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Monday, 2 February 2015

SUKUK PIPELINE - Issue plans around the world

Following are major Islamic bond issues in the global pipeline.
The Thomson Reuters Global Sukuk Index is at 117.48601 points, up from 115.79726 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 115.34912 against 113.69014 at end-2014.
IVORY COAST - Ivory Coast plans to make a debut 200 billion CFA franc ($340 million) sukuk issue in 2015, the region's development planning agency UMOA-Titres said in January.
EGYPT - Egypt is exploring the idea of issuing international sukuk, but that would require regulatory change, Hanan Salem, first deputy minister for economic and financial policies at the Finance Ministry, said in January.
QATAR ISLAMIC BANK - Qatar Islamic Bank plans to raise up to 2 billion riyals ($549 million) through a capital-boosting sukuk issue, the bank said in mid-January.
PUTRAJAYA HOLDINGS - Malaysia's Putrajaya Holdings Sdn Bhd has proposed issuing 370 million ringgit ($103 million) of 15-year sukuk musharaka, Malaysian Rating Corp said in mid-January.
BANK ISLAMI - Bank Islami Pakistan, the country's second largest full-fledged Islamic bank, plans to raise 3.5 billion rupees ($34.8 million) via subordinated sukuk, a bank official said. Issuance of the first 500 million rupee tranche, which still requires regulatory approval, could be as early as this quarter.
MOBILINK - Pakistan Mobile Communications (Mobilink), the country's largest telecommunications operator, plans to raise 6.9 billion rupees via sukuk this quarter, Pakistan Credit Rating Agency said.
BANGLADESH CENTRAL BANK - At the start of January Bangladesh's central bank launched a weekly sukuk issuance programme; it introduced three-month paper, having previously only sold six-month sukuk, and will now hold auctions every Thursday.
INTERNATIONAL BANK OF AZERBAIJAN - International Bank of Azerbaijan, the country's largest and the only state-owned bank, plans to issue $200-300 million of debut sukuk this year, a senior manager said in early January.
TUNISIA - Tunisia will delay its planned debut issue of $500 million in Islamic bonds until the third quarter of the year to allow parliament time to amend a law concerning the sale, Finance Minister Hakim Ben Hamouda said in early January.
BAHRAIN - In early January Bahrain launched direct sales of local currency government sukuk and bonds through its securities exchange, to broaden the investor base for its debt as sliding oil prices put state finances under pressure. The bourse set a minimum subscription of 500 dinars ($1,326).
NINGXIA - China's AVIC Capital Co said in late December that its unit AVIC Securities had signed an agreement to advise the government of the country's Ningxia Hui Autonomous Region on the global issue of up to $1.5 billion worth of instruments such as sukuk and U.S. dollar bonds, with maturities up to five years.
INDONESIA - The government plans to issue 7.14 trillion rupiah of project-based sukuk in 2015 to finance three infrastructure programmes and develop the sukuk market, the Jakarta Post quoted Suminto, director of Islamic bonds at the debt management office, as saying in mid-December.
The finance ministry plans to sell retail sukuk worth around 20 trillion rupiah in April, an official at the debt management office said in early December.
The government plans to issue global sukuk in the first quarter of 2015 before the U.S. Federal Reserve starts increasing interest rates, Scenaider Siahaan, a director at the debt management office, told Reuters; he did not give details.
AXIS REIT - Malaysia's Axis REIT said in mid-December that it planned to expand its sukuk programme to 3.0 billion ringgit from its existing size of 300 million ringgit, and extend the programme to a perpetual programme from 15 years.
TURKIYE FINANS - Turkish Islamic lender Turkiye Finans Katilim Bankasi applied to issue 143 million lira ($60.5 million) via sukuk, the Capital Markets Board said in mid-December.
TIRSAN TREYLER - Turkiye Finans received regulatory approval for a 71 million lira sukuk issue by trailer manufacturer Tirsan Treyler Sanayi ve Ticaret, the Capital Markets Board said in mid-December.
1MDB - Malaysia's sovereign wealth fund, 1Malaysia Development Bhd , has postponed the sale of up to 8.4 billion ringgit of sukuk to 2015, two people familiar with the matter said in early December.
GULF FINANCE HOUSE - Bahrain's Gulf Finance House is in talks on buying two asset management firms for a total of up to $500 million and is planning to increase debt to finance the deals, chief executive Hisham al-Rayes told Reuters in early December. He said GFH would have a preference for using sukuk over syndicated loans.
UNITAPAH - Malaysia's UniTapah Sdn Bhd plans to issue up sukuk murabaha of up to 600 million ringgit to refinance a term loan funding construction of the new campus for Universiti Teknologi MARA in Perak, RAM Ratings said in early December.
KENYA - Kenya will issue its debut sukuk in the next financial year to June 2016, not this one as some had expected, its finance minister said at the start of December.
CAGAMAS - Malaysia's state-backed mortgage lender Cagamas will raise up to $2.5 billion with a multi-currency Islamic bond programme, credit agency RAM Ratings said at the start of December.
TURKEY - The Turkish Treasury said in late November it would issue sukuk worth 1.5 billion lira by end-February.
ICD - The Islamic Corporation for the Development of the Private Sector, the private sector arm of the Jeddah-based Islamic Development Bank, plans to tap Islamic capital markets to raise as much as $1.2 billion in long-term funds during its current financial year, which started in October, its chief executive told Reuters in late November.
POINT ZONE - Malaysia's Point Zone (M) Sdn Bhd, a subsidiary of KPJ Healthcare, received in early November authorisation from the Securities Commission to establish a sukuk programme of up to 1.5 billion ringgit.
MALAYSIA BUILDING SOCIETY - Malaysia Building Society Berhad is planning a second issuance of its structured covered sukuk commodity murabaha programme, aiming to raise up to 700 million ringgit, bankers said in mid-November.
KUVEYT TURK - Turkish Islamic bank Kuveyt Turk mandated CIMB Investment Bank, Kuwait Finance House and Maybank Investment Bank to issue up to 2 billion ringgit of sukuk in Malaysia, bankers said in mid-November.
FLEETCORP - Turkey's Fleetcorp, wholly owned by Kuwait's The International Investor, has received regulatory approval to raise up to 150 million lira via sukuk, the Capital Markets Board said in early November.
BANK MUSCAT - The Islamic unit of Bank Muscat, Oman's largest lender, plans to tap the sukuk market in the first quarter of next year, in what would be the first sukuk sale by a bank in the country, a bank official said in late October. The issue would fall under a 500 million rial ($1.3 billion) sukuk programme which shareholders approved in March this year.
TEMASEK EKSLUSIF - Temasek Ekslusif, a wholly owned unit of Malaysian property developer Gamuda Bhd, will raise up to 1 billion ringgit with Islamic bonds, ratings agency RAM Ratings said late in October.
OMAN - Oman's government will make its first issue of rial-denominated sukuk for the domestic market as soon as in the first quarter of 2015; the issue may be worth the equivalent of around $300 million or $400 million, with maturities of five or seven years, financial affairs minister Darwish al-Balushi told Reuters in late October.
KAZAKHSTAN - Kazakhstan may make its second international issue of sukuk in 2015, central bank governor Kairat Kelimbetov told Reuters in late October. The issue would probably be quasi-sovereign but plans have not been finalised yet; details are likely to be decided near the end of this year.
LUXEMBOURG - Luxembourg is open to the idea of making more sovereign sukuk issues after conducting its first such issue at the end of September, Luxembourg finance minister Pierre Gramegna told Reuters in late October.
ETISALAT - Abu Dhabi-based telecommunications firm Etisalat is planning its first sukuk issue, bankers told IFR in early October. The company will have the documents ready in coming weeks, but the deal is more likely to be launched in early 2015, they said.
BANK ISLAM - Malaysia's Bank Islam, wholly owned by BIMB Holdings, has set up a 1 billion ringgit subordinated sukuk programme to boost its regulatory capital, RAM Ratings said in early October.
BINTULU PORT - Malaysia's Bintulu Port Holdings is expected to prepare for its planned Samalaju Port project with a proposed sukuk issue, likely to be 700-800 million ringgit, The Edge daily reported in early October.
MALAYSIA MARINE - Malaysia Marine and Heavy Engineering said in late September it had received approval from the Securities Commission to establish a sukuk murabaha programme of up to 1 billion ringgit.
MAHCO MALAYSIA - Mahco Malaysia, a vehicle to issue sukuk for Mohammed Othman Al Houkail Trading & Contracting Co, a medium-sized contractor in Saudi Arabia, proposed an Islamic medium-term note programme of up to 300 million ringgit, RAM Ratings said in late September.
CENDANA SEJATI - Malaysia's Cendana Sejati, a unit of local bank Masraf Al Barakah, proposed a 360 million ringgit senior sukuk murabaha medium-term note programme, RAM Ratings said in late September.
AGAOGLU - Turkish construction-to-energy Agaoglu Group plans to raise around $300 million by issuing sukuk, Niyazi Albay, Agaoglu's chief investment officer, told Reuters in mid-September. No specific time frame was given.
AKTIF BANK - Aktif Bank, Turkey's largest privately owned investment bank, has received regulatory approval to issue 200 million lira in sukuk, the Capital Markets Board said.
DOGUS GROUP - Turkish conglomerate Dogus Group has received regulatory approval to raise $370 million by issuing the country's first U.S. dollar-denominated corporate sukuk, the Capital Markets Board said in late August. No time frame was given.
CIMB ISLAMIC - CIMB Islamic, the sharia-compliant unit of Malaysia's second largest bank, is preparing an Islamic bond programme to raise up to 5 billion ringgit, ratings agency MARC said in late August.
SUNWAY - Malaysian property developer Sunway will raise up to 2 billion ringgit by issuing sukuk mudaraba, it said in August; short-term commercial paper under the programme will have maturities of between a month and a year, while medium-term notes will have maturities of one to seven years. Sunway will make its first issuance within two years.
SOCIETE GENERALE - Societe Generale completed the roadshow for the first issue in its 1 billion ringgit multi-currency sukuk programme in Malaysia, and would decide on the size in days, the bank said on June 18. In early July, banking sources said Societe Generale was still seeking a window to launch.
IFC - The International Finance Corp, the World Bank's lender to the private sector, is considering a return to the Islamic bond market, an IFC official said. A sukuk issue was still in the early stages of discussion but would likely be in the fiscal year starting in July 2014.
JORDAN - Jordan's government is studying a proposal to issue its first Islamic bond as early as in 2015, possibly raising over $1 billion in multiple currencies, but a preference for concessionary loans from aid donor countries could hinder the plan, government sources said.
(Yahoo.News / 01 Febuary 2015)
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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

Islamic finance looks to outgrow bad habits as it expands

After a year of landmark deals which are opening new markets for Islamic finance, the industry is under fresh pressure to address some of its shortcomings and prove that it is not just an imitation of conventional finance.
Born in its modern form during the 1970s, Islamic finance has boomed in the last few years on the back of strong economic growth in its core markets, the Gulf and southeast Asia.
Over the past 12 months it has shown signs of going global, as even non-Muslim countries have promoted it in the hope of luring cash-rich Islamic funds. Britain, Hong Kong and South Africa issued debut sovereign Islamic bonds; the industry's worldwide assets are now estimated to total over $2 trillion.
But with this success have come doubts over whether Islamic finance is living up to all of its principles. After all, it was launched not merely to make money, but to promote Muslim values such as equity, risk-sharing and social inclusion.
Those values may sometimes be getting lost as financial institutions engineer products which obey the letter of Islamic law - for example, a ban on interest payments - while mimicking conventional finance in many ways.
Top industry bodies such as the Jeddah-based Islamic Deveopment Bank, a multilateral lending institution with 56 member countries, are leading calls for Islamic banks to strengthen their moral foundations and promote real economic activity instead of monetary speculation.
This will require the sector to go back to the drawing board and develop genuine Islamic finance products that are not only profitable but support socioeconomic development, IDB president Ahmad Mohamed Ali said in a speech in Jakarta in November.
"The potential of Islamic finance is not fully realized and in practice most financing is concentrated on a few modes."
A survey by consultancy PWC, published last October, found only 52 percent of Islamic banking customers in the Gulf region believed their bank lived up to their religious values.
Ashruff Jamal, PWC's global Islamic financial services leader, said Islamic banks were "at a crossroads" as growth was slowing and to maintain expansion, they would need to convince increasingly sophisticated customers that they were different from conventional banks.
REGULATORS
One area of controversy is the structures which Islamic banks used for funding. In Asia and parts of the Gulf, for example, murabaha - a cost-plus-profit deal where one party buys merchandise for another - is popular. But scholars criticize it for its resemblance to a conventional loan, with the pricing of a murabaha contract effectively acting as an interest payment.
Structures with stronger risk- and profit-sharing elements such as musharaka, a partnership in which two or more parties agree to provide capital, are rarer.
In some jurisdictions, regulators are moving to change this, but it remains to be seen whether they can shift entrenched behavior among the banks.
In Pakistan, central bank governor Ashraf Wathra warned Islamic banks last week to develop ways to reward their customers in line with a rise in the sector's profitability, or face unspecified regulatory action.
In Malaysia, the government plans to roll out an investment platform this year to spur wider use of risk-sharing and equity-based contracts by Islamic banks.
The result of such initiatives could be to push Islamic banks beyond their longstanding role as credit providers to become investment intermediaries - a shift that would bring them closer to the spirit of Islamic finance, some analysts feel.
"Banks will become more of a full-service, asset manager-type of organization versus just banking services," said Khalid Howladar, Moody's global head of Islamic finance.
Also controversial are the "Islamic windows" of banks and insurers, which let them operate conventional and sharia-compliant businesses side by side. Funding of the two sides is supposed to be completely separate, but the arrangement can lead to doubts.
Although Islamic windows are common, they can make it hard for Islamic institutions to distinguish themselves from conventional ones in the eyes of consumers, PWC's Jamal said.
There are signs of a gradual regulatory backlash against the practice. Qatar banned it in 2011, and when Oman introduced Islamic banking rules in 2012, it required Islamic windows to operate out of physically separate branches. In Indonesia, a new law requires insurers to spin off their Islamic windows by 2024.
SOCIAL IMPACT
It may be harder, though, to ensure Islamic finance lives up to the principle that it should promote social welfare by giving needy people better access to funds.
Tens of millions of people in the Muslim world lack bank accounts because of poverty, poor education and lack of infrastructure. In theory, Islamic banks could help to change this by attracting customers who are not served by conventional banks. But outside a few areas, such as rural Afghanistan, there is little evidence of them doing this on a large scale.
"At the moment this has been neglected, so there is a void - this is not in line with Islamic teaching," said Abdul Halim Ismail, who in 1983 founded Malaysia's Bank Islam, the country's first full-fledged Islamic lender.
Ismail is prompting the idea of an institution that would channel charitable funds into projects to help the poor and needy, with such investments managed by Islamic banks to burnish their social credentials.
But few Islamic banks - perhaps inevitably, given pressure from shareholders and financial markets - are embracing the social dimension and making substantial efforts to offer products such as sharia-compliant microfinance.

Excluding some efforts in Indonesia and Pakistan, "I fear there is not much to tell regarding an attempt by bigger Islamic finance institutions to become active in microfinance," said Matthias Range, advisor at the German government's international development agency GIZ, which supports such efforts.
(Reuters / 01 Febuary 2015)
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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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