Entries in English and Malay (Bahasa Melayu)

Tuesday, 2 December 2014

Islamic finance body IIFM to develop trade, corporate finance contracts

The Bahrain-based International Islamic Financial Market (IIFM) will develop contract templates for sharia-compliant corporate finance and trade finance transactions, as the industry body expands its mandate, its chairman said on Monday.
IIFM, a non-profit which develops specifications for Islamic finance contracts, is aiming to double the number of its standards by as early as next year.
The new standards would help broaden the scope of IIFM, as the bodywork to harmonise industry practices, said Khalid Hamad, executive director of banking supervision at Bahrain’s central bank and IIFM chairman.
“Such an initiative is a strategic step by the IIFM board to meet the demands of the industry,” he told a seminar in Bahrain.
Trade finance has remained a marginal business for Islamic banks even as other areas have boomed in recent years, partly because of a lack of scale and expertise compared to larger and more established Western banks.
Last month, the IIFM launched its sixth standard covering collateralised “murabaha” agreements, which serve as an alternative to repurchase agreements, a key liquidity management tool largely absent in Islamic finance.
The IIFM is also studying the impact of a G20 initiative that calls for the introduction of central clearing for over-the-counter derivative trades.
This could prove problematic for Islamic banks, as some of their transactions might not be accepted by such clearing-houses, while margin requirements would entail the charging of interest, which is banned in Islamic finance.
“Specifically, it is worth exploring if a sharia compliant CCP [central clearing Counterparty] structure is possible,” said Hamad.
The IIFM has previously launched standard contract templates for Islamic profit rate swaps as well as hedging and treasury transactions. It is working on standards for cross-currency swaps, foreign exchange forwards and Islamic bonds.
The body, was started operations in 2002, was founded by the Islamic Development Bank and the central banks and monetary authorities of Bahrain, Brunei, Indonesia, Malaysia and Sudan. Additional members include the State Bank of Pakistan and the Dubai International Financial Centre.
(Gulfnews.Com / 02 December 2014)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Moody's assigns A3 rating to Cagamas Global Sukuk's programme

Kenya will issue its debut sukuk in the next financial year, not this one as some had expected, after it opted to borrow an additional $750 million from its maiden $2 billion Eurobond issued in June, its finance minister said on Monday.
Parliament is set to consider a recommendation by its finance committee to double the government's external debt ceiling to $28 billion to fund the construction of a newrailway, port, roads and power plants.
There were expectations in the market the government would issue a bond compliant with Islamic law or shariah this financial year, partly to reduce domestic borrowing and lower interest rates.
Henry Rotich, the cabinet secretary for the Treasury, said the re-opening of the Eurobond, which is expected to be completed on Wednesday, had given the government time to prepare the documentation for the sukuk issue.
"We will prepare for sukuk but for the next financial year," he told Reuters on phone, without indicating the potential size of the bond. He said it would be issued in the finiancial year in the financial year ending June 2016.
Kenya's central bank chief, Njuguna Ndung'u, said last month the country's public debt was sustainable at 46 percent of gross domestic product (GDP) because much of it was supporting transport and other projects that will fuel growth.

A senior government source who did not wish to be identified told Reuters last week that the re-opened Eurobond was getting good demand from investors who were willing to pay a premium.
(Reuters Africa / 01 December 2014)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Latest Posts

Upcoming Events on Islamic Finance, Wealth Management, Business, Management, Motivational

Alfalah Consulting's facebook


Alfalah Consulting is NOT providing any kind of loan to finance project etc and asking for a fee. If you've received any email claiming to be from Alfalah Consulting, offering loan to you, please ignore it or inform us for further actions. Our official email is If you've received an email from, that's NOT from us. Be cautious!