When Dr. Zeti speaks, you should be listening

A few quotes and thoughts on Dr. Zeti Akhtar Aziz's speech at ISRA. 

Increased liberalisation and greater foreign participation in the Islamic financial markets are reinforcing this trend and resulting in increased cross border financial flows. This is contributing to increased international financial and economic linkages between nations, particularly among emerging economies.

The development of more cross-border financial flows by Islamic financial institutions is a big positive, and makes sense since Islamic finance is supposed to be focused on facilitating economic activity.  The European debt crisis, which has led to significant fall-off in import demand (not to mention the continuing slow growth elsewhere in the developed countries, means that developing countries are going to have to both focus on their domestic markets and other trading partners as sources of demand for their products.  If Islamic finance can provide financing for the trade flows--which should be a good fit with the products used in the Islamic finance industry, it will be beneficial.  The one area where it may be difficult for Islamic finance is where floating currencies are involved, since it is more difficult to hedge against fluctuations of currencies. 

These developments [the establishment of AAOIFI and the IFSB] have been particularly important to the recent intensification of the internationalisation of Islamic finance which in turn contributes towards building bridges and forging greater linkages among a wider range of economies.

 In this respect there is still more progress to make, since there remain concerns about the regulation of Shari'ah scholars, and no similar body to AAOIFI and IFSB to provide international Shari'ah scholar oversight, although it is being discussed. In one respect IFSB is much further along than AAOIFI in providing transparency in the regulatory standards under which Islamic financial institutions must abide, because it publishes its standards online, whereas AAOIFI does not.  Dr. Zeti does not mention this explicitly, but does highlight the need for: "greater leverage on technology for the active dissemination of information at real time further facilitates the harmonisation process."

She then moves on to globalization in Islamic finance:

In the recent years, the intermediaries have also gained scale and the financial markets have gained depth and maturity.

I would take issue to some degree with Dr. Zeti regarding the depth and maturity of Islamic finance markets, although from her perspective as the central bank governor in Malaysia, she does deserve a pass on this issue.  The Islamic finance market in Malaysia has developed considerable depth and maturity, enough so that it is attracting attention from companies in the GCC (mostly banks), who have looked east to tap more liquid markets, even though it exposes them to currency fluctuations (some of the banks are using the Ringgit markets to avoid currency risk where they have subsidiaries operating in the local Malaysian market). 

However, even some GCC markets have showed they are maturing as the prospect of default by Dana Gas on their $1 billion sukuk attracted some media coverage, but not the same level of concern as when Nakheel was seen at risk of defaulting on its sukuk (a key difference of course is that Dana Gas is a private company while Nakheel's first sukuk was backed by Dubai World, a quasi-sovereign entity). 

The speech shifts into high gear from here, when Dr. Zeti warns that " Its resilience during the global financial crisis should not result in complacency."  This is an important point and mirrors what the IFSB said in response to claims that Islamic finance was immune from financial crisis.  There is a consensus now which disputes the optimistic claims that Islamic finance was not touched by the financial crisis because its structure is fundamentally different than the conventional financial industry. 

It was not necessarily the complex products (CDO, CDS, etc) that ultimately led to the major bank failures, but was instead a failure in the markets of their assets, and doubts about their value, combined with the inherent leverage of the products themselves which dried the market up and took away the ability to use their assets as collateral in repo markets to meet liabilities as they came due.  A dramatic fall in the value of a firm's assets, whether those are complex derivatives or equity-based products, will lead counterparties to question the solvency of any financial institution, Islamic or conventional.

This lack of confidence will spread at a speed in direct proportion to the levels of leverage employed in the balance sheet, and the degree to which the bank is subject to possible liquidity crunches either from depositors with current accounts or other counterparties providing short-term debt.  The inability to access liquidity and the inability to roll over maturing short-term debt (a drying up of interbank liquidity) led to the conventional banks' failures during the financial crisis and could lead to a similar failure in the Islamic finance market as well since it was the liquidity, not the toxic assets, that were the ultimate reason for the failure.

Islamic finance remains vulnerable to a liquidity crisis because 1) there is limited inter-bank lending, 2) nearly no interbank repo, and 3) few options for the central bank to act as lender of last resort (except ad hoc means like the wakala deposits the UAE Central Bank placed with Islamic banks during the crisis).  The lesson from the financial crisis is that when an asset price falls that triggers a fall in the value of your assets and questions about your solvency, the line between survival and failure is the degree to which the financial institution is leveraged (where the debt acts to magnify losses, just as it does profits) and the degree to which you rely on short-term financing (either deposits or inter-bank financing).  Higher leverage and greater liquidity needs lead to a greater likelihood of failure.

Dr. Zeti then goes to highlight the linkage between Islamic finance and socially responsible investing (which I have highlighted before on this blog):

First is the need to highlight with greater clarity the value proposition of Islamic finance so as to ensure that it remains a form of financial intermediation that serves the real economy and that it will continue to be a benefit to society. This requires the development of financial products and services that manifests the value propositions of Islamic finance, and that such products are marketed with simplicity so as to facilitate a greater understanding of the main benefits of the products. In relation to this, Islamic finance presents significant appeal to the growing Socially Responsible Investment (SRI), sustainable investments and ethical finance. This is particularly relevant in the context of the recent global financial crisis. It [the financial crisis] has brought to the forefront the need for the financial system to be linked to the economy and for the need for greater and improved levels of transparency, fairness, ethics and social responsibility in modern finance.

Beyond financial returns, SRI also accords primary consideration to the impact on economic activity and on the broader society, thereby incorporating the important dimensions of environmental sustainability, social responsibility and governance. This is in close parallel with the inherent principles of Islamic finance, in which financial transactions must be underpinned by real economic activities, and its operations are guided by the principle that money should also be used to create social good.

Then she moves on to another favorite topic of mine, Islamic microfinance and a focus on making Islamic finance inclusive:

The second imperative is for the outreach of Islamic finance to be inclusive and to be accessible to all, particularly the lower income groups and small businesses. An important agenda in the global economy is to achieve a more balanced growth with reduced income disparities. Financial services has a tremendous role in contributing towards a more equitable economic growth and a more sustainable development. In relation to this, Islamic financial institutions need to strive to enhance the access of their financial services to all segments of society. This imperative translates into the need and demand for more Islamic microfinancial products. In emerging as a new market niche, Islamic microfinance would meet the differentiated demands of low income communities and provide support to entrepreneurial activities. Its strong value proposition reinforced by financial inclusion would result in significant potential to uplift the economic performance and development. Furthermore, Islamic microfinance, if supported by microtakaful, has the potential to provide a more comprehensive, sustainable and accessible financing and protection solution for the lower income groups and small businesses.

I have said it before and I will say it again, Dr. Zeti's speeches are almost always required reading and she has a knack for making important points rather than repeating the same platitudes that are too frequently repeated.  This should be commended, and also serve as a reminder that when Dr. Zeti speaks, you should be listening.

Accreditation, rules on Shari'ah scholar conflict of interest begins to gain traction

The move to formalize the requirements for Shari'ah scholars in terms of training (through an accreditation program) and managing potential conflicts of interest is moving forward as the International Shari'ah Research Academy, based in Malaysia, was working with its counterparts in the Middle East on a set of guidelines.  These counterparts include the Islamic Research & Training Institute (part of the Islamic Development Bank group).

The move follows a Malaysian initiative announced back in August to provide an accreditation program for Shari'ah scholars in that country, which was led by Aznan Hasan, the president of the Association of Shari'ah Advisors in Islamic Finance (ASAS), who is also a prominent Shari'ah scholar. 

The regulation and accreditation of Shari'ah scholars is one of the more important areas of standardization in Islamic finance.  If the participation of a Shari'ah scholar on multiple boards is limited, it could result in a more prominent role for junior scholars who sit on boards, but are only slowly gaining name recognition on their own, rather than by virtue of the senior scholars they have trained with. 

Increasing the number of scholars with name recognition has the potential to lower the Shari'ah fees for certifying deals because their fees are likely to be lower than for senior scholars.  However, I think there is a potential for fees on the senior scholars to increase if they are limited to serving on a more limited number of boards, and are likely to see their fees bid up, potentially to the exclusion of smaller Islamic financial institutions. 

However, this might not be a significant problem.  If the senior scholars with the greatest international name recognition shift their focus towards global financial institutions, it will open up more board seats for junior scholars on smaller, more locally-focused Islamic financial institution that will tend to rely more on their Shari'ah board's domestic name recognition, to demonstrate their Shari'ah-compliance to the local market.

Other aspects of the discussions are around Shari'ah board potential conflicts of interest, like owning stock in the institutions on whose boards they sit, and issues around limiting scholars from advising multiple Islamic financial institutions in the same sector or geography who compete against one another.  In Malaysia, for example, Bloomberg describes how Bank Negara regulations do not allow Shari'ah scholars to "sit on more than one board involved in the same business". 

This is likely to be only the first step down a long road of providing more formal oversight of Shari'ah scholars to ensure that the Islamic finance industry has the Shari'ah board capacity that can scale with it.  In addition, more stringent rules on accreditation and managing potential conflicts of interest can avoid problems down the road by mitigating or eliminating these conflicts and potential conflicts of interest. 

Tawarruq

There are almost as many opinions on tawarruq as there are people who know what the term means. With questions being raised about whether a recently launched Goldman Sachs murabaha sukuk was a tawarruq or not, the issue has been thrust into the forefront of discussions within Islamic finance*. A discussion of some of these issues are available from Camille Paldi (posted as a PDF).

This article had a link to a page from ISRA, which listed a number of different fatawa from different Shari'ah boards about the permissibility of, and structure of, tawarruq transactions. I, of course, cannot say whether a tawarruq is permissible or not. However, reading Paldi's article, and the Shari'ah opinions about tawarruq, there are some points which I find noteworthy about tawarruq.

The basic structure of a tawarruq (as used in the financial industry) is that the bank will buy a commodity (e.g. nickel from the London Metal Exchange). Once ownership transfers to the bank, it will resell the metal the the customer for the price paid, plus a profit, with repayment either in installments or as a lump sum. In either case, repayment will occur in the future. The customer then takes ownership of the metal and sells it to a metal broker to get cash.

In terms of economic outcome, neither party owns the metal, but the customer has X dollars in cash, with an obligation to repay the bank X + p dollars (p is the profit). In this example, the bank and the client can be switched for a tawarruq-based deposit product. During the entire transaction, the only time the metal involved makes an appearance is in the initial purchases and sales. One fatwa said: "It is compulsory to base this practice on the purchase of assets, which are then sold to the party who desires financing, i.e. the customer. The customer will then sell it to another party at a price that is agreeable to both parties. The delivery and payment is concluded on the spot".

When the final sale is completed, another fatwa reads: "One of the conditions of a legitimate tawarruq contract is that the bank must not guarantee the customer a specified price in the market but sell the goods at the best price, in accordance with the forces of supply and demand at the time of sale." One of the issues raised by multiple fatawa was avoiding instances where the bank (or its broker) is both selling to the bank and buying back. 




These Shari'ah issues are interesting--I cannot offer an opinion about what they mean for the Shari'ah-compliance of any individual product--but they do raise a few issues on the financial side (e.g. if one were looking at the way transactions were actually carried out).  First, the basis of the organized tawarruq product relies to some degree on ensuring that the price paid for the commodity is equal to the price at which it can be sold.  The commodity markets on which these tawarruq transactions are based can be volatile, even on an intra-day basis, so an Islamic bank acting on its own behalf to buy the metals and later as agent for the customer to sell them, is exposed to the risk that the price of the commodity rises or falls.

Theoretically, I assume that the bank is supposed to pass that price risk on to the customer, who owns the metals between the initial purchase and the final sale.  However, many customers, particularly retail customers, will not want to assume the price risk of the underlying commodity.  There may even be regulations that limit the ability of the bank to change the effective profit rate after the contract is signed (the effective rate would change if the markup is fixed and the price realized is different than the original cost of the metals; if the price fell, the rate would increase while if the price rises, the rate would decrease).  Yet, the bank cannot guarantee the price realized on the sale of the commodities lest it become both the seller and the buyer (as an intermediary). 

Besides the operational issues with tawarruq, there are more theoretical arguments about its use.  Initially, tawarruq was used for short-term inter-bank financing, where there was no other alternative available (there still are only a few, which was the rationale for forming the International Islamic Liquidity Management Corp.).  Then the product became a consumer financing product.   Now it is being used to structure deposits.  The theoretical question is whether tawarruq ties the hands of Islamic banks to structures that (at slightly higher cost) replicate conventional banks. 

I am generally in favor of Islamic banks using products that meet a banking need from Muslims who would not otherwise engage in the financial system.  I think that makes sense.  However, I also believe that creating an exact replication of the conventional financial system, or even the banking system, albeit with more transaction costs, is not the best goal for Islamic banking.  There is a middle ground between making products available to meet consumer need and turning the entire exercise into a problem-solving exercise for clever bankers and lawyers. 

There is, I think, a valid place for tawarruq in the development of Islamic banking.  It is a useful tool where other tools are not yet designed.  For example, there are few products available for education financing from Islamic banks and the benefit from providing this type of financing to people who will not use interest-based financing is high, both for the individuals and for society as a whole.  This is the proper role of organized tawarruq (in my opinion) within Islamic banking.  It is a fine tool, but Islamic bankers should not let tawarruq be the only tool (as the expression goes, when all you have is a hammer, everything looks like a nail).




* I wrote an article on the sukuk for The Islamic Globe, which was followed by a critical article about the sukuk program, which was followed by another critical article with a rebuttal by the firm which provided Shari'ah consulting services to GS.

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.
  

Shari'ah scholar licensing, IIT sukuk, Islamic indices

Bloomberg has a more detailed article about the planned Shari'ah scholar certification body, although the details are not yet fully described. I think this is a positive development because it will provide a way for newer or less recognized scholars to build credibility and become selected to be members of Shari'ah boards. This will increase the number of qualified scholars with experience that could be the biggest development to get around the well publicized lack of scholars that are selected to serve on Shari'ah boards. Currently, most Islamic financial institutions select the most recognizable Shari'ah scholars to gain credibility about the Shari'ah-compliance of their offerings. This has led to the top scholars being on many, many Shari'ah boards, which limits the amount of time they can devote to each. This could lead to less thorough review of each product than if the workload were spread across a larger number of scholars. Hopefully the ISRA proposal will move beyond the planning stage and on to become an organization that carries as much weight and recognition as AAOIFI or the IFSB.

There is an article in The Banker about Islamic indices, which have only been around since 1999 when Dow Jones launched their Islamic Finance World index. The article is interesting and notable because it mentions the absence of ETFs (not total absence; there are a few, but not many and most are very small). The Islamic funds industry has grown significantly in the past 10 years, so it seems that the ETF sector would be a natural area for growth as an alternative to actively-managed mutual funds.

The small sukuk ($10 million) from the International Innovative Technologies, which is the first UK-based company to issue a sukuk, is being heralded as the first of many from the UK and Europe. However, I think it is unlikely that this small sukuk, which was subscribed by one entity, Millenium Private Equity, will have that effect. The sukuk--a sukuk al-musharaka--came obout when an investor in IIT suggested Islamic finance as a way to finance the business. This (along its small size and status as a 'first') reminds me of the East Cameron sukuk, which was issued by the US-based wildcatter oil & gas firm with properties offshore Louisiana. While I am not predicting that the sukuk will end up the same way the East Cameron sukuk did (with the bankruptcy of the issuer), I do think that the idea that a small sukuk from a relatively unknown issuer can spark further issuance is overstated. It will take a larger, more well-known issuer to demonstrate that sukuk are the "real thing" to other potential issuers in the UK and Europe. That may happen in the near-term, but it will not make IIT the one that broke the market open. However, it is a start--albeit a small one--that will generate plenty of media attention that could make a sukuk from a better known issuer less surprising. It will be interesting to see what happens from here.

The secretary-general of AAOIFI, Dr. Mohamad Nedal Alchaar, has an opinion article in The National about the potential for France to develop its Islamic finance industry.

Other News

• The current issue of Opalesque's Islamic Finance Intelligence has several interesting articles. One by Shahzad Siddiqui and Toby Birch discusses gold bullion and Islamic private equity. Mohammed Khnifer discusses what happens when sukuk default.  Nikan Firoozye discusses the structure of the consecutive or rolled murabaha. The full issue can be downloaded by clicking through to any of the articles.
  
• South Korea may revive the bill to put sukuk on par with conventional bonds, after it was scuttled earlier this year.
  
• According to an IMF report, the driving force behind the growth in the industry after 2000 was the rise in oil prices, not 9/11. I hope to post something on the report when I have a chance to read it.
  
• The Thai Securities & Exchange Commission will issue rules for sukuk in October, according to the body's Secretary-General.
  
• Kuwait Finance House-Turkey may issue $100 million more in five-year sukuk, after its first issue in August, which was also the first sukuk issued in Turkey. The government of Turkey may consider issuing sukuk "in the future" according to the Finance Minister Mehmet Simsek.
  
• The Central Bank of Bahrain's Sukuk al-Salam was oversubscribed with BD73.5 million ($195 million) in subscriptions for the BD12 million ($31.5 million) issue. The return on the three month securities will be 0.69%.
  
• DIFC Investments will make a scheduled $2.88 million periodic payment on its $1.25 billion sukuk on time, according to a statement posted on NASDAQ Dubai.
  
• A paper in South Africa discusses the basics of Islamic banking.
  
• Malaysia issued four takaful licenses, primarily to foreign companies as it liberalizes its financial sector in a bid to attract more Islamic finance.
  
• Islamic finance could exceed $2 trillion in the next three-to-five years.
  

Indonesia sukuk, rules on forward currency transactions, ISRA to set up Shari'ah scholar org

Indonesia sold sukuk through a private placement for 336 billion rupiah ($37.45 million). There was an indication that the government would move away from the auction method towards private placements after several auctions where the yields demanded by investors were higher than the Ministry of Finance was willing to expect. The higher yields versus conventional bonds were attributed to lower liquidity in secondary markets for sukuk compared to conventional bonds in Indonesia, something that is common in other countries as well. The current issue is non-tradable sukuk with a yield of 7.3% maturing in 2014.

The Shari'ah Advisory Council of Bank Negara Malaysia, the country's central bank, ruled that no payment can be made in exchange for a forward currency transaction used for hedging (based on a binding promise, wa'ad). The basis for the ruling was that the upfront fee would turn the transaction into a bilateral wa'ad, which is viewed as a contract, which is not permissible. The unilateral (binding) promise is viewed as acceptable because it is a promise made without compensation. The issue of bilateral wa'ad also emerged as a stumbling block in the IIFM report on sukuk repo transactions.

The International Shari'ah Research Academy for Islamic Finance (ISRA) may set up an international body for Shari'ah scholars with the hope of creating a (self-)regulatory organization for Shari'ah scholars. Currently, there is no international body that regulates Shari'ah scholars, although the procedures for Shari'ah-compliance are standardized through AAOIFI and the IFSB. I think it is a good effort, but I agree with Muneer Khan, head of Islamic finance at the law firm Simmons & Simmons, who is quoted saying that "It's very difficult to set up an international body which actually has the power to effect these changes [...] It all depends on voluntary cooperation. A lot of work would have to take place behind the scenes to get regulators to sign up".

The editor of Arabian Business, Damian Reilly, wrote an opinion piece in the paper about Moody's recent downgrading of Bahrain's rating from A2 to A3. He says that, despite Moody's claim that the ratings downgrade was based on its budget deficits and dependence on higher oil prices of $80 to balance its budget, it was based on Moody's view that the outlook for Islamic banking in 2011 was diminished. The Moody's analysis also cited the size of Bahrain's banking sector--much of which is Islamic banks--that has assets of three times the country's GDP. Mr. Reilly counters that the large size of Islamic banking as a share of the country's banking sector--and that industry's better performance in the financial crisis--suggests that Moody's is becoming more cautious on Islamic banking. In my opinion, his point avoids the real detriment that a global recession can have on an Islamic banking system. Even if the Islamic banking system performs better than conventional banks, the government would find it hard to support the banking industry if things became worse. The budget deficit is currently 7.3% of GDP (expressed another way, 2.4% of total banking assets) and even a small requirement for cash from the government by the banking industry would have a disproportionally large share of the country's GDP and also a large increase in the budget deficit, which could make the country's creditors uneasy.

JP Morgan estimates that the tradable sukuk paid to Nakheel's creditors for 60 percent of what they were owed (with the remaining 40 percent paid in cash) are worth about 60% of their value if they made all principal and periodic payments. The estimates of their fair value is based on Nakheel being able to pay "almost all" coupon payments but JP Morgan doubts Nakheel's ability to repay the principal in 2015. The five-year sukuk have a coupon of 10% per year. The terms of Nakheel's payment to trade creditors was higher than their offer to debt holders of Dubai World, who extended maturities of debt with a 1% yield. The holders of Nakheel's 2009 and 2010 sukuk received redemption in full with funds from the Dubai Financial Stability Fund and the 2011 sukuk are expected to be repaid in full from the same source.

Other News

• The Islamic Development Bank's $3.5 billion sukuk program securities will be listed in Kuala Lumpur and London. So far $1.1 billion has been issued and another $1 billion will be issued by year end in 5-, 7-, and 10-year sukuk. This is separate from the RM1 billion sukuk that was listed on Bursa Malaysia yesterday.
  
• The bill to put sukuk on equal footing with conventional bonds in the tax code in South Korea has been held up by the (unfounded) concern that it could lead to money laundering and financing of terrorist groups. This is unfortunately not an isolated case where unfounded fears hamper the growth of Islamic finance.
  
• The East Asian region lead the Dow Jones Islamic Indices in August according to a report from Dow Jones.
  
• Affin Bank has applied for the first Islamic bank license in China, according to an article in Business Times. The Ningxia Hui Autonomous Region was working in 2009 to develop a pilot Islamic financial services institution in northwest China.
  
• Indonesian bank BNI Syariah wants to partner with foreign investors to expand its Islamic banking business.
  
• Another article discusses the dichotomy between the GCC and Malaysia in the state of their Islamic finance sectors, primarily new sukuk issuance.
  
• The CEO of the Qatar Exchange, Andre Went, says it is drafting new rules to cover trading in bonds and sukuk. Trading was expected to begin in September, but Mr. Went did not say when trading would begin.
  

Islamic pricing benchmark, Khazanah sukuk

The International Shariah Research Academy for Islamic Finance (ISRA) in Malaysia is planning to release a study on a proposed Islamic benchmark pricing rate in 2011. The proposal received criticism about the practicality of having two different pricing benchmarks within Malaysia. The criticism has merits and the development of a separate Islamic yield curve would provide limited benefit compared to other areas that the effort required could be directed towards like strengthening Islamic financial institutions' liquidity management. However, if Islamic financial products move beyond replication of conventional financial products and take on different risk characteristics than conventional products, a separate pricing benchmark could be useful for new issuers because the pricing would reflect the balance between supply and demand for Islamic financial products in the secondary markets.

Malaysian state-owned Khazanah Holdings may issue S$500 million ($354 million) in sukuk to finance its purchase of Parkway Holdings, a hospital operator. The sukuk would be the largest issued in Singaporean dollars passing a S$200 million issue from the Islamic Development Bank.

Other News

• The final decision on Tamweel and Amlak, two troubled Dubai-based Islamic mortgage companies could come this month. It is reported that Dubai Islamic Bank is seeking to increase its share of Tamweel to over 50%. Tamweel's statement on its restructuring did not confirm or deny Dubai Islamic Bank's reported plans.
  
• Saturna Capital, the fund manager of the Amana Funds received a fund license in Malaysia.
  
• A credit union in the US is offering Islamic financial services.
  
• Gulf African Bank, one of the first Islamic banks in Kenya, reported a profit in the first quarter of 2010 and expects its first full-year profit this year.
  
• Pakistan hopes to double the share of Islamic banks in the country over the next 3 years, to 12% of total assets. For comparison, Malaysia is set to reach the 20% mark this year.
  
• An article discusses the idea that Dubai World attracted more attention than its overall impact in the financial markets and points out that the reason for the near-default was the financial and economic conditions as well as company-specific factors that were not related to Nakheel using a sukuk rather than a conventional bond to raise financing.
  
• Nakheel has begun paying contractors and may resume construction on some projects "within weeks".
  
• A Malaysian bai bithaman ajil (BBA) sukuk was placed on negative ratings watch. The BBA structure is used extensively in Malaysia, but not accepted in most other countries.
  
• The government of Kazakhstan is supporting Islamic finance in the country with the assistance of Abu Dhabi, whose government owned bank Al Hilal opened an Islamic bank in Kazakhstan.