Gulf Times

#Emirates said to seek $1bn #sukuk to diversify funding

Dubai's Emirates airline plans to raise as much as $1bn through sukuk before higher US interest rates push up borrowing costs. A spokeswoman said the company was constantly seeking diverse sources of funding, including bank finance, operating leases, Islamic financing, sukuk and bonds. Governments in the Gulf oil-exporting countries borrowed from international bond markets at a record pace in 2017 as they sought to cover budget deficits worsened by low oil prices. Saudi Arabia raised $21.5bn through sukuk and other bonds, followed by Abu Dhabi’s $10bn issue and Kuwait’s $8bn fundraising. Emirates raised $913mn through a sukuk issue with a 10-year lifespan in 2015. Proceeds funded the acquisition of four Airbus A380-800s, the world’s largest passenger aircraft. Airbus recently questioned the future of the A380, in case Emirates does not place a crucial order for new airplanes.

Digital currencies remain tricky subject for Islamic finance

The role and status of cryptocurrencies remains a hotly disputed issue in the Muslim world. While entrepreneurs and Islamic finance startups openly encourage the use of digital currencies, others keep thinking otherwise. The latest escalation in the dispute was a fatwa against all cryptocurrencies issued by the Egyptian Grand Mufti Shawki Allam. He said that since trading of cryptocurrencies was similar to gambling, it was forbidden in Islam. His fatwa came after Bitcoin in mid-December soared to almost $20,000 per token but then lost one third of its value in just 24 hours. In addition, Egypt’s legitimate bodies also do not consider trading a virtual currency to be acceptable. However, nations that play a substantial role in Islamic finance, namely Malaysia, Indonesia, UAE, Turkey and even Saudi Arabia have no problem to accept cryptocurrencies. In Dubai, OneGram was the first company to set up the Shariah-compliant cryptocurrency called OneGramCoin. There are already two real estate developers in Dubai, which accept payments in digital currencies.

#Qatar witnessing robust momentum in #fintech, says Sheikh Abdulla

According to Qatar Central Bank (QCB) Governor Sheikh Abdulla bin Saoud al-Thani, Qatar is witnessing a robust momentum in fintech. The country is opening up increasing opportunities for digital payments, money management, lending, loyalty and rewards, remittances, investments and advisory services. Sheik Abdulla said the QCB’s recently launched new strategy would need to ensure that fintech firms are enhancing the financial system. Although there have been some success stories, he said banks and insurance companies in the region have been slow to embrace innovation. The fintech industry in Qatar remains very small, but it has seen a few startups such as Hasalty. As a mobile application, Hasalty improves financial literacy for children supported by the Qatar Business Incubation Centre.

The new #investment trend: Islamic ETFs

The growing popularity of Islamic finance has led to the constant development of new Shariah-compliant investment products. Most of those products have been developed and popularised in Malaysia. Islamic Exchange Traded Funds, or Islamic ETFs have become increasingly popular among both institutional and retail investors globally. They have low management costs, high liquidity, relative safety and solid appreciation potential as a mid- to long-term investment. The main difference from conventional ETFs is that Islamic ETFs track only benchmark indices that consist of Shariah-compliant stocks or assets. An Islamic ETF is managed strictly under Shariah principles and overseen by an appointed Shariah committee. This naturally increases costs and results in higher fees compared to conventional ETFs. To tap the huge potential, Islamic ETFs need to be made cost-effective and get incentivised by governments to attract both institutional and retail investors. In the Gulf Cooperation Council (GCC) countries ETF is relatively new. In the GCC more promotion is needed to bring Islamic ETFs out of their niche.

Global #sukuk issuance jumps 45.3% to $98bn in ’17: S&P

According to Standard & Poor’s (S&P), global sukuk issuance increased 45.3% year-on-year to $97.9bn in 2017. This performance was primarily driven by good liquidity conditions in the Gulf Cooperation Council (GCC) countries. S&P head of Islamic Finance, Dr Mohamed Damak said the outlook for sukuk in 2018 looked uncertain. He added that tighter global liquidity conditions, mounting geopolitical risks and slow progress on the standardisation of Islamic finance products would continue to hold the market back. The US Federal Reserve is expected to increase rates by 75 basis points. Central banks in the GCC countries would probably mirror such an increase due to the peg of their currencies with the US dollar. Regarding retail sukuk, the agency believes that development of this part of the market necessitates a specific regulatory framework. Retail sukuk issuance has been successful in some countries where authorities provided a tax incentive to drain a portion of the savings toward this market.

#Qatar needs to develop regulatory framework to cement Islamic finance lead: QFC

According to a Qatar Financial Center (QFC) study, Qatar needs to reform interbank liquidity management to study leakages from Islamic banks through interbank finance. Moreover, there is also a need to develop a regulatory framework and promote green bonds and sukuk. So far Qatar has led the world in ensuring in the authenticity of Shariah-compliant bank assets with Qatar Central Bank and the QFC Regulatory Authority requirements separating Islamic and conventional banks. To ensure this segregation, there should be a review of interbank markets to limit flows from Islamic banks to conventional ones in their liquidity management operations using 'Murabaha'. The report also stressed the role of a centralised guidance on fit and proper criteria for Shariah scholars and promoting Fintech development.

QIIB high ratings by Moody’s, Fitch reflect #Qatar’s economic strength, says Al-Shaibei

QIIB announced that Moody’s and Fitch Ratings have affirmed its ratings at 'A2' and 'A' respectively. Moody’s said that its rating is based on several considerations, one of which is that the bank maintains high levels of liquidity and a strong capital base. Fitch explained that immediate risks from the diplomatic crisis to the bank’s overall standalone credit profile has reduced. The bank’s funding profile has generally stabilised from the back of outflows of nondomestic funding and the Qatari authorities have continued to provide funding support. QIIB's CEO Dr Abdulbasit Ahmad al-Shaibei said this strong rating was a confirmation of the strength of the Qatari economy and its ability to overcome various types of risks. He added that the ratings of Moody’s and Fitch proved that QIIB had a solid financial position, confirmed by its financial results, as in the third quarter of 2017, when the bank achieved a growth of 5.1%.

#Qatar plans central Shariah committee for Islamic banks

Qatar is planning to set up a central Shariah committee for Islamic banks to create consistency in Islamic finance. According to Central Bank Governor HE Sheikh Abdulla bin Saoud al-Thani, this move ensures that the country’s financial regulations are benchmarked to international standards. A recent report by the World Bank and the Bahrain-based General Council for Islamic Banks and Financial Institutions suggested further action by regulators to strengthen the sector’s governance. One of the action points of the Qatar Central Bank (QCB) is assessing remuneration and commission framework of financial advisers and insurance intermediaries and implementing an appropriate conduct of business regime. In 2016, the QCB issued new regulations for insurers on licensing, controls, accounting, risk management and actuaries’ reports and also stipulated minimum capitalisation levels and limits on risky asset classes. QCB's new strategy is looking at supporting the growth of the asset management sector through aligning requirements across regulatory frameworks.

Confidence, but some uncertainty remains: Islamic finance trends

In 2018 the expansion of Islamic finance into non-Muslim jurisdictions is set to continue. Conventional investors have started to appreciate the potential of Islamic finance at times of a persistent low-to-zero-interest rate environment. According to data collected by financial intelligence firm Dealogic, issuance of Islamic debt by non-Muslim countries climbed to a three-year high in 2017. Islamic finance is perceived by them as being more stable compared to the conventional banking system. However, the industry is likely to face a continued backlash in the GCC caused by the current economic woes in the region, particularly in Saudi Arabia. According to rating agency Standard & Poor’s, Islamic finance assets should be back in growth mode in 2018 in the GCC, but at a slow pace of just around 5%. One impulse for growth could be the creation of Shariah-compliant pension schemes modelled after Malaysia, as well as other obligatory social insurances in GCC countries. A new trend is likely to transform into a new Islamic finance asset class in 2018: green and sustainable sukuk, as part of impact investing.

Islamic finance seen adapting to new economic conditions

The Islamic Finance Development Report and Indicator (IFDI) 2017 was presented at the 24th World Islamic Banking conference 2017 held from December 4 to 6 in Bahrain. The report was commissioned by the Islamic Corporation for the Development of the Private Sector (ICD) and put together by business intelligence provider Thomson Reuters. The report uses five indicators to measure the development of the $2.2tn Islamic finance industry, which are quantitative development, knowledge, governance, corporate social responsibility and awareness. This year, Malaysia, Bahrain and the UAE kept leading the IFDI country rankings for the fifth consecutive year, while the GCC remains the leading regional hub for the industry. Oman remained unchanged on rank four, while Saudi Arabia dropped two notches to rank seven, and Jordan, Qatar and Indonesia fell one notch each to ranks nine, ten and eleven. The big newcomer is the small Southeast Asian sultanate of Brunei, which made a jump from rank 14 to rank 9.

Islamic #funds, asset management sector poised for growth

A report by Malaysia International Islamic Financial Center shows that the Islamic fund and wealth management sector is expected to grow significantly. The report notes that Malaysia and Saudi Arabia have the largest market share of the global Islamic funds and wealth management industry, together holding more than 67%. Saudi Arabia contributed a 35.6%-share of $25.2bn and 209 Islamic funds at end of the first quarter of 2017, while Malaysia has the most number of Islamic funds globally with 388 funds managing a total AuM of $22.6bn. The growth of the sector stems from the fact that global fund and asset managers increasingly notice the potential of this sector. Since it is now also accessible to institutional investors, as well as non-Muslim investors, they began using it as a new way to diversify investments. In a projection by Thomson Reuters, the global Islamic funds and asset management industry remains poised for growth and should increase in volume by more than 8% to $77bn by 2019.

Dana Gas seen returning to table after London ruling

Dana Gas plans to appeal the UK court ruling on $700mn of its outstanding sukuk. According to Dana Gas, the decision by the London court is flawed because the UAE-based company was barred from participating in the proceedings due to an injunction at home. Judge George Leggatt said the English law contracts are enforceable in the case. Dana was challenging a provision called purchase undertaking, which allowed the trustee on behalf of investors to force Dana to buy them out of the agreement at par. Dana shares fell as much as 5.6% on the Abu Dhabi stock market on Sunday. The court ruling puts investors one step closer to resolving a dispute over the sukuk that highlighted one of the Islamic finance industry’s weak spots.

#Pakistan eyes $3bn debt through #sukuk, Eurobonds

Pakistan has allowed immediate borrowing of up to $3bn from international debt markets by floating three sovereign bonds. The country is going to float the bonds in the largest transaction to take pressure off the central bank’s foreign exchange reserves that are depleting at a rapid pace. Earlier, the government borrowed $2bn in 2014 through similar capital market transactions. A consortium of banks have initially indicated that five-year sukuk, ten-year Eurobond and another 30-year Eurobond with combined proceeds of around $2bn to $3bn can be floated. The cabinet waived a dozen income taxes to make the float attractive for foreign investors. Road shows are expected to be held in the UK, US, Dubai, Singapore and Hong Kong. Standard Chartered Bank, Industrial and Commercial Bank of China, Citibank and Deutsche Bank were appointed for the Eurobond issue. For the proposed Sukuk, the Fourth Pakistan International Sukuk Company is being incorporated by the Finance Division.

#Bangladesh’s Islamic finance market in need for proper regulation

Bangladesh has a burgeoning Islamic finance industry focused on the retail market, but there is no comprehensive legal framework for the sector. Bangladesh has 8 Islamic banks and 15 non-Islamic banks that offer Islamic-banking services through Islamic windows. Currently, the Islamic finance sector in the country is led by Islami Bank Bangladesh which manages around 90% of Islamic-banking assets and deposits. Takaful is also growing in popularity. Bangladesh currently has 11 companies for both the life and non-life takaful market at a combined asset base of close to $1bn and a market share of 17%. The central bank has been working for considerable time on an industry-wide regulation to expand beyond retail banking. At present there are no regulations for sukuk issuances even though there would be huge market for both sovereign and corporate sukuk. Other challenges than the absence of comprehensive regulations are a lack of service diversification and a lack of a skilled workforce.

#Sukuk momentum seen as sales poised for record

Cheap oil and ambitious infrastructure-building programmes have set the scene for a record year for Islamic bond sales. In the Arabian Gulf, Saudi Arabia led the way with a $9bn global offer in April, while Oman and Bahrain have also sold sukuk. In Malaysia, funding for rail and other projects is driving ringgit issuance by state- owned companies. According to data compiled by Bloomberg, sukuk sales have reached $42.2bn so far this year. CIMB Islamic Bank has arranged the most Islamic note sales by value this year. The bank's CEO, Mohamed Rafe Mohamed Haneef, expects this momentum to be continued through to 2018. Besides the Saudi offer, the biggest sales so far this year are Hong Kong with $1bn, Indonesia with $3bn, Turkey with $1.25bn, Oman with $2bn and Bahrain with $850mn of sukuk in September. In Malaysia, state-owned companies DanaInfra Nasional and Prasarana Malaysia have been among the biggest corporate issuers this year.

#Green #sukuk set to become sustainable #investment tools

Sukuk investing in environmentally sustainable projects has become increasingly popular in the recent past. In the latest development, Malaysia saw its first green sukuk in July, when solar power firm Tadau Energy came out with a green sukuk with a tenure of 16 years, raising 250mn ringgit ($59.2mn). Malaysia’s Securities Commission came up with a Sustainable Responsible Investment Sukuk Framework as early as in 2014. This regulation clarified that proceeds of such sukuk should be used to preserve the environment, conserve the use of energy and promote renewable technologies. The World Bank lauded Malaysia for its innovative approach. Another initiative emerged in the Gulf Cooperation Council. The Green Sukuk and Working Party was set up as a collaboration of experts in project development, environmental standards, capital markets, and Islamic finance. Founders include Masdar City’s Clean Energy Business Council, the Climate Bonds Initiative and the Gulf Bond and Sukuk Association. The group is now developing green sukuk for interested issuers, including governments, companies and development banks.

#Islamic #finance climbs higher on UNDP agenda

The 72nd session of the UN General Assembly was held from September 19 to 25 in New York. The event was co-organised by the Islamic Development Bank (IDB) and the UN Development Programme (UNDP). It emphasised that the successful implementation of the SDG (Global Goals) require a significant amount of financial resources. The UNDP once more mentioned Islamic finance and how it could be tapped as a scalable funding source for global development. According to Magdy Martínez-Soliman, UN assistant secretary general, the gap in SDG financing is currently estimated at $2.5tn every year. He noted that official development assistance alone is not an adequate source of financing, but Islamic finance could effectively come to the rescue. As a key driver, the IDB has established the Global Islamic Finance and Impact Investing Platform (GIFIIP) to create the framework of the investing ecosystem. The GIFIIP’s role is also the matchmaking between Islamic finance investors and other players, such as business incubators, development organisations and inclusive business ventures seeking capital.

#Sukuk market great hope may never recover from Dana

Dana Gas is an independent natural gas supplier based in Sharjah. Its dispute with investors is now making its way not only through UAE courts, but through English courts as well. Dana’s gone so far down the road to avoid its debt repayments that the affair could easily scare international investors away from the sector. The fallout can be seen in the new issue market. While sovereign sales are carrying on, the broader corporate and financials market in the Middle East has been awaiting resolution of this dispute. In June Dana claimed that its $700mn outstanding sukuk were non-compliant with Shariah law and the money it paid out to holders of the bonds should be returned. Bondholders objected and suggested an immediate payment of half of the $700mn face amount outstanding and the due date for the balance extended for three years. The case is now disputed in Sharjah and London, where it stays until October 12, to allow court proceedings in Sharjah to conclude.

#Brexit suspense casts shadow over #UK as an Islamic finance hub

Uncertainty over the UK’s future status as a financial hub after leaving the European Union (EU) is already casting a shadow over London’s Islamic finance sector. It is estimated that London would lose at least 10,000 banking jobs and 20,000 roles in financial services as clients move €1.8tn of assets out of the UK. The banking exodus would also hit the Islamic finance sector in London, which is the largest globally in a non-Muslim jurisdiction. London currently hosts more than 15 large banks that operate Islamic finance windows and dozens of related service providers. A banking lobbying group has already urged the UK government to introduce post-Brexit laws that make sure that demand for Islamic finance services does not diminish. As long as the UK gives no clear direction whether and how it would excel as a financial hub, competitors will continue positioning themselves as alternative locations. Within the EU, Luxembourg and Dublin, and partly Frankfurt, have good chances to take on roles as Islamic finance hubs for Islamic finance institutions with business in the EU.

QInvest invests in #Spanish #marina OneOcean Port Vell

#Qatar's QInvest has invested in OneOcean Port Vell in Barcelona, Spain. Originally built for the 1992 Olympic Games, the marina recently completed its transformation to a luxury facility, creating the ultimate destination for yachts up to 190m. QInvest will work with the city and port authorities in Barcelona to increase the profile of the marina by investing additional resources in the port infrastructure. OneOcean Port Vell is QInvest's second investment in Spain this year, having earlier invested into a Spanish real estate strategy focused on land developments in Madrid, Barcelona, Valencia and Marbella. The objective is to acquire well-located land parcels across Spain and develop residential apartments for first home owners. QInvest’s revenues from all business lines were QR209mn, resulting in an operating profit of QR113mn and net profit of QR34.6mn in the first half of this year. The bank’s global assets stood at QR4.7bn at the end of June 30, 2017.

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