The National

#Sukuk ‘too complex’ as tool to raise funds

Sukuk issuance growth in the Arabian Gulf is likely to remain subdued this year even as ­countries in the region need to raise more debt to plug budget deficits. According to the latest research from S&P Global Ratings, the reason lies in the complexity of selling Sharia-compliant bonds. S&P's analyst Mohamed Damak said sales of Islamic bonds fell in 2015 and 2016 in the GCC as the issuance of conventional bonds soared. Globally, the market for sukuk is also expected to remain stable this year at between US$60 billion and $65bn. Despite the recent rebound in oil prices, the GCC will need about $275bn of financing between this year and 2019, of which half is expected to come from bonds and sukuk. Complexity of sukuk issuance is not the only headwind facing Islamic financing. According to S&P, rising interest rates in the US will also dampen appetite for sukuk this year.

Would-be #entrepreneurs #rise up #to the #challenge at #Abu #Dhabi #fintech #hackathon

The fintech event, held earlier this month, was organised by GlassQube and Startup Weekend, a global movement coordinated by TechStars and supported by Google for Entrepreneurs, with the support of Abu Dhabi Global Market, Abu Dhabi’s financial free zone and financial regulator, and Temenos, a global financial software vendor. It brought together more than 100 developers, designers and aspiring entrepreneurs – many of are at university and some still at school – and challenged them to build a functional minimum viable product.
"We took those products and judged them based on their technical aspects, their commercial viability, how thoughtful those teams were about what is the actual potential of these products and services to find a market," says Bernard Lee, GlassQube’s chief executive and a co-founder.
"What’s important here is that it’s not just an idea. It is how do we take this idea and how do we actually convert it into something that is real? Something that shows how a consumer base can potentially interact with this particular application."

Talal Al Zain to head new Islamic investment bank in Abu Dhabi

The newly formed Islamic investment bank ADCorp has named Talal Al Zain as its chief executive. Its two main shareholders, Abu Dhabi Financial Group (ADFG) and GFH Financial, said the new company has an authorised capital of US$100 million and will be the first Sharia-compliant institution in Abu Dhabi Global Market. Mr Al Zain, formerly chief executive of PineBridge Investments Middle East, said that ADCorp would focus on corporate finance, wealth and asset management for institutions and ultra high net worth ­clients. He said that geographically the firm’s investment strategy will allow ADCorp to become the long-term business partner of choice for clients in the region.

Gulf investments in Africa beginning to spread far and wide

Traditionally, investments from the Arabian Gulf into Africa have focused on North Africa, but this scenario is slowly changing. According to the Economist Intelligence Unit, FDI inflows from the Gulf to sub-Saharan Africa topped US$9.3 billion between 2005 and 2015, with Kenya, Uganda, South Africa and Nigeria attracting the largest number of Gulf investors. Especially the sectors with high return margins are capturing the attention of investors. Saudi Arabia and the UAE are among the top investors on the continent when it comes to agriculture. The UAE’s Al Dahra Agriculture is investing in wheat farming in Egypt, while Saudi companies have invested heavily in Sudan’s agricultural sector.

Islamic banking set to launch in #India amid controversy

India will get its first taste of sharia-compliant banking when the Islamic Development Bank launches operations in the state of Gujarat. No date has yet been announced, but already complaints have emerged within the ruling Hindu nationalist Bharatiya Janata Party. Prominent BJP politician Subramanian Swamy says Islamic banking goes against India’s principles of secularism. India's prime minister Narendra Modi visited Saudi Arabia in April and signed an extensive agreement with the bank. Under the agreement, the IDB will establish its first Indian branch in the Gujarat city of Ahmedabad and go on to open more branches in India in the future.

Arab Monetary Fund calls for central banks to step up in #Islamicfinance

Central banks need to have a stronger role in setting regulations for the region’s Islamic banks. Abdulrahman Al Hamidy, the head of the Arab Monetary Fund, said regulators need to introduce new liquidity management tools. The region’s central banks have moved to offer Islamic banks new, Sharia-compliant liq­uidity facilities to help shore up their short-term financial positions. The UAE Central Bank introduced a Sharia-compliant short-term lending facility in March last year. It allows banks to sell and repurchase Sharia-compliant securities overnight at profit.

#ArabianGulf #Islamicbanks to weather the storm

According to Standard & Poor’s the profitability of Islamic banks in the Arabian Gulf is likely to deteriorate this year due to the fallout from the price of oil. The 70 per cent drop in oil over the past two years has put pressure on growth prospects and widened deficits across the region. Yet S&P predicts that Sharia-compliant lenders will weather the storm without too much damage because they have capital buffers that include quality assets. Islamic banking assets are continuing to grow at a rate of 16 per cent per year and by 2020, the global Islamic banking industry profit pool is expected to reach $30.3bn.

Counting the cost of personal debt in the UAE

Hundreds of readers have written to The National to share their financial woes, following a series of articles in the Money section about worrying levels of personal debt in the UAE. The reason why UAE residents are building up such alarming liabilities is the lack of knowledge about the sky-high credit card interest rates in the country. According to a recent survey, about two-thirds of credit card holders are unaware of their card’s interest rate.

Sukuk market gains Gulf interest

Long-term sukuk issuance rose by 21 per cent year-on-year in the first quarter, as Gulf states with worsening fiscal balances tapped international bond markets. According to Fitch the GCC states – along with Mal­aysia, Indonesia, Turkey, Singapore and Pakistan – issued US$11.1 billion of sukuk in the first three months of the year. These countries issued 39.3 per cent of their debt as sukuk – the highest ratio of sukuk to conventional debt in eight years.

Saudi insurance sector to outperform oil

The Saudi insurance sector will grow by up to 17 per cent a year over the next five years thanks to regulation enforcement and growth in motor insurance, the Dubai-based investment bank Arqaam Capital said yesterday. Arquaam expects the Saudi insurance sector to be the least affected by weaker oil prices, budget cuts and the tightening liquidity as the enforcement of existing regulations will propel motor and medical premiums growth at a rate of 15-25 per cent and 14-16 per cent respectively. According to an Alpen Capital report released last year, the Saudi central bank has issued several new regulations regarding underwriting practices, reserving, actuarial-backed pricing and solvency requirements in the past two years, to help grow the industry.

Islamic banking assets to reach $1 trillion milestone by end-2015

Global Islamic banking assets are expected to reach $1 trillion by the end of the year as Sharia-compliant financing increases market share in emerging markets, according to the consultancy firm EY. Sharia-compliant assets of commercial banks in Qatar, Indonesia, Saudi Arabia, Malaysia, the UAE and Turkey are set to exceed $801 billion in 2015, representing 80 per cent of international banking assets. Islamic banking assets are continuing to grow at a rate of 16 per cent per year and by 2020, the global Islamic banking industry profit pool is expected to reach $30.3bn, EY said. Islamic finance is especially picking up in the corporate world, where demand for sukuk has been on the rise in the Middle East in recent years.

Innovation a vital growth driver for Islamic finance industry

Product innovation has become imperative for the Islamic finance industry. This is going to be one of the key growth drivers for the industry in the coming years as demand for new products across segments such as Islamic banking, Takaful, sukuk and funds rises thanks to increased understanding and acceptance of Sharia-compliant products.
Islamic banking
Islamic banks are struggling with lower profitability compared to the conventional banks. The estimated 19 % lower profitability of Islamic banks compared to the conventional banks can be primarily attributed to higher expenses and lower average product holding (APH) per customer. Islamic banks have an APH of 2.1 compared to the APH of 4.9 for the conventional banks. Higher profitability can be aimed and achieved by Islamic banks by developing new products, which would provide cross-selling opportunities and higher APH. Islamic banks can also benefit from shedding their existing obsolete systems and embracing technological innovation to bring down costs.

Emirates Reit first-half property earnings increase

Emirates Reit yesterday posted an 8 per cent rise in first-half earnings generated by its properties, thanks to higher rents and service charge ­income. Revenue between January and June reached US$19.1 million, up 7.9 per cent from $17.7m for the same period last year. Net income grew 6 per cent to $44.7m because of a $31m gain from the revaluation of its properties. The company said its investment properties were valued at $613.4m as of June 30, up 9.6 per cent from $559.7m for the year-earlier period. Emirates Reit has $1.3m of property that is being fitted out. About $344m worth of its investment properties have been mortgaged against Islamic financing facilities.

Dubai Islamic Bank to advise Pakistan on sale of equity in Kapco

Dubai Islamic Bank will reportedly advise Pakistan on selling its 40 per cent stake in Kot Addu Power Company (Kapco) as the country’s economic upsurge lifted its benchmark stock market index to a record this month. The emirate’s biggest Sharia-compliant lender would lead an advisory group that includes Deloitte, Lummus Consultants International, and Mohsin Tayebaly and Company. Pakistan has rejuvenated its economy in recent years after the IMF provided a US$6.6 billion bailout loan in 2013. The country, a net energy importer, is also set to gain from the collapse in oil prices and China’s $46bn investment plan to build transport infrastructure connecting the two countries.

Al Hilal Bank in boardroom reshuffle after twin resignations

Al Hilal Bank has reshuffled its board after the abrupt departure of its chairman and chief executive within a week of each other. The Abu Dhabi-based Islamic bank said a new board had been appointed under the chairmanship of Mohamed Abdullah Al Rumaithi, following the resignation of the former chairman Ahmed Ateeq Al Mazrouei on Monday. Mr Mazrouei’s decision to quit came just a week after the resignation of the chief executive Mohamed Jamil Berro. Sarie Asaad Arar, previously the bank’s chief business officer, was appointed last week as the acting chief executive. The bank said both resignations were for “personal reasons”, declining to give details.

Bahrain’s decline as regional financial centre ‘to affect property sector’

Bahrain will not regain its status as the region’s leading financial centre amid fierce competition in the Arabian Gulf, thus hurting its property market, says the latest country report by Business Monitor International (BMI). The country’s historical position as the regional centre for Islamic finance is being challenged by Dubai, while banks in Abu Dhabi, Qatar and Saudi Arabia have been competing strongly against the banking sectors in Bahrain and Dubai, according to the market research company. Even so, Bahrain’s construction sector is set to continue growing at about 3.6 per cent over the next four years, it said. And public sector investment will finance infrastructure projects.

Dubai mounts global sukuk drive as listings top other financial centres

Dubai has overtaken other financial centres in listing Islamic bonds on its exchanges, and is mounting a global drive to attract more listings while developing new channels to trade sukuk, Hamed Ahmed Ali, the chief executive of Nasdaq Dubai said. The exchange is working on ways to sell sukuk directly to retail investors, expanding the primary market beyond institutional buyers, and designing a sharia-compliant repurchase agreement, he said. Sukuk listed on Dubai’s two exchanges, Nasdaq Dubai and Dubai Financial Market, rose to $36.7 billion last month from $7bn in 2013. Nasdaq Dubai accounts for the vast majority. Until 2013, issuers from the Gulf usually chose European exchanges to list sukuk; that has begun changing.

Gulf Finance House to sell unit via public offering, plans acquisition

Gulf Finance House (GFH) is planning to make an acquisition this year and sell a unit in an initial public offering. The expected moves are part of efforts to reshape GFH, which was hit hard by the 2008-2009 global financial crisis. Currently the Bahrain-based Islamic investment bank has four units: investment banking, commercial banking, real estate and industry. GFH’s first quarter net profit rose 140 per cent to US$6 million from $2.5m a year earlier. GFH, which is talking to one firm in Bahrain and two in Dubai, is banking on closing this year with at least one leveraged acquisition valued at about $200m. The firm is seeking to finance the acquisition through 30 to 40 per cent equity and the remainder in debt.

Sukuk issuance falls as Malaysia central bank stops offering short-term Islamic bonds

Sukuk issuance plunged in the first five months of this year after Malaysia’s central bank stopped issuing short-term Islamic bonds, data from Standard and Poor’s showed. Issuance fell to US$33.7 billion in the year to May 31, down from $50.5bn in the same period of last year, according the rating agency’s figures. Bank Negara Malaysia (BNM) was responsible for about $10bn of sukuk issuance last year, mostly in short-term sukuk with tenors of three months. Overall sukuk issuance excluding BNM was down 5.1 per cent against the previous year’s figure of $35.5bn. Demand for sukuk from investors outside the Islamic world has been significant, but a shortage of supply characterises an industry segment in which highly-rated sovereign issuances are sought after and many times oversubscribed. The collapse in the price of oil could further harm sukuk issuance.

ADIB chief urges UAE to widen provision of short-term liquidity to Islamic lenders

Tirad Al Mahmoud, chief executive of Abu Dhabi Islamic Bank, has urged the Central Bank to broaden its provision of short-term liquidity to Sharia-compliant lenders. The UAE should also offer longer-term funding facilities to Islamic banks so as to improve their business capability, he added. The Central Bank allows Islamic banks to park Sharia-compliant assets on its balance sheet in exchange for profit. This is only available on an overnight basis. The central banks of the UAE and Bahrain recently introduced a series of short-term treasury management tools to help Islamic lenders to manage their cash flows. Bahrain and the UAE are the only countries in the region whose central banks offer liquidity tools to Islamic lenders.

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