IslamicFinance.de

Transparency International published its annual Corruption Perception Index. The index ranks 180 countries using a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean. This year, more than two-thirds of countries score below 50. With an average of score of 43. In South East Asia, Singapore again leads the way this year as the highest ranked country. The United Kingdom increased its score from 81 to 82. The US moves up to 16th position following a single point increase to their score. The UAE increased it’s score by 5 moving up to 21st place in the index. Malaysia moved down nine places, from 53rd to 62nd on the index. Indonesia also lost 6 places in the index despite scoring the same as last year.

Dynastic planning is increasingly topical in the Middle East as founders focus more attention on ensuring that the family remains in harmony. According to Laurence Black, Regional Director at Asiaciti Trust, establishing a structure to manage family dynamics and ensure a smooth transition of assets helps minimise family conflict. As families become more global from their Middle East bases, there are more and more issues to consider. Families are looking further out in wealth transitioning as well, thinking about their personal legacies, such as philanthropic interests. Well-structured dynastic planning helps mitigate dangers that might arise due to political instability or other forms of fragmentation like foreign ownership rules. Cross-border issues are ever more prevalent as asset classes and geographical dispersion become more diverse. Trust structures and other special vehicles are ideal for protecting assets and can maintain control for the principals in their lifetimes.

The typical GCC merchant family is facing many challenges to the maintenance, expansion and inter-generational transitioning of its wealth. According to Yann Mrazek, Managing Partner at M/HQ, there is some gradual increase in investment outside the region, but nearly three-quarters remains in the region. The focus remains concentrated on only three asset classes, the family’s own business, real estate, cash or deposits. While times are clearly changing and people from the GCC are spreading out further, their assets seem to become more concentrated. Moreover, the UAE economy is more open than ever before, implying greater competition for businesses. All this represents a wonderful opportunity for firms such as M/HQ. An estimated 30% of families are not thinking about estate planning, while 70% are receptive to legacy matters. For those with offshore assets, a trust or a foundation are likely to be compatible. For domestic assets, there are new tools being rolled out in the region. These include new SFO, trust and foundation regimes.

Tariq Bin Hendi, Ph.D., Executive Vice President of Emirates NBD, discussed the challenges that lie ahead for Private Banking. Bin Hendi said that approximately 200,000 ultra-high net-worth individuals are going to be passing down almost 30 trillion US dollars to their children. In addition, there will be millions of people passing down more moderate wealth, from the entrepreneurial and business fields. In the UAE, the older generation still prefer real estate and equities to the private equity and technology sectors that their children and grandchildren favor. Wealth management institutions are changing the way they interact with the new generation of clients. They need to better equip themselves with more nimble technology, from AI to Robo-advisors to ATMs, so as to not lose ground to the new startups. Bin Hendi suggests a new generation of products and services, which include a combination of human and AI interaction. Emirates NBD is spending 1 billion Dirhams over the next 3 years to bring about this technological revolution.

Maybank Islamic hopes to attract RM2 billion (USD453 million) in deposits – within a year – by launching two new financial products. The products are Foreign Currency Mudharabah-i (FCM-i) and the Profit Now Account-i (PNA-i). FCM-i is a short-term Islamic foreign currency term deposit account based on the principle of Mudharabah. Dividends on FCM-i are based on an agreed profit-sharing ratio which is agreed up-front. The actual dividend will then be calculated on this ratio and the amount payable will be known upon maturity of the investment. The minimum deposit for individual customer is equivalent to USD5,000; tenures range from one to 12 months.