"UK to ease issuance of 'Islamic bonds'", Financial Times, October 31, 2006
The move by the U.K. will define the regulatory framework surrounding the issue of sukuk. Since there has not been a defined treatment of sukuk for capital gains tax or capital allowances, many companies have been reluctant to issue sukuk in London, instead issuing them offshore. In addition to capturing a share of the sukuk market, it "reflects hopes among senior British politicians that the sector could help build bridges with the Muslim world".
"Prudential plc to establish a fund management and distribution base at Dubai International Financial Centre", AMEinfo, October 31, 2006
U.K.-based financial services company Prudential plc announced that it received a license from the Dubai Financial Services Authority (DFSA) to operate in the Dubai International Financial Centre (DIFC). The company plans on using the license to expand into Shari'ah-compliant financial products.
"Ernst & Young to host the World Islamic Infrastructure Finance Conference 2006 Powertable", AMEinfo, October 31, 2006
The World Islamic Infrastructure Finance Conference Powertable will focus on how large-scale infrastructure projects can raise the capital necessary with Shari'ah-compliant products. The conference will be held November 5-6, 2006 in Doha, Qatar.
This is one of many conferences listed on the Institute of Halal Investing's website under Conferences
Tuesday, October 31, 2006
Monday, October 30, 2006
FSA regulations, Optimum Capital Protected Fund, Faith-based credit counseling, Sukuk growth, Islamic investment banking, Mashreqbank...
"Green light for new home finance regulation", Financial Services Authority (UK), October 30, 2006
The British Financial Services Authority (FSA), the body charged with regulation of the British financial industry has announced the approval of additional Shari'ah-compliant mortgage products. The regulatory body is currently accepting applications for licenses to sell newly-regulated products, which will be issued in April 2007. The FSA Director of Retail Policy, Dan Waters, said of the new policy will "ensure fairer treatment for consumers wanting to buy their homes in [a] way that is compliant with Islamic law, building on the work that we have already done in the field of Islamic financial services to improve consumer access to these products."
"Khaleej Finance and Investment presents KFI-Optimum a Sharia'h-compliant Fund", AMEInfo, October 28, 2006
Khaleej Finance and Investment, has announced the launch of a US$50 million Shari'ah-compliant Capital Protected Fund. The fund is based on the Dow Jones Islamic Equity Index, Crude Oil and Copper. If held 3 or 4 years the investor will receive 100 percent of their initial capital with a minimum return on investment of 10 percent (3 years) and 12 percent (4 years).
"In God we trust: Consumers let faith guide finances", Dallas Morning News, October 30, 2006
Insight into religious-based financial counseling courses. The courses are proliferating in Christian churches across the U.S., but largely absent in mosques and temples. Explanation in the article on the paucity of financial-counseling courses in mosques:
"Sukuk listings in GCC region to exceed $20b", Khaleej Times, October 28, 2006
S&P approximate the sukuk market in the Gulf Cooperation Council (GCC) region to increase from $5 to $10 billion in rated sukuk today to more than $20 billion by the end of the decade.
"Aseambankers grows Islamic ops", The Star (Malaysia) , October 28, 2006
Aseambankers Malaysia Bhd, the investment banking arm of Maybank, announced plans to expand its Islamic operations outside of Malaysia into the Middle East and Indonesia.
"CIMB Interested in International Syariah Bonds", TEMPO Interactive (Indonesia), October 30, 2006
A large Malaysian Islamic investment bank, CIMB Islamic has expressed interest at assisting in upcoming issues of government and infrastructure bonds in Indonesia, in addition to their domestic business and the Middle East.
"'Khazanah Sukuk' Sets New Benchmark for Investors", MENAfn, October 30, 2006
This article describes where the sukuk market is heading since the issues of the first Exchangeable Trust Certificates (the Khazanah sukuk, which are exchangeable for equity in Telekom Malaysia) and the first sukuk with both put- and call-options (the Musharaka Trust Sukuk issued by The Investment Dar).
"Masreqbank upbeat on Islamic finance", Gulf News, October 30, 2006
The UAE-based Masreqbank has launched an Islamic banking arm, Badr al-Islami, with which they hope to capture 5 percent of the rapidly growing market for Islamic banking in the UAE within five years. The bank has invested significant funds in the new arm, beginning with the creation of a Shari'ah board
"International Banks Flocking To New Dubai Special Financial District", Easy Bourse, October 30, 2006
Large International banks are flocking to Dubai and many of these banks are using the opportunity to open Islamic windows.
The British Financial Services Authority (FSA), the body charged with regulation of the British financial industry has announced the approval of additional Shari'ah-compliant mortgage products. The regulatory body is currently accepting applications for licenses to sell newly-regulated products, which will be issued in April 2007. The FSA Director of Retail Policy, Dan Waters, said of the new policy will "ensure fairer treatment for consumers wanting to buy their homes in [a] way that is compliant with Islamic law, building on the work that we have already done in the field of Islamic financial services to improve consumer access to these products."
"Khaleej Finance and Investment presents KFI-Optimum a Sharia'h-compliant Fund", AMEInfo, October 28, 2006
Khaleej Finance and Investment, has announced the launch of a US$50 million Shari'ah-compliant Capital Protected Fund. The fund is based on the Dow Jones Islamic Equity Index, Crude Oil and Copper. If held 3 or 4 years the investor will receive 100 percent of their initial capital with a minimum return on investment of 10 percent (3 years) and 12 percent (4 years).
"In God we trust: Consumers let faith guide finances", Dallas Morning News, October 30, 2006
Insight into religious-based financial counseling courses. The courses are proliferating in Christian churches across the U.S., but largely absent in mosques and temples. Explanation in the article on the paucity of financial-counseling courses in mosques:
"In Islam, prohibitions against receiving or paying interest mean Muslims are less likely to be deep in debt than others.
'Credit is OK as long as it's paid on time, no interest,' said Imam Yusuf Ziya Kavakci, an Islamic law scholar at the Islamic Association of North Texas in Richardson.
Muslims are taught to be 'economical, don't squander, plan for the future and invest in continuous, perpetual charity like a scholarship for a student so you are rewarded after death,' Mr. Kavakci said. 'Be content.'"
"Sukuk listings in GCC region to exceed $20b", Khaleej Times, October 28, 2006
S&P approximate the sukuk market in the Gulf Cooperation Council (GCC) region to increase from $5 to $10 billion in rated sukuk today to more than $20 billion by the end of the decade.
"Aseambankers grows Islamic ops", The Star (Malaysia) , October 28, 2006
Aseambankers Malaysia Bhd, the investment banking arm of Maybank, announced plans to expand its Islamic operations outside of Malaysia into the Middle East and Indonesia.
"CIMB Interested in International Syariah Bonds", TEMPO Interactive (Indonesia), October 30, 2006
A large Malaysian Islamic investment bank, CIMB Islamic has expressed interest at assisting in upcoming issues of government and infrastructure bonds in Indonesia, in addition to their domestic business and the Middle East.
"'Khazanah Sukuk' Sets New Benchmark for Investors", MENAfn, October 30, 2006
This article describes where the sukuk market is heading since the issues of the first Exchangeable Trust Certificates (the Khazanah sukuk, which are exchangeable for equity in Telekom Malaysia) and the first sukuk with both put- and call-options (the Musharaka Trust Sukuk issued by The Investment Dar).
"Masreqbank upbeat on Islamic finance", Gulf News, October 30, 2006
The UAE-based Masreqbank has launched an Islamic banking arm, Badr al-Islami, with which they hope to capture 5 percent of the rapidly growing market for Islamic banking in the UAE within five years. The bank has invested significant funds in the new arm, beginning with the creation of a Shari'ah board
"International Banks Flocking To New Dubai Special Financial District", Easy Bourse, October 30, 2006
Large International banks are flocking to Dubai and many of these banks are using the opportunity to open Islamic windows.
Friday, October 27, 2006
Islamic finance internationalized, mega Islamic bank, Waqf Fund
"Islamic Finance Comes of Age", Business Week, October 27, 2006
The Islamic financial industry is growing rapidly, but needs to mature and become more diviersified in order to avoid 'ghettoization'. This is the main thesis of the Business Week article. The industry, according to the writers, a pair of analysts at Standard & Poor's, has become internationalized, but due to regional differences has not become a cohesive globalized industry.
"Mega Islamic bank emerging?", The Star (Malaysia), October 27, 2006
Experts in Malaysia believe that a mega Islamic bank should be established in the country and the largest bank in the country, Bank Islam Malaysia Bhd was "one of the banks interested [in being] a founding member" according to the General Council for Islamic Banks and Financial Institutions (CIBAFI), Sheikh Saleh Abdullah Kamel.
"BIBF named manager of Waqf Fund", Gulf Daily News, October 27, 2006
The Bahrain Institute of Banking & Finance (BIBF) has been named the manager of the Waqf Fund, a US$4.6 million special fund to support research and education in Islamic finance
"Bank Muamalat on track to hit RM100m net profit target", Business Times (Malaysia), October 27, 2006
The Islamic financial industry is growing rapidly, but needs to mature and become more diviersified in order to avoid 'ghettoization'. This is the main thesis of the Business Week article. The industry, according to the writers, a pair of analysts at Standard & Poor's, has become internationalized, but due to regional differences has not become a cohesive globalized industry.
"Mega Islamic bank emerging?", The Star (Malaysia), October 27, 2006
Experts in Malaysia believe that a mega Islamic bank should be established in the country and the largest bank in the country, Bank Islam Malaysia Bhd was "one of the banks interested [in being] a founding member" according to the General Council for Islamic Banks and Financial Institutions (CIBAFI), Sheikh Saleh Abdullah Kamel.
"BIBF named manager of Waqf Fund", Gulf Daily News, October 27, 2006
The Bahrain Institute of Banking & Finance (BIBF) has been named the manager of the Waqf Fund, a US$4.6 million special fund to support research and education in Islamic finance
"Bank Muamalat on track to hit RM100m net profit target", Business Times (Malaysia), October 27, 2006
Thursday, October 26, 2006
JBIC sukuk, Malaysian bond issues
"Japan Bank for International Cooperation preparing to issue Islamic bonds in Malaysia", International Herald Tribune, October 26, 2006
In late August and early September 2006, news sources were reporting that the Japan Bank for International Cooperation was planning a sukuk issue around the beginning of the year. Today's story confirms these reports and also announces that the sukuk will be issued annually on the Malaysian market denominated in Ringgit. The estimated size of next years issue is between $200 and 300 million (RM736 to 1,100 million).
"Pending Islamic bond sales in Malaysia", Business Times (Malaysia), October 26, 2006
In late August and early September 2006, news sources were reporting that the Japan Bank for International Cooperation was planning a sukuk issue around the beginning of the year. Today's story confirms these reports and also announces that the sukuk will be issued annually on the Malaysian market denominated in Ringgit. The estimated size of next years issue is between $200 and 300 million (RM736 to 1,100 million).
"Pending Islamic bond sales in Malaysia", Business Times (Malaysia), October 26, 2006
Wednesday, October 25, 2006
Islamic finance market size and potential
Two articles (below) came out today with estimates of the size and growth potential of Islamic finance. They both come in on the low side of estimates I have seen (the highest being from Moody's at $750 billion and $750-1,000 billion from an unpublished draft document created by the Islamic Research & Training Institute (IRTI) and the Islamic Financial Standards Board (IFSB)). While I have no data to suggest that these estimates are too high, back of the envelope calculations suggest that the Islamic financial industry is between $230 and $480 billion in 2006, just assuming that it held $100 billion in assets in 2000 and has been growing between 15 and 30 percent per year since then. Regardless of the exact figure the Islamic financial industry has been growing at an astonishingly high rate, particularly in the past five years and looks set to continue growing rapidly into the future.
"S&P: Islamic Fin Meets Just 10% Of Muslim Community Market ", Dow Jones, October 25, 2006
Standard & Poor today came out with an estimate that there are $400 billion in Shari'ah-compliant assets worldwide. The industry, S&P estimates, is only serving 10 percent of the market's total potential demand of $4 trillion worldwide.
"There are now over 300 institutions offering Shariah compliant banking, with an asset base around US$250bn-500bn", Research & Markets Press Release (via Yahoo! Business), October 25, 2006
"S&P: Islamic Fin Meets Just 10% Of Muslim Community Market ", Dow Jones, October 25, 2006
Standard & Poor today came out with an estimate that there are $400 billion in Shari'ah-compliant assets worldwide. The industry, S&P estimates, is only serving 10 percent of the market's total potential demand of $4 trillion worldwide.
"There are now over 300 institutions offering Shariah compliant banking, with an asset base around US$250bn-500bn", Research & Markets Press Release (via Yahoo! Business), October 25, 2006
Tuesday, October 24, 2006
Islamic banks squeezed in the GCC by conventional multinational banks
"Challenges and opportunities in the world's hottest market", Financial Times (via Yahoo! News), October 24, 2006
Amid tremendous growth of project finance opportunities within the Gulf Cooperation Council (GCC) area, local banks (both conventional and Islamic) are being squeezed out of the market due to their relatively small size. In many of the largest deals, the multinational banks are able to offer lower financing rates than can any smaller local bank. In one sense, that is bad news for Islamic banks, but it will not spell disaster for the industry. Islamic banks have not grown enough (nor have convential banks based in the GCC region) to be able to offer financing to large projects on the scale as multinationals. What remains to be seen, however, is whether the local Islamic banks in the GCC can expand further or whether they will see markets dominated by Islamic windows of conventional multinational banks.
Amid tremendous growth of project finance opportunities within the Gulf Cooperation Council (GCC) area, local banks (both conventional and Islamic) are being squeezed out of the market due to their relatively small size. In many of the largest deals, the multinational banks are able to offer lower financing rates than can any smaller local bank. In one sense, that is bad news for Islamic banks, but it will not spell disaster for the industry. Islamic banks have not grown enough (nor have convential banks based in the GCC region) to be able to offer financing to large projects on the scale as multinationals. What remains to be seen, however, is whether the local Islamic banks in the GCC can expand further or whether they will see markets dominated by Islamic windows of conventional multinational banks.
Islamic Finance Qualification, ICCI to launch new investment bank
"London Lord Mayor to launch Islamic finance qualification", Islamic Republic News Agency, October 24, 2006
"Launching in London of the Qualification in Islamic Finance" (Translated from French to English by Google Translate), Ecole Superieure des Affaires
The joint offering of an Islamic finance qualification (IFQ) by the Securities & Investment Institute (SII) in London and the Ecole Superieure des Affaires (ESA) in Beiruit was announced on June 3, 2006, but only available in London & Beiruit. However, beginning next Tuesday, October 31, 2006, the test will be available via Computer Based Testing (CBT), expand the number of testing locations worldwide (the SII provides a list of CBT locations [pdf])
"$1b int'l Islamic investment bank to be launched - Saudi Arabia", MENAfn, October 24, 2006
An investment bank with capital of $1 billion will be launched according to the president of the Islamic Chamber of Commerce and Industry, Saleh Kamel. The location of the headquarters is not known yet, although it is believed it will be in Saudi Arabia, Malaysia, Bahrain or the UAE.
"Launching in London of the Qualification in Islamic Finance" (Translated from French to English by Google Translate), Ecole Superieure des Affaires
The joint offering of an Islamic finance qualification (IFQ) by the Securities & Investment Institute (SII) in London and the Ecole Superieure des Affaires (ESA) in Beiruit was announced on June 3, 2006, but only available in London & Beiruit. However, beginning next Tuesday, October 31, 2006, the test will be available via Computer Based Testing (CBT), expand the number of testing locations worldwide (the SII provides a list of CBT locations [pdf])
"$1b int'l Islamic investment bank to be launched - Saudi Arabia", MENAfn, October 24, 2006
An investment bank with capital of $1 billion will be launched according to the president of the Islamic Chamber of Commerce and Industry, Saleh Kamel. The location of the headquarters is not known yet, although it is believed it will be in Saudi Arabia, Malaysia, Bahrain or the UAE.
Monday, October 23, 2006
Export Development Canada, Sharjah Islamic Bank sukuk
"EDC poised to increase Islamic financing business to develop new markets for Canadian exporters", Government of Canada News, October 23, 2006
Export Development Canada (EDC) has signed a Memorandum of Understanding (MoU) with the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank (IDB). The MoU begins a commitment by the Canadian government to work with Islamic financial institutions (IFIs) in order to increase opportunities for export by Canadian firm. The EDC provides export credit to Canadian firms. The ICIEC provides takaful (Shari'ah-compliant insurance) for firms exporting to countries in the Organization of the Islamic Conference (OIC) and to assist companies wishing to invest in OIC countries.
"Clifford Chance, DWS handed rolse on LSE sukuk flotation", The Lawyer, October 23, 2006
The Sharjah Islamic Bank (SIB) issued a five-year sukuk on the London Stock Exchange. The certificates represent a share of assets purchased by a special purpose vehicle (SPV) from the SIB. The distribution paid to holders of the certificates come from income generated by the underlying assets. The sukuk issue were announced on September 19, 2006.
Export Development Canada (EDC) has signed a Memorandum of Understanding (MoU) with the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank (IDB). The MoU begins a commitment by the Canadian government to work with Islamic financial institutions (IFIs) in order to increase opportunities for export by Canadian firm. The EDC provides export credit to Canadian firms. The ICIEC provides takaful (Shari'ah-compliant insurance) for firms exporting to countries in the Organization of the Islamic Conference (OIC) and to assist companies wishing to invest in OIC countries.
"Clifford Chance, DWS handed rolse on LSE sukuk flotation", The Lawyer, October 23, 2006
The Sharjah Islamic Bank (SIB) issued a five-year sukuk on the London Stock Exchange. The certificates represent a share of assets purchased by a special purpose vehicle (SPV) from the SIB. The distribution paid to holders of the certificates come from income generated by the underlying assets. The sukuk issue were announced on September 19, 2006.
Sunday, October 22, 2006
"Islamic Finance Structuring" seminar from DIFX Academy and IIIF, Islamic finance facilities
"DIFX Academy to give Islamic training courses with Malaysia based IIIF", AMEInfo, October 21, 2006
The training arm of the Dubai International Financial Exchange, the DIFX Academy has launched a new course November 15-16, 2006 in partnership with the International Institute of Islamic Finance, the Kuala Lumpur-based training institute. The two-day training seminar will be called "Islamic Finance Structuring" and will be held in Dubai, UAE. This any many other conferences are listed on the Institute of Halal Investing website under "Conferences"
"Palm District Cooling secures USD50 million Islamic finance facility from Dubai Islamic Bank", AMEInfo, October 22, 2006
Few details were released other than the finance facility for Palm District Cooling will be used for long term capital expenditures. The company was established in 2004.
The training arm of the Dubai International Financial Exchange, the DIFX Academy has launched a new course November 15-16, 2006 in partnership with the International Institute of Islamic Finance, the Kuala Lumpur-based training institute. The two-day training seminar will be called "Islamic Finance Structuring" and will be held in Dubai, UAE. This any many other conferences are listed on the Institute of Halal Investing website under "Conferences"
"Palm District Cooling secures USD50 million Islamic finance facility from Dubai Islamic Bank", AMEInfo, October 22, 2006
Few details were released other than the finance facility for Palm District Cooling will be used for long term capital expenditures. The company was established in 2004.
Friday, October 20, 2006
Islamic financial companies work together
"Firms sign pact to provide Islamic finance services", Gulf Daily News (Bahrain), October 20, 2006
The Emirates Islamic Bank and Albaraka Banking Group signed a memorandum of understanding to work together to increase the awareness and availability of Islamic financial products. The two banks will exchange deposits in different currencies, organize investment of surplus liquidity, and clearing funds.
The Emirates Islamic Bank and Albaraka Banking Group signed a memorandum of understanding to work together to increase the awareness and availability of Islamic financial products. The two banks will exchange deposits in different currencies, organize investment of surplus liquidity, and clearing funds.
Thursday, October 19, 2006
CIMB Islamic, Mudarabah Investment Product, Australian Islamic banking
"CIMB Islamic wins global Bank of the Year award", The Edge Daily, October 19, 2006
The magazine The Banker named CIMB as the Bank of the Year for Islamic investment banking. The bank was involved in the issue of the World Bank's first Islamic bond, a Bai' Bithaman Ajil (deferred payment sale), the first exhchangeable sukuk for Khazanah Nasional.
"ADCB offers Islamic investment product", Khaleej Times (UAE), October 19, 2006
The Abu Dhabi Commercial Bank (ADCB) has begun offering a new Islamic investment product called the Meethaq Mudarabah Investment Program (MMI). The program makes investment in Shari'ah-compliant assets. The investments are made for 3, 6 or 12 months and the minimum investment of US$10,000.
"NAB eyes 'untapped' Islamic finance market", The Australian, October 19, 2006
The National Bank of Australia will begin to offer Islamic finance to take advantage of the large potential market that is currently not being served. The Muslim population is around 300,000 or 1.5% of the total population
The magazine The Banker named CIMB as the Bank of the Year for Islamic investment banking. The bank was involved in the issue of the World Bank's first Islamic bond, a Bai' Bithaman Ajil (deferred payment sale), the first exhchangeable sukuk for Khazanah Nasional.
"ADCB offers Islamic investment product", Khaleej Times (UAE), October 19, 2006
The Abu Dhabi Commercial Bank (ADCB) has begun offering a new Islamic investment product called the Meethaq Mudarabah Investment Program (MMI). The program makes investment in Shari'ah-compliant assets. The investments are made for 3, 6 or 12 months and the minimum investment of US$10,000.
"NAB eyes 'untapped' Islamic finance market", The Australian, October 19, 2006
The National Bank of Australia will begin to offer Islamic finance to take advantage of the large potential market that is currently not being served. The Muslim population is around 300,000 or 1.5% of the total population
Wednesday, October 18, 2006
London Islamic finance, Al Rayan Bank & Dubai Financial LLC Shari'ah-compliant currency profit rate swap
"UK's Brown meets with City businessmen, aims to cut back on regulation", Government News Network (UK), October 18, 2006
In a meeting with City financial leaders, Chancellor of the Exchequer Gordon Brown and Economic Secretary Ed Balls laid out plans to cut back on regulation of the financial sector to encourage traditional financial sectors and to encourage "new and innovative areas such as hedge funds and Islamic finance". The U.K. has been working to try and make London one of the centers of Islamic finance in the West. Gordon Brown and Ed Balls are expected to become the next prime minister and chancellor of the exchequer, respectively, when Tony Blair steps down next year.
"The Al Rayan Bank gets down to business", AMEInfo, October 18, 2006
The recently founded Al Rayan Bank in Qatar is beginning its operations by becoming a funder in the Smart Industrial City, an eco-friendly industrial city focusing on electronics technology and manufacturing. Al Rayan is an Islamic bank and opened its first branch on October 8. The bank will continue to participate in infrastructure projects and large-scale project finance.
"Citibank facilitates 1st Islamic cross currency profit rate swap", The Edge Daily, October 18, 2006
Citibank and Dubai Financial LLC (DF) have entered into a Shari'ah-compliant cross currency hedge transaction to hedge DF's foreign exchange risk arising from its investment ina 40 percent stake in Bank Islam Malaysia Bhd. The foreign exchange profit rate swap has a 5-year tenure and is based upon Murabaha (cost-plus) transactions. "Citigroup said the deal involved Citibank and DF agreeing to undertake a series of commodity trades in different currencies. The effect of the hedge will be to insulate the DF from variations in FX rates." One of the significant parts of the deal is the harmonization of Shari'ah standards that it supports. Because DF operates in Dubai, but has a large equity stake in Bank Islam Malaysia, DF and Citibank structured the deal to meet the Shari'ah standards in Malaysia and the Middle East. In the past, Shari'ah boards in the Middle East have been more conservative in the types of products they will endorse.
In a meeting with City financial leaders, Chancellor of the Exchequer Gordon Brown and Economic Secretary Ed Balls laid out plans to cut back on regulation of the financial sector to encourage traditional financial sectors and to encourage "new and innovative areas such as hedge funds and Islamic finance". The U.K. has been working to try and make London one of the centers of Islamic finance in the West. Gordon Brown and Ed Balls are expected to become the next prime minister and chancellor of the exchequer, respectively, when Tony Blair steps down next year.
"The Al Rayan Bank gets down to business", AMEInfo, October 18, 2006
The recently founded Al Rayan Bank in Qatar is beginning its operations by becoming a funder in the Smart Industrial City, an eco-friendly industrial city focusing on electronics technology and manufacturing. Al Rayan is an Islamic bank and opened its first branch on October 8. The bank will continue to participate in infrastructure projects and large-scale project finance.
"Citibank facilitates 1st Islamic cross currency profit rate swap", The Edge Daily, October 18, 2006
Citibank and Dubai Financial LLC (DF) have entered into a Shari'ah-compliant cross currency hedge transaction to hedge DF's foreign exchange risk arising from its investment ina 40 percent stake in Bank Islam Malaysia Bhd. The foreign exchange profit rate swap has a 5-year tenure and is based upon Murabaha (cost-plus) transactions. "Citigroup said the deal involved Citibank and DF agreeing to undertake a series of commodity trades in different currencies. The effect of the hedge will be to insulate the DF from variations in FX rates." One of the significant parts of the deal is the harmonization of Shari'ah standards that it supports. Because DF operates in Dubai, but has a large equity stake in Bank Islam Malaysia, DF and Citibank structured the deal to meet the Shari'ah standards in Malaysia and the Middle East. In the past, Shari'ah boards in the Middle East have been more conservative in the types of products they will endorse.
Tuesday, October 17, 2006
Floating rate sukuk and SHAPE Financial
"Sharjah Islamic Bank's global Sukuk debut secures $225 million", MENA Report, October 17, 2006
The sukuk are the first from Sharjah Islamic Bank and are floating profit rate sukuk with the rate tied to the London Interbank Offered Rate (LIBOR) plus 65 basis points. The sukuk will mature in five years. This article, unlike many articles on sukuk issues breaks down the purchasers by region: 41 percent went to European or Asian investors while 59 percent went to Middle Eastern investors. It would have been interesting, however, to see how much demand there was from Europe out of that 41 percent.
"SHAPE Financial Corp. assigned as Sharia Advisor for the world's first GCC-oriented Sukuk fund", AMEInfo, October 17, 2006
Virginia-based Islamic finance advisory firm SHAPE Financial Corp has been selected to advise on Shari'ah-compliance for the Sanad Sukuk Fund. The Fund will invest in Gulf Cooperation Council (GCC) area sukuk. Increasing the secondary market trading in sukuk is very important for sustaining the high growth of sukuk issues by making them more liquid financial instruments than they are now, where they are often held to maturity. The minimum subscription is currrently US$100,000 once the fund is launched in November 2006 and redemptions are allowed on a quarterly basis.
The sukuk are the first from Sharjah Islamic Bank and are floating profit rate sukuk with the rate tied to the London Interbank Offered Rate (LIBOR) plus 65 basis points. The sukuk will mature in five years. This article, unlike many articles on sukuk issues breaks down the purchasers by region: 41 percent went to European or Asian investors while 59 percent went to Middle Eastern investors. It would have been interesting, however, to see how much demand there was from Europe out of that 41 percent.
"SHAPE Financial Corp. assigned as Sharia Advisor for the world's first GCC-oriented Sukuk fund", AMEInfo, October 17, 2006
Virginia-based Islamic finance advisory firm SHAPE Financial Corp has been selected to advise on Shari'ah-compliance for the Sanad Sukuk Fund. The Fund will invest in Gulf Cooperation Council (GCC) area sukuk. Increasing the secondary market trading in sukuk is very important for sustaining the high growth of sukuk issues by making them more liquid financial instruments than they are now, where they are often held to maturity. The minimum subscription is currrently US$100,000 once the fund is launched in November 2006 and redemptions are allowed on a quarterly basis.
Monday, October 16, 2006
News about Islamic finance, Malaysian banking & takaful and DIFX largest exchange for sukuk
"Bankers face Mecca", Sunday Times (UK), October 15, 2006
The Sunday Times Business section provides an article about Islamic finance estimating its size at $1 billion growing at 25 percent per year. The article takes the position of the managing director of Dar al Istithmar, a shari'ah consultancy co-founded by Deutsche Bank, Humayon Dar who was quoted by the Times, "The clergy have been working with western institutions — the bearers of capitalism. There is now a fine kind of marriage emerging between the Islamic world and western banks in the form of sharia-compliant finance." While Mr. Dar sees possibilities to Islamize almost all western financial products, other Shari'ah scholars are more skeptical. One product raising significant skepticism, recently unveiled by Deutsche Bank, is Shari'ah-compliant derivatives.
"Islamic Banking Industry Well Capitalised, Says Dr. Zeti", Bernama, October 16, 2006
The Governor of Bank Negara Malaysia, the Malaysian Central Bank, Dr. Zeti Akhtar Aziz says the Islamic banks in Malaysia are well capitalized. Their risk-weighted capital ratio is 14.8 percent at the end of August and the non-performing ratio is 4.2 percent.
"HSBC unit picks Malaysia as global hub for takaful business", Yahoo! News (from AFP), October 16, 2006
HSBC's Malaysian takaful company HSBC Amanah Takaful Sdn Bhd has announced plans to use it Malaysian base as a base to expand its takaful business globally. Takaful is similar to mutual insurance, with additional restrictions that make it Shari'ah-compliant.
"DIFX is world's largest exchange for sukuk with Investment Dar listing", AMEInfo, October 16, 2006
The Dubai International Financial Exchange (DIFX) has $4.11 billion in sukuk listed on the exchange with the issue of $150 million by The Investment Dar Company K.S.C. (TID) today. Between January and June 2006, $4.6 billion in non-soverign sukuk was issued by Gulf-based issuers, more than double the amount for the same period in 2005.
The Sunday Times Business section provides an article about Islamic finance estimating its size at $1 billion growing at 25 percent per year. The article takes the position of the managing director of Dar al Istithmar, a shari'ah consultancy co-founded by Deutsche Bank, Humayon Dar who was quoted by the Times, "The clergy have been working with western institutions — the bearers of capitalism. There is now a fine kind of marriage emerging between the Islamic world and western banks in the form of sharia-compliant finance." While Mr. Dar sees possibilities to Islamize almost all western financial products, other Shari'ah scholars are more skeptical. One product raising significant skepticism, recently unveiled by Deutsche Bank, is Shari'ah-compliant derivatives.
"Islamic Banking Industry Well Capitalised, Says Dr. Zeti", Bernama, October 16, 2006
The Governor of Bank Negara Malaysia, the Malaysian Central Bank, Dr. Zeti Akhtar Aziz says the Islamic banks in Malaysia are well capitalized. Their risk-weighted capital ratio is 14.8 percent at the end of August and the non-performing ratio is 4.2 percent.
"HSBC unit picks Malaysia as global hub for takaful business", Yahoo! News (from AFP), October 16, 2006
HSBC's Malaysian takaful company HSBC Amanah Takaful Sdn Bhd has announced plans to use it Malaysian base as a base to expand its takaful business globally. Takaful is similar to mutual insurance, with additional restrictions that make it Shari'ah-compliant.
"DIFX is world's largest exchange for sukuk with Investment Dar listing", AMEInfo, October 16, 2006
The Dubai International Financial Exchange (DIFX) has $4.11 billion in sukuk listed on the exchange with the issue of $150 million by The Investment Dar Company K.S.C. (TID) today. Between January and June 2006, $4.6 billion in non-soverign sukuk was issued by Gulf-based issuers, more than double the amount for the same period in 2005.
Friday, October 13, 2006
A discussion of Shari'ah-compliant usufructs
"Shari'ah principles for sharing the usufruct", Gulf News, October 14, 2006
An article that discusses the rules under Shari'ah for sharing a usufruct in a leasing (ijara) agreement. The specific issue of ijara the article discusses is that of multiple people wanting to lease and then sub-lease an asset.
An article that discusses the rules under Shari'ah for sharing a usufruct in a leasing (ijara) agreement. The specific issue of ijara the article discusses is that of multiple people wanting to lease and then sub-lease an asset.
UBS to offer new tradable securities
"UBS eyes Islamic financing with new product", Gulf News, October 14, 2006
While the global market for sukuk has grown significantly, particularly in the last few years, it is still a very illiquid market, where many bonds are held until maturity. This is partly due to the prohibition of bai' al-dayn (trading of debt). UBS announced today that it had created (and applied for patents on) a new commodity-linked investment certificate (sukuk). Little details beyond this was released by UBS. One of the other objections to similar products besides their similarity to bai' al-dayn is that many of them rely in some way on bai' al-'ina (buy-back transactions) where an asset is sold under the condition that the seller will repurchase the asset in the future at a mark-up, which is also prohibited by Shari'ah law. Until more details are released for Islamic scholars to review, however, it will be unclear whether the new product is widely accepted as Shari'ah-compliant.
While the global market for sukuk has grown significantly, particularly in the last few years, it is still a very illiquid market, where many bonds are held until maturity. This is partly due to the prohibition of bai' al-dayn (trading of debt). UBS announced today that it had created (and applied for patents on) a new commodity-linked investment certificate (sukuk). Little details beyond this was released by UBS. One of the other objections to similar products besides their similarity to bai' al-dayn is that many of them rely in some way on bai' al-'ina (buy-back transactions) where an asset is sold under the condition that the seller will repurchase the asset in the future at a mark-up, which is also prohibited by Shari'ah law. Until more details are released for Islamic scholars to review, however, it will be unclear whether the new product is widely accepted as Shari'ah-compliant.
Islamic credit cards
"QIB launches first Alysr credit card", The Peninsula (Qatar), October 13, 2006
The Qatar Islamic Bank (QIB) has launched a Shari'ah-compliant credit card (Alysr). The card provides 20,000 Qatari Riyals (US$5,500) in credit. No interest is charged, but there is a QR125 (US$35) monthly fee. 10 percent of the balance is due each month and for each transaction, the bank deposts RQ1 (US$0.25) for each transaction to its zakat fund.
The Qatar Islamic Bank (QIB) has launched a Shari'ah-compliant credit card (Alysr). The card provides 20,000 Qatari Riyals (US$5,500) in credit. No interest is charged, but there is a QR125 (US$35) monthly fee. 10 percent of the balance is due each month and for each transaction, the bank deposts RQ1 (US$0.25) for each transaction to its zakat fund.
Thursday, October 12, 2006
Primer on Islamic Finance - AP
"Islam's Finance Rules", Associated Press on Yahoo!, October 12, 2006
The Associated Press provides a very simplistic primer on Islamic finance.
The Associated Press provides a very simplistic primer on Islamic finance.
American companies adopt Shari'ah-compliant business practices
"Islamic-Safe Finance Grows in the West", Associated Press on Yahoo!, October 12, 2006
The Associated Press has a story this afternoon about companies becoming more open to Shari'ah-compliance. The conventional company (a coffee company) mentioned in the story is Caribou coffee company, based in Minneapolis, Minnesota. According to the AP,
The Associated Press has a story this afternoon about companies becoming more open to Shari'ah-compliance. The conventional company (a coffee company) mentioned in the story is Caribou coffee company, based in Minneapolis, Minnesota. According to the AP,
"When Caribou Coffee went public last year,[...] the nation's second-largest coffeehouse chain said [in its prospectus] it would never sell pork or porn. It wouldn't charge or receive interest, either."This is an unusual move for a coffee company to take. More commonly, financial companies will start an Islamic window, branches financially distinct from the interest-charging divisions, to offer Shari'ah-compliant financial products. The reason for Shari'ah-compliance provided by their CEO on their website is that their majority shareholder from 2000 is Arcapita Bank, B.S.C., a Bahraini-based Islamic bank (Caribou was incorporated in 1992). Even after the IPO, Arcapita still holds 61 percent of the company's outstanding common stock.
Malaysian Vacation Takaful, European Islamic Finance Classes, QREIC Murabaha Facility
"DIFX Academy and Ecole Superieure des Affaires (ESA) plan training collaboration", AMEInfo, October 12, 2006
The two organizations plan to provide training in Islamic finance in Europe beginning in November 2006 with more classes added in early 2007. The ESA collaboration with the DIFX Academy will also provide courses in derivatives.
"Takaful Malaysia launches vacation scheme", Business Times (Malaysia), October 12, 2006
Syarikat Takaful Malaysia Bhd has begun offering vacation insurance that is Shari'ah-compliant. The insurance covers participants when they are on vacation domestically or internationally and covers accidental death & permanent disablement. It also will cover household belongings in the event of theft while the participant is on vacation.
"QREIC expands financing sources with HSBC Amanah and Masraf Al Rayan", AMEInfo, October 12, 2006
The Qatari company that recently concluded a sukuk, the Qatar Real Estate Investment Company (QREIC) has just signed a US$105 million Murabaha (cost-plus) facility with HSBC Amanah, the bank's Islamic window, and Masraf Al Rayan.
The two organizations plan to provide training in Islamic finance in Europe beginning in November 2006 with more classes added in early 2007. The ESA collaboration with the DIFX Academy will also provide courses in derivatives.
"Takaful Malaysia launches vacation scheme", Business Times (Malaysia), October 12, 2006
Syarikat Takaful Malaysia Bhd has begun offering vacation insurance that is Shari'ah-compliant. The insurance covers participants when they are on vacation domestically or internationally and covers accidental death & permanent disablement. It also will cover household belongings in the event of theft while the participant is on vacation.
"QREIC expands financing sources with HSBC Amanah and Masraf Al Rayan", AMEInfo, October 12, 2006
The Qatari company that recently concluded a sukuk, the Qatar Real Estate Investment Company (QREIC) has just signed a US$105 million Murabaha (cost-plus) facility with HSBC Amanah, the bank's Islamic window, and Masraf Al Rayan.
Wednesday, October 11, 2006
Risk management & Shari'ah rating
"KFH-Bahrain to implement state-of-the-art risk management systems", AMEInfo, October 11, 2006
The Bahrain branch of the Kuwait Finance House, a large Islamic bank, has hired SunGard to provide the bank with risk management software in order to allow it to better manage risk.
"Bahrain Islamic Bank supports Sharia'a quality rating workshop", AMEInfo, October 11, 2006
The Bahrain Islamic Bank (BIsB) has given its support to a workshop on Shari'ah Quality Ratings. The ratings assess the degree to which a financial institution complies with Shari'ah law and is carried out by the Islamic International Rating Agency (IIRA). The IIRA began in June 2005 and aims to provide soverign, instrument, entity, Shari'ah and corporate government ratings of Islamic Financial Institutions (IFIs). Currently, the organization only provides ratings on corporate governance and Shari'ah Quality. The Shari'ah Quality Ratings look at the Shari'ah board activity (frequency, agenda and minutes) and relation between the Shari'ah board and the management. The ratings range from highest (AAA) down to the lowest (B).
The Bahrain branch of the Kuwait Finance House, a large Islamic bank, has hired SunGard to provide the bank with risk management software in order to allow it to better manage risk.
"Bahrain Islamic Bank supports Sharia'a quality rating workshop", AMEInfo, October 11, 2006
The Bahrain Islamic Bank (BIsB) has given its support to a workshop on Shari'ah Quality Ratings. The ratings assess the degree to which a financial institution complies with Shari'ah law and is carried out by the Islamic International Rating Agency (IIRA). The IIRA began in June 2005 and aims to provide soverign, instrument, entity, Shari'ah and corporate government ratings of Islamic Financial Institutions (IFIs). Currently, the organization only provides ratings on corporate governance and Shari'ah Quality. The Shari'ah Quality Ratings look at the Shari'ah board activity (frequency, agenda and minutes) and relation between the Shari'ah board and the management. The ratings range from highest (AAA) down to the lowest (B).
Tuesday, October 10, 2006
Takaful growth, Europe hosts the IIFF, Airline financing & DIG partners with Bank Islam Malaysia
"Premiums to soar for Islam-based insurance", International Herald Tribune, October 10, 2006
Worldwide, Islamic insurance (takaful) has been growing rapidly recently. The IHT article cites a figure from Moody's Investors Service of $7.4 billion in premiums in 2015 worldwide, compared to just $2 billion last year. HSBC Amanah, the Islamic finance unit of the multi-national bank, gives an even higher estimate of growth, predicting that takaful premiums could be $14 billion by 2015. The takaful industry has just recently been attracting Western multinational banks. American International Group opened a Bahrain office at the beginning of October and reinsurers Hannover Re and Swiss Re have begun Islamic reinsurance (retakaful) units. Takaful resembles mutual insurance where all members are the insured and the insurers, in order to avoid riba (usury) and gharar (speculation), which make traditional insurance products haram (prohibited).
"European banks to debate Shari'a compliance", AMEInfo, October 10, 2006
When bankers meet at the International Islamic Finance Forum (IIFF) in Zurich between November 13th and November 16th, the focus will be on wealth management. As the demand for Islamic finance has risen significantly over the past five years, so has the demand for Shari'ah-compliant wealth management strategies, particularly for investors in the Middle East which has seen large increases in wealth due to high oil prices.
"Financial times", ITP Business, October 10, 2006
This is another article from ITP business discussing the uses of Islamic financing in aircraft purchases by airlines, led by Emirates Airlines. While many companies are still using conventional financing, "with Middle East airliners expected to invest billions over the next decade to increase their fleets, experts believe the popularity of Islamic finance could potentially skyrocket". There are not yet reliable estimates about the size of the Shari'ah-compliant airline-finance sector yet, nor are there predictions on future growth in quantitative terms.
"Bank Islam to be one of world's top Islamic banks, says new partner", Bernama, October 10, 2006
Dubai Investment Group (DIG), a large conglomerate from the United Arab Emirates is partnering with Bank Islam Malaysia Bhd in an attempt to build an international Islamic Bank. The CEO of the DIG, Soud Ba'alawy, estimated that the Islamic finance industry has $350 billion in assets worldwide and is growing at 16 percent per year. Other estimates have placed the size of the industry between $200 billion and $750 billion in assets.
Worldwide, Islamic insurance (takaful) has been growing rapidly recently. The IHT article cites a figure from Moody's Investors Service of $7.4 billion in premiums in 2015 worldwide, compared to just $2 billion last year. HSBC Amanah, the Islamic finance unit of the multi-national bank, gives an even higher estimate of growth, predicting that takaful premiums could be $14 billion by 2015. The takaful industry has just recently been attracting Western multinational banks. American International Group opened a Bahrain office at the beginning of October and reinsurers Hannover Re and Swiss Re have begun Islamic reinsurance (retakaful) units. Takaful resembles mutual insurance where all members are the insured and the insurers, in order to avoid riba (usury) and gharar (speculation), which make traditional insurance products haram (prohibited).
"European banks to debate Shari'a compliance", AMEInfo, October 10, 2006
When bankers meet at the International Islamic Finance Forum (IIFF) in Zurich between November 13th and November 16th, the focus will be on wealth management. As the demand for Islamic finance has risen significantly over the past five years, so has the demand for Shari'ah-compliant wealth management strategies, particularly for investors in the Middle East which has seen large increases in wealth due to high oil prices.
"Financial times", ITP Business, October 10, 2006
This is another article from ITP business discussing the uses of Islamic financing in aircraft purchases by airlines, led by Emirates Airlines. While many companies are still using conventional financing, "with Middle East airliners expected to invest billions over the next decade to increase their fleets, experts believe the popularity of Islamic finance could potentially skyrocket". There are not yet reliable estimates about the size of the Shari'ah-compliant airline-finance sector yet, nor are there predictions on future growth in quantitative terms.
"Bank Islam to be one of world's top Islamic banks, says new partner", Bernama, October 10, 2006
Dubai Investment Group (DIG), a large conglomerate from the United Arab Emirates is partnering with Bank Islam Malaysia Bhd in an attempt to build an international Islamic Bank. The CEO of the DIG, Soud Ba'alawy, estimated that the Islamic finance industry has $350 billion in assets worldwide and is growing at 16 percent per year. Other estimates have placed the size of the industry between $200 billion and $750 billion in assets.
Monday, October 09, 2006
Islamic Finance Company unveiled
"Islamic Finance Company Unveiled", Gulf News October 10, 2006
A new company, the Islamic Finance Company, has been started with the goal of focusing on the UAE's market for Islamic finance. The new company will focus on Islamic personal and corporate finance.
A new company, the Islamic Finance Company, has been started with the goal of focusing on the UAE's market for Islamic finance. The new company will focus on Islamic personal and corporate finance.
Rapid growth seen in Indonesian Islamic finance industry
"Indonesia Islamic banking share seen up-Central Bank," Yahoo News Asia (provided by Reuters), October 9, 2006
The Central Bank of Indonesia has estimated that Islamic banking assets will rise from 1.5 percent of all banking industry assets today to 5 or 6 percent in 2011. The growth will be propelled by changes in Shari'ah-compliant banking regulation that makes this regulation less onerous than it is currently.
The Central Bank of Indonesia has estimated that Islamic banking assets will rise from 1.5 percent of all banking industry assets today to 5 or 6 percent in 2011. The growth will be propelled by changes in Shari'ah-compliant banking regulation that makes this regulation less onerous than it is currently.
"The total assets of Islamic banks amounted to 22.9 trillion rupiah ($2.48 billion) in July, or around 1.5 percent of the domestic banking industry's total assets. The figure was about 1.4 percent at the end of last year."
Swiss Islamic private banking & HSBC Malaysia
"Swiss Sharia bank courts Gulf petrodollars", swissinfo, October 9, 2006
While the recent success achieved by Faisal Private Bank being granted a license to operate in Switzerland has been around for a few days, this story has one interesting piece of information that other sources have not been able to provide.
The consensus estimates from other organizations has been in the $200-500 billion range globally. Such a high estimate from as reputable an organization as Moody's enhances my belief that Islamic finance is larger than generally understood.
"HSBC Malaysia taking steps to beef up its Islamic ops", The Star (Malaysia), October 9, 2006
HSBC Bank Malaysia Bhd has committed to expanding its Islamic banking operations, which currently account for 15 percent of the bank's balance sheet in order to capture the growth of Islamic finance in the country as it works to become an industry hub. The bank also plans to open a joint venture takaful (Shari'ah-compliant insurance) company in the next month.
While the recent success achieved by Faisal Private Bank being granted a license to operate in Switzerland has been around for a few days, this story has one interesting piece of information that other sources have not been able to provide.
"Financial agency Moody's Investors Service estimates that Islamic financial institutions manage around $750 billion globally".
The consensus estimates from other organizations has been in the $200-500 billion range globally. Such a high estimate from as reputable an organization as Moody's enhances my belief that Islamic finance is larger than generally understood.
"HSBC Malaysia taking steps to beef up its Islamic ops", The Star (Malaysia), October 9, 2006
HSBC Bank Malaysia Bhd has committed to expanding its Islamic banking operations, which currently account for 15 percent of the bank's balance sheet in order to capture the growth of Islamic finance in the country as it works to become an industry hub. The bank also plans to open a joint venture takaful (Shari'ah-compliant insurance) company in the next month.
Friday, October 06, 2006
Islamic derivatives?
"The Forbidden Fruit", Zawya (from Banker Middle East), September 2006
Deutsche Bank claims to have developed a Shari'ah-compliant derivative that would allow Islamic investors to enter the derivatives market, but many scholars are sceptical about whether derivatives can ever be Shari'ah-compliant. Sheikh Mohammed Taqi Usmani, a Shari'ah scholar on the Shari'ah boards of several large banks & the Dow Jones Islamic Market index believes derivatives are incompatible with Shari'ah law, "They are completely against the principles of Shari'ah and I am of the view that we should not even enter the field". However, another prominent Shari'ah scholar Dr. Hussain Hamid Hassan who is a member of the Deutsche Bank Shari'ah board for derivatives disagrees and say the derivative products are created within a conservative Shari'ah framework. Dr. Hussain says, "We don't want to make money at the risk of our reputation, or against the letter and the spirit of Shari'ah, so it is important that the scholars are fully informed and involved on even the most complex and innovative structures." The article comes out on the side of neither scholar, asserting that the real question is not whether derivatives can be made halal, but whether derivatives should be used at all or whether they are just too potentially risky for the international financial system.
Deutsche Bank claims to have developed a Shari'ah-compliant derivative that would allow Islamic investors to enter the derivatives market, but many scholars are sceptical about whether derivatives can ever be Shari'ah-compliant. Sheikh Mohammed Taqi Usmani, a Shari'ah scholar on the Shari'ah boards of several large banks & the Dow Jones Islamic Market index believes derivatives are incompatible with Shari'ah law, "They are completely against the principles of Shari'ah and I am of the view that we should not even enter the field". However, another prominent Shari'ah scholar Dr. Hussain Hamid Hassan who is a member of the Deutsche Bank Shari'ah board for derivatives disagrees and say the derivative products are created within a conservative Shari'ah framework. Dr. Hussain says, "We don't want to make money at the risk of our reputation, or against the letter and the spirit of Shari'ah, so it is important that the scholars are fully informed and involved on even the most complex and innovative structures." The article comes out on the side of neither scholar, asserting that the real question is not whether derivatives can be made halal, but whether derivatives should be used at all or whether they are just too potentially risky for the international financial system.
Dow Jones GCC Islamic Index, Malaysian Islamic finance, SCOMI & Indonesian power sukuk
"Dow Jones plans GCC Islamic regional index", GulfNews, October 6, 2006
Five days after Global Investment House announced that it launched a GCC Islamic Index Fund, Dow Jones has jumped in as well with a commitment to launch its own fund. The Global Director of the Dow Jones Islamic Market index, Rushdi Siddiqui, is quoted saying that ""We just launched an Islamic index for Kuwait. The Dow Jones Islamic Market Index (DJIM) Kuwait is our initial attempt to create GCC Islamic country indices and then roll up to GCC Islamic regional index and GCC regional sector indices,"
"Malaysia shifts to high gear in bid for Islamic banking to reach 2010 goal", Brunei Times, October 6, 2006
At a media event in Malaysia, the head of the Kuwait Finance House, Salman Younis predicted that Islamic banking will make up 20 percent of all banking within Malaysia by 2010. The industry has been growing rapidly since it began in 1983. The share of all banking captured by the Islamic banking industry was 10 percent in 2003 and by midyear 2006 had risen to 12 percent. The government of Malaysia has been actively working to make the country a center in Islamic banking by liberalizing the industry and offering tax cuts and other incentives to benefit users and providers of Islamic banking. It has also moved towards issuing new licenses for Islamic insurance (takaful).
"Scomi unit plans Islamic bond", Business Times (Malaysia), October 6, 2006
SCOMI Group Bhd plans to issue RM630 million (US$170 million) in Shari'ah-compliant Murabahahnotes once it obtains regulatory approval to do so.
ASIA DEBT PIPELINE: Landbank Marketing; PLN Bookbuilding", EasyBourse, October 6, 2006
The Indonesian power company Perusahaan Listrik Negara (PLN) has plans to issue US Dollar conventional bonds, contrary to their original plans. The switch was due to unresolved issues with taxation of Shari'ah-compliant bonds. The Indonesian government had hoped that the PLN issue would be a prelude to its own planned issue of Shari'ah-compliant bonds, something the government of the country with the largest Muslim population has yet to do.
Five days after Global Investment House announced that it launched a GCC Islamic Index Fund, Dow Jones has jumped in as well with a commitment to launch its own fund. The Global Director of the Dow Jones Islamic Market index, Rushdi Siddiqui, is quoted saying that ""We just launched an Islamic index for Kuwait. The Dow Jones Islamic Market Index (DJIM) Kuwait is our initial attempt to create GCC Islamic country indices and then roll up to GCC Islamic regional index and GCC regional sector indices,"
"Malaysia shifts to high gear in bid for Islamic banking to reach 2010 goal", Brunei Times, October 6, 2006
At a media event in Malaysia, the head of the Kuwait Finance House, Salman Younis predicted that Islamic banking will make up 20 percent of all banking within Malaysia by 2010. The industry has been growing rapidly since it began in 1983. The share of all banking captured by the Islamic banking industry was 10 percent in 2003 and by midyear 2006 had risen to 12 percent. The government of Malaysia has been actively working to make the country a center in Islamic banking by liberalizing the industry and offering tax cuts and other incentives to benefit users and providers of Islamic banking. It has also moved towards issuing new licenses for Islamic insurance (takaful).
"Scomi unit plans Islamic bond", Business Times (Malaysia), October 6, 2006
SCOMI Group Bhd plans to issue RM630 million (US$170 million) in Shari'ah-compliant Murabahahnotes once it obtains regulatory approval to do so.
ASIA DEBT PIPELINE: Landbank Marketing; PLN Bookbuilding", EasyBourse, October 6, 2006
The Indonesian power company Perusahaan Listrik Negara (PLN) has plans to issue US Dollar conventional bonds, contrary to their original plans. The switch was due to unresolved issues with taxation of Shari'ah-compliant bonds. The Indonesian government had hoped that the PLN issue would be a prelude to its own planned issue of Shari'ah-compliant bonds, something the government of the country with the largest Muslim population has yet to do.
Thursday, October 05, 2006
World Bank Bond Issue highlighted problems of lack of Islamic financial harmonization
Arab Banks, Investors Frown on World Bank Bonds, World Bank Press Reviews, September 21, 2005
Note: Since this blog has only existed since September 2006, there will be some old news and some current news posted.
The World Bank's issue of Islamic bonds in September 2005 highlighted the divergent views on Shari'ah-compliance, particularly between Malaysia and the Gulf States. The former has taken a more open interpretation of the Qur'an and the Sunna in deciding whether products are Shari'ah-compliant than the Gulf states. As a result, many Arab banks and investors shunned the World Bank's recent issue, which was approved as Shari'ah-compliant in Malaysia (and issued denominated in Malaysian Ringgit). Because the World Bank's issue uses a complicated investment and does not represent sharing in the future profits of a tangible asset, many Gulf banks and investors believe that it represents riba, which Islam considers haram (not permitted). Because there is not a single regulatory regime for determining Shari'ah-compliance of different Islamic finance products, the globalization of Islamic finance is slowed.
Note: Since this blog has only existed since September 2006, there will be some old news and some current news posted.
The World Bank's issue of Islamic bonds in September 2005 highlighted the divergent views on Shari'ah-compliance, particularly between Malaysia and the Gulf States. The former has taken a more open interpretation of the Qur'an and the Sunna in deciding whether products are Shari'ah-compliant than the Gulf states. As a result, many Arab banks and investors shunned the World Bank's recent issue, which was approved as Shari'ah-compliant in Malaysia (and issued denominated in Malaysian Ringgit). Because the World Bank's issue uses a complicated investment and does not represent sharing in the future profits of a tangible asset, many Gulf banks and investors believe that it represents riba, which Islam considers haram (not permitted). Because there is not a single regulatory regime for determining Shari'ah-compliance of different Islamic finance products, the globalization of Islamic finance is slowed.
Headlines for October 5, 2006
"IFIS Launches Exclusive Online Islamic Finance Shariah Supervisory Database", MENAfn, October 5, 2006
The Islamic Finance Information Service (IFIS), a research tool from ISI Emerging Markets has launched a database of Shari’ah scholars that is searchable both by scholar and institution. It is designed to allow institutions to find Shari’ah scholars. However, there is still a shortage of Shari’ah scholars with in depth knowledge of complex financial products, which are needed to meet the increasing demand for Shari’ah-compliant financial products.
"QIIB plans Islamic insurance firm in Syria", The Peninsula (Qatar), October 5, 2006
The soon-to-be-established Syrian International Islamic Bank, controlled largely by the Qatar International Islamic Bank (QIIB), has begun plans to open an Islamic insurance (takaful).
"Top-ranked Tokyo-Mitsubishi UFJ to enter Islamic finance", Antara (Indonesia), October 5, 2006
Tokyo-Mitsubishi UFJ, the largest bank by assets will team with Commerce International Merchants Bank (CIMB) to offer Islamic banking products and Islamic bonds (sukuk
The Islamic Finance Information Service (IFIS), a research tool from ISI Emerging Markets has launched a database of Shari’ah scholars that is searchable both by scholar and institution. It is designed to allow institutions to find Shari’ah scholars. However, there is still a shortage of Shari’ah scholars with in depth knowledge of complex financial products, which are needed to meet the increasing demand for Shari’ah-compliant financial products.
"QIIB plans Islamic insurance firm in Syria", The Peninsula (Qatar), October 5, 2006
The soon-to-be-established Syrian International Islamic Bank, controlled largely by the Qatar International Islamic Bank (QIIB), has begun plans to open an Islamic insurance (takaful).
"Top-ranked Tokyo-Mitsubishi UFJ to enter Islamic finance", Antara (Indonesia), October 5, 2006
Tokyo-Mitsubishi UFJ, the largest bank by assets will team with Commerce International Merchants Bank (CIMB) to offer Islamic banking products and Islamic bonds (sukuk
Wednesday, October 04, 2006
Headlines for October 4, 2006
”Kuwait Bank to Sell Hedge Contract”, International Herald Tribune, October 4, 2006
The Kuwait Finance House has begun offering ijara rental swap, a product that allows the customer to convert fixed profit rate into variable rate and vice versa. This provides consumers with a way to hedge their ijara rental contracts against profit rate changes.
”Islamic bank gets Swiss license”, AMEinfo, October 3, 2006
The Swiss Federal Banking Commission has approved the application of Faisal Finance (Switzerland) SA to begin operations as a private bank in Switzerland offering Islamic products. It will be called Faisal Private Bank (Switzerland) S.A.
The Kuwait Finance House has begun offering ijara rental swap, a product that allows the customer to convert fixed profit rate into variable rate and vice versa. This provides consumers with a way to hedge their ijara rental contracts against profit rate changes.
”Islamic bank gets Swiss license”, AMEinfo, October 3, 2006
The Swiss Federal Banking Commission has approved the application of Faisal Finance (Switzerland) SA to begin operations as a private bank in Switzerland offering Islamic products. It will be called Faisal Private Bank (Switzerland) S.A.
Tuesday, October 03, 2006
Headlines for October 3, 2006
"Emaar to raise US$1 billion in debut Islamic facility", MENA report, October 3, 2006
Emaar Properties PJSC, a Dubai-based real estate company, is offering its first Islamic musharaka facility. The facility will last for five years and will raise US$1 billion. The company is building the Downtown Burj Dubai development, which includes what will become the world's tallest building.
”World Islamic Banking Conference 2006 to focus on driving growth & delivering on market expectations”, MENA report, October 3, 2006
The World Islamic Banking Conference 2006 being held in Bahrain on December 9-11, 2006. In its 13th year, the WIBC theme is ‘Driving Growth & Delivering on Market Expectations through Product Innovation & Service Quality’.
”HSBC ready for challenges next year”, The Edge Daily, October 3, 2006
HSBC Bank Malaysia Bhd expects to significantly expand its banking operations within Malaysia next year. The CEO Datuk Zarir J Cama is quoted by the article discussing the high use of Shari’ah-compliant products by non-Muslims, ““About 60% to 70% of Islamic mortgages at HSBC are given to non-Muslims, and investors are also looking at the various products and returns,”
Kuwait Finance House Introduces KFH Ijarah Rental Swap”, Bernama, October 3, 2006
The Kuwait Finance House (KFH) has begun offering a hedge against ijara rate fluctuations. The product is targeted to those with ijarasubjected to fluctuations in reference rates (e.g. cost of funds rate). The product can be used with “any variable or fixed ijarah based facility such as ijarah contract financing, ijarah project financing, ijarah auto financing, ijarah asset acquisition financing, or even ijarah-based sukuk”.
Just another ethical investment or a force to be reckoned with?, Times (U.K.)”, October 3, 2006
The Times provides a short article discussing the growth of Shari’ah-compliant banking and investment. The article concludes that there may be a huge increase in usage of Shari’ah-compliant products, but ends by quoting Andrew Roberts of the law firm Linklaters who believes “there is a limit to which investors will accept a lower yield or pay a premium for doing a deal under Sharia.” However, the jury is still open on whether Shari’ah-compliant products do have lower returns than conventional products.
”Malaysia’s leadership in global sukuk market challenged, Business Times (Malaysia), October 3, 2006
In a talk on Islamic finance in Kuala Lumpur, Malaysia, Shari’ah scholar professor Dr. Malik Muhammad Mahmud Al-Awan noted the growing competition from the Middle East, other Asian countries and even Europe in growing the market for sukuk.
Emaar Properties PJSC, a Dubai-based real estate company, is offering its first Islamic musharaka facility. The facility will last for five years and will raise US$1 billion. The company is building the Downtown Burj Dubai development, which includes what will become the world's tallest building.
”World Islamic Banking Conference 2006 to focus on driving growth & delivering on market expectations”, MENA report, October 3, 2006
The World Islamic Banking Conference 2006 being held in Bahrain on December 9-11, 2006. In its 13th year, the WIBC theme is ‘Driving Growth & Delivering on Market Expectations through Product Innovation & Service Quality’.
”HSBC ready for challenges next year”, The Edge Daily, October 3, 2006
HSBC Bank Malaysia Bhd expects to significantly expand its banking operations within Malaysia next year. The CEO Datuk Zarir J Cama is quoted by the article discussing the high use of Shari’ah-compliant products by non-Muslims, ““About 60% to 70% of Islamic mortgages at HSBC are given to non-Muslims, and investors are also looking at the various products and returns,”
Kuwait Finance House Introduces KFH Ijarah Rental Swap”, Bernama, October 3, 2006
The Kuwait Finance House (KFH) has begun offering a hedge against ijara rate fluctuations. The product is targeted to those with ijarasubjected to fluctuations in reference rates (e.g. cost of funds rate). The product can be used with “any variable or fixed ijarah based facility such as ijarah contract financing, ijarah project financing, ijarah auto financing, ijarah asset acquisition financing, or even ijarah-based sukuk”.
Just another ethical investment or a force to be reckoned with?, Times (U.K.)”, October 3, 2006
The Times provides a short article discussing the growth of Shari’ah-compliant banking and investment. The article concludes that there may be a huge increase in usage of Shari’ah-compliant products, but ends by quoting Andrew Roberts of the law firm Linklaters who believes “there is a limit to which investors will accept a lower yield or pay a premium for doing a deal under Sharia.” However, the jury is still open on whether Shari’ah-compliant products do have lower returns than conventional products.
”Malaysia’s leadership in global sukuk market challenged, Business Times (Malaysia), October 3, 2006
In a talk on Islamic finance in Kuala Lumpur, Malaysia, Shari’ah scholar professor Dr. Malik Muhammad Mahmud Al-Awan noted the growing competition from the Middle East, other Asian countries and even Europe in growing the market for sukuk.
Monday, October 02, 2006
First Islamic commodity-linked product
"Rush to tap into Islamic market", Financial Times, October 2, 2006
"Complex route to ensure that financial products receive scholars' approval", Financial Times, October 2, 2006
The Financial Times published two articles in its online edition that relate two Islamic finance. The first one describes the first commodity price-linked, Shari'ah-compliant product, launched by UBS. It also discusses the enormous growth in sukuk, as well as the growing (but small) secondary markets for sukuk. The second article discusses the problems with ensuring that products are Shari'ah-compliant. As has been discussed in numerous places, one of the main issues raised is the lack of harmonization of Shari'ah standards across the world, particularly between the Middle East and Malaysia. As the article points out, "Malaysian scholars, for example, are more willing than their Gulf counterparts, to accept derivatives and hedging." The other difficulty with Islamic financial instruments is that they must be approved each time they are used, not just when products different from established products are introduced.
"Complex route to ensure that financial products receive scholars' approval", Financial Times, October 2, 2006
The Financial Times published two articles in its online edition that relate two Islamic finance. The first one describes the first commodity price-linked, Shari'ah-compliant product, launched by UBS. It also discusses the enormous growth in sukuk, as well as the growing (but small) secondary markets for sukuk. The second article discusses the problems with ensuring that products are Shari'ah-compliant. As has been discussed in numerous places, one of the main issues raised is the lack of harmonization of Shari'ah standards across the world, particularly between the Middle East and Malaysia. As the article points out, "Malaysian scholars, for example, are more willing than their Gulf counterparts, to accept derivatives and hedging." The other difficulty with Islamic financial instruments is that they must be approved each time they are used, not just when products different from established products are introduced.
Sarawak Enterprise Corp Berhad (SECB) to isse RM1.165 billion sukuk
"SECB signs funding arrangement for power plant", Malaysian Star, October 2, 2006
The company is working with the RHB Islamic Bank in Malaysia to offer the RM1.165 billion (US$316 million) sukuk to fund a coal-fired power plant. The companies involved praised the issue as innovative in bringing Malaysian Shari'ah standards in closer agreement with those of the Middle East. Convergence of Shari'ah standards is widely seen as a needed move in order for the Islamic finance industry to become more globalized.
The company is working with the RHB Islamic Bank in Malaysia to offer the RM1.165 billion (US$316 million) sukuk to fund a coal-fired power plant. The companies involved praised the issue as innovative in bringing Malaysian Shari'ah standards in closer agreement with those of the Middle East. Convergence of Shari'ah standards is widely seen as a needed move in order for the Islamic finance industry to become more globalized.
GCC Islamic Index launched
"Global launches new GCC Islamic Index", Kuwait Times, September 30, 2006
Global Investment House has launched an index of Gulf Cooperation Council (GCC) region companies that are Shari'ah-compliant to complement its Global Islamic Index, which grew over 70 percent in market capitalization to US$143 billion in the first half of 2006.
Global Investment House has launched an index of Gulf Cooperation Council (GCC) region companies that are Shari'ah-compliant to complement its Global Islamic Index, which grew over 70 percent in market capitalization to US$143 billion in the first half of 2006.
AIG to offer takaful (Islamic insurance) to Middle Eastern customers
"American International starts Islamic insurance", Reuters, October 1, 2006
American International Group (AIG) has announced that it will begin to offer Shari'ah-compliant insurance (takaful) to Gulf Arab customers with plans in the future to expand to Asia. The market for takaful is estimated at US$15 billion by 2015.
American International Group (AIG) has announced that it will begin to offer Shari'ah-compliant insurance (takaful) to Gulf Arab customers with plans in the future to expand to Asia. The market for takaful is estimated at US$15 billion by 2015.
Calyx Financial to start Shari'ah-compliant mutual fund
"Calyx Financial Announces Formation of Shari'ah Supervisory Board" (pdf), Calyx Financial Press Release, September 29, 2006
Calyx Financial, an institutional investment firm for clients outside the United States, has announced that it has formed a Shari'ah board headed by Sheikh Yusuf Talal DeLorenzo as part of their plans to begin an international, Shari'ah-compliant fund of funds. The Shari'ah board will also include Dr. Mohd Daud Bakar and Shiekh Nizam Yaquby.
Calyx Financial, an institutional investment firm for clients outside the United States, has announced that it has formed a Shari'ah board headed by Sheikh Yusuf Talal DeLorenzo as part of their plans to begin an international, Shari'ah-compliant fund of funds. The Shari'ah board will also include Dr. Mohd Daud Bakar and Shiekh Nizam Yaquby.
Growth in Islamic banking in the U.K.
"No interest allowed, but Islamic lending is finally finding a way", The Times (U.K), September 30, 2006
A brief article focusing on the strong growth but miniscule size of Islamic finance compared to its potential size, both in the U.K. and the Muslim world.
A brief article focusing on the strong growth but miniscule size of Islamic finance compared to its potential size, both in the U.K. and the Muslim world.
Primer on Islamic Finance
"Islamic Banking - A Fast-Growing Industry", The Middle East Media Research Institute (MEMRI) Inquiry & Analysis Series No. 297, September 29, 2006.
This article provides a brief overview of the structure and issues of Islamic banking without much probing into the details or providing insights on the future of Islamic banking. It is a worthwhile primer for those with little knowledge of Islamic banking.
This article provides a brief overview of the structure and issues of Islamic banking without much probing into the details or providing insights on the future of Islamic banking. It is a worthwhile primer for those with little knowledge of Islamic banking.
Default under Ijara (leasing) agreements
"Defining defaults in lease contracts", Gulf News special report, September 30, 2006
Gulf News provided a discussion on the conditions of default under ijara in the real estate context. The author of part one the special report, Sohail Zubairi, is the Vice president and Head of Sharia Structureing, Documentation & Product Development at the Dubai Islamic Bank. The article goes through the specific conditions for ending an ijara (leasing) agreement when the leased asset is destroyed through negligence or bad faith.
Gulf News provided a discussion on the conditions of default under ijara in the real estate context. The author of part one the special report, Sohail Zubairi, is the Vice president and Head of Sharia Structureing, Documentation & Product Development at the Dubai Islamic Bank. The article goes through the specific conditions for ending an ijara (leasing) agreement when the leased asset is destroyed through negligence or bad faith.
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