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IIFM, BAFT to create MRPA for Islamic trade finance

BAFT (Bankers Association for Finance & Trade) and IIFM (International Islamic Financial Market) announced a memorandum of understanding to jointly create a master risk participation agreement to support Islamic Trade Finance. The Islamic Risk Participation Agreement (IMRPA) will incorporate the practical considerations for funded and unfunded risk participations in trade assets within a Shari’ah-compliant framework. BAFT President Tod Burwell said BAFT was proud to partner with IIFM to introduce some much-needed standardization to the market in support of Islamic trade. IIFM Chairman Khalid Hamad said this collaboration would contribute to increasing the trade finance business on a Shari’ah-compliant basis.

Is bitcoin permissible in Islam? Muslims disregard clerics’ warnings and invest

#Turkey has witnessed a rise in interest in bitcoin and the hundreds of other cryptocurrencies that have been modeled on it. Bitcoin trade here has gone from about 9,000 transactions a month in May 2017 to 42,000 in December 2017. A handful of companies in construction, education and the food industry have begun accepting cryptocurrencies for payment. The value of bitcoin and other cryptocurrencies fluctuates widely, leading some to caution against investment. Diyanet, Turkey’s religious affairs directorate, said in December that bitcoin and Ethereum had no intrinsic value like gold, nor were they backed by a government, so they did not meet the standards of reliability to make them a currency. Another ruling in January said the factors driving the value of cryptocurrencies were too shrouded in secrecy, exposing investors to fraud and use by criminal networks. According to Onur Baran Caglar, a FinTech consultant and lecturer at Istanbul Aydin University, the debate over bitcoin misses the real potential of the underlying technology. That real potential is the blockchain, a digital ledger that keeps track of all bitcoin transactions worldwide.

Dubai launches #incubator to boost ethical Islamic start-up firms

Dubai Airport Freezone Authority (DAFZA) has announced the launch of Goodforce Labs, a startup incubator focused on supporting ethical startups in the fields of Islamic economy and Halal industries. Goodforce Labs will select a group of startups and small and medium enterprises and support them towards a $50 million in annual revenues and measurable social impact. Most Islamic economy startups face many problems and struggle to grow and survive. A number of startups have joined the incubator like Growmada, an e-platform for selling handicrafts from developing countries, Waqf 2.0, a cloud-based platform for managing Awqaf, Zileej, a company specializing in disciplined entertainment products and Rabia Z, which designs modest women’s clothing.

Emir of Kano to Deliver Opening Keynote Address at the RFI #Summit 2018

The organizers of the Responsible Finance & Investment (RFI) Summit 2018 have announced the opening keynote speaker for the Summit, His Royal Highness Emir Muhammadu Sanusi II, Emir of Kano. His Royal Highness will share his experience in advocating for sustainable economic development and the creation of a more equitable financial system.

Emir Sanusi began his career as a banker until he was appointed Governor of the Central Bank of Nigeria in 2009 and then Emir of Kano in 2014. He won an international reputation as a reformer following the bail-out of nine lenders soon after becoming Governor of the Central Bank.

Blake Goud, CEO of the RFI Foundation, and the RFI Summit organizers feel honored to have HRH Emir Sanusi delivering an opening keynote address.

The RFI Summit will take place on 26 and 27 April 2018 at the Atlantis Hotel by Giardino in Zurich, Switzerland. The summit is an initiative of the RFI Foundation and Swiss Arab Network to build awareness of shared values that can bring socially responsible investing (SRI), environmental, social and governance (ESG) and Islamic finance together to increase their positive impact.

Media Contacts

Saudi Dar Al Arkan Real Estate hires banks ahead of 5-year dollar #sukuk deal

Dar Al Arkan Real Estate Development has mandated banks to arrange investor meetings ahead of a planned U.S. dollar five-year sukuk offering. If the deal goes ahead, Dar Al Arkan will be the first Saudi company to issue an international bond this year. The banks mandated are Alkhair Capital, Deutsche Bank, Dubai Islamic Bank, Emirates NBD Capital, Goldman Sachs International, Nomura, Noor Bank and Standard Chartered Bank, who will act as joint bookrunners of the deal.

Two Essential Volumes on #Corruption

In this article Rick Messick recommeds two recent books on corruption: Dan Hough’s Analysing Corruption and Alina Mungui-Pippidi and Michael Johnston’s Transitions to Good Governance: Creating Virtuous Circles of Anti-Corruption. Hough's book is an introduction to the study of corruption for those new to the field. Mungui-Pippidi and Johnston's volume covers Botswana, Chile, Costa Rica, Estonia, Georgia, Qatar, Rwanda, South Korea, Taiwan, and Uruguay. In this book experts explain how these countries progressed from a situation where corruption is the norm to one where it is becoming the exception. In these countries the governance norm has changed from a biased resource distribution to a society where the state is largely autonomous towards private interest and the allocation of public resources is based on ethical universalism. Readers looking for practical approaches and innovative moves will find much of value in these books.

Islamic Development Bank gives initial price guidance for dollar #sukuk - lead

Islamic Development Bank (IDB) has given initial price guidance for a senior, unsecured five-year U.S. dollar-denominated sukuk in the high 30 basis points over mid-swaps. IDB President Bandar Hajjar said that the bank planned to launch a $2.5 billion sukuk soon. CIMB, Citi, Emirates NBD Capital, HSBC, Natixis, SMBC Nikko and Standard Chartered Bank are the banks leading the deal.

Project Ar-Rahn 2 listing oversubscribed

Muamalat Venture, a wholly owned subsidiary of Bank Muamalat Malaysia had a second listing on Malaysia's Investment Account Platform. The investment book was oversubscribed by more than 1.05 times on the first day of its listing. Project Ar-Rahn 2 is an investment in a share of aggregate capital contribution of Muamalat Venture under the musharakah joint venture with Permodalan Kelantan, in selected branches of Islamic pawn broking (Ar-Rahn) business activities. The investment of RM20 million in Project Ar-Rahn 2 is for a tenure of one year and expected to generate a return of 7% per annum for investors.

Emirates to meet investors ahead of possible #sukuk issuance

Emirates airline mandated local and international banks to arrange a global investor roadshow ahead of a possible sukuk issuance. The carrier mandated Citi and Standard Chartered Bank as global coordinators and joint lead managers, alongside BNP Paribas, HSBC, J.P. Morgan, Abu Dhabi Islamic Bank, Dubai Islamic Bank, First Abu Dhabi Bank, Emirates NBD Capital, and Noor Bank as joint lead managers. Proceeds from the issuance will be used for general corporate purposes. Emirates did not disclose the size of the possible sukuk, but said it will be of benchmark size. The company has tapped the debt capital markets with four issuances since 2011 raising over $3.65 billion, over 50% of which has been from sukuk. The most recent aircraft order was for 36 Airbus A380s worth $16 billion and was made in late January. Delivery of the aircraft will begin in 2020.

Islamic bonds face 'uncertain and muted' 2018 amid central bank tightening and geopolitics

According to S&P Global Ratings, the outlook for 2018 is uncertain because of geopolitical risks and economic uncertainties. Sukuk issuance was strong last year with $97.9 billion, up 45.3% from the $67.4 billion issued in 2016. So-called "jumbo issuances" were seen in Saudi Arabia and other Gulf Cooperation Council (GCC) economies in 2017. Mohamed Damak, senior director at S&P Global Ratings, said the first two months of 2018 had been marked by a good performance for local currency issuance and a drop in foreign currency issuance. He added that 2018, as a whole, was expected to see a drop in sukuk issuance, with expectations for around $70-80 billion in total. There are a number of reasons for this, including central bank tightening, lower financing needs of GCC banks and geopolitical risks. Another reason for lower sukuk performance could be the slow progression of the standardization in the sukuk market.

Global Report on the Financing of Nuclear Weapons

More than USD 525 billion was made available to the nuclear weapon producing companies
by the investors listed, according to the report. These investors assisted with share and bond issuances, owned or managed shares and bonds or outstanding loans or made credit facilities available to nuclear weapon producing companies between January 2014 and October 2017.

The research includes all outstanding loans and credit facilities during the research period, not only new loans issued. The top 10 investors alone provided more than USD 253 billion to the identified nuclear weapon producers, nearly half of the total investment. All of the top 10 are based in the US. The top 3: Blackrock, Capital Group, and Vanguard, have a combined investment of more than $110 billion. In Europe, the most heavily invested are BNP Paribas (France), Crédit Agricole (France) and Barclays (United Kingdom) with combined investments over $24 billion.
22 positive examples: The Hall of Fame

Don’t Bank on the Bomb 2018 also profiles financial institutions that have adopted, implemented

How much does Amazon’s rumoured bank account threaten MasterCard and Visa?

Amazon is planning to provide a product similar to checking accounts to bypass MasterCard and Visa for purchases on its platform. Card issuers stand to lose wallet share, if Amazon can convince people to change payment behaviour and open checking accounts with them for Amazon purchases. The bank of choice will win by growing deposits. It would also mean that smaller ecommerce merchants will need to work harder to attract sales away from Amazon. This strategy doesn’t have to be limited to Amazon and their bank of choice. For example, Amex Shop Small is an attempt at community purchasing mentality with small businesses. However, Amex Shop Small does not help the small business on the fee front. If the new bank account feature is introduced, revenues could be pocketed by Amazon as additional profit, or passed through to merchants to reduce sales fees and payment costs.

New Form of Islamic Bond Makes Debut at Iran Fara Bourse

The Iranian government issued 30 trillion rials (about $670 million) worth of Manfa’ah sukuk at the over-the-counter exchange Iran Fara Bourse. The 42-month bonds, bearing a maximum of 20.1% annual interest, will be backed by 51 trillion rials ($1.13 billion) of government revenues. Each Manfa’ah sukuk is priced at 1 million rials ($22.2).

#UK Islamic bonds to be worth GBP58 billion by 2028

UK’s Gatehouse Bank has calculated that the value of Sukuk assets listed on the London Stock Exchange (LSE) would double to GBP57.8 billion in the next decade, if issues continue at their current rate of growth. Sukuk only began life in the UK in 2007, but their numbers have been swelling at an annual rate of around 5%, though they are still little understood. Gatehouse Bank CEO Charles Haresnape sees this growth as a huge opportunity for Britain. He urges the Government to capitalise on this week's summit on Islamic finance and make it more than just a single effort for one large oil company to list on the LSE. He believes an on-going trade mission is needed to make London the world centre for all Islamic finance.

#Saudi crown prince seeks solution to banks' $2.6 billion Islamic tax row: sources

Saudi Crown Prince Mohammed bin Salman has directed the government to resolve a dispute with banks facing higher Islamic tax liabilities. The General Authority of Zakat and Tax (GAZT) is demanding tax for years going back as far as 2002. Banks are contesting the extra payments, which are estimated at around 9.8 billion riyals ($2.6 billion) across 11 of the kingdom’s 12 listed banks. Although Saudi banks and other firms generally do not pay corporate tax, they are subject to zakat, a 2.5% levy on each bank’s net worth. Lenders and the authorities have been at loggerheads over the amount of zakat they pay for more than a decade. The dispute has captured more attention recently as the kingdom seeks to attract billions of dollars of foreign investment from global equity indexes. Bankers say the way the tax is calculated is opaque and the heavy financial demands on banks threaten the stability of the banking sector and capital markets.

What’s the demand for #gold in Islamic markets?

The Dubai Gold and Commodities Exchange (DGCX) plans to introduce a physically-backed Shariah-compliant spot gold contract. Trading is expected to begin March 29. This comes at a time when the global demand for gold dropped 7% to 4,071.7 tonnes in 2017. Among key Muslim-majority economies in 2017, Turkey saw the biggest demand for investment bars and coins, at 52.4 tonnes, representing 5% of global demand. Indonesia follows with 20.2 tonnes, equivalent to around 2% of global demand for investment bars and coins. Saudi Arabia leads Gulf Cooperation Council (GCC) countries, with 9.9 tonnes, representing around 0.96% of global demand. The United Arab Emirates (UAE) saw a demand of 5.5 tonnes, equal to around 0.53% of global demand. Globally, Greater China and India were the biggest markets for investment bars and coins, at 313.8 tonnes and 164.2 tonnes, respectively.

#Kenyan firm tapped to train Islamic Finance #professionals

The Bahrain-based General Council for Islamic Banks and Financial Institutions (CIBAFI) has accredited Kenyan firm Aqeel Consulting to offer its professional development courses in Islamic finance. Aqeel Consulting's Managing Director Jaafar Abdulkadir said this partnership would develop a critical mass of professionals to support the growth of Islamic finance in the region. Aqeel will be conducting professional development courses on behalf of CIBAFI, which will be the certification body. The courses will be customised to suit the local scenario. Abdulkadir added that the collaboration with CIBAFI would reduce reliance on expertise from other countries. The professional development courses will meet global standards, but with local relevance.

Money and monetary stability in Europe, 1300-1914

by K. Kivanç Karaman, Sevket Pamuk, Seçil Yildirim-Karaman 24 February 2018

Some findings from a very longterm historic perspective on monetary systems:

selected quotes:

The evidence collected suggests that, despite many switches between standards and systems, fiscal capacity and political regimes ultimately shaped patterns of monetary stability. Theories of monetary stability that rely on the mechanics of monetary systems perform poorly when such a long-run perspective is taken.

Through the period we study, monetary systems were transformed more than once with the introductions of ledger, fiduciary, and fiat monies. These new monies were made possible by technological innovations in minting and printing and institutional innovations in banking and legal systems.


How Illicit Finance Controls Can Make It Harder for Nonprofits to Serve the World’s Neediest - and What to Do about It

A growing number of humanitarian aid organizations are having trouble finding banks willing to work with them. Notably, many humanitarian organizations working in Syria and Yemen report having difficulties with payments. In some cases, nonprofit organizations (NPOs) have been denied bank accounts or have had their existing accounts closed. More frequently, they have had their transaction delayed. Unable to rely on the formal banking system, some NPOs have resorted to transporting cash or turning to money transfer operators. Banks’ aversion to working with NPOs may stem from the fear of facilitating illicit finance, terrorist financing and sanctions violations. Policymakers should consider expanding the use of humanitarian exemptions. Banks may adopt sector specializations, so that they have dedicated staff who understand how NPOs operate. A standardized customer due diligence template tailored to NPOs would be useful for establishing mutual expectations. Another solution would be tracking aid transfers on a permissioned blockchain network that would give banks greater confidence and lead to easier access to finance.

MIMOS and INCIEF sign MOU for collaboration in the area of Islamic #Fintech

A Memorandum of Understanding (MoU) was signed by Malaysia’s Applied Research and Development Centre MIMOS and the International Centre for Education in Islamic Finance (INCEIF), to develop a blueprint for an Islamic finance-based investment technology platform. The MOU was signed by INCEIF President Dato' Dr Azmi Omar and MIMOS President Ahmad Rizan Ibrahim. Under the MOU, the two institutions will collaborate in research and development, in particular the areas of Big Data Analytics, Deep Learning and Fintech. Further, INCEIF and MIMOS may also cooperate in field-testing, technology transfer and commercialisation of technological products.

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