CPI Financial

Evolving Islamic fintech

In this interview Stalla Cox CBE, the Managing Director of DDCAP speaks about her company and the evolving Islamic fintech scene. DDCAP Group was established over twenty years ago and has always selected its global expansion strategically. DDCAP opened in the Dubai International Financial Centre (DIFC) in 2008. Following the turn of 2000, there was significant repatriation of Shari'ah compliant capital to the Middle East. At a similar point in time, DDCAP was also invited by Bank Negara Malaysia to join a steering group that was formed in response to the Malaysian financial authorities granting permissions to Islamic banks from the GCC to do business locally. Consequently, a regional office was opened in Kuala Lumpur, Malaysia. The global financial services industry is moving at an incredible pace. With ETHOS AFP, DDCAP managed to create an enabling platform with global reach and provides a fully integrated treasury trading workflow for Shari’ah-compliant transactions.

Are bank mergers in the GCC as profitable as they seem?

In the past two years, we have seen a number of bank mergers take place in the GCC. While the cost synergies of a bank merger can be tempting, the strategies to execute such a consolidation vary significantly and there is no "one size fits all" approach. A number of GCC banks observe a healthy capital position, requisite scale, and supportive shareholders also provide the necessary impetus for international expansions. However, not all international expansion strategies have yielded desired returns. In the past few years, one of three GCC banks incurred losses in their international operations. Only two out of every five banks are witnessing improvement in returns compared to the previous year.

Noor Bank reshuffles board ahead of merger with DIB

UAE’s Dubai Islamic Bank (DIB) is progressing with the acquisition of Noor Bank whose board of directors has been reconstituted recently. Following the reshuffle, Noor Bank’s board of directors now includes Adnan Chilwan, the Group CEO of DIB and Yahya Saeed Ahmed Nasser Lootah, Hamad Buamim as well as Ahmad Mohammad Saeed Bin Humaidan and Abdulla Ali Obaid Al Hamli. DIB shareholders gave approval for the acquisition through an increase of the bank’s capital from 6.6 billion shares to 7.2 billion shares, with a share swap ratio of one new share in DIB for every 5.49 Noor Bank shares. The GCC financial services industry is witnessing a wave of consolidation as banks seek ways to improve competitiveness and boost capital amid slowing economic growth.

IIRA reaffirms GFH Financial Group’s BB / B fiduciary ratings

Islamic International Rating Agency (IIRA) has reaffirmed its 'BB/B' international scale ratings at GFH Financial Group (GFH), with a stable outlook. GFH's key business lines include investment banking, real estate development as well as the recently expanded treasury and proprietary investments and commercial banking undertaken through its 55.4% holding of Bahrain-based Khaleeji Commercial Bank. The group’s capital adequacy ratio reduced to 14.5% in Q3 2019, remains comfortably above the Central Bank of Bahrain minimum of 12.5%. The bank’s cost rationalisation measures among other strategies are expected to result in boosting of profitability over the coming periods.

#Kuwait’s Warba Bank receives licence to conduct securities activities

Warba Bank has obtained licence from the Capital Market Authority (CMA) to engage in certain securities activities. The new licence allows the lender to conduct activities like investment portfolio manager, collective investment scheme manager as well as investment manager, subscription agent and custodian.

Creating footsteps in Kuwait’s Islamic banking sector

Kuwait Finance House (KFH) has embarked on a digital transformation journey. Kuwait and Bahrain have each launched their respective digital banking platforms and soon, Malaysia will have its own. By the end of 2018, a seamless digital customer experience is expected to be publicly available. In Malaysia the KFH is active in the infrastructure financing front, supporting the third light rail transport system (LRT 3) and the second Mass Rapid Transit (MRT 2) projects through the provision of Islamic financing facilities. The project is expected to benefit the local communities through the promotion of real estate developments around the proposed train stations. Furthermore, the project is expected to generate more than 2,000 jobs during the construction phase.

How Lombard Odier got into the Islamic investment space

Lombard Odier has launched a full suite of Shari’ah-compliant investment solutions. Arnaud Leclercq, Limited Partner at Lombard Odier Group, said the offering began as a bespoke creation for one client six years ago, it has grown from a $10 million to in the hundreds of millions, primarily for investors in the Middle East. The investments are a mix between Sukuk and equities. Equities are chosen using a combination of MSCI’s Islamic Index and Lombard Odier’s inhouse experts. The goal is to reach $1 billion in total Islamic investment the next three to five years. Lombard Odier plans to increase its presence in the Middle East, with an office in Abu Dhabi for the coming year currently in the planning stages and a partnership with a Saudi firm currently in the works.

Supporting Islamic #fintech’s growth

In this interview Ayman Sejiny, CEO of Ibdar Bank, talks about founding the Bahrain Fintech Bay. Bahrain Fintech Bay (BFB) is working to build a fintech ecosystem that will support industry growth and position Bahrain as a regional fintech hub. Sejiniy believes that the days of 'e-banking' are nearly over and the shift to mainstream digital finance is becoming a reality. Ibdar is an early adopter, transforming its organisation into a fully digitised Islamic Investment Firm for the Global Islamic Digital Economy (GIDE). Ibdar bank provides opportunities in aviation, real estate, Sukuk and investment funds. The bank is also expanding its services to include an array of Investment Advisory services.

Reconciling #cryptocurrency in Islamic finance

Over the last few years, the market capitalisation of cryptocurrencies has reached a near $400 billion with over 1500 currencies been created. Among them, bitcoin has been the most popular with a market capitalisation of over $150 billion. Currently, there are divergent opinions regarding the Islamic understanding of bitcoin among Shari’ah scholars. A section of Shari’ah scholars believe that bitcoin is purely speculative, while others believe that it is a digital asset and not money. There are also some who completely differ and opine that bitcoin is currency. According to Dr. Arindam Banerjee, Associate Professor at Amity University, at the current stage crypto is not suited as a means of exchange in Islamic banking and financial institutions.

#Saudi refinance firm mulls #Sukuk issuance to fund mortgage drive

The Saudi Real Estate Refinance Company (SRC) plans to begin issuing sukuk in late September or early October 2018. SRC aims to refinance 20% of Saudi Arabia's primary home loans market, which authorities hope to expand to SAR 500 billion by 2020. Currently Saudi Arabia’s primary home loans stands at SAR 290 billion. Fabrice Susini, CEO of Saudi Real Estate Refinance Company, said that the company will now begin issuing Sukuk to raise money, first in Saudi riyals but eventually in foreign currencies. The company was founded in 2017 by the Public Investment Fund (PIF) and has so far operated with financing from the sovereign wealth fund and short-term deals with banks.

#Bahrain's Bank Alkhair sells stake in Turkish investment firm

Bahrain’s Bank Alkhair has sold its majority stake in Turkish investment firm Alkhair Capital, as the lender exits some markets. Bank Alkhair entered the Turkish market a decade ago, acquiring an initial 75% stake in the investment firm. The bank has faced a challenging business environment over the past year and is currently streamlining its business lines. Additionally, the bank sold its stake in Pakistani lender Burj Bank and in 2017 the firm upgraded its business licence in the UAE and expanded its capital markets business in Saudi Arabia in a bid to focus on other markets. Now Bank Alkhair has received approval to transfer its 95.79% stake in Alkhair Capital to Ankara-based A1 Capital. The value of the transaction was not disclosed.

Noor Bank rolls out Noor Wealth

Noor Bank has launched Noor Wealth, a Shari’ah-compliant platform offering tailored product mixes. Noor Wealth targets customers with a minimum of AED 367,300 of assets under management or a minimum salary of AED 50,000. The bank offers mutual funds among other 10 lenders in the GCC and it also offers access to fixed-income products through its Sukuk platform and Islamic structured products. Noor Wealth collaborates with Knight Frank to offer global physical real estate services for its customers. Mufazzal Kajiji, Head of Retail Banking at Noor Bank, said that Noor Wealth currently serves clients from 10 countries and is in the process of expanding.

Lombard Odier launches Shari'ah-compliant #investment offering

Lombard Odier has launched a full suite of Shari'ah-compliant investment solutions. Arnaud Leclercq, Limited Partner at Lombard Odier Group said that since the offering began as a bespoke creation for one client, it has grown from a $10 million to in the hundreds of millions, primarily for investors in the Middle East. Lombard Odier's Islamic investments have averaged 4-5% returns since 2012. The goal is to reach $1 billion in total Islamic investment the next 3-5 years. The investments are a mix between Sukuk and equities. Equities are chosen using a combination of MSCI's Islamic Index and Lombard Odier's in-house experts. The clients serviced with these solutions are primarily from the UAE, Saudi Arabia, and Kuwait. Lombard Odier plans to increase its presence in the Middle East with an office in Abu Dhabi.

Islamic wealth management and its relevance in modern times

The objective of Islamic wealth management is economic justice through equitable distribution of wealth. This by no means restricts private ownership and entrepreneurship but a wider circulation of wealth and invested in socially beneficial economic activity. To serve social justice, wealth is not considered legitimately earned unless the risk-and-rewards are both shared in a financial contract: so one-sided no-risk-sharing contracts are not permitted. Islamic wealth management involves wealth generation, accumulation, preservation, purification and distribution. Creation of wealth is defined more broadly than in conventional practice. A set of filters are applied to financial transactions that ensure permissibility. Impermissible gains are expected to be distributed to the needy as a method of purification or cleansing. The process of cleansing applies in corporate finance and investment as well.

Global #Sukuk issuances surges 44 per cent in Q1

According to the latest statistics by RAM Ratings, a total of $12 billion worth of Sukuk was issued in March 2018, bringing global Sukuk issuance to $30 billion in Q1 2018, a 44.4% surge from $20.8 billion for the same period last year. The increase is likely due to a boost from Saudi Arabia with issuance reaching $6.5 billion as at end-March 2018. Malaysia had issuances rising from $9.6 billion to $11.5 billion, accounting for the second-largest year-on-year increase, followed closely by Indonesia at $5.5 billion, the UAE at $3.3 billion and Turkey at $1.4 billion. Malaysia retained the top spot in terms of global Sukuk issuance with a 38.2% market share worth $11.5 billion as at end-March 2018. Saudi Arabia stayed in second place with a 21.7% share worth $6.5 billion, Indonesia closed on third place with 18.2% and the UAE with 10.8%.

Al Hilal Bank and ADGM to collaborate on knowledge-based initiatives

Al Hilal Bank and Abu Dhabi Global Market (ADGM) have signed a Memorandum of Understanding (MoU) to develop a strategic collaboration. The MoU focuses on the utilisation of ADGM Academy, the newly established financial educational centre. The MoU provides Al Hilal Bank with The Academy’s network of trainers, internationally renowned curriculum and ADGM’s business ecosystem. Al Hilal Bank Senior Managing Director Sultan Al Mahmood said this partnership represents a unique learning and development opportunity for employees to develop a best practice financial education. The signing ceremony took place on Monday, 16 April 2018 at the ADGM Academy, located on Al Maryah Island. It was attended by H.E. Ahmed Ali Al Sayegh, Chairman of ADGM and H.E Khalaf Abdulla Rahma Al Hammadi, Vice Chairman of Al Hilal Bank.

First full-fledged Islamic bank approved in #Afghanistan

Afghanistan’s central bank has granted a license to the Islamic Bank of Afghanistan (IBA). IBA Chief Financial Officer Faizan Ahmed said the bank had completed the conversion of its balance sheet. It plans to introduce wealth management products and launch new digital banking services in the coming months. Afghanistan’s banking sector is small, but Islamic finance is seen as an important feature that could help attract more people into the financial system. IBA estimates that only 5.7% of the population has dealings with the banking sector and the majority of the country in unbanked. Islamic banking has been offered in Afghanistan by a handful of firms through so-called Islamic windows, but there have been no full-fledged Islamic banks so far. Lenders with Islamic windows include Afghan United Bank, Ghazanfar Bank and Afghanistan International Bank.

ADIB funds GBP19 million acquisition of Bristol's The Hub

Abu Dhabi Islamic Bank (ADIB) has arranged an Islamic financing transaction to fund the acquisition of The Hub, located at the Aztec West Business Park, Bristol. The transaction is worth GBP19.35 million and is arranged on behalf of a private Saudi-based client. The Hub is a regional UK office for Atkins, a multinational design, engineering and project management consultancy. The building has been awarded a BREEAM excellent rating, as overall carbon emissions are more than a third lower than expected for a building of its size. ADIB opened its office at One Hyde Park in London in May 2012 and was the first UAE-based bank providing Islamic financial services to be licenced to operate in the UK, being one of the six banks that are fully Shari'ah-compliant.

#UK Islamic bonds to be worth GBP58 billion by 2028

UK’s Gatehouse Bank has calculated that the value of Sukuk assets listed on the London Stock Exchange (LSE) would double to GBP57.8 billion in the next decade, if issues continue at their current rate of growth. Sukuk only began life in the UK in 2007, but their numbers have been swelling at an annual rate of around 5%, though they are still little understood. Gatehouse Bank CEO Charles Haresnape sees this growth as a huge opportunity for Britain. He urges the Government to capitalise on this week's summit on Islamic finance and make it more than just a single effort for one large oil company to list on the LSE. He believes an on-going trade mission is needed to make London the world centre for all Islamic finance.

Saudi CMA approves Bank AlJazira's proposed rights issue

The Saudi Capital Markets Authority has announced its resolution approving Bank Aljazira’s request to increase its capital by way of rights issue valued at SAR 3,000,000,000. The offering price and the number of shares will be determined after market closing of the same day in which the extraordinary general assembly meeting is held. After reviewing the bank’s application in light of the governing regulatory requirements, the CMA has issued its resolution approving Bank Aljazira’s capital increase request. The CMA’s approval merely means that the legal requirements as per the Capital Market Law and its Implementing Regulations have been met.

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