The attempts to offer conventional financial products in Afghanistan are perceived as yet another foreign attempt to challenge basic tenets of the Afghan society. This perception - shared not only in the countryside but also by sectors of urban society - is fuelling resentment and distrust among people. As a consequence, the already meager financing in the rural areas, where 75% of the population lives, is drying up and almost non-existent. This is undermining any meaningful economic and social take-off. Within this landscape, Islamic finance and takaful represent a necessary tool to address the population's discomfort with the conventional approach, ease cultural tensions and creatively mend social relations.
Currently, Pakistan ranks ninth globally terms of development of the Islamic financial services industry but some recent purposeful steps would prove to be a game changer, said Mian Shahid, Chairman United International Group (UIG). Now, the conventional insurance companies in Pakistan are set to make major inroads into the Islamic insurance business with the active support of regulators, he added. The potential of Takaful in the Muslim world is still largely unexploited, he said, adding that its premiums are expected to reach $20 billion by 2017. Saudi Arabia, UAE and Malaysia enjoy the lion’s share on account of their advanced Islamic finance sector while Pakistan would need more simplified regulatory frameworks to propel the industry’s expansion, the insurance veteran observed.
The International Bank of Azerbaijan (IBAR), the biggest bank in Azerbaijan managing more than 35% of total banking assets in the country, has announced the signing of a Shari'a Supervisory agreement with Shariyah Review Bureau (SRB). IBAR hopes that SRB and its experience will help the bank to build the Shari'a Complaint business and lift its Islamic financial sector to a successful future. Shariyah Review Bureau is today recognized globally for its iconic Shari'a Compliance services. With more than 37 Shari'a scholars, the company's growth includes recently doubling Shari'a review and Certification capacity in the GCC. As the pace of change in the Islamic financial industry accelerates at an international level, institutionalized services of Shari'a Advisory firms like SRB has become increasingly evident.
International Bank of Azerbaijan (IBA), 50.2% owned by Ministry of Finance, is preparing to launch a separate sharia-compliant banking unit as the former Soviet state prepares an Islamic banking law slated for next spring. A stand-alone unit would allow IBA to more than quadruple its Islamic financing business in the country. IBA has thus far extended $180 million of Islamic financing in the country; after legislation is passed, this could increase to as much as $750 million within a year. IBA also wants to create a strong domestic Islamic banking platform for use with its subsidiaries in Russia, Georgia and Qatar. IBA has hired Bahrain-based consultancy Shariyah Review Bureau to help in the design of several projects.
A new study by International Finance Corporation (IFC) showed that around 35 per cent of SMEs in the Middle East and North Africa (MENA) are excluded from the formal banking sector because they seek Sharia-compliant products that are not readily available in the market. The study, which was carried out across nine countries, found a potential market gap of up to $13.2 billion for SME Islamic financing in the region with a corresponding depository potential of $9.71 billion to $15.05 billion across these countries. The study pointed out that apart from a high level of risk aversion that banks in the region have, poor regulatory environments, differing perceptions of Islamic finance, and a lack of relevant products were hindering the growth of Islamic SME banking.
A shortage of global sukuk will probably help cut borrowing costs on Pakistan’s first Islamic bonds since 2005, boosting a government besieged by opposition street protests. The government plans to offer $1 billion of the notes, with the sale scheduled for the first week of September. Assuming it’s a five-year maturity, the coupon rate will probably be 5.75 percent to 6.25 percent. The nation paid 7.25 percent for 2019 non-Islamic dollar debt in April. This deal will be an important test to see how a politically volatile country, as Pakistan is at the moment, can issue a high-yield sukuk. There will be demand because no other country is giving this huge return. The rupee has rebounded 9.3 percent from a record-low of 108.70 per dollar on Dec. 3. It closed at 99.49 yesterday.
The National Bank of Pakistan (NBP) has sought regulator’s approval to conduct due diligence of Burj Bank, as the bank wants to continue its footprints in the Islamic banking industry. The NBP had already initiated the process of converting its existing branches into Islamic ones, which will increase to 175 by the end of this year. The acquisition of Burj Bank provides NBP with the opportunity to become a key player in the Islamic banking industry of Pakistan. Burj Bank is the smallest of five full-fledged Islamic banks in Pakistan with a network of 75 branches. The State Bank of Pakistan is stepping up its push to develop Islamic banking, encouraging lenders to expand their operations in the world’s second most populous Muslim nation.
Hong Kong, Indonesia and Pakistan are banking on pent-up investor demand as they look to raise up to a combined US$3.5bn in the fast-growing Islamic bond market. The three sovereign sukuk issues, including a planned US$1bn debut from Triple A rated Hong Kong, are set to launch before the end of September. Indonesia is Asia’s only regular in the global sukuk market, having issued annually since 2010. Pakistan has sold Islamic debt overseas only once before, in 2005, while Malaysia has typically preferred to target its own domestic market. Hong Kong, in particular, is looking to promote itself as a regional hub for Islamic financing to capitalise on growing trade links between Greater China and the Middle East.
Countries including Pakistan, Tunisia and South Africa are drawing up plans to issue government bonds that comply with Islamic law as they seek to take advantage of strong investor demand for emerging market sovereign debt. Tunisia is working with the Islamic Development Bank to issue a 1bn dinar ($580m) sukuk this year, while Jordan has instructed a committee to look into the possibility of issuing sukuk next year. Governments in South Africa and the Philippines also say they are considering raising money through the sale of Islamic debt.
The Gulf banks are fast replacing European lenders in expansion within the Middle East region and into some of the fast growing emerging markets in Asian and Africa in the context of improving health of their balance sheets and strong support from shareholders. Banks from GCC, particularly those from the UAE and Qatar are in the forefront of overseas expansion.First Gulf Bank (FGB), for example, announced last month that it has a new representative office in South Korea as part of plans to expand its presence in Asia Pacific. Qatari banks have been seeking overseas expansion to cut dependence on local markets and access trade flows across the Middle East, Africa and Asia. Doha Bank is expanding its presence in Hong Kong, India and Saudi Arabia.
Pakistan’s second largest life insurance company informed members of the Karachi Stock Exchange (KSE) on Friday that it intends to enter the window Takaful business. The board of directors of EFU Life Assurance has approved changes in its memorandum of association under Takaful Rules 2012 to launch Takaful. The Securities and Exchange Commission of Pakistan (SECP) replaced Takaful Rules 2005 with Takaful 2012 two years ago, which allowed conventional insurance companies to set up Islamic windows to conduct shariah-compliant business. EFU Life Assurance is not the only company that has shown interest in setting up Islamic window operations. Jubilee Life, the largest player in the life segment in terms of gross premiums, is also eyeing the Shariah-compliant business after the implementation of Takaful Rules 2012.
Dubai Islamic Bank Pakistan (DIBPL) has appointed Mufti Muhammad Hassaan Kaleem as the Bank’s new country Head of Shari’a. Mufti Hassaan has also been appointed a member of the Bank’s Shari’a Board by the Board of Directors of DIBPL, subject to approval of State Bank of Pakistan. Mufti Hassaan has vast experience in matters of Shari’a teachings and advisory and has been teaching various courses in Islamic Studies and Arabic at Darl-ul-Uloom Karachi for the last 17 years. He is a member of several institutions and boards, including Dar-ul-Ifta, JamiaDarul-ul-Uloom Karachi, Chairman Shari’a Board of Securities & Exchange Commission of Pakistan (SECP) and others.
State Bank of Pakistan’s (SBP) five-year strategic plan will drive strong asset growth in the Islamic finance sector, given the high domestic demand for Islamic banking. SBP’s plan targets a 15 per cent share of banking system assets for the sector by 2018, up from around 10 per cent as of December 2013. The National Bank of Pakistan will convert around 6 per cent of conventional branches into Islamic-banking branches over the next two years. Although the sector is expanding rapidly, the Islamic operations of the top five banks — National Bank of Pakistan, Habib Bank, MCB Bank, Allied Bank, and United Bank are small and currently account for less than 2 per cent of their assets on average. Moreover, rapid growth in the sector is likely to weaken asset quality.
EFU insurance group will offer shariah-compliant insurance products in Pakistan through its general and life units. Both EFU Life Assurance and EFU General Insurance plan to open takaful windows. The plans come two months after regulators cleared the way for conventional firms to offer Islamic products, part of regulatory effort to increase insurance penetration in Pakistan. EFU General had Rs13.9 billion ($140.8 million) in written premiums in 2013, representing roughly a quarter of the industry’s total. EFU Life has a branch network of over 150 branches around the country. A source at one of the units said the takaful windows could be operational in two to three months.
EFU Life Assurance and EFU General Insurance, Pakistan's largest private insurance group, will offer sharia-compliant insurance products through takaful windows. The plans come two months after regulators cleared the way for conventional firms to offer Islamic products, part of regulatory effort to increase insurance penetration in Pakistan. Company officials declined to comment on their plans but a source at one of the units said the takaful windows could be operational in two to three months. The Securities Commission had earlier said it had received five applications for takaful windows and expected as many as half of all conventional insurers in Pakistan to eventually apply for a licence.
The Islamic Corporation for the Development of the Private Sector (ICD) hopes to advise on the mandate for Pakistan's $1 billion Islamic bond. ICD and Karachi-based Burj Bank, 33.9 per cent owned by ICD, have applied to be advisers on the sovereign deal, meeting Pakistan's finance ministry earlier this week. A ministry statement also said that it would review the applications starting next week. The ICD has further initiatives in the pipeline. Among others, ICD signed separate agreements to help develop Islamic leasing businesses in Malaysia and Uzbekistan, as well as extending $5 million in financing to support SME lending in the former soviet state.
Pakistan's central bank will sell 49.5 billion rupees ($503.8 million) of Islamic bonds, the country's first such issuance in 15 months, with pricing to be set on Wednesday. The sukuk will inject a much-needed liquidity management tool for the domestic Islamic banking industry. The appetite for local currency sukuk has grown with Islamic banks posting double-digit asset growth, but the government has been unable to match demand, constraining the sector's financing and investment capability. The government has not indicated whether it would issue more local currency sukuk this year, although the finance ministry has said it was considering issuing dollar-denominated sukuk.
State-owned Ziraat Bank has interest in buying the Islamic bank Bank Asya. Yet nothing is official just now, according to Ziraat Bank, a state owned bank. The move would allow Ziraat to enter the Islamic banking market. The Turkish government would also like to change the banks’ capital structure that is controlled by Gülen supporters. Bank Asya has been the subject of focus since the Turkish media reported that state-owned companies and institutional depositors loyal to Prime Minister Recep Tayyip Erdo?an had withdrawn around 4 billion Turkish Liras in the wake of the Dec. 17, 2013, graft probe.
An Iranian trial and execution raised questions about corruption at high levels in various countries. Reports said that Mahafarid Amir Khosravi, a billionaire businessman was executed in a prison, North of Tehran for being involved in a $2.6 billion state bank scam, the largest fraud case since 1979 Islamic Revolution in Iran. The public in America, Britain and other European countries reacted with surprisingly many comments on social media platform. They wish such a harsh punishment for their nations in order to deal with corruption amongst politician and businessmen.
The 19th Annual General Meeting of Social Islami Bank Limited was held in Sylhet, Bangladesh. A 12% cash dividend for the financial year 2013 was approved by the shareholders in the AGM. Major (Retd.) Dr. Md. Rezaul Haque, the Chairman of the Board of Directors of the Bank presided over the meeting. Directors of the Bank were present. The Managing Director of the Bank Md. Shafiqur Rahman stated that SIBL maintained and achieved a stable position in 2013 despite of many challenges in all of their key areas of operations.