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Gulf grapples with ‘silent’ economic crisis

After years of strong economic growth, most of the economies of the six-member Gulf Cooperation Council (GCC) began to slow back in 2014. Major layoffs started soon after 2015, with major and minor employers shedding jobs. The cuts continued in 2016 and 2017, too. Most of those made redundant were non-natives and this has had an impact on the real estate sector. Dubai’s DAMAC announced this month that its second-quarter 2018 profits were down 46% year-on-year, while fellow developer Nakheel saw its profits dip 3.8% in the first six months of this year. Retail and tourism also felt the pinch, as the number of shoppers has dropped off. In Dubai there is a general fear in the emirate on speaking out about the economy, leading many to dub this the "silent crisis".

RBI’s efforts to stabilise rupee hit country’s forex reserves, experts say

A strong US dollar and subsequent interventions by the country’s central bank to stabilise the rupee drained over $1.80 billion (Dh6.61 billion) from India’s foreign exchange reserves. Reserves plunged by $1.82 billion during the week ended August 10 to $400.88 billion from $402.70 billion reported one week earlier. According to Anindya Banerjee, deputy vice-president of Kotak Securities, the decline in Forex reserves can be attributed to the RBI’s intervention to stem the decline in rupee’s fall. Foreign currency assets fell sharply, but the value of the country’s gold reserves increased by $145.6 million to $20.69 billion.

World’s first ESG #sukuk #fund another step forward for #Malaysia’s responsible finance

Malaysia’s Shariah-compliant BIMB Investment Management launched the world’s first environmental, social and governance (ESG) sukuk fund on August 1. BIMB’s ESG Sukuk Fund is the company’s fifth ESG-focused fund as a result of its partnership since 2015 with London-based Arabesque Asset Management. BIMB Investment CEO Najmuddin Mohd Lutfi said the company plans to launch more ESG that incorporates fintech like artificial intelligence, machine learning, big data, data analytics. The next investment focus could be in U.S. equity and multi-asset funds.

ADIB’s Shareholders approve ADIB’s capital proposal to support growth

Shareholders of Abu Dhabi Islamic Bank (ADIB) have approved proposal for a rights issue of AED 1 billion to raise the Paid and Issued Share Capital through a tradeable rights issue of 464 million new shares. Shareholders also approved the issuance of USD 750 million (AED 2.75 billion) perpetual Tier 1 sukuk, and the repayment of its USD 1 billion (AED 3.67 billion) sukuk issued in 2012. The capital plan has been developed to support the bank’s continued growth and its objectives in achieving its strategy while meeting regulatory requirements.

Anticipating fraud in Islamic #fintech

The rapid development of information technology has a huge impact on the development of financial products and services. The advances in technology have forced banks to change and follow innovation in business strategies that use technology as an important component in their development.

Which are the Sharia-compliant mutual #fund schemes in #India?

There are three Sharia-compliant mutual funds in India: Tata Ethical, Taurus Ethical and Reliance ETF Shariah BeES. The first two are actively-managed multi-cap schemes and Reliance ETF Sharia BeES is an exchange-traded fund (ETF) that invests in the Nifty50 Sharia Index.
There are also sectoral funds with investment in Reliance Pharma, ICICI Pru Pharma Healthcare & Diagnostics, SBI Technology Opportunities, ICICI Pru Technology or Franklin India Technology. However, these funds are vulnerable to cyclical fluctuations in their respective sector.

Waqfcoin: Crowdfunding Platform Uses Blockchain to Serve Humanity

Singapore-based fintech firm Finterra has developed a crowdfunding platform that uses blockchain to create smart contracts that would be linked to specific Waqf projects. Cash Waqf is a type of Waqf which is categorised as movable Waqf. It aims to promote service to mankind by establishing the endowment using money as opposed to using immovable assets. The idea of Waqfcoin lies on the principles of cash Waqf. Blockchain technology can be used to build trust in Waqf management and to ensure accountability. The technology could also provide a comprehensive global database on Waqf, which can be easily created and maintained in a transparent manner.

Islamic finance in the shipping industry

As the shipping industry continues to struggle with access to finance, Islamic finance may be a viable option for ship owners. The global growth of sukuks has been steadily increasing, but Islamic finance has its own uncertainties. The lack of standardisation in documentation contributes to this uncertainty. The UAE had established the Higher Shari’ah Authority back in 2016, whose mission is to issue fatwas and ensure the legitimacy of Islamic products and services. Any documentation developed under the auspices of the Authority still needs to be negotiated by the parties and adapted according to the structure and type of the sukuk. It is hoped that the shipping industry will be able to benefit from the continuous growth of Islamic finance.

Use of Ripple as a Cross-Border Solution Confirmed by #Kuwait Finance House (KFH)

Kuwait Finance House (KFH) is establishing the first blockchain-powered transaction system in the country. A series of questions arose when the formation of this system was announced. KFH has itself confirmed that they are using Ripple’s cross-border solutions to complete the blockchain-based transaction. KFH also conveyed that they would soon be joining RippleNet, which they initially announced back in May. This would enable them to become an active part of the ever-growing blockchain technology ecosystem. While neighboring Saudi Arabia may have banned cryptocurrency trading, it is obvious that Kuwait welcomes the underlying technology of virtual currencies.

#Saudi’s Al Rajhi Bank says expat exodus could impact its remittance business

Al Rajhi Bank expects low-single digit loan growth for the rest of 2018 as it curtails its loans while economic reforms take shape. A plan to reduce reliance on expatriates to generate jobs for Saudis has seen the number of foreign workers fall by more than 700,000 since last year. Al Rajhi's CEO Steve Bertamini said the expatriate exodus might have some impact on its remittance business. The bank has already seen an overall rise in banking for women and car loans for women have begun to rise substantially from a low base. Bertamini said that their entry into the workforce will mean more demand for accounts, loans and saving products.

Gassner's picture

Turkish Lira

Dear Readers,

The dramatic fall of the Turkish lira leads to a lot of coverage in the international media. What are the underlying economic drivers of this fall in value?

All economies are suffering from too much debt on sovereign, corporate and consumer level due to the promotion of debt finance, by basle regulation and faulty tax incentives.

But: Turkey is special because its consumers are highly indebted buying a lot of consumerware on credit, and the corporates borrowed short term in foreign currencies way too much. The first contributes to a trade deficit and the second to vulnerability when the currency exchange rate of the Lira is dropping.

The corporate borrowing, is funded by so-called carry trades, where investors buy higher-yielding assets with funds borrowed in lower-interest-rate countries. This stabilises initially the Lira, but makes it vulnerable to withdrawal. Typically the desire to withdraw funds is calmed down by raising interest rates. Turkey was number one for this funding method and now is punished for taking such unreasonable risk. See an old article from 2016 about carry trade as investment opportunity:

Abu Dhabi National #Takaful Co. PSC announces combined net profit of AED 48.6 million for H1 2018 achieving a growth of 19% in profit

Abu Dhabi National Takaful Co. PSC (ADNTC) released its financial results as at end of second quarter on 30 June 2018. The company announced a combined net profit of AED 48.6 million, achieving a growth of 19% compared to AED 41 million for the same period last year. The technical profit reached AED 60 million showing an increase of 9% compared to AED 55.2 and the underwriting profit reached AED 36.4 million showing an increase of 6% compared to AED 34.2 million for the same period last year. According to CEO Osama Abdel Raouf Abdeen, the underwriting profit of AED 36.4 million for the first half of 2018 is an indication of the company's credibility as the leading takaful operator in the region.

#Kuwait’s Warba Bank receives licence to conduct securities activities

Warba Bank has obtained licence from the Capital Market Authority (CMA) to engage in certain securities activities. The new licence allows the lender to conduct activities like investment portfolio manager, collective investment scheme manager as well as investment manager, subscription agent and custodian.

Prominent Turkish bankers, businesspeople see no macroeconomic reason for currency volatility

For Turkey's bankers and businesspeople it has been impossible to explain the high volatility in the exchange rate over the past few weeks. The fundamentals of the Turkish economy are solid and macroeconomic indicators fail to account for the recent slide in the Turkish lira, which dropped by more than 40% since the beginning of this year. These fluctuations are seen as manipulations on the Turkish lira and economy, as part of an economic war waged against Turkey by U.S. President Donald Trump. The U.S. dollar tumbled nearly 5% against the Turkish lira on Tuesday. European shares rebounded Tuesday as the Turkish currency firmed. The Central Bank introduced measures on the Turkish lira and the foreign exchange market (FX) liquidity management. The bank said it would provide all the liquidity needed by banks and closely monitor markets and prices, while raising collateral FX deposit limits for lenders' lira transactions from 7.2 billion euros ($8.2 billion) to 20 billion euros.

Creating footsteps in Kuwait’s Islamic banking sector

Kuwait Finance House (KFH) has embarked on a digital transformation journey. Kuwait and Bahrain have each launched their respective digital banking platforms and soon, Malaysia will have its own. By the end of 2018, a seamless digital customer experience is expected to be publicly available. In Malaysia the KFH is active in the infrastructure financing front, supporting the third light rail transport system (LRT 3) and the second Mass Rapid Transit (MRT 2) projects through the provision of Islamic financing facilities. The project is expected to benefit the local communities through the promotion of real estate developments around the proposed train stations. Furthermore, the project is expected to generate more than 2,000 jobs during the construction phase.

How Lombard Odier got into the Islamic investment space

Lombard Odier has launched a full suite of Shari’ah-compliant investment solutions. Arnaud Leclercq, Limited Partner at Lombard Odier Group, said the offering began as a bespoke creation for one client six years ago, it has grown from a $10 million to in the hundreds of millions, primarily for investors in the Middle East. The investments are a mix between Sukuk and equities. Equities are chosen using a combination of MSCI’s Islamic Index and Lombard Odier’s inhouse experts. The goal is to reach $1 billion in total Islamic investment the next three to five years. Lombard Odier plans to increase its presence in the Middle East, with an office in Abu Dhabi for the coming year currently in the planning stages and a partnership with a Saudi firm currently in the works.

Supporting Islamic #fintech’s growth

In this interview Ayman Sejiny, CEO of Ibdar Bank, talks about founding the Bahrain Fintech Bay. Bahrain Fintech Bay (BFB) is working to build a fintech ecosystem that will support industry growth and position Bahrain as a regional fintech hub. Sejiniy believes that the days of 'e-banking' are nearly over and the shift to mainstream digital finance is becoming a reality. Ibdar is an early adopter, transforming its organisation into a fully digitised Islamic Investment Firm for the Global Islamic Digital Economy (GIDE). Ibdar bank provides opportunities in aviation, real estate, Sukuk and investment funds. The bank is also expanding its services to include an array of Investment Advisory services.

Reconciling #cryptocurrency in Islamic finance

Over the last few years, the market capitalisation of cryptocurrencies has reached a near $400 billion with over 1500 currencies been created. Among them, bitcoin has been the most popular with a market capitalisation of over $150 billion. Currently, there are divergent opinions regarding the Islamic understanding of bitcoin among Shari’ah scholars. A section of Shari’ah scholars believe that bitcoin is purely speculative, while others believe that it is a digital asset and not money. There are also some who completely differ and opine that bitcoin is currency. According to Dr. Arindam Banerjee, Associate Professor at Amity University, at the current stage crypto is not suited as a means of exchange in Islamic banking and financial institutions.

Mortgages set to boost lending at #Saudi banking giant Al Rajhi

A jump in mortgages and a recovery in Saudi Arabia’s economy may help Al Rajhi Bank to reverse a decline in lending. According to CEO Steve Bertamini, higher government spending and faster economic growth amid higher oil prices should help the revival. Home loans have risen as much as 6% this year and there are 450,000 Saudis eligible to purchase a home under one of the government programs. Saudi Arabia’s new housing project announced in February includes an 18 billion riyal ($4.8 billion) loan-guarantee program to boost access to funding and 12.5 billion riyals to support down-payments. Al Rajhi Bank in July reported an 18% rise in second-quarter profit to 2.57 billion riyals. According to Bloomberg economists, Saudi Arabia’s economic expansion will accelerate to 1.6% this year from 0.9% in 2017.

#Saudi refinance firm mulls #Sukuk issuance to fund mortgage drive

The Saudi Real Estate Refinance Company (SRC) plans to begin issuing sukuk in late September or early October 2018. SRC aims to refinance 20% of Saudi Arabia's primary home loans market, which authorities hope to expand to SAR 500 billion by 2020. Currently Saudi Arabia’s primary home loans stands at SAR 290 billion. Fabrice Susini, CEO of Saudi Real Estate Refinance Company, said that the company will now begin issuing Sukuk to raise money, first in Saudi riyals but eventually in foreign currencies. The company was founded in 2017 by the Public Investment Fund (PIF) and has so far operated with financing from the sovereign wealth fund and short-term deals with banks.

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