The #UAE-based Emirates Real Estate Fund (EREF) has procured a AED700 million ($190.6 million) Shari’ah compliant finance facility with Emirates NBD. CEO of Emirates NBD Asset Management Tariq Bin Hendi said the facility would enable the bank to complete strategic acquisitions to boost the value of the fund. Over the last 24 months the fund has invested over $163 million in real estate acquisitions including Binghatti Terraces in Dubai Silicon Oasis, Arabian Oryx House in Al Barsha Heights, part of Burj Daman Office Tower in the DIFC and a residential building in Remraam, Dubailand. The partially undrawn facility is a five-year, profit-only Mudharabah facility with a 10% repayment of principal in its fourth year.
The share of sukuk issuance in core markets such as the Gulf Cooperation Council (GCC) region, Malaysia, Indonesia, Turkey and Pakistan are expected to keep up their market share in 2017. New sukuk issuance from the core markets rose to $40 billion (Dh147 billion) in 2016 from about $32 billion a year earlier. This represented 28.5% of total bond and sukuk issuance in these markets in 2016, down marginally from 29% in 2015. Malaysian companies continue to be the most active corporate issuers. Several other key markets have introduced or updated sukuk laws in the past few years, including Saudi Arabia, Oman and Kuwait, which should gradually boost issuance. According to Faisal Hasan, Head of Investment Research at Kamco, the outlook for sukuk issuance in 2017 remains positive as GCC economies are expected to return to issuing sukuks to fund their deficits. Analysts say GCC corporates that tap capital markets are more likely to issue sukuk or a mixture of both, rather than only bonds to attract a wider local and regional investor base.
Kuwait Finance House (KFH) has welcomed the Central Bank of Kuwait (CBK)’s instructions and regulations regarding the role of Sharia Supervisory Boards in Islamic banks. Islamic Banks would be given until December 31st, 2017 to fulfill the requirements. Isa Abdullah Duwaishan, Executive Manager Shariah Control & Advisory at KFH, stated that the executive team of the board encompasses qualified Shariah controllers who audit the compliance and commitment of all bank departments to sharia rules. He reiterated the efforts of continually improving the skills of Shariah controllers and the Shariah staff in the bank through engaging them in specialized training courses. KFH's Shariah Supervisory Board issues Fatwa and Shariah reports that are viewed as a reference to other banks.
Bank Islam's managing director Datuk Seri Zukri Samat said he would not extend his contract when his tenure ends in June this year. When asked on his successor, Zukri said there was still plenty of time to search for a successor since it was only January. On Bank Islam Visa Infinite MPN credit card-i, he said it was introduced in response to Bank Negara’s call for a cashless society. He said the collaboration with MPN was the bank’s continuous cooperation with the academic institutions starting with the introduction of the UniDebit card in 2012. Meanwhile, MPN chairman Professor Tan Sri Zakri Abu Hamid welcomed the strategic cooperation to strengthen the corporate image of both parties.
According to Fitch Ratings, Malaysia's takaful sector continues to enjoy higher growth than the conventional sector. This growth is driven by a low base, stable domestic consumption and increasing consumer awareness. The rating agency said that regulatory pressure would drive sector consolidation in the short term. As takaful operators realign their strategic focus and gradually retain more risks, Fitch expects some bottom-line volatility in the short term. For the first half of 2016 (1H2016), family takaful grew by 9.8%, while general takaful grew by 5.8%. This compared to 8.2% growth in conventional life and 2.6% in general insurance.
Emir of Kano, Malam Muhammad Sanusi II is expected to speak at an Islamic finance conference organized by the International Institute of Islamic Banking and Finance (IIIBF) at Bayero University, Kano. The Director of the institute, Binta Tijjani Jibril, said the conference would draw participants from within Nigeria as well as other countries such as the United States, Malaysia, Saudi Arabia, Morocco, Indonesia and Egypt. She added that when the mayor of London came to Nigeria, he advised the government to embrace Islamic finance because of its benefits. Britain is competing with Malaysia to be the hub of Islamic finance in the world because they see it as good business not a religious issue.
Fitch Ratings said it expects sukuk issuance in 2017 to continue at the same pace like last year. Sukuk issuance in core markets rose by 26% in 2016 and maintained its share of capital markets funding despite large conventional bond issues by Saudi Arabia, Abu Dhabi and Qatar. New sukuk issuance with a maturity over 18 months from the core markets of the Gulf Cooperation Council (GCC) region, Malaysia, Indonesia, Turkey and Pakistan rose to $40 billion in 2016 from about $32 billion a year earlier. In 2016 10 key markets issued sovereign sukuk and other sovereigns in the GCC region have indicated they could issue sukuk, or a mix, in the future. Sovereigns and supranationals are likely to remain the dominant issuers, but bank issuance may also rise in some markets, driven by issuance to meet regulatory capital requirements.
Saudi Binladin Group (SBG) is negotiating with banks an extension of up to two years on a 10 billion riyal ($2.7 billion) Islamic credit facility used to pay for building work at the kingdom’s Grand Mosque in Mecca. Contractors in Saudi Arabia have had to deal with delays and late payment after the government trimmed spending to adjust to the impact of lower oil prices. Mecca’s mayor Osama bin Fadl Al-Bar told Reuters in September that the expansion would be completed in either 2017 or 2018. But the timeline for the mosque has now been delayed. SBG had received some of the backlog of payment owed to it by the government in recent months, but a large portion remains outstanding.
The goal of this event is to strengthen boards of directors of microfinance institutions in the Middle East and North Africa (MENA) region. The case studies include topics such as governance, risk management, client centricity, sustainable growth and operating in challenging environments. This event is organized by Calmeadow, the Center for Financial Inclusion (CFI) and Sanabel. Calmeadow is a Canada-based NGO with 30 years of experience in financial inclusion and corporate governance initiatives. CFI brings eight years of experience in risk management and governance. Sanabel is a microfinance network with 90 members which serve a total of approximately 1.6 million clients in 13 Arab countries.
Banks in Iran have made progress since the signing of the nuclear deal, yet many obstacles to doing business internationally remain. The deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), was meant to free up Iran’s economy and banking sector by lifting the sanctions imposed on the country in exchange for curbs on Iran’s nuclear programme. Under the nuclear sanctions, the US fined several big banks for dealing with sanctioned countries. For that reason, many large international banks fear being fined again if they re-engage with the country, even though they are now allowed to do so under the terms of the JCPOA. So far, only small banks have been willing to re-engage with Iran.
#Saudi Arabia’s Bank AlJazira has reported a drop in profits of 32.25% to SAR 872 million for 2016. Profits for Q4 2016 were down 4.4% on a year ago to SAR 152 million. Earnings per share were down from SAR 3.22 to SAR 2.18. However, the loans and advances portfolio contracted by 0.18% to SAR 42 billion. The bank attributed the fall in net income to a decrease in operating income by 14%. There is also a decrease in net special commission income, net trading income and other operating income against an increase in net exchange income and net banking fees. Total equity as of end-2016 was SAR 8,104 million, comparing with amount of SAR 7,413 million the previous year, an increase of 9%.
Abu Dhabi Islamic Bank (ADIB) has launched its First Shari'ah compliant equity investment structured note of the year 2017. The note is linked to a basket of undervalued blue chip companies from diversified sectors including healthcare, technology & telecommunications. The investment note has a maturity of one year and minimises investment risk by providing 100% capital protection to the capital invested. The note is currently open for subscription until 22 January, 2017 with a minimum investment requirement of $30,000. ADIB’s last three matured equity investment notes have yielded returns of 4.2%, 4.8% and 6.2%, respectively.
Nogaholding, the investment arm of Bahrain’s National Oil and Gas Authority (NOGA), has approached banks with the aim of setting up an international bond programme. The bond programme could be either for conventional bonds or for sukuk, but since Nogaholding’s latest U.S. dollar fund-raising exercise was an Islamic loan, a sukuk programme seemed more likely. A spokeswoman for Nogaholding declined to comment. In March last year, the company raised a $570 million murabaha facility with a five-year maturity. The 2016 loan backed projects such as the Bahrain LNG Import Terminal, a modernisation programme for Bahrain Petroleum, and expansion of facilities at the Bahrain National Gas Expansion.
Two Takaful insurance companies have commenced operations in the country, thus, becoming the first set of fully-fledged Takaful Insurance companies in Nigeria. The two companies are Jaiz Takaful Insurance Company, with head office in Abuja, and Noor Takaful Insurance Company based in Lagos State. Although there is still a misconception about Takaful Insurance that it is a scheme for the Muslims, the two operators believe that with increased awareness and education they will correct this misconception. The chairman of Noor Takaful Insurance, Ambassador Shuaibu Ahmed, said Takaful is about joint guarantee, whereby individuals jointly guarantee themselves against any loss or damage. The CEO of Jaiz Takaful Insurance, Momodu Musa Joof, said his company’s products are inspired by the need for customers to benefit from the contributions they pay as policyholders.
There are 38 real estate investment trusts (REITs) in Singapore’s stock market. The REIT with the worst performance over the last 12 months is Sabana Shariah Compliant REIT (SGX: M1GU), whose units have fallen by 49% in price to S$0.36 currently. Sabana REIT is unique for being the world’s first Shariah-compliant REIT. In the third quarter of 2016 Sabana saw its gross revenue decline by 9.7% to S$23.0 million while its net property income shrank by 24% to S$13.9 million. Although the REIT’s portfolio occupancy rate managed to step up from 88.8% in the second quarter of 2016 to 89.2%, the number is still lower than the 91.7% seen a year ago. Market researcher Knight Frank projected a decline in industrial rents in Singapore of 6% to 8% in the fourth quarter of 2016. Put another way, Sabana REIT’s business environment is in a condition of low demand and oversupply.
#Malaysia’s securities regulator has proposed establishing a fund to invest in the country’s Islamic finance funds and make them more attractive to institutional and foreign investors. The proposed fund is part of an Islamic fund and wealth management blueprint launched on Thursday. It would invest in multi-currency Islamic investment products managed by Malaysian-based asset managers. The fund could address challenges that Islamic funds have faced so far. Few Malaysian-managed funds are offered overseas but this is starting to change. CIMB Islamic Asset Management, for example, this week launched an Ireland-domiciled dollar-denominated sukuk fund. The Employees Provident Fund is launching a RM111.45 billion shariah-compliant retirement fund this month, which could serve as a boon to asset managers in the field.
Jaiz Takaful has unveiled its profit sharing insurance concept to the Nigerian public. The CEO of Jaiz Takaful Insurance, Momodu Musa Joof, said that their products are inspired by the need for customers to benefit from the contributions they pay as policyholders. He added that the concept is very transparent and practical. Jaiz Takaful Insurance is a public limited liability company registered with Corporate Affairs Commission (CAC) and regulated by National Insurance Commission (NAICOM). It is among the first full-fledged Takaful insurance providers in Nigeria which are shariah compliant and it is now open for business to Muslims and non-Muslims across Nigeria and beyond.
The planned China-Pakistan Economic Corridor, or CPEC, is expected to bring the full potential of Islamic finance in infrastructure funding into action. The CPEC will see €54bn in investments up to 2030 to create or expand highways, railways, ports, airports, power plants, solar parks and wind farms, pipelines and optical fibre lines. Pakistan’s Finance Minister Ishaq Dar has repeatedly emphasised that Pakistan wanted to make Shariah-compliant financing its first choice for infrastructure and long-term financing needs. In fact, the government plans to shift between 20% and 40% of its debt financing to Islamic sources from conventional ones, which is also the case for CPEC projects. Co-financing for the corridor comes from Chinese state loans, as well as from the Asian Development Bank and the new, China-backed Asian Infrastructure Investment Bank. The CPEC is predicted to create more than 700,000 direct jobs up to 2030 and add two to 2.5 percentage points to Pakistan’s annual economic growth.
The Brookings Institution published its new study entitled "Change of pace: Accelerations and advances during the Millennium Development Goal era". The paper examines which trajectories changed, for better or worse between 2000 and 2015. The three key findings of the study are the following: firstly, at least 21 million extra lives were saved due to accelerated progress. During the 2000s there were major accelerations in rates of progress. Secondly, acceleration varied considerably across issues and geographies. Positive changes were concentrated in sub-Saharan Africa and low-income countries, as classified by the World Bank in 2000. Thirdly, low-income country acceleration versus middle-income country gains shows a major difference in trends among low-income countries (LICs) versus middle-income countries (MICs). LICs indicated more acceleration but smaller relative gains, while MICs tended to see larger relative gains but less acceleration.
For Islamic banking, the opening up of Iran is a huge development, as Iranian banks make up the world’s largest financial system based on Islamic law. A large number of sukuk and other Islamic securities from Iran are expected over the next few years. Estimations are that there are over 150 Iranian companies considering Islamic sukuk sales. Iran also requires funds for its infrastructure development programs estimated at around $1 trillion over the next decade, according to a report published by Forbes. Islamic banks in the region are building their activities in key sectors of the economy. Retail banking has traditionally been the mainstay of Islamic banking in the region. Here, investment in digital and smartphone banking will be crucial in future.