Asian Finance Bank (AFB) has appointed Khalid Mahmood Bhaimia as its new chief executive officer effective from March 21, 2017. Bhaimia has over 20 years of experience in the global Islamic banking industry. He previously served as the CEO of Unicorn International Islamic Bank and RHB Islamic Bank as well as Hong Leong Islamic Bank’s managing director. AFP is a full-fledged Islamic bank and is backed by a consortium of shareholders comprising Middle Eastern financial institutions.
Malaysia’s proximity in the ASEAN region and its mix of urban, suburban and rural population makes it a suitable environment for testing and launching FinTech solutions for the global Islamic Finance market. Datuk Yasmin Mohamood, CEO of Malaysia Digital Economy Corp (MDEC), has opened the country’s doors for FinTech startups and companies. Yasmin was speaking at the Finnovasia 2017 Conference in Kuala Lampur and claimed Malaysia as a viable test-bed for FinTech companies. He added that an organized FinTech ecosystem will be developed with the support of Bank Negara Malaysia and the country’s Securities Commission. In August last year, Bitspark partnered Malaysia’s Vitaxel to bring remittance solutions over the bitcoin blockchain. Later in December, Malaysian non-profit Blockchain Embassy Asia established a steering committee toward educating organizations about blockchain technology.
UEM Edgenta will issue Islamic commercial papers (ICP programme) and Islamic medium-term notes (IMTN) with a combined aggregate up to RM1bil in nominal value and a sub-limit of RM300mil.
UEM Edgenta said the proceeds raised from the sukuk programmes would be utilised for its syariah-compliant general corporate purposes. The ICP programme has been assigned a preliminary rating of MARC-1/S and the IMTN programme has been assigned a preliminary rating of AA-IS by Malaysian Rating Corp. The company added that it had lodged the required information and relevant documents relating to the proposed sukuk programmes to the Securities Commission.
The #Malaysian Securities Commission (SC) released its SC 2016 Annual Report. The report states that the Malaysian capital market remains resilient and sustainable, growing in an orderly trajectory, attracting sound investor interest. According to SC chairman Tan Sri Ranjit Ajit Singh, the outlook for the Malaysian capital market in 2017 is positive. The SC is in capacity-boosting mode armed with several initiatives. These include launching the new Malaysian Code of Corporate Governance, the approval of RM5.95 million by the nascent Capital Market Development Fund aimed at encouraging new entrants into the industry, and the establishment of an Institute for Capital Market Research in 2017. This complements the initiatives by the SC in 2015 and last year, including the introduction of the first Equity Crowdfunding Framework in the region and a peer-to-peer financing framework.
The #Malaysian government is encouraging investors from China to tap into the estimated USD3 trillion global demand for halal products by exploring business opportunities in Tanjung Manis Halal Hub (TMHH) in Bintulu, Sarawak. According to Second Minister of Resource Planning and Environment Datuk Amar Awang Tengah Ali Hassan, Malaysia is a pioneer in halal certification ensuring the integrity of halal products and services through strict compliance with Syariah requirements. Awang Tengah added that the Sarawak Government had established the TMHH which covers an area of 124,517 hectares making it the largest among all the other halal hubs in the region. Among the investment potentials in TMHH he revealed is the cultivation of food crops, aquaculture, poultry and livestock, food processing, cosmetics, and health products. On another note, Awang Tengah revealed that China has remained an important trading partner as well as a major source of Foreign Direct Investment (FDI) for Sarawak.
RHB Islamic Bank is expecting to disburse at least RM50 million this year to facilitate the development of entrepreneurs. The fund is part of the Teras Fund programme provided via the Bumiputera Agenda Steering Unit (Teraju). According to RHB Islamic Bank's CEO Datuk Adissadikin Ali, the collaboration with Teraju had so far disbursed RM200 million as of 2016 from the total fund raised of RM400 million. He said the original fund for the programme was RM80 million, but RHB Islamic managed to raise the fund by leveraging on resources to RM400 million.
Islamic finance has largely been a priority area in Malaysia for three decades and it is not about to slow down. The World Bank's recent Global Report on Islamic Finance highlighted Malaysia as having the largest Islamic banking assets in the region with US$156.7 billion (RM697.15 billion) as at 2013. Malaysia is also the second-largest economy in terms of total syariah-compliant financial assets. However, the report also suggested the need to address several challenges like the need for alternative investments. On a positive note, the report said the syariah governance framework was advanced in Malaysia. Within Asia, Malaysia has been dominating the sukuk issuance market. The US dollar-denominated sukuk have been growing, but sukuk denominated in Malaysian ringgit are growing even faster and dominate the market.
According to AllianceDBS Research, a new wave of merger and acquisition (M&A) activities in the Islamic banking space is plausible, although the timing remains the key risk. Potential M&A candidates include the Malaysia Building Society (MBSB), and Bank Muamalat Malaysia (Muamalat). The research house added domestic Islamic financing growth was expected to continue outpacing conventional loans growth, driven by regulatory push for internationalisation of Islamic finance. This was mainly underpinned by a growing push by banks to fulfil Bank Negara Malaysia’s target of 40% proportion of Islamic financing. AllianceDBS predicts the big game-changer will be product innovation. The research house named the main Islamic banking proxy, the BIMB Holdings (BIMB) as the largest Shariah compliant financial institution with strong potential to lead product innovation.
Islamic finance is the area where Malaysia leads the world. Malaysia has 54% of global sukuk outstanding, 314 Islamic investment funds worth RM100.6 billion ($22.7 billion), and an Islamic capital market that has tripled in size since 2005, accounting for 60.1% of the total Malaysian capital market. In August the Employees Provident Fund (EPF) launched its Shariah savings scheme to give members the option to convert their conventional account to an Islamic one. It has said it expects to invest an average of RM25 billion in Shariah assets every year and it intends to allocate a minimum of 45% of its assets into Shariah-compliant forms. Thus, EPF has sufficient scale to be very interesting to asset managers worldwide. Largely through that mechanism, there are now 20 fully fledged Islamic fund management companies operating in Malaysia.
Yinson Holdings' subsidiary Yinson Production (West Africa) has converted its existing US$780mil conventional loan to an Islamic Murabahah term financing facility. Group executive chairman Lim Han Weng said this was the largest Islamic facility for floating production storage and offloading (FPSO) financing to-date. Maybank Investment Bank acted as the coordinating bank for the conversion while Maybank Islamic acted as the syariah adviser. Upon completion of the conversion, Yinson is expected to meet the debt over total assets financial ratio benchmark required by the Securities Commission for a syariah-compliant security.
Bank Islam's managing director Datuk Seri Zukri Samat said he would not extend his contract when his tenure ends in June this year. When asked on his successor, Zukri said there was still plenty of time to search for a successor since it was only January. On Bank Islam Visa Infinite MPN credit card-i, he said it was introduced in response to Bank Negara’s call for a cashless society. He said the collaboration with MPN was the bank’s continuous cooperation with the academic institutions starting with the introduction of the UniDebit card in 2012. Meanwhile, MPN chairman Professor Tan Sri Zakri Abu Hamid welcomed the strategic cooperation to strengthen the corporate image of both parties.
According to Fitch Ratings, Malaysia's takaful sector continues to enjoy higher growth than the conventional sector. This growth is driven by a low base, stable domestic consumption and increasing consumer awareness. The rating agency said that regulatory pressure would drive sector consolidation in the short term. As takaful operators realign their strategic focus and gradually retain more risks, Fitch expects some bottom-line volatility in the short term. For the first half of 2016 (1H2016), family takaful grew by 9.8%, while general takaful grew by 5.8%. This compared to 8.2% growth in conventional life and 2.6% in general insurance.
#Malaysia’s securities regulator has proposed establishing a fund to invest in the country’s Islamic finance funds and make them more attractive to institutional and foreign investors. The proposed fund is part of an Islamic fund and wealth management blueprint launched on Thursday. It would invest in multi-currency Islamic investment products managed by Malaysian-based asset managers. The fund could address challenges that Islamic funds have faced so far. Few Malaysian-managed funds are offered overseas but this is starting to change. CIMB Islamic Asset Management, for example, this week launched an Ireland-domiciled dollar-denominated sukuk fund. The Employees Provident Fund is launching a RM111.45 billion shariah-compliant retirement fund this month, which could serve as a boon to asset managers in the field.
The Securities Commission Malaysia (SC) has launched a five-year Islamic Fund and Wealth Management Blueprint designed to drive further development and growth of Malaysia's Islamic capital market. The Blueprint aims to establish the country as a leading international centre for Islamic fund and wealth management. It was launched by Datuk Johari Abdul Ghani, Second Finance Minister of Malaysia, on behalf of Prime Minister Dato’ Sri Mohd Najib Tun Razak, at the International Fund Forum 2017. To be implemented on a phased approach, initial work programmes will include the formulation of a framework for SRI funds, the setting up of a global centre for Islamic capital market and the introduction of a digital investment services framework.
The year 2016 records quite remarkable achievements in terms of financial technology (fintech). The Investment Account Platform (IAP), Malaysia’s first multi-bank platform for financial intermediation in the Islamic financial system, was launched on the 17th February 2016. The IAP serves as a central marketplace to finance small and medium enterprises (SMEs) with initial funds of RM 150 million. Eight Islamic Crowdfunding Platform operators from across the globe clicked together to form Islamic Fintech Alliance (IFT Alliance) and launched it on the 1st April 2016. Then, on the 26th September 2016, New York-based Wahed Invest launched Wahed, the world’s first automated Islamic investment platform. Two months later, the Kuala Lumpur-based Faringdon Group announced that it would be launching Asia’s first Shariah compliant Robo Advisor. The online tool called Algebra will provide automated portfolio management advice. Further progress of these initiatives and new innovative entrants will position 2017 for more excitements.
Sabah Credit Corporation (SCC) increased the size of its Sukuk Musharakah programme from RM1.5 billion to RM3.5 billion. According to CEO Datuk Vincent Pung, the move will allow SCC to consolidate outstanding Sukuk issuance and generate an additional RM1 billion for the corporation to plan its future loans growth. Pung also announced i-Cash, a personal loan facility, offering borrowers simplified and online loan processing and the flexibility of drawing the loan. Finance Minister Datuk Seri Musa Aman noted that SCC had anticipated a significant drop in profits of RM16 million initially to RM54 million for the year 2016, but instead reported a beyond expectation pre-audited profit of over RM60 million as of December 2016. He said the corporation has also donated over RM23 million through more than 150 Corporate Social Responsibility projects such as rural hostels, orphanages, half-way homes and centres for single mothers.
Although Malaysia is a leader in Islamic finance research, very few of the research papers published have translated into feasible innovations, until recently. To help push the sector forward and bring the research and ideas to fruition, International Centre for Education in Islamic Finance, with the support of Bank Negara Malaysia, the Association of Islamic Banking Institutions Malaysia and the Malaysian Takaful Association, recently held the Islamic Finance InnoFest 2016. For this festival, INCEIF accepted idea submissions from all over the world, including Japan, Australia and Pakistan, to promote inclusiveness.
“We believe that to really push for innovation, we cannot be stuck in a silo. That is why it is not limited to only Malaysians,” says Associate Professor Dr Baharom Abdul Hamid, director at INCEIF’s Centre of Research and Publication and InnoFest chairman.
Funding Africa’s huge development needs has long represented a big challenge. This has spawned all kinds of innovative financing mechanisms in the past and could spell an opportunity for Islamic finance, notably haria-compliant bonds, or Sukuk. Still in an embryonic state in Africa – but growing nonetheless – these instruments could play a potential role in delivering large infrastructure projects, from building new airports to constructing power plants and building roads. While it is early days for Africa, on a global scale Islamic finance is not a new concept.
A longstanding feature of the financial markets of Malaysia – a world leader in the field – and across the Middle Eastern Gulf, its spread now encompasses non Muslim-centric territories worldwide. This is a pattern that is catching on, albeit slowly, in Africa. While northern Africa has provided a natural entry point for Islamic products, current activity now focuses on sub-Saharan markets, notably in West Africa.
A Chartered Accountant and Tax Administrator, Mr. Bicci Alli has said that the federal government as well as states cannot shun Islamic financial instruments whose market is valued at over $2.6 trillion, because it has the capability to bridge the infrastructure deficit in the country.
The federal government is presently looking for financial and legal advisers and trustee firms to organise its first Islamic bond in the domestic market, the Debt Management Office (DMO) said on Monday. Nigeria is working on a debut sovereign sukuk but has yet to determine the size of a potential deal. Issuance of a sovereign sukuk is part of a plan by Nigeria’s debt office to develop alternative sources of funding and to establish a benchmark curve.
#Malaysia Building Society Bhd (MBSB) has received Bank Negara’s approval for talks on a proposed merger with Asian Finance Bank (AFB). MBSB will soon start negotiations with the existing Middle Eastern shareholders of AFB, namely Qatar Islamic Bank (66.67%), RUSB Investment Bank (16.67%), Tadhamon International Islamic Bank (10%) and Financial Assets Bahrain (6.67%), for the merger. The negotiations are to be completed within the next six months. For the nine months ended Sept 30, 2016, AFB reported a net profit of RM4.54 million, an 18.8% drop compared with RM5.58 million in the same period last year. MBSB has a goal to become an Islamic financial institution by 2020 through merger with an Islamic lender. It centres his business efforts on six areas, namely, business focus, right pricing, asset quality, cost cutting, retail collection and information technology initiatives.