Gulf Times

#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.

Rise of #Islamic #finance meets #human #capital #gap

The strongly growing popularity of Islamic banking and Islamic finance and its increasing global spread has led to a considerable undersupply of talent in this sector. Both the Middle East and Southeast Asia, but also new regions currently adapting to the alternative finance system such as in Africa and Central Asia are effected.

Estimations are that there is a shortfall of between 8,000 and 10,000 in main Islamic finance fields in Gulf Cooperation Council countries alone, plus more in peripheral sectors such as law and regulatory affairs, financial technology, insurance and others. Altogether, as the industry continues to grow, at least 56,000 people will be needed to serve the Islamic financial sector in the coming years, according to the Finance Accreditation Agency of Malaysia.
“Islamic banking assets in six core markets – Qatar, Indonesia, Saudi Arabia, Malaysia, the UAE and Turkey – are estimated to reach a combined asset volume of $1.8tn by 2019,” says Dr. Amat Taap Manshor, the FAA’s CEO. “But the human capital meant to support the industry is still in its infancy, and shortages will be felt most acutely in the capital market sector,” he added.

Barwa Bank almost finishes review of #merger recommendations

Barwa Bank has almost finished legal and financial studies regarding its merger with Masraf Al Rayyan and International Bank of Qatar (IBQ). Barwa Bank CEO Khalid al-Subea said that any development in this regard will be announced through a joint statement by the three banks. Barwa Bank's recent Al Majd initiative offers its clients an exceptional banking package within the framework of various ongoing national initiatives. Barwa Bank also announced the launch of its new Shariah-compliant savings account that offers high flexibility and profit rate of an expected 3%, where profits are paid on a quarterly basis. The account allows clients to withdraw once every quarter up to 25% of the current balance.

#Takaful remains challenged sector within Islamic finance industry

While Islamic banking is on a solid path to form competitive ecosystems within the global finance industry, takaful is still an underperformer within the sector. A look at the figures shows that takaful remains a small-volume and fragmented industry with total contributions of just $25bn and only around 300 takaful and retakaful operators worldwide. In comparison, the global volume of life- and non-life insurance was worth $3.6tn in contributions in 2016, according to figures from Allianz Group. According to Deloitte, the challenges are underdeveloped risk management and internal controls, improvable operational and business excellence, achieving better product governance and strategy, governance and regulatory compliance and a lack of talent building. Adding to these issues is that takaful is currently concentrated on just a few world regions. Most Islamic jurisdictions have untapped market potentials, but takaful operators are struggling with product innovation and general outreach to uninsured persons.

Islamic finance industry hampered by global economic conditions

The Islamic Financial Services Board (IFSB) released its IFSB Industry Stability 2017 Report. It states that global economic volatilities, consistently low oil prices and reduced demand for credit are among the factors that currently weigh on the Islamic financial service industry. The study says that 2016 marked another year of slower growth amid adverse macro-economic conditions. They include adjustments in the value of global Islamic banking assets in US dollar terms on the back of exchange rate depreciations in countries such as Malaysia, Turkey and Indonesia, as well as the persistent lack of global standardisation, and lower liquidity and profitability compared to the conventional banking sector. According to the IFSB, the global size of the Islamic financial service industry has not changed much, with total Islamic finance assets just slightly increasing to $1.89tn from $1.88tn. Another factor that affected asset growth was the currency depreciation in Iran, the world’s largest Islamic finance jurisdiction in terms of assets.

Islamic finance sharpens its profile in Southeast Asia

#Malaysia’s eastern region Sarawak will host this year’s World Islamic Economic Forum (WIEF) from November 21 to 23. According to Sarawak’s Deputy Chief Minister Awang Tengah Ali Hasan, the state will use the forum as a platform to promote Islamic investment opportunities in various industries. He added that Sarawak was currently also undergoing a rural transformation programme and had designated 77,000 hectares of land for the development of a halal hub. The deputy minister said the WIEF will also focus on strengthening the partnership between Muslim and non-Muslim communities. The conference is expected to attract about 2,000 potential participants and representatives of various sectors. In another development, Islamic finance will soon make its foray into Cambodia, which is home to an estimated 300,000 Muslims. Two Malaysia-based Islamic financial institutions are expected to open their first branches by the end of the year and in 2018. Another recent highlight for Islamic finance was the Brunei Darussalam Islamic Investment Summit 2017 held on August 2 and 3.

#Indonesia takes big step towards #boosting I#slamic #finance industry

Indonesia, that is so far a behind in developing a comprehensive Islamic finance industry, has taken a big leap towards the creation of a supportive framework for Shariah-compliant banking end of July. On that day, the country’s President Joko Widodo inaugurated the National Committee for Shariah Finance, as part of the government’s push to make Indonesia a global hub for the Islamic financial industry.
It has been tasked to accelerate, expand and develop Shariah-compliant financial services to support the country’s development, National Development Planning Minister Bambang Brodjonegoro said in a statement. The ministry is the one that introduced its master plan for the development of the country’s Islamic finance future last year.

KFH is planning #expansion in #China

Kuwait Finance House (KFH) is considering expanding into China and Egypt as the region’s banking sector nears saturation. According to bank's CEO, Mazin Saad al-Nahedh, there are opportunities for a Kuwaiti bank to operate in China. He added that the bank was looking at options to buy a license to operate in Egypt as well. KFH is cautiously optimistic about its operations in Turkey. Its subsidiary Kuveyt Turk contributes 22% to the group’s bottom line as of the end of June. The bank expects credit growth of no less than 20% to 25% over the next three to four years as long as base rates remain where they are. As KFH continues its restructuring and sale of non-core assets, the bank is studying offers for its stake in Aref Investment Group, which it aims to sell by the end of the year. KFH is also planning to buy Bahrain’s Ahli United Bank, but hasn't started negotiations yet.

Shariah-compliant, gold-backed #digi-coins could change Islamic finance

The launch of the first-ever Islamic finance-compatible cryptocurrency could be a game changer for the entire Islamic banking industry. OneGram calls itself the world’s first Shariah-compliant cryptocurrency whose value is backed by actual gold reserves. The company started selling a total stock of 12.4mn digital tokens on May 21 that are backed by one gram of gold each. The Initial Coin Offering programme aims to raise around $500mn. At its sister company GoldGuard, OneGram will store the physical gold in a vault inside the Dubai Airport Free Zone. OneGram’s founder and CEO, Mohammed Ibrahim Khan, says he felt inspired by Bitcoin whose use is subdued in the Arab world. He added that OneGram has Shariah scholars on its board who ensure that the company is fully compliant with Islamic finance requirements. According to Mohammed, large-scale funds of more than $200mn have been committed by Dubai-based Tabarak Investment Capital. The sale of the OneGram coins is going on until September 22 this year and no more coins will be ever issued from then.

#Qatar has ninth-strongest Islamic finance industry

The state of Qatar lists rank nine this year on the annually published Islamic Finance Country Index. The index is part of the Global Islamic Finance Report 2017 and was compiled by London-based Islamic finance consultant firm Edbiz Consulting. Qatar’s ranking is testament to its solid Islamic finance industry which is built upon solely fully-fledged Islamic banks. The country with the world’s strongest Islamic finance industry remains Malaysia, followed by Iran, Saudi Arabia, UAE and Kuwait. This is the second year in a row that Malaysia has been in the top position, taking over from Iran in 2016. According to Edbiz CEO Sofiza Azmi, in the list of 48 countries, there are 14 that saw a decrease in their scores. Among the 13 countries that improved their ranking, Tunisia took the biggest leap. Other big gainers are Pakistan and Kazakhstan. The report concludes that the ranking suggests that countries with large Muslim populations are the future frontiers for growth in Islamic banking and finance.

Islamic finance is making a case for ‘impact investment’

Islamic finance is increasingly being discovered as a vehicle to support sustainable development goals by a method called "impact investing". For this the Islamic Development Bank (IDB) and the Istanbul International Center for Private Sector in Development launched the "Global Islamic Finance and Impact Investing Platform". A report was also launched which sheds light on the potentials of Islamic finance in impact investment. The basic idea is that ethical values within finance are deeply rooted in Islamic theology and jurisprudence. Ethical and sustainable investment products can tap a wider range of demand if they are made Shariah-compliant to appeal to Muslims. At the same time, non-Muslims may embrace them if they are designed for an ethical purpose. Malaysia was the first to announce guidelines for the issuance of socially responsible sukuk as early as 2014. Meanwhile, Islamic finance companies from the UK, Canada, Hong Kong and GCC countries joined impact investing through Islamic finance.

#Algeria edges towards Islamic finance as energy income dives

Algeria is edging slowly towards offering banking services to suit more religiously conservative investors. The country is now looking for more ways to offset the sharp fall in oil prices and its energy revenues. Six state-run banks plan to start Islamic financial services by the end of the year or in early 2018, and a national Shariah board that would oversee Islamic banking is also planned by the end of 2017. However, Algeria’s Islamic finance plan still faces huge barriers. It lacks a legal framework and technical expertise. Algeria is far behind North African neighbours Morocco and Tunisia, which have started to develop legislation for Islamic finance and sukuk bonds, overseen by a central religious board. Algeria is targeting domestic savers rather than foreign investors. Many local people distrust the state-owned banks and keep large sums at home, untaxed, in Algerian and foreign currency.

#Japan keeps making inroads into global Islamic finance

Japan continues foraying into the global Islamic finance sector in order to benefit from previously untapped opportunities. The Japanese Mizuho Bank through its Malaysian subsidiary became the next bank to enter an Islamic finance deal by signing a murabaha credit facility agreement. The deal is valued at $300mn and was signed by Mizuho Bank and the Islamic Corporation for the Development of the Private Sector (ICD). The two-year financing term will be used to fund projects undertaken by ICD in its member countries and is the first cross-border bilateral Islamic facility for Mizuho Bank. The agreement follows a similar deal between the ICD and Bank of Tokyo-Mitsubishi UFJ on a $100mn murabaha facility back in 2014. Japan’s capital market regulator Financial Services Agency supports Japanese banks to conduct Islamic finance business by allowing their foreign subsidiaries to take Islamic deposits. Currently, the sector is waiting for amended banking regulations to enable banks to provide Islamic banking products on the domestic market for the first time.

London keen to maintain role as Islamic finance hub

Amid Brexit-fuelled uncertainty, London is trying to do its best to stay afloat as one of the most important hubs for Islamic finance in the Western world. There are now five fully-fledged Islamic banks, one Shariah-compliant hedge fund manager and one dedicated takaful provider in the UK. Also, there are over 20 banks providing Islamic financial services in “banking windows,” more than in any other European country. They benefit from the depth and liquidity of London’s capital markets, the large pool of expertise offered by specialists. Furthermore, the London Stock Exchange is a key global venue for the issuance of sukuk.
Experts say that one of the biggest drawbacks of Brexit for the entire UK banking industry will be the loss of “passporting” privileges that allow UK banks to access the single EU market without restrictions. Another issue is legal uncertainty for existing Islamic banks over to what extent current banking and financial regulations – which have largely been influenced by EU law – will change.

Shariah-compliant #pension schemes gaining popularity

Shariah-compliant pension funds are entering the wealth and asset management segment worldwide. One example for a state-backed Shariah-compliant pension fund is the Islamic savings scheme option introduced in Malaysia. Here $25bn of the fund’s entire assets of $160bn have been dedicated to the new Shariah-compliant investment line. According to Moody’s global head of Islamic finance, Khalid Howladar, Shariah-compliant investments now represent 15% of the fund’s entire investment, which makes it the largest standalone Islamic pension fund globally. Another country where Islamic pension funds are in growing demand is Pakistan. A number of banks, financial service providers and fund managers offer private or voluntary state-supported retirement savings schemes whose investments are made strictly in Shariah-compliant instruments. In the Western World, the UK and Australia were the first to offer Islamic pension schemes. In the Gulf Cooperation Council (GCC) countries, Islamic pension funds are yet comparably small, particularly state-backed ones.

#China-#Pakistan corridor set to unleash potential of Islamic finance schemes

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.

#Debate #continues in #India about #Islamic #finance

It seemed as if the path had been cleared for the introduction of Islamic finance in India after the country’s central bank made a proposal to launch Islamic banking windows at conventional banks. With two crucial effects awaiting: Firstly, greater financial inclusion of unbanked Indians, not necessarily only around 170mn Muslims, but also those interested in ethical banking, and, secondly, an increased influx of investments from Muslim regions, namely the Gulf, into India.
However, the proposal got rebuffed in December by the Indian finance ministry which, in a surprising declaration, argued that Islamic banking was “not relevant” any more in achieving the objectives of financial inclusion as the government had already introduced other programmes for all citizens towards that end.

India’ Minister of State for Finance Santosh Kumar Gangwar also said that a number of legal changes would become necessary even if limited Islamic finance products were to be introduced, which would result in “numerous legal hurdles.”

Silatech signs new accords to support Arab youth

Silatech founder and chairperson HH Sheikha Moza bint Nasser witnessed the signing of a number of Memorandums of Understanding (MoU) with its partners to support the Arab youth. HH Sheikha Moza also chaired the first meeting of the new Board of Trustees of Silatech at which Silatech’s annual performance 2016 and strategy and achievements report 2016 were presented. Silatech signed an agreement with QNB Africa to empower Youth in Sudan with Sama Al Shabab Portfolio. This way QNB Sudan will direct 12% of its portfolio towards financing youth enterprises. Another MoU to employ Tunisian youth was signed in order to create 50,000 jobs by 2020 and reduce migration of Tunisian competencies abroad. In another agreement, Silatech partnered with the World Congress for Muslim Philanthropists to develop the first innovative Micro-waqf platform to connect youth entrepreneurs with donors and investors.

QIIB expects to receive licence for Moroccan JV before year-end: CEO

#Qatar International Islamic Bank (QIIB) expects to secure the licence from the Moroccan authorities for its joint-venture bank in the kingdom before the year-end. CEO Abdulbasit A. al-Shaibei said QIIB firmly believed that Morocco presented a 'good opportunity' for the bank, being a gateway to North Africa, which is in need of Shariah-based, value-driven banking. He said QIIB and its partners in Morocco have identified the branches and installed the IT systems. While there are opportunities, al-Shaibei said any new market would pose some challenges. In terms of overseas ventures, QIIB will now be focused only on Morocco. Al-Shaibei said 2016 was a challenging year not just in the Middle East, but everywhere. However, he said he remained very optimistic about the Qatari economy and the future opportunities of the country.

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