IslamicFinance.de

Standard Chartered Saadiq (Saadiq) and Credit Guarantee Corp Malaysia (CGC) have collaborated to launch Malaysia’s first Islamic portfolio guarantee (PG) scheme to provide financing to small and medium enterprises (SMEs) in the country. The term-financing facility, which offers financing from RM100,000 to RM800,000 over a flexible financing tenure of between 12 and 84 months, is expected to benefit about 400 SMEs within the next one year. Up to RM200mil will be offered under the Islamic PG agreement between Saadiq and CGC. Under the agreement, CGC would guarantee 70% of the approved total principal amount undertaken by SMEs and assist to verify the credibility of applicants in consultation with Saadiq. The scheme is expected to have a shorter turnaround time in terms of approval and disbursement to enable SMEs to gain quicker access to financing.

Bank Negara Malaysia’s (BNM) recently announced concept paper on life insurance and family takaful (LI and FT) may be the insurance sector’s re-rating catalyst. The proposals made in the paper focus on ensuring sustainable operating costs, enhancing disclosure and improving policyholders’ value proposition, which should collectively boost penetration, especially in the mass market. Key measures in the recent proposals include the introduction of the minimum allocation rate to replace commission/operating cost limits on investment-linked products, promoting distribution channels and encouraging greater product transparency with enhanced disclosure requirements and web aggregators. The outcome is considered a win-win for customers and insurers.

Malaysia's Royal Award for Islamic Finance commences the third global search to honour an exceptional individual in the field of Islamic finance, with the opening of nominations. An independent seven member international jury will select the deserving individual. The selection criteria encompass both qualitative and quantitative aspects, including financial innovation and pioneering work, exceptional leadership, adoption and acknowledgement within the industry, and inspiration and influence towards future progress and development of Islamic finance. The closing date for nomination is 31 January 2014, and interested persons and parties can submit their nomination online via the website award.mifc.com or via email RAIFSecretariat@seccom.com.my.

London has long been the default centre for international firms to issue sharia-compliant bonds, but it faces a mounting challenge from Dubai and Kuala Lumpur. The final result of the three cities' rivalry may not be known for years, but thousands of jobs and large amounts of direct investment in companies and real estate are likely to depend on the outcome. The most high-profile - and most cut-throat - area of competition between the three centres is arranging sukuk. Other areas of competition include Islamic insurance, known as takaful, and asset management. London has led in attracting sukuk issues by big international companies because of the massive size of its conventional financial markets and its globally respected legal system. However, its position looks weakest among the three centres from a long-term perspective because it is not located within a natural pool of sukuk issuers and European customers will remain a limited group.

UDA Holdings will work with Bank Muamalat to develop 40.47ha of wakaf land with a gross development value of RM1 billion. The land, ready for development, is spread throughout the country and owned by the respective state Islamic Religious Councils. Bank Muamalat will provide the end financing for UDA to develop the land. The implementation of development projects on the wakaf land will be based on the concept of Ijarah or leasing. To realise the development of wakaf land, UDA acting as the developer, will underwrite the development costs, while also being responsible for marketing the projects.

The Malaysian government has announced plans to transform the country’s capital Kuala Lumpur into a major financial centre in a bid to raise its profile and spark greater international trade and investment. The proposed new financial district, covering 70 acres and featuring 11 new buildings with 25 or more floors, is known as the Tun Razak Exchange (TRX). In order to achieve the goal of becoming a financial superpower, TRX must turn to a more niche approach and build on the country’s established strength in the rapidly growing Islamic financial marketplace. Malaysia must leverage its status as an established Islamic finance hub. And it must address the challenges associated with the supply of high quality human capital.

Al Rajhi Bank Malaysia has appointed Syed Maqbul Quader as Chairman effective Nov 6, 2013. Syed Maqbul, 64, has served as an independent non-executive director of the bank from Aug 1 this year. He holds a Bachelor of Commerce from Dhaka University and has over 40 years' experience in the banking industry. He was involved in establishing the Corporate Banking Group at Al Rajhi Bank in Saudi Arabia and also the Offshore Banking Unit of Chase Manhattan Bank in Bahrain. According to Al Rajhi Bank Chief Executive Officer Datuk Azrulnizam Abdul Aziz, Syed Maqbul's international exposure in particular will be highly relevant for the bank in its aspiration to be the preferred Islamic financial services bank.

Maybank Islamic is confident of continuing its growth trajectory this year. Chief executive officer Muzaffar Hisham said the bank is looking at a pre-tax profit and zakat growth of between 10 and 15 per cent, after a 25 per cent growth to RM1.19 billion last year. The bank's growth will be led by an increase in cross-border transactions, which he said are on a steady rise. Indonesia and Singapore are the next key growth areas for Maybank Islamic. Muzaffar said he wants to grow the bank's cross-border investments via its treasury services window at Maybank Hong Kong. The bank has a strong retail banking presence in Singapore and has issued one sukuk in the island state. In Indonesia, its Islamic banking reach is through Maybank Group's subsidiary, Bank Internasional Indonesia. He added that the bank is also targeting to attract corporations from the United Kingdom wanting to expand in Asia.

Malaysia's Malayan Banking (Maybank) has launched an Islamic asset management unit to cater to growing investor appetite for sharia-compliant investment products. Maybank asset management will leverage the Maybank group's network of business lines, which range from consumer banking to Islamic insurance, as well as its geographical presence across Asia. It aims to launch Asian-themed investment funds using a bottom-up investment strategy, with products to be marketed primarily in Malaysia and Indonesia. Maybank acquired Indonesian asset management firm PT GMT Aset Management, and it will also explore opportunities in the Middle East through Maybank Investment Bank's stake in Saudi Arabia's Anfaal Capital, according to Nor Azamin Salleh, chief executive of Maybank asset management.

The Law Harmonisation Committee is working to encourage use of Malaysian rules for cross-border Islamic deals instead of English law. Regulations are being amended to remove loopholes that discourage Shariah deals to make the nation the preferred place to settle disputes. Malaysia still has a single set of laws that govern both Shariah-compliant and non-Islamic commercial contracts, and they can sometimes render Islamic deals less competitive. However, Malaysian law is unlikely to displace English legislation in other deals, although it may find some acceptance among offshore investors who have businesses or investments in the country.

Amanie Shariah Screening system app, launched by Amanie Nexus Sdn Bhd, screens and filters all public-listed equity/stocks in the global stock exchange to produce the universe of Shariah investable stocks. With this app, it is possible to download and check the Shariah status of over 33,000 stocks worldwide any time and anywhere before making any investments. Newly released, the app is available in Android variant on Google Play Store before it is released a Windows Phone 8 version and Blackberry 10. Razi Pahlavi, chief executive officer of Amanie Nexus, feels that Malaysia has sufficient talents in app development. However, the commercialisation stage is where most developers will need help and guidance, he notes.

The Saudi Arabian and Malaysian cooperative and Islamic insurance (takaful) markets are the only two that are seeing growth especially in new policies and profitability, according to the report 'Global Takaful Insights 2013' by Ernst & Young. Too many operators are pursuing an insufficient number of risks to increase their gross written contributions (GWC). The Saudi Arabian Monetary (SAMA) directed all insurance operators in the Kingdom to align with the cooperative insurance model. Saudi Arabia is the single largest Islamic insurance market in the world. Meanwhile, Malaysia has emerged as the world's largest family (life) takaful market, with a proven model and regulatory clarity. In the near to medium term, traditional growth markets, including Saudi Arabia, UAE and Malaysia, continue to ride on favorable market conditions and a young demographics structure, the report concludes.

Aeon Credit Service, which has been deliberating on a cash-raising exercise to beef up its capital adequacy ratio (CAR), is said to have chosen the route for a perpetual notes or sukuk issue instead of equity. Analysts are expecting the proposed perpetual notes or sukuk, which is subject to the authority's approval, to be announced soon given the non-bank financial institution's 16.3% CAR as of Aug 20, 2013 is nearing Bank Negara Malaysia's minimum requirement of 16%. Aeon Credit could raise some RM190 million from the proposed exercise to increase its CAR to 22% based on its shareholders funds. No significant dilution on Aeon Credit's earnings per share is expected. Aeon Credit's D/E ratio surged to 5.67 times as of Aug 20, 2013 from 4.6 times as of May 20, 2013.

Malaysian takaful players are poised for a dearth in talent and must prepare their human resource (HR) requirements to avert the inevitable situation within the next five years. This is due to the fact that takaful players will have to hire more people following the introduction of the Islamic Financial Act (IFSA) 2013 which requires them to separate their family and general takaful businesses into separate entities. There is already a shortage of valuable industry personnels not just in the takaful industry but also in the conventional insurance industry now and this will be exacerbated when the IFSA comes into force.

Malaysia continues to take the lead in the Asean takaful industry with 71% share of gross takaful contributions, according to a report by Ernst & Young. Malaysia has a largely underinsured population with a low insurance penetration rate and strong government support for the Islamic finance sector. With a proven model and regulatory clarity, the country is set to further build on this leadership position. At present, Malaysia’s takaful sector derives nearly 78% of its net contributions from the family takaful business. However, globally the recent trends suggest an deceleration of the industry. Hence, expansion of the takaful industry is relatively slowing as firms struggle for scale and face growing competition, but the sector is still poised to sustain double-digit growth, said the report in its overall findings.

Broking firm, Miller has recruited Razi Sulaiman, a treaty reinsurance and takaful specialist, for its Malaysia operations. Miller anticipates significant future growth in the takaful sector and Razi will help to further develop the company's presence in this arena. Razi Sulaiman has built up knowledge of treaty and facultative reinsurance having specialised in technical support and claims previously. He began his career with Uni Asia Insurance before joining Miller. Working closely with Faris Davidson and the rest of the team in Malaysia he will help to grow Miller’s treaty and facultative book, focussing on Malaysia, Brunei & Indonesia and with particular emphasis on the takaful sector.

Syarikat Takaful Malaysia is targeting double digit-growth in new business this year driven by its family and group segments. Group managing director Datuk Mohamed Hassan Kamil said the company aims to maintain its lead in the group family takaful business, capturing 40% of the market sector, and 20% of the combined family and general takaful business. He noted that Takaful Malaysia will carry on being cautious in accepting only profitable underwriting contracts while avoiding those prone to greater risks. Hassan also mentioned that developing new product offerings is definitely an area the company is looking into as it strongly believes this would likely be the key driver of sales. Takaful Malaysia's growth areas are still within the fire and engineering segments.

BIMB Holdings yesterday received shareholders' nod to buy the remaining 49% stake it does not own in Bank Islam Malaysia Bhd from Dubai Financial Group (DFG) and Lembaga Tabung Haji (LTH). The acquisition is expected to be accretive to the group's earnings by another 5% from the financial year ending Dec 31, 2014 (FY14). With BIMB's current 51% controlling stake in Bank Islam, the Islamic banking unit is already contributing 85% to the group's revenue and earnings. BIMB shareholders also gave the green light to BIMB to raise up to RM3 billion through a combination of a rights issue and a sukuk to part-finance the acquisition. Besides, BIMB might reportedly acquire stake in Bank Muamalat Malaysia from state investment fund Khazanah Nasional and conglomerate DRB-Hicom.

Malaysia is tightening rules for the $307 billion of stocks now deemed in compliance with Shariah law as it seeks to attract more investment from overseas Muslims. The Securities Commission will require companies to limit debt and cash that don’t conform to Koranic principles to less than 33 percent of total assets to qualify for Shariah listing, from no provision previously. The regulator will publish a revised list of equities next month from the current 801 that comply with religious tenets. The new regulations put the nation on a par with the conditions needed for inclusion in the Dow Jones Islamic Market World Index, which has a market capitalization of $14.9 trillion.

Malaysia remains a forerunner in global sukuk with the global outstanding sukuk amounting to over US$148 billion as at June 2013, which represents 60.4 per cent of the total global sukuk. Deputy Prime Minister Tan Sri Muhyiddin Yassin said credit must be given to Bank Negara Malaysia, the Securities Commission Malaysia, Shariah scholars and the Islamic financial industry community for their efforts to bring Malaysia's Islamic finance marketplace to the current level of sophistication. Muhyiddin, who is also Education Minister, also pointed out that shortage of qualified experts in Islamic finance was the constraining factor for the innovation of new products and services in most countries.