Khalid Howladar

Shariah-compliant #pension schemes gaining popularity

Shariah-compliant pension funds are entering the wealth and asset management segment worldwide. One example for a state-backed Shariah-compliant pension fund is the Islamic savings scheme option introduced in Malaysia. Here $25bn of the fund’s entire assets of $160bn have been dedicated to the new Shariah-compliant investment line. According to Moody’s global head of Islamic finance, Khalid Howladar, Shariah-compliant investments now represent 15% of the fund’s entire investment, which makes it the largest standalone Islamic pension fund globally. Another country where Islamic pension funds are in growing demand is Pakistan. A number of banks, financial service providers and fund managers offer private or voluntary state-supported retirement savings schemes whose investments are made strictly in Shariah-compliant instruments. In the Western World, the UK and Australia were the first to offer Islamic pension schemes. In the Gulf Cooperation Council (GCC) countries, Islamic pension funds are yet comparably small, particularly state-backed ones.

#Oman and #Indonesia making most progress in Islamic finance

According to Moody’s Investors Service, Oman and Indonesia have made the most progress this year in terms of taking initiatives to advance Islamic finance. According to Khalid Howladar, global head of Islamic finance at Moody’s, Oman’s strategy has already yielded substantive results and new sukuk regulations have been published. Over three years Oman’s Islamic banking sector has gone from zero to an agregate of around 10% of the banking system’s financing assets as of June 2016. Indonesia has several inititives to accelerate growth. Also, the country launched a 10-year Islamic finance master plan that consists of action plans and interventions covering key aspects. Meanwhile, markets that seem to have stalled this year are the United Arab Emirates (UAE) and Saudi Arabia.

Islamic banking assets, deposits post larger growth in #Oman

Amid challenging economic conditions, the Islamic banking sector in Oman achieved significant growth since its start in 2012. The total assets of Islamic banks and windows combined, amounted to RO 2.7 billion as at the end of July 2016 which constituted about 8.5% of the total banking system assets. According to Khalid Howladar, Global Head of Islamic Finance at Moody’s, the growth has been a result of the Omani government’s strategy that has allowed conventional banks to offer Islamic services. Howladar addted that the growth is driven by strong retail demand and proactive government legislation. Across the GCC the Islamic banking sectors have been experiencing growth in their respective market shares with the lone exception of Kuwait.

Islamic banking growth outpaces conventional peers in key markets

According to Moody's, the Islamic banking sector continues to outpace growth of conventional banking in key markets, often supported by proactive regulations and strong retail customer demand. Analysts say the broader slowdown in growth, reflects more challenging economic conditions across a number of core Islamic markets, particularly in the GCC countries due to lower oil prices. Despite the current challenges the sector still has potential for further growth, especially in countries such as Oman, Turkey and Indonesia where the penetration of Islamic financing assets remain relatively low. According to Khalid Howladar, Global Head of Islamic Finance at Moody’s, Oman has been highly successful in achieving a high level of Islamic banking penetration. Oman's example shows the effectiveness of government support and regulation in acting as a catalyst for growth.

Prospects remain robust for Islamic finance

According to Moody’s, the growth prospects for the Islamic finance sector are still strong despite new sukuk issuance remaining subdued this year. Moody’s global head of Islamic finance Khalid Howladar said growth in the Islamic banking sector continues to broadly outpace that of conventional banks in most systems in which Islamic banks have been established. The sector also has potential for further growth, especially in countries in which the penetration of Islamic banking assets remains relatively low, at between 5%-10% of Islamic financing assets. New sukuk issuance volumes in 2016 are expected to remain flat, at around US$70bil. Growth in the Takaful sector is also slowing, but the rating agency expects it to remain at double digit levels into 2017 and for gross contributions to reach US$20bil by next year.

Moody’s: Prospects remain robust for Islamic finance despite subdued #sukuk issuance

According to Moody’s, the growth prospects for the Islamic finance sector are still strong despite new sukuk issuance remaining subdued this year. Moody’s global head of Islamic finance Khalid Howladar said growth in the Islamic banking sector continues to broadly outpace that of conventional banks in most systems in which Islamic banks have been established. The sector also has potential for further growth, especially in countries in which the penetration of Islamic banking assets remains relatively low, at between 5%-10% of Islamic financing assets. New sukuk issuance volumes in 2016 are expected to remain flat, at around US$70bil. Growth in the Takaful sector is also slowing, but the rating agency expects it to remain at double digit levels into 2017 and for gross contributions to reach US$20bil by next year.

Moody's: Islamic banks' strong liquidity profiles driven by retail strengths and government sukuk availability

Moody's Investors Service says that the liquidity coverage ratios of Islamic banks in key Asian and GCC countries highlight sound liquidity profiles and broad compliance with Basel III regulatory requirements.
"In the report, we highlight that a key driver of LCR performance is the funding profile of banks and, in this context, over-reliance on corporate deposits and unsecured wholesale funding means higher potential liquidity pressures," says Simon Chen, a Moody's Vice President and Senior Analyst. "However, banks with a greater proportion of retail deposits that are considered more 'sticky', typically display stronger LCRs," adds Chen.

Moody's says: Malaysia's Sukuk market may grow 10 percent

A 10 percent growth in the Malaysian Sukuk market for this and next year is in line with the positive views on the long-term growth trends in the global Sukuk market according to Philipp Lotter, Moody's Managing Director for the Corporate Finance Group in ASEAN. Malaysia will remain the world's largest Sukuk market, says Khalid Howladar, Moody's Global Head for Islamic Finance. Singapore and Hong Kong are tapping into this fast-growing asset class although Saudi Arabia is showing strong domestic potential," adds Howladar.

Saudi market eyes strong year after sukuk success

The success of Saudi Arabia’s first government-backed Islamic bond issue, and the dairy company Almarai’s planned sukuk, will set the stage for what will probably be one of the kingdom’s strongest years for Islamic bonds.
The Almarai bond plus the four as-yet-unannounced sukuk issues that HSBC is also preparing, would total “multiple billions” of Saudi riyals. Saudi Arabia’s government is encouraging the current expansion of the sukuk market.
According to Khalid Howladar, an analyst with Moody’s Investment in Dubai and Fahad al-Saif, the HSBC sukuk developer, by issuing government-backed sukuks, Saudi Arabia also is trying to expand the capacity of its capital markets.

Syndicate content