Central Asia

Kazakhstan studies lower capital requirements for Islamic banks

Kazakhstan's central bank is considering halving the capital requirement for Islamic banks to 5 billion tenge ($16.3 million) from 10 billion tenge, part of a series of initiatives to attract foreign capital to Central Asia's largest economy. The majority Muslim state is keen to develop Islamic finance, according to a Thomson Reuters study released on Tuesday. A proposed reduction in capital requirements for Islamic banks would apply for both local and foreign investors, deputy governor Nurlan Kussainov was quoted as saying in the study. This could encourage new entrants in a market that now has one full-fledged Islamic bank, Al Hilal Islamic Bank.

Latest Thomson Reuters, IRTI And CIBAFI Report Suggests Kazakhstan Well Under Way To Building Islamic Finance Economy

Thomson Reuters, the Islamic Research and Training Institute (IRTI) and the General Council for Islamic Banks and Financial Institutions (CIBAFI) have launched a new report analysing the state of Islamic Finance in Kazakhstan titled “a future perspective of Islamic finance”. The report, produced in partnership with the National Bank of Kazakhstan, was launched during a dedicated Roundtable on Islamic finance emerging markets, ahead of the World Islamic Banking Conference (WIBC) in Manama, Bahrain. The report predicts a positive economic outlook for Kazakhstan, with an estimated GDP growth of 2.4% in 2016.

Standard Chartered sets up Shariah advisory board

Standard Chartered Pakistan has established a Shariah board to help guide the bank's transactions in accordance with the principles of Shariah. This board has been formed in compliance with the Shariah Governance Framework and from the directives of State Bank of Pakistan. The members are: Sheikh Nizam Yaquby (Chairman), Mufti Muhammad Abdul Mubeen, Mufti Irshad Ahmad Aijaz and Mufti Muhammad Abdullah. Through liasing with the board of directors and senior management of the bank, the Shariah board shall ensure Shariah compliance as per regulatory requirements. The board would also endeavour to provide guidelines for devising new products and services.

Interest-based lending: Drive needed to create awareness of Islamic alternatives

Even some prominent scholars are of the view that while charging interest is not permitted in Islam, paying interest on loans is not impermissible. This is a view that demands an analysis from both an intellectual and economic perspective. A scholar argues that those who pay interest do not fall under the category of those who “eat others’ property unjustly” and that they must not also be deemed as “cooperating” in dealing in interest. The Prophetic tradition also prohibits cooperation in matters related to interest-based business. According to the scholar, the payer of interest does not “eat others’ property unjustly.” Hence, he does not commit any sin when he pays interest. This is a flawed argument, as interest-based transactions are by their very nature cooperative in nature.

Xinhua Insight: China changes tactics in financial fight against poverty

Zhang Xiangyin still remembers the day his daughter-in-law left home three years ago, leaving her 33-day-old son. She could no longer bear living entrenched in poverty in their mountain village.
Zhang, a 58-year-old farmer in Bijie City of southwest China's Guizhou Province, knows exactly what poverty means. With two daughters, who got married and moved away and his son in the coastal Shenzhen City as a migrant worker, the baby boy was left to the elderly couple.
But two 11-month-old Simmental cows he bought with a 24,000-yuan (3,762 U.S. dollars) government loan this September are expected to change his fate.
"The cows will give birth soon and are likely to have four calves within three years, which would produce 40,000 yuan in revenue," said Zhang.
After four years, Zhang expects between 20,000 to 30,000 yuan in net profits with newborn calves, which would lift him out of poverty.
In the past, Zhang was too poor to think of raising cows. A cow costs 12,000 yuan in the local market while Zhang's annual income was just a tenth of that, relying on a tiny plot of corn and potato crops.

Kazakhstan set for debut sovereign sukuk in early 2016

Kazakhstan's parliament has approved legislative amendments to facilitate Islamic finance, paving the way for Central Asia's largest economy to issue its first sovereign sukuk next year, a government official said.
The amendments, which still require the president's signature, would also allow for the conversion of conventional banks into Islamic ones, said Yerlan Baidaulet, an adviser to the Investments and Development Ministry.

«We expect the sovereign sukuk in early spring of next year. Probably in March, it depends on the decision of the Ministry of Finance as it has its own budgetary process», Baidaulet said on the sidelines of an industry conference in Kuwait. The legal amendments to the banking services and securities laws are the latest steps by the majority Muslim state to help develop Islamic finance. A dedicated Islamic banking law is also currently in preparation, Baidaulet said. Lawmakers have also passed a law to establish an offshore centre in the capital Astana, which is partly aimed at attracting Islamic finance business, he added.

Russian financiers focus on ethical finance

The leading Russian companies consider Islamic finance as a new and effective source of capital attraction. The issue of forming a collaboration with the Middle East and Southeast Asia capital markets will be discussed at the debate seminar of the Russian finance directors’ club.
The financiers of the largest Russian companies such as Vnesheconombank, Rosselkhozbank, Rosevrobank, SIBUR holding, the RUSSIAN INVESTMENT SOCIETY, VTB Capital Investment Management, Svyaztransneft, Inteco, Promsvyazkapital, Far East energy Management Company, INTERAVIAGAZ and others have confirmed their participation in the conventional meeting.
The key topic of the seminar – «Crisis – it is time to make an important decisions. TODAY IS TOO EARLY, TOMORROW WILL BE TOO LATE». The discussions will also touch on the issues of economic situation and risks assessment, forecasts, collaboration with banks, financing import from the West Europe with the assistance of the export and credit agency. The first Vice-President of the Russian finance directors’ club Tamara Kasyanova, who is in the top 100 of the Russian economy and finance experts, will hold the seminar.

Value of global Islamic finance assets projected to reach $3.2 tn by 2020

Global Islamic finance assets had an estimated value of $1.8 trillion in 2014 and are expected to almost double by 2020 to reach $3.2 trillion, according to the ICD Thomson Reuters Islamic Finance Development Indicator.

The projections come ahead of the 2015 World Islamic Banking Conference (WIBC 2015), which will be hosted by Thomson Reuters, the world's leading provider of intelligent information for businesses and professionals, and The Islamic Research and Training Institute (IRTI), an affiliate of the Islamic Development Bank Group.

The Islamic Development Bank and the National Bank of Kyrgyzstan are planning to launch a joint Islamic bank in the republic

The head of National Bank of Kyrgyzstan Tolkunbek Abdygulov and the president of the Islamic Development Bank (IDB) Ahmad Mohamed Ali Al-Madani had discussed the prospects of jointly opening an Islamic bank in Kyrgyzstan.
Additionally, they had talked about the other relevant things such as the perspectives of Kyrgyz Republic economy development, the establishment of a joint Shariyah compliant commercial bank and the possibility of opening an IDB representative office in Kyrgyzstan. The discussion took place during the International Financial conference “Islamic Finance: Meeting Global Aspirations” in Kuwait, on November 11, 2015.

Tolkunbek Abdygulov also had a meeting with Christine Lagarde, the Managing director of the International Monetary Fund, in which they discussed further course of cooperation between Kyrgyzstan and the IMF and drew a plan on joint actions during the financial crisis. Ms Lagarde also noted the concerted actions of Kyrgyztan’s National Bank and the government on monetary and fiscal policies.

PIA closes over-subscribed structured syndicated Islamic facility

Pakistan International Airlines Corporation (PIA) recently announced the successful closure of its US$ 120,000,000 Secured Syndicated Islamic Facility.
Citibank and Mashreq Bank PSC acted as joint initial mandated lead arrangers, bookrunners and coordinators for the facility. The transaction received an overwhelming response from the market and was over-subscribed.
The syndicate comprised of a diverse set of banks spread across GCC and South Asia. The participating banks included Askari Bank Limited, National Bank of Pakistan, Noor Bank PJSC, United Bank Limited and Warba Bank KSCP as mandated lead arrangers and bookrunners, Bank Islam Brunei Darussalam Berhad as lead arranger and Bank Alfalah Limited as arranger. This transaction once again reiterates the multitude of synergies developing between the Middle East and Pakistan.
The facility carries a tenor of three years and will be utilized to support the Company’s ongoing strategic growth plans and general corporate purposes.

JP Morgan clients buy into Islami Bank

JP Morgan's clients have bought around 3 % shares of Islami Bank Bangladesh Ltd or IBBL over the past several years, officials said. The US-based banking firm bought the shares for its institutional and indi-vidual investors. The shareholding empowers JP Morgan to hold a post in IBBL's board of directors as the law allows a shareholder to become a director in a publicly-listed company in Bangladesh with a stake of 2 %.
“The market plunge that began in December 2010 in Bangladesh has attracted foreign investors to buy IBBL shares,” MA Mannan, managing director of IBBL, told The Daily Star.
“JP Morgan's investment in IBBL shares reflects our strength.”
The current market price of IBBL's total shares stands at Tk 4,508 crore -- at over Tk 28 a share as of yesterday. Presently, IBBL has nearly 161 crore shares, with a face value of Tk 10 per share. If the current market price of IBBL shares is taken into account, JP Morgan's holding of 3 percent shares is valued at over Tk 137 crore. JP Morgan is one of the largest asset and wealth managers in the world with assets under its management worth $1.7 trillion (as of December 31, 2014).

Kazakhstan set for debut sovereign sukuk in early 2016

Kazakhstan's parliament has approved legislative amendments to facilitate Islamic finance, paving the way for Central Asia's largest economy to issue its first sovereign sukuk next year, a government official said.
The amendments, which still require the president's signature, would also allow for the conversion of conventional banks into Islamic ones, said Yerlan Baidaulet, an adviser to the Investments and Development Ministry.
"We expect the sovereign sukuk in early spring of next year. Probably in March, it depends on the decision of the Ministry of Finance as it has its own budgetary process," Baidaulet said on the sidelines of an industry conference in Kuwait.
The legal amendments to the banking services and securities laws are the latest steps by the majority Muslim state to help develop Islamic finance. A dedicated Islamic banking law is also currently in preparation, Baidaulet said.

Iran issues $300m equivalent domestic bond

Iran, frozen out by sanctions, has not been a fixture in the international debt markets since 2002. But when it eventually returns, which it surely will in the next year or so, its first step back may turn out to have been a little-noticed domestic issue that took place on September 30. The issue of Islamic government treasury bills, it could even be said, was the country’s first true domestic bond. There has been a sort of debt market in Iran for years, but it does not resemble anything like local currency markets elsewhere in the world. The predominant vehicle is the Agh Mosharekat (participation paper) an instrument which carries a fixed coupon, is not tradable, and can be returned to the bank at any time during its (typically three-year) duration and redeemed.

Islamic finance to fuel China’s Belt and Road initiative: Prince Turki

Finance from Islamic nations wants to play an important role in China's Belt and Road initiative, Turki bin Faisal Al Saud said at the International Finance Forum in Beijing on November 7.
Also known as Turki Al Faisal, Prince Turki is a member of the Saudi Arabia royal family, one of the founders of the King Faisal Foundation and chairman of the King Faisal Center for Research and Islamic Studies.
"I'm glad to see that the AIIB (Asian Infrastructure Investment Bank) is considering taping Islamic funds," he said. "Islamic finance is very suitable for infrastructure financing, and we want to contribute to the One Belt One Road."
The initiative is composed of infrastructure development across Asia and Europe. It's estimated that China will invest a total of $900 billion and spur a regional input of $300 billion.
Chinese banks having been raising clout in the Gulf such as issuing bonds. The country is also strengthening its trade relations with Islamic countries.
However, the plan comes with risks, as Chinese companies have to first become familiar with Islamic finance, which has complex rules.

SBP reiterates commitment for Islamic banking

State Bank of Pakistan has reiterated its commitment for promotion and development of Islamic banking in Pakistan.
According to SBP’s press release, the share of Islamic banking in total deposits of the banking industry surged to 12.8% as of 30th June, 2015 due to is persistent efforts and is consistently growing with a cumulative average growth rate of over 50% during the past 12 years .
“To-date 5 full fledge Islamic banks, one Islamic Banking Subsidiary and 17 banks with dedicated Islamic Banking Branches are operating in the country with over 1700 branches spread all over the country”, the release read.
SBP has developed Shariah compliant open market operations for managing liquidity of Islamic banking sector, which is quite unique in the Islamic world. State Bank Shariah Board has also approved structure of Government of Pakistan Ijara Sukuk issued in the past and all such structures for future issues will be approved by SBP Shariah Board before their launch”.

SBP reiterates commitment to boost Islamic banking

In order to remove any ambiguity and doubt among the general public, the State Bank of Pakistan (SBP) has reiterated its commitment for promotion and development of Islamic banking in Pakistan.
Due to persistent efforts of SBP and the federal government, the share of Islamic banking in total deposits of the banking industry has surged to 12.8% as of June 30, 2015 and is consistently growing with a cumulative average growth rate of over 50% during the past 12 years. To-date, 5 full fledge Islamic banks, one Islamic banking subsidiary and 17 banks with dedicated Islamic banking branches are operating in the country with over 1,700 branches spread all over the country.

Islamic Bank May Support Green Sukuk for Renewables Projects

The Islamic Development Bank indicated that it may issue green sukuk bonds compliant with religious law and increase lending for climate-related projects with an announcement at the United Nations global warming conference in Paris at the end of the year.
“Estimates for the 2030 agenda indicate that we need to move from billions to trillions of dollars of support annually for sustainable development,” Savas Alpay, chief economist of the IDB, said in a phone interview. “Traditional sources of development finance will not be enough. We must also look at non-traditional sources. We will be using Islamic finance to bring new resources to the table.”
Khazanah Nasional Bhd, Malaysia’s state-owned sovereign wealth fund, issued green sukuk last November after introducing guidelines for socially responsible debt in August 2014. It was the second entity after the London-based International Financial Facility for Immunization announce plans to sell ethical-based sukuk.
Green Sukuk

BMA Funds signs trust deed for Islamic income scheme

BMA Asset Management Company Limited (BMA Funds), a non banking finance company, formally signed the trust deed for its forthcoming Islamic income scheme, BMA Minhaj Islamic Income Fund at CDC Pakistan. The event brought together the representatives from CDC, trustee of the BMA Minhaj Islamic Income fund, and the senior management of BMA Asset Management Company Limited.

Following the same trend of leadership, BMA Minhaj Islamic Income Fund will offer a unique one of its kind scheme for investors who wish to benefit from the equity market and at the same time seek capital appreciation that adheres to shariah principles. It primarily aims to generate superior risk adjusted returns to earn a stable halal income over medium to long term by investing in fixed income instruments present in Pakistan debt market.

Interviewed: Samiullah: Modaraba A Profitable Sector Of Pakistan’s Islamic Financial Industry

Muhammad Samiullah is currently associated with NBFI & Modaraba Association of Pakistan as Secretary General. From the platform of the Association, he has organized a number of workshops and seminars on different topics relating to the NBFI and Modaraba Sectors.
Samiullah is an active Member of FPCCI Standing Committee for Islamic Banking & Takaful. He is also a Member of the Arbitration Panel of Karachi Stock Exchange and holds a Master’s degree in Economics from Karachi University, Law Graduate and Dipomaed Associates of Institute of Bankers in Pakistan. He also has a Post Graduate Diploma in Islamic Banking & Takaful from Darul Uloom, Korangi. By profession Samiullah is a banker and has worked in Habib Bank Limited (HBL) in different disciplines for about 27 years, with his last posting in HBL as Vice President & Company Secretary, First Habib Bank Modaraba. He also officiated as Chief Executive of First Habib Bank Modaraba for quite some time.

Iran's Saman Bank to enter Turkish market

After Bank Mellat obtained the right to expand its operations in Turkey in March 2014, Iran's Saman Bank has also applied to the Central Bank of the Republic of Turkey (CBRT) and the Banking Regulation and Supervision Agency (BDDK). The BDDK is now considering the Iranian bank's request; BDDK is expected to issue a reply around New Year's. Bank Tejarat and Pasargad Bank are also expected to reapply to be involved in the Turkish finance market after Saman Bank's application is approved. The approval of the expansion request of Bank Mellat, which had not been operationally active in Turkey due to sanctions and had downsized in 2012, also raised hopes for other banks.

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