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Friday, 15 April 2016

Pakistan eyes Rs100bn in sukuk for power project

ISLAMABAD: The government will guarantee Rs100 billion ($955 million) worth of Islamic bonds (sukuk) to fund what would become the country’s fourth largest hydropower plant, aiming to address power shortages that have hindered economic growth.
The deal would be one of largest infrastructure sukuk sold to date, helping expand a funding format that has largely been confined to handling mid-sized deals with shorter tenors.
The 10-year sukuk, to be privately placed by the Neelum Jhelum Hydropower Company (Private) Limited, was given a preliminary AAA rating by credit rating agency JCR-VIS with a stable outlook.
The rating will be finalised upon review of legal documents and the issuance of the government guarantee, which will cover the issuance amount and profit payments, JCR-VIS said in a statement.
Unlike conventional bonds, sukuk are investment certificates which follow religious principles that forbid interest payments, instead paying returns linked to an underlying asset.
The project’s total cost is estimated at Rs40bn, with around three quarters of that being funded through debt. The plant would generate 969 MW of power adding around 5 per cent to the country’s total installed power generation capacity, with the first generating unit expected to start operation in mid 2017.

Infrastructure sukuk have been slow to appear, partly because they often require the transfer of assets into special purpose vehicles, which can be problematic for political or legislative reasons when it comes to large state projects.

(DAWN / 13 April 2016)
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Islamic finance skills in high demand

Future developments and innovations of an industry are driven by highly skilled and talented human capital and Islamic finance is no exception.
Its Sharia-compliant banking industry is particularly in dire need for such experts because the sector is growing faster than educational institutes can provide professionals. 
Figures vary, but with the Islamic finance industry displaying robust growth — estimated to be maintained at 15-20 per cent a year — experts say emerging markets would require at least 50,000 Islamic finance professionals in the next few years to keep the sector moving.
Producing Islamic finance specialists presents challenges, though. Islamic banking, in principle, is of higher complexity than its conventional counterpart, and the expertise where Islamic finance talent is needed includes Sharia-compliant financial engineers and product developers who structure innovative financial solutions tailored for both Muslim and non-Muslim markets.

“It is important for talent to have knowledge combining finance, economics and Sharia principles, while being dynamic, innovative and creative enough to lead the industry forward,” says Riyaz Malik of Malaysia-based International Center for Education in Islamic Finance (INCEIF), one of the largest institutions catering to human capital needs of Sharia-compliant finance.
The centre sets standards for education in the sector and regularly welcomes delegations from educational institutions in the UAE.

Urgent requirement

In the UAE, the Dubai Islamic Economy Development Centre estimates that around 8,000 Islamic finance experts are needed. Dubai in particular urgently requires specialists with the city’s plans to foster an Islamic economy, enhance Sharia-compliant banking institutions, including setting up a Islamic export-import bank and establishing a halal finance regulatory and standardisation body, as well as an arbitration centre to resolve disputes in Islamic contracts.
To that end, the Bahrain Institute of Banking and Finance recently entered a joint initiative with the UAE-based International Islamic Centre for Reconciliation and Arbitration (IICRA) to launch a Certification in Islamic Arbitration programme.
“It is a first-of-its-kind Islamic finance qualification for legal professionals and a benefit to the Islamic finance industry,” IICRA Secretary-General Abdessattar Khouildi said at the signing ceremony in Dubai last month.
The initiative is among the few that recently contributed to improvement in Islamic finance education. While, globally, close to 500 institutions offer courses or degrees in Islamic finance as per the ICD Thomson Reuters Islamic Finance Development Indicator, most are in Malaysia, and an increasing number in the UK.
In the UAE there are currently nine universities offering Islamic finance-related degrees and over 30 training institutions offering a variety of Islamic finance courses, according to KFH Research.
The problem is that courses and university classes in different countries are not necessarily interchangeable because Sharia banking regulations differ. 
“One big challenge for human capital development in Islamic finance is the absence of globally benchmarked standards for Islamic finance education and training,” says Amat Taap Manshor, CEO of Malaysia-based Finance Accreditation Agency (FAA), suggesting an international accreditation body specifically for Islamic finance courses.
The FAA aims to provide exactly that. Since its inception in Malaysia in 2013, where it ensures that Islamic finance training programmes meet international quality standards, the agency extended its services to Europe, as well as the Middle East and North Africa.

Regional initiatives

GCC countries have also established several initiatives to develop Islamic finance professionals across the region, notably the Saudi Arabia-based Islamic Development Bank and its affiliate, the Islamic Corporation for the Development of the Private Sector.
The latter developed the Islamic Finance Talent Development Programme as a means of addressing the shortfall in Islamic finance human capital in its member countries. Meanwhile, the Accounting and Auditing Organisation for Islamic Financial Institutions in Bahrain is another important regional body to offer training courses.
In the UAE, the Dubai Centre for Excellence in Islamic Banking and Finance was launched in 2013. It offers students masters and foundation certificates in Islamic banking and finance through Hamdan bin Mohammad Smart University, which recently also launched a PhD programme in Islamic finance.
Among the UAE banks that are proactively seeking academic collaborations to develop talent is Abu Dhabi Islamic Bank, which has joint programmes on Islamic finance with academic institutions such as Abu Dhabi University and American University in Dubai, as well as Malaysia’s INCEIF.

(Special Report / 15 April 2016)
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