IslamicFinance.de

According to Amanie Advisors CEO Suhaida Mahpot, the existing skepticism towards crypto in Islamic countries is not a pure rejection, but rather a consequence of uncertainty. Mahpot compared the existing situation of cryptocurrencies with Malaysia’s controversial types of investment known as Amanah Saham Bumiputera (ASB) and Amanah Saham Nasional (ASN). The perception of ASB has transformed over the years and it was decided to consider it as "harus" in 2012, which means that it is neither prohibited nor encouraged by the teachings of the faith. Both ASB and ASN investments were finally declared permissible for Muslims by the Selangor Fatwa Committee, the same regulatory authority that previously prohibited them. Mahpot argues that the same goes for digital currencies and financial institutions and scholars need more education about cryptocurrencies and their benefits.

The Maldives Islamic Bank (MIB) has launched its Initial Public Offering on the Maldives Stock Exchange with the aim of raising MVR244 million (US$15.8 million), offering a 31% stake for public ownership. MIB is offering 6,975,000 shares at a price of MVR35 per share, including 4.5 million ordinary shares offered for subscription and 2.4 million offered for sale. According to the bank, buyers must subscribe to a minimum of 20 shares, which is equivalent to MVR700. Subscriptions exceeding the minimum amount must be in multiples of 10 shares. The expected date of listing of the shares or commencement of trading is November 12.

Fintech startup Dana is looking for another strategic investor. Currently backed by Ant Financial, Dana offers services such as QR-code based transfers and online credit-card transactions for individuals as well as merchants. Dana is considering expanding its footprint in Indonesia by offering other financial services such as insurance. The startup is wary of becoming labelled a shadow bank operating outside of regulatory jurisdictions. Indonesia’s internet economy, the largest and the fastest growing in the region, reached $27 billion in 2018 and is poised to grow to $100 billion by 2025, according to a report by Google and Temasek Holdings Pte.

Bank Islam Malaysia is the top domestic sukuk broker for the first half of the year (1H), after helping issue US$5.15 billion (RM21.21 billion) worth of sukuk in the market. Bank Islam’s market share of the sukuk issued accounted for 29.03% of the total ringgit-denominated sukuk issued in the 1H. The bank advised on 10 issues for the period. The second-largest issuer in the 1H is Maybank Investment Bank, which was ranked first last year for the same period after having helped issue US$4.1 billion of sukuk. Analysts expect the local sukuk market to remain active driven by capital raising by government and corporates for major construction works such as the East Coast Rail Link, Light Rail Transit Line 3 and Mass Rapid Transit Line 3 projects.

The Inland Revenue Board of Malaysia has released new guidance on restrictions to the deductibility of interest expenses. The rules are based on the recommendations of the OECD in Action 4 of its base erosion and profit shifting (BEPS) Action Plan. The rules are intended to prevent tax base erosion through the use of excessive interest expense deductions to reduce domestic tax. There are parts that have been customized based on domestic circumstances. The Malaysian rules cap allowable interest expense deductions at 20 percent of a taxpayer's income before interest, tax, depreciation, and amortization (EBITDA). Disallowed deductions for one year can be carried forward to the subsequent year.

Indonesia's Shariah advisory services provider, ZICO Shariah is planning and drafting the Islamic Economic Masterplan for 2019-2024 for the world’s largest Muslim country. Led by a team of economics experts, the masterplan project included 50 Indonesian and Malaysian consultants. It focuses on 14 areas of interest including halal food, tourism, and fashion, Islamic banking and capital markets, small and medium enterprises, digital economy, and social finance. The formal launching of the final masterplan took place at a significant Islamic economy event in Bandung on 26 April 2019 and in Jakarta on 14 May 2019.

According to the Fintech Malaysia Report 2018, Malaysia had 166 fintech companies operating in the country as at July last year. Payments and e-wallets made up the majority at 19% and 17% of the fintech players respectively, followed by cryptocurrency players (12%) and crowdfunding companies (6%). While Malaysia appears to be well ahead of Vietnam and the Philippines in the fintech race, it’s still nowhere near Indonesia. Mohammad Ridzuan Abdul Aziz, president of the Fintech Association of Malaysia (FAOM), believes that instead of viewing fintech as a race against other countries, the focus should be on collaboration between the key stakeholders. He added that the government also provides a variety of monetary incentives and support programmes for start-ups, and is now recalibrating various agencies to improve awareness and efficiency.

Malaysian Industrial Development Finance (MIDF) remains tight-lipped about its negotiations with Al Rajhi Banking and Investment Corp (Al Rajhi Malaysia). Both banking groups announced on Jan 10 this year that Bank Negara Malaysia’s approval had been secured to commence talks on a potential merger. However, both parties failed to reach an agreement past the March deadline. The companies then requested for an extension and were given another three months, up to June 27 this year. A merger of the two banks would result in a combined banking group with RM13.17 billion in assets. The merger with Al Rajhi Malaysia will allow MIDF to become an Islamic financial institution as it currently does not have an Islamic banking licence. MIDF brought in RM76.86 million in revenue and RM12.11 million in net profit for 1Q19.

According to CIMB Group Holdings group CEO Tengku Datuk Seri Zafrul Aziz, banks are doing as much as they can to balance lending to customers with responsible financing. He said commercial banks would want to grow their loans to maximise returns, but that must always be balanced against the banks’ risk metrics. To promote financial inclusivity, CIMB Bank Bhd and CIMB Islamic Bank Bhd have set aside at least RM12bil for the B40 group to access to facilities such as home, automotive, Amanah Saham Bumiputra and personal financing from 2019 to 2020. CIMB Bank and CIMB Islamic’s are assisting the B40 segment via the lowest-in-market financing rate of 2.9% per annum, under Bank Negara’s RM1bil Fund for Affordable Homes, to help those in the B40 group buy their first residential property. Based on data from Bank Negara, the industry’s loan growth rebounded slightly to 4.6% year-on-year in May from 4.5% in April, ending a five-month downtrend.

Malaysian Islamic fund manager BIMB Investment has become an official signatory of the United Nations-supported Principles for Responsible Investment (UNPRI). BIMB Investment is the only bank-backed Islamic asset manager in Malaysia to be a UNPRI signatory. The UNPRI group works to understand the investment implications of environmental, social and governance (ESG) factors and supports its network in incorporating these factors into their decisions. BIMB Investment CEO Najmuddin Mohd Lutfi said that the company has integrated more than 250 ESG metrics in its investment process since 2015. The company currently manages over 1 billion Malaysian ringgit of ESG assets. At the moment there are around 2,300 signatories to the UNPRI. Other signatories from Malaysia include Xeraya Capital, Navis Capital Partners, the national retirement fund KWAP, sovereign wealth fund Khazanah, and Corston-Smith Asset Management.

Philippines’ central bank will fast-track the issuance of Islamic finance regulations in the country as soon as the Islamic banking law is approved by the president. Philippines has been accelerating the growth of its Islamic economy sectors in the last couple of years. The country’s interest in Islamic finance is two-fold: to attract Shariah-sensitive foreign investments and capital from Islamic countries, as well as to provide its approximately 10 million domestic Muslim population with an Islamic banking option. The country also hopes to increase its exports to Muslim-majority countries and has been developing its halal infrastructure to support this goal. Its national halal certification scheme was launched last year and in February the Department of Science and Technology opened the Philippine National Halal Laboratory and Science Centre.

According to Professor Datuk Dr Azmi Omar, President of the International Centre for Education in Islamic Finance (INCEIF), it is necessary to address millennials, as they constitute a significant proportion of the Malaysian population. Therefore, Islamic banks must be smart enough, in either that they create another subsidiary, a virtual bank, or roll out more of their services in terms of virtual applications. He added that virtual Islamic banks will attract millennials, but not everyone will go for digital banking. It is an alternative. In March this year, BNM governor Datuk Nor Shamsiah Yunus said the central bank had had some preliminary discussions with a few banks, with virtual banks overseas. In its report on Islamic Banking Moody's noted that Malaysia planned to issue new virtual banking licenses by end-2019. This could increase competition for deposits, especially among Islamic banks with weaker deposit franchises.

The planned merger of Malaysian Industrial Development Finance (MIDF) and Al Rajhi Banking and Investment Corp (Al Rajhi Malaysia) is now uncertain as the shareholders have missed the June 27 deadline. The shareholders of the two companies have sent a request to Bank Negara Malaysia (BNM) seeking more time to further negotiate the merger plan. In March 2019, BNM had already granted three months’ additional time for the proposed merger. Al Rajhi Bank is likely to stay on as a shareholder in the proposed merged entity while PNB would remain its largest shareholder. After the completion of this merger process, MIDF is expected to become an Islamic bank. The merger plan, if it succeeds, would lead to a financial services entity with a combined asset value of MYR 14.09 billion.

The Association of Islamic Banking and Financial Institutions Malaysia (Aibim) has ensured that its member banks will continue to provide access for Islamic finance banking products. Aibim’s president Datuk Adissadikin Ali assured that customers who are eligible will not be deprived from access to financing. He added that customers should also recognise the need to make sound decisions based on their own affordability and in line with their financial conditions. Last year, Islamic banks approved a total of RM37.7 billion, representing 36.7% from the total financing for the purchase of residential properties. They also approved RM12.4 billion of personal financing and supported RM1 billion funding for the small and medium enterprises (SMEs).

Bank Muamalat Malaysia aims to grow its revenue from Islamic pawnbroking (Ar-Rahnu) by up to RM50million. The bank's second pawnbroking campaign was launched on June 20 and will run for 10 months until March next year. Bank Muamalat consumer banking division head Zury Rahimee Zainal Abiden said the bank aims to tap the interest of up to 50,000 people in comparison to only 27,000 during the previous campaign period. Throughout this campaign, Bank Muamalat is offering a one kilogramme gold wafer as the main prize, 100 gramme gold wafer for the second prize and 50 gramme gold wafer for the third prize. Bank Muamalat is also offering a prize of a gold wafer on a monthly basis for more than 200 selected customers throughout this campaign period. From the first campaign the bank recorded up to RM26.9million of revenue from the gold business with an average of 2,700 new accounts every months. Bank Muamalat has more than 1.2 million customers and this segment of the business contributed 8% to the group earnings.

American startup PayJoy makes it easier for people without a bank account or credit profile to purchase a smartphone on installment. The phones and loans are provided by third parties. What PayJoy provides is proprietary software that locks the phone if payments are not made on time, making the device unusable. Once the missed installments are paid, the phone is unlocked and can be used as normal. According to PayJoy, its technology can do more than just put smartphones in users' hands. Customers' payment histories are reported back to local credit bureaus, which serves to build up credit profiles. PayJoy aims to expand in emerging markets such as Asia, particularly in India and Indonesia. In most markets, PayJoy partners up with local mobile makers, distributors and lending institutions. The company then takes a cut from every loan originated using its technology, a business model that lowers costs as well as risks for PayJoy.

HSBC has launched its first environmental, social and governance (ESG) Islamic structured product in Malaysia. The product offered by HSBC Amanah provides customers the opportunity to invest in a product that matches their values when it comes to environmental and social causes. It pays fixed coupon of 3.90% per annum (three years tenor) and 4.50% per annum (four years tenor) in the first two years of the investment. Payout at the end of third and fourth year is subject to Hang Seng Corporate Sustainability Index performance. Hang Seng Corporate Sustainability Index tracks the performances of Hong Kong listed companies that excel in corporate sustainability. The CEO of HSBC Amanah Malaysia Arsalaan Ahmed said the introduction of the ESG Islamic Structured Product clearly demonstrates HSBC’s pioneering strength in Islamic finance, particularly with regard to product innovation.

The crucial role of Islamic finance in financing China’s Belt and Road Initiative (BRI) pays homage to the Silk Road and symbiotic relationship between China and the Islamic world prior the 15th Century. Rightfully so, as BRI is the 21st Century’s New Silk Road. Introduced in 2013 by Chinese President Xi Jinping, BRI consists of overland roads and railway systems – The Belt – and maritime highways – The Road. It allows the seamless and efficient transportation of people, natural resources, products, and capital to flow to and from mainland China. The sheer magnitude of BRI finds itself in its financing. A crucial role exists for Islamic financial institutions due to the emerging market of the Middle East, Africa, and South-Asia (MEASA). Jiang Xiheng, Vice President at the China Center for International Knowledge on Development (CIKD), stated the importance of having the United Arab Emirates as a partner in BRI.

Maybank Islamic wants to be the bridge for the Islamic banking sector between the Gulf Cooperation Council (GCC) and the ASEAN region. CEO Datuk Mohamed Rafique Merican expressed confidence that the company would be able to play the role in facilitating the trade, as well as flow of funds for financial activities between the two regions. Last year, MIB announced that it might receive regulatory approvals to set up its Dubai branch in the first half of 2019. Maybank Islamic has strong footprints in Islamic finance, particularly in Malaysia, Indonesia and Singapore. Being the largest Islamic bank in Malaysia, Maybank Islamic has about RM225 billion worth of assets as at Dec 31, 2018 (FY18). Its total gross financing for FY18 advanced 8.1% year-on-year to RM176.8 billion and its Islamic financing contributed 58.7% to the group's total financing.

Bank of Maldives (BML) Islamic launched a range of Shariah-compliant financing products. BML Islamic Retailers’ Financing allows businesses with average monthly sales of MVR 50,000 to finance up to three times the monthly sales volume, and a repayment period of 48-months for financing facilities and 12-months for Wakala based overdraft facilities. Additional security is not required for financing up to MVR 500,000. BML Islamic Business Development Financing offers flexible collateral requirements for working capital, refurbishment, property development or to buy new machinery. BML’s Deputy CEO Mohamed Shareef stated that the new products show the Bank’s commitment to the growth of Small and Medium Enterprises in the country.