DUBAI, Dec. 29 (Xinhua) -- The year
2012 marked a turning point for banking on Islamic principles as new markets
and new regulations in the Mideast helped the sector to flourish.
According to Ernst and Young,
globally assets managed in line with Shari'ah will reach in 2013 an all-time
high, amounting to 1. 8 trillion U.S. dollars, up from 1.2 trillion U.S.
dollars in 2012.
Neither the ongoing turmoil in the
Middle East nor the Euro zone debt crisis could prevent Islamic banks in the
Middle East from reaching out to new markets and more business. While issuances
of Islamic bonds, known as sukuk, flourished and new markets like Egypt and
Oman embraced the banking in line with Shari'ah by setting up new laws and
regulations to remove legal hurdles for Islamic banks.
Run on Islamic bonds
News issuances of Islamic bonds
reached 40 billion U.S. dollars globally in 2012, up from 36 billion dollars
last year, according to Malaysian Bank CIMB. In July, the Gulf state of Qatar
launched one of the largest sukuk with a volume of four billion dollars. The
issuance attracted bids worth a whopping 25 billion dollars. The proceeds will
be used to revamp the country's infrastructure in order to be ready to host the
FIFA 2022 football world cup.
But the sector suffered a setback
when Dana Gas from the Gulf sheikhdom of Sharjah failed to settle a one billion
dollar sukuk which was due on Oct. 31 since payment delays from clients in
Egypt and in Kurdistan. However, Dana agreed with creditors to restructure the
sukuk on Dec. 1.
Crossover markets
Meanwhile, the Egyptian cabinet
approved on Dec. 23 draft law on the issuances of sukuk. Under the draft law,
new sectors such as individual and investment funds, will now be able to
finance government projects through Islamic bonds. The draft law was referred
to parliament for debate to be passed and enacted.
The Sultanate of Oman is the latest
country which legalized Islamic finance in May 2011. Meanwhile, Oman has
amended its national law in order to regulate Islamic banking transactions in
order to abide to the royal decree number 69/2012.
As the first Islamic bank in Oman,
Bank Nizwa said it would launch operations at the start of 2013. Listed on the
Muscat Securities Market on July 5, Bank Nizwa shares have been traded sideways
since then.
In addition, "Iraq is
contemplating Islamic banking legislation while Libya prepares to implement its
Islamic banking framework," said Ashar Nazim, partner for global Islamic
banking at Ernst and Young.
Gulf region leads
Although Islamic finance, which
forbids interest and trading in shares of "un-ethical" businesses
(like producers of weapons of alcohol), is a global phenomenon, the Middle East
remains the industry's nucleus. Saudi Arabia is the biggest market for Islamic
banking followed by Malaysia and UAE, Nazim said.
According to the report, the Islamic
banking industry in Saudi Arabia, with an estimated 207 billion dollars of
Shari'ah- compliant assets, was ranked first in 2011. Malaysia ranked second
with total assets of 106 billion dollars and the third was United Arab Emirates
(UAE) with 75 billion dollars.
Due to the industry's bullish
outlook, investors also sent shares of Islamic financial institutions higher.
UAE-based Ajman Bank whose shares were listed on the Dubai Financial Market DFM
gained 68 percent in value in 2012, outperforming the DFM general index which
climbed 17 percent higher.
Al Salam Bank Bahrain shares which
were traded in Manama and Dubai rose by 39 percent since Jan. 1. In the third
quarter of 2012, the bank's net profit rose five-fold year on year to hit of
6.8 million Bahraini dinars (18.04 million dollars).
Looking abroad
Other Islamic banks prepare to expand
abroad. Masraf Al-Rayan from Doha, Qatar, expressed interest in buying troubled
Islamic Bank of Britain, known as IBB, but the deadline looms as IBB's largest
shareholder Qatar International Islamic Bank wat to have clearity over a
possible deal until January, according to sources. "That the Qatar Central
Bank separated Islamic banking from conventional banking in 2012 by law helped
the Shari'ah-finance industry a lot," said Syed Hasan, general manager
wholesale banking at Masraf Al-Rayan.
Frascesco Pavoni, head of financial
services at German consultancy Roland Berger, said that all Gulf states shall
follow Qatar's example. By separating Islamic finance from conventional
banking, Islamic banks, often younger and smaller in size that their
conventional counterparts, gain a higher radius to expand and reach out to
potential clients, said Pavoni.
Islamic finance is not only about the
prohibition of interest. Because risky asset management strategies like
short-selling, trading naked options or futures are banned under Shari'ah,
banks and investors increasingly choose for Islamic financing strategies.
"God has permitted trade, but forbidden interest," says the Holy
Koran in sura 2, verse 275.
(Shanghai Daily.Com / 29 Dec 2012)
---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com
No comments:
Post a Comment