Thursday, June 17, 2010

Pakistan central bank explores interbank money markets, Indonesia to issue global sukuk in October

Pakistan's central bank is developing Shari'ah-compliant interbank money market products. This follows the announcement that the UAE central bank is also developing inter-bank liquidity management Islamic certificates of deposit. This is a welcome trend to allow Islamic banks to manage their surplus liquidity and will help to provide greater stability to Islamic banks.

Global sukuk issuance is expected to rebound in 2011 as infrastructure projects begin in Asia and the Middle East following a significant slump since the credit crisis affected Islamic finance in 2008 and 2009. Indonesia is planning a global sukuk in October that could be as large as $500 million to $600 million, less than its $650 million sukuk issued in 2009. The government may issue 5-year sukuk, but would prefer 7-10 year sukuk, which would be beneficial as a benchmark for domestic corporate sukuk. This would be complementary to the possible tax holiday for sukuk to boost the domestic Islamic finance industry.

Other News

  • Islamic finance is gaining popularity among bankers looking to "change some terms here and there" according to Andrew White, the director of the International Islamic Law and Finance Center in Singapore.
  • Lahem Al-Nasser of Asharq Al-Awsat believes that an Islamic central bank is needed and that Islamic banks should have their reserves linked to gold. I disagree: bringing the gold standard to Islamic finance would be no more successful than it was in conventional banking and would limit greatly the growth potential of the industry while offering limited benefits as the price of gold fluctuates significantly.
  • Ithmaar Bank, which recently converted to be an Islamic bank says it is fully Shari'ah-compliant and denied reports about disagreements with its Shari'ah board over conventional assets being converted to be Shari'ah-compliant.
  • The governor of the Central Bank of Afghanistan is working with Pakistani experts to implement regulations for Islamic banks within the next two months.
  • Indonesian bank Bank Permata launched an Islamic mortgage product based on ijara mutahiyah bittamlik (lease ending in ownership).
  • Malaysian Prime Minister wants Bank Islam to expand the Islamic pawnbroking system Ar-Rahnu from urban areas to rural areas.
  • A Bahraini investment house, Tharawat, plans to launch a $50-$60 million private equity fund investing in Saudi Arabian real estate in the third quarter.
  • After delaying a planned bond issue, SABIC received $1 billion in Shari'ah-compliant credit from Alinma Bank.
  • CNBC Europe has an interview with a professor of Islamic finance in Spain, Celia De Anca of IE Business School in Spain.
  • The Nigerian Deposit Insurance Corporation is introducing Islamic deposit insurance using Malaysia as an example.

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