A moveable feast

Rapids • Deals • News • Takaful • Asset Management • Ratings • Moves
15th April 2015 (Volume 12 Issue 15)
A moveable feast Islamic finance is not only robust and resilient, but versatile. It has weathered the recent economic adversities with style, and the industry continues to grow not only in size but in depth, innovation, ability and of course, in interest to the wider markets – as the principles of Shariah prove to be of consistent benefit to an ever-widening array. This week we take a look at the sector from the other side of the fence, exploring the growing competition in the Sukuk sector from the perspective of the arranging banks and asking what advantages and compelling interest the transactions offer them in terms of wider industry access. Continuing the theme of versatility and adaptability, our IFN reports this week look at emerging markets, the new liquidity measure from the Central Bank of Bahrain and Islamic ETFs, while our analyses cover Bangladesh and retail banking. Our correspondents write on Brazil, the UAE, Qatar, private equity and venture capital and provide you a global economic outlook. Special reports are brought to you by Ishrat Hussain of State Bank of Pakistan on differentiating Islamic banking through customer service; Mezbah Uddin Ahmed, a member of the Association of Chartered Certified Accountants, on IFRS for Islamic finance as well as a controversial piece by Hussain Kureshi on Islamic finance and Madoff. Features come from Farouk Alwyni of Alwyni International Capital on Indonesia and Tim Sinclair from Al Rayan Bank on opportunities in the UK, and we also have a piece on retail banking from Chowdhury Shahed Akbar. We also bring you a Takaful feature from Erwin Noekman of Indonesi a Takaful Association. It’s a packed issue this week with plenty to sink your teeth into. As more and more guests join the party, the feast may be moveable but it’s also mouthwatering – and the selection is only getting bigger. Bon appétit! Cover Story A banking boom: The competitive market for Sukuk sales The Sukuk sector has surged into 2015 with a strong showing of significant deals and an exciting pipeline of both sovereigns and corporates coming up. As the market becomes more lucrative however, it is also becoming more competitive, with ever more banks entering as bookrunners, lead managers and underwriters. LAUREN MCAUGHTRY takes a look at the other side of the coin: exploring the arena from the arrangers’ perspective and asking why the industry appeals so strongly — and to such a wide range of players. IFN Reports • Emerging markets see strong recovery in 2015 • Islamic ETFs — Not why, but when • A new liquidity management tool in Bahrain • Al Hilal Takaful and Euler Hermes form partnership to strengthen market foothold in the region • Islamic banks struggle to meet digital demand • Sukuk market performing well despite volatile environment • Sovereign Sukuk: Positive progress • Takaful players paying the price of regulation disharmony • IFN Global Trendswatch • IFN Weekly Poll: Can Shariah crowdfunding cater to the large SME market better than banks? IFN Country Correspondents • Developments on the Brazilian front • The UAE — A key participant in the Islamic finance economy • The future is bright in Qatar IFN Sector Correspondents • The ‘other’ reason non-Islamic issuers are flocking to Islamic finance • New modes of supporting the Quranic prohibition on predatory lending IFN Country Analysis • Bangladesh: A resilient Islamic finance player despite regulatory hurdles IFN Sector Analysis • Retail banking in Islamic finance Shariah Pronouncement As part of banking services, an Islamic bank offers issuance of various types of letters of guarantee against a fee. Such letters of guarantee are issued based on a request from the bank’s customer. Case Study Ras Al Khaimah’s largest public issuance: US$1 billion Sukuk Ijarah The government of Ras Al Khaimah (RAK) via its Investment and Development Office has successfully completed the issuance of its US$1 billion Sukuk Ijarah on the 24th March 2015. The Sukuk was well received by market constituents with an oversubscription rate of 3.5 times. Special Reports Differentiating Islamic banking through customer service To expand globally, banks are removing the word ‘Islamic’ from their corporate names. Dubai-based Noor Islamic Bank has changed its name to Noor Bank and Abu Dhabi Islamic Bank now plans to call itself Abu Dhabi International Bank when operating abroad. IFRS for Islamic finance: Development is needed with no delay In just a few decades since its inception, Islamic finance has established itself as an important element of the global financial industry. The reach of Islamic finance currently extends to no less than 70 countries. What does Islamic finance have in common with Madoff? Absolutely nothing, opines HUSSAIN KURESHI, who believes he is one of the harshest critics of Islamic finance, simply because as a Muslim he is so anguished by seeing the name of Islam behind so many agendas, causes, sub-ideologies and excuses to fool other people, and in this article he elaborates. Islamic finance as an industry is not plagued by fraud (as yet) but by lack of preparation and standardization. Features Improving the quality of the growth of the Indonesian Islamic banking industry The year 2014 marked the slowing down in the growth of the Indonesian Islamic banking industry. Based on figures from the Indonesian Financial Services Authority (OJK), the total Islamic banking assets (fully-fledged Islamic commercial banks and Islamic windows of commercial banks) were at IDR272.3 trillion (US$21.78 billion) which translated to a growth of around 12.4% compared to its 2013 figure, which was at IDR242.3 trillion (US$19.38 billion). Shariah compliant real estate crowdfunding — Leveraging the Indonesian real estate boom “An upgrade (in credit ratings) amid deteriorating global economic conditions shows declining investment risk… more attractive for capital inflows”, declared Hartadi Sarwono, the deputy governor of Bank Indonesia in 2011. Today, although many things have changed, this sentiment is still largely valid — to some even more so after the election of Joko Widodo to office in 2014. Retail banking challenges for Islamic banks When Islamic banking first came into being, it was tiny in the financial world. Being a nascent industry, it did not have the capacity to compete with the old conventional banking system; nonetheless, it grew and witnessed significant development in terms of growth and size. The opportunity for Islamic business finance products in the UK The Islamic finance industry is recognized as the world’s fastest-growing modern finance sector, as ever greater numbers of the world’s two billion Muslims seek out finance that is compliant with Shariah. Valued at over US$1.3 trillion by the UK Islamic Finance Secretariat, the sector experienced an annual growth of 17.6% between 2009 and 2013. The next wave of the re-Takaful industry in Indonesia “When in Rome, act like a Roman.” The phrase would also be applicable when one is in Indonesia. It means that there is a need to have local wisdom when carrying out trade in Indonesia. Book Excerpt Can Islamic finance save the global system? A new book titled ‘Islamic Finance and the New Financial System’ claims to have the answer. Global finance has learned many lessons from the financial crisis of 2008, but its future is still far from certain.  CONTACTS Editorial: Sasikala Thiagaraja Direct Line: +603 2163 7800 ext 34 Finance: Faizah Hassan Direct Line: +603 2162 7800 ext 26 Sales: Dubai: Geraldine Chan Direct Line: +971 4 427 3628 Kuala Lumpur: Steve Stubbs Direct Line: +603 2162 7800 ext 55 Subscriptions: Dubai: Mithun Gangolli Direct Line: +971 4 427 3638 Kuala Lumpur: Siti Amilia Amir Amzah Direct Line: +603 2162 7800 ext 27