Microcredit Client Survey - A Brief Review

While this was not necessarily related to Islamic finance, it caught my attention because the March issue of the newsletter focuses on developing a halal microfinance model. This paper provides an example of some issues related to measuring outcomes of microcredit programs.

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Short Review of:
Ahmad, Qazi Kholiquzzaman. 2007. "Socio-Economic and Indebtedness-Related Impact of Micro-Credit in Bangladesh" The University Press Limited, Dhaka.

Available online through International Union for Conservation of Nature and Natural Resources (IUCN) in Word format

This report, paid for by Action Aid Bangladesh, an anti-poverty group, and written by Action Aid and Bangladesh Unnayan Parishad (BUP), a self-described "multi-disciplinary research organization" presents the results of interviews with 2,501 people across Bangladesh with more than 4 years of borrowing history from microfinance insitutions (MFIs). Of the 2,501 interviewees, over 99 percent were women and most were married women. 87% of those interviewed borrowed less than Taka 20,000 (US$290) and a majority (56.1%) borrowed less than Taka 10,000 (US$144).

The report takes, I believe, an overly critical view of the effect MFIs and microcredit in general can have. They appear to base their judgements on an idealistic view that microfinancing alone should be able to help the majority of the people they interviewed as measured by becoming landowners, becoming more educated, owning cultivated land and large livestock, food intake, access to sanitation and access to health services. While the ultimate goal is to raise the level of income of MFI clients, it will not happen in just the 30 year period in which MFIs have operated in Bangladesh. There is also an element to which the pool of those interviewed will tend to have worse outcomes than the total pool of MFI clients. By only interviewing those with 4 years or more of microcredit history, the study excludes those who are able to build their assets so they no longer need to rely on micro-credit loans. One metric in particular will demonstrate why this problem is likely to be present. Most MFIs focus their services on the landless poor so their client base will typically be made up of a high number of landless (or those owning very small amounts of land) and this statistic will stay relatively constant over the life of the institution as some borrowers are able to buy land, they will drop out of the client base of the MFI as new landless clients come in. One cannot necessarily assume that because "there is virtually no change in the pattern of ownership of homestead land, with about 92% owning less than 25 decimals, both now and before enrollment" that microcredit is unsuccessful in reducing poverty (p. 32).

MFIs are not a silver bullet cure for poverty, nor are they perfect or applicable to all situations (e.g., some Muslims may not use microfinance because it is based on interest, which many believe is prohibitted as riba). However, microfinance provides a viable tool to fight poverty and if a halal microfinance product is developed, could be an added way to help the poor improve their own economic and social status.

London launch of Islamic bonds

The FInancial Times reported today that two large sukuk, one $2.5 billion from Aldar Properties and one likely above $1 billion for Dubai Islamic Bank, will be listed on the London Stock Exchange within the next several weeks. The bonds are part of efforts in the U.K. to make London the center of Islamic finance in the West.

Japan enters Islamic finance training, UBG denies EPF bid for stake in RHB, Emirates Global Islamic Bank offers istisna'

Bank of Japan beginning to learn about Islamic finance

The Bank of Japan, will work to learn about how Islamic finance works, according to BoJ Governonr Toshihiko Fukui. The development follows the announcement by the Japan Bank for International Cooperation (JBIC) in November of its upcoming issue of Shari'ah-compliant sukuk. Japanese lender Bank of Tokyo-Mitsubishi UFJ Ltd. is working on sukuk issues with Malaysian CIMB Group Bhd, parent company of CIMB Islamic.

Earlier this month, Dr. Zeti Akhtar Aziz, governor of Bank Negara Malaysia, urged Japan to become more involved in the Islamic finance industry.

Utama Banking Group denies knowledge of EPF bid for stake in RHB

Utama Banking Group which holds 32.8% of Rashid Hussain Bhd, says it is unaware of an unnamed source's claim of a bid from Employers Provident Fund, which currently owns 30 percent of RHB, for UBG's holdings of RHB.

Emirates Global Islamic Bank to offer istisna'

Emirates Global Islamic Bank Limited, which was certified as an Islamic bank by the State Bank of Pakistan on February 13, 2007, announced that it will offer istisna' as a form of new home finance. Istisna' is a means of finance for projects with a longer manufacturing process where the agreement lays out the financing timeline for the project. The chairman of Emirates Global Islamic Bank, Sheikh Tariq Bin Faisal Al Qassimi, is also chairman of Emirates Investment Group.

Mobily to borrow $2.8 billion

The funds will be borrowed through Shari'ah-compliant means, but the specifics were not released.

Carbon-neutral Islamic finance conference, Bank Muamalat, Mudaraba needs improved corporate governance

Islamic finance conference to be carbon-neutral

The 3rd Annual Islamic Wealth Management Event, to be held April 24-25, 2007, will be carbon neutral (using a carbon offsetting service from Carbonfund.org). The conference, organized by Michael Gassner Consultancy, Ltd., is the first conference in Islamic finance to be carbon neutral and, I believe, the first step in a trend of Islamic financial institutions adopting ideas from socially responsible investing (which are also present in Islamic belief) such as environmental impact awareness, fair labor standards and consciousness about how Islamic finance can be used as a way to help the poor and reduce poverty.

Bank Muamalat denies offering shares to Kuwait Finance House

Malaysian Islamic bank Bank Muamalat denied offering a portion of its shares, 70 percent of which are owned by Bukhari Capital Bhd, to Kuwait Finance House (KFH). The bank did not deny that it would look at any 'good' offers, but said that it was focused on asset growth. KFH is one of the few foreign-owned Islamic banks in Malaysia and is currently bidding for a controlling stake in Rashid Hussain Bhd, which owns the parent company of RHB Islamic Bank Bhd.

Improve corporate governance in mudaraba--SECP commissioner

The Securities & Exchange Commission of Pakistan (SECP) commissioner, Salman Shaikh believes that corporate governance in mudaraba-financed ventures should be improved. Speaking to top management of the Modaraba Association of Pakistan, he said "the basic modaraba model should be re-evaluated and newer model with enhanced shareholders’ rights, eviction of bad management, a clear separation of ownership and control should be considered."

Lloyds looks to Qatar

Lloyd's, the large insurance company, is looking at entering the market for Islamic insurance in Qatar.

Deyaar to go public

Deyaar, the real estate subsidiary of Dubai Islamic Bank, will make an initial public offering (IPO) in the first half of 2007, pending regulatory approval.

Bahrain Islamic banks in Malaysia, Kenyan Islamic bank, SBP speech, Accounting & Legal Issues in Islamic finance

Bahraini banks moving into Malaysia?

The Deputy Prime Minister Datuk Seri Najib Tun Razakannounced that, in addition to the Gulf area banks Kuwait Finance House and Al Rajhi Banking & Investment Corp which already operate in Malaysia, a Bahraini Islamic bank wants a license to operate in the country.

First Islamic bank to open in Kenya

The bank, the Gulf African Bank Ltd., is financed by Dubai Islamic Bank, Bank Muscat International, Istithmar, the Free Trade Area bank and Saudi investors. It will open in April. [Previous post]

State Bank of Pakistan governor speech

In a speech over the weekend, Dr. Shamshad Akhtar, the governor of the State Bank of Pakistan echoed the message of the central bank governor of Malaysia that Islamic banks should focus on the SME market.

Accounting & Legal Issues in Islamic finance

There are issues with legal and accounting differences between Islamic finance and conventional finance. The former will be discussed at an IFSB Conference on March 28-29, 2007 while the latter is being discussed after the release of a study by the University of Wollongong in Dubai (UOWD).

The IFSB conference is listed on the Institute of Halal Investing website, conference page

Broadening markets for Islamic finance, RHB bidding war could end today

Broaden market for Islamic finance --Malaysian Central Bank Governor Dr. Zeti

In a speech given today for the INCIEF conference "Islamic Finance: Issues and Challenges of Co-existence in an Entrenched Conventional System", the governor of Bank Negara Malaysia, Dr. Zeti Akhtar Aziz, commented that:

"Islamic finance must promote greater financial inclusion involving all levels of the community. Opportunities also need to be created for Islamic financial products to have an outreach to the small and medium-sized enterprises. Moreover, financial instruments structured under the Salam, Istisna' and Musyarakah [Musharaka] contracts need to be designed to stimulate activities in those sectors such as agriculture and manufacturing where there is limited participation by conventional finance. We need to reach those segments of society and economic activities that have not fully benefited from the success of Islamic finance."

This is one area in which the Islamic financial industry can successfully compete with the conventional financial industry by offering distinctive products that are not just Shari'ah-compliant versions of conventional products. Within the SME market (as well as in microfinancing), if Islamic banks can develop monitoring systems where borrowers have the incentive to accurately report their profits (a principal-agent problem), then Islamic banks may be able to serve this market better than conventional banks.

Bidding war for Rashid Hussain could end today

The Financial Times reports that Utama Banking Group could decide as early as today whether to sell its 32% controlling stake in Rashid Hussain Bhd (RHB) for RM2.16 billion ($618 million) to Kuwait Finance House. If this occurs, RHB is expected to sell its 65% share of RHB Capital to its shareholders, effectively ending Malaysian firm EON Capital's attempt to purchase RHB Capital and RHB for RM8.8 billion ($2.52 billion). RHB Capital is the parent company of unlisted RHB Bank and RHB Islamic Bank. Kuwait Finance House is limited to holding 30% of RHB under current foreign ownership rules, but they have the edge because they plan to clear the firm's debts of RM3.9 billion ($1.12 billion) as part of their promised investment of up to RM12 billion ($3.43 billion). One of the challenges, however, for KFH if they gain control of RHB is to deal with the 90 percent of interest-bearing assets. The company plans to convert the bank into a mega Islamic bank but has not laid out a specific plan for how this will be accomplished.

Mega Islamic Bank still planned

CIBAFI announced last year that it would oversee the opening of a mega Islamic bank during 2006, and today claimed that it still plans to do so and is working with the Islamic Development Bank to create an Islamic bank based within one of the Gulf Coorperation Council (GCC) countries or Malaysia.

BUK may offer Islamic banking classes

The British University of Kuwait, which is expected to open in 2007, may offer program of study in Islamic banking by 2008.

Islamic banks in Kenya & Pakistan

Islamic bank to open in Kenya

Several GCC-area Islamic banks are partners in a new Islamic bank set to open in Kenya. The firms involved are Bank Muscat International (BMI), Istithmar and the International Finance Corp. The bank has not been named yet.

Dubai Islamic Bank Pakistan

The Pakistani branch of the Dubai Islamic Bank has provided Rs. 5.5 billion ($90.6 million) in home financing. The announcement of the creation of Dubai Islamic Bank Pakistan Ltd. came in March 2005.

HSBC Takaful seeks talent & UAE sukuk issues and

Islamic finance described

Ibrahim Warde, a professor at Tufts University, wrote an opinion piece for the english-language version of Le Monde on Islamic finance back in 2001 which I came across reprinted in an Islamic internet news agency. I went back and found the original article and thought it was so well written, it was worth linking to even though it is over 5 years old

UAE sukuk

UAE-based Aldar Properties issued a $2.53 billion sukuk, the third largest ever issued.

Khaleej Times reports that Dubai Islamic Bank will issue $5 billion in Islamic financing in 2007, much of it as sukuk. Bloomberg reports that the sukuk issues will be $8 billion.

HSBC Takaful seeks skilled employees

The takaful (Islamic insurance) branch of HSBC, HSBC Amanah Takaful Sdn Bhd, which has 66 employees is seeking recent graduates and other skilled employees to increase its business. The need to find adequate levels of skilled labor has been one of the difficulties the Islamic finance and insurance industries have had in expanding further and this shortage will get worse over time.

Further Real Estate Finance Activity in the GCC, New MBA in Islamic Finance in the U.K.

Gulf Finance House launches stand-alone real estate company

Following similar announcements from Al Salam Bank Bahrain and Deyaar, the subsidiary of Dubai Islamic Bank (DIB), Gulf Finance House announced today that they plan to increase their infrastructure and real estate development division. The real estate markets have significantly grown since 2002. Real estate investment funds in the Gulf Cooperation Council grew from $42 million in 2002 to $2 billion in 2004 and have continued to grow since then. Similarly large growth has occurred across the real estate industry and provides the impetus for banks to finance further real estate development.

Cass Business School to offer Executive MBA Courses in Islamic Finance

The courses, offered at Cass Business School in London in collaboration with the Dubai International Financial Centre (DIFC), will begin in September 2007. The press release from Cass Business School includes a quote from Dr. Omar bin Sulaiman, "The boom witnessed in the region [for Islamic finance] has opened the doors to hundreds of thousands of jobs, and there is a dearth of qualified professionals in the financial sector. As reforms accelerate further within the Islamic finance sector, there will be a requirement for talents at a level and scale never seen before." The courses follow an article last November in the Financial Times about the possibility of an Islamic Finance MBA as well as a widely-reported shortage of skilled employees to staff the continued growth of the Islamic financial industry. That article ended with the quote from a senior executive at a Middle Eastern Islamic bank, "Shariah scholars may have knowledge of religion but they don't necessarily know the marketplace. As the demand grows for Islamic money and the scale of this business grows rapidly, MBAs who understand the conceptual basis may be far more successful than just plain MBAs."

GCC Islamic banks, new conferences, Islamic Trade Finance Corporation launch

GCC-area Islamic bank

Al Salam Bank Bahrain announced plans to start a real estate company. The bank also announced plans to expand its operations in Algeria and Sudan. Al Salam Bank has operated in Sudan since 2005.

Deyaar, the real estate subsidiary of Dubai Islamic Bank has increased its capital by 56 percent (to DH1.56 billion [$425 million]).

Islamic finance conferences

The 1st Annual World Islamic Finance & Investment Conference will be held in Kuwait from March 4-5, 2007. The conference, "Capitalising on Emerging International & Regional Growth Opportunities", will focus on the impact of the industry's growth, regionalization and the emergence of larger banks affects the industry.

The 12th Annual International Islamic Finance Forum (IIFF) will be held in Dubai from April 2-5, 2007. It will focus on a recent report released by KPMG and strategies of growth & diversification. The KPMG reports on Islamic finance are available online.

These conferences, as well as a newly announced conference in Geneva, Switzerland in April 2007, are listed on the Institute of Halal Investing's Conference page.

IDB launches ITFC

The Islamic Development Bank (IDB) will launch an Islamic Trade Finance Corporation (ITFC) on February 24. The focus of the ITFC is to encourage trade between members of the Organization of the Islamic Conference

Bids for RHB & RHB Capital delayed

Bidders for control over Rashid Hussain Bhd (RHB) and RHB Capital have agreed to a delay to give them more time to review their offers. Kuwait Finance House, which offered to purchase the 32% stake in RHB held by Utama Banking Group (UBG), agreed to wait until February 23rd to finalize any agreement to purchase the stake. UBG told the Financial Times that it was not considering a counter-offer from Primus Pacific Partners for its shares of RHB. EON Capital has also delayed its deadline for deciding whether to buy RHB Capital until March 2.

Aseambankers downgraded its rating on RHB Capital shares to "Hold".

Foreign Policy blog on Islamic finance

David Bosco, writing to the Foreign Policy editors' blog commented on the Financial Times story about Pakistan's new sukuk issue, but avoided substantial discussion of what Islamic finance is. Instead, he ended the post with "The association of Islam with terrorism has prevented the United States from becoming a player in this area. And Arab governments outside the Gulf, such as Egypt's, have been wary of strengthening the financial clout of the Islamist opposition and setting up competition for state-run banks."

While the industry has not become as significant a player in the financial industry in the U.S. as it has in majority Muslim countries like Malaysia, there are several home finance banks that offer Shari'ah-compliant financing, as well as several mutual funds.

RBH to sell RHB Capital, Interview with the head of the Islamic Bank of Thailand, Other news

RHB to cancel sale of RHB Capital if it accepts EON Capital's offer

Rashid Hussain Bhd, the Malaysian financial services holding company, has made a renouncable offer of sale of RHB Capital, in which it holds a 65% stake. The proceeds from the sale would be used to pay RHB debts, including those owed to RHB Capital. the Business Times in Malaysia provides a before-and-after chart of the effect of the sale. The one unknown if the deal goes through is where the 65 percent stake would end up. The sale of RHB Capital would not directly affect KFH offer for a 32% stake in RHB (currently held by Utama Banking Group). If RHB accepts the offer made by EON Capital, the sale of RHB Capital would not go forward. However, despite assurances from RHB that the sale of RHB Capital does not present an attempt to hinder the EON Capital offer, it appears that KFH remains favored to take over RHB.

Shares in RHB Capital were down over uncertainty about the EON Capital offer for RHB.

Islamic Bank of Thailand

Reuters provides an interesting interview with the head of the Islamic Bank of Thailand, a Buddhist from the northern part of the country. The bank attempts to bridge the divide that has lead to an insurgency in the Muslim south of the country against the Buddhist government by promoting development and poverty reduction through micro-financing projects throughout the south. " The four-year-old bank has 50,000 customers and 100 million baht [$2.8 million] in outstanding Islamic loans in the south. It aims to expand to 300,000 customers and 500 million baht [$14 million]in loans there by 2008."

Brunei breaks ground for Centre for Islamic Banking, Finance and Management

The new building will house the Centre for Islamic Banking, Finance and Management at the Universiti Brunei Darussalam. It will open by the end of 2008.

Brunei offers short-term ijara certificates

The certificates will have a 90 day maturity and a yield of 3.15%. Brunei is selling B$90 million ($58 million) of ijara certificates.

RHB to sell shares of RHB Capital, KFH expands to Asia, Zeti: Japan should play a role in Islamic financial industry, Other news

Rashid Hussain to sell stake in RHB Capital

The sale of RHB Capital will allow highly-indebted Rashid Hussain Bhd (RHB) to repay some of its debt. It is widely expected to increase the chance that Kuwait Finance House will end up with control of RHB and RHB Capital. However, EON Capital still has a chance at winning control of RHB, as noted by Loke See Ooi of PacificMas Asset Management in Kuala Lumpur, "EON Capital's offer is quite attractive, so you never know [the outcome for sure]."

KFH expand into Asian healthcare market

Kuwait Finance House, one of the largest Islamic banks in the Gulf Region which recently opened Asian operations based in Malaysia, will team up with Singapore-based Pacific Healthcare Pte Ltd. to invest in new healthcare centers across Asia.

BNM governor urges Japanese involvement in Islamic financial industry

The governor of Bank Negara Malaysia, the Malaysian central bank, Zeti Akhtar Aziz,wants Japanese businesses to become more involved in the Islamic financial industry. Zeti believes that it "could be an important channel for strengthening ties between Asia and other parts of the world, especially the Middle East".

Conference on Micro- and Medium-sized Enterprises (MMEs) in Brunei

The conference is sponsored by the Universiti Brunei Darussalam and the Islamic Research and Training Institute and will occur from April 17-19, 2007 in Brunei. The conference will focus on increasing the availability of Islamic financial services for the Micro- and Medium-sized Enterprises. It is these areas in which many people, including myself, believe there is the greatest opportunity for the Islamic financial industry to have a significant positive societal impact, primarily through the reduction of poverty by enabling MMEs to grow through bank financing.

The conference is listed on the Institute of Halal Investing Conference calendar.

Pakistan issues Islamic Treasury Bills

According to the Financial Times, Pakistan will issue a Shari'ah-compliant form of Treasury bills (it has issued over Rs. 1 trillion [$17 billion] on conventional bonds to date). Neither the article nor the State Bank of Pakistan provide details on the structure of the bills except that they will be called 'bait-ul-maal' certificates.

Kuwait National Bank begins Money Market Fund

Kuwait National Bank announced a new Watani KD Money Market Fund, which will be liquid on a weekly basis and Shari'ah-compliant. No details are provided about what investments it makes except that they will be "short and medium term money market instruments in compliance with the principles of the Islamic Sharia".

British Islamic mortgage company Alburaq reaches £100 million in approved mortgages

Alburaq, the British Islamic mortgage firm, has reached £100 million ($195 million) in approved Shari'ah-compliant home financing and expects this number to reach £1 billion ($1.95 billion) by 2009. The company opened in 2004.

KFH ups bid for RHB, GFH announces European private equity fund, Islamic banking in Pakistan

Gulf Finance House announces European private equity fund

Gulf Finance House, the Bahrain-based Islamic investment house which opened in 1999, announced the creation of a European private equity fund. The bank, which claims to have raised $1 billion in new private equity in 2006, also has a Middle East and North Africa regional fund.

Kuwait Finance House ups bid for RHB and RHB Capital

Kuwait Finance House one of two bidders for control of Rashid Hussain Bhd and RHB Capital, competing with EON Capital, has set a minimum price it will pay for shares of RHB and RHB Capital. Previously, KFH offered RM2.16 billion ($618 million) for Utama Banking Group's 32 percent stake in RHB, which owns 65% of RHB Capital. The new offer is RM2 ($0.57) per share of Rashid Hussain Bhd, RM1.8 ($0.52) per call warrant of RHB Capital and RM4.8 ($1.37) per share of RHB Capital.

KFH plans to invest $3.4 billion in RHB to turn it into a mega Islamic bank. The current EON Capital bid is $2.86 billion for RHB.

Islamic banking in Pakistan

The monthly magazine Newsline in Pakistan has an interesting article about the development of Islamic banking in Pakistan.

IHI featured in The Oregonian, EON Capital has backing from ABN AMRO--source, Brunei opens first Islamic university

Institute of Halal Investing featured in The Oregonian

The Institute of Halal Investing is featured in the February 10, 2007 Living section of The Oregonian, the main newspaper in the U.S. state of Oregon. The reporter Nancy Haught, the religion reporter for the paper, produced a very good piece on halal investing, as well as a description of the current activities of the Institute of Halal Investing.

BIMB balances different Islamic financial activities and plans expansion

BIMB, which receives 85 percent of its revenue from Bank Islam Malaysia Bhd (BIMB), plans to balance this mainstay with its other business including Syarikat Takaful Malaysia Bhd and BIMB Securities Sdn Bhd. According to The Star, BIMB plans to expand into investment banking and fund management and hopes to make BIMB Securities a more significant part of its business.

EON Capital has financial backer for bid to control RHB and RHB Capital

While the name of the source of financial backing has not been announced (the company said it will be announced soon), the Business Times and the Star quote unnamed sources who say the backer is ABN Amro.

Islamic University launched in Brunei

The Universiti Islam Sultan Sharif Ali (UNISSA) will offer courses almost exclusively in Arabic (although one course will be offered in English. UNISSA hopes to be known for graduating top religious scholars.

New sukuk, Retakaful, Brunei Islamic banking, RHB share price up as bidding war continues, U.K. Shari'ah-compliant home finance

French firm expands into retakaful

The Asia-Pacific division of French reinsurance company SCOR will apply to the Labuan Offshore Financial Services Authority (LOFSA) for a license to offer retakaful (Islamic reinsurance). The takaful markets are experiencing high growth, but there has been very little retakaful available. Many takaful firms are forced out of necessity to use conventional reinsurance so the decision by SCOR Asia-Pacific to expand into retakaful will cheer up firms offering takaful concerned about the reputational effect of using conventional reinsuarance.

Brunei sees increased competition in banking

The effect of rapid growth of Islamic banking in Brunei is lower margins for both conventional and Islamic banks, according to an article in BruDirect. However, some of the reduction of margins cannot be attributable to Islamic banking alone, particularly since all banks compete for a share of a very small market. Sources at Baiduri Bank, a conventional bank in Brunei, described how "we have a situation where too many banks are fiercely competing for a share of the small market. It is more the excessive number of banks rather than the development of Islamic banking that exerts pressure on pricing and operations."

MMC Corp subsidiary to issue $2.26 billion in sukuk

According to the Wall Street Journal (sub. rqd.), Nucleus Avenue (Malaysia) Bhd., a subsidiary of MMC Corp, plans to issue RM7.9 billion (US$2.26 billion) in sukuk this year.

New Shari'ah-compliant home finance product

Alburaq, a U.K. subsidiary of ABC International Bank, will expand its home finance products.

RHB share price rises

As the bidding war continues between Kuwait Finance House and EON Capital, the parent company of EON Bank, for the 32% stake in RHB currently held by Utama Banking Group Bhd, the share price of Rashid Hussain Bhd (RHB) closed at RM 1.73 per share, while RHB Capital share prices rose 6 percent to RM4.60 per share, the highest level since June 13, 2000

New bidder approved for RHB

The Malaysian central bank, Bank Negara Malaysia, has allowed EON Capital to sumbit a rival bid for the 32% stake in Rashid Hussain Bhd (RHB), currently held by Utama Banking Group Bhd. The current leading offer is from Kuwait Finance House, which bid RM2.16 billion and promised to inject RM12 billion in capital into the indebted company. EON Capital has not yet made an offer. However, KFH and Utama have set February 16 as the deadline for making an agreement. Primus Pacific Partners has also been approved to make a bid, but has not submitted one.

Standard & Poor's announced that the offers will not have an impact on ratings or outlook of RHB but the ratings agency will monitor RHB and reassess if control of the company changes or it is restructured.

KFH to buy UBG stake in RHB

Kuwait Finance House and Utama Banking Group Bhd have agreed to the sale of the 32 percent stake of RHB currently owned by UBG. As a part of the deal, for which KFH agreed to pay RM2 per share of RHB which closed at RM1.68 after the deal was announced, Utama will join in the consortium headed by KFH with a 20 percent share. The total purchase price will be RM2.16 billion(US$ 618 million). KFH plans to inject significant funds into the heavily-indebted bank in the hopes of turning it into an Islamic mega bank. The following three news stories provide similar analysis of the sale: [Reuters] [International Herald Tribune] [The Edge Malaysia]

Islamic Development Bank to create an institute for financial and trade contribution

The Iranian national news agency, IRNA, reports that the Islamic Development Bank will begin an institute for financial and trade contribution on February 24th. While the name of the organization is not mentioned in the article, the likely organization, according to the IsDB website is the International Islamic Trade Finance Corporation, an organization originally created at the 2006 IsDB meeting.

4th Islamic Financial Services Board Summit to address cross sectoral supervision of Islamic financial institutions

The 4th Annual Islamic Financial Services Board Summit, which will be held in Dubai from May 15-16, 2007, will address cross-sectoral approaches to the supervision of Islamic financial institutions. Speakers include ten Central Bank governors, Rodrigo de Rato, Managing Director of the International Monetary Fund and Former Prime Minister of New Zealand, Mrs Jenny Shipley.

This conference is listed within the Institute of Halal Investing conference calendar, which is organized chronologically and includes a link to the conference when it is available.

Al Rajhi Bank plans Malaysian expansion

According to AMEinfo, Al Rajhi bank plans to expand its operations into Malaysia. The bank would follow the Kuwait Finance House and the Asian Finance Bank, which was funded by Qatar Islamic Bank

Recent articles from the Financial Times

U.K. based newspaper, the Financial Times has been quite active relative to most Western newspapers in writing stories about the growth of Islamic finance and there are three that have appeared within the past week:
• Challenge of a financial product with a religious dimension(February 6)
• Britain leads secondary market for Islamic bonds(February 5)
• Degrees of difficulty for recruits to Islamic banking(February 1)

MoU for small project financing in U.A.E.

Sharjah Islamic Bank and Abu Dhabi Islamic bank have signed a memorandum of understanding to cooperate in offering Shari'ah-compliant financing to small and medium sized projects. The article describing the MoU highlighted the importance of these types of projects (as they were in the U.S. and Europe) for providing support to economic growth.

Indian prime minister discusses feasibility of an Islamic bank in the country

The Indian PM Manmohan Singh agreed that it is worth taking another look at the feasibility of Islamic banking in India, but critics were sceptical.

UK banks expand, UBG stake in RHB, Islamic financial institution strategy

UK banks to enter Islamic banking industry

Bloomberg reports that Barclays and Royal Bank of Scotland have begun considering entry in the Islamic banking industry. The report quoted Debashis Day, a Dubai-based partner for Clifford Chance law firm.

Struggle for UBH stake in RHB

There are now four offers for RHB shares held by Utama Banking Group Bhd: one would have RHB Capital shares sold to RHB shareholders and the other three would be sales to either Kuwait Finance House, Primus Partners or EON Capital. Kuwait Finance House (KFH) has agreed to a non-exclusive offer to purchase the UBG stake, Primus Partners has received approval from Bank Negara Malaysia to negotiate with UBG for its stake in RHB, while EON Capital has not yet received approval to negotiate with UBG. KFH has suggested that it will invest RM12 billion (US$3.4 billion) in RHB if its bid is successful.

Islamic Banking strategy

The president of Gulf Finance House (GFH), Esam Janahi, described GFH successes and future plans & strategy at a forum in Kuwait. The statement also provided a detailed description of the new GFH investments in Morocco.

Citigroup Asia head of Islamic Banking, Rafe Haneef, described to The Star (Malaysia) plans for segmenting the Islamic banking market and addressing each opportunity separately.