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Monday, 4 April 2016

Malaysia: Government support and neutrality on tax vital for sukuk issuance

KUALA LUMPUR: The main requirement for successful issuance of sukuk is support from the government to ensure that it would be tax neutral, not worse off from issuing a conventional one.
“With the government support, it is then open to the government, government-linked companies or private companies to issue sukuk,” Islamic Finance practitioner Mohamed Ridza Abdullah was reported as saying in Casablanca, Morocco by financial magazine Les Eco, which was made available to Bernama.
Ridza was invited to speak at a sukuk workshop in Casablanca to raise awareness on sukuk issuance as an alternative to capital funding in view of surging interest on Islamic bonds across Africa.
“The reform (amendment) of Act no.33-06 by the Moroccan government for a securitisation framework, which is comparable to best international standards, would allow the country to position itself as a destination of choice for the development of securitisation and Islamic finance in Morocco and Africa,” Ridza, managing partner of a Kuala Lumpur-based law firm, said.
Sukuk are syariah-compliant financial instruments, which are issued to raise funds in a Shariah-compliant manner and like conventional financial instruments, can be listed on a stock exchange.
By subscribing a sukuk, its holder receives a beneficial ownership in the underlying assets, which are acquired with the issue proceeds.
Ridza’s presentation at the workshop on sovereign sukuk and corporate sukuk was attended by participants, comprising bankers, insurance and other capital market investors, as well as executives, members of the media, shariah advisers and decision makers from the Morocco Central Bank, Securities Commission, Ministry of Finance, and insurance regulators.
He also held meetings with the Casablanca Stock Exchange to deliberate on its interest over the issuance of listed sukuk in Morocco.
Responding to a suggestion by the magazine that fewer sukuk issued by Malaysia in 2015 could bend market potential for further growth globally, Ridza said the decline was due to Malaysia’s adherence to its policy of fiscal deficit reduction against the backdrop of weak commodity prices and foreign exchange volatility.
He said, however, it has a silver lining as it also reflects increasing internationalisation and diversity of Islamic capital markets.

(Berneo Post Online / 04 April 2016)
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Malaysia: Insurance, takaful sectors to face slower growth

PETALING JAYA: RAM Ratings said it expects growth in the Malaysian insurance and takaful sectors to moderate in 2016 amid the challenging landscape and uncertainties in the financial markets that are anticipated to continue through the year.
In a statement yesterday, the credit rating agency said against its gross domestic product forecast of 4.4% for 2016, gross premiums are projected to expand about 5% for life insurance, 2-3% for general insurance and 4-5% for takaful contributions.
“Insurers and takaful operators were not spared the fallout from slower economic growth and subdued consumer sentiment in 2015.”
Last year, RAM said gross premiums in the general insurance segment edged up 1.7% year-on-year to RM15 billion, while life insurance premiums fared slightly better, advancing 5.4% to RM37.4 billion.
It said although family takaful continued to expand at 8% last year, growth in the general takaful segment eased 6%, ending the year with RM7 billion and RM2.3 billion of gross contributions, respectively.
Overall, RAM said the sector’s profit declined 13.8% as benefits and claims as well as commissions and management expenses outpaced the increase in premiums/contributions and investment returns fell amid a volatile market.
However, it said despite the likelihood of slower momentum in the near-term, the industry’s mid to long-term outlook remains favourable given the low insurance penetration rate, rising consumer awareness and greater efforts in product innovation and distribution.
“Insurers and takaful operators’ capitalisation levels and reserves remain robust and the industry is supported by a sound and prudent regulatory framework.
“Against this backdrop, we have maintained a stable outlook on the credit profiles of our rated insurers and takaful operators,” it noted.
Over the next few years, RAM said the operating landscape will evolve with regulatory-driven liberalisation.
It added that the de-tariffication of motor and fire insurance, to be implemented in phases beginning this year, bodes well for the sector as premiums will gradually commensurate with underwriting.

In addition, RAM said it expects the life and family takaful sectors to see greater operational flexibility as initiatives set out under the life insurance and family takaful framework are gradually implemented.

(The Sun Daily / 01 April 2016)
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