Malaysia

EPF to boost #investments in shariah-compliant private equity funds

The #Malaysian Employees Provident Fund (EPF) is prepared to increase its investments in shariah-compliant private equity (PE) funds. Deputy CEO Datuk Mohamad Nasir Ab Latif said the pension fund has not met its full asset allocation target for its PE segment. He noted that the fund allocated 10% to infrastructure and real estate investment, while PE investment currently stood at 4%, adding that there was a shortage of shariah-compliant funds in the domestic and international markets. He said EPF would continue to invest in both shariah-compliant and conventional funds concurrently. For the second quarter ended June 30, 2017, EPF's shariah-compliant savings accounted for RM820.71 million out of RM11.51 billion of its total investment income, while RM10.69 billion was generated from its conventional savings.

Why #green #Sukuk could be a key growth driver for Islamic finance

Islamic finance is exploring green bonds in order to develop Sharia-compliant financial products to invest in climate change solutions. Green Sukuk are Sharia-compliant investments in renewable energy and other environmental assets. Over $30bn worth of green bonds were issued in the second quarter of 2017. Issuance from emerging markets has jumped from $2.3bn to $9.2bn year-on-year versus 16% a year ago. Malaysia has the opportunity and ambition to be a leader in this space on the premise that Malaysia is already a leader in Islamic finance. Another active player on this front is the United Arab Emirates (UAE), which launched the Green Finance and Investment Support Scheme to promote green projects. Green Sukuk is a good model to finance sustainable infrastructure as well as help bridge the gap between conventional and Islamic finance. The most important challenge for Sukuk is gaining acceptance by international investors due to lack of standardisation and legal enforceability risk. Other challenges of green Sukuk include investor’s awareness, demand for energy supply, government support and demand for energy financing.

CIMB Islamic outlines #growth #plans

In this interview CIMB Islamic Bank CEO Mohamed Rafe Mohamed Haneef talks about the bank's achievements in Malaysia and its growth plans. The most significant segment for CIMB Islamic Bank is retail banking. When Haneef joined the bank, consumer banking’s contribution was between 40 and 45%, while at the end of June it was almost 60%. The bank came up with an embedded model which enables both CIMB Islamic and the conventional side from CIMB Group to tap the same talent. CIMB operates on two separate licences, but out of the same branches, as relationship managers offer both Islamic and conventional banking options. According to Haneef, the bank plans to focus on the Asean region first before eventually building inroads into the Middle East beyond 2018. CIMB Group’s Islamic Asset Management is in close contact with the Securities Commission (SC) and plans to contribute to the development of Sustainable and Responsible Investing (SRI).

Interview with Mr. Khairul Kamarudin, CEO of Bank Islam #Malaysia Berhad

In this interview Khairul Kamarudin, CEO of Bank Islam Malaysia, talks about his leadership style and areas of focus. Besides sustainability, the other main area of focus will be digitalisation. In 2016 the bank launched the innovative product called 'e-Donation' Terminal using Visa PayWave, a platform where donations can be made through the contactless electronic method using any debit/credit card. Bank Islam has also taken a step towards accepting fintechs with the recent strategic collaboration with Cognizant. This will allow the bank to embark more on innovative digital Islamic banking. In terms of charity, Bank Islam has its own Waqf project in its office building, which provides prayer facilities to more than 3,000 people per week. Also, the bank supports the affordable development project in Selangor and a school-construction project in the state of Perlis.

Cagamas issues country's first dual tranche #sukuk reopening

Cagamas announced its 14th issuance for the year, a three-year, RM1 billion sukuk, which represents Malaysia's first ever dual tranche sukuk reopening. Proceeds from the issuance will be used to fund the purchase of Islamic house financing from the financial system. CEO Datuk Chung Chee Leong noted that the final yield was priced competitively at a spread of 50 basis points over the three-year Government Investment Issue. He said as at September 8, 2017, Cagamas' secondary trading volume stood at over RM5 billion. He added that subscription from foreign-based investors indicates continued confidence in the company. The new issuance will bring the company’s aggregate issuance for the year to RM8.5 billion.

Global #sukuk market to continue upward trajectory, says Islamic finance promotion agency

According to the Malaysian International Islamic Financial Centre (MIFC), the global sukuk market is set to continue its upward trajectory in 2017 as the fundamentals supporting their issuance remain intact. MIFC said global sukuk issuances stood at US$59.1 billion as of the first half of 2017 (1H17), an increase of 45.6% compared with 1H16. Malaysia continues to be the main driver in the Islamic capital markets, with the country commanding a 46.4% market share in sukuk issuance. As for outstanding sukuk, Malaysia's share stands at 52.6%. MIFC observed that Malaysia is the pioneer in the world's first green sukuk, as evident by the RM250 million of Islamic bond issued by Tadau Energy. Also, the regulator Securities Commission Malaysia is offering several incentives to attract green issuers including tax deduction on issuance costs, which is valid until the year of assessment 2020.

#Malaysia wins praise for #green #sukuk initiative

The World Bank has praised Malaysia for financing sustainable, climate-resilient growth. Victoria Kwakwa, World Bank regional vice-president for East Asia and Pacific, said Malaysia’s innovative green sukuk initiative would help close the gap for both infrastructure and green finance. In July, Tadau Energy issued the Green SRI Sukuk Tadau, the RM250 million Sustainable Responsible Investment shariah-compliant bond, which holds a tenure of up to 16 years. It will finance a 50-megawatt solar power plant. Kwakwa said the framework underlying this instrument was the result of collaboration between the Securities Commission of Malaysia, the Malaysian Central Bank and the World Bank Group. She said the World Bank issued US$10 billion in bonds through the green bond programme since 2008 and new issuances in the global market are expected to exceed US$120 billion this year.

Hong Leong Islamic lends RM350m to TERAJU

Hong Leong Islamic Bank (HLISB) has pledged RM350 million for the Bumiputera Agenda Steering Unit (TERAJU) via its new Bumiputera companies programme. Of that amount, RM225 million will go to working capital and the balance for asset acquisition. The programme aims to increase Bumiputera SME's participation in the Malaysian economy by enabling small medium enterprises (SMEs) to scale up and compete in the open market. HLISB chief executive officer Jasani Abdullah said the bank targets to provide financing facilities to between 20 and 30 companies annually. He pointed out HLISB would be focusing on industries such as construction and infrastructure, telecommunications, agriculture, manufacturing and green technology sectors. Meanwhile, TERAJU chief executive officer Datuk Husni Salleh said HLISB's participation would assist Bumiputera participants to expand locally and overseas.

Six #Islamic #banks collaborate to develop #waqf #fund

Six Malaysian Islamic banks have agreed to jointly develop a waqf fund which focuses on projects in four areas — economic empowerment, education, health and investment.
The banks are namely: Affin Islamic Bank Bhd, Bank Islam Malaysia Bhd, Bank Muamalat Malaysia Bhd, Bank Kerjasama Rakyat Malaysia Bhd (Bank Rakyat), Maybank Islamic Bhd and RHB Islamic Bank Bhd . They have signed a Waqf Fund Strategic Collaboration Agreement.

Rise of #Islamic #finance meets #human #capital #gap

The strongly growing popularity of Islamic banking and Islamic finance and its increasing global spread has led to a considerable undersupply of talent in this sector. Both the Middle East and Southeast Asia, but also new regions currently adapting to the alternative finance system such as in Africa and Central Asia are effected.

Estimations are that there is a shortfall of between 8,000 and 10,000 in main Islamic finance fields in Gulf Cooperation Council countries alone, plus more in peripheral sectors such as law and regulatory affairs, financial technology, insurance and others. Altogether, as the industry continues to grow, at least 56,000 people will be needed to serve the Islamic financial sector in the coming years, according to the Finance Accreditation Agency of Malaysia.
“Islamic banking assets in six core markets – Qatar, Indonesia, Saudi Arabia, Malaysia, the UAE and Turkey – are estimated to reach a combined asset volume of $1.8tn by 2019,” says Dr. Amat Taap Manshor, the FAA’s CEO. “But the human capital meant to support the industry is still in its infancy, and shortages will be felt most acutely in the capital market sector,” he added.

#PNB expanding #Islamic #finance agenda: Wahid Omar

Permodalan Nasional BHD is pushing for much bigger Islamic financial activities in order to turn Malaysia into a centre of global Islamic banking. In an interview to mark his one-year stint in the country’s largest unit trust fund, group chairman Tan Sri Abdul Wahid Omar explains how PNB and its strategic companies will intensify efforts to boost syariah-based investment and financing products.
Regarding the Islamic finance agenda being so important to PNB it was asked, if it is tied to the government’s objective of making Malaysia the Islamic financial hub of the world.
Mr. Tan Sri Abdul Wahid Omar answered: „Indeed, if you look at the aspirations of our unitholders, they want syariah-compliant unit trust funds. I think this was why back in 2008, there was a fatwa that investments made in Amanah Saham Nasional Bhd were permissible. This fatwa was issued at the national level and 10 states adopted the fatwa, excluding Selangor and Penang. Over the past year, we had been engaging with the Selangor Mufti Department and based on those engagements, they revised their fatwa positively. So starting from April, investments in ASNB funds are “harus”.

The #continuing allure of #Islamic #finance

The total Islamic finance industry was estimated at around $ 1.9 trillion in assets for the year end of 2016, and it pales into insignificance compared with traditional finance. However of special interest is the growing popularity of Islamic finance from both the Muslim and non-Muslim financial institutions and investors. Islamic assets are very much concentrated in the banking sector which holds $1.5 trillion in total, with the Islamic bonds or sukuks worth $320 billion, and investment funds and insurance or so called takaful worth $56 billion and $25 billion respectively.
The majority are purchase and sale or murabaha and leasing or ijara transactions. Some major Gulf companies are turning to the sukuk market to raise funds, with Saudi Aramco and the Government of Saudi Arabia both successfully launching sukuk tranches which were heavily oversubscribed.

BNM to measure VBI adoption in Islamic FIs

Bank Negara #Malaysia is developing a scorecard with Islamic banking players that will measure the adoption of value-based intermediation (VBI) initiative. According to deputy governor Abdul Rasheed Abdul Ghaffour, the VBI marks the next step to realise the full potential of Islamic finance. The VBI Community of Practictioners (COP) includes nine Islamic banking institutions, Bank Islam, Bank Muamalat, CIMB Islamic, Agrobank, HSBC Amanah, Maybank Islamic, AmBank Islamic, Alliance Islamic and Standard Chartered Saadiq. While VBI shares similarities with ethical finance, ESG (environmental, social and corporate governance) and SRI (sustainable, responsible, impact investing), the distinguishing factor is the Syariah aspect. Business propositions from new sectors such as small and medium-sized enterprises (SMEs) would benefit from financial applications based on potential value creation and not just their credit scores.

Talent deficit in Islamic finance affects quality #sukuk issuance

The shortage of high-quality sukuk in the Islamic finance market is a result of the deficit in virtuous talent, according to Datuk Mohammad Faiz Azmi, Former Malaysian Institute of Accountants (MIA) president. He also said there was a lack of safe assets at present, leaving issuances by the government always oversubscribed. He added that the opportunity now existed for sukuk issuance from Indonesia, which has a lot of infrastructure plans such as to build more roads, have trains, ports, better airports and others. In a recent Bank Negara strategic paper, the central bank revealed that the annual growth rate of the Islamic finance industry had slowed from 24.2% in 2011 to 8.2% last year. Mohammad Faiz said MIA has launched the Mini Pupillage Programme to create a pool of knowledgeable and specialised talents in the area of Islamic finance.

World Bank sees massive potential in #green #sukuk

The #Malaysian company Tadau Energy became the first entity in the world to issue a green sukuk. Called Green SRI Sukuk Tadau, the RM250 million Sustainable Responsible Investment (SRI) syariah-compliant bond holds a tenure of up to 16 years. RAM Rating Services assigned it a long-term rating of "AA3". The framework underlying the green sukuk’s debut is the result of a collaboration between Bank Negara Malaysia, the Securities Commission (SC) and the World Bank. World Bank country manager Faris Hadad-Zervos called the issuance of the green sukuk a historic event, not just for Malaysia but for the whole world. Faris stressed the creation of the framework was key in making the world’s first SRI sukuk a reality. World Bank financial specialist Jose De Luna Martinez said the Tadau sukuk would potentially lead Malaysia to be a green sukuk hub of the Asean region.

Financial inclusion through Islamic #microfinance

According to statistics from the World Bank, an estimated two billion adults worldwide do not have access to basic financial services. Realising this fact, the World Bank has partnered with public and private sector institutions and established the Universal Financial Access by 2020 (UFA2020) initiative to promote financial inclusion. As the main aim of the microfinance industry is to alleviate poverty, Islamic microfinance is a branch of that with Islamic financial principles. In Cambodia the Islamic microfinance industry is still in the nascent stage. Recently, the Cambodian government has opened its doors to two Islamic microfinance institutions into Cambodia namely Amanah Ikhtiar Malaysia (AIM) and Yayasan Pembangunan Ekonomi Islam Malaysia (YAPEIM). AIM is currently setting up its branch office in Cambodia while YAPEIM is slated to come in by the first quarter of 2018.

Going For Listing: Ihsan #Sukuk for a good cause

Ihsan Sukuk is Malaysia's first sustainable and responsible investment (SRI) sukuk for retail investors and is now listed on Bursa Malaysia. The RM100 million issuance is the second Sukuk Ihsan programme, the first having been a RM100 million tranche issued in 2015 only for institutional investors. While the minimum investment is RM1,000, the sovereign wealth fund also provided room for small-scale investors to start from as low as RM10 via two crowdfunding platforms ATAPLUS and pitchIN. The proceeds will be channelled into the Yayasan AMIR Trust Schools Programme aimed at improving access to quality education at government schools. The sukuk’s tenure is seven years and both the retail and non-retail sukuk holders will receive annual payments. The principal adviser and lead arranger is CIMB Investment Bank Bhd, while the joint lead managers are Maybank Investment Bank and RHB Investment Bank.

PNB mulls introduction of Islamic shares for Maybank

Permodalan Nasional Bhd (PNB) is studying a potential issuance of Islamic shares (i-shares) by Malayan Banking (Maybank). PNB group chairman Tan Sri Abdul Wahid Omar said currently about 25% of the Maybank group’s earnings come from the syariah-compliant businesses, and proposed that 20% of the group’s shares can be designated as i-shares. The move to list i-shares would provide an extra boost to the Malaysian Islamic capital market, said Abdul Wahid. He added that there are currently only two listed syariah-compliant financial institutions in Malaysia, BIMB Holdings and Syarikat Takaful Malaysia. If the plan goes through, it will create RM20 billion worth of new syariah-compliant instruments, which is three times bigger than BIMB’s market capitalisation. Abdul Wahid added that the group is looking at three asset classes for further investments overseas, namely public equities, private equities and real estate.

Shariah-compliant 1% interest on #studyloans ‘can’t be abolished’

Shamsul Anuar Nasarah, chairman of the National Higher Education Fund (PTPTN), says the 1% interest charged on study loans is not to make a profit, therefore it is not right to abolish it. In his view, the cost is minimum and is used to cover the staffing and administrative costs of those who are managing the accounts. Borrowers are charged between 1% and 3% interest, and additionally, their loan amount will increase if they fail to pay their instalments. After the agency's establishment, administrative costs had amounted to 4% a year. It was gradually reduced to 3% a year since January 1, 2004. Now, the interest is only 1% a year, beginning June 1, 2008. In 2017 PTPTN is expected to collect RM4 billion by the end of the year. Higher Education Minister Idris Jusoh said the target was achievable as the agency had collected RM3.4 billion last year, when its target was only RM2 billion.

Islamic finance sharpens its profile in Southeast Asia

#Malaysia’s eastern region Sarawak will host this year’s World Islamic Economic Forum (WIEF) from November 21 to 23. According to Sarawak’s Deputy Chief Minister Awang Tengah Ali Hasan, the state will use the forum as a platform to promote Islamic investment opportunities in various industries. He added that Sarawak was currently also undergoing a rural transformation programme and had designated 77,000 hectares of land for the development of a halal hub. The deputy minister said the WIEF will also focus on strengthening the partnership between Muslim and non-Muslim communities. The conference is expected to attract about 2,000 potential participants and representatives of various sectors. In another development, Islamic finance will soon make its foray into Cambodia, which is home to an estimated 300,000 Muslims. Two Malaysia-based Islamic financial institutions are expected to open their first branches by the end of the year and in 2018. Another recent highlight for Islamic finance was the Brunei Darussalam Islamic Investment Summit 2017 held on August 2 and 3.

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