ISRA Shari'ah scholar certification

The plan by ISRA to set up a global certification for Shari'ah scholars is proceeding and the body expects to pick a board of regulators to develop the qualifications by year-end. The goal of the certification is to ensure that all Shari'ah scholars have requisite training and competence not only in Shari'ah, but also finance. I believe the primary beneficiaries of the qualification will be the less well known scholars who may find more demand for their services with the certification providing some confirmation that they are qualified. However, there will remain significant momentum among particularly the global financial institutions to recruit the highest profile scholars to their Shari'ah boards as a way of enhancing their reputation as being Shari'ah-compliant.

Other News

• Moody's Investor Services and Mashreq Capital DIFC believe that the Nakheel trade creditor sukuk will spur secondary market activity in sukuk because many trade creditors will sell them.
  
• Dana gas and Aldar's convertible sukuk performed well in the first two months of the third quarter, with their yield falling from 13.6% to 10.77% (for Dana Gas). The GCC sukuk market has been slow since the financial crisis and the AAOIFI resolution on sukuk.
  
• Padiberas Nasional Bhd issued sukuk as part of a RM750 million ($240 million) sukuk program. While issuance has rebounded in Malaysia, it has remained sluggish in the GCC following the Dubai debt crisis last fall.
  
• The National Bank of Ethiopia is close to approving a directive to allow Islamic banks and Islamic windows at conventional banks. Stanbic Bank in Tanzania, which launched Islamic financial products earlier this year, submitted an application to the country's central bank to widen its product offering.
  
• An article on an Islamic finance conference in Switzerland provides a good summary of the challenges facing Islamic finance if it wants to become more attractive and attract non-Muslim clients.
  
• An article from Trade Arabia discusses one small part of the Islamic financial industry that is Islamic exchange traded funds (ETFs)>
  
• Sudan delayed its planned $300 million sukuk issuance again citing the financial crisis.
  

Last week's news

Apologies for the delay in posting since last week, but I have been furiously working on our 501(c)(3) application. I will hopefully resume regular blogging by later this week. --Blake

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In response to the credit crunch, Dubai Ports World is planning an IPO to avoid the higher yield promised to the sukuk holders of the $3.5 billion convertible sukuk if a share floatation was cancelled. The sukuk was issued to fund the purchase of Peninsular & Oriental Steam Navigation, a U.K. ports group.

Rs. 55 billion ($906 million) in direct investments, mostly from GCC investors has flowed to the Pakistani Islamic banking industry this year as of the end of September.

Sukuk continue to be issued at a furious pace.

GCC-Asian links in Islamic finance grow as the Central Bank of Bahrain licensed the Islamic Bank of Asia to open an office in the country. The Islamic Bank of Asia became the first Islamic bank to receive a license in Singapore earlier this year.

The International Finance Corporation, the private lending arm of the World Bank, will finance investors setting up Islamic banks in Kenya.

Islamic home financing takes another leap forward in the U.K.

Shari'ah Capital will work with the Dubai Multi Commondities Centre to develop Shari'ah-compliant investment products "based on hard assets such as commodities and precious metals".

A letter in the Financial Times last week addressed the potential for soverign wealth funds particularly in the GCC region to move their assets towards Islamic finance.

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"

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)