Bahrain Financial Exchange in 1st Annual Islamic Finance Conference

The Bahrain Financial Exchange (BFX), the first multi-asset exchange in the Middle East and North  Africa (MENA), participated in the 1st Annual Middle East Islamic Finance & Investment Conference  (MEIFIC 2011) held in Dubai.

 

The conference, which focused on the vital role of the global Islamic finance industry, provided key industry players with an ideal platform to discussthe reality of the Islamic finance market specifically in the Middle East. 

Mr. Craig Hewett, Chief Business Officer of the Bahrain Financial Exchange, hosted a session entitled "Exchanges: the catalyst for growth in Islamic Finance", where he addressed the significance of exchanges and their integral role in Islamic finance and driving liquidity into Islamic markets, as well as in facilitating price discovery, transparency, transaction cost efficiency and risk mitigation. 

Mr. Hewett commented on the success of the 1st Annual MEIFIC conference and the benefit it provided to the industry, saying that, "The Islamic finance industry has been on a steady and consistent growth pattern for a number of years now, which has lead to a wealth of options and opportunities for the investor. In order to help encourage the industry to continue following this upwards growth trend, we have strategically positioned our business to offer a unique and powerful toolset that will not only simplify Islamic transactions, but ensure it continues to adhere to the underlying Islamic Shariah principles upon which our industry is built.

The e-Tayseer product, which was recently introduced, is the first of these tools, and through i  we offer financial institutions the option to purchase assets directly from asset suppliers to be used for Murabaha liquidity management transactions, all in a secure online environment." 

The BFX is the first multi-asset exchange in the MENA region providing a unique opportunity for the MENAfinancial services sector to link-in with established markets and take a step forward on the global financial services stage.

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Article from Global Islamic Finance Magazine 

UAE Banks A Leading Force in Mortgage Fees Change

An Islamic finance house is thought to be the UAE’s first bank to waive hefty fees charged to mortgage customers due to delays in the completion of their properties.

Homeowners in the country have been hit hard by conventional banking rules, which state that mortgage holders must continue to pay profit rates to their banks, even if the handover date has passed and their properties have not been finished.

But Dubai Bank has said its Ijarah property finance customers who have been affected by late handovers will have their payment schedules readjusted with new rates, with many clients receiving refunds on the fees they have already been charged.

‘Customers who took out Ijarah Property finance whose profit rates were calculated using a previous method, will see their profit rate retroactively revised to align with the applicable EIBOR plus  a margin however, subject to  the terms specifically stated in the Ijara property finance agreement,’ the bank said in a statement.

‘Dubai Bank will provide these customers with a rebate, as necessary. For existing clients who have Ijara facilities where the Ijarah rate is based upon the Dubai Bank Base Rate (DBBR), the applicable rate will also be reduced by 1%. This reduction will affect future profit rates and will not be applied retroactively,’ the statement continued.

Dubai Bank has also undertaken to complete all adjustments and refunds by the end of May. Chief executive officer Giel-Jan Van Der Tol said that the move had been approved by the bank’s Sharia board, and was ‘entirely in line with a commitment to share the risk with our customers’.

The move could put pressure on the UAE’s other Islamic lenders, such as Amlak, Tamweel and Dubai Islamic Bank to put similar measures in place. Many projects in Dubai have stalled over the last two years due to oversupply and a collapse in the emirate’s property prices.

However, as few developments have been officially cancelled, many investors and potential homeowners have been forced to continue paying large sums to their banks for delayed projects.

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Article from Global Islamic Finance Magazine 

Diaz Reus opens office in Dubai International Financial Centre

It has been reported that Diaz Reus & Targ, LLP, a Miami-based full-service international law firm focusing on project finance, trade, customs, financial, commercial and corporate transactions and governance, foreign government relations, tax planning, immigration, litigation, and arbitration, has opened a new full service office in the Dubai International Financial Centre Dubai International Financial Centre (DIFCDIFC), announces Michael Diaz, Jr., managing partner.

"Having an office in DIFCDIFC makes it easy and convenient for clients to contact Diaz Reus about business, trade, government relations and investment matters," said Arti Sangar, partner in charge of the firm's Dubai office.

In addition to their physical location within the DIFCDIFC, Sangar, Diaz, and fellow partner Carlos F. Gonzalez, are admitted within the DIFCDIFC Courts. Noted Gonzalez, who is fluent in Arabic and has worked on matters in the Middle East, "Our ability to provide clients seamless representation, from starting or growing their physical presence in Dubai and throughout the MENA region, to quickly and efficiently resolving business related disputes within the DIFC's world-class facilities, made our decision to stay and grow in Dubai simple."

As the leading business hub in the United Arab Emirates, DIFCDIFC supports economic development in the region by providing the needed legal and business services, as well as physical infrastructure. "It is considered a global gateway for finance, capital and investment," added Sangar. 

DIFCDIFC focuses on banking services (investment banking, corporate banking and private banking); capital markets (equity, debt instruments, derivatives and commodity trading); asset management and fund registration (fund registration, fund administration and fund management); reinsurance;Islamic finance and back office operations. One of the key subsidiaries of the center is NASDAQ Dubai (formerly Dubai International Financial Exchange (DIFX).

 

In addition to Dubai, Diaz Reus operates offices in Miami and Orlando, Florida; Shanghai, China; Mexico City, Mexico; Frankfurt, Germany; Caracas, Venezuela; Bogota, Colombia: and Buenos Aires, Argentina, as well as an affiliate office in Sao Paulo, Brazil.

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Article from Global Islamic Finance Magazine 

Islamic Banks in Turkey Are Thriving

Islamic Banks in Turkey are said to be continuing to thrive and prosper in the heart of a rich population who want to tap into the Shariah compliant methods of financing. 

According to Osman Akyuz, the secretary general of TKKB and the former General Manager of Albaraka Turk Participation Bank, total assets of participation banks in 2010 increased by 25 percent on 2009 reaching $28.1 billion; deposits increased by 22 percent to reach $21.9 billion, of which 66 percent were in Turkish lira and 34 percent in foreign currencies; financing allocated by the participation banks grew by 25 percent to reach $20.8 billion; total shareholders' equity increased by 19 percent to $3.5 billion; net income however increased by 4 percent to reach $491.6 million; and the number of branches and number of staff of participation banks  totaled 607 and 12,694 respectively growing at a year-on-year rate of 8 percent.

Turkey is still far from other Islamic hubs such as in countries like Saudi Arabia (38 percent);Brunei (40 percent) and Malaysia (21 percent). The current market share of participation banks in Turkey is a mere 6 percent, although bankers such as Ufuk Uyan, CEO of Kuveyt Turk Participation Bank are confident that a target of between 10 percent to 12 percent market share is achievable over the next few years, given the current growth of the sector in Turkey and globally. In fact, there are two new applications with the Turkish banking authorities from  abroad for licenses to launch participation banks.

Similarly, the market share of participation banks assets is 4.31 percent; of participatio  deposits is 5.4 percent; and of participation financing 6 percent. The financing to deposit ratio of participation banks in 2010 was 96 percent compared with 83 percent for th  conventional banking sector in Turkey. In terms of non-performing loans, participation banks also fared better. The NPL for participation banks in 2010 was 341 million Turkish liras or 0.34 percent compared with 379 million liras or 0.47 percent in 2009.

In recent months Kuveyt Turk Participation Bank has pioneered an exchange-traded fund (ETF) backed by physical gold; gold-based current and term accounts; the purchase of gold coins through ATMs; launched the first cooperate sukuk in Turkey (a $100 million Sukuk Al-Ijara); and is planning a second $500 million sukuk later this year. Turkiye Finans pioneered the first participation ETF in the world; it has launched several mutual funds; and a spate of gold-backed current and savings accounts. Albaraka Turk Participation Bank is also finalizing its debut Sukuk issuance; has pioneered products such as the Barakat Card aimed at the small and rural farming  community; a franchise and business card.

Asya Bank, the only wholly-Turkish owned of the four participation banks, is setting the pace in several ways. It joined up with the Jeddah-based Islamic Corporation for the Development of the Private Sector (ICD), the private sector funding arm of the Islamic Development Bank (IDB) Group, to set up Tamweel Africa, a holding company which invests in the equity of Islamic banks, leasing companies and finance and investment entities in Africa. Asya Bank is also planning to expand abroad and according to reports it has applied to the Reserve Bank of India (RBI), the central bank, to open a representative office in Mumbai.

Asya Bank like other Turkish banks is an active raiser of funds through the international Murabaha syndication market. The lack of sukuk legislation has meant that Turkish banks are forced to venture offshore to raise medium-to-long-term funds to finance some of their activities, instead of deposits which are largely short-term. In fact, the Turkish National Assembly in February passed tax and other measures to facilitate the introduction of Sukuk Al-Ijara in Turkey.
 

As such Turkish participation banks are increasingly exploring the possibilities of raising funds through a Sukuk issuance, albeit dependent on the quality and volume of available Ijara assets that can be securitized.

Asya Bank in fact recently went to the market to raise $300 million in a Murabaha (cost-plus financing) syndicated loan - the largest single such facility extended to a Turkish bank. Because of the huge appetite from the market, the Murabaha facility was upsized from the original $150 million to $300 million. The facility actually comprised two tranches - a $171 million tranche (in US dollars) and a 94.5 million-euro tranche. A record 26 international financial institutions participated in the syndication. They included Standard Chartered Bank in the UK, ABC Islamic Bank in Bahrain, Noor Islamic Bank in Dubai, National Bank of Abu Dhabi, as well as 22 others from the United States, Europe, Turkey, Pakistan and other Middle East and North Africa countries.

Source

Article from Global Islamic Finance Magazine 

Islamic Bank Sees Potential in Thailand

It has been reported that the Islamic Bank of Thailand (IBank) plans to expand its financial  services to the upper southern provinces to support Muslim communities affected by recent flooding,according to president Dheerasak Suwannayos.

The bank will focus on Surat Thani, Nakhon Si Thammarat, Phatthalung and Trang provinces for its business expansion, which is scheduled for the second quarter this year after the flooding eases.

IBank's operations currently cover Narathiwat, Yala, Pattani, Satun and Songkhla."There is business potential i the upper south because of rising farm prices," said Mr Dheerasak.Prices of key regional products including rubber and palm are likely to keep rising, he added. Shrimp farms will also contribute handsome income to farmers.

With IBank's niche market of only Muslim clients, it will face less competition than otherf inancial institutions in the area, he added.

Mr Dheerasak said that mortgages and related financial products would be the bank's initialofferings. Loans will be focused mainly on those affected by recent flooding that require home renovation.

Later on, the bank plans to offer hire-purchase options to its customers.Existing clients of the bank affected by the flooding receive extended debt repayment periods and special credit lines lasting until July.

IBank, a state-owned institution, is in the process of recapitalising to 9.87 billion baht from 3.43 billion after it receives approval from the Finance Ministry.

The new funds raised will be used to facilitate loan expansion. It expects total outstanding debt will rise to 100 billion baht this year from around 90 billion.

Moreover, the recapitalisation will help maintain the bank's strong capital adequacy under its business expansion plan for this year. IBank's Bank for International Settlements ratio is currently 12%.ratio.

The bank also plans to launch around 50 billion baht worth of Islamic bonds in local and overseas markets in the second quarter this year.

Source

Article from Global Islamic Finance Magazine 

Malaysia's Governer Zeti Prioritises Talent In Developing Islamic Finance

Malaysian Governer Zeti has said that she will prioritise talent development in the financial sector, making its approach a holistic one and across the spectrum of the financial services industry, as quoted in a statement from Tan Sri Dr Zeti Akhtar Aziz.

This is to develop a strong pool of financial sector talent with world class capabilities to driveresponsible growth and development of the sector.

“As many of the initiatives supporting these strategies are multi-disciplinary and multi-layered,the approach is grounded in a shared commitment with the industry in a comprehensive, coordinated aid in her keynote address at the AIF International Symposium 2011, yesterday “With the strong support of all the key stakeholders and practitioners in the industry, we can make a critical and lasting contribution towards creating a talented workforce for the industry,” she said.

Zeti said Malaysia’s financial sector has continued to forge ahead and its contribution to thecountry’s Gross Domestic Product had increased from 9.2 per cent in 2000 to 11.7 per cent in 2009 and expected to grow further in time.

Likewise, there will be greater employment and increasing demands for specialised skills and enhanced expertise in finance.

The workforce must not onlyrise above current challenges but must be well equipped to excel in the significantly changed environment, she said.

Zeti said the regulatory reform in the financial sector and the onset of new standards and requirements and the emergence of new risk disciplines and fundamental changes in financialreporting standards required financial professionals to be equipped with new knowledge and skills.

Talent shortages continue to be acute in high growth areas such as wealth management, Islamic finance and investment advisory services.

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Article from Global Islamic Finance Magazine 

NEST pension scheme names Sharia, ethical managers

By Cecilia Valente

LONDON | Mon Apr 11, 2011 4:14am EDT
 

LONDON (Reuters) - Britain's new national pension scheme for workers whose employers do not run their own plans has appointed HSBC and F&C to run the Islamic and ethical portfolios respectively.

The National Employment Savings Trust, expected to become Britain's largest pension fund with up to 100 billion pounds in total assets by 2030, will offer the two portfolios, among others, when it launches next year.
Contributions of members choosing Islamic fund management will be paid into the HSBC Life Amanah Pension Fund, run by the banking group's Islamic finance unit. Such investments would shun association with areas forbidden by Islam, such as alcohol, weapons, pornography, gambling and mainstream financial services because they charge interest, also seen as sinful.

"The NEST Sharia fund will be 100 percent invested in this fund," NEST's head of investment Mark Fawcett told Reuters.

The contributions of those who want to invest in a portfolio which takes into account issues such as employment practices, human rights and the environment, will be funnelled into F&C's Stewardship International Fund.

"There are positive focuses that align very well with what we know about our members; protecting human rights, good employment practices, positive impact on local communities," Fawcett said, adding he expected the option to be reasonably popular.

NEST will charge members, potentially millions of workers with no corporate pension, the same fee as the default option, which is expected to attract around 80 percent of inflows given most members were expected to shy away from making specific investment choices.

The scheme has already appointed UBS, BlackRock and State Street to manage global equity, bond, cash and British sovereign debt.

NEST is setting up a pre-retirement fund for members who want to save in the short term to buy insurance. This is likely to invest in money markets, gilts and corporate bonds, Fawcett said, adding a request for tender would come later this year.

(Editing by Dan Lalor)

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Article from Reuters

Sri Lanka & Bangladesh Eyes New Areas of Islamic Finance

LankaBangla Finance Limited, a leading non-banking financial institution (NBFI) is going to launch new Shariah-based products to broaden its business.

"We are going to launch the Islamic shariah-based product on deposit and financing by June next,"  Mafizuddin Sarker, managing director of LankaBangla Finance Ltd told the FE recently.The company in its drive will also expand the growing businesses in credit cards, SME and factoring in the coming months.

"We are set to expand our network in Sylhet, Jessore, Khulna and Bogra this year," the LankaBangla  chief executive added.The company held its 14th annual general meeting March 27 last and approved 55 per cent stock dividend for the shareholders.

"We had only 25 per cent public shareholders out of our total company equity-owners when we went public in 2006, but now it has reached to a whopping 56.6 per cent," Mr Mofiz mentioned.

He said the growing number of general shareholders prove that the company is committed towards  maintaining the responsibility and accountability. The company's net profit jumped to Tk 1,700.15 million in 2010 showing a whopping 128.49 per cent rise against the amount of 2009. Total portfolio of LankaBangla reached to Tk 15,064.57 million registering a 40.8 per cent growth.

Mr Mafiz said his company is working hard to expand the secondary market.LankaBangla Finance is one  of the recipients of license awarded by Bangladesh Bank to act as primary dealer (PD). "But our efforts will not be fruitful unless the government allows a transparent policy on taxation against the income of bonds," Mr Mafiz clarified.

He mentioned that at present the policy on bonds of Bangladesh is not conducive like the policies of neighbouring countries.He further added that the central bank should not allow participation of non-licensee FIs at the Bangladesh Bank auction.

Emphasising the need for developing the bond market, he said mobilization of internal resources has become a core necessity to reduce the dependence on external resources."We have the opportunity to develop bond market, but the chance should not be missed," he commented.

Established in late-1996, LankaBangla Finance is a joint venture financial institution established  with multinational collaboration of foreign equity investment from Sri Lanka and Kingdom of Saudi  Arabia.

Reviewing the sectoral performance, Mr Mafizuddin Sarker, also chairman of Bangladesh Leasing and  Finance Companies Association (BLFCA) demanded of the government to exempt the financial institutions(FIs) from double taxation in case of booking income by the parent FIs from subsidiary.

"Effective tax liability for the parent company would be 50 per cent against the current rate of  42.5 per cent under a directive of the Securities and Exchange Commission (SEC) on establishing separate subsidiary for stock trading by banks and FIs,"

Currently FIs have been paying 42.5 per cent income tax on its taxable income and upon opening of a  subsidiary, income tax payable would be 37.5% on the taxable income of the subsidiary company and the parent company would book the dividend income in its books.

However 20 per cent tax on dividend is required to be imposed on the dividend income to be received  by the parent company under the prevailing regulation.

"This is certainly not an encouraging factor to go for opening of subsidiary which was aimed at  expanding the businesses of our companies," the BLFCA chief said.

Making a plea for avoiding payment of income tax twice on the same income by the parent company and  subsidiary company, the BLFCA chief cited example of India.

"India handled the matter by inserting a special provision in the Finance Act of 2009," he added.In another demand, the BLFCA chief said in order to reduce the dependency on bank borrowing, FIs should be more focused to attract deposit from public in a three-month plus tenor.

Currently FIs can take deposit from institutions and individual with a tenure of not less than 6  months.Many FIs have short term product as well like factoring, credit card, treasury operations etc.The BLFCA chief also demanded that the 'existing exemption on the cumulative exposure in the form of  underwriting and portfolio loan of a merchant banker at any time should not exceed five times of its equity' should be applicable in case of subsidiary of FIs as well.

Source

Article from Global Islamic Finance Magazine 

Gulf’s Finance Seek To Purchase Banks in Turkey

It has been reported that many banks in the gulf are looking to Turkey to make key Shariah compliant investments as Turkey is spurring ahead in the Islamic finance and banking industry.

Adnan Ahmed Yousif, chairman of the Union of Arab Banks (UAB), has said banks from the Gulf are  looking for Turkish banks to acquire.

Speaking at the “Enhancing Shamgen Banking: Turkey, Syria, Lebanon and Jordan” conference in  Istanbul on Tuesday, Yousif said big Arab banks such as Al Rajah Bank, Qatar National Bank and Abu  Dhabi Islamic Bank were seeking opportunities to become established in Turkey by purchasing a national bank.

He said regional countries have the potential to grow more if they cooperate more. “We need more cooperation in the banking and finance sector in the coming period. Globalization forces us to become involved in more joint projects,” Yousif said, referring to a regional cooperation agreement in the field of banking that was signed between Turkey and three of its southern neighbors with whom it envisions establishing a single market, an example of regional economic cooperation that many said  was the Middle East version of the European Union.

This aim of the agreement is to support and facilitate trade and investments between Turkey, Jordan,Syria and Lebanon. The four countries also earlier signed free trade and visa-exemption agreementsto improve trade and bilateral cooperation amongst themselves.

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Article from Global Islamic Finance Magazine 

Abu Dhabi Commercial Bank Announces New Head

Abu Dhabi Commercial Bank Islamic Division has announced that Amr Saad Al Mehnali will be new head of Islamic Banking. Mr Mehnali is a UAE national who has been with ADCB since the year 2006. 

During his time at ADCBADCBAbu Dhabi Commercial Bank Amr has played a significant role in the  development of the Islamic Banking division. He was instrumental in the launch of ADCB Abu Dhabi Commercial Bank's Islamic Banking Business in 2008 and has been an acting member of the Steering Committee in monitoring the project since its inception. 

As SVP and Head of Retail Credit, Amr oversaw the restructuring of Abu Dhabi Commercial Bank's  entire credit division, most notably through the acquisition of the Royal Bank of Scotland's retail business in the UAE.

In addition to his business role, Amr is also a nominated board member by Abu Dhabi Commercial Bank for Abu Dhabi Finance (ADF) and Abu Dhabi Commercial Islamic Finance Company (ADCIF). He also represents bu Dhabi Commercial Bank in National Anti Money Laundering Committee of the Central Bank of UAE Ala'a Eraiqat, Chief Executive Officer and Board Member at Abu Dhabi Commercial Bank,said:

"It is with great pleasure that we appoint Amr to the position of Head of Islamic Banking for the Bank. He has done an exceptional job contributing to ADCBADCBAbu Dhabi Commercial Bank over the past five years and has shown a continuous ambition to help develop the products and services that we offer our clients. Amr is an advocate for prudent management to further the Bank's success in the UAE and we are proud of his accomplishments and confident that he will perform at thehighest level in his new role as Head of Islamic Banking." 

Amr Saad Al Menhali, Head of Islamic Banking at Abu Dhabi Commercial Bank ,said: "I am delighted to be appointed to this new position and look forward to working with our expert team to enhance the benefits Islamic banking brings to our customers at Abu Dhabi CommercialBank. It is a very exciting time for Islamic Banking as investors look for stability across the region." 

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Article from Global Islamic Finance Magazine