More Khazanah sukuk & Islamic branding

Khazanah Holdings will continue to issue convertible sukuk to reduce its holdings in government-linked corporations like Telekom Malaysia and PLUS Expressways.

An article about Islamic branding.

New exchangeable sukuk

Khazanah issued another exchangeable sukuk for $850 million with about 50% going to Middle Eastern investors. The first one was issued in September 2006 for $750 million exchangeable into shares of Telekom Malaysia. The sukuk will have the option to exchange into ordinary shares of PLUS Expressways Bhd.

Rapid sukuk issuance interrupts executives' vacations

The furious pace of sukuk issues has forced Islamic financial executives to cancel their vacations. The UAE is trying to issue more sukuk than Malaysia and become the region with the most sukuk issuance.

Kuwaiti-based firm Adeem Investment Company plans to expand its offices in the U.K. because of the changes to the laws designed to attract Islamic financial institutions. Adeem was one of the firms involved in the purchase of Aston Martin from Ford.

A few more details from the Financial Times about the group (BMB Group) which absorbed most of Dar Al Istithmar's staff including their Islamic economist Humayon Dar. BMB Group "specialises in investments for the royal families in Brunei, Saudi Arabia and other Gulf countries."

Islamic scholars warn against "Shari'ah shopping," describe importance of reducing the cost of Islamic finance and broadening the number of scholars consulted by Islamic banks.

New takaful products, LLB announces first Islamic ETF

CIMB takaful expects RM1 billion ($290 million) after it rolled out three new products.

Liechtensteinische Landesbank (Switzerland) Ltd. (LLB) launched the first Islamic Exchange Traded Funds (ETF), which are linked to the performance of the LLB Hilal Indices. "The LLB Hilal Indices provide a transparent benchmark for Shariah-compliant investors who wish to gain exposure to the "Islamic Crescent Region (or "Islamic Hilal"), a moon-shaped geographic area spanning from Morocco to Indonesia, including Turkey and Pakistan."

Dar al Istithmar lost it's Islamic economist and six or seven other staff members to BMB Group.

CSR, Indonesia and the GCC

A summit on corporate social responsibility (CSR)opens today in Dubai. The summit will focus on the lead provided by Western businesses as well as Islamic finance:

"The business case for CSR in the Middle East region is gaining momentum. Islamic finance is setting a good example and in many ways runs in parallel with socially responsible investing. Stakeholders now want to be associated with businesses that support a whole range of social or environmental benefits, which is still a challenge for regional corporate cultures to absorb."

Asia Times Online has a detailed description of the present and future of Islamic finance in Indonesia.

Dar Al Istithmar, a subsidiary of Deutsche Bank, has been absorbed by BMB Group to create BMB Islamic. Very little informationis available about BMB Group. Its holding company is an offshore company in Brunei.

The growth of the Islamic financial industry in the GCC has led to increased calls for the development of short-term Shari'ah-compliant financial products which companies can use for liquidity management. One way some firms do this is by wakala (e.g. Amlak Finance's $800 million, 360-day wakala), where investors give "cash with a lender who then uses it to buy qualifying financial assets. The investor gets a commission and a share of the profits generated by the funds."

Rushdi Siddiqui, global director of the Dow Jones Islamic Market Indexes, is in Malaysia discussing the necessary underpinnings of an Islamic exchange traded fund (ETF).

The Investment Dar and Airbus are considering a joint venture to provide Shari'ah-compliant financing for aircraft purchases.

Srei Infrastructure Finance Ltd. becomes the first Indian company to receive approval from the Reserve Bank of India to use Islamic financing over Rs. 200 crore (Rs. 2 billion; US$49 million). "[Sunil] Kanoria [Srei's director] was reluctant to share the details of the instrument, but said that the the cost of financing would be lower than any similar instrument in India. Industry sources said it might be similar to a quasi-equity bond."

"'Moving forward, TAQA will attempt to balance its Islamic and conventional borrowing,'," says Peter Barker Homek at an Islamic project finance conference. Islamic financing could capture GCC project finance market.

Sukuk for infrastructure

Zeti: sukuk will be important for meeting infrastructure needs of the Middle East and Asia.

The first Shari'ah-compliant infrastructure fund in India is on the way

GE may enter Islamic financial industry

General Electric may enter the Islamic finance industry with a partner already doing Islamic finance. In a presentation (pdf) on "Growth in Developing Markets" from September 29, 2006, Islamic banking is briefly mentioned under the heading "Developing products to fit markets".

Brunei issued more Shari'ah-compliant government bonds. They issued $46 million in ijara sukuk bringing the total issued by the government since April 2006 to B$800 million (US$521 million). The 91-day sukuk have a yield of 2.275%.

50% of Middle Eastern project financing involves Islamic financing.

Speaking at the "Sukuk Summit" in London, Dr. Zeti Akhtar Aziz, the governor of Bank Negara Malaysia, the Malaysian central bank described the need for "greater diversity in the type and maturity of the sukuk in the market for Islamic financial institutions and portfolio managers to manage their funds effectively".

A new report from KPMG describes the barriers remaining to the expansion of Islamic finance.

KFH expansion, Malaysia, Indonesia, Turkey & Shari'ah scholars

Kuwait Finance House, the Kuwaiti Islamic bank, will expand within the Middle East to Saudi Arabia, Oman and Qatar and may also look to expand in Asia. Currently, KFH operates only in Malaysia. The expansion will be funded by the recent $1.06 billion share sale.

The number of Malaysian Islamic banks continues to grow even as the conventional sector works to consolidate. This article is also available from Business Times as a pdf file.

CIMB Islamic appointed Sheikh Nizam Yaquby to its Shari'ah Supervisory Board for the next two years. Sh. Yaquby is a member of over 40 Islamic financial institutions' Shari'ah boards. The company's investment banking business will also triple its Islamic private equity funds.

The DIFC listing of its $1.25 billion sukuk on the DIFC pushes the amount of sukuk over the $10 billion mark.

Central Bank of Bahrain governor Rasheed Al-Maraj believes the Islamic finance industry needs to acheive greater harmonization to succeed.

Indonesian's second largest lender, PT Bank Central Asia Tbk, plans to enter the Islamic finance industry through an acquisition of two smaller lenders.

Turkey's Islamic banks (participation banks) are growing rapidly.

IIFM, Malaysia-Indonesia IF Cooperation

The International Islamic Financial Market Conference (IIFM) begins today in Bahrain. The conference is listed on the IHI site with information on the subjects covered.

A mInister in the Malaysian government, speaking at a recent conference, believes that Malaysia and Indonesia should increase cooperation on Islamic finance and halal products.

Details of the Gulf Finance House Global Depository Receipts, expected to raise between $250 and $300 million.

The sukuk conference coming soon in London will work on tightening the rules on commodity murabaha, particularly ensuring that the funds are used in a Shari'ah-compliant manner.

The Arab American News provides a summary of the two-day conference before the Canadian convention of ISNA.

KFH in Malaysia, Project finance in the GCC and an article about me

Kuwait Finance House (Malaysia) Bhd, the subsidiary of the Kuwaiti Islamic bank, is benefitting from becoming the first foreign Islamic bank in Malaysia when it opened in February of 2006. Managing director Salman Younis said, "We recently managed to conclude several deals in the region".

Project finance in the GCC which is estimated to be a $1 trillion market is one of the new growth areas in the Islamic financial industry.

A very nice article about my work with the Institute of Halal Investing written by Michelle Bates Deakin, a freelance writer for UUWorld, the magazine of the Unitarian Universalist Association.

Sukuk, Islamic investing in India & Singapore training center for Islamic bankers

There are now $8 billion of sukuk listed on the Dubai International Financial Exchange (DIFX). Total global sukuk issuance this year could be $50 billion, more than twice the $20 billion in 2006.

Islamic investors from the Gulf countries are now beginning to look for investments in India

Singapore Polytechnic will set up a training center to train new Islamic bankers.

Shari'ah-compliant home financing, sukuk and book reviews

Shari'ah-compliant home financing in Canada is up to 600 basis points more expensive than a conventional mortgage. This compares with around a 100 basis point spread between Islamic and conventional mortgages in the United States and results from a lower amount of activity. It probably also reflects the absence of a the U.S. government sponsored organization Freddie Mac (Federal Home Loan Mortgage Corporation) which buys mortgages from lenders packages & sells them as mortgage-backed securities in the secondary markets. Freddie Mac injects greater liquidity into the mortgage markets which allows lenders to serve more customers. Several Islamic financial institutions in the U.S. sell Shari'ah-compliant home financing to Freddie Mac (University Bank, Guidance Financial, Devon Bank and American Finance House-LARIBA).

Sub. Rqd.: The Financial Times reporter Farhan Bokhari writes on Lloyd's TSB decision to offer Shari'ah-compliant business products.

International Investment Group KSCC, a Kuwaiti financing company issued $200 million in unrated convertible sukuk. Ekttatab (formerly Kazma Holding) is seeking to raise $148 million from a share issue for investment in Shari'ah-compliant IPOs. UAE-based Amlak Finance will sell $272 million of sukuk.

The emergence and evolution of sukuk.

Waqf in Guernsey.

Terence Tan writes two book reviews in The Star (Malaysia). An Introduction to Islamic Finance (by Zamir Iqbal and Abbas Mirakhor) is "the first book to introduce all of the essential topics [in Islamic finance] in one volume" while Islamic Finance: The Regulatory Challenge (by Simon Archer and Rifaat Ahmed Abdel Karim) gives a " well aligned [and] consensus view on the [regulatory] way forward"

S&P Shari'ah Indexes

Standard & Poor's launched six Shari'ah-compliant indexes for the Saudi Arabain stock market. 62.9 percent of the stocks listed on the exchange are Shari'ah-compliant.

S&P Shari'ah Indexes

Standard & Poor's launched six Shari'ah-compliant indexes for the Saudi Arabain stock market. 62.9 percent of the stocks listed on the exchange are Shari'ah-compliant.

Takaful and Re-Takaful

Islamic insurance (takaful) and re-insurance (re-takaful) are described by Financial Times writer Andrea Felsted.

"While most of the attention given to Islamic finance has centred on bonds and banking, Islamic insurance is fast gaining ground.

A raft of international insurers are piling into Islamic insurance - or takaful - to gain a foothold in this expanding market.

The principles of takaful are similar to those that underpin mainstream mutual insurance."

Currently the largest market for takaful is Malaysia, but there is recent growth of interest in takaful in the Gulf Cooperation Council (GCC) states.

Council on Foreign Relations on Islamic financing

CFR's overview of Islamic finance

King & Spalding partner Jawad Ali speaks with the Council of Foreign Relations about the growth of Islamic financing.

Shari'ah scholar & lawyers

The Economist has an article on Islamic finance focusing on Shari'ah scholar Hussein Hamid Hassan.

Commentary in UK-based Legal Week addresses the cynics in the legal community working on Islamic finance with a message:

"One partner says: “There are a number of clients out there who still believe that all these deals are about is changing the word ‘interest’ to something else in loan documents. But Islamic finance works on the basis of risk-sharing, with the issuer and the bank agreeing to share the risk of an investment on agreed terms and divide profits between them."

and a warning

"And with the avalanche of petrocurrency still pouring into the sector and clear signs that sukuk trading is rapidly going mainstream, there are compelling reasons for advisers to commit to the sector. But lawyers, especially those joining the sector late, should remember that there is no such thing as a sure bet."

UK sukuk conference & controversy about Islamic hedge funds

There will be a conference in London, UK from June 20-21, "The Sukuk Summit - Strategies for Today: Demystifying Islamic Capital Markets (ICM) Products". The details and links to the summit website and press release are available from the IHI conferences listing for June 2007

Islamic hedge funds are controversial. One speaker on the topic at a conference in Bahrain told conference participants "he had nothing to say because [Islamic hedge funds] do not exist" due to the prohibition of 'selling what you don't own'. Others argue that the basic hedging strategies are Islamic in intent by providing risk control.

The Dana Gas convertible sukuk announced yesterday is part of a growing wave of convertible bond issues in the Gulf Cooperation Council (GCC) driven by the recent poor performance of the regon's equity markets.

Middle Eastern investors, likely from Kuwait or Qatar, will finance a Shari'ah-compliant real estate investment project in Japan.

Prudential, the U.K. insurance company, signed a Memorandum of Understanding yesterday with Saudi bank Aljazira to take a 39 percent stake in the bank's takaful business, Ta'awuni, as well as part of the bank's fund management business.

"ETFs could track the benchmark index, or certain growth sectors, or even Islamic finance. " --The Star (Malaysia)

DP World, DIFC issue sukuk

DP World, the company which issued the first convertible sukuk with its five year, $3.5 billion issue in early 2006, plans to issue two more sukuk (one 10-year sukuk and one "very long term" sukuk). The purpose of the issue is to 'extend its maturity profile'.

The Dubai International Financial Centre priced its first sukuk issue (al-mudabara sukuk) of $1.25 billion with a "profit participation rate" of 37.5 basis points (0.375%) above the London interbank offered rate (LIBOR).

Brunei's Islamic banking industry has 27 percent market share. The Sultanate plans on adding a longer-term sukuk issue in the future to its 91-day sukuk al-ijara.

A new convertible sukuk?

Dana Gas, the first private natural gas company in the Middle East, will issue $1 billion of sukuk. The article from Khaleej Times also mentions that Dana Gas "said a sukuk is a fixed term debt obligation that could be converted into shares of the issuer at the election of the sukuk investor and, under certain conditions, at the election of the issuer of the sukuk." This suggests that the sukuk may be convertible, an uncommon feature in sukuk The first convertible sukuk was the $3.5 billion Dubai Ports World sukuk used for the takeover of P&O in the beginning of 2006.

Analysts are still pessimistic about Amlak Finance's application for a banking license in the UAE.

The National Bank of Dubai will begin offering a "Shari'ah-compliant savings plan with takaful benefits" with Dubai Islamic Insurance and Reinsurance Company and FWU AG. The minimum monthly contribution is AED 500 (US$ 136).

Islamic banking has potential to develop in the West, says K S Sreekumar of Trade Arabia

UK Islamic home financing, real estate fund & takaful

Since April 6, 2007, the U.K. Financial Services Authority has regulated the Islamic mortgage market in the U.K. and the regulation has created significant growth in the industry.

HDG Mansur, a US & UK property investment company is planning to raise funds for Shari'ah-compliant real estate investments in Western countries. The fund, Al-Umran Global Property Fund aims to have a portfolio between $1.2 billion and $2.0 billion within a year.

According to Standard & Poor's, the regulatory environment in Malaysia lowers the industry risk of the takaful industry compared with the Gulf Cooperation Council.

Opinions on Islamic finance, plans & reports denied

An opinion piece about whether Islamic finance should continue creating Islamic versions of conventional products or whether it would be better served in the long run by focusing on providing products which are not currently available.

Conventional and Islamic real estate financing in the UAE should rely more on securitization, says Nasser Saidi, the cheif economist at the Dubai International Financial Centre

Gillian Tett of the Financial Times explores the new innovations in Islamic finance, as well as critics' claims that the industry should fully develop a smaller set of products before introducing new products such as Shari'ah-compliant hedge funds and derivatives. In addition to rapidly increasing the complexity of the Islamic financial industry, critics argue that despite having the contracts approved by scholars, contravene the prohibition of gharar (speculation).

Professor Bala Shanmugam of Monash University in Malaysia argues that Islamic Financial Institutions (IFIs) should offer micro loans to the poor using murabaha (cost-plus financing) or qard hassan (benevolent loan).

Another description of Gulf Finance House's (GFH) plan to issue Global Depository Receipts (GDRs) on the London Stock Exchange.

The Kuwaiti government denies reports that it is selling its stake in Kuwait Finance House.

Commercial banking & GFH listing on the LSE

The Commercial Bank of Dubai received approval from the UAE central bank to open an Islamic banking window.

Gulf Finance House plans to issue shares on the London Stock Exchange by the end of June.