UAE: Dubai Islamic Bank eyes double-digit profit growth, acquisitions

Dubai: The Dubai Islamic Bank (DIB) has dealt with much of its balance sheet weakness and should see profits for 2013 grow in the high double digits, allowing it to eye acquisitions in new markets in Asia, officials said.

Leaders at the world’s oldest sharia-compliant lender told Reuters it had put aside around Dh5 billion ($1.36 billion) against the sort of soured property loans and transactions which drew into question Dubai’s future as a financial hub in 2009.

In his first media interview since taking over to deal with the fallout of the 2008 global crisis, Chief Executive Abdulla Al Hamli said the bank was now anxious to expand but was being held back in part by the unrest dominating the Middle East.

His deputy Adnan Chilwan said the bank expects to see close to 17 per cent growth in net profit this year after spending the last five years cleaning its books and strengthening its core banking operations.

I can confidently say that Dubai Islamic Bank has nothing to hide. We are very strong, clean and ready for the next growth phase,” Al Hamli told Reuters in the interview on Wednesday.

“2013 has started positively, with first quarter results up by 17 per cent compared to last year,” Chilwan said. “We anticipate similar growth for the remaining part of the year.”

DIB shares are up 43 pct so far this year to 2.88 dirhams, giving it a market capitalisation of about 10.9 bln dirhams. Investment firm Arqaam Capital last month raised its target price for the bank to 3 dirhams from 2.6 dirhams.

 LESSONS LEARNED

The 38-year-old bank, 30 per cent-owned by Investment Corporation of Dubai, needed government support after the global credit crisis burst the emirate’s property bubble, reducing real estate prices by more than 60 per cent over three years after 2008.

Chilwan said the bank had cut real estate investment to 27 per cent of its portfolio from 45 per cent in 2008 and that it would be happy to trim that exposure further.

“The crisis has made us more aware of our key strengths and focus areas,” he said. “The bank’s portfolio has changed and will continue to shift away from being real estate specific towards more consumer and wholesale banking.”

DIB’s non performing loans peaked at 14.5 per cent after the crisis and dropped to 12 per cent by the end of 2012. It hopes to reduce that figure to 10 percent this year.

“Geographically, expansion into Asia makes a lot of sense from where we are placed. One would want to look at Malaysia, Indonesia and maybe India,” Chilwan said. The bank is also interested in the European markets but won’t be active before the dust settles in the euro zone, he said.

DIB expects to finalise its buyout of Tamweel through a share swap by mid May, Chilwan said, with the sharia-compliant mortgage lender due to be delisted right afterwards.

(Gulfmews.Com / 05 May 2013)

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Kuwaiti firm launches Islamic trade finance fund

Kuwait-based Asiya Investments has launched an Islamic trade finance fund with $20 million in seed capital, aiming to cater to small Asian manufacturers.

Asiya, whose largest shareholder is sovereign wealth fund Kuwait Investment Authority, aims to fill a gap left by Western banks that are scaling back their trade finance business, making credit scarce for small and medium-sized firms.

"We engage those companies that are already banked but whose credit lines are limited - we are complementing their financing," said Sulaiman Alireza, executive director of Asiya's investment management arm in Hong Kong.

Despite strong growth in Islamic finance globally over the last few years, the industry has neglected merchandise trade, leaving trade finance for conventional banks to dominate.

But conventional banks are retreating because of the world financial crisis and higher capital requirements under upcoming Basel III regulations, which could open up about 20 percent of the business to non-bank institutions, Alireza said.

Established as the Kuwait China Investment Co in 2005, Asiya estimates that current annual intra-Asia trade of $5 trillion could reach $20 trillion by 2020.

Asiya's Cayman-domiciled fund, soft-launched in December, offers short-term financing through murabaha contracts, where the fund buys and sells merchandise on behalf of the company and shares a portion of the profits.

"We use a murabaha structure with the underlying commodity serving as collateral. This is a standard, tried-and-tested murabaha structure," Alireza said.

Islamic institutions across the Gulf are working to diversify their money market transactions, so Asiya's product could appeal to some of them. It will have a higher yield than commodity murabaha contracts and better liquidity than sukuk, Alireza said.

Asiya's fund aims for a net return to investors of above 5.0 percent and it has $55 million worth of assets in the pipeline, with capacity for approximately $400 million, said Brian Luck, director of Asiya's advisory office in Dubai.

"Trade finance is not well known as an asset class...but the reality is there are not enough Islamic fixed income products available," Luck said. Plans include offering the trade finance product on a managed account basis, he added.

The firm identifies clients such as denim and latex manufacturers through its Singapore-based joint venture partner, EuroFin Asia.

(Al-Arabiya / 06 May 2013)


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Malaysia: Post-election hope for future of Islamic finance in the nation

Today, as Malaysians welcome their newly elected and returned Members of Parliament as well as state assemblymen, I would like to share with you about my hope for the future of Islamic finance in Malaysia.

Islamic finance, as I have often said time and time again, has come a long way in Malaysia.

It dominates the primary and secondary debt capital market with 70%-80% market share. It also dominates the equity capital market with close to 90% of the listed stock on Bursa Malaysia being Syariah-compliant stocks.

It is increasingly becoming a force in the banking sector with a 30% market share. Many other components of the Islamic financial market such as takaful, asset management, wealth management, private equity, etc, are also growing by leaps and bounds with increasing market share.

The following are my hopes for the future of the market in Malaysia:

1. I would like to see better recognition and acceptance on the part of everyone involved in the market on the difference between Islamic banking activities, Islamic debt capital activities, Islamic equity capital activities, Islamic asset management activities, Islamic private equity activities and Islamic operating lease activities.

Of course, this is not an exhaustive list of the activities done in the market and people need to learn all of them to have better appreciation of them.

2. I would like to see people having a greater understanding of the difference between a licensed bank, a licensed investment bank, a non-bank financial institution, a licensed fund management company, a private equity firm, a licensed investment company, non-profit organisation undertaking, etc, that are undertaking the myriad existing Islamic financial activities in the market.

Financial solutions

3. I would like for people to stop accusing Islamic financial institutions in general of merely emulating and replicating the products and services of conventional financial institutions.

They need to learn that an Islamic bank’s offerings are not dependent on what a conventional bank offers.

In my experience, when it comes to developing and innovating products for the Islamic financial market, I, just like many other bankers in Islamic financial institutions, am only interested in providing financial solutions that are desired and needed by consumers in a manner that is consistent (thaty is, not in contradiction) with Syariah.

If a product turns out to have the same feature or deliver the same economic effect as a conventional financial product, then it is a mere coincidence, considering that both Islamic and conventional banks try to meet the same consumer demands.

4. I would like for people to stop trying to find a distinction between an Islamic bank and a conventional bank undertaking banking activities.

A bank, irrespective of whether it is an Islamic or a conventional bank, exists to intermediate between the haves and have-nots by meeting the differing financial needs of the various customer segments (for example, mass market, mass affluent, HNWIs, corporate, institutional investors, etc).

The only difference or distinction between an Islamic and a conventional bank or any type of operating entity doing other Islamic or conventional activities would be the fact that an Islamic bank or institution undertakes its activities purely in a manner consistent with Syariah, while the conventional institutions are not Syariah-compliant.

5. I would like to see the proliferation and inclusion of wakaf in the Islamic financial market. Wakaf is the missing component in the market now.

Economic dealings

6. I would like to see the education on the prohibition of riba or usury to be done starting from pre-school up to pre-university in the country’s education syllabus.

Most of us are taught about what is halal and haram in terms of food consumption from the time we were born (just to exaggerate), so it should not be difficult for the same to be done for our financial and economic dealings.

7. I would like to see our Islamic financial institutions become more international in its operation – more Islamic banks to obtain international rating; more of them having the capacity to do cross border financial activities to facilitate intra-trade in a Syariah-compliant manner.

8. I would like to see more Malaysian bankers based in Malaysia, either still serving or retired, being recognised by Malaysians as the global market leaders that they are or were.

Too long have we awarded and recognised foreigners over Malaysians when in fact the architects of the Islamic banking industry, the debt capital market or sukuk market (both local and global), the takaful industry, the Islamic equity capital market, the Islamic asset management and many more are all Malaysians! We should stop being shy of our talent and capacity.

9. I would like to see less confusion on how Islamic finance is governed under Syariah. We should fully embrace the basic principle of Syariah that everything is allowed unless clearly and expressly stipulated as disallowed in the Quran and legitimate Hadith.

The onus is to prove that something is disallowed instead of trying to prove that something is allowed. We need to put our energy in the right place so that the dynamism, robustness and integrity of our market is not lost.

10. I would like to see more Malaysian bankers having Syariah degrees. More Syariah degree holders should aspire to become bankers instead of just religious teachers.

If banks can hire English, agriculture, engineering, law or accountancy graduates, we can definitely hire Syariah graduates as bankers but they must be willing to slug it out just like everybody else.

There are many more things that I hope to see happening in the Malaysian Islamic financial market, but suffice for me to stop at a list of 10. I hope the new parliamentarians and state assemblymen will share some of the hopes that I have listed here.

Legislators play a significant role in creating the right platform for a more inclusive Islamic financial market and we have not communicated enough on their roles in making Islamic finance in Malaysia the best in the world all these years.

I wish all of them the best in their new five-year term and look forward to their continuing support of Islamic finance.

(F.M.T News / 06 May 2013)

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Tunisia: Draft Law On Islamic Investment Fund to Be Submitted to NCA Shortly

Tunis — A draft law on the Islamic Investment Fund will be submitted shortly to the National Constituent Assembly (NCA), Minister in charge of Economic Affairs Ridha Saiidi said on Thursday.

Amendments introduced to this bill by the Finance Ministry were approved at a Cabinet meeting held on Thursday, he indicated at a press briefing after the meeting.

Finance Minister Elyes Fakhfakh said a technical committee has been created within his department to delve deeper into Islamic bonds (Sukuk), which should be launched late 2013.

The meeting also looked at the economic situation in the country and the economic indicators recorded in the first quarter of 2013, in the light of which it was decided to revise growth prospects down to 4% in 2013 against 4.5% predicted earlier, he indicated.

He also said a slight improvement was recorded in development expenditures in the first quarter of 2013, adding that Foreign Direct Investments have reached 147 million Tunisian dinars (MTD) against 77 MTD in the same period of 2012.

Though fiscal resources have increased by 0.7% compared to the first three months of 2012, they remain below the forecasts set under the 2013 State budget, the Minister noted.

Mr. Fakhfakh also pointed to a growth in 2013 State budget expenditures, citing the 772-MTD increase in subsidy expenses, in addition to the mobilisation of an additional amount of 400 MTD to restructure public banks.

Measures will be taken to mobilise fiscal resources worth 200 million dinars to address the additional pressure on the 2013 budget, said the Finance Minister.

The amount of loans granted under the 2013 budget is estimated at 6,817 million dinars, 1,800 contracted with the domestic market and 4,017 million borrowed from international markets, he indicated.

Mr. Fakhfakh also said that 700 MTD have been mobilised under investment credits while the amount of loans meant to support the State budget is estimated at nearly 4,300 MTD.

Nearly 1,200 MTD have already been deposited at the Public Treasury, he noted.

The African Development Bank (AfDB) seeks to implement a third programme to support the 2013 State budget through a loan worth 1,000 MTD, the Minister stressed, adding that Tunisia has begun talks with the French government to convert its debts.

Minister of Tourism Jamel Gamra said, on his part, that the Cabinet meeting had emphasised the need to strengthen the role of regional tourism councils.

He also announced a growth in booking rates during the last four weeks, particularly from French and Russian markets.

Efforts will be exerted to attract tourists Algerian, Libyan and Gulf tourists, he indicated.

(Tunis Afrique Presse, 2 May 2013)

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Pilgrim Funds Give Indonesia Syariah Banks Booster Shot

Indonesia’s plan to shift 11 trillion rupiah ($1.1 billion) of pilgrim’s savings into Shariah- compliant lenders is a booster-shot that will help narrow the gap with neighboring Malaysia.

Deposits set aside by those planning a Hajj visit to Mecca in Saudi Arabia will be shifted by the Ministry of Religious Affairs from non-Islamic banks within a year of announcing the policy, Anggito Abimanyu, director-general of Hajj and Umrah at the ministry, said in an interview yesterday. The funds are equivalent to 7.3 percent of the 150.8 trillion rupiah in savings at Islamic lenders, less than a sixth of Malaysia’s 310 billion ringgit ($102 billion), central bank data show.

Shariah banking assets in Indonesia jumped 35 percent in the year through February and the government wants to lift its market share from 4.6 percent to 10 percent by 2015. Authorities in Kuala Lumpur have relaxed foreign-ownership rules and used tax breaks to help the industry grow to a point where it accounts for 20 percent of the nation’s financial assets. Of the 211,000 Indonesians that went on last year’s Hajj, 92 percent did so on a state-organized tour.

“We are glad for this move as it shows the government’s commitment in supporting the industry’s growth,” Lukita Tri Prakasa, corporate secretary at PT Bank BRI Syariah in Jakarta, which has created a team to manage the incoming money, said in an April 30 interview. “This is very good for us as it will increase our third-party funds and boost our expansion.”

TRADING VOLUMES

The entire Hajj fund totaled 55 trillion rupiah in March, with about 35 trillion rupiah invested in non-tradable sovereign sukuk and 9 trillion rupiah already placed at Islamic lenders, official data show. The government wants to increase trading volumes by selling less bonds to the fund,Dahlan Siamat, director of Islamic financing at the debt management office, said in November, potentially giving Shariah banks another boost.

Bank Indonesia is in talks with the religious affairs ministry on how the funds will be divided up between the banks Edy Setiadi, executive director for Islamic banking at the monetary authority, said in an April 29 e-mailed response to questions. Indonesia has 11 fully fledged Islamic lenders and 24 so-called Shariah-compliant window operations at non-Islamic banks. The central bank is also seeking to spur industry growth by requiring the windows to become standalone units by 2015.

Since the incoming Hajj money will be recorded as a liability, BRI Syariah plans to ask for additional capital from its parent, PT Bank Rakyat Indonesia, the nation’s second- largest by assets, to maintain a healthy balance sheet, Prakasa said. Bank Indonesia requires that lenders hold reserves of at least 8 percent of their loans and deposits.

‘NICE BONUS’

PT Bank Muamalat Indonesia, the nation’s second-largest Shariah lender, has actually been reducing the amount of Hajj money it manages to focus more on its core business of retail banking, Finance Director Hendiarto Yogiono said. It cut the funds by 36 percent to 1.25 trillion rupiah in 2012, as its assets increased 38 percent to 44.9 trillion rupiah.

“Islamic banks have grown rapidly, so the government sees that they can handle a bigger responsibility now,” Yogiono said in an April 30 interview from Jakarta. “It’s a nice bonus, but we don’t expect the decision to cause a dramatic change as the sum isn’t so big.”

Growth in the Shariah-compliant banking industry may spur demand for Islamic bonds as lenders seek to invest their funds. Global sales of sukuk, which pay returns on assets to comply with the religion’s ban on interest, increased 3.8 percent to $14.8 billion in 2013 from the same period last year, data compiled by Bloomberg show. Issuance totaled a record $46.5 billion in 2012.

FUND’S MANDATE

The average yield on Shariah-compliant bonds sold internationally rose 14 basis points, or 0.14 percentage point, last month to 3.05 percent, the HSBC/Nasdaq Dubai US Dollar Sukuk Index shows. The premium investors demand to hold the notes over the London interbank offered rate, or Libor, widened seven basis points to 184.

Islamic bonds returned 1.4 percent this year, according to the HSBC/Nasdaq index, while debt from emerging markets gained 0.5 percent, JPMorgan Chase & Co.’s EMBI Global Index shows.

The Hajj is one of the five pillars of Islam and every able-bodied Muslim is obliged to make the journey at least once in their lives, performing rituals like circling the cube-shaped Kaaba, one of the religion’s most sacred sites. A record 3.16 million pilgrims traveled to Mecca to do the Hajj in 2012, a Saudi Arabian government statement shows. This year’s event will take place in October.

“It was always part of the mandate that funds used for the pilgrimage should be managed in a Shariah-compliant way,” BRI Syariah’s Prakasa said. “We are studying options and making sure we will be ready to put the funds to work so it doesn’t become an operational cost burden for us.”

(Bloomberg, 2 May 2013)

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Egypt’s nod to Islamic finance to attract investments: stock exchange chief

DUBAI, May 1 — The passing of a new law that would legalize Islamic bonds by Egypt’s upper house a day ago could trigger an investment windfall for the highly indebted country, the chairman of Egypt’s stock exchange said here on Wednesday.

Mohammed Omran, at the ongoing two-day Africa Global Business Forum, said the underdeveloped bond market at the Nile would get a boost by the new law which increases certainty for foreign investors.

“The share of financing based on capital markets increased to 25 percent last year from 10 percent in 2005, but 75 percent of financing is still provided from loans granted by banks,” said Omran.

Islamic bonds, or sukuk, do not pay interest but distribute profits based on tangible assets like properties, land or commodities.

In 2012, the global sales volume of issued sukuk reached an annual record of 46 billion U.S. dollars.

Omran said foreign Arab investors and retail bank clients in Egypt are likewise keen to invest in line with Islamic law, or Sharia.

Hitesh Asarpota, director of structural finance at bank Emirates NBD in Dubai, agreed with Omran, and cited Turkey as an example where a convention state bond that was launched in January 2012 attracted 3 percent of Arab investors, but an Islamic sovereign bond five months later attracted more than 50 percent.

Egypt is seeking desperately foreign investments, as its financial stand worsened in the wake of the 2011 upheaval.

Egypt’s sovereign debt to gross domestic debt ratio swelled to 80 percent in 2012 from 76 percent in the previous year, according to figures compiled by Lebanese lender Bank Audi.

Talks between the Egyptian government and the International Monetary Fund on a 4.8-billion-dollar emergency loan have been held for the last two years without solid results.

While the Islamic finance industry became mainstream banking in the Gulf Arab region, Malaysia and Indonesia, banking in line with Sharia is still insignificant in Egypt as ex-President Hosni Mubarak kept Islamic finance as he saw it as fertile ground for the once oppositional Muslim Brotherhood, which today heads the government.

(NZ Week, 1 April 2013)

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Main principles of Islamic finance

Islamic finance has become a force in its own right, especially in the emerging markets of Asia and the Middle East. However, this has not been without its fair share of ups and downs. The industry suffered the after-effects of the global financial crisis and has been criticised for products that look too much like their conventional cousins. 

It has, however, grown to become significant parts of the banking systems in countries such as Saudi Arabia, Malaysia and the UAE and even countries with Muslim minorities are considering measures to spur its growth in their markets. 

To move forward, the industry would do well go back to its roots. The main principles of Islamic finance are that of risk-sharing: taking on risks for possible rewards or losses and a requirement for financial transactions to be backed by assets such as properties or land. 

Going back to these principles, especially the latter, will pave the way for what we believe, are the strongest opportunities for Islamic finance: Sukuk (Islamic bonds) project finance and Islamic real estate investment trusts (Reits). Although nascent, there is so much opportunity for more of these deals because project finance bonds and Reits are a natural fit with Islamic finance, which is about building a stable future by investing in the real economy and putting one's capital to productive use for societies' benefit. 

As the global population is forecasted to reach 9.2 billion by 2050 from 7 billion currently, project finance Sukuk can help to raise more capital to build infrastructures such as roads, water supply installations, houses and schools, especially in the developing countries. Islamic Reit, which by definition, is asset-backed by a portfolio of properties, is a new asset class that fund managers and private investors can consider, post the financial crisis, when money has flown out of traditional equities. 

LIQUIDITY POOL 

The population boom means more infrastructure investment will be needed in Africa, Asia and the Gulf Co-operation Council (GCC) countries. Globally, KPMG estimates $40 trillion is needed in the coming decades to provide basic levels of infrastructure. 

In the GCC, infrastructure spending is estimated to reach $120 billion over the next 10 years while Southeast Asia's infrastructure expenditure is forecasted to exceed $150 billion over the next five years. 

To fund these projects, governments and private sector developers can use bank financing but the liquidity pool is becoming limited as banks become concerned about liquidity risk and regulations that require more capital to be set aside for long-run project finance facilities. 

Long-term financing is essential as infrastructure assets can be productive for at least 10 years. A viable alternative is to tap into the funds of longer-term investors such as pension and sovereign wealth funds, via project finance Sukuk. Given that most of the needs are in the GCC and Southeast Asia, two regions with significant Islamic funds, project finance Sukuk is an avenue that issuers can consider. 

In 2010, a significant Sukuk project finance, which was a first in many ways, is Trans Thai-Malaysia (Thailand)'s MYR 600 million Sukuk. The issuer, TTM (Thailand), is equally owned by Thailand and Malaysia's national oil companies, PTT Public Co Ltd and Petronas respectively. 

The second opportunity in Islamic finance is Reits. For fund managers and private investors, this asset class is a good alternative to bonds because investors get exposure to real estate while enjoying the benefits of investing in bonds and equities. 

With Reits, investors get a steady stream of income, which together with potential increase in the share price, may lead to attractive total returns. Share prices tend to be stable. Buyers are available if investors want to sell because listed Reits are liquid. 

Tax treatment is also favourable because dividends are tax-exempt in some countries like Singapore. The properties and shares are managed by professionals. And investors need far less capital to invest in Reits compared to properties directly. Most of the listed Reits are currently in the US. Asia, which forms about 12 per cent of the global Reit market, presents an incredible opportunity, especially since Reits have proven to perform better than equity and bond indices in the US and Singapore. The five currently listed are mostly in Asia, three in Malaysia and one in Singapore. 

(The writer is Global CEO of HSBC Amanah and CEO of HSBC Bank Malaysia Berhad.)

[Business Recorder, 23 April 2011]

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Malaysia aims to collaborate with Oman to develop Islamic finance

KUALA LUMPUR: Malaysia is looking forward to collaborating with Oman to address challenges in developing the Islamic finance industry, says the Regent of Perak Raja Nazrin Shah.

He said a potential area of collaboration and an issue faced by the industry today was human capital development, and Malaysia had established several institutions to provide training for Islamic finance professionals.

“These institutions include the International Centre for Education in Islamic Finance, the Islamic Banking and Finance Institute of Malaysia and the Securities Industry Development Corp.

“Leveraging on these institutions, Oman and Malaysia can embark on joint initiatives to develop a pool of professionals to drive innovation and growth of the Islamic finance industry,” he said when addressing theOman Islamic Economic Forum 2013 in Muscat yesterday.

Raja Nazrin said Malaysia’s Islamic banking assets reached US$164.9bil (RM501.71bil) as at end-December last year, with an average growth rate of between 18% and 20% annually, while total assets of its Takaful industry amounted to US$6.4bil, with a market penetration rate of 13%.

“The Islamic capital market reached a size of US$460bil, as at end-2012, after registering an average growth of about 14% per annum over the past decade,” he said.

On the global front, Raja Nazrin said the industry posted an annualised growth rate of almost 15% over the past 10 to 15 years to reach a size of about US$1.3 trillion.

He said that while this growth was achieved primarily in Muslim-majority countries, an increasing number of non-Muslim-majority jurisdictions have also been developing their Islamic finance industry, including the UK, Luxembourg and Hong Kong.

“The size of Islamic financial assets is forecast to reach US$1.8 trillion by 2016, while cross-border financing and investment activities are expected to accelerate, especially in the Islamic capital market, as emerging economies embark on infrastructure spending,” he added.

Raja Nazrin, who is also the financial ambassador of the Malaysia International Islamic Financial Centre, said that bilateral trade between Oman and Malaysia rose significantly to US$740mil in 2011 from US$265mil in 2010. – (Bernama, 2 May 2013)

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Call to raise standards of Islamic asset management for growth

KUALA LUMPUR: The standards for Islamic asset management should be raised so that it can compete with conventional peers, said Fajar Capital Group CEO Iqbal Khan here.

He said though the Islamic asset management industry remains marginal and fragmented and continues to lag behind conventional systems which is estimated at US$58 billion (RM176 billion), its characteristics to compete in the market through values, ethics and authenticity will prove to be advantageous in the future.

“The industry has several competitive strengths in light of the evolving economic paradigm, including increasing institutional demand where sophistication has led to a rise in the number of Shariah-compliant alternatives for institutional investors,” he said during the inaugural public lecture organised by the BNP-Paribas- INCEIF Centre for Islamic Wealth.

He said global Islamic finance assets was expected to hit US$1.8 trillion in 2013 based on a report from Ernst and Young, adding that Islamic asset management is expected to grow around US$300 million to US$500 million this year.

“There is also a continued retail demand as global middle class will grow by more than 160% in the next 25 years from 1.8 billion in 2012 to 4.9 billion in 2030. The projected expansion of the global middle class is leading to exponential growth potential in takaful, waqf and pension funds,” Iqbal said.

According to him, though the global economic outlook is negative, this would not prevent Asia as well as the Middle East and the North Africa region (MENA) to become growth engines for the Islamic asset management industry. Another competitive strength of the Islamic asset management industry would be due indirectly, he said, to the fragility of the conventional system.

“The fragility of the conventional financial system has led to opportunities for institutions and markets that embrace ethical values. The ‘Occupy Movements’ in the US, the European sovereign debt crisis and the Arab Spring have led to grassroots support for concrete economic reforms,” Iqbal said.

Innovation with ethics and integrity, the ability to deliver the full proposition to the low end of the market, and delighting the customers with innovative products are core components that will ensure a brighter future for Islamic asset management.

Painting a positive picture of the Islamic management industry, the Dubai-based Fajr Capital Group CEO said the industry has played a significant role in the evolution of Islamic finance, which started in Saudi Arabia with the Darul Maal but it lacked the framework to succeed, forcing the industry to focus on Islamic banking.

However, the Islamic banking system had to follow the conventional banks and asset management was relegated but with growing demand and greater awareness in the new century, Islamic asset management is “seeing the light in the tunnel”.

From the year 2000, the Islamic banking and finance industries started to see the entry of investment funds, Islamic investment banks and pension management as well as the takaful.

“After three decades of Islamic finance, people wanted greater Syariah-compliant management of their funds. As was the case in Saudi Arabia, where a majority of workers said they wanted their pension funds to be managed by Syariah-compliant agencies,” Iqbal said.

He said Malaysia played a leading role, with a well structured approach, in the Islamic wealth management industry and hoped that Malaysia will export its success story to the rest of the Islamic world.

(FMT, 30 April 2013)

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London and Dubai want Islamic finance crown

London and Dubai are competing for the title of the biggest Islamic finance listing centre in the western world. But their financial firms are also cooperating in ways that a decade ago

Would have seemed unlikely.

Sheikh Khalifa, President of the UAE, and Queen Elizabeth of Britain are not likely to have discussed a niche subject like Islamic finance when they met yesterday in Windsor Castle. But it is a subject close to the heart of the UAE and United Kingdom's financial industry. Dubai, in fact, this year launched its boldest challenge yet to London's lead in Sharia financing.

Dubai set out in January its plans to become the "capital" of the Islamic industry, with global rules to enforce standards on industries as diverse as Sharia finance, halal food, pharmaceuticals and cosmetics, and charitable endowments.

Plans for a UK sovereign sukuk may have been shelved, but the British government recently established an Islamic finance task force, intended to rejuvenate the UK's Sharia-compliant industry.

For HSBC, the British banking giant that is the biggest underwriter of sukuk worldwide, it helps to have a foot in each city, Simon Cooper, the bank's regional chief executive, said last week.

"The Islamic capital markets are markets that we dominate, and trading of those bonds takes place in Dubai," he said. "As we look to continue the development of both the tenor and the structure of Islamic bonds, that will definitely benefit Dubai's expansion and its development of its financial centre."

The British capital - described last month as the "eighth emirate" of the federation by Boris Johnson, London's mayor, because of the large number of UAE nationals who travel there during the summer - is also presenting opportunities for the increasingly healthy UAE banking sector.

Emirates NBD, the biggest bank in Dubai, was seeking to grow its business in the UK through London, said Rick Pudner, the bank's chief executive, in a conference call on Thursday.

"As far as London perspective, we've said we want to build up our wholesale banking operations, treasury markets and the private bank. That's a key component there," he said. He added that the bank was a key supporter of Dubai's Islamic initiatives.

Islam is the fastest-growing religion in the UK and the potential gains from Sharia-compliant industries are attracting companies including Abu Dhabi Islamic Bank. The lender has established a private banking centre at One Hyde Park in Knightsbridge, one of the most exclusive addresses in the capital, where large numbers of the very wealthy reside.

The 2.7 million Muslims in England and Wales represent the second-biggest religious group after Christians, according to official census data from 2011.

Hussain Al Qemzi, who sits on the board of a Dubai committee tasked with overseeing the development of the emirate's Islamic economy, has said that there is no reason why Dubai could not take London's crown as the biggest listing centre for sukuk.

Dubai's Government, Emirates Airline and Dubai Electricity and Water Authority have raised a total of US$2.75 billion through listings on the Nasdaq Dubai and the Dubai Financial Market, according to data from Bloomberg.

So far, Dubai is way ahead - London, which raised four times more than Dubai with $9.7bn in listings last year, has listed no sukuk at all this year.

That said, Dublin's efforts to swipe a greater share of the sukuk industry from London are bearing fruit - the Irish Stock Exchange has listed $5.75bn so far this year.

But an increasingly global outlook was something that the industry currently lacked, said Moinuddin Malim, the chief executive of Mashreq Al-Islami, at a conference in Dubai last month.

"Islamic finance as of today is really a local if not regional business. There's no Islamic banks in the world that have a presence in 10 or 15 countries, they're mostly regional players and mostly local players," he said. "Today, we look at Malaysia and say that Malaysia is the leading Islamic hub, but the fact is it's all for the in-house requirements of Malaysia."

(The National, 1 May 2013)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com