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Islamic Banking & Finance: What is Holding Back Sharia Finance in #Indonesia?

Despite having the world’s largest Muslim population and despite forming a dynamic emerging economy, Indonesia plays a small role only in the global Islamic banking industry. Islamic banking apparently has a hard time taking off in Southeast Asia’s largest economy. Despite the low penetration of Islamic finance in Indonesia, the country now ranks first in the Islamic Finance Country Index. The country has recently launched the Masterplan of Sharia Economy 2019-2024, with ambitious plans for the future.

Foreign banks invited to open Islamic branches in the #Philippines

With the approval of a new Islamic banking law in the Philippines doors are now open for domestic and foreign banks to open an Islamic banking window or to establish a subsidiary Islamic bank in the country. The law states that it is the responsibility of an Islamic bank, or window, to ensure its compliance with Shariah principles. Like in other Muslim nations without a central regulatory Shariah board, Islamic banks in the Philippines will have to constitute their own Shariah advisory council. Under the law, Islamic banks in the Philippines can offer current accounts, savings accounts, investment accounts and foreign currency deposits, among other financial products. They can also issue Shariah-compliant funding instruments, including sukuk, upon approval by the central bank’s monetary board.

#Philippines central bank approves preliminary Islamic banking regulations

Bangko Sentral Ng Pilipinas has approved preliminary regulations for Islamic banks and Islamic banking units. The preliminary policy initiatives of the central bank came after the Islamic banking law was signed by President Duterte on August 22 and became effective on September 15. The preliminary regulations are to jumpstart the implementation of the law. Banks must establish their own Shariah advisory boards to ensure Shariah compliance for their institutions. The Philippines has been accelerating the growth of its Islamic economy sectors in the last couple of years to attract foreign investments and to provide its approximately 10 million domestic Muslim population with an Islamic banking option.

Alliance Islamic Bank Launches Halal in One Programme

Alliance Islamic Bank launched its Halal in One Programme, a halal enterprise ecosystem that aims to help small-and-medium enterprises (SMEs). The programme offers business owners solutions like business advisory, business matching services, and shariah-compliant financing. Alliance Islamic signed a memorandum of understanding with its strategic partner HQC Commerce Sdn Bhd (HCSB) in conjunction with the launch of Halal in One Programme. Alliance Islamic CEO Rizal IL-Ehzan Fadil Azim said SMEs in Malaysia have the advantage to tap into the global halal segment, where 90% of SMEs are not certified. He said Alliance Islamic's Halal in One Programme offers business advisory to help SMEs obtain halal certification from the Department of Islamic Development Malaysia.

Malaysia Plans Digital Banking License Launch

Malaysia becomes the latest to capitalize on the rising trend of digital banking with plans to issue up to five licenses.

Islamic banks ready to support SMEs

The local Malayesean small and medium enterprises (SMEs) are not fully utilising various solutions provided by Islamic banks despite credit availability. The Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) took a survey in Kuala Lumpur and Selangor and about 10,000 SMEs received RM10 billion in funding.

Experts say the odds are against gold dinar

Prime Minister Dr Mahathir Mohamad brought an idea of a gold dinar as an international reserve currency for Muslim countries in preference to the US dollar as the dollar was sometimes unstable. Nazari Ismail, a professor of economics at Universiti Malaya thinks, that the idea is not reliable, as countries as Saudi Arabia, Qatar, Pakistan and Indonesia would be not interested in the prime ministers proposal.

Islamic finance body IILM names new CEO

The International Islamic Liquidity Management Corporation (IILM) has announced on monday that Dr. Umar Aimhanosi Oseni is their new CEO. (IILM) is an international consortium that issues short-term Shariah-compliant financial instruments to facilitate cross-border liquidity management for institutions that offer Islamic financial services.

BIMB group restructuring to finally unfold

The BIMB Holdings Bhd group is set to finally unfold. BIMB announced a series of proposals that will ultimately see it transfer its listing status to its wholly-owned subsidiary Bank Islam Malaysia Bhd. In the first step, BIMB will undertake a private placement of new shares to raise RM800 million to fully settle outstanding sukuk held by Lembaga Tabung Haji (TH). BIMB had, December 2018, done an early partial redemption of RM609.9 million, helping reduce the outstanding amount.

Leaders call for use of alternative currency among Muslim countries against US Dollar

At the ongoing Kuala Lumpur Summit 2019, leaders of the Muslim world have pressed for alternative currency for use in trade and seek independence from US Dollar. Turkish President Recep Tayyip Erdogan said Muslim countries should try to create new transaction systems. He added that Islamic finance needs to be part of the agenda just like in Malaysia. Meanwhile, Iran's President Hassan Rouhani was of the view that Muslim nations should come up with a new own cryptocurrency. Malaysia's Prime Minister Tun Dr Mahathir Mohamad also believes that a united cryptocurrency is needed for Muslim states, as a cryptocurrency can cut through bureaucratic and market fluctuations. He added that utilising cryptocurrency or national currency would help attain independence from over-reliance on the US dollar.

#Qatar reaches out to Shariah market in #Malaysia, #Turkey

Qatar has taken the lead in reaching out to Malaysia and Turkey through which the country aims to be the dominant player in the global Shariah financial landscape. Under the proposed plan, Turkey would cover Islamic finance needs in Europe, Qatar would serve the greater Middle East and North Africa and Malaysia will continue to serve the Asian markets. The London Stock Exchange is currently a global venue for the issuance of sukuk, while Hong Kong and Luxembourg have also made inroads but Qatar believes the market should be led by Muslim countries. Qatar Financial Center (QFC) Authority CEO Yousuf Mohamed al-Jaida has a vision to cover the entire globe’s Islamic financial transactions between three financial centres, Doha, Istanbul and Malaysia, therefore he sees a need to share platforms and technology.

Alibaba-backed Indonesian multifinance fintech Akulaku planning Islamic roll-out

Indonesian fintech Akulaku will launch its Shariah-compliant platform in the first half of 2021. The Jakarta-based company is a leading online multifinance provider in Indonesia and now it wants to enter the Islamic sector with Akulaku Syariah to tap into local demand. Akulaku in January raised $100 million from investors including Alibaba’s financial services arm Ant Financial. Akulaku disbursed around 4 trillion rupiah ($285.34 million) in loans during January-October this year and announced on Dec 12 that it wants to raise offshore financing to help it reach its target of 6 trillion rupiah next year. Akulaku started in 2014 with virtual credit cards and moved into providing services for a range of virtual payments, from phone and mobile top-ups to utilities bills. It now also offers P2P lending, financing, and e-commerce in Indonesia, and also has a presence in the Philippines, Vietnam, and Malaysia.

WWF calls on Asean banks’ 'proactivity' in addressing environmental risks

According to the World Wide Fund For Nature (WWF), banks belonging to the Association of Southeast Asian Nations (Asean) need to shore up regulatory safeguards to address the environmental and climate crisis. WWF’s Head of Asia Sustainable Finance Jeanne Stampe called on Asean banks to be more "proactive" in addressing environmental issues. In Malaysia, Singapore, Thailand and Vietnam, WWF found out financial regulators and banking associations expect banks to develop environmental policies on environmentally or socially sensitive sectors. But WWF said 43% of the banks assessed in these four countries mention having such policies in place, while only 15% disclose these policies. In light of this, WWF recommended regulators to provide more prescriptive guidance to enhance resilience and attractiveness of the finance industry.

#Turkey, #Malaysia, #Qatar can pioneer in Islamic finance

Ready to be taken to the next level, the burgeoning sector of Islamic finance is ready to take root in new regions through Turkey, Malaysia and Qatar. According to Yousuf Al-Jaida, CEO of the Qatar Financial Centre, Malaysia could act as a gateway for Islamic finance into Asia, with Turkey into Europe and Qatar the Middle East and Africa. He stressed that Malaysia was ready with its legal framework to facilitate the sector, while Qatar and Turkey need to step up and do more for the sector. Al-Jaida said these three countries could form a large platform to share experience, technology and knowledge. He is optimistic and sees a bright future, as Islamic finance is now growing at an even quicker pace than conventional finance.

Putting Children At The Center Of Africa-China Poverty Reduction Agenda

According to UNICEF, investing in children is the fundamental solution to end child poverty and inequality and set the foundation for sustainable and inclusive economic growth. The statement was made during the Africa-China Poverty Reduction and Development Conference at the 10th Forum on China-Africa Cooperation (FOCAC). The 10th FOCAC Africa-China Poverty Reduction and Development Conference, co-hosted by China’s State Council Leading Group Office of Poverty Alleviation and Development (LGOP) and the Uganda Ministry of Agriculture, Animal Industry and Fisheries, had the theme of "Partnership for Transformation in Africa". Delegates expressed the urgent need to invest in social policies and infrastructures which combat child poverty in Africa, where around three out of every four children are affected by multi-dimensional poverty.

Time for #Malaysia to lead Islamic social finance endeavours

According to the State of the Islamic Economy Report 2018/19, Malaysia has been the leader of the Islamic economy ecosystem for five consecutive years. In addition to Malaysia’s impressive performance as the front-runner in the commercial sector of Islamic finance, perhaps it is time for the country to gear itself up to also lead the revitalisation of Islamic social finance instruments. These instruments could play a vital role in reducing poverty and addressing challenging socio-economic problems such as education, unemployment, malnutrition and health issues. In Malaysia, the utilisation of philanthropic Islamic social finance instruments such as zakat and waqf seems to be restricted because of regulatory hurdles. The concept of sadaqah seems to be underutilised, although there is a huge potential in it. A product called Sadaqa House, initiated by Bank Islam Malaysia Berhad (BIMB), is an example of its application.

Green investments, financing gain traction in #Indonesia despite lack of investor awareness

The "green is the new black" sustainability trend has reached the financial world as investors are slowly turning to invest in environment, social and governance (ESG)-compliant assets in Indonesia. Rising awareness of the mounting environmental and social problems has prompted global investors to invest in sustainable assets that comply with ESG standards. Although this type of investment has been gaining popularity in the developed markets for the past several years, Indonesia seems slow in adopting the trend. For BNP Paribas Asset Management Indonesia, sustainable mutual funds only accounted for 4% of its total assets as of September 2019. The fund manager currently offers three ESG-compliant mutual fund products to its clients that adhere to sustainable and responsible investment.

SC launches new roadmap to drive sustainable investments

The domestic capital market is expected to play a critical role in helping Malaysia meet the estimated RM45 billion required to finance its long-term sustainable development goals. Securities Commission Malaysia (SC) chairman Datuk Syed Zaid Syed Jaffar Albar said climate change poses physical and financial risks to companies. The change to more sustainable practices requires investments in new technologies and funding which carries risks with indeterminate outcomes. Malaysia alone is projected to require RM45 billion in the next five years. Therefore, the SC released the sustainable and responsible investment (SRI) roadmap to establish the country as a regional SRI centre. The roadmap identified 20 strategic recommendations based on the SC’s five i-Strategy: the widening of the range of SRI instruments, increasing the SRI investor base, building a strong SRI issuer base, instilling a strong internal government culture and designing information architecture.

#Indonesia’s Alami wants to prove Islamic finance can be profitable

Alami started as an aggregator platform in 2018. The firm later obtained a registration from the Indonesian Financial Services Authority (OJK) in May 2019, and since then, the startup has channeled nearly 70 billion rupiah (US$4.96 million) to more than 50 SMEs. Founder Dima Djani hopes to dispense a total of 80 billion rupiah (US$5.6 million) by the end of this year, and he targets to triple the number next year. From fundraising to business operations, Alami is committed to complying with all sharia principles and values. In the near future, Alami plans to reactivate its aggregator platform, and the firm is also currently exploring opportunities to add individual loan services in collaboration with sharia banks.

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