IslamicFinance.de

Assets of the Islamic banks operating within the UAE totalled to 535 billion AED by the end of last month. That is around 6% growth since the beginning of this year. And it accounts for 20.2% of the total banking assets in the country. These are valued at around 2.639 trillion AED during the first 10 months of 2017, according to figures of the UAE Central Bank.
This obvious growth in Sharia-compliant financial operations in the UAE mirror the significant development of these kind of banking products which have been enjoying impressive growth across the whole region in the last few years.

According to Central Bank figures, the value of credit provided by the Islamic Banks since the beginning of 2017 until October surged to 361 billion AED, a growth of 7.7% against that of December 2016.
Loans and credit facilities provided by Islamic banks make up 22.8% of total loans provided by the entire banking system in the UAE, valued at 1.584 trillion AED by the end of last month.

According to the General Council for Islamic Banks and Financial Institutions (CIBAFI), Turkey should raise public awareness of Islamic finance to boost the sector's market share. CIBAFI's secretary general, Abdelilah Belatik, called Turkey's target of raising Islamic banks’ share to 20% by 2023 ambitious but achievable. The council’s annual gathering to discuss Islamic finance will be held in Turkey next April. Belatik said that countries like Turkey and Indonesia and regions such as Central Asia and Africa are important as they have a great growth potential in the Islamic finance sector. Belatik said they work with countries which lack the infrastructure and regulation for Islamic finance to show them its role in the economy. He also underlined Islamic finance's significance for financial stability.

The fast-growing Islamic finance industry can play a significant role in closing the infrastructure gap through public-private partnerships (PPP). According to the World Bank, shari‘ah-compliant assets have grown exponentially in the past two decades, accumulating nearly $1.9 trillion in assets. The Gulf Cooperation Council has the largest share of shari‘ah-compliant assets, at 42% of the global total, followed by Middle East and North Africa with 30% and the rest of Asia at 22%. Islamic banking and Islamic deposits grew faster than their conventional equivalents in Qatar, UAE, Saudi Arabia, Malaysia, Indonesia and Turkey. Developing countries in Asia will need to invest $26 trillion from 2016 to 2030, or $1.7 trillion per year to eradicate poverty and respond to climate change. The infrastructure needs of Sub-Saharan Africa exceed $93bn annually. Islamic finance instruments like Istisna and Ijarah can be used for large, longer-term financing arrangements, such as financing for power projects, infrastructure and transport equipment.

The Financial Services Authority (OJK) recently licensed Indonesia’s first full-fledged Islamic fund management company, Paytren Asset Management (PAM). This newly established Islamic fund manager is another milestone in the development of the country’s Islamic capital market.

Over the last few years, Islamic finance has witnessed a remarkable growth at 15 to 20% Compounded Annual Growth Rate (CAGR). The industry's rapid growth undoubtedly creates a huge demand for new expertise. Like other countries, Malaysia also needs a significant boost of Islamic finance talents. Based on Bank Negara Malaysia’s Financial Sector Blueprint 2011-2020, the financial sector would require an additional 56,000 employees of whom 22,400 are specifically needed to support the Islamic sector by 2020. According to a survey by the Finance Accreditation Agency (FAA), 80% of the respondent countries believed that the available Islamic finance talents do not satisfy industry needs. Malaysia has taken the lead and established three training institutions. They are the Islamic Banking and Finance Institute Malaysia (IBFIM), the International Centre for Education in Islamic Finance (INCEIF) and the International Syariah Research Academy for Islamic Finance (ISRA).

The Shariah Advisory Board (SAB) of the Securities and Exchange Commission of Pakistan (SECP) has reviewed the proposal of Shariah-compliant trading counter. The main feature of the proposal is to convert the T+2 settlement into T+0 settlement mechanism in the Shariah-compliant securities listed on the Pakistan Stock Exchange (PSX). The Shariah Advisory Board has granted approval of the proposed trading counter. The board also reviewed and granted approval of three AAOIFI standards: Shariah Standard No 17 - Investment Sukuk, Shariah Standard No 18- Possession and Shariah Standard No 23 - Agency and the Act of an un-commissioned agent.

Le Global Islamic Finance Award, remis le 6 septembre au président Ismaïl Omar Guelleh, récompense la formidable croissance de la finance islamique à Djibouti. Depuis la libéralisation du secteur bancaire, en 2006, les trois acteurs du pays, Saba Islamic Bank, Salaam African Bank et East Africa Bank, sont parvenus à s’octroyer 25% des comptes et 21% du total des actifs de la place. En 2016, pour veiller à la régularité des produits financiers, le pays a d’ailleurs installé un Comité national de la charia. Depuis six ans, la Banque centrale de Djibouti organise le grand rendez-vous africain de la finance islamique, l’International Islamic Banking Summit in Africa (IIBSA), dont la prochaine édition aura lieu en 2018.

In this interview Madina Kalimullina, adviser on Islamic economics, speaks about the Moscow Halal Expo and Islamic banking in Russia. Although legislation for Islamic banks is still missing, special groups in the Central Bank and the State Duma have been working on this topic. Today the state officially recognizes the concept of partner banking, which can be called Islamic banking. At the Moscow Halal Expo a halal installment plan was proposed, which removes all elements prohibitied from the point of view of Islamic standards. Over the last 8 years all international Sharia standards of Islamic financing were translated into Russian. So banks are gradually testing new products. This year's exhibition has two main topics. The first is cryptocurrencies and the second is multi-level marketing.

National Bank of Fujairah (NBF) announced the completion of a Shari’a-compliant bullion financing transaction with Malabar Gold. It is the first bullion financing in accordance with the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) standards on gold in the UAE. This partnership follows the launch of the AAOIFI Shari’a Standard on Gold in December 2016. The standard lays out a clear guidance on the permissibility to trade in gold in a shari’a compliant manner. It also enables Islamic finance institutions to develop new gold-based products and transactions. Vince Cook, NBF’s CEO, said he was delighted to be at the forefront of this major transaction in the gold and jewellery market. He thanked for the support of partners Malabar Gold, Amanie Advisors and World Gold Council.

The world’s financial landscape has changed fundamentally over the last few years. Islamic equity funds experienced strong growth during the second half of the 1990s. In 1996, there were 29 Islamic funds, valued at US$800 million. Nowadays, Indonesia plans to become a leading Islamic finance hub. The Jakarta Islamic Index has 30 sharia shares accounting for Rp 2.1 quadrillion with 32.7% of market capitalization.

In 2008, the Malta Financial Ser­vices Authority was the first EU regulator to issue guidelines on Islamic finance, which were updated in 2015-2016. In 2016, the Malta Stock Ex­change launched an Islamic Equity Index in order to attract investment and business from the Middle East. From a legislative aspect, Malta is already well-geared to welcome new structures that provide for Islamic finance. Malta is the only EU member country whose regulatory framework provides for protected cell companies and incorporated cell companies. Thus it may easily accommodate Takaful insurance solutions. Islamic investors are given the opportunity to set up their funds as Special Purpose Vehicles, Undertakings for Collective Investment in Transferable Securities, Alternative Investment Funds or Professional Inves­tor Funds. Islamic finance institutions may also generate funds by listing on the Malta Stock Exchange.

After examining the details of Islamic banking, Reserve Bank of India (RBI) has decided not to pursue the matter any further. It all started in late 2008 when former RBI governor Raghuram Rajan had stressed on the need for a closer look at the issue of interest-free banking in the country. Later, an inter-departmental group (IDG) set up in the RBI examined the legal, technical and regulatory issues for introducing Islamic banking in India. It recommended an "Islamic window" in conventional banks for gradual introduction of Sharia-compliant banking. However, no deadline was given for the proposal. This Sunday the central bank has refused to go on with the idea saying the decision was taken after considering the opportunities available to all citizens to access banking and financial services.

American University is offering a graduate certificate in Islamic Finance to prepare professionals for both emerging and established markets. The curriculum includes courses that focus on the role of Islamic finance in the global economy and Islamic capital markets. For Ghiyath Nakshbendi, an executive at American University, the graduate certificate is a dream come true. He regularly brings in experts to speak to classes. Speakers who visit and Skype in include CEOs, lawyers and high-profile Islamic finance professionals from Kuwait, Qatar and Bahrain. Nakshbendi does not want finance professionals to be deterred by the "Islamic" in Islamic finance. Students enrolled in the certificate program come from a variety of backgrounds and religious traditions. He believes that the program will help redefine the way professionals do business.

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) will prioritize wider adoption of its standards by engaging national regulators in key markets. Islamic finance has grown fast in part due to self-regulation, but the approach is now viewed as a barrier to growth. AAOIFI secretary-general Hamed Hassan Merah said wider adoption had a direct link to the qualitative growth of the industry. AAOIFI has recently signed Borsa Istanbul and the Saudi Arabian Monetary Agency as institutional members. Special attention will be given to Malaysia and the convergence of AAOIFI standards with the local rules. An AAOIFI survey of 213 scholars found 78% of respondents favour making AAOIFI sharia standards mandatory. On the other hand, 82% of respondents said Islamic finance institutions should adopt them on a voluntary basis.

The 2017 Annual Impact Investor Survey from the GIIN showed that respondents committed more than $21 billion to impact investments in 2016 and planned to commit 17% more in 2017. Geographically, however, the Middle East and North Africa (MENA) only makes up 2% of assets under management. Islamic finance is largely concentrated in three markets, Iran, Malaysia and Saudi Arabia, but it spans nearly every part of the world. Globally there are largely untapped markets that show immense potential for Islamic finance, such as sub-Saharan Africa. There, the primary driver of the region’s Islamic economy is the need for quality infrastructure. For example, the Nigerian government recently announced the sale of a N100 billion ($326 million) debt sovereign sukuk on the local market, meant to fund road infrastructure in the country. The principles of Islamic finance and impact investing have many areas of overlap. Islamic finance can be a strong source to finance sustainable development in many areas around the world.

According to Zahid ur Rehman Khokher, secretary-general of the Islamic Financial Services Board (IFSB), the growth potential of Islamic finance in the Asian market is much bigger than might be expected. He emphasized the developing role of fintech within the sector and the IFSB's role in setting standards. He noted the importance of Islamic microfinance in addressing issues of financial inclusion and improving participation in the financial sector. With the range of new services that are emerging, Zahid feels that capacity building is the biggest challenge at the moment. He feels there is a need for developing human resources and appropriate expertise within central banks, Shariah boards, as well as in commercial financial institutions.

DMCC has signed a Memorandum of Understanding (MoU) with Dubai SME to create a web-based trade finance platform for SMEs. The platform will be Sharia-compliant and operate under the DMCC Authority regulatory framework. Present at the signing ceremony was Gautam Sashittal, CEO of DMCC and Abdul Baset Al Janahi, CEO of Dubai SME. Gautam Sashittal said this cooperation between DMCC and Dubai SME opens a new avenue for funding and financing SMEs. Al Janahi said the SME sector in the UAE has evolved remarkably during the past decade chiefly due to support from the government. He added that this MoU was among a series of partnerships created after identifying the gap that existed in the SME landscape in terms of mobilising resources. DMCC is using Alternative International Management Services (AIMS) to make the platform Sharia-compliant.

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.

Saudi Arabia’s central bank has joined the Islamic financial regulator Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). The move could increase cross-border financial deals in the region, as guidelines will apply to all financial institutions within Saudi Arabia. Both conventional and Islamic banks will now be subject to the same standards, potentially encouraging deals with other Muslim countries. AAOIFI Chairman Sheikh Ebrahim bin Khalifa Al Khalifa stated that the addition of the Saudi central bank would help foster closer collaboration with the kingdom. Saudi Arabia may now hold ambitions of becoming a global heavyweight in the Islamic finance sector. However, it will face intense competition from Malaysia, South Africa and the UK.

Dubai Economy in partnership with Dar Al Tawreeq has launched a Sharia-compliant smart programme to offer receivables finance to suppliers dealing with government entities in Dubai. Dubai Economy is the first government entity to offer such a financing option to suppliers. Faster payment will support businesses in growing sustainably and maintaining cash flows. Businesses working with government entities can use the smart software developed by Dar Al Tawreeq to ensure liquidity by obtaining financing on their invoices. The programme also provides easy access to on-demand working capital for businesses at no additional cost. The programme was launched by Khalid Al Kassim, Assistant Director General in Dubai Economy and Haitham Al Refaie, CEO of Tawreeq Holdings. The programme emphasises the principle of public-private partnership adopted by Dubai in its evolution into an Islamic Economy Capital.