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Securities Regulation: USA-SEC Adopts Rules to Permit Crowdfunding

Dear Readers,

The US Securities Exchange Commission has issued recently press release regarding equity crowd funding and its regulation:

"Washington D.C., Oct. 30, 2015 —
The Securities and Exchange Commission today adopted final rules to permit companies to offer and sell securities through crowdfunding. The Commission also voted to propose amendments to existing Securities Act rules to facilitate intrastate and regional securities offerings. The new rules and proposed amendments are designed to assist smaller companies with capital formation and provide investors with additional protections."

Equity funding is discriminated threefold in finanical markets despite most people assume that a market economy would leave choices to market participants. The three key problems are: 1) Risk weighting of equity finance a multiple higher than debt finance, thus making it unattractive for banks to provide equity finance and consequently destabilizing economies with excess debt. 2) Tax deductibility of interest expense. 3) Entry barriers to the securities markets to raise equity.

Bahrain's Islamic finesse

Bahrain was for decades regarded as the financial centre of the Middle East, but it was hard hit during the recession and is arguably still picking up the pieces.
The Gulf state expects to run a budget deficit of more than $3.8bn this year and has proposed a string of policy reforms, including axing millions of dollars of food, fuel and other subsidies, to help it rebalance the books.
Despite this, its leaders claim Bahrain has “passed the stress test” of the past years’ fiscal woes and is bouncing back as a financial hub.
The number of finance institutions in Bahrain has grown steadily over the years to around 400 (from 190 in 1991) and work has recommenced on the $1.3bn Bahrain Financial Harbour scheme, which houses the country’s stock exchange and high-profile tenants such as Gulf Finance House and BNP Paribas.

Robin Hood Coop, an Activist Hedge Fund

Now here is an improbable idea:an activist hedge fund.Out of Tampere, Finland, comes the Robin Hood Asset Management Coop, which legally speaking, is an investment cooperative. It is designed to skim the cream off of frothy investments in the stock market to help support commoners. As the website for the coop describe it:
We use financial technologies to democratize finance, expand financial inclusion and generate new economic space.Robin Hood’s proposition is no different than it was 600 years ago in Sherwood: arbitrage the routes of wealth and distribute the loot as shared resources. Today we just use different methods to achieve the same:we analyze big data, write algorithms, deploy web-based technologies and engineer financial instruments to create and distribute surplus profits for all. Why? Simply, we believe a more equitable world is a better one.

ITS ETHIX makes islamic finance compliance easier

Nasr Albikawi, CEO of International Turnkey Systems, introduces us to its ETHIX Islamic finance compliance product
Islamic finance is a burgeoning industry. And with more people looking towards more ethical financial solutions, it’s becoming a part of the mainstream market and offering. Nasr Albikawi, CEO of International Turnkey Systems, discusses the international growth of Islamic finance, and how ITS ETHIX can reduce the costs of Sharia compliance

Xinhua Insight: China changes tactics in financial fight against poverty

Zhang Xiangyin still remembers the day his daughter-in-law left home three years ago, leaving her 33-day-old son. She could no longer bear living entrenched in poverty in their mountain village.
Zhang, a 58-year-old farmer in Bijie City of southwest China's Guizhou Province, knows exactly what poverty means. With two daughters, who got married and moved away and his son in the coastal Shenzhen City as a migrant worker, the baby boy was left to the elderly couple.
But two 11-month-old Simmental cows he bought with a 24,000-yuan (3,762 U.S. dollars) government loan this September are expected to change his fate.
"The cows will give birth soon and are likely to have four calves within three years, which would produce 40,000 yuan in revenue," said Zhang.
After four years, Zhang expects between 20,000 to 30,000 yuan in net profits with newborn calves, which would lift him out of poverty.
In the past, Zhang was too poor to think of raising cows. A cow costs 12,000 yuan in the local market while Zhang's annual income was just a tenth of that, relying on a tiny plot of corn and potato crops.

Roadmap to boost Islamic financing

Recognizing the huge economic opportunities of Islamic financing, the Peace and Equity Foundation (PEF) in partnership with Al Qalam Institute, Cordaid and World Bank (WB) Philippines, is gearing up for drafting of the 21-year roadmap to attain compliance to Sharia'h-based financing industry.
Islamic Financing is touted as a growing "$2 trillion" global industry,
The roadmap will be patterned from the Southeast Asian countries like Indonesia, one of the leading countries in adopting Islamic Finance in the global scale. It will be divided into three stages with seven years each of realization.
Ricardo Torres, PEF's Partnerships and Program manager, in a press conference Wednesday, told reporters this 21-year journey will commence next year.
Torres was in Davao City for the three-day Sharia'h conference dubbed as “Islamic Financing in the Philippines: A Step towards the First Seven years,” at the Ritz Hotel and Garden Oases, "The first seven years will be the first step and we intend to implement it starting 2016. After this Sahria’ah conference which will be attended by some 200 stakeholders we intend to craft fully the whole roadmap,” Torres said.

Franklin Templeton to set up syariah funds in KL

The world's second-largest asset manager by market value plans to attract some of the US$376 billion (S$528 billion) parked in Malaysian bank deposits by setting up global Islamic stock and bond funds next year.
Franklin Templeton Investments, which has more than US$801 billion in assets, will seek approval from the regulator to start at least two syariah-compliant funds to serve as offshoots from the three it has in Luxembourg, country head Sandeep Singh said in an interview in the Malaysian capital last week.
That would complement similar investment options available from CIMB- Principal Asset Management and RHB Islamic International Asset Management.
The new funds will widen choices for Malaysians looking to diversify after this year's 17 % plunge in the ringgit and a political scandal hurt confidence. A looming US interest rate increase has already prompted global investors to offload twice as many stocks in the South-east Asian nation as they did for all of last year as well as to cut bond holdings.

Updated list of Shariah – Compliant Securities by Securities Commission Malaysia’s Shariah Advisory

The Securities Commission Malaysia (SC) today released an updated list of Shariah-compliant securities approved by its Shariah Advisory Council (SAC). The updated list, which takes effect on 27 November 2015, features a total of 667 Shariah-compliant securities. These securities constitute 74 per cent of the total 901 listed securities on Bursa Malaysia.
The list includes thirty-five (35) newly classified Shariah-compliant securities and excludes thirty-nine (39) from the previous list issued in May 2015.
The full list, which is updated twice a year based on the companies’ latest annual audited financial statements, is now available on the SC website at The next updated list will be made available in May 2016, based on the review of the audited financial statements released up to 31 March 2016.

GCC boards identify risk management as key issue in company governance

BDI's 2015 Promoting Professional Directorship report reveals that over 40 % of GCC board members surveyed would like to see more audit and risk management expertise at the board level
Risk management, along with succession planning, strategy and the role of the chairman, were the topics covered at BDI's Mastering the Boardroom Workshop held this week In Riyadh in partnership with J.P. Morgan
Following the last financial crisis and with the current economic climate, companies have been paying more attention to risk management. Boards play a crucial role in risk oversight, however, not enough board directors in the Gulf region are aware of and have clear visibility on the top risks facing the company according to the GCC Board Directors Institute (BDI)'s recent survey on board effectiveness.

Dec. 3: World Social Forum information session

On Dec. 3, from 5:30 – 7 p.m. in Arts W-215, McGill will host an information session about the World Social Forum (WSF) coming to Montreal on Aug. 9-14, 2016. The World Social Forum 2016 expects between 50,000 and 80,000 people from more than 120 countries and nearly 5,000 local and global civil society organizations to participate collectively in 1,500 workshops, conferences, and arts-based activities over the course of six days. The larger aim is to build bridges between Montreal’s francophone and anglophone communities, and the many other linguistic and cultural communities that call Montreal and Quebec home.

Barwa Bank sets up $2bn sukuk programme

Qatar’s Barwa Bank has established a $2bn sukuk issuance platform for the purchase of shariah compliant assets, according to Moody’s.
The rating agency has assigned a provisional rating of A2 to the programme, in line with its rating on the state controlled lender’s foreign currency deposits.
Trust certificates sold from the platform will be issued by a newly created Cayman Islands special purpose vehicle called BBG Sukuk Ltd and will


Innovation a vital growth driver for Islamic finance industry

Product innovation has become imperative for the Islamic finance industry. This is going to be one of the key growth drivers for the industry in the coming years as demand for new products across segments such as Islamic banking, Takaful, sukuk and funds rises thanks to increased understanding and acceptance of Sharia-compliant products.
Islamic banking
Islamic banks are struggling with lower profitability compared to the conventional banks. The estimated 19 % lower profitability of Islamic banks compared to the conventional banks can be primarily attributed to higher expenses and lower average product holding (APH) per customer. Islamic banks have an APH of 2.1 compared to the APH of 4.9 for the conventional banks. Higher profitability can be aimed and achieved by Islamic banks by developing new products, which would provide cross-selling opportunities and higher APH. Islamic banks can also benefit from shedding their existing obsolete systems and embracing technological innovation to bring down costs.

Risk management, SME financing top Islamic banks agendas-survey

Islamic banks around the globe view risk management, equity financing and deepening their client base as the most pressing issues facing the sector in coming years, a survey released on Friday showed.
The survey drew input from the heads of 83 Islamic finance institutions, the first comprehensive attempt to measure business sentiment in a growing-yet-diverse industry which holds around $2 trillion in assets globally.
The General Council for Islamic Banks and Financial Institutions (CIBAFI), a non-profit organisation headquartered in Manama, conducted the survey between April and June. Two-thirds of the respondents were full-fledged Islamic banks.
Commercial financing remains the top revenue driver, but financing to small and medium sized enterprises (SMEs) ranked second-highest, the survey showed.
SMEs are seen as leading revenue for Islamic banks in Asia, with trade finance ranking highest in sub-Saharan Africa.
In the Gulf region SMEs are also in focus, partly due to concerns about over concentration of business from large firms.

Akerlof Says Free Markets May Manipulate Our Thinking

At a recent IMF forum, George Akerlof, 2001 Nobel Laureate in Economics, discussed his new book, which is based on the idea that free market forces can produce systemic harm by exploiting human weaknesses.
Ever since Adam Smith, the central teaching of economics has been that free markets provide us with material well-being, as if by an invisible hand. In a recent book, Phishing for Phools—The Economics of Manipulation and Deception, Nobel Prize–winning economists George Akerlof, University Professor at the McCourt School of Public Policy at Georgetown University, and former resident scholar at the Fund, and Robert J. Shiller, Professor at Yale, deliver a fundamental challenge to this insight. They argue that markets are inherently filled with tricks and traps and will “phish” us as “phools.”

Intellectual capital most important in Islamic banks

The main challenge faced by the Islamic banking in the Sultanate today is building up solid knowledge and experience among bankers about Islamic finance while keeping pace with the demand in the market. "Recruiting potential front-runners in this area and providing the right knowledge dosage at the right time is key success element. Retention is always a challenge in the banking sector and it is rather more intense towards persons who already started working within Sharia-compliant products and practiced Islamic banking", said Mohammed al Balushi, Chief Human Resources Officer at alizz Islamic bank.

SEDCO Capital showcases local know-how and global reach

Islamic finance seen as a real point of convergence between the East and the West. Hasan AlJabri, CEO of SEDCO Capital participated in the Global Ethical Finance Forum which was hosted by the Scottish Government and in cooperation with the UK Islamic Finance Council.
The forum which took place in Edinburgh, Scotland, brought together thought leaders and executives from the ethical finance industry to ‘discuss untapped opportunities and spur convergence and collaboration’. The forum was officially opened by Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia and HRH Emir Muhammad Sanusi II, Emir of Kano.

Under the title “Growing the global ethical finance industry through collaboration and convergence”, AlJabri pointed that although there are many different forms of responsible investments, Environmental, Social and Governance (ESG), Socially Responsible Investing (SRI), and Islamic Finance, they all emerge from concern about the social and environmental consequences of investment practices, and a desire to ensure that investors make a positive contribution to the societies in which they operate to create sustainable economic development.

Islamic finance body IIFM launches cross currency swap standard

The Bahrain-based International Islamic Financial Market (IIFM) launched a standard contract template for sharia compliant cross currency swaps on Thursday, as the industry body seeks to enhance use of hedging tools in the sector. As Islamic finance grows, institutions are increasingly taking larger positions, often in various currencies, prompting the need for widely-accepted mechanisms to manage such risks.
It is the seventh standard issued by the IIFM, a non-profit industry body which develops specifications for Islamic finance contracts. Applications of the standard are mainly for interbank treasury placements, but it can also be used alongside Islamic bonds (sukuk) as well as trade and corporate finance deals, chief executive Ijlal Ahmed Alvi told Reuters.

Kazakhstan set for debut sovereign sukuk in early 2016

Kazakhstan's parliament has approved legislative amendments to facilitate Islamic finance, paving the way for Central Asia's largest economy to issue its first sovereign sukuk next year, a government official said.
The amendments, which still require the president's signature, would also allow for the conversion of conventional banks into Islamic ones, said Yerlan Baidaulet, an adviser to the Investments and Development Ministry.

«We expect the sovereign sukuk in early spring of next year. Probably in March, it depends on the decision of the Ministry of Finance as it has its own budgetary process», Baidaulet said on the sidelines of an industry conference in Kuwait. The legal amendments to the banking services and securities laws are the latest steps by the majority Muslim state to help develop Islamic finance. A dedicated Islamic banking law is also currently in preparation, Baidaulet said. Lawmakers have also passed a law to establish an offshore centre in the capital Astana, which is partly aimed at attracting Islamic finance business, he added.

Banks pledge to support green finance

The nation’s eight largest banks, representing 46 % of national banking assets, have committed to implementing sustainable financing as part of global environment goals.

Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Central Asia (BCA), Bank Negara Indonesia (BNI), Bank Muamalat, BRI Syariah, Bank Jabar Banten (BJB) and Bank Artha Graha Internasional signed the commitment with the Financial Services Authority (OJK) and the World Wildlife Fund (WWF) Indonesia on Monday. The commitment was manifested in a pilot project called “first step to becoming a sustainable bank”, marking a big move taken by the banks less than a year after the OJK launched the 2014-2019 Sustainable Financial Roadmap, according to OJK head Muliaman D. Hadad.

“I hope these eight banks, which are the prime movers in this project, can encourage other banks and financial institutions to join the country’s implementation of sustainable finance,” Muliaman said in his speech. Through the green banking pilot project, Muliaman said participating banks were expected to balance their pursuit of profits with willingness to conserve the environment, serving as examples to their peers.

MENA Sukuk market expanded 14 % YTD

The Middle East and North Africa region recorded strong growth in the Sukuk market in the first 10 months of 2015, according to Michele Leung, Director, Fixed Income Indices, S&P Dow Jones Indices.
The market value, as tracked by the S&P MENA Sukuk Index, rose 14 % YTD to 37 billion, compared with the mere 1 % growth in the conventional bond market in the region. The Sukuk market has expanded 37 % since the S&P MENA Sukuk Index’s inception in July 2013. United Arab Emirates is the most active issuing country in the region, and it remains dominant in terms of country exposure at 52 %, followed by Saudi Arabia at 17 %.
Overall, governments have continued to diversify their funding platforms, and the global Sukuk market has witnessed solid support from the lack of primary supply. Looking at the indices’ total return performance, there has been a 1.1 - 1.3 % decline in both Sukuk and bond markets month-to-date. As of Nov 18, 2015, the S&P MENA Sukuk Index rose 1.05 % YTD, while the S&P MENA Bond Index outperformed and gained 1.90 % in the same period.

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