UK Experts Eye Islamic Finance Solution
 |
| The Islamic finance is gaining popularity in UK better than other European countries. |
CAIRO – A decision by the UK government to put on hold earlier plans for the first Islamic sovereign bond from a western country was criticized as a setback for the initiative that could have provided more security to a shaking economy.
“It would certainly help the UK market if the
government decided to go ahead with a benchmark sukuk,” Farmida Bi, partner at
Norton Rose, the law firm, told the Financial Times.
“It could galvanize the market and would lead
to more interest in Islamic finance in London and [continental] Europe.”
Affected by a financial crisis, the UK put the
plans to issue the Islamic instrument on hold which would have been the first
Islamic bond to be issued by a western government.
The government cited fears that a new
instrument might struggle to attract demand in difficult market conditions that
have been made worse by the troubles in the eurozone.
Yet, London still remains the main arena
outside the Muslim world for Islamic finance.
In 2006, Britain's fifth-biggest bank, Lloyds
TSB, began to roll-out its Islamic financial services across the country.
The UK is the only country in the European
Union to have Islamic banks. It is also developing its takaful market for
Islamic insurance.
The UK also has a strong foothold in
developing products such as commodity murabaha – Islam’s version of interbank
short-term lending and syndicated loans.
Moreover, London has established the first
secondary market in sukuk outside the Islamic world to help Islamic investors who
seek to buy property and assets in the UK in a way that fits in with their
religion, which bans earning interest, speculating or risk-taking.
London is also advanced in Islamic retail
services, with institutions offering a range of Islamic banking products, such
as mortgages and car loans.
The Islamic Bank of Britain, granted a license
in August 2004, became the first Islamic bank in the UK and has continued to
attract customers for mortgages.
Enhance Market
Admitting that the government made huge efforts
to facilitate Islamic finance in the UK, there is a feeling among many bankers
that the government must launch a sovereign sukuk to help the market move to
the next stage.
“I think it has been a mistake by this
government not to revive the idea of an Islamic government bond,” a banker at a
big City institution told Financial Times.
“They worry about price and demand, but the UK
gilts market is a haven.
“We are confident there would be strong demand
for this product, as it is Islamic and would be denominated in sterling, which
is what investors want, as there are so many problems in the eurozone.”
Despite the recent decision to hold the new
instrument, the Islamic finance was gaining popularity in UK better than other
European countries.
For example, though France has around 7
million Muslims, compared with UK 2 million Muslims, progress in Islamic
finance in France was stalled due to problems over banning the face veil and
burka in public places which put off investors.
Starting almost three decades ago, the Islamic
banking industry has made substantial growth and attracted the attention of
investors and bankers across the world.
A long list of international institutions,
including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking
business.
Currently, there are nearly 300 Islamic banks
and financial institutions worldwide whose assets are predicted to grow to $1
trillion by 2013.
Islam forbids Muslims from usury, receiving or
paying interest on loans.
Islamic banks and finance institutions cannot
receive or provide funds for anything involving alcohol, gambling, pornography,
tobacco, weapons or pork.
Shari`ah-compliant financing deals resemble
lease-to-own arrangements, layaway plans, joint purchase and sale agreements,
or partnerships.
Investors have a right to know how their funds
are being used, and the sector is overseen by dedicated supervisory boards as
well as the usual national regulatory authorities.
The Shari`ah-compliant system is now being
practiced in 50 countries worldwide, making it one of the fastest growing
sectors in the global financial industry.
Source: onislam.net
Islamic Banking Is the Need of the Hour: Experts
Even as RBI and government aren't keen on allowing Islamic banking, experts from the world of Islamic finances today said it is a question of "how soon and not whether it will be allowed", as this mode of banking can greatly help a fund-starved country get long-term finances.
"It is not when, but how soon, the Reserve Bank and the government will take a positive view on this highly effective financing option," T Balakrishnan, the brain behind the country's first proper Shariah-compliant financial services firm Al Barakah Financial Services, promoted by the Kerala government, told PTI on the sidelines of a meet on Islamic banking organised by the Indo-Arab chamber of Commerce and Industries here today.
Balakrishnan, who just retired as the additional chief secretary of Kerala in-charge of industries and commerce, said the Kerala State Industrial Development Corporation-promoted Al Barakah Financial Services, which was refused permission by the RBI early this year to start NBFC operations, is still hopeful of getting the regulatory nod.
Islamic banking prohibits charging interest from idle deposits, but allows investment in productive projects/ business and the resultant profit-sharing.
Pointing out that 75 per cent of the bank deposits in Kerala is held by the state's Muslim population, which constitute 25 per cent of population, he said, if Al Barakah Financial Services, in which, the state holds 11 per cent equity, or any other organized player is allowed to operate, they can easily channel billions of rupees to build infrastructure in the state. But he added none of these depositors draw interest from their banks, as it is prohibited under their faith.
Currently, Islamic banks across the globe manage an asset base of over USD 1 trillion (as of 2010), which is projected to reach USD 2.8 trillion by the turn of 2015.
Addressing the summit, Rajya Sabha deputy chairman R Rahman Khan blamed the bureaucracy for their myopic approach to developmental issues.
"The problem is that our bureaucracy is not open to change and look for newer ideas. So is the case with the officials at the central bank. If they open their eyes and look at the Arab world and their finances, they will find that their banking model is many times better and more stable than interest-driven banking system that we have," Khan said.
Shariq Nisar, a director at TASIS that advices Shariah-complaint companies in their investment areas, said, "It is not that there is no Islamic banking being practiced in the country now. There are aplenty, but all in an unorganised manner. What we need is a formal approval from regulators, so that large players can enter and tap this huge untapped money for productive purposes."
Pointing out that already Islamic fund houses like Gulf Finance House, have invested over USD1 billion in the country's infra sector like roads, ports, railways, airports, which are all Shariah-compliant, a partner at law firm Clasis Law Ishtar Ali said the Naiad Toll Bridge was partly funded by Islamic finances.
"But companies cannot come and invest in more such projects because our banking rules don't allow them to do so," he said.
Balakrishnan said, Al Barakah Financial Services will again move the RBI for approval and expressed the hope that it will come by going by the 30 per cent (or USD 300 billion) funding gap envisaged by the Centre for its USD 1 trillion infra push in the next Plan period.
He also drew his optimism from the recent statement by the Prime Minister that it is high time the country looked at the Malaysian model of infra funding.
The Southeast Asian tiger economy heavily depended on Islamic funds for its infra expansion. So are China, the US, Britain, Germany, France and many other non-Arab, non-Muslim nations, Balakrishnan said, adding Islamic banking is thriving in as many as 75 countries today.
Source: outlookindia.com
Record profits for Abu Dhabi Islamic Bank
Abu Dhabi Islamic Bank (ADIB) reports better than expected quarterly results despite the impact of lending restrictions imposed by the central bank. ADIB saw its highest ever quarterly net profit for the third quarter at AED 319.1 million ($86.8 million), only slightly higher than the AED 314.5 million ($85.6 million) it reported for the same period a year earlier. The Islamic lender beat average forecasts for profit of AED 286.5 million ($78 million).
The bank said the impact of new central bank limits on lending hampered growth, "Despite growth in customer numbers and a more diversified product offering, the impact of the UAE Central Bank guidelines on personal banking, fee income and asset growth was noticeable," Chief Executive Tirad M Mahmoud said in a statement.
Earlier this year, the regulator capped the amount commercial banks can lend to individuals at 20 times their salary and set the period for loan repayment at 48 months to prevent excesses seen prior to the 2008 financial crisis.
ADIB said it booked AED 150.8 million ($41 million) in credit provisions in the third quarter, 8.9 per cent lower than in the third quarter of last year, while customer deposits were flat at AED 54.3 billion ($14.7 billion) in Q3 2011 versus AED 54 billion last year.
Meanwhile, Islamic financing expanded 1.9 per cent in Q3 compared to the same period a year earlier to AED 51.17 billion ($13.9 billion).
ADIB also reported a 3.2 per cent year-on-year jump in nine month profit ending September 30 reporting earnings of AED 938.9 million ($255.6 million) compared with AED 909.5 million ($247.6 million) it reported the same time last year.
The lender said it also expects slower growth next year, "the UAE may face another down cycle in the credit environment triggered by the prevailing negative global sentiment and its impact on the entire region," Mahmoud said.
"The main area of concern is the concentration of non-performing real estate assets which require a lot more time to recover," he said, adding the bank expects low single digit growth in both assets and liabilities for the sector and the bank.
Source: CPI Financial dot net
Islamic banks got good prospects: HSBC
Source: http://www.iol.co.za/business/international/islamic-banks-got-good-prospects-hsbc-1.1161423
Islamic finance 'developing Halal roadmap'
Islamic banks got good prospects: HSBC
October 20 2011
Recent regulatory changes in Kuwait and Qatar, retail client preferences for Shariah-compliant banking products, and stronger balance sheets and funding positions, offer better growth prospects for Islamic banks compared with conventional peers, HSBC said as it initiated coverage on four Islamic banks.
The brokerage initiated Saudi Arabia's Alinma Bank and Qatar Islamic Bank with “overweight”.
In an October note, the brokerage said it expects Alinma, which has no legacy credit risk in its loan portfolio, to double its market share in the medium term, helped mainly by corporate lending.
HSBC said it expects Qatar Islamic Bank to gain from recent regulatory changes in the country that do not allow conventional banks to offer Islamic banking services.
The brokerage downgraded Abu Dhabi Commerical Bank to “neutral” from “overweight” saying slowing private sector activity, rising foreign exchange refinancing costs and a flattening US yield curve will impact net interest margins in the long term.
The brokerage also upgraded Qatar National Bank to “neutral” from “underweight” citing the bank's excess capital.
The brokerage however, cut its price targets on Saudi Arabian banks including Riyad Bank and Samba as it expects the cash-rich corporate segment and direct intermediation by the government in the private sector to reduce their growth opportunities.
HSBC also cut its price targets on Abu Dhabi banks including UNB and Abu Dhabi Commercial Bank on slowing growth outlook.
The brokerage cut price targets on Egyptian banks EGB and Credit Agricole Egypt on weaker revenue growth. - Reuters
Islamic finance 'developing Halal roadmap'
DUBAI: The Dh3.68 trillion ($1 trillion) global Islamic finance industry is in the process of developing a road-map to converge on the booming halal market, said an industry expert while speaking at an Islamic Finance forum in Malaysia.
'Growing Muslim population, awareness and consumers, their rising literacy and professional training, sustainable nature of Islamic economy, role of press, social media are contributing factors for the impressive growth of Islamic finance and Halal industry,' he added.
Lootah was speaking at the convergence mechanism of Islamic Finance and Dh 2.4 trillion ($651 billion) Halal market at the 8th Kuala Lumpur Islamic Finance Forum 2011 (KLIFF), organized by the Centre for Research and Training (CERT).
The event, officiated by the Malaysian Minister of Finance II, Y.B Dato’ Seri Hj Ahmad Husni Hanadzlah, was held in Kuala Lumpur, Malaysia, and ended on Friday.
From the international Halal food industry, Al Islami was the only halal food company which was invited to this international and prestigious event to share its experience and evolution of becoming a world leader in halal food industry, said a company statemment.
Lootah pointed out that modern Islamic banking originated with the establishment of the Dubai Islamic Bank in 1975, an Islamic economy movement initiated by the founder of Al Islami Foods Hajj Saeed Lootah, also the chairman of Lootah Group, a business conglomerate based in Dubai.
'Hajj Saeed passionately believes in and practices the Islamic principles and values across every facet of life. His unwavering commitment to these values helped Al Islami to set a benchmark in the global halal food industry,' he added.
Concurrent industry events were organized to cover the complete package of Islamic finance industry that included: Shariah Forum, The Takaful Rendezvous, Ethics and Finance Roundtable Exhibition, Workshops, Islamic Finance Essay Competition, and Islamic Finance Awards.
KLIFF 2011 gathered more than 1,500 delegates ranging from regulatory authorities, Shariah scholars, bankers, legal practitioners, Takaful operators, consultants, and academicians in Islamic finance around the globe.
TradeArabia News Service: http://www.tradearabia.com/news/FOOD_206147.html
Islamic Sukuk market proved resilient in the face of the crisis
JEDDAH: NCB Capital, Saudi Arabia's largest investment bank and leading GCC wealth manager, discussed the future of Islamic funds industry at the 7th World Islamic Funds Conference held recently in Bahrain under the theme "Global and Regional Economic Outlook: Assessing the Impact on the Performance of Islamic Funds."
 |
| An Islamic Bank in Kuwait |
Addressing the conference, NCB Chief Economist Jarmo Kotilaine said: "Strong growth in Islamic banking continues apace," noting that global Islamic banks' assets have increased considerably from $145 billion in 2002 to $1,033 billion in 2010.
He added: "While the global economic crisis negatively impacted the Islamic banking sector after growing at double-digit pace for a number of years, resulting in Islamic banking assets slowing down to 9.8 percent in 2009, growth accelerated again to 26 percent in 2010 and the interest for Islamic finance continues to grow even in non-Islamic countries as reflected by the fact that there are over 300 Islamic financial institutions worldwide across 75 countries."
Discussing sukuk, Kotilaine reported that the sukuk market proved resilient in the face of the crisis, stating that globally, funds raised through sukuk issues grew from $2.8 billion in 2001 to $53.2 billion in 2010 and even during the tumultuous period of 2008-2009 funds raised from sukuk increased significantly.
"Sukuk are also emerging as a new asset class for investors, since asset-backed/based instruments provide relative capital protection and predictable returns to investors, while In addition, a near-absence of long term financing tools and a growing importance of long term capital projects launched in the region have also increased the attractiveness of sukuk.
"After a brief setback in 2010, increasing private sector activity is driving the revival in the GCC sukuk market. Funds raised through sukuk in the GCC in 2011 reached 38 percent ($17 billion) of global issuance up to September 2011, compared to only 28 percent ($7.6 billion) and 22 percent ($6.1 billion) in 2009 and 2010 respectively. Corporate issuance of sukuk in 2011 accounted for around 87 percent ($14.6 billion) of total issuance compared to 77 percent ($4.6 billion) of total issue in 2010."
According to NCB Capital, Islamic finance is gaining prominence in non-Islamic countries. In the UK, the government has set an objective to make London the hub for Islamic finance and there are plans to issue sovereign sukuk and amend tax laws on IF. France, Germany, Japan, Singapore and South Korea are other countries where the governments are taking active steps to promote Islamic banking and finance, while Hong Kong aims to become the Islamic finance gateway to China.
Looking at the prospects of global economic recovery, Kotilaine commented that economic slowdown in the US, inflationary shocks in Asia and sovereign debt in the EU all remain a core risk to the global recovery.
"After growing by a dismal 0.4 percent in Q1, the US economy grew by 1 percent in Q2, 2011 while the unemployment rate remained over 9 percent during this period. Also, the ratings downgrade by S&P hit the country's credibility in the international markets. Furthermore, the IMF in its June 2011 report revised the US economic growth forecast downward to 2.2 percent from its previous projection of 2.4 percent for 2011. Over the long term, with US public debt close to 100 percent of GDP mark, substantial increase in the rate of fiscal tightening in coming years is more likely.
"Sovereign debt concerns along with faltering recovery clouds the EU economic outlook," said Kotilaine. "Germany, the largest economy in the EU region slowed down during Q2 to only 0.1 percent QoQ largely due to a decline in household spending and higher imports. In France, economic activity stagnated with real output witnessing no growth during 2Q, while the Spanish economy contracted by 0.2 percent in the same period. Overall, lack of confidence in the Euro zone's ability to effectively manage the sovereign debt concerns continues to hurt investor sentiments."
Moving on to the subject of emerging economies, Kotilaine reported that although their growth rate is nearly twice the pace of their industrialized world counterparts, they are facing increasing inflationary pressure.
"While emerging market central banks continue to raise interest rates, inflation remains at elevated levels - the CPI interest rate in China was 6.2 percent in August while the WPI inflation in India continues to hover near the 10 percent mark. Money tightening along with sluggish recovery in the West will likely have a negative impact on the emerging markets' economic growth.
"Even though the IMF revised its growth projection for the emerging economies to 6.6 percent from the earlier 6.5 percent for 2011, growth will likely slow down on account of emerging global pressure."
No comments:
Post a Comment