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World’s Largest Islamic Bank Successfully Completes Ripple #Blockchain Trial

Saudi Arabia’s largest bank recently completed its first cross-border transfer using Ripple technology. Having Al Rajhi Bank on board is a major validation for the blockchain service provider. Money was transferred between Al Rajhi Bank offices across Saudi Arabia and Jordan. The transfer took mere seconds to complete and reduced fees to a bare minimum. Completing this trial will help Saudi Arabia digitize the customer banking experience even further. More specifically, digitizing the banking experience will allow for faster and cheaper transactions. Al Rajhi Bank runs over 200 remittance centers across the country. The whole Kingdom of Saudi Arabia may soon see mass adoption of Ripple’s ecosystem.

Interview with Ahmed Abdul Rahim, Chief Executive Officer of Ithmaar Bank

In this interview, Ahmed Abdul Rahim talks about Ithmaar Bank’s recent performance, the global Islamic banking industry and the increasing use of technology in banking. Ithmaar Bank is now entirely focused on retail banking and is considered one of the biggest Islamic retail banks in Bahrain. The waiting period at the branches has been reduced and the customer is provided various delivery channels for services like call center, Internet banking, EasyPay and mobile banking. EasyPay is the first-of-its-kind mobile-payment service in Bahrain. The service enables customers to shop simply by tapping their mobile phones at the checkout counters of participating merchants. As a pioneering Islamic retail bank, Ithmaar ensures that all its products and services are compliant with Islamic Sharia rules and that business is conducted accordingly.

Satyajit Das: Banking problems redux

There are over $3 trillion in stressed loan assets globally and the World Bank estimates that the current ratio of non-performing loans (NPLs) to total gross loans is around the 2009 levels of 4.2%. European banks have around euro 1.2 trillion of problem loans. Banking systems in many other advanced economies also face increasing risks. NPL problems are also apparent in India, China and Brazil. Solution of banking crises requires strong earnings, capital infusions, isolation of bad loans and industry reforms. But the ability of banks to earn their way out of the crisis to allow losses to be written off is limited. Banking problems represent a major source of continued economic instability. In modern economies, the financial system acts as a reservoir of bad debts, which can create financial crises. A new such episode may be beginning.

Dana debacle highlights need for unified Islamic finance regulator

A recent report from Standard & Poor’s said that Islamic financial assets had accelerated toward the end of 2016, but that such progress was unsustainable in the long term. The agency pointed out too that a lack of standardization was a barrier to creating a truly global industry based in the Middle East. The Islamic economy would continue to grow but at much lower rates than in the boom years from 2007 onward. It is against this background that recent events at Dana Gas should be seen. In 2013, the company issued sukuk totaling $700 million. Dana, which does a lot of its business in Egypt and Iraq, had problems getting paid in those countries. Earlier this month, Dana said it had received new legal advice which meant its sukuk were no longer to be considered Shariah-compliant. The Dana debacle confirms the belief that what is really needed is a much more standardized regulatory approach in the Islamic finance market.

Fitch: Dana Gas case highlights #Sukuk's legal uncertainties

According to Fitch Ratings, credit rating implications for sukuk arising from Dana Gas's attempt to have its mudaraba sukuk declared unlawful will take time to emerge. The impact of the move remains unclear until all relevant proceedings are resolved. Fitch added that sharia compliance typically does not have credit implications for Fitch-rated sukuk. Fitch does not rate Dana Gas or its sukuk. Dana Gas started court proceedings in the UAE to have its sukuk declared unlawful and unenforceable in the UAE. Sukuk regulations have been introduced and updated in several countries in recent years, but standardisation, harmonisation and legal precedents are limited in most jurisdictions. This case could set an important precedent for the relationship between sharia compliance and credit risk, and give greater clarity on enforceability.

The rise of Islamic fintech, global opportunities for #Bahrain

At the moment Islamic fintech is more of an aspiration than a reality. As the fintech industry and the demand for ethical investments grows exponentially, we are witnessing a want for the convergence of two. Seeing this space in the Middle Eastern banking industry, the Kingdom of Bahrain has entered a partnership with fintech incubator Singapore Fintech Consortium (SFC) and asset management and advisory firm Trucial Investment Partners. This partnership stands to initiate, nurture and sustain Bahrain’s fintech ecosystem while pulling from the experience of global industry leaders. Likewise, Bahrain has also recently opened a consultation led by the Central Bank of Bahrain (CBB), with the aim of establishing a regulatory sandbox for fintech. It enables businesses to take advantage of the concentration of Islamic financial institutions and the consultation focuses on crowdfunding, including Shari’ah-compliant crowdfunding.

Moody's: Dana Gas Shari'ah breech is credit negative for #Sukuk investors

Dana Gas petitioned the English High Court of Justice for injunction after commencing legal proceedings in Sharjah courts to have its Mudharaba Sukuk declared unlawful. Dana Gas publicly stated on 13 June 2017 that its $700 million Sukuk in its present form is not Shari'ah compliant and is therefore unlawful in the UAE. If the company's petitions are upheld by the Sharjah courts, it would trigger a standstill on the two upcoming contractual payments, a credit negative for the Dana Gas Sukuk investors. Although most investors regard the company’s announcement as a tactical move in its debt negotiations, a ruling in favour of Dana Gas would potentially send shockwaves among Islamic finance and Sukuk investors.

Why Islamic finance is insufficiently innovative

There are three possible explanations to the question why innovation might be slower in Islamic finance than in the conventional finance industry. These are the size of the industry, cultural factors and religious conservatism. First, the industry is tiny compared with conventional finance, Islamic finance assets are only 1.07% of total financial assets. Culturally, Muslim majority countries display much more respect for age and seniority than do locations like Silicon Valley or London. Finally, there is the question of religious conservatism. The rules of traditional Islamic law have always been derived from the original sources of Quran and hadith, and from past judicial rulings. Requiring all legal developments to be based on prior sources limits the scope for innovation. Mohammed Amin states that fintech can only transform Islamic finance if Shariah scholars are sufficiently agile in developing traditional Islamic law to accomodate innovation.

#Kuwait’s Islamic finance sector on strong growth trajectory, IMF says

According to a recent study by the International Monetary Fund (IMF), Kuwait’s Islamic financial services sector is growing rapidly, with Islamic banking emerging as the most developed component of the industry. Islamic banks’ market share increased rapidly between 2005 and 2010 and has since then stabilised at around 38%. Kuwait’s Islamic banking sector includes systemically important banks. The largest Islamic bank in Kuwait accounts for 23% of total banking system assets, over 70% of the Islamic banking assets. The capital adequacy ratio and Tier-1 capital remain above 15%. The IMF report notes that the economic diversification effort could help drive further growth in Kuwait’s Islamic banking industry.

Raising funds through #sukuk: The prospects, the drawbacks

#Nigeria announced the issuance of N100billion ($328million) sukuk, which brings to close a process that started last year. The first sign of the process was given last year by Alhaji Mahmoud Isa-Dutse, Permanent Secretary at the Ministry of Finance. He said that sukuk could be linked to a wide range of projects from power plants to railways. The sukuk is a 7-year tenor debt instrument which will go on sale from June 28, 2017, for three days via book building. It will be traded on the Nigerian Stock Exchange (NSE) and the FMDQ Securities Exchange OTC platform. Dr. Abraham Nwakwo, Director General of the Debt Management Office, said the sukuk was part of the plan to fast track the development of infrastructure and engage in project-tied capital raising.

#Zakat requires Muslims to donate 2.5% of their wealth: could this end poverty?

Zakat is a powerful source of good with untapped potential for contributing to sustainable development. There are some striking commonalities between the sustainable development goals (SDGs) and zakat. Zakat is mandatory giving; all Muslims eligible to pay it must donate at least 2.5% of their accumulated wealth for the benefit of the poor. But despite its tremendous potential for contributing to the SDGs, zakat organisations have been overlooked by development organisations. Between $3tn and $5tn is estimated to be needed per year to achieve the goals, but current investment falls short at around $1.4tn. By working together with religious organisations, development bodies can fill the $2.5tn investment gap, while also promoting peace and development. A shift in the public mindset is needed so that zakat is seen as a programme needing professional management for positive change, rather than simply charity.

Fitch: Dana Gas Case Highlights #Sukuk Legal Uncertainties

According to Fitch Ratings, credit rating implications for sukuk arising from Dana Gas's attempt to have its mudaraba sukuk declared unlawful will take time to emerge. The impact of the move remains unclear until all relevant proceedings are resolved. Fitch added that sharia compliance typically does not have credit implications for Fitch-rated sukuk. Fitch does not rate Dana Gas or its sukuk. Dana Gas started court proceedings in the UAE to have its sukuk declared unlawful and unenforceable in the UAE. Sukuk regulations have been introduced and updated in several countries in recent years, but standardisation, harmonisation and legal precedents are limited in most jurisdictions. This case could set an important precedent for the relationship between sharia compliance and credit risk, and give greater clarity on enforceability.

IDP and JCSB partner to grow #SME businesses

The Islamic Corporation for the Development of the Private Sector (ICD) and JSCB Microkreditbank Uzbekistan have entered into a Joint Strategic Collaboration to finance SMEs in Uzbekistan. The Line of Financing facility agreement for the amount of USD 12 million was signed by the CEO of ICD, Khaled Al-Aboodi and the Acting Chairman of JSCB Microkreditbank, Shukhrat Rasulov. The collaboration will focus on developing the private sector especially SMEs, improving the living standard, generating tax revenues for the government and promoting Islamic Banking in the country. Khalid Al-Aboodi stated that ICD was pleased to extend a line of financing facility to Microkreditbank which will enhance the impact of socio-economic development. Shukhrat Rasulov welcomed the partnership with ICD and ensured that JSCB was committed to providing professional banking services while promoting private entrepreneurship in the Republic of Uzbekistan.

Three-way bank #merger in #Qatar aims to close by year end -sources

Executives working on a three-way bank merger in Qatar expect to finish valuing the deal in the coming weeks. Shareholders at Masraf Al Rayan, Barwa Bank and International Bank of Qatar are committed to pushing ahead with the deal despite the current embargo by some of Qatar's Arab neighbours. A shake-up has long been mooted in the Qatari banking sector given that 18 local and international commercial banks serve a population of 2.6 million. The more than two-week travel and diplomatic boycott could further dent bank performance if the dispute drags on. In December, Reuters reported that the trio had begun merger talks which would create the Gulf state's second-largest bank. The new bank, which would be run in compliance with Islamic banking principles, would have assets worth around 160 billion riyals ($43.6 billion).

La première émission de #sukuks aura lieu le 15 septembre prochain

Abdellatif Jouahri, gouverneur de Bank Al-Maghrib, a annoncé la première émission de sukuks aura lieu le 15 septembre prochain. Après le lancement en mai dernier de Umnia Bank, Attijariwafa bank a présenté dernièrement à la presse sa nouvelle banque participative, Bank Assafa. Cinq banques participatives ont été agréées par Bank Al-Maghrib en début d’année. BMCE Bank of Africa s’est associée à Al Baraka Banking Group du Bahreïn, la Banque centrale populaire (BCP) au groupe saoudien Guidance Financial Group, et le Crédit Agricole du Maroc à l’Islamic Corporation for the Development of the Private Sector (ICD).

IMF warns #Kenya of loopholes in Islamic banking #regulation

The International Monetary Fund (IMF) has warned that the rapid growth of Islamic finance in Kenya is happening without adequate protection of depositors. Despite the fact that the Shariah banks are already offering loan products, Kenya is yet to refine its prudential regulations to cater for Islamic banking. Kenya is also yet to come up with a Shariah-compliant deposit insurance scheme and is continuing to manage deposit insurance premiums in a single pool for all banks. This situation could complicate compensation of depositors if a bank offering conventional and Islamic products collapses. According to the IMF, Kenya should seek to bring clarity to the grey areas in Islamic finance as it drafts amendments to the banking law as promised in the 2017/18 budget.

Business #schools feed hunger for courses on Islamic finance, aboriginal leadership

As the world of business is global, business schools are getting similarly global in their outlook. The need for a more diverse approach in business schools crosses all levels, from the makeup of faculty and the curriculum to the students themselves. Walid Hejazi, associate professor at University of Toronto’s Rotman School of Management stresses that diversity from a business school perspective is not so much a moral or equity imperative as it is about long-term sustainability. In his view, businesses that are diverse in their workforce are not only more innovative, they also work more effectively. Other business schools are following suit emphasising diversity on all levels. For example, the Beedie School of Business at Simon Fraser University introduced an Aboriginal Business and Leadership EMBA program to advance aboriginal leaders’ business education.

The #Sukuk Investment Opportunity

The #Nigerian Debt Management Office (DMO) is accessing the local market for N100 billion through Sukuk. The first Nigerian Sukuk is a 7-year tenor debt instrument and will go on sale from June 28, 2017, for three days via book building. It will be traded on the Nigerian Stock Exchange (NSE) and the FMDQ Securities Exchange OTC platform. The bond will target retail and institutional investors, while First Bank and Islamic wealth manager Lotus Capital will act as managers for the sale. According to DMO, the introduction of Sukuk is not only a way of raising capital for the government and promotion of greater financial inclusion, it is also part of the plan to fast track infrastructure development. The current manager of DMO, Dr. Abraham Nwankwo will be leaving office at the end of June and the Sukuk issuance is seen as his parting gift.

Islamic Development Bank Group, UN Cooperating on SDG #Partnership Strategies

Islamic Development Bank (IDB) Group President Bandar Hajjar and UN Deputy Secretary-General Amina Mohammed identified priority areas for a strengthened cooperation. They also explored opportunities to collaborate on global, regional and country-level priorities to achieve the SDGs. The UN and the IDB will seek to develop private sector partnerships, advance the Global Islamic Impact Investing Platform for blending Islamic Financing and Private Sector resources, and promote institutional cooperation. Bandar Hajjar stressed that the IDB Group was fully committed to the SDGs, while Amina Mohammed underscored the importance of interactive partnerships with governments and of country-level results.

Islamic finance growth to lose momentum in 2018: S&P report

According to S&P Global Ratings, the Islamic finance industry will continue to expand this year, but will lose some momentum in 2018. Even though sukuk issuance accelerated in the first half of this year and will likely stay strong in the second half, S&P Global Ratings believes this growth rate is not sustainable. In their view, the current economic situation in core Islamic finance markets and depreciation of local currencies have weighed on the industry’s performance in 2016 and 2017. The report foresees a deterioration of GCC Islamic banks’ profitability in 2017 and 2018 as the cost of funding has increased and the cost of risk is on the rise. Sharia is still interpreted in different ways across the various Islamic finance markets. However, the industry appears to be going in the right direction with the proposal for central Shariah boards.

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