Gulf Times

Dana Gas seen returning to table after London ruling

Dana Gas plans to appeal the UK court ruling on $700mn of its outstanding sukuk. According to Dana Gas, the decision by the London court is flawed because the UAE-based company was barred from participating in the proceedings due to an injunction at home. Judge George Leggatt said the English law contracts are enforceable in the case. Dana was challenging a provision called purchase undertaking, which allowed the trustee on behalf of investors to force Dana to buy them out of the agreement at par. Dana shares fell as much as 5.6% on the Abu Dhabi stock market on Sunday. The court ruling puts investors one step closer to resolving a dispute over the sukuk that highlighted one of the Islamic finance industry’s weak spots.

#Pakistan eyes $3bn debt through #sukuk, Eurobonds

Pakistan has allowed immediate borrowing of up to $3bn from international debt markets by floating three sovereign bonds. The country is going to float the bonds in the largest transaction to take pressure off the central bank’s foreign exchange reserves that are depleting at a rapid pace. Earlier, the government borrowed $2bn in 2014 through similar capital market transactions. A consortium of banks have initially indicated that five-year sukuk, ten-year Eurobond and another 30-year Eurobond with combined proceeds of around $2bn to $3bn can be floated. The cabinet waived a dozen income taxes to make the float attractive for foreign investors. Road shows are expected to be held in the UK, US, Dubai, Singapore and Hong Kong. Standard Chartered Bank, Industrial and Commercial Bank of China, Citibank and Deutsche Bank were appointed for the Eurobond issue. For the proposed Sukuk, the Fourth Pakistan International Sukuk Company is being incorporated by the Finance Division.

#Bangladesh’s Islamic finance market in need for proper regulation

Bangladesh has a burgeoning Islamic finance industry focused on the retail market, but there is no comprehensive legal framework for the sector. Bangladesh has 8 Islamic banks and 15 non-Islamic banks that offer Islamic-banking services through Islamic windows. Currently, the Islamic finance sector in the country is led by Islami Bank Bangladesh which manages around 90% of Islamic-banking assets and deposits. Takaful is also growing in popularity. Bangladesh currently has 11 companies for both the life and non-life takaful market at a combined asset base of close to $1bn and a market share of 17%. The central bank has been working for considerable time on an industry-wide regulation to expand beyond retail banking. At present there are no regulations for sukuk issuances even though there would be huge market for both sovereign and corporate sukuk. Other challenges than the absence of comprehensive regulations are a lack of service diversification and a lack of a skilled workforce.

#Sukuk momentum seen as sales poised for record

Cheap oil and ambitious infrastructure-building programmes have set the scene for a record year for Islamic bond sales. In the Arabian Gulf, Saudi Arabia led the way with a $9bn global offer in April, while Oman and Bahrain have also sold sukuk. In Malaysia, funding for rail and other projects is driving ringgit issuance by state- owned companies. According to data compiled by Bloomberg, sukuk sales have reached $42.2bn so far this year. CIMB Islamic Bank has arranged the most Islamic note sales by value this year. The bank's CEO, Mohamed Rafe Mohamed Haneef, expects this momentum to be continued through to 2018. Besides the Saudi offer, the biggest sales so far this year are Hong Kong with $1bn, Indonesia with $3bn, Turkey with $1.25bn, Oman with $2bn and Bahrain with $850mn of sukuk in September. In Malaysia, state-owned companies DanaInfra Nasional and Prasarana Malaysia have been among the biggest corporate issuers this year.

#Green #sukuk set to become sustainable #investment tools

Sukuk investing in environmentally sustainable projects has become increasingly popular in the recent past. In the latest development, Malaysia saw its first green sukuk in July, when solar power firm Tadau Energy came out with a green sukuk with a tenure of 16 years, raising 250mn ringgit ($59.2mn). Malaysia’s Securities Commission came up with a Sustainable Responsible Investment Sukuk Framework as early as in 2014. This regulation clarified that proceeds of such sukuk should be used to preserve the environment, conserve the use of energy and promote renewable technologies. The World Bank lauded Malaysia for its innovative approach. Another initiative emerged in the Gulf Cooperation Council. The Green Sukuk and Working Party was set up as a collaboration of experts in project development, environmental standards, capital markets, and Islamic finance. Founders include Masdar City’s Clean Energy Business Council, the Climate Bonds Initiative and the Gulf Bond and Sukuk Association. The group is now developing green sukuk for interested issuers, including governments, companies and development banks.

#Islamic #finance climbs higher on UNDP agenda

The 72nd session of the UN General Assembly was held from September 19 to 25 in New York. The event was co-organised by the Islamic Development Bank (IDB) and the UN Development Programme (UNDP). It emphasised that the successful implementation of the SDG (Global Goals) require a significant amount of financial resources. The UNDP once more mentioned Islamic finance and how it could be tapped as a scalable funding source for global development. According to Magdy Martínez-Soliman, UN assistant secretary general, the gap in SDG financing is currently estimated at $2.5tn every year. He noted that official development assistance alone is not an adequate source of financing, but Islamic finance could effectively come to the rescue. As a key driver, the IDB has established the Global Islamic Finance and Impact Investing Platform (GIFIIP) to create the framework of the investing ecosystem. The GIFIIP’s role is also the matchmaking between Islamic finance investors and other players, such as business incubators, development organisations and inclusive business ventures seeking capital.

#Sukuk market great hope may never recover from Dana

Dana Gas is an independent natural gas supplier based in Sharjah. Its dispute with investors is now making its way not only through UAE courts, but through English courts as well. Dana’s gone so far down the road to avoid its debt repayments that the affair could easily scare international investors away from the sector. The fallout can be seen in the new issue market. While sovereign sales are carrying on, the broader corporate and financials market in the Middle East has been awaiting resolution of this dispute. In June Dana claimed that its $700mn outstanding sukuk were non-compliant with Shariah law and the money it paid out to holders of the bonds should be returned. Bondholders objected and suggested an immediate payment of half of the $700mn face amount outstanding and the due date for the balance extended for three years. The case is now disputed in Sharjah and London, where it stays until October 12, to allow court proceedings in Sharjah to conclude.

#Brexit suspense casts shadow over #UK as an Islamic finance hub

Uncertainty over the UK’s future status as a financial hub after leaving the European Union (EU) is already casting a shadow over London’s Islamic finance sector. It is estimated that London would lose at least 10,000 banking jobs and 20,000 roles in financial services as clients move €1.8tn of assets out of the UK. The banking exodus would also hit the Islamic finance sector in London, which is the largest globally in a non-Muslim jurisdiction. London currently hosts more than 15 large banks that operate Islamic finance windows and dozens of related service providers. A banking lobbying group has already urged the UK government to introduce post-Brexit laws that make sure that demand for Islamic finance services does not diminish. As long as the UK gives no clear direction whether and how it would excel as a financial hub, competitors will continue positioning themselves as alternative locations. Within the EU, Luxembourg and Dublin, and partly Frankfurt, have good chances to take on roles as Islamic finance hubs for Islamic finance institutions with business in the EU.

QInvest invests in #Spanish #marina OneOcean Port Vell

#Qatar's QInvest has invested in OneOcean Port Vell in Barcelona, Spain. Originally built for the 1992 Olympic Games, the marina recently completed its transformation to a luxury facility, creating the ultimate destination for yachts up to 190m. QInvest will work with the city and port authorities in Barcelona to increase the profile of the marina by investing additional resources in the port infrastructure. OneOcean Port Vell is QInvest's second investment in Spain this year, having earlier invested into a Spanish real estate strategy focused on land developments in Madrid, Barcelona, Valencia and Marbella. The objective is to acquire well-located land parcels across Spain and develop residential apartments for first home owners. QInvest’s revenues from all business lines were QR209mn, resulting in an operating profit of QR113mn and net profit of QR34.6mn in the first half of this year. The bank’s global assets stood at QR4.7bn at the end of June 30, 2017.

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.

Barwa Bank almost finishes review of #merger recommendations

Barwa Bank has almost finished legal and financial studies regarding its merger with Masraf Al Rayyan and International Bank of Qatar (IBQ). Barwa Bank CEO Khalid al-Subea said that any development in this regard will be announced through a joint statement by the three banks. Barwa Bank's recent Al Majd initiative offers its clients an exceptional banking package within the framework of various ongoing national initiatives. Barwa Bank also announced the launch of its new Shariah-compliant savings account that offers high flexibility and profit rate of an expected 3%, where profits are paid on a quarterly basis. The account allows clients to withdraw once every quarter up to 25% of the current balance.

#Takaful remains challenged sector within Islamic finance industry

While Islamic banking is on a solid path to form competitive ecosystems within the global finance industry, takaful is still an underperformer within the sector. A look at the figures shows that takaful remains a small-volume and fragmented industry with total contributions of just $25bn and only around 300 takaful and retakaful operators worldwide. In comparison, the global volume of life- and non-life insurance was worth $3.6tn in contributions in 2016, according to figures from Allianz Group. According to Deloitte, the challenges are underdeveloped risk management and internal controls, improvable operational and business excellence, achieving better product governance and strategy, governance and regulatory compliance and a lack of talent building. Adding to these issues is that takaful is currently concentrated on just a few world regions. Most Islamic jurisdictions have untapped market potentials, but takaful operators are struggling with product innovation and general outreach to uninsured persons.

Islamic finance industry hampered by global economic conditions

The Islamic Financial Services Board (IFSB) released its IFSB Industry Stability 2017 Report. It states that global economic volatilities, consistently low oil prices and reduced demand for credit are among the factors that currently weigh on the Islamic financial service industry. The study says that 2016 marked another year of slower growth amid adverse macro-economic conditions. They include adjustments in the value of global Islamic banking assets in US dollar terms on the back of exchange rate depreciations in countries such as Malaysia, Turkey and Indonesia, as well as the persistent lack of global standardisation, and lower liquidity and profitability compared to the conventional banking sector. According to the IFSB, the global size of the Islamic financial service industry has not changed much, with total Islamic finance assets just slightly increasing to $1.89tn from $1.88tn. Another factor that affected asset growth was the currency depreciation in Iran, the world’s largest Islamic finance jurisdiction in terms of assets.

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.

#Indonesia takes big step towards #boosting I#slamic #finance industry

Indonesia, that is so far a behind in developing a comprehensive Islamic finance industry, has taken a big leap towards the creation of a supportive framework for Shariah-compliant banking end of July. On that day, the country’s President Joko Widodo inaugurated the National Committee for Shariah Finance, as part of the government’s push to make Indonesia a global hub for the Islamic financial industry.
It has been tasked to accelerate, expand and develop Shariah-compliant financial services to support the country’s development, National Development Planning Minister Bambang Brodjonegoro said in a statement. The ministry is the one that introduced its master plan for the development of the country’s Islamic finance future last year.

KFH is planning #expansion in #China

Kuwait Finance House (KFH) is considering expanding into China and Egypt as the region’s banking sector nears saturation. According to bank's CEO, Mazin Saad al-Nahedh, there are opportunities for a Kuwaiti bank to operate in China. He added that the bank was looking at options to buy a license to operate in Egypt as well. KFH is cautiously optimistic about its operations in Turkey. Its subsidiary Kuveyt Turk contributes 22% to the group’s bottom line as of the end of June. The bank expects credit growth of no less than 20% to 25% over the next three to four years as long as base rates remain where they are. As KFH continues its restructuring and sale of non-core assets, the bank is studying offers for its stake in Aref Investment Group, which it aims to sell by the end of the year. KFH is also planning to buy Bahrain’s Ahli United Bank, but hasn't started negotiations yet.

Shariah-compliant, gold-backed #digi-coins could change Islamic finance

The launch of the first-ever Islamic finance-compatible cryptocurrency could be a game changer for the entire Islamic banking industry. OneGram calls itself the world’s first Shariah-compliant cryptocurrency whose value is backed by actual gold reserves. The company started selling a total stock of 12.4mn digital tokens on May 21 that are backed by one gram of gold each. The Initial Coin Offering programme aims to raise around $500mn. At its sister company GoldGuard, OneGram will store the physical gold in a vault inside the Dubai Airport Free Zone. OneGram’s founder and CEO, Mohammed Ibrahim Khan, says he felt inspired by Bitcoin whose use is subdued in the Arab world. He added that OneGram has Shariah scholars on its board who ensure that the company is fully compliant with Islamic finance requirements. According to Mohammed, large-scale funds of more than $200mn have been committed by Dubai-based Tabarak Investment Capital. The sale of the OneGram coins is going on until September 22 this year and no more coins will be ever issued from then.

#Qatar has ninth-strongest Islamic finance industry

The state of Qatar lists rank nine this year on the annually published Islamic Finance Country Index. The index is part of the Global Islamic Finance Report 2017 and was compiled by London-based Islamic finance consultant firm Edbiz Consulting. Qatar’s ranking is testament to its solid Islamic finance industry which is built upon solely fully-fledged Islamic banks. The country with the world’s strongest Islamic finance industry remains Malaysia, followed by Iran, Saudi Arabia, UAE and Kuwait. This is the second year in a row that Malaysia has been in the top position, taking over from Iran in 2016. According to Edbiz CEO Sofiza Azmi, in the list of 48 countries, there are 14 that saw a decrease in their scores. Among the 13 countries that improved their ranking, Tunisia took the biggest leap. Other big gainers are Pakistan and Kazakhstan. The report concludes that the ranking suggests that countries with large Muslim populations are the future frontiers for growth in Islamic banking and finance.

Islamic finance is making a case for ‘impact investment’

Islamic finance is increasingly being discovered as a vehicle to support sustainable development goals by a method called "impact investing". For this the Islamic Development Bank (IDB) and the Istanbul International Center for Private Sector in Development launched the "Global Islamic Finance and Impact Investing Platform". A report was also launched which sheds light on the potentials of Islamic finance in impact investment. The basic idea is that ethical values within finance are deeply rooted in Islamic theology and jurisprudence. Ethical and sustainable investment products can tap a wider range of demand if they are made Shariah-compliant to appeal to Muslims. At the same time, non-Muslims may embrace them if they are designed for an ethical purpose. Malaysia was the first to announce guidelines for the issuance of socially responsible sukuk as early as 2014. Meanwhile, Islamic finance companies from the UK, Canada, Hong Kong and GCC countries joined impact investing through Islamic finance.

#Algeria edges towards Islamic finance as energy income dives

Algeria is edging slowly towards offering banking services to suit more religiously conservative investors. The country is now looking for more ways to offset the sharp fall in oil prices and its energy revenues. Six state-run banks plan to start Islamic financial services by the end of the year or in early 2018, and a national Shariah board that would oversee Islamic banking is also planned by the end of 2017. However, Algeria’s Islamic finance plan still faces huge barriers. It lacks a legal framework and technical expertise. Algeria is far behind North African neighbours Morocco and Tunisia, which have started to develop legislation for Islamic finance and sukuk bonds, overseen by a central religious board. Algeria is targeting domestic savers rather than foreign investors. Many local people distrust the state-owned banks and keep large sums at home, untaxed, in Algerian and foreign currency.

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