Egypt Islamic banking assets to hit USD18bn in 2014

Islamic banking assets in Egypt are expected to reach around EGP 128 billion (USD 18.4 billion) in 2014, realizing an average growth of 10% to 12%. Islamic banking assets were valued at EGP 114 billion in 2013, up 11% from the previous year. Islamic financing extended by banks rose 6% to EGP 76.4 billion in 2013 while deposits grew by 13% to EGP 103 billion in the same period. The Islamic banking sector accounts for 7% of total banking assets in Egypt. Meanwhile, investors from Saudi Arabia are reportedly evaluating various investment opportunities in Egypt, including in the industrial and agricultural sectors, but are waiting for the political and security situation to stabilize before making a move.

Islamic banking remains unpopular in Egypt: Gallup poll

A recent Gallup survey reported that Islamic banking remains unpopular in Egypt, with only 3% of adults using Islamic banking services and only 49% who have heard of Islamic banking in the country. The poll also found that 45% of all respondents preferred a more expensive loan from an Islamic bank to a cheaper loan from a conventional bank. Identifying the reasons for this lack of demand will require extensive research. However, there is no reason why Islamic banking could not increase in the future if its demand increased, given that the only barrier to its use is the lack of its popularity. The survey was conducted in 2012 through face-to-face interviews with 1,000 adults aged above 15 years in Egypt, Tunisia, Algeria, Morocco, and Yemen.

Egypt's Ridge Capital plans Islamic fund of fund in 2013

Cairo-based Ridge Islamic Capital plans to launch the first dedicated Islamic fund of funds in the Middle East by the end of this year, with an initial capital base of $150 million. The Bahrain-domiciled fund will invest across a pool of sharia-compliant funds around the world. Ridge Islamic will contribute $15 million to the fund's capital. The Ridge Islamic fund will be U.S. dollar-denominated and use controls designed to limit risk, including exposure caps by country, sector and asset class. The rules will allow up to 20 percent of the fund's net asset value to be allocated directly into sharia-compliant financial instruments; up to 40 percent of net asset value could go into cash and Islamic money market instruments. The fund has a three-member sharia board with scholars from Egypt, Saudi Arabia and Bahrain.

Bank of Khartoum plans 12 more retail branches and launching financing for livestock exports

The Bank of Karthoum will add 12 new retail branches and cash points, mainly in eastern and central Sudan, bringing the total number to 75 by next year and has steadily expanded its business in Africa. Its main shareholders, Dubai Islamic Bank, Sharjah Islamic Bank and Abu Dhabi Islamic Bank, are more than tripling the capital. In a second expansion step, the bank will launch several dedicated funds for private firms to finance the export of livestock and agricultural products such as sesame seeds to Gulf Arab countries, Jordan and Egypt. Faced with the loss of most oil reserves to South Sudan, Sudan is trying to boost exports of gold and farming exports such as cotton, cash crops or gum arabic from its vast farmlands.

Faisal Islamic Bank of Egypt posts 68% jump in H1 profits

Faisal Islamic Bank of Egypt has announced its net profit for the quarter ending June 30, 2013, jumped around 68% to EGP413.2m. The Shari'ah-compliant lender reported net profits of EGP281m for the corresponding period a year earlier.

Al Baraka Bank Egypt recognized by Other Ways Management Association Club

Al Baraka Bank Egypt, a subsidiary banking unit of Al Baraka Banking Group, announced the winning of the 'The Majestic Five Continents Award for Quality and Excellence' granted by the European Foundation 'Other Ways Management Association Club'. The Award will be delivered in a grand ceremony to be held in Geneva on 18 November 2013, and will be attended by official delegations and businessmen from 40 countries around the world. Al Baraka Bank Egypt won the prize as a result of aspects like high quality of customer service, creativity, teamwork, diversity of products of development and corporate finance, lease and assets finance, retail and treasury products, and foreign operations. Mr. Ashraf El Ghamrawy, Vice Chairman and Chief Executive Officer of Al Baraka Bank Egypt, emphasized the bank's pioneering role in development finance and social responsibility through the Bank's Zakat fund, and the consolidation of partnership relations with all government and private agencies, among others.

Finance minister: Laws and regulations governing Islamic Bonds set to continue

Laws, legislative rules and regulations governing Islamic bonds will be implemented as planned, as part of government efforts to revive the economy, according to Egyptian Finance Minister Ahmed Galal. However, he refused to say who would assume the role of Chairman of the Islamic Bonds Division within the ministry, after the sacking of previous chairman Ahmed Al-Nagar. Ahmed Al-Gabali, Advisor to the Minister on Islamic Bonds, is reportedly interested in the position but will need to be made aware of the nature of the job before applying. Galal previously published a decision to dispose of a number of legal advisors and chairmen of financial units due to their affiliation with the Muslim Brotherhood, among them Ahmed Al-Nagar, previous Chairman of the Ministry of Finance’s Islamic Bonds División.

Jump in bank profits in the last six months

Egypt’s banking sector witnessed a jump in profits during the first half of the current fiscal year in comparison to the same period last year, and even in comparison to the first quarter of this year. The Faisal Islamic Bank of Egypt stated that its profits for the first half of the current fiscal year totalled EGP 370.8m (nearly $53m), a 30.7% increase compared to the same period last year. Bankers throughout the country expect that other institutions will also soon announce increases in their profit margins for the first half of this year, due to their subscription to government debt instruments, which have brought high returns over the last six months. The stabilisation of the country is expected to allow banks to begin lending once again at higher rates, to both individuals and companies, which would help stimulate the economy, support banks and help them achieve higher profit margins.

Hamas Faces Financial Crisis

The Hamas government relies heavily on the taxes and tariffs imposed on goods flowing through the crossings with Israel and the tunnels with Egypt to cover monthly costs and payments for governance. The Hamas government taxes the majority of the Egyptian products to raise revenue, while the taxes on the Israeli supplies, including basic goods, go to the government in Ramallah. Now, the supply of goods smuggled from Egypt through underground tunnels has nearly come to a halt, severely exacerbating the economic hardship already being suffered by the Palestinian residents of the Gaza Strip. Tax receipts from goods entering through the tunnels account for about 40% of the government's general revenue. Thus, as a result of the tunnel closures, the government has been forced to borrow from the National Islamic Bank in Gaza to pay the salaries of local staff.

The fate of Islamic bonds remains vague after the ouster of the Muslim Brotherhood

Ahmed Al-Gabali, Technical Advisor for Islamic bonds at the finance ministry. temporarily left his post at the Ministry of Finance due to his conviction that not enough political and economic support currently exists to push Egypt’s Islamic bonds law. This, he said, will cause returns on any Islamic bonds that are issued to be significantly less than previously estimated. He stated that the fate of Egypt’s Islamic bonds law changed after the events of 30 June and the ouster of former president Mohamed Morsi. He maintained, however, that Islamic bonds would remain a powerful finance tool in the future, since sukuk have existed in a number of countries that do not operate under an Islamist or a Brotherhood regime. Abdullah Al-Adali, chairman of the taxes division at Price Waterhouse Coopers, stated that he supported keeping the country’s Islamic bonds law as it was despite the removal of Morsi.

Islamic banking association launches index of bourse’s Sharia-compliant shares

Islamic banking experts have called on the Central Bank of Egypt to tailor its policies regarding Islamic banking services to be more in line with those of Islamic banks themselves. The call came during the fourth annual conference of the Egyptian Islamic Finance Association, during which the association launched its index of shares compatible with Islamic law, measuring the performance of those shares traded on Egypt’s stock exchange by their compatibility with Sharia standards.Mustafa Ibrahim, forensic audit manager for the National Bank for Investment, said the index was unique in that it was founded upon Sharia standard number 21, released by the Accounting and Auditing Organisation for Islamic Financial Institutions.

Islamic Development Bank considers $10 billion funding for Egypt

The Islamic Development Bank is considering a recent request by Egypt for $10 billion in funding for infrastructure development projects, to be provided over the next five years. On Monday, Egypt received a $300 million loan from the IDB to the Egyptian General Petroleum Corporation. The loan is part of a total $1 billion loan agreement signed by Egypt with the IDB in July of last year aimed at funding food and energy imports. Ahmed Mohamed Ali, head of the Islamic Development Bank Group reiterated the bank’s commitment to helping Egypt surmount its formidable economic challenges, having already granted it $6 billion in funds. Ali pledged to send an IDB team to Cairo to begin discussions on the requested $10 billion loan in September.

Crowell & Moring Cairo advises ADIB-Egypt on Islamic finance deal

Crowell & Moring's Cairo office has advised the Abu Dhabi Islamic Bank-Egypt in connection with an Islamic finance facility extended to Maridive and Oil Services SAE. Abu Dhabi Islamic Bank- Egypt was the Initial Mandated Lead Arranger and the global coordinator in the deal, coordinating the financing with several Banks. The deal is the first Islamic Ijara structure syndication to take place in the Egyptian market, valued at $150 million. As legal counsel to the initial mandated lead arranger, Crowell & Moring advised the facility providers (the banks) on the structuring and documentation of the transaction.

Egyptian CSOs submit recommendations on Bank’s Safeguard Policies

A group of Egyptian civil society organizations have submitted their recommendations to the World Bank as input to Phase 1 of the Social and Environmental Safeguard policy review process. The document was endorsed by many of the same organizations that pushed the Bank to hold a civil society consultation in Cairo since such a meeting had not originally been scheduled to take place. In the submission, the groups emphasized the need for transparency, shared responsibility and accountability between the Bank and borrowing governments, and the need for the Bank to align its standards with those of international standards and conventions, while remembering that safeguards should contribute to the Bank’s overarching goal of reducing poverty.

Bank tie-up collapses in Egypt

A joint venture deal between Middle East’s EFG-Hermes and Qatar’s QInvest has failed because the Egyptian Financial Supervisory Authority did not approve it in time. Under the terms of the deal, QInvest would have injected $250m into a joint venture banking business, and owned 60 per cent. Businessmen in Egypt have complained that, since the 2011 revolution officials have shied away from making big decisions because of fears over possible allegations of corruption. Analysts had also speculated that the failure of the regulator to approve the deal might be linked to the trial of the two chief executives of EFG-Hermes, alongside the two sons of the former president, over profits from the 2007 sale of El Watany Bank of Egypt. However, EFG-Hermes has said in the past that it did not believe the case had anything to do with the delay in approving the joint venture.

Islamic Development Bank promises major investments in Egypt

The Islamic Development Bank plans to invest US$3 billion into the Egyptian market over the next five years as it sees promise and many long-term investment opportunities there. The funds would come in the form of financing and investment. Over the past few years the bank has made investments in Egypt worth US$3 billion, of which US$1 billion came during the last year alone. The Islamic Bank increased its investments in Egypt after the 25 January revolution, at a time when several international institutions had doubts about investing in the nation. The bank’s main objective is to support development.

Suspect in brazen Syrian bank robbery held in Egypt

The main suspect wanted in connection with a brazen daylight robbery of more than US$10 million (Dh36.7m) from Syrian International Bank for Trade and Finance (IBTF) has been held for questioning in Egypt. In January, $3.4m in cash, €4.75m (Dh22.8m) and 33m Syrian pounds (Dh1.7m) was allegedly stolen from the vault of the IBTF in Damascus. The bank learnt that the suspect fled Damascus to Egypt immediately after allegedly committing the crime. The suspect was arrested last month, upon the discovery by Cairo authorities that his passport was fraudulent. The bank has hired a lawyer to expedite the extradition of the suspect from Egypt.

Shura Council Economic Committee set to accept $50m from Islamic Development Bank

The Economic Committee at the Shura Council is set to accept the $50m development loan from the IDB to encourage the growth of small and medium sized enterprises (SMEs), with $320,000 set aside for logistical aid and worker training programs. Repayment will begin three years after the grace period for withdrawal. Ghadi Wali, secretary general of Egypt’s Social Fund for Development (SFD), said that the SFD will employ a number of international experts in order to review the potential outcome and effects of the IDB loan. She said that the SFD’s goal would be to distinguish between real losses and those suffered as a result of Egypt’s depreciating currency.

Pharos: Plan B: Issue Energy Sukuk to Local Banks - What if The IMF Deal is Not Sealed?

Since the IMF deal might fail, Plan B could be the issuance of US$-denominated sukuk certificates to local Banks in turn for EGPC rights in upcoming oil/gas fields. This will be akin to monetizing production sharing rights owned by EGPC. This alternative will still require aggressive reduction in energy subsidies to ensure repayment of sukuk liabilities as they come due. The two prerequisites of Plan B success are 1) stability in the movement of FC customer deposits and 2) execution of energy sector reforms . Both actors ultimately hinge on political reconciliation.

EFG, QInvest merger deal awaiting Egyptian regulator's nod

Egypt-based investment bank EFG Hermes has said its merger deal with Qatari investment company QInvest is to lapse on May 3, unless it receives long-awaited approval from Egyptian regulators. If EFG does not receive a 'no objection' from the Egyptian Financial Supervisory Authority in the coming days, it will be difficult to implement the joint venture agreement. A spokesman for the authority said the deal was still being studied and that a decision would be announced at the right time, declining to give any details or time frame.

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