Societe Generale sets up sukuk programme in Malaysia

Societe Generale (SOGN.PA), France's third-largest bank by assets, will set up a 1 billion ringgit ($311.3 million) multi-currency sukuk (Islamic bonds) programme in Malaysia, the second conventional bank to do so in as many weeks.

Sukuk are growing in popularity as a funding choice for corporates and sovereigns across the globe, with Malaysia a preferred jurisdiction as the largest and most liquid Islamic capital market.

The programme would issue sukuk through a wholly owned subsidiary of SocGen, a structure featuring back-to-back sharia-compliant contracts that would provide investors legal recourse to the French lender, Kuala Lumpur-based credit ratings firm RAM Ratings said in a bourse filing on Thursday.

SocGen did not immediately respond to requests from Reuters for comment.

Reuters reported last year that SocGen was considering issuing $300 million worth of sukuk in Malaysia, with proceeds used to expand the bank's operations in the Middle East.

RAM Ratings gave the bond programme a AAA(s), or stable, rating but gave no details on the sukuk tenure, structure or when a first issuance might occur.

The announcement comes a week after Bank of Tokyo-Mitsubishi UFJ, a unit of the Mitsubishi UFJ Financial Group (8306.T), set up a $500 multi-currency sukuk programme in Malaysia.

Such new issuers are crucial in Malaysia's efforts to internationalise its Islamic capital markets, which remains dominated by domestic issuers. International firms represent less than 10 percent of total issuance.

An accommodative tax regime and strong demand from local investors have made Malaysia an attractive market for issuers from as far away as Kazakhstan, but big names could encourage even more firms to tap the market.

Malaysia's sukuk market saw a 26 percent slump in issuance last year due to uncertainty ahead of national elections and worries about the Federal Reserve's monetary policies, credit ratings agency Moody's said in a report.

(Reuters / 12 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

Asia presents huge developmental potential for Islamic finance

Dubai: Asia presents huge developmental potential for Islamic finance and is likely to be the main driver of Islamic banking growth in the near future given the untapped potential in India, Bangladesh and Indonesia, according to a report. Islamic finance can be utilised for greater integration of financial markets with the real economy and for improvement of the economic balance between emerging and frontier markets, according to Kuwait Finance House Group report. Islamic banking is banking that is consistent with the principles of Sharia which prohibits acceptance of specific interest or fees for loans of money. Originally dominated by Islamic banking products and services, Islamic finance has expanded its offerings around the world to cover Shari, a compliant insurance and capital market (which include principally Islamic bonds and Islamic fund management). Having thus grown across all component segments in Asia too, as at end-2013 the region's Islamic finance assets totalled about USD 391.2 billion, equalling 22 per cent of Islamic finance assets worldwide, the report said. Asia's Islamic finance asset composition is characteristically balanced - in particular, among Islamic banking and Islamic bonds sectors - with Islamic banking accounting to 49 per cent of aggregate Islamic financial assets in Asia, followed by financial certificates (45 per cent), Islamic funds (5 per cent) and takaful (1 per cent), a co-operative system of reimbursement in case of loss. However, the report did not provide details of Islamic banking operations in countries like India, Bangladesh and Indonesia. Driving the industry in the region is Malaysia, the global leader in Islamic finance, particularly in the areas of Islamic banking, bonds and funds, the report said. The Malaysian Islamic finance sector remains robust and continues its sustained growth patterns underpinned by strong regulatory support and various government initiatives intended to open up newer Islamic finance potential. The country's Islamic banking sector now accounts for approximately 25.7 per cent of the total domestic banking system, it said. Malaysia is also host to 287 Islamic funds domiciled in the country - the highest in any single jurisdiction. The Malaysian Islamic banking sector assets growth continued to outperform the conventional sector by growing at a double-digit rate. 

In 2013, the Islamic banking sector grew by 16.5 per cent to account for 25.7 per cent of total assets in the overall banking system. 

Between 2009 and 2013, the Islamic banking sector's assets grew at a compounded annual growth rate (CAGR) of 16.4 per cent. In contrast, assets of the overall banking system grew at a CAGR of 8.8 per cent during the same period. 

(Zee News / 12 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