Wakala enters Europe, Transparency in Islamic finance, new public fund and other news

EIIB offers Wakala

The European Islamic Investment Bank (EIIB) will offer wakala, a product used in the Middle East, but not yet in Europe, is similar to a money market account where deposits are used in investments and a commission and a share of profits are paid to depositors. Using wakala is one way in which the use of murabaha for financing can be reduced from current levels (estimated at 80 percent of all Islamic financial transactions) and the use of equity instruments encouraged.

Central Bank of Bahrain governor calls for transparency in Islamic finance

In another speech, this one give at the Euromoney Islamic Finance Summit in London, the Central Bank of Bahrain governor Rasheed Al Maraj warned of dire consequences for the future of the Islamic financial industry are not created. Mr. Al Maraj described how:

"Investors must clearly understand the nature of the investment they are entering into, including in particular the potential downside risks to their capital. The allocation of costs and the calculation of profits must also be transparent. Furthermore, these must reflect in a fair manner the relative contributions of shareholders and customers. If these areas are not successfully addressed, then certain parts of the industry risk damage to their credibility, which in turn may discredit the industry as a whole."

This movement to increased transparency, with the goal set higher than minimum regulatory standards will do a great deal to safeguard the industry's reputation and increase its credibility as an ethical industry.

Three Middle Eastern banks eye Indonesian Islamic banking market

Three banks, Al Baraka Islamic Bank, Qatar Islamic Bank and Al Salam Bank, plan to expand their operations into Indonesia. This follows moves by Kuwait Finance House to expand into Asian markets through Malaysia.

Dubai Growth Fund (Enmaa') Class A announced

Asset management and investment banking firm 3i Capital Groupannounced the launch of a $100,000,000 Shari'ah-compliant fund, part of an AED1 billion ($272 million) Dubai Growth Fund. The funds will be invested in high growth equities and pre-IPO firms and will follow the guidelines of the Dow Jones Islamic Market Index

Other News

A description of the offering and listing of Dubai Holdings' $2.46 billion sukuk.

Deutsche Bank white paper, Ed Balls speaks on Islamic finance & other news

Deutsche Bank produces white paper on the structure of Shari'ah-compliant "swaps"

Deutsche Bank and the consultancy it partly owns, Dar Al Istithmar, produced a white paper on structuring a Shari'ah-compliant "swap". While the paper acknowledges that "the technique DB uses has the same economic result as a total return swap but is structured differently" to ensure Shari'ah-compliance, the move towards transparency demonstrated by the white paper being publicly available is a positive move in the Islamic financial industry and I hope that other IFIs begin to demonstrate commitment to a similar level of transparency. [Press Release] [White Paper - PDF]

Ed Balls speaks on the British gov't role in Islamic financial industry

UK Economic Secretary Ed Balls MP, spoke at the 6th Euromoney Annual Islamic Finance summit in London, where he described the steps already taken, as well as those under development, to attract Shari'ah-compliant funds into the British market. While he addressed the Shari'ah-compliant mortgage market as well as other products designed to assuage funding problems for Muslim-owned businesses, his primary focus was on sukuk issue and secondary market trading in the UK. To date, most sukuk are held until maturity because there is no secondary market, in part because a lack of common standards creates uncertainty about individual sukuk. "The lack of standardisation is hindering liquidity," Ed Balls notes in the prepared text for his speech. "It prevents investors from knowing what risk they are assuming when they invest and increases the costs associated with sukuk". [Press Release] [Text of Speech]

Other News

A conference on various investment topics in the Middle East & North Africa (MENA) region will be held February 20-21, 2007 in Dubai, UAE. There is a website for the Broader MENA Investment Summit and it will be added shortly to the IHI's Conference list.

Merrill Lynch is opening an office at the Dubai International Financial Centre, in part to capture a share of the growing market for Islamic finance.

The government of Kuwait announced the formation of the Jaber Islamic Bank, which will be 24 percent owned by the state and the remaining shares will be privately held.

UM Financial, DJIM Titans 100 Index ETF, Sukuk standards

Shari'ah-compliant mortgages in Canada

The Toronto Star has a story on a financing company in Canada, UM Financial, that has been offering diminishing partnership mortgage products (musharaka mutanaqisa). The company has partnered with two companies, first the Credit Union Central of Ontario (CUCO), then recently also the McMaster Savings & Credit Union. The Shari'ah board of UM Financial is made up of local Islamic scholars and community leaders.

Increase appetite for risk in IFIs--Rushdi Siddiqi

Rushdi Siddiqi, Director of the Dow Jones Islamic Market Index Group, believes Islamic financial insitutions need to increase their appetite for risk. Mr. Siddiqi believes that Islamic banks need to increase their size in order to achieve the goal of higher appetite for risk.

Dow Jones Islamic Market Titans 100 Index launched

The first Islamic exchange traded fund (ETF) was licensed to be listed on the Swiss exchange. The ETF is issued by BNP Paribas and based on the Dow Jones Islamic Market Titans 100 Index (pdf), an index of the 100 largest companies that comply with the Shari'ah standards of the Dow Jones Islamic Market Index.

IIFM & ICMA to develop sukuk standards

The International Islamic Financial Markets (IIFM) and International Capital Market Association (ICMA) have agreed to cooperate in developing universal standards for sukuk to increase the appeal of the products.

Shari'ah supervisory boards, KFH Malaysia to offer retail products, Other news

KFHMB to offer retail Islamic banking products in 2007

The Malaysian subsidiary of Kuwait Finance House, Kuwait Finance House (Malaysia) Bhd (KFHMB) has announced that it will roll out its line of retail Islamic banking products this year. KFHMB offers foreign currency current accounts, diminishing musharaka (musharaka mutanaqisa) and other home financing plans. The bank is one of only three foreign-owned Islamic banks in Malaysia and sees its expansion there as the first step in opening branches across Southeast Asia.

Role of Shari'ah Supervisory Boards

In a detailed description of the shortage of qualified Shari'ah scholars, Nik Muhamad Hafiz Nik Hassan, the senior executive of the Islamic Financial Services Unit at the Labuan Offshore Financial Services Authority (LOFSA), highlights a criticism of the current structure of Shari'ah Supervisory Board. Scholars like Dr. Ali Mohammed El Gari and the late Dr. Zaki Badawi have criticized the appearance of a conflict of interest between the Shari'ah board's role performing their regulatory role while also being paid by the banks for which they provide oversight. While accurate figures are withheld by Islamic financial institutions, it is widely understood that the fees paid to Shari'ah scholars is very high (up to $500,000) and has increased in recent years as the demand for qualified Shari'ah scholars has risen faster than the supply.

Other news

The Gulf Daily News in Bahrain provides a description of the opening day of the International Islamic Financial Market (IIFM) meeting in Karachi, Pakistan.

As expected, the Indonesion government announced a forthcoming Islamic bond issue. Although Indonesia is the largest Muslim majority country in the world by population, the country has an underdeveloped Islamic finance market. 88% of its 245 million people are Muslim.

Islamic banking, GIFF, Pakistani government to promote Islamic financial products

Islamic banking

In an interesting opinion piece (with a discussion over at washingtonpost.com), a professor at Durham University in the U.K., Rodney Wilson, contemplates whether Islamic banking should be embraced as a positive development in banking or shunned as a tool for 'financial ghettoization'. Along the way to explaining why he believes it is provides a net benefit to the community, he writes:

Ultimately Islamic banking and finance is about the emergence of a distinctively Islamic form of capitalism that may co-exist and interact with Western, Chinese, Russian or any other capitalism. Such a development should be welcomed and facilitated, and not hindered or suppressed.

While Professor Wilson's argument largely makes sense in terms of injecting a new ethical constraint into mainstream banking, I find one aspect of his argument a bit troubling.

Professor Wilson believes that the effective privatization of Shari'ah boards (i.e. a system where the Shari'ah scholars are employed by Islamic financial institutions individually) contributes to the development of the industry (as opposed to government-controlled Shari'ah boards). I don't believe this is necessarily a net positive. While it is undeniable that countries like Sudan, Iran and, until recently, Pakistan that employed a top-down approach had a less developed Islamic banking system, the appearance of conflicts of interest in the 'privatized' Shari'ah board model harms the appeal of Islamic banks. At the same time, Kuwait has a Shari'ah arbitration group that was created by the government that decides Shari'ah-compliance where the scholars disagree and has around 30 Islamic financial institutions.

Pakistan to promote Islamic finance

The governor of the State Bank of Pakistan, Dr. Shamshad Akhtar (also the Deputy Governor of the Islamic Financial Standards Board (IFSB) for 2007, said the government was ready to promote the further development of Islamic finance in the country. She was speaking at the International Islamic Finance Conference in Karachi. A summary of the conference is available from albawaba.com.

Bank Negara Malaysia to host Global Islamic Finance Forum (GIFF) in March

Bank Negara Malaysia, the Malaysian central bank, announced that it will hold the Global Islamic Finance Forum from March 26 - 29, 2007 in Kuala Lumpur, Malaysia. The forum will be made up of four concurrently occuring forums, the Investors & Issuers Forum (March 27-28), the Financial Regulators Forum in Islamic Finance (March 26-29), the Banking and Financial Law School (March 27) and the IFSB Annual Meetings & Events 2007 (March 24-29).

The conferences will be added shortly to the Institute of Halal Investing's listing of Islamic finance conferences

Japanese Islamic Finance Conference

A summary is available from the IFSB.

Miscellany

AmInvestment received an award from Islamic Finance News for its recent REIT and Mudaraba.

Newsletter

As the IHI starts to move into greater clarity as an organization, I plan to start compiling a list of those who want to receive a weekly or monthly newsletter about Islamic finance and the Institute of Halal Investing. If readers of my blog want to sign up or provide a suggestion for it (e.g., please include X, Y and Z in the Newsletter), either leave a comment on this post or email me at info@investhalal.org.

CIMB Islamizing products, Interview with CEO of Sharjah Islamic Bank, Japanese Islamic financial conference

Japanese hold conference on Islamic finance, plan issue of sukuk

The Japanese Minister of Finance, Hiroshi Watanabe, expects Islamic money and financial systems to become more influential. Mr. Watanabe expects the increase to come "amid high crude oil prices" and wants Japanese businesses to look to attract funds from the Islamic financial markets through the issue of sukuk.

The Japanese Bank for International Cooperation announced that it will issue sukuk, becoming the first G-8 country government-linked institution to do so.

GCC could see Islamic capital flight

Limited investment opportunities and low levels of liquidity within Islamic financial markets in the GCC could cause a flight of Islamic capital out of the GCC region, according to Rushdi Siddiqui, Global Director of the Dow Jones Islamic Market Index Group.

Interview with CEO of Sharjah Islamic Bank

AMEinfo has an audio interview with Mohammad Abdulla, CEO of Sharjah Islamic Bank on the future of the industry, particularly within the UAE.

CIMB announces plans to Islamize every product they offer

CIMB Islamic Bank, the Islamic arm of CIMB Bank in Malaysia has announced plans to Islamize all the conventional products it offers, working on 63 products over the next year. The latest product, Islamic All-Stars Global Restricted Mudharabah Structured Investment-i, which offers capital protection, a return based on the future returns of twenty global blue-chip companies. The "indicative gross profit rate" will be 8 percent for the first year and between 8.5 and 10 percent for years two through five.

Miscellany

The Qatar Islamic Bank has announced plans to seek a license in the U.K. as a part of its expansion into Europe by providing 51% of the £25 million ($49.6 million) capital for the Europe Finance House. No further details are available about the Europe Finance House.

Malaysian national mortgage firm Cagamas Bhd will offer bonds in Q2 of 2007, according to an unnamed source. Although it has not been announced yet, the bonds are expected to be Islamic bonds (sukuk).

Shari'ah consultancy, Islamic Venture Capital, Indian Islamic Finance

Shari'ah consultancy to form

Plans are laid for the opening of an Islamic finance consultancy. The new consultancy will be launched by Dubai Islamic Bank and will provide research, training and legal/Shari'ah assistance to its clients and eventually provide Shari'ah rating and audit functions as well.

Islamic venture capital

Muhammad Saleem, author of the critical book Islamic Banking: a $300bn Deception, wrote in the Financial Times about proposing the use of venture capital-style products as an alternative to the murabaha (cost-plus) basis used by most Islamic financial institutions. He believes these will be closer to the substance of the Shari'ah. While this may be the case, it will be difficult to structure an entire financial system around VC. Despite the problems with moving towards a VC model, particularly in countries with weaker legal protections for investors, the VC model could still be implemented on a smaller level, such as a halal form of microfinancing. It is this area, I believe, which will seal the socially beneficial role for Islamic finance, promoting the equitable goals of Islamic finance and widening its impact and popularity among both Muslims and non-Muslims.

Indian Islamic banking

There has been a recent push by Muslim MPs in India for the government to allow the growth of Shari'ah-compliant banking in the country.

Miscellany
A veteran Bahraini banker, Faisal Alshowaikh,has been named as chief of the new Asian Finance Bank, the third foreign-owned Islamic bank to open in Malaysia.

Malaysian government sukuk, Indonesian Shari'ah-compliant finance law, Islamic Develoment Bank loans

Islamic Development Bank announces loans

On January 15th, the Islamic Development Bank, the multilateral bank representing countries within the Organization of the Islamic Conference, announced the receipients of loans from its Development and Technical Assistance fund, as well as loans and grants from its Waqf Fund.

Indonesian law on Shari'ah-compliant financial institutions

The Indonesian House of Representatives is planning to pass a law allowing and regulating Shari'ah-compliant financial institutions. The law will allow Islamic banking and finance to begin to operate within the largest Muslim-majority country where Islamic finance is significantly underdeveloped compared to the Gulf Region and Southeast Asian countries like Malaysia.

Third foreign-owned Islamic bank opens in Malaysia

The Asian Finance Bank opens in Malaysia, becoming the third foreign-owned Islamic bank to begin operating in Malaysia. Gulf Times reports that Qatar Islamic Bank (QIB) has a 20% stake in the Asian Finance Bank. The two other foreign owned Islamic banks are Kuwait Finance House and Saudi-owned Al Rahji Banking and Investment.

Malaysia contemplates issuing U.S. Dollar-denominated Islamic debt

The Malaysian government announced plans to issue a U.S. Dollar-denominated Islamic government bond upon the maturity of US$600 million, 5-year Islamic bond issued in 2002. The new bond would be structured to appeal to Gulf Region investors who tend to follow stricter interpretations of Shari'ah-compliance and will be exchangeable for shares in companies owned by the government's investment holding arm Khazanah Nasional Bhd. The bonds will be structured using ijara, a leasing transaction, or musharaka, a partnership arrangement. In an ijara-based sukuk, the issuer sells government property to a special purpose vehicle funded by the sukuk issue, which then leases back the property to the government and transfers the rent payments to the holders of the sukuk. At the maturity date, the SPV re-sells the property to the government. In a musharaka transaction, the arrangement is less clear, but I believe it would be structured as follows. The government would sell the property to an SPV, which is funded by issuing sukuk. The government pays rent to sukuk holders plus a share of the value of the property owned by the SPV, thus buying back the property over the length of the sukuk issue.

Miscellany

Ratings Agency Malaysia (RAM) received the second-best ranking for Islamic Ratings Agencies. The first place Islamic rating agency was Islamic International Rating Agency (IIRA).

Shari'ah standards and sequential murabaha

Unified Shari'ah standards unlikely

Reuters reports again that there is strong resistance to standardizing Islamic financial products and Shari'ah standards. From my perspective, I understand the resistance, particularly since the industry is so young relative to conventional finance, but I think there is an aspect of standardization that should be encouraged and that is standards dealing with conflicts of interest (both real and potential) between the Shari'ah boards and the banks they regulate (and work for) and transparency and social impact regulation. In terms of standardizing products and accounting standards, I disagree with the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the industry's accounting standards organization head Mohamad Alchaar, who believes that "Products have to be similar...across markets", according to a quote in the Reuters article, "Fully unified Islamic finance rules seem unlikely".

While regulatory standards for Islamic financial institutions are vitally important, harmonizing products rather than standards for transparency will make Islamic finance too rigid for an industry at its level of maturity. The reliance on what Mahmoud El-Gamal calls 'Shari'ah arbitrage' and a myopic reductionist focus on the term 'interest' rather than the intent of the prohibition of riba calls for promoting flexibility of product development, while the need for prudential regulatory standards promotes harmonization of transparency requirements of Islamic financial institutions. It is in this area where two needs arise most clearly: conflict of interest mitigation for Shari'ah boards, and the promotion of the tools developed in the socially responsible investing and corporate social responsibility movements.

Sequential murabaha

The deal is described as a "series of sequential murabaha transactions". The property relationship director at Lloyd TSB Coporate Markets is quoted:

"This is a landmark Murabaha deal that required a specially tailored and individually structured finance package. We were able to bring together our commercial property experience, our track record in Islamic finance and our financial markets expertise to ensure we arranged the best deal for ADEEM."

While the article provides a description of the structured finance-nature of the transaction, it largely avoids the mechanism by which it is Shari'ah-compliant. There is no distinction between the transaction and a conventional transaction except for the re-engineering from conventional to 'sequential murabaha'. It generated fees for the organizations involved, but it is unclear how it increased the social equity impact of the project compared to a conventional, explicitly interest-based transaction.

KFH buys stake in RHB, Islamic credit cards, Miscellany

Kuwait Finance House buys stake in RHB

Despite the denials issued yesterday, Kuwait Finance House announced it had reached a Memorandum of Understanding for the purchase of 32.8% of Rashid Hussain Bhd Group, parent company of RHB Islamic Bank from Utama Banking Group.

Shari'ah-compliant credit cards

Abu Dhabi Islamic Bank has concluded its drawing
for monetary prizes for using its Shari'ah-compliant credit card. They note that

"All ADIB contracts, operations and transactions are carried out under the Islamic Shari'a principles with a strong focus on customer needs and innovative products and services in order to provide a customer focused ethical banking solution. [...] ADIB’s lines of products and services are 100% Shari’a compliant and offer the lowest profit rates available."

The idea of a Shari'ah-compliant credit card seems to stretch the credulity of Islamic finance as something more than myopic reductionism towards a focus on the term 'interest', rather than the concept of exploitative, usurious lending behavior. In the previous description, the difference between the Islamic and conventional product is the word 'profit' being used instead of 'interest'. To add what is essentially a lottery to the credit card adds to the image of a product missing the intent of the prohibition of riba.

Miscellany

Bahrain Islamic Bank (BIsB) announced a 77 percent increase in profits in 2006.

Islamic International Rating Agency (IIRA) voted Best Islamic Rating Agency in a poll from Islamic Finance News.

Palm Oil REITs, RHB stake sale, International Shari'ah standards

Malaysian palm oil REIT

Boustead Holdings Bhd announced a REIT holding eight Malaysian palm oil estates and two palm oil mills. It will be Shari'ah compliant, but there is not a description on how this will be accomplished since most REITs have higher debt that conventional Shari'ah standards allow.

Utama denies sale of RHB to KFH

While reports have indicated that Kuwait Finance House planned to purchase a 32.8% stake in RHB Group, the company currently owning the shares, Utama Banking Group, has denied the reports, but is seeking approval to negotiate the sale of the shares with another buyer, Primus Pacific Partners.

No international Shari'ah standards needed

AMEinfo reports that an unnamed Shari'ah scholar has stated that no unified Shari'ah standards are needed, but that a baseline set of standards that allow local differentiation would be preferable.

Increase transparency of IFIs--CBB Governor

The Central Bank of Bahrain's governor Rasheed Al Maraj said he wanted to see more transparency at Islamic financial institutions to increase the level of trust the institutions are held in by customers and potential customers. He was speaking at the two-day Shari'ah Conference for Islamic Financial Institutions.

Miscellany
Qatar National Bank's Islamic wing, QNB Al Islami, has announced plans to increase the number of branches.

IFSB Chair named, KFH to buy share of Bank Muamalat, Islamic hedge funds

IFSB

The Islamic Financial Services Board has named Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia as its Chairwoman in 2007. Her deputy will be Dr. Shamsad Akhtar, Governor of the State Bank of Pakistan who became the first female governor of the bank in 2006 0following a career working for the World Bank and Asian Development Bank.

KFH, Bank Muamalat & RHB Islamic Bank

Kuwait Finance House, a large Kuwaiti Islamic financial institution has been trying to enter the Malaysian market and is believed to be trying to purchase a 70% stake in the country's second-largest Islamic bank, Bank Muamalat as well as a 32.8% stake in Rashid Hussain Bhd (RHB), the parent company of RHB Islamic bank.

Testing the limits of financial engineering

An article in the Norwalk (Connecticut) Advocate describes the development of products needed to create an Islamic hedge fund by Connecticut-based Shariah Capital (which provides an article on sukuk from U.S. News & World Report a week ago). The article describes how the "firm received fatwas, or religious blessings, on Shariah-compliant investment vehicles that provide an alternative to short-selling and options trading." The key to this description is that the fatawa create Shari'ah-compliant versions of conventional products and their success criteria, therefore, is how closely they match conventional products, while remaining compliant with the Shari'ah. This is described even more succinctly on Shariah Capital's website:

"Shariah Capital is committed to becoming a leader in modern Islamic finance by developing the solutions behind competitive Shariah compliant alternatives to conventional Western financial instruments and investment products. [...] In collaboration with prominent Shariah scholars and Western financial and legal experts, Shariah Capital has developed risk management tools that replicate the economics of conventional short sales, options trading and leverage with Shariah compliant equivalents."

While Shariah Capital pursues more controversial products than many Islamic financial institutions, the way of thinking is common with most other Islamic financial institutions: Let's find a way to have conventional produts re-engineered to become Shari'ah-compliant. This is one way to open a new niche market with a customer base that will pay extra cost to have products that are backed by a fatwa certifying that it conforms to the scholars' interpretation of Islamic law & jurisprudence, but it is not innovative in a way that will expand its market outside of it's niche. Innovation should be directed more towards incorporating the lessons learned from Socially Responsible investing (SRI) into Islamic finance and tailoring SRI to the ethical priorities of Islam. This will create products with appeal to a larger segment of the Muslim community and also, particularly given some of the shared roots between Christianity, Judaism & Islam, could make Islamic finance appealing to non-Muslims as well, which would allow the industry to make an even larger impact.

Islamic Bank of Britain, Burnei Islamic Finance University & Islamic banking in 2007

"Islamic Bank of Britain FD resigns", Accountancy Age, January 11, 2007

The Finance Director of the Islamic Bank of Britain will leave the bank March 31, 2007, but it is not yet clear to which Islamic financial institution he will move.

"Islamic varsity to be best",Brunei Times, January 11, 2007

A new Islamic university is planned in Brunei. The Universiti Islam Sharif Ali will try to attract scholars, including those specializing in Islamic banking, from around the world.

"Malaysia's Islamic bank assets may rise 15pc", Business Times (Malaysia), January 11, 2007

Another article describing the movement of Islamic finance in 2006 and predicting another year of rapid growth in 2007.

Articles - January 10th

Asian Islamic Banks ranked

"Maybank is Region's Largest Islamic Banking Player", Bernama, January 8, 2007

The study found that Malaysia was the location of most of the largest 40 Asian Islamic banks with 17 institutions holding 73 percent of the total Shari'ah-compliant assets.

Islamic-compliant tracker

"Pioneer Islamic-compliant tracker launched", Financial Times, January 9, 2007

Islamic sukuk

"Islamic bond sales may grow to 11 billion pounds", Reuters UK, January 10, 2007

Amlak to open in Egypt

"Amlak to set up branch in Egyptian market", Zawya, January 8, 2007

Amlak will be the first Emirati home finance house with an international branch.

Malaysia Islamic finance

"Islamic banking Malaysia's Big Bang", The Star (Malaysia), January 8, 2007

Bank Negara again voted as Best Central Bank, The Edge Daily, January 10, 2007

"Islamic financial centre initiative promises brighter year", Business Times (Malaysia), January 8, 2007

Islamic Development Bank

"Islamic Development Bank plans bond sale - paper", Yahoo! Asia News, January 6, 2007

"IDB Plans to Facilitate Economic Integration", Zawya, January 9, 2007

Indian Islamic finance

"The Shariah way to Gulf funds", Economic Times (India), January 8, 2007

Islamic Banking 2007

"Islamic Banking 2007 Outlool: Eager Eyes on RM1t market", Business Times (Malaysia), January 8, 2007

Islamic Real Estate Finance ME Awards

"Dubai Properties wins award for BB", AMEinfo, January 9, 2007

Dubai Holdings sukuk

"Dubai Holdings unit likely to float bonds this month", Gulf News, January 10, 2007

Islamic Commercial Papers

New Islamic securities issued

"Gamuda Announces Islamic Securities Programme", Bernama, January 5, 2007

The 'Islamic Commercial papers' are reported to be "issued based on either the Syariah principle of Musyarakah [Musharaka] or Murabahah". Based on the agency problems associated with Musharaka, it is highly likely that the issue will follow other Islamic securities issues and be based on a murabaha transaction, although it is unspecified what commodity will be used in the transaction.

January 4, 2007

Apologies for the brevity, but I have been out of the office taking care of my jury duty.

Islamic banking awards - Islamic Real Estate Finance (IREF)

"Arab Banking Corporation (B.S.C.) lands two top awards at IREF ceremony in Dubai", AMEinfo, January 3, 2007

Arab Banking Corporation (B.S.C.)
IREF

"DIB named Best Islamic Finance House in UAE", AMEinfo, January 3, 2007

Dubai Islamic Bank

Convertible sukuk issue used to sell Abu Dhabi Islamic bank to EIIC

"Abu Dhabi Islamic Bank plans $408.5m sukuk", The Peninsula (Qatar), January 3, 2007

Abu Dhabi Islamic Bank

Emirates International Investment Co.

Kuveyt Turk

"Kuveyt Turk Scores A First With US$200 Mln Syndicated Murabaha Facility", Bernama, January 4, 2007

Turkiye Finans Katilim Bankasi (Kuveyt Turk)

Sukuk, Growth in 2007 & Technology Use in Islamic finance

Islamic banking growth in 2007

"Islamic Banking in 2007 Set for Massive Growth", MENAfn, January 1, 2007

An article discussing the growth prospects for Islamic banking over the coming year.

Palm oil sukuk

"Tapping the debt capital market", The Star (Malaysia), January 1, 2007

"From 2001 to 2006, 81% of the debt papers issued by plantation companies were based on Islamic principles. Al Ijarah made up 40% of the total debt papers issued, followed by Al-Bai Bithaman Ajil (24%) and Murabahah (11%). Out of these issues, 42% were structured debts, 52% were straight bonds and 6% were asset-backed securities."

IT use in Islamic finance

"Malaysian Islamic banks more tech savvy but less profitable", Business Times (Malaysia), January 2, 2007

An article about the use of technology in Islamic finance and the relative use of technology and its influence on Islamic financial profitability. It appears that while GCC IFIs use a lower level of technology than Malaysian IFIs, they exhibit higher profitability likely due to better utilization of the technology.