Sri Lanka’s Islamic Finance market tops Rs 300 billion

The Islamic Finance market has an estimated market of around Rs 300 billion and with the operation of current five commercial licensed banks, three finance companies and other institutions,Sri Lanka’s total deposit base is nearly Rs 35 billion and the total loan base is Rs 24.8 billion,a top financial analyst said.

To tap a huge market potential of this size there is certainly much room for development in the Sri Lankan industry such as new products, product developments and liquidity and integrating with the country’s development needs, Head of Credit MCSL Financial Services Limited Leonard Perera said.

“It is essential that we raise funds and investments from the international markets. We have to search for new markets, institutions and entrepreneurs to open out channels to bring in investments to the country. Therefore Islamic Finance would be an ideal fund generator in the international markets,”Perera told the Daily News Business.

He further said that Islamic finance was one key opportunity, which we can make use of to bring in funds via different agencies, countries and foreign currencies. Introducing new Shariah-compliant instruments and bringing in our own new products are important in expanding the Islamic finance industry in the country, he said. The expansion in the banking, finance and insurance sector will not only assist to build the economy, but also to build the nation collectively,” he said.

Perera said Islamic finance industry is an ideal solution to the Sri Lankan market in order to enhance its banking, finance and insurance with different products and investments because Islamic Finance is not only to Muslims but also for every person. During the recent past the country has made remarkable progress in the Islamic finance industry and still has a huge market potential, he said.

“Sri Lanka can grow in the Islamic finance has lot of potential, but it is important that the industry has a plan and grow steadily. The thrust has to build among the public in taking the industry to the next level could be done since it could be distinguished from traditional banking system where its main advantage is it is risk free, interest free in interest asset and service backed and contractual certainty,’’he said.

Sri Lanka is one of the few non Islamic countries that available this business has a lot of potential in the market it is one of the growing sectors in the world, he said. According to industry sources that Islamic Financial sector has evolved and grown to reach US$ 1.3 trillion with a growth of 15 percent, which operates in 42 countries including15 non Islamic countries including USA, UK, Canada, and Switzerland Australia are top end countries that operate this instrument, he said. Perera said that major banks such as HSBC, Standard Chartered Bank ABN Amro have dedicated Islamic Banking subsidiaries or Islamic Banking windows, he said.

In Sri Lanka the Banking Act No 30 of 1988 was amended in March 2005 to accommodate the concepts of Islamic banking is recognized by IMF, World Bank, Basel Committee premier global bank regulator and funding body, he added. 

(Daily News / 27 Nov 2013)

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Prince Charles keen to explore Islamic finance

COLOMBO: Prince Charles is keen to explore Islamic finance as an instrument in managing climate change in countries vulnerable to natural disasters.

The Prince of Wales inquired about Islamic finance to Prime Minister Datuk Seri Najib Razak in their half-hour meeting here Friday at the invitation of Prince Charles.

Prince Charles and Najib are in the capital of Sri Lanka in conjunction with the Commonwealth Heads of Government (CHOGM) Meeting 2013.

Speaking to Malaysian journalists here, he said Prince Charles asked him if needy countries and those categorised as "small and vulnerable" could gain access to Islamic financing.

In response to the inquiry from Prince Charles, the Prime Minister said, he explained that it requires indepth study.   

This is because, he said, it may require the involvement of sovereign funds if they want to issue Sukuk for such financing.

During the meeting, Najib said they exchanged views on the Commonwealth and the future of the organisation.

On his meeting with Sri Lankan President Mahinda Rajapaksa on the latter's invitation on Thursday, he expressed his view on the tourism potential of the island.

He said Malaysia and Sri Lanka also want to improve the good ties following the end of the country's internal conflict.

"In this peaceful time, the potential of Sri Lanka is more visible," he added.

(News Straits Times / 16 Nov 2013)

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Sri Lanka can become Islamic Finance hub

Given the geographical location of Sri Lanka, the country has tremendous upside potential to attract Islamic flows from Middle East to Far East, and thereby emerge as a commercial hub in the region, Managing Director and Chief Executive Officer at Amana Bank Limited Faizal Salieh, indicated last week.

Speaking at the Second Islamic Finance news Sri Lanka Roadshow (IFN) organized by the REDmoney Group of Malaysia in collaboration with the Amãna Bank, he further said that the demand for Islamic Financial services is on the rise, locally, where over 25 percent of the clients associated with the foresaid bank, which offers ‘Sharia’ compliant financial products, are non-Muslims.

“As of today, the country has one full-fledged Takaful bank, four banks that have opened Islamic financing windows and four financial institutions that offer Islamic banking instruments. Due to the uniqueness in terms of fairness, asset based approach and refusal to profit from genuine difficulties of people, Islamic finance is becoming increasing popular world over, among Muslim and non-Muslim customers alike,” the Chief expressed.

Despite the rapid development of the, however, Salieh pointed out there were still issues and challenges facing the Islamic Finance sector in Sri Lanka that has to be discussed and deliberated in order to progress further.

“The products offered need to be further developed. For instance, the agricultural sector of the country should be integrated to the Islamic Finance framework. On the other hand, the Central Bank of Sri Lanka could introduce Sharia compliant treasury bills, to enhance investor base of the country and thereby sustain the growth momentum of the country,” Salieh observed.

However, he emphasized that the regulator should communicate with stakeholders attached to the Islamic Finance sector in order to harmonize Sharia compliant products with the Sri Lanka’s economic system. 

Meanwhile, addressing the same forum, Governor of the Central Bank of Sri Lanka Ajith Nivard Cabraal reiterated that Sri Lanka’s banking and economic sectors should welcome fresh features and instruments such as Islamic Finance in order to attain and sustain the eight percent GDP growth target set by the regulator.

“Sri Lanka is one of the fastest growing economies in the region today. In order to retain this momentum, however, the country’s economy is open for new investors - to venture, and lock themselves into positions with Sri Lanka,” Cabraal remarked.

(The Nation / 01 Sep 2013)

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Sri Lanka: Amãna Takaful sustains profit momentum into 2013

May 17, 2013 (LBT) - Composite insurer Amãna Takaful PLC (ATPLC) posted modest growth in all aspects of the business in Q1 2013. Releasing their interim results, the company reported that consolidated Revenue of Rs. 463.4 million grew by 15% over Q1/2012 with profit before tax of Rs. 22.9 million, an increase of 55% in the same comparison.

Amidst many challenges, Non-Life business kept pace with the industry and grew by 10% to Rs. 357 million in which all classes delivered product-line profitability, notably Motor. Prudent and speedy management of motor claims and its supply chain continue to impact positively among all stakeholders. Consequently the combined ratio too improved substantially to 86% from 98% a year ago.

Gross Written Premium of the Life segment improved significantly to Rs. 105.8 million or 34% over the corresponding period in 2012, over-performing industry growth performance of 7% (Source IASL). New Business performance on Regular products and Prosper - the Wealth Management offer, took a major share of this increase.

Lacklustre performance in the white-listed equities coupled with volatility in bullion virtually halved investment income to Rs. 22 million compared to the corresponding quarter in 2012. Importantly, a 46% improvement in the Under-writing result at Rs. 134.7 million helped to mitigate the under-performance in investment income.

“The start to 2013 was extremely volatile and highly charged due to un-warranted and extraneous influences that adversely impacted our client base and trading partners. This was exacerbated by intense price cutting. Nonetheless, we stayed the course and weathered the storm, growing on par with industry while defending our market share,” said CEO Fazal Ghaffoor, commenting on the first quarter performance.

“It is heartening that our strategy to deliver sustainable growth in our people’s performance, our quest for a balanced portfolio and real achievements on the productivity front while delivering real value to our customers, is well on track to achieve the desired outcomes,” he concluded. 

Meanwhile, Amãna Takaful Group, which also includes Amãna Takaful Maldives reported first Quarter profit of Rs. 41.3 million. “The Groups first quarter results are a good start to the year, despite the challenging trading environment more particularly here at home. The operation in the Maldives is progressing steadily on all fronts”, commented Chairman Tyeab Akbarally. “While great and real opportunities are yet to be fully optimised with prudent risk management and innovative product offers in our pipeline, I remain optimistic of our growth momentum. For sure, the industry has to get its act together in responsible tariff management practices” the Chairman concluded.

The company’s re-fashioned strategic route map to build sustainable balanced growth and profits has begun to deliver results. The plan took flight last year and reached grass root levels in the organisation together with the establishment of new branches, refurbishment of existing locations and leveraging information communication technology to boost service at customer touch-points. One of a few ISO certified insurance operators in Sri Lanka, Amãna Takaful now operates in 22 locations with plans of expanding its footprint further. ATPLC also operates three key strategic business units that specialise in Life, General and Medical Takaful, which is unique in its approach to serve the respective developing customer segments. Furthermore, by keeping to its tenet of mutuality, the company also offers financial protection through the Takaful concept to the needy of the Sri Lankan populace by providing Navodhaya - ATPLC’s Micro-Takaful (insurance) solution. 

The current Board of Amãna Takaful PLC includes, Tyeab Akbarally (Chairman), Ehsan Zaheed (Executive Director), Non-Executive Directors - Osman Kassim, Dr A. A. M. Haroon, Dr T. Senthilverl, Dr Ifthikar Ismail and Non-Executive Independent Directors M. H. M. Rafiq, Dato’ Fadzli Yusof, A. S. M. Muzzamil, Ali Sabry and, R. Gopinath.

(Lanka Business Today / 17 May 2013)

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Amãna Takaful presents annual plan

Amãna Takaful, one of Sri Lanka’s fastest growing composite insurers recently presented its annual plan cascade to its staff. Under the theme ‘We Are Winning’, all staff members were presented with the 2012 performance of the company highlighting the year and the milestones achieved above expectations on many fronts.

“We are winning. Our growth trajectory is promising and we have expanded to new markets in 2012. This year we are even more bullish to reach the homes and offices of more Sri Lankans to introduce them to the concept of Takaful through products of mutual value”, said Fazal Ghaffoor, Chief Executive Officer, Amana Takaful PLC, making a presentation to the audience that had converged from all branches.

The event was attended by almost the entire staff together with members from the Board of Directors. The respective Heads of Departments presented the highlights of 2012 and plans for the year 2013 focusing on its development and growth plans in its respective areas.

Amana Takaful reported an impressive growth of 26% for the 9 months to September 2012, well above the industry’s 12.2% and looks forward to releasing the results of the 4th quarter 2012.

The Company’s performance in terms of total Gross Written Premium (GWP) of Rs. 1,151.5m up to September 2012 compares with Rs. 913.6m in the same period of 2011. The General Insurance business accounted for Rs. 891.0m, growing significantly at 28.5% over the comparative period in 2011. The Life segment’s Gross Written Premium of Rs. 260.4m to September 2012, reflects a growth of 18.4% over the corresponding period last year. These results reflect a substantial upside against the industry performance of 18.3% and 4.4% on General and Life businesses respectively as at end September 2012.  

With branches in 21 locations island-wide, Amãna Takaful has been successful in its journey of more than a decade in establishing a strong position for the concept of Takaful amidst stiff competition with 20 other conventional industry players. The company has been able to deliver unique value, the Takaful way, to Corporates and individuals alike as a composite insurer.

(The Nation / 27 Jan 2013)

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Sri Lanka: Amana Takaful to support development in Hambantota

Amãna Takaful, one of the fastest growing composite insurers in Sri Lanka, recently declared open a new office premise in Hambantota, the bastion of development in the South. The move strengthens the company’s presence in the South already having its offices situated in Galle and Matara. The Branch was ceremonially declared open by M. Shaheed Usuph, President, Chamber of Commerce-Hambantota.

The move to Hambantota by Amãna Takaful is meant to support the development taking place in the area. The branch will provide tailor made insurance solutions to the people who are going through rapid economic progress in the region. Hambantota marks the 21st branch to be established by the company catering to all segments of society having its operations spread to cover all parts of the country including the Northern and Eastern provinces.

“We serve all Sri Lankans and stand here in Hambantota today to deliver our exceptional products and services to its people. With the ever escalating development in the South and the increased economic activity, our move to Hambantota is timely. As one of the fastest growing insurance companies in Sri Lanka we wanted to be one of the early movers to the market and ensure that our customers are provided with the highest level of service.” Said.Fazal Ghaffoor, Chief Executive Officer, Amãna Takaful speaking at the opening ceremony attended by prominent businessmen, professionals and members of the financial services fraternity. 

(The Nation / 11 Nov 2012)

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Amana Bank forecasts six-fold growth for Islamic banking in Sri Lanka

Amana Bank, Sri Lanka’s only full-fledged Islamic lender, plans to double its branches by expanding in rural areas, forecasting a six-fold growth in demand.

The company, which started in August 2011, will add five outlets this year to its existing 14 and nine in 2013, Colombo-based chief executive officer Faizal Salieh said in an October 17 interview.

Sri Lankan Islamic banking assets could reach $1.5bn from $250mn now, he added, without specifying a timeframe. Amana posted a net profit of 178mn Sri Lankan rupees ($1.4mn) in the nine months through September and had assets of SLR18bn, according to Salieh.

Amana is targeting unbanked individuals and the small-to-medium sized enterprises that are driving the nation’s growth, Salieh said.

The $59bn economy expanded 8.3% last year, the fastest pace since records began in 1959, as the government boosted spending on roads, ports and power plants following the end of a 26-year civil war in 2009.

“Islamic finance is at an infant stage in Sri Lanka but it’s developing,” Suresh Perera, a tax and regulatory principal with KPMG Sri Lanka in Colombo, said in an interview recently. “There’s demand from the Muslim population involved in trade and business and there’s also interest from non-Muslims.”

Of the country’s 21.5mn people, about 8% are Muslim, compared with a majority of 69% who are Buddhist, according to the CIA World Factbook. In neighboring India, which has no Islamic finance policies, Muslims account for 13% of the 1.2bn population, the world’s third largest.

Five non-Islamic lenders are also offering Shariah-compliant services through booths, according to an e-mailed statement from the department of bank supervision at the central bank.

Amana’s website shows it has branches concentrated across central Sri Lanka from the west to east coasts, including the capital Colombo and the cities of Kandy, Kattankudy and Mawanella. 

Hatton National Bank started its Shariah windows in February to tap the market as about 25% of all businesses in Sri Lanka are owned by Muslims, L A M Hisham, who heads the Islamic finance unit, said in an interview.

“This is an alternative and lucrative way of banking,” Colombo-based Hisham said, adding that the bank’s network of 250 branches helps reach out to Muslim customers. “We are looking for more innovative products to offer.”

There’s been no progress since the government announced in 2010 it would grant Shariah-compliant financial transactions the same tax treatment as non-Islamic products, Amana’s Salieh said.

Hisham said KPMG is leading the lobby to solve those issues, but he doesn’t see them as a hurdle to growth.

Demand for Islamic banking products may not be strong enough for Sri Lanka to develop a regulatory framework as the Muslim population is small, according to Singapore-based consulting company Five Pillars.

“Their many war-torn years may still be a concern before foreign funds consider Islamic finance opportunities in Sri Lanka,” Raj Mohamad, managing director at Five Pillars, said by e-mail. “It still has some years to go before joining the queue to attract Islamic finance monies.”

Drafting new rules would help pave the way for a sale of Shariah-compliant bonds, or sukuk, and provide the nation with an alternative source of financing.

China, India and the Manila- based Asian Development Bank are the biggest donors for infrastructure projects in Sri Lanka. The International Monetary Fund has provided $2.6bn to help the nation rebuild foreign-currency reserves since the end of the civil war.

“We have supported Islamic finance and will be very supportive,” Ajith Nivard Cabraal, governor of the Central Bank of Sri Lanka, said in an interview recently from Colombo. 

“Sukuk and other Shariah-compliant instruments would be a source of funding for projects and beneficial to Sri Lanka,” he said.

Worldwide sales of sukuk, which pay returns on assets to comply with Islam’s ban on interest, almost doubled this year to a record $39.1bn from the same period last year, according to data compiled by Bloomberg.

Average yields on the debt declined six basis points, or 0.06 percentage point, last week to an all-time low of 2.86%, the HSBC/Nasdaq Dubai US Dollar Sukuk Index shows. The difference between the average and the London interbank offered rate, or Libor, narrowed 14 basis points to 181 basis points.

Shariah-compliant notes returned 8.5% in 2012, according to the HSBC/Nasdaq index, while debt in developing markets climbed 16.5%, JPMorgan’s EMBI Global Composite Index shows.

Amana, whose shareholders include Bank Islam Malaysia and Jeddah-based Islamic Development Bank, plans to expand to overseas markets such as India, the Maldives and Mauritius once its domestic business strengthens, Salieh said.

“What would drive the growth of Islamic banking in Sri Lanka is its ability to attract investment from outside such as Middle Eastern and Far Eastern funds,” he added.
Islamic banking assets in Sri Lanka are small relative to those in neighboring Pakistan and Bangladesh, who have the world’s second- and fourth-largest Muslim populations.

Holdings that comply with religious tenets in Pakistan total $6.8bn and $10bn in Bangladesh, according to central bank data. Indonesia, home to the world’s largest Muslim population, has assets of $16.8bn.

Sri Lanka’s economy, which relies on exports of tea, spices and textiles, will probably slow to growth of 6.8% in 2012, as the weaker global outlook hurts demand for its goods, central bank governor Cabraal had said by telephone. That’s still more than the 3.5% pace in 2009. The Asian Development Bank on October 3 estimated the island’s economy will expand 6.5% this year and 7% in 2013.

 “The main opportunity for Islamic finance in Sri Lanka is growth in the Muslim community,” Sanjeewa Fernando, an analyst at CT Smith Stockbrokers in Colombo, said by e-mail. “Well-organised marketing could be seen as a strategy to overcome challenges such as a lack of awareness.

(Gulf Times / 05 Nov 2012)


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Sri Lanka: Amana Takaful records 32 % growth for 1H of 2012

Amana Takaful, recorded an impressive growth of 32% for the first half of 2012, well above the industry. The first half figures released by the company reflects a total Gross Written Premium(GWP) of Rs 770.8 million up from Rs.584.7 million in the comparative period of 2011. Individually, the first half General and Life businesses’ GWP of Rs. 603.3 million and 167.5 million respectively, grew by 32 % each in the same comparison.

This compares with the overall industry growth of 11 % in which General and Life segments moved up by 17 % and 3 % respectively as per industry sources. This performance propelled ATPLC’soverall market position. The General business performance was well supported by the Motor portfolio growth as well as the Non-Motor classes which moved up by 29 %, in which Medical was at the forefront. With the launch of “PROSPER” an Investment-linked Life product in the second half of 2011, ATPLC realized a significant contribution in the overall growth.

At an underwriting level, though the result was positive in comparison with the corresponding period last year, the significant increase in the Motor Claims stifled the planned performance goal.

Notwithstanding the slide in the equity market conditions, the judicious management of our diversified investment portfolio yielded an upside in investment returns of 263 % over the same period last year.

Despite the afore mentioned, ATPLC ended the half year with a loss of Rs. 34 million primarily driven by an over-run in Motor claims, as stated earlier. However, at Group level, a consolidated profit of Rs 43.6 million is reported to which the Maldives Takaful operation contributed substantially among the other subsidiaries.

Amana Takaful Maldives (ATM), now in its first year of operation as a PLC, recorded a GWP of MRF 29.7 million Rs 252.3 million) posting a growth of 31 % over 2011.

(Daily News / 03 Sept 2012)

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Sri Lanka: CDB partners with ADL Capital to offer Islamic financial services

Citizens Development Business Finance PLC (CDB) will venture into the expanding domestic market of Islamic Finance with the scheduled launch of the company’s Sharia’h compliant Independent Finance Unit branded “CDB Meezan” shortly. The specialised Unit will operate under the overall ambit of CDB and will roll out a range of deposit and financing products and services to its entire clientele.

The setting up of “CDB Meezan” was facilitated under the expert guidance and supervision of SEC registered Investment Manager, Adl Capital Limited - a Market Intermediary which in addition to its Fund Management role specialises in structuring turnkey Islamic Financing solutions to the local and overseas industry. These include, establishing fully-fledged Islamic banking units and product structuring for licensed banks/registered finance companies/leasing companies. Adl Capital’s corporate advisory functions also includes structuring Shariah compliant products for the Capital and Equity Markets, and offers specialized staff training and Shariah-based financial advisory services to private businesses.

“We have been exploring the possibilities of launching Islamic Finance for a while now, however, in seeing that the demand for these products is on the increase in the recent times, we believe it is a timely start to offer Islamic Financial products to our customers,” said Roshan Abeygoonewardena, Director/Chief Operating Officer of CDB. 

Associate Director of Adl Capital Limited, Sabri Abdul Cader commenting at the conclusion of the company’s assignment said, “The entry of CDB Meezan into the world of Islamic Finance is testimony to the resilience that the domestic IBF sector has demonstrated in Sri Lanka’s 15 year history of Islamic Banking & Finance. We are delighted to partner CDB in this endeavor. With the guidance and support from learned and reputed scholars, we are confident that CDB Meezan will deliver value and benefits to all its stakeholders”.

(The Nation / 22 July 2012)

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Sri Lanka: SriLankan Airlines gets $175m sukuk from Gulf banks

SriLankan Airlines signed a $175 million sharia-compliant loan, a statement from one of the arranging banks said on Sunday, the first time the carrier has borrowed from the international syndicated loan market.

The state-owned airline completed the four-year facility with Abu Dhabi Islamic Bank, Abu Dhabi's Al Hilal Bank, Mashreq Bank, Dubai's Noor Islamic Bank and United Bank Limited, a statement from Mashreq's Islamic arm said.

The loan was provided in dollars and UAE dirhams and will be repayable from ring-fenced cash flows, the statement added.

Mashreq Al Islami acted as the coordinating bank.

"The successful closure of this transaction is clear evidence of the growing acceptance of the Sri Lanka credit story in international markets," said John Iossifidis, head of international banking group at Mashreq.

He emphasized the growing importance of Sri Lanka in the region and how Mashreq, in conjunction with its other key partner banks, have been instrumental in closing the facility despite the difficult global liquidity conditions continuing.

He added, “Sri Lanka is a key strategic market for Mashreq and we are committed to working alongside our core relationship clients, to explore different forms of capital raising."

This transaction marks an important foray in the Islamic banking space by a major corporate based in Sri Lanka and should pave the way for many similar transaction in the future.

SriLankan Airlines, the national carrier of Sri Lanka, currently operates a fleet of 19 aircraft covering 60 destinations across the globe with an increasing presence in the Middle East and Asia.

The successful arrangement of this facility will financially strengthen SriLankan Airlines at a time when the Government of Sri Lanka expects the airline to be a catalyst for the further growth of Sri Lanka’s economy, especially tourism and export industries. - TradeArabia News Service &Reuters

(Trade Arabia / 02 July 2012)

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