to the current regulatory environment that would remove growth impediments. For instance, regulation does not authorize conventional banks to create Islamic windows, which has left them behind in the race to create Islamic product offerings.

"Islamic finance could help Kazakhstan to access a new class of investors looking for Sharia compliant products and contribute to widening banking penetration," added Mr. Damak. "The country has a substantial investment pipeline and could use sukuk to attract external financing."

If this growth materializes, Kazakhstan might over time become a regional Islamic finance hub, S&P said.

For Islamic finance to develop in a given market, the agency sees the following as key success factors: securing the political and business community's willingness and support; establishing a central Sharia supervisory body; pricing competitively; introducing liquidity management instruments, and educating human resources on Islamic finance specificities.

(Trend / 09 June 2014)
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Sukuk pipeline - Issue plans around the world

AKTIF BANK - A special purpose vehicle of Turkish lender Aktif Yatirim Bankasi said on June 6 it would issue up to 200m lira ($96m) of sukuk. It did not give details.
RAS AL KHAIMAH - The emirate of Ras Al Khaimah, part of the United Arab Emirates, has invited banks to pitch for arranger roles on a potential dollar-denominated sukuk, sources said in early June. A deal isn't expected until at least the third quarter of this year.
BOTM - Bank of Tokyo-Mitsubishi UFJ said on June 5 it was seeking to raise as much as $500m through a multi-currency Islamic bond programme in Malaysia, becoming the first Japanese bank to use sukuk for fund-raising.
EMAAR - The malls unit of Dubai's Emaar Properties would hold meetings with fixed income investors from June 8 ahead of a potential benchmark-sized sukuk issue, Emaar said. Benchmark size is traditionally understood to be worth at least $500m.
UEM SUNRISE - Malaysian property developer UEM Sunrise has mandated CIMB and Maybank to lead a potential issuance off a 2bn ringgit ($620m) sukuk programme; bookbuilding is likely to kick off over the next couple of weeks after the borrower and its leads sound out investors, bankers said in early June.
BANGLADESH - The central bank is seeking to amend rules on its existing sukuk programme to broaden its use and allow for sovereign issuance by the government, a central bank spokesman said in June.
BANK ISLAM - Malaysia's Bank Islam plans to raise 1bn ringgit by selling Islamic bonds to fund organic growth as well as a potential acquisition in Indonesia, two people involved told Reuters in early June. A 300 million ringgit Basel-III compliant Tier 2 sukuk is awaiting approval from the central bank and the Securities Commission for issue in July.
(Arabian Business.Com / 10 June 2014)
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