Exim Bank plans sukuk

The head of Malaysia’s state-owned trade financier said he plans to tap the global sukuk market for a second time, as Shariah-compliant assets look set to reach 40 per cent of the bank’s total in 2015.

Export-Import Bank of Malaysia Bhd’s assets that comply with religious tenets will rise to RM2.4 billion (US$721 million) this year, representing a 30 per cent portion, from 2013’s RM1.5 billion, chief executive officer Datuk Adissadikin Ali said in an interview yesterday. The company is aiming to sell dollar-denominated Islamic bonds in the second half of next year, he said.

The state-owned entity became the world’s first trade financier to issue US currency sukuk with its debut offering in February that helped plug a shortage of corporate Islamic dollar debt in Asia. The lender started providing Shariah-compliant loans in 2009 to support demand in an industry whose assets Bank Negara Malaysia projects will triple to US$6.5 trillion worldwide by 2020.

“We are not short of business,” Adissadikin said in Kuala Lumpur. “Our plan is to grow by 30 per cent every year and we have been beating the target consistently.”

The lender is expanding its Islamic finance business as part of Prime Minister Datuk Seri Najib Razak’s drive to make the nation a global Shariah-compliant hub by 2020, Adissadikin said. Exim Bank met its full-year target of RM5 billion for Islamic and conventional loans at the end of October and the figure may now climb to RM6 billion this year, he predicts.

The company’s planned sukuk will be its third in the international debt market and Exim Bank faces the prospect of higher yields as the Federal Reserve gears up to raise interest rates next year.

The bank will probably offer US$200 million to US$300 million of dollar sukuk with a maturity of five years or more sometime in the second half of 2015, Adissadikin said.

“Timing is not a priority as we can pass the cost to our clients,” he said.

Exim Bank sold US$300 million of dollar Islamic notes due in 2019 at a coupon of 2.874 per cent in February. The securities last yielded 2.48 per cent, according to data compiled by Bloomberg. The lender is rated A3, the fourth-lowest investment grade, by Moody’s Investors Service and A- by Fitch Ratings.

Average yields on global sukuk, which pay returns on assets to comply with the religion’s ban on interest, dropped 57 basis points this year to 2.85 per cent, according to a Deutsche Bank AG Index. That’s down from 2014’s high of 3.44 per cent on January 2 and compares with the low of 2.77 per cent in September.

Worldwide sales of the debt rose 10 per cent to US$38.8 billion in 2014 from a year earlier after reaching US$43.1 billion in 2013 and an unprecedented US$46.8 billion in 2012, data compiled by Bloomberg show.

Exim Bank’s total banking assets may end the year around RM8 billion, up from RM5.3 billion in 2013, Adissadikin said. The company posted a net profit of RM144.7 million last year, compared with RM123.8 million in 2012, according to its annual annual report. Adissadikin declined to give an earnings forecast for 2014.

Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank Bhd, said it makes sense for Exim Bank to be offering Shariah-compliant financing given that it’s a significant part of the Malaysian economy.

“Exim Bank Malaysia acts as a strong ambassador for Islamic finance,” Badlisyah at the unit of CIMB Group Holdings Bhd, said in a phone interview in Kuala Lumpur yesterday. “The very fact that they issued a dollar sukuk this year and are able to offer wider solutions to their clients also allows them to stand out.

(News Straits Times Online / 11 November 2014)

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Malaysia's Cagamas adds amortisation to bond, sukuk programme

Malaysia's state-backed mortgage lender Cagamas Bhd has broadened the scope of its 40 billion ringgit ($12 billion) bond and sukuk issuance programme by adding the use of a novel amortisation format, a regulatory filing showed.

Cagamas's mandate as the national mortgage corporation and the leading issuer of AAA debt securities in Malaysia is to facilitate home ownership but, is also exploring ways to develop a deeper and more liquid domestic bond market.

An amortising bond is structured in a way that gradually reduces the value of the bond over a fixed period of time, meaning the borrower pays off the full amount before the final maturity date.

Amortising bonds are commonplace, but the format is rare for sukuk. Last year, Dubai's Emirates airline launched the first such sukuk in the international market, a 10-year $1 billion deal with an average weighted life of five years.

Cagamas said it had received confirmation from its sharia advisers and the capital market regulator for the proposed change to its issuance programme.

This would not affect the programme's AAA credit rating from RAM Rating Services, the company added.

In 2012, Cagamas broadened its range of issuance with the introduction of an agency-based sukuk known as wakala, which is acceptable to Islamic investors from outside Malaysia for trading in the secondary market.

(Reuters / 09 November 2014)

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Islamic Finance begins transacting on NASDAQ Dubai Murabaha Platform for Islamic financing

Islamic Finance, a UAE-based leading Sharia’a-compliant financial institution, has carried out its first transaction on the NASDAQ Dubai Murabaha Platform, which provides Islamic financing services to a rapidly growing number of individual and institutional customers.

Officially launched in April 2014, the platform has completed a total of more than Dhs21 billion of transactions. It was set up by NASDAQ Dubai jointly with Emirates Islamic and is playing a key role in Dubai’s growth as the Capital of the Islamic Economy globally.

Clients of Aafaq – Islamic Finance and other companies can use the NASDAQ Dubai Murabaha Platform to execute streamlined transactions within minutes. As the platform expands it has the potential to make Dubai the international centre for processing Sharia’a-compliant financing.

His Excellency Essa Kazim, Chairman of Dubai Financial Market and Secretary General of Dubai Islamic Economy Development Centre (DIEDC), said: “The expansion of the NASDAQ Dubai Murabaha Platform underlines the continuing success of the initiative launched by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, the Vice President and Prime Minister of the UAE and Ruler of Dubai, to develop Dubai as the global Capital of Islamic Economy, as overseen by His Highness Sheikh Hamdan Bin Mohammed Bin Rashid Al Maktoum, the Crown Prince of Dubai. By effectively serving the clients of Aafaq – Islamic Finance and other companies, the platform will provide growing support for the strengthening of the Islamic finance sector in the UAE.”

Sheikh Faisal Saoud Bin Khalid Alqassimi, Managing Director of Aafaq – Islamic Finance, said: “The NASDAQ Dubai Murabaha platform is a very attractive alternative to many other Islamic financing solutions, which can be subject to unexpected price movements, spreads and delays as well as poor liquidity. We are making use of the platform to offer our clients solutions for a variety of purposes, from personal finance to funds for company expansion.”

The platform makes use of Sharia’a-compliant Certificates that have been developed for the underlying assets of the financing transactions. Islamic banks, Islamic windows of conventional banks, and Islamic finance companies and their clients can make use of the platform through trading Certificates.

Abdul Wahed Al Fahim, Chairman of NASDAQ Dubai, said: “NASDAQ Dubai will build on the growing success of the platform to attract more financial institutions to join it from the UAE and beyond, so that their clients can also benefit from its many advantages. We are committed to further enhancing our Islamic financing infrastructure with the support of all market participants.”

Hamed Ali, Chief Executive of NASDAQ Dubai, said: “The NASDAQ Dubai Murabaha Platform meets the specific requirements of Sharia’a-compliant financing within a framework of international capital markets best practice. As a sophisticated and secure financing channel, it is set to cater to an increasing number of customers all over the world.”

Abdulla Al Awar, Chief Executive of DIEDC, said: “Aafaq – Islamic Finance’s decision to join the platform is another positive example of Islamic financial institutions in the UAE taking far-seeing and proactive steps to enhance the services that they offer to clients. This process is rapidly building critical mass in the Islamic financial sector in both quality and quantity.”

(Ame.Info / 06 November 2014)

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PH eyes Islamic bank to develop Mindanao

The Philippines is turning to Islamic finance to rejuvenate Bangsamoro, a Muslim-majority region whose economy has been stifled by decades of civil war.

The Bangko Sentral has set up a task force with the World Bank and the country’s only Shariah-compliant lender to develop the industry, Governor Amando Tetangco said Oct. 29 in Manila. Bangsamoro is an autonomous region set to be created on the southern island of Mindanao after President Benigno Aquino signed a peace agreement with Muslim rebels.

The Philippines said in July it planned to sell sovereign sukuk by mid-2016, following the UK and Hong Kong in creating a local benchmark for a global industry whose assets are forecast by the Malaysia International Islamic Finance Centre to more than triple to $6.5 trillion by 2020. The Bangsamoro Development Agency says it needs P110 billion ($2.4 billion) to rebuild a region that has a poverty rate more than double the national average.

“The Islamic banking industry may be a catalyst for the economic growth of the people of the Bangsamoro region,” Megat Hizaini Hassan, head of the Islamic finance practice at law firm Lee Hishammuddin Allen & Gledhill in Kuala Lumpur, said in an interview.

“It may also be useful for the regulators in the Philippines to consider Islamic finance not just for Mindanao, but rather as a means of bringing in foreign investment,” he said.

The Philippines, which considered a law to support Islamic finance as far back as 1973, may amend the charter of Al-Amanah Islamic Investment Bank of the Philippines to allow other Shariah-compliant lenders, the central bank’s Tetangco said.

“The idea is to allow Islamic banks to co-exist with conventional banks and have a level playing field,” he said. “We’re working as fast as we can,” he said, adding that the measures would require congressional approval.

The Bangsamoro government is also waiting on legislative approval to be formally established after President Aquino submitted a bill to this effect on Sept. 10.

The Philippines signed a peace deal with the Moro Islamic Liberation Front in March to end a four-decade insurgency in Mindanao, home to most of the country’s 5 million Muslims. The pact also seeks to unlock investment in the mineral-rich south.

Bangsamoro supercedes the failed Autonomous Region in Muslim Mindanao, an entity created in 1989 during a previous attempt at peace. Some 49 percent of people in that area lived on less than $1.20 a day in 2012, compared with the national average of 20 percent. Aquino attended a two-day forum that ends today in Mindanao’s Davao City aimed at seeking international aid and investment for Bangsamoro.

“There is a dire need for financial services to support economic development in the Mindanao area,” Idiosa Ursolino, senior vice president at Al-Amanah Islamic Investment Bank in Manila, said in a Nov. 4 e-mail interview. “That could be made possible by a culturally-friendly business environment like the Shariah-compliant business opportunities.”

(Manila Standard Today / 06 November 2014)

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Ghana Muslim Mission launches Zakat Fund

The Greater Accra Regional branch of Ghana Muslim Mission (GMM) has launched its regional zakat fund aimed at becoming the leading and credible body in Ghana.

The GMM also aims to manage the fund professionally and in accordance with Islamic principles and tenets.

The fund seeks to encourage Muslims to pay their zakat and in turn manage the money for the good of beneficiaries as prescribed in the Quran and Hadith.

Mr Nurudeen Quaye, Greater Accra Regional Imam, GMM said Zakat is an obligatory act ordained by Allah to be performed by every adult and abled bodied Muslim and it is the third pillar of Islam.

He said the fund is to sensitise qualified Muslims to pay their zakat and by so doing help the payee to fulfil his or her religious duty to Allah.

He said this positions them and their community to obtain associated benefits from Allah.

He said the fund is also to provide a platform for the effective collection, management and disbursement of funds to the beneficiaries and manage payments to yield optimal returns within the bounds of Islamic principles.

Mr Quaye said zakat is mandatory on gold, silver and money, the produce of the earth of grains and fruits, livestock’s, camels, sheep , cattle and goats on the condition that they are free grazing, as well as goods owned to be sold.

He added that the fund is also to implement programmes targeted at identified beneficiaries as well as implement credible governance system that assures stakeholders it is managed prudently.

Dr Sheikh Amen Bonsu, National Chairman of the GMM said paying of zakat is a form of worship, and accordingly the payer of zakat submits one to the will of Allah.

He said payment of zakat helps to remove selfishness from ones heart which is a spiritual ailment inimical to one’s faith.

He said it is a form of self-purification and helps purify the property of the payer and abet the sufferings of the needy and poor thereby reducing ill feelings in the society.

Dr Bonsu said the fund would therefore provide a veritable means of accumulating funds to execute eligible projects for the Muslim community.

He urged Muslims to make it a point to pay their zakat into the fund for the development of the Muslim community in Ghana.

The board of trustees to take over sight responsibility of the fund includes Mr Suleiman Konney, Mr Issah Tagoe, Mr Ibrahim Mensah, Mr Mohammed Doku, Mr Ahmed Adjei Adjetey, Mr Mohammed Quarcoo, Mr Ahmed Quarcoo and Mrs Mariam Obeng.

The GMM was established in 1957 as a purely Islamic organisation with the aim of propagating the Islamic religion and the teachings of the Prophet Mohammed as laid down in the Holy Quran and Hadith.

(Ghana Web / 04 November 2014)

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DIFC Investments prices $700m sukuk at 4.325 per cent

Dubai: The DIFC Investments LLC (DIFCI), late on Tuesday successfully priced its $700-million (Dh2.56 billion) 10-year sukuk issued at par with a 4.325 per cent profit rate.

The transaction, which represents DIFCI’s return to the debt capital markets since its issuance in 2007, was priced at 185 bps spread over US dollar mid-swaps. The DIFCI’s transaction is the first dollar-denominated benchmark issuance by a regional corporate since last July.

Ahead of the sukuk issuance, DIFCI was assigned a BBB-issuer credit rating by S&P. Shortly after receiving its credit rating, DIFCI undertook an extensive marketing strategy covering Abu Dhabi, Dubai, Hong Kong, Singapore and London.

The order book opened on Monday morning and quickly gained momentum and was in excess of $1.9 billion by London close of business. The strong investor interest was sustained throughout Asia and the order book grew to approximately $3 billion, representing approximately 4.3 times oversubscription.

We are extremely pleased with the success of this transaction. The sukuk represents a milestone in DIFC’s credit story and acts as a testament to the improved credit fundamentals of the company,” Essa Abdulfattah Kazim, Governor of DIFC, said.

Dubai Islamic Bank, Emirates NBD Capital, Noor Bank. and Standard Chartered Bank acted as joint lead managers on the issuance. The sukuk will be listed on Nasdaq Dubai.

(Gulfnews.Com / 04 November 2014)

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Indonesia eyes consolidation, new laws in roadmap for Islamic finance

Authorities in Indonesia want to reshape the country's Islamic finance industry by encouraging consolidation and building a new regulatory system, as the sector plays catch-up to more mature markets in Malaysia and the Middle East.

Regulators are finalizing a five-year roadmap to be presented this month to industry players, who have repeatedly called for clearer laws.

"This is quite a deep review and I'm not surprised if the roadmap we have in the end is a full-fledged revision of what we have had," Halim Alamsyah, deputy governor of Bank Indonesia, the country's central bank, told Reuters.

Indonesia has the world's biggest Muslim population but its Islamic finance market lags well behind that of neighbor Malaysia: Indonesia's Islamic banks held 4.9 percent of total banking assets in the country last year compared with more than 20 percent for their Malaysian counterparts.

The central bank and the country's financial services authority, Otoritas Jasa Keuangan (OJK), are looking at ways to give regulatory support for Islamic banks to hold at least 15 percent of the market by 2023. By that year, Islamic windows of conventional banks must be spun off into standalone entities.

The country is also looking at the idea of creating a large, standalone Islamic bank that could spur consolidation in the industry.

Such entities would have an ideal size of around 200 trillion rupiah ($16.5 billion), said Edy Setiadi, executive director for sharia banking at OJK. That is three times as large as the 65 trillion rupiah held by Indonesia's largest Islamic bank at present, PT Bank Syariah Mandiri. 

The country's ministry of state-owned enterprises first proposed the idea together with the central bank and OJK. Three options are being considered: the merging of several existing Islamic banks, the conversion of an existing conventional bank into an Islamic one, and creating an altogether new Islamic bank.

A bigger institution would have the scale to reduce operating costs and provide services at more competitive rates, the central bank's Alamsyah said.

There were 11 full-fledged Islamic banks and 23 Islamic windows in Indonesia with combined assets of 242 trillion rupiah last year, central bank data showed.

DUAL ECONOMY, INCENTIVES

The new roadmap seeks to establish separate legal policies and infrastructure for the Islamic banking sector.

"The Islamic economy can go hand in hand with the conventional side until a certain point. As it becomes bigger, this may be the right time to have a separate way forward," said Alamsyah.

Regulators are considering ways to channel more government-related transactions to Islamic banks. "If that can happen, that would increase quite significantly the supply of Islamic funds," Alamsyah added.

New incentives would seek to make it easier for banks to sell their Islamic products. Under existing rules, banks can sell Islamic products throughout their network in a province as long as there is one standalone Islamic branch in that province. There are 34 provinces in Indonesia.

The rule could be changed to match the country's regions, of which there are only five, said OJK's Setiadi.

Regulators are also looking at laws with a view toward giving regulatory approval to more Islamic banking products, allowing for a wider product range to help sharia-compliant banks grab a bigger share of the market, Setiadi added without elaborating.

About 51 percent of Indonesia's population now owns bank accounts, latest statistics show, up from 40 percent in 2008.

(Reuters / 04 November 2014)

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Malaysia: AirAsia proposes RM1b Sukuk

KUALA LUMPUR: Low-cost carrier AirAsia Bhd has proposed to set up a  Sukuk Mudharabah programme to raise up to RM1bil.

It said on Thursday this is part of its funding plan and has mandated AmInvestment Bank Bhd to be the sole principal adviser, lead arranger, lead manager and facility agent.

Of the RM1bil, it plans to use RM550mil to part finance its capital expenditure and RM300mil to refinance its banking facility.

The Sukuk Mudharabah shall be recognised as equity capital from an accounting perspective.

AirAsia said the programme is perpetual in tenure, where AirAsia has a call option to redeem the Sukuk Mudharabah at the first call date, which is at end of the fifth, seventh or 10th year.

It added periodic distributions on the Sukuk Mudharabah can be deferred (in part or in full) at AirAsia’s option, where the deferred periodic distributions are cumulative and not compounding.

The Sukuk Mudharabah will be issued under the Shariah principle of Mudharabah. It added the Sukuk Mudharabah will not be rated. 

“Payment obligations on the Sukuk Mudharabah will at all times, rank ahead of other share capital instruments or security for the time being outstanding, but junior to the claims of all other present and future creditors of AirAsia (other than obligations ranking pari passu with the Sukuk Mudharabah),” it said.

(The Star Online / 30 October 2014)

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New initiatives help widen Britain’s Islamic finance market

The scope of Britain’s Islamic finance market is widening with several initiatives from the government and private sector, although the country is about to lose one of its six full-fledged Islamic banks.

In June, Britain became the first Western country to sell sovereign sukuk (Islamic bonds), helping boost its industry credentials as competition intensifies among global financial centers for a slice of Islamic business.

Britain has 22 firms that offer sharia-compliant financial products and they held an estimated $19 billion in assets last year, according to a report by lobby group TheCityUK. These include six full-fledged Islamic banks such as Bank of London and the Middle East, European Islamic Investment Bank, Gatehouse Bank and the Islamic Bank of Britain (IBB).

Last week a government official said the Central Bank would look into developing a liquidity management tool for use by Islamic banks, while Britain’s export credit agency expects to guarantee sukuk for the first time next year, an issue by a customer of European plane maker Airbus.

In May, the Bank of England widened the types of sharia-compliant debt instruments that Islamic banks can use in their liquidity buffers, under a policy statement known as PS4/14.

Islamic banking accounts for only a tiny fraction – less than 1 percent – of the British banking sector, far below the share of roughly a quarter seen in the Gulf.

But taken together, the new official initiatives seem likely to create a more benign environment for Islamic finance, allowing banks to operate more flexibly and efficiently, and therefore more cheaply. Depending on how quickly it moves ahead, the plan for the liquidity management tool could conceivably put Britain ahead of some Gulf countries in providing options in this area.

“PS4/14 is a strong enabler... this is very powerful for us,” Sultan Choudhury, chief executive of Birmingham-based IBB, said on the sidelines of an industry conference in Dubai.

The new rules allow Islamic banks to hold a variety of instruments, ranging from sukuk issued by the Qatari government to those issued by Saudi Arabian firms, Choudhury said.

The IBB, a unit of Qatar’s Masraf Al Rayan, is now moving into the wholesale business and plans to change its name to Al Rayan Bank in December, subject to regulatory approval, as it looks to appeal to a wider customer base.

Alternatives

Despite this, London-based European Islamic Investment Bank is now in discussions with regulators to relinquish its banking license, the lender said in a regulatory filing.

Under a 2012-2016 strategy, EIIB is exiting legacy private equity investments, seeking more stable income from its asset management and advisory services.

Dropping its deposit-taking license would remove cumbersome capital and reporting requirements. In July, EIIB failed to secure regulatory approval to appoint a chief financial officer.

Other banks are also adjusting their strategies. London-based Gatehouse Bank aims to generate more deals outside the domestic property market, its recently appointed chief executive told Reuters in August.

Bank of London and The Middle East, Britain’s largest Islamic bank, is developing private banking services with Malaysia’s Bank Muamalat.

Non-banks are also spotting opportunities, such as asset management firm London Central Portfolio (LCP), which has launched two sharia-compliant property funds since December.

“We have every intention of rolling this out across all future funds,” said Naomi Heaton, chief executive of LCP. “With the Islamic finance industry growing rapidly and far quicker than the conventional fund sector, we wish to continue to capitalize on this market.”

Last week, London’s Battersea Power Station project announced it had secured a 467 million pound ($754 million) Islamic syndicated loan, one of the largest Islamic transactions ever conducted in the country. 

(Al-Arabiya News / 02 November 2014)

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Turkey bank eyes Islamic finance unit

ISTANBUL: Turkish state-run lender Halkbank has decided to establish an Islamic finance unit, in line with a government effort to develop the sector and tap a pool of investors in the Gulf and southeast Asia.

The bank said its management would seek regulatory approval for the Islamic unit, known locally as a participation bank, but gave no further details on the plans.

'The Halkbank board has mandated the general management for the establishment of a participation bank, and to carry out the required processes for legal and administrative permissions,' it said in a stock exchange filing.

Islamic finance has developed slowly in Turkey, the world's eighth most populous Muslim nation, partly because of political sensitivities and the secular nature of its laws.

This changed in 2012, when the government issued its debut $1.5 billion Islamic bond and kick-started regulatory moves to allow wider use of Islamic finance contracts. The government has since issued dollar and lira-denominated Islamic bonds.

(Gulf Daily News / 01 November 2014)

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