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Wednesday, 10 April 2019

Islamic banking players must invest in technologies

10 April 2019 (Bernama)

KUALA LUMPUR: Islamic banking and finance players must be intensely invested in technologies to transform the way they conduct banking services and disseminate their products more effectively and efficiently.

In making the call, Prime Minister Tun Dr Mahathir Mohamad said the application of smart technology within the financial industry — financial technology (fintech) — has positively disrupted the industry, as well as other industries such as mobile payments, money transfers, loans, fundraising and asset management.

“The latest technology embraced by fintech leverages on the Internet, mobile devices, social media integration, big data analytics and artificial intelligence makes financial transactions more automated, user-friendly and more convenient, thus (giving) a superior customer experience.

“Fintech has also penetrated the Islamic finance space despite it (the technology) being considered in a very early stage.

“However, the potential disruptions to traditional Islamic finance should not be underestimated. The disruptions can swing both ways,” he said at the 15th Kuala Lumpur Islamic Finance Forum 2019, here, today.

Dr Mahathir said the evolutionary pace in the Islamic banking and finance industry has intensified in recent years where concepts of Islamic finance have been incorporated into many financial products to meet the changing needs of consumers, businesses and investors.

He said the landscape has been supported by a well-developed regulatory, prudential, legal, accounting, framework and reinforced by the necessary research and development.

“Initiatives to promote greater awareness and education among Muslims and non-Muslims have also been intensified,” he said.

Dr Mahathir said crowdfunding and peer-to-peer (P2P) financing options from fintech provide solutions for individuals and small and medium enterprises that require financing but do not qualify for financing from traditional Islamic financial institutions.

He said investors were also entitled to higher potential returns by investing directly into the business ventures that they finance via the online financing marketplace.

“Overall, fintech in the Islamic finance space positively contributes to the evolution of the Islamic finance products and services offering.

“Elimination of credit intermediaries results in lower prices and/or higher potential returns," he elaborated.

Dr Mahathir said Malaysia has spearheaded a number of innovative developments in Islamic finance, with the aim to spur the vibrancy of the industry, such as the issuance of the first Sustainable and Responsible Investment Sukuk and Green Sukuk, as well as the launch of the Investment Account Platform.

The Prime Minister said the industry’s move towards embracing value-based intermediation, which was issued by Bank Negara Malaysia in 2015, would further strengthen Malaysia’s leadership position and advance the growth of Islamic finance towards generating positive, sustainable impact to the economy, community and environment.

“Islamic finance can be a catalyst for the growth of green developments globally.

“It will require continued collaboration with global and local stakeholders to converge in standards and reporting, as well as to spur innovation, to reduce barriers and cost for issuers and increase transparency and awareness for investors,” he added.-Bernama

10 April 2019 (Bernama)

Pakistan to issue Rs200 billion sukuk to ease power sector debt

10 April 2019 (Gulf Times)

The Imran Khan government is set to list another Islamic bond of Rs200 billion in the capital market in May after a similar successful launch earlier as it is keen to bring power sector circular debt down to Rs250 billion till the year-end.

Officials here say that the government is to issue another Rs200bn ‘Pakistan Energy Sukuk-II’ in May to resolve the power sector’s ballooning circular debt.

The bond will be floated on the Pakistan Stock Exchange under over-the-counter (OTC) listing to raise proceeds.

The bond would have a 10-year maturity period. Profit rate will be based on Karachi Interbank Offered Rate (Kibor) plus a margin of 80 basis points (Kibor+0.8%).

On March 1, the government raised the same amount from ‘Pakistan Energy Sukuk-I’. 

Officials said the government targeted to curtail circular debt to Rs250bn by December 31.
The power sector’s overall circular debt currently stands at Rs1.410tn, which includes bank loans of Rs603bn parked into Power Holding Private Limited (PHPL) and circular debt of Rs807bn.

The government had already released Rs200bn to energy companies to reduce circular debt.
Officials said the upcoming fund would be used to ease out liquidity crunch the energy sector is facing. The sector (government) owes billions of rupees to oil and gas suppliers and other companies.

The government chose Meezan Bank as lead arranger for the upcoming issue as was the case of the last transaction, while PHPL, owned by the power division, will be the issuer.
The financial institution would arrange institutional investors, including Islamic banks, mutual funds and financial investors.

Officials said the government would raise Shariah-compliant financing through PHPL of power division to settle the circular debt, especially of state-owned generation companies and power distribution companies.

The latest sukuk would be OTC-listed on the stock exchange, subject to all the relevant waivers, approvals, permissions regarding compliance of all relevant regulations and payments by issuer of all related costs for OTC listing.

A senior official said the sukuk would be declared statutory liquidity requirement-eligible by the government and State Bank of Pakistan (SBP).

The government would provide irrevocable and unconditional sovereign guarantee to the investors for all payments of the sukuk. All rental payments and payment at maturity will be payable at the SBP counter.

The official said the ministry of finance would give irrevocable standing instruction/direct debit authority in favour of investors to the SBP. The bank would duly acknowledge in writing the confirmation of the standing instructions, the official added.

10 April 2019 (Gulf Times)

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