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Wednesday, 22 October 2014

U.K. Dream of Becoming Islamic Hub Needs Corporate Assist

The U.K.’s ambition to become a global hub for Islamic finance, bolstered by a debut sovereign sukuk in June, needs corporate borrowers to take the baton.
There’s never been a publicly sold Islamic bond from a corporate in the country, according to data compiled by Bloomberg. The closest it has come was a $500 million issue by the Middle Eastern unit of London-based HSBC Holdings Plc in 2011. International Innovative Technologies Ltd., a clean energy company in Gateshead, privately placed the U.K.’s first corporate sukuk in 2010.
London is attempting to marry its status as one of the world’s financial hubs with an industry that’s poised to almost double in the four years through 2018 to be worth about $3.4 trillion, according to Ernst & Young LLP estimates. Even after the city’s former Lord Mayor, Roger Gifford, said Islamic finance should be as British as fish and chips, the U.K.’s debt office said in August it doesn’t have any current plans to sell further sukuk.
“We’re really looking for corporates to issue sukuk, to create a benchmark,” Farmida Bi, a London-based partner at law firm Norton Rose Fulbright, which advised Goldman Sachs Group Inc. on its debut sukuk sale, said by phone Oct. 9. The U.K.’s sukuk “was never just about fundraising for the government,” she said. “There’s definitely a desire to build the industry beyond the sukuk, to provide a framework.”

Corporate Catalyst

The U.K. sold Shariah-compliant notes maturing in July 2019 at a profit rate of 2.036 percent, receiving orders worth more than 10 times the 200 million pounds ($322 million) raised. The debt yielded 1.47 percent at 9:35 a.m. in London. The average rate of sukuk in the Middle East is 4.1 percent as of Oct. 17, according to JPMorgan Chase & Co. indexes.
“The demand seen for the U.K. sukuk should act as a catalyst for further issuances from the government or from U.K. corporates looking to access the liquidity in the Islamic market,” Humphrey Percy, London-based chief executive officer of the Bank of London and The Middle East, said by e-mail on Oct. 9. BLME is the largest Islamic bank in Europe, according to its website. “We welcome more participants here to further develop the market and increase its depth.”
The government will review its sukuk sale and consider how it can further develop its strategy for Islamic finance, Sarah Ellis, spokeswoman for the debt office, said in August. The office last week directed a request for comment to the Treasury, who didn’t respond to e-mailed questions.

‘Western Center’

A lack of issuance may not hold back the industry. The U.K. has six Shariah-compliant lenders, more than any European country, according to London-based Wayne Evans, a senior adviser of international strategy at TheCityUK, an independent company promoting financial services in the U.K.
The government last year set up an Islamic finance task force to cement London’s position as the leading “Western” center for Islamic finance, and TheCityUK was invited to be one of the practioner representatives, Evans said.
“Arguably, London already has this status,” Evans said by e-mail Oct. 16. Two London-based banks are among “the leading arrangers of global sukuk, around 25 law firms in the U.K. are supplying services in Islamic finance, and advisory services are provided by the largest four professional services companies,” he said.
Global Islamic bond sales jumped 16 percent so far this year to $37.2 billion, according to data compiled by Bloomberg. The U.K. was the first non-Muslim government to sell sovereign sukuk, and was followed by Hong Kong, South Africa and Luxembourg.
“There is energy, drive and focus on promoting Islamic finance across the economy,” Norton Rose’s Farmida Bi said. The government is “trying to make it clear to corporates that Islamic finance is a source of financing that they can tap into, it’s available,” she said.
(Bloomberg / 20 October 2014)
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Malaysia: Muslim world needs to develop revolutionary method in Islamic finance

KUALA LUMPUR: The Muslim world needs to develop a revolutionary method in Islamic finance to allow entrepreneurs and financiers to leverage each other to contribute to the nation’s economic growth sustainability, Datuk Seri Najib Tun Razak said.

The prime minister said Islamic countries had made remarkable progress and became a significant group in the global economy as the total gross domestic products of the Organisation of Islamic Cooperation (OIC) countries had grown to US$9.4 trillion in 2012 from US$7.5 trillion.

The numbers showed that the Muslim world has limitless potential, he said in a keynote address at the Association of National Development Finance Institutions in Member Countries of the Islamic Development Bank (ADFIMI) – SME Bank International Forum 2014 here yesterday.

“The Muslim world through organisations, such as ADFIMI, must continue to emphasise that Islamic nations are peaceful sovereigns and a source of prosperity for the world.

“Our potential is enormous if we are organised and get our act together,” he said.

The prime minister said as an Islamic finance pioneer, Malaysia could and must play an influential role in ensuring the sector’s future development.

“Ten years ago, Malaysia issued the world’s sovereign sukuk.

Today, Islamic finance is a US$1.2 trillion market; this is expected to rise to US$2.6 trillion by 2017.

Islamic finance is now growing at 50 per cent faster than conventional banking,” he said.

Hence, Najib called on small medium enterprises (SMEs) to make greater inroads in Islamic finance as one of the fastest growing sectors in a crowded financial marketplace.

Najib drove home the point that there were some issues that needed to be rectified by the industry, such as regulatory hurdles, lack of consumer education and the need for more business-friendly policies.

In Malaysian context, he said, the government aimed to increase the SME macroeconomic contribution to 41 per cent of the GDP, 62 per cent of employment and 25 per cent of exports by 2020.

“This is a tall order, but I believe this is achievable and attainable,” he said
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Najib noted that RM12 billion was spent for 157 SME development programmes last year that supported nearly 890,000 projects across all economic sectors.

He said that this year the spending rose to RM13 billion and almost half of the funds came from the private sector.

Present were Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz, Khazanah Nasional Bhd Deputy Chairman Tan Sri Nor Mohamed Yakcop, SME Bank Group Managing Director Datuk Mohd Radzif Mohd Yunus, and ADFIMI Chairman Mehmet Emin Ozcan.

(Borneo Post Online / 22 October 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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