4th March 2015 (Volume 12 Issue 09)

Powered by: IdealRatings®

(All Cap)

1000

1025

1050

1075

1100

TMSSFTW

1,071.96

0.16%

1,070.23

In the wake of the fi nancial crisis, fi ngers were pointed at the lack of foresight shown by international rating agencies in recognizing and predicting default — both in terms of institutions and issuances. But in recent months many of the major players have pulled their socks up and poured their eff orts into updating their approach to accommodate the rapidly changing environment which the fi nancial markets are in now. LAUREN MCAUGHTRY spoke to the global heads of Islamic fi nance of the top three global fi rms to fi nd out their views on the coming year — and their strategy for meeting both its challenges and its opportunities.

Rating agencies got a bad rap following the fi nancial crisis, but with the three top dogs pulling no punches and a plethora of smaller players coming up through the ranks to cover the other end of the spectrum, new markets and new sectors are being penetrated while the methodology of rating is becoming increasingly rigorous — stimulating faith in the industry and assisting it to grow by off ering investors greater confi dence in both issuances and institutions.

“When you have new participants coming into the market they look for

a third party opinion, a trusted source — somebody who can give them global comparability,” explained Khalid Howladar, the global head of Islamic fi nance at Moody’s Investor Services, to IFN. “If we rate a property in Dubai and we rate a government-related entity in Malaysia, the ratings come from the same scale. We provide a trusted opinion into new markets with issues you’re unfamiliar with.”

A growing market The need for ratings is driven by investor demand — and as Islamic fi nance spreads its wings, so the role of rating agencies becomes more important. Investors are also increasingly participating in diff erent markets, in which they might be unfamiliar. In the context of Islamic fi nance for example, we see growing numbers of Gulf investors investing in Asia, and Asian investors participating in markets in the Gulf. And because you can no longer talk about those two markets without talking about Islamic fi nance, this has inevitably led to a higher profi le for the industry. Where fi ve or 10 years ago capital market issuance was probably 90% conventional and 10% Sukuk, the Gulf is

now heading more towards 50/50 while of course the steps taken by Malaysia to dominate the Islamic debt capital market has resulted in a split more like 80/20. In both markets — but especially across the Middle East along with new entrants from non-Muslim jurisdictions — there is a visible trend towards Islamic fi nance and as a result of that investors inevitably seek somebody else’s opinions, views and ideas to inform and reassure them.

Big versus smallSo who is doing what? The three major players (Moody’s, S&P and Fitch) lead the pack but we are also seeing a multitude of smaller players emerge: with fi rms such as RAM Ratings, MARC, Capital Intelligence Ratings (CI) and the Islamic International Rating Agency (IIRA) stepping up their game and moving into new markets. The value here is perhaps not so much in

the competition, but in the diff erence in scale. The industry needs players

of all levels, and while the major players may take care of the

headline deals they cannot do everything for all people. “I would like to say Moody’s can be there all time for all people everywhere but realistically, we

continued on page 3

COVER STORY

The World’s Leading Islamic Finance News Provider

BIM — the fi rst of its kind in the Middle East..8

UAE: New insurance rules, new game..10

Niger eyes sovereign Sukuk issuer title..11

Indian fi rm joins the international Islamic fi nance scene..13

“ Wealth, properly employed, is a blessing and a man may lawfully endeavour to increase it by honest means.”

Hadith narrated by Bukhari

CIMB Islamic.Artisans of

Islamic Finance™

Rating the industry: How agencies are changing the game

2© 4th March 2015

IFN RAPIDS

Disclaimer: IFN invites leading practitioners and academics to contribute short reports each week. Whilst we have used our best endeavors and eff orts to ensure the accuracy of the contents we do not hold out or represent that the respective opinions are accurate and therefore shall not be held responsible for any inaccuracies. Contents and copyright remain with REDmoney.

DEALSIDB mandates nine banks for benchmark US dollar Sukuk off ering

Bank Negara Malaysia sells fi ve-year government investment issues worth RM4 billion (US$1.11 billion)

Garuda Indonesia plans to issue global Sukuk mid-April, becoming fi rst Indonesian company to tap international Sukuk market

International Islamic Liquidity Management Corporation receive overwhelming bids for its latest Sukuk facilities

Gulf Finance House to raise US$230 million in Sukuk this year for its acquisition plans

Weststar Capital makes early redemption of RM900 million (US$250.25 million) Sukuk Mudarabah

Qatar International Islamic Bank to discuss Tier 1 Sukuk proposal on the 15th March during Ordinary General Assembly

Khazanah Nasional to auction Sukuk worth RM1 billion (US$278.05 million) to fund schools

Qatar Islamic Bank shareholders approve issuance of QAR5billion (US$1.37 billion) Tier 1-boosting Sukuk

IDB cancels trust certifi cates worth RM300 million (US$83.42 million) following complete purchase of outstanding facilities

NEWSKenya Commercial Bank receives National Treasury approval for Islamic banking window

Afriland First Bank sets 2015 target for Islamic unit; XOF3 billion (US$5.19 million) in deposits and XOF2 billion (US$3.46 million) in fi nancing extension

SEDCO Capital and Madison Marquett e acquire Coral Landings III in Florida

Trowers & Hamlins applies for Malaysian qualifi ed foreign law fi rm license reserved for Islamic fi nance players

Bank Syariah Mandiri puts together aggressive growth plans to compensate poor 2014 performance

Japan’s Financial Services Agency considers regulatory changes to facilitate domestic Islamic fi nance activities

Potential merger between Bank Islam and MBSB; possibility mooted at shareholder level

Maybank’s Shariah units likely to reach top-fi ve position in Indonesia this year, says chairman

Gatehouse Bank to co-launch dedicated lett ing brand to support private rented sector joint venture

The UAE and Luxembourg discuss Islamic banking memorandum of understanding

ASSET MANAGEMENTEiff el Management assumes total ownership of Emirates REIT’s share capital following acquisition of Dubai Islamic Bank’s 25% stake

TAKAFUL Avicennia keen to tap Turkey’s Shariah compliant insurance market

Doga Group receives verbal approval for Takaful operations; likely to enter market this year

RATINGSJordan Islamic Bank maintains ‘AA’ Shariah quality rating

Moody’s affi rms Emaar Properties’s Sukuk ratings and changes outlook to positive

Islamic International Rating Agency assigns foreign and local currency rating to Albaraka Turk

Moody’s downgrades outlook on fi ve Omani banks’ deposit ratings in light of weakening government support capacity

Fitch affi rms Saudi Arabia’s ratings with a stable outlook

MARC assigns ratings to SPRINT’s RM510 million (US$141.08 million) Islamic securities

MOVESSingapore Exchange CEO Magnus Bocker confi rms his departure

Al Salam Bank Bahrain elects board members

European Islamic Investment Bank names Neil McDougall interim fi nance director

Lee Kim Shin re-joins Allen & Gledhill as managing partner

Barwa Real Estate appoints former QNB Capital chief as group CEO

Maybank Investment names Fad’l Mohamed as new deputy CEO

IFN Rapids ................................................... ..2

IFN Reports:

IFN Awards 2014 in Dubai gathers over 400

of Islamic fi nance’s leading lights • BIM — the

fi rst of its kind in the Middle East • IFN Global

Trendswatch • Islamic banks increasingly

looking towards international and regional

expansion • UAE: New insurance rules, new

game • Niger eyes sovereign Sukuk issuer title

• IFN Weekly Poll: With several M&A activity

reported over the past weeks, could we see more

att empts from Islamic banks to merge in 2015

to gain market share? • Indian fi rm joins the

international Islamic fi nance scene • Sovereign

Sukuk: Oman and Niger ............................ 7

IFN Analysis:

Russia — moving strong, but will it make it? ...15

Liquidity management: An improving sector ... 16

Shariah Pronouncement ........................ 17

IFN Country Correspondent:

Indonesia; Barizil; Morocco .......................... 18

IFN Sector Correspondent:

Real Estate .................................................... 20

Special Reports:

Infl uence of faith on Sri Lankan Muslims’ economic

behavior ................................................................21

Conventional features in Murabahah-based

fi nancing: Shariah issues .....................................22

What is an asset? .................................................24

Asset sManagement:

The expanding market for Shariah compliant

investment funds ..................................................... 25

Islamic liquidity management products – an in-

depth look ................................................................... 27

Islamic Finance news ................................... 29

Deal Tracker ................................................. 34

REDmoney Indexes .................................... 35

Eurekahedge data ....................................... 37

Performance League Tables ....................... 39

Events Diary................................................. 43

Company Index ........................................... 44

Subscription Form ....................................... 44

Volume 12 Issue 9

3© 4th March 2015

COVER STORY

focus on global transactions,” agreed Khalid. “The smaller agencies have a strong position in the local market and a local focus and while there is a trend towards international issuance, to get there you need to have smaller entities to introduce these corporates to the credit and ratings culture — to the idea that somebody is going to come, look at their institution, kick the tires and publish a view of what they think of them. It can be a disconcerting idea to expose yourself that way, so the local entities defi nitely have a role to play.” As those companies develop they may outgrow the local agency — for example, if they seek international fi nancing, foreign investors may demand a rating from an agency they are familiar with rather than a local entity, which is able to compare and rate it on a global benchmark.

“When Malaysian issuers or Gulf issuers go to new markets, that cross-border space is where the international rating agencies come into a much bigger pool of money and a much more diverse pool of investors,” explained Khalid. Nonetheless: “The more competition the bett er, because it gives a choice,” he insisted. “I think there’s room enough in capital markets for everyone.”

Scaling up SukukSpeaking of the capital markets, rating Sukuk is as much of an issue as rating individual institutions — and one in which there is still a long way to go. “We are dealing with an industry that really lacks standardization in many aspects, so we have to understand and accommodate the fact that each structure could be diff erent depending on its individual features,” commented Bashar Al Natoor, the global head of Islamic fi nance at Fitch Ratings, to IFN.

“What we do now is deal with each structure individually. Where does it fall within the debt structure, within that specifi c entity, whether it is a bank, a corporate or a sovereign. Our Sukuk rating criteria also accommodates the various levels of debt — whether senior unsecured, it can be secured, or it can be subordinated.

That is supported by other criteria — for example the hybrid criteria – if the intention is there and the Sukuk are designed for that purpose,” he explained. “In the Sukuk criteria, the key message is, that we look through the structure of the Sukuk at the originator of the transaction. The Sukuk rating is benchmarked to the rating of the originator and, in the case of a senior unsecured obligation, the rating would typically be in line with the originator’s issuer default rating (IDR).

“Sukuk constitute a benefi cial ownership interest, not a debt. So for the Sukuk that we rate, the goal is to rank that investment with the equivalent debt level. Sukuk are typically structured around contractual arrangements formulated according to Islamic law and have been developed as an alternative to conventional debt instruments. So we look at the structures in detail individually and analyze them to ensure the transaction has direct recourse, that it contains similar rights and obligations to similar debt (so if an issuer is issuing a bond and a Sukuk, that they are pari passu).”

Institutional issuesFor originator-backed (also called asset-based) Sukuk any issuance rating will always be based on the strength of the underlying institution. “The actual rating of the Sukuk is always linked to the IDR which is the starting point — the obligor’s rating,” confi rmed Bashar. “Then like any other bond you also raise a rating for that specifi c instrument.”

For the asset-backed arrangements (ie, where the underlying assets that serve as collateral are the only credit support) they would typically be rated according to established structured fi nance criteria, including analysis of the extent to which Sukukholders would have recourse to the Sukuk assets on the insolvency of

the originator.

And this can cause wider ripples. For example in the Gulf, when even robust corporates struggle to raise fi nancing from banks due to

institutional or macro weaknesses in the sector post-fi nancial crisis,

many fi rms were incentivized to get their own rating and source their own

fi nancing in the capital markets, to avoid the problems being experienced by local banks. “Banks can have a lot of problems, and there is a role to play for everyone,” said Khalid. “The crisis highlighted that banks are not always the safest option, and this has pushed corporates towards the market, where they are borrowing for perhaps fi ve or 10 years rather than just one or two. In general, banks do need to move away from just lending and develop their capital markets capabilities in order to keep up.”

New pasturesAnd there is a lot of keeping up to do. “Islamic fi nance is growing and att racting signifi cant interest from a growing number of countries,” commented Mohamed Damak, the global head of Islamic fi nance at S&P Ratings, to IFN. “We think that the growth in 2015 will mainly come from Asia, GCC and these new countries. The drop in oil price and expected increase in Fed interest rate is creating new challenges though.”

Bashar agrees. “Last year was an interesting year and we saw new markets opening up outside the Islamic

Rating the industry: How agencies are changing the gameContinued from page 1

continued on page 4

While there is a

trend towards international issuance, to get there you need to have smaller entities to introduce these corporates to the credit and ratings culture

4© 4th March 2015

COVER STORY

core markets. However, we have started to notice this year that more att ention by the Islamic markets on the infrastructure development for Islamic fi nance – for example Indonesia, Bahrain and Malaysia, are seeing more activity from existing Islamic fi nance sovereigns improving their regulation to have a wider coverage, which is something that is needed.” He points out that Dubai, the UK, Africa and Asian markets are also all potential hotspots. “This year we could see an increase in the actual need for fi nancing, as well as an improvement in the regulations to widen the investor base within those countries. These two factors could have a positive impact on the industry.”

Jockeying for positionHowever, Khalid warns that while everyone wants to get in on the act, certain factors are needed for a country to become a real hub for Islamic fi nance. “You need a domestic market to support your status. You need local companies to issue Sukuk, you need local banks to buy and issue Sukuk, you need all the players to make it happen. In Dubai and the UAE they have a lot of corporates that issue a lot; while Bahrain for example doesn’t have that many large companies that can create a liquid domestic Sukuk market.

“Countries like Pakistan and Indonesia, they have huge potential because they’ve got massive populations that want Islamic banking, and that will help support the growth of Islamic banks. Those Islamic banks will then issue Sukuk for fi nancing and will have to buy Sukuk, and local corporates will then realize that if they issue Sukuk, the banks will buy it. Then they will set up funds to buy Sukuk, as will Shariah compliant investors. So you’ve got that whole ecosystem that extends from a domestic base of demand. Countries like Turkey, Indonesia, Pakistan — those are the ones to watch.”

A change of paceTo encourage this growth and development, several of the rating agencies have implemented sweeping new changes to their systems in order to boost confi dence and improve accuracy.

“We updated our Sukuk

rating criteria in January 2015,” confi rmed Mohamed of S&P. “While fundamentally we have not changed our approach, we have made the updated criteria even more transparent by clarifying the fi ve conditions a Sukuk has to meet to be rated at the same level as its sponsor. In addition, we have clarifi ed instances where investors might be exposed to a residual asset risk and how we will analyze this risk from a rating perspective. S&P is the only agency that does that currently. The ratings have to be requested by the company (we don’t do unsolicited ratings). Our methodologies are public and transparent and we apply them. Ratings are determined by committ ees with experienced voters.”

Moody’s is also in the process of introducing a brand-new and updated methodology. “Post-crisis, we got a lot of insight about bank failures and bank crises,” explained Khalid. “Regulators don’t want to be bailing out banks, and so they have created new regulations and regulatory regimes that eff ectively will allow banks to fail, without causing massive systemic distress — and rather than taking money from taxpayers, which will make bondholders and Sukukholders and debtholders liable to take a haircut instead.” The new methodology integrates the insights gained by banks and bank regulators and also off ers a more transparent approach to rating banks and evaluating how the operating environment in a country aff ects banks. The agency has also more extensively incorporated the behavior of the macro environment into the methodology in a more transparent way, which is a big change.

“We had about 30-40 diff erent factors all going into our bank analysis — it made it much simpler to focus on key

metrics that we saw in the crisis tended to be the key drivers of default,” said Khalid. “There are a lot of diff erent factors

that you can look at for a bank, but there

are fi ve broad factors that really serve as

predictors and those are the ones we have

focused on.

“We have learned a lot about how both banks and regulators are looking to behave and so it’s almost like a new world order in terms of banks and we needed to update the methodology to refl ect that. And in that context, Islamic banks still are banks. For all the Islamic principles surrounding risk sharing and equity participation and asset backing, Islamic banks still behave like credit institutions and their risk profi le is still captured very well within this banking methodology.

“There were accusations in the past that the system was too complex, not transparent, and that we were lagging a litt le in certain markets. This new methodology makes us much more transparent, much more accountable. We are using metrics that are much bett er at predicting defaults. So I think overall it will improve our quality, it will improve our values. The feedback has been very positive, and I am confi dent that this will be a key change for us that will help market participants get to grips with the credit risk of a very fast-changing world.”

Luxury or necessity?But are these ratings actually needed? How relevant are they for the market, and how much do investors actually value them? Last year Malaysia removed the need for ratings on Sukuk, while the UAE also removed some barriers for small corporates including ratings and reporting requirements. “This has its positive and negatives,” thinks Bashar. “It will allow more corporates to enter into the market and issue Sukuk, because the regulations are becoming less tight. This could translate to more positive issuance. But it will have an implication for the transparency of that issuance and that will be taken into consideration by investors.”

“The need for ratings is an interesting one,” agreed Khalid. “Many think it’s great from a regulatory standpoint if you mandatorily have to have ratings — but actually we don’t like being a part of the regulatory framework. It puts a lot of reliance on us because we actually only provide opinions. If the regulator makes a rating mandatory it creates a distortion because we’re not a regulatory

Rating the industry: How agencies are changing the gameContinued from page 3

continued on page 5

5© 4th March 2015

COVER STORY

body or a government body. It should be an option for investors to say whether they want ratings or not. We’re a company like everybody else and if you think we’re useful then you pay for the services and it becomes a commercial arrangement. As soon as you create that regulatory obligation, people who don’t want a rating might be forced to get one and think “Why should I pay for it?” — and that creates a lot of other issues.”

Looking forward2014 was a seminal year for Islamic fi nance — so what can we expect for its successor?

“It is an interesting time for Islamic fi nance,” thinks Khalid. “Last year was a landmark year in terms of the globalization of the industry. The year before wasn’t as impactful and this year may not be as impactful either. I believe

you’ll see new sovereigns enter, but not on the scale of the UK, Hong Kong, South Africa, Luxembourg, which are all big-hitt ers. I don’t think there will be as many landmarks. Instead there will be more focus on centers trying to position themselves to support their domestic markets. Indonesia, Pakistan and a lot of other countries are behind in their development of these markets and need to pick up the pace. Malaysia serves as a benchmark of what you can achieve when all parties pull together within a country.”

Bashar also highlights the potential for growth in established markets. “On the positive side we have seen conscious moves in Indonesia, Malaysia and Bahrain becoming more open with a wider investor base. That is something defi nitely constructive and we would like to see how that evolves and impacts the market. Indonesia in particular is

really targeting the market — they have announced a strategy for Islamic fi nance and we could start to see the benefi t of that soon.

“In terms of actual fi nancing needs, you have to remember two main aspects: oil prices, and the geopolitical situation. We have seen some stabilization of oil prices in the last few weeks, and this could have a positive impact on investor sentiment. We have already seen some activity on the ground, we do not think that regional banks liquidity will be signifi cantly pressured, by the lower prices — but it will become more precious. This could drive corporates into the capital markets.”

As it does so, we can only hope that the evolution of the rating agencies will continue to keep pace with its growth and support its development.

Rating the industry: How agencies are changing the gameContinued from page 4

continued on page 6

Gene Fang, associate managing director of the fi nancial institutions group at Moody’s, spoke exclusively to IFN on their recent methodology review.

The past seven years have marked a period of near-continuous crisis in

signifi cant segments of the world’s fi nancial industry, in particular in the banking sectors of Europe and North America. The crisis has had profound consequences for bank balance sheets, public policy, banking supervision, regulatory requirements and, not least, for investors in banks. The implication

is a changing environment for bank creditors, and a fundamental shift in the way failing banks are resolved or recapitalized. This confl uence of shocks, failures, bailouts and defaults witnessed since 2007 prompted a review of Moody’s overall methodology.

Moody’s methodology: Updated

Chart 1: Overall methodology process

SUPPORT & STRUCTURAL ANALYSIS

Baseline CreditAssessment (BCA)

(aaa-c)

A liateSupport

Loss Given Failure(LGF) Liability

Analysis

GovermentSupport

Analyzes a bank’s nancialsand operating enviroment tocapture its standaloneprobability of failure.

OUTPUT

BCA Adjusted BCA PreliminaryRating Asessments(Aaa-C)

RATED DEPOSITSSENIOR DEBTSUBORDINATED

Credit Ratings(Aaa-C)

Adjusts the BCA to capture thelikehood of a liate support.

Captures the risks di erentcreditors are exposed to in theevent of the bank’s failureabsent support.

Captures the extent to whichrisk to each creditor class ismitigated by public support.

1 2 3 4

NEW

Source: Moody’s Investor Services

6© 4th March 2015

COVER STORY

Rating the industry: How agencies are changing the gameContinued from page 5

“Based on our own back testing, we don’t expect the new methodology to have a substantial immediate impact on existing ratings. However, in our view, the new methodology’s revised scorecard and macro profi le will provide more transparency to the market around key rating factors, as well as the judgment analysts make with respect to those factors,” said Fang.

“We also think the innovations in our loss given failure analysis capture the direction in which the global bank regulatory landscape is headed, particularly with respect to the risk that creditors face to government ‘bail-in’ (that is, the imposition of losses on creditors in the event of a bank failure). “While Asian regulators have so far been cautious in implementing bail-in regulations, bail-in regulations are already in eff ect for many European and US banks.” The new global banking methodology is similar in structure to the current

methodology, but adds support and structural analysis, a key innovation in a bail-in world. The main credit factors the fi rm analyzes are similar to those it currently uses: solvency and liquidity are at the heart of our standalone analysis.However, the presentation of this analysis diff ers from that conducted previously. In particular, there is a greater role for potential system-wide pressures conveyed through a ‘macro’ profi le and Moody’s’ scorecard now aims to capture its rating committ ees’ qualitative views on the range of credit factors aff ecting a bank’s standalone fi nancials, including adjustments for supplementary ratios and forward-looking assessments, as appropriate.

The scorecard will now focus on fi ve core ratios proven to be strongly predictive of failure or the need for support, supplemented by additional metrics relevant to each issuer.

The ratings will continue to incorporate, where appropriate, the benefi ts of potential support from affi liates or from governments. The agency will, however, introduce a liability-side analysis into our post-failure risk assessment, refl ecting the importance of considering the cushion against loss provided by subordination for successive debt classes in a bank’s resolution, whether that takes place via a ‘going concern’ mechanism or rather in liquidation. This will apply to banks subject to resolution regimes and allows it to refl ect the risk of increased balance sheet encumbrance in its debt and deposit ratings.

“The new methodology reinforces our… position by anticipating how regulatory developments can impact credit investors. Particularly given the shifting regulatory landscape for banks post-global fi nancial crisis, we hope the new methodology helps maintain our leadership and relevance to the market,” concluded Fang.

Chart 2: Key changes - Graphical representation

SUPPORT & STRUCTURAL ANALYSIS

Baseline CreditAssessment (BCA)

(aaa-c)

A liateSupport

Loss Given Failure(LGF) Liability

Analysis

GovermentSupport

1 2 3 4

NEWNEW: Captures bank’s operating environment with addition of Macro Pro le

Simpli ed Scorecard:- Incorparates forecasts- Quanti es our credit judgements within scorecard-Di erent nancial ratios used to capture bank’s liquidity and solvency

The sorecard analysis begins with ve core ratios which have shown to be strongly predictive of failure or the need for support: >> >> >> >>

>>

>>

>>

>>

NEW: Approach to nothing up or down debt and deposits of banks in system with “Operational Resolution Regimes” (e.g. Eu and US) by:- Size of loss (resolution type)- Amount of subordination- size of debt class

Outside of these regimes, current notching continiues

Notching based on “waterfall” analysis of post failure balance sheet in resolution

NEW: Now adds support at the instrument class level, rather than the bank level

NEW: We will use soverign rating rather than systemic support indicators (SIS)

Now combines parent and cooperative group support

>>

>>

>>

>>

Asset Quality: Problem loans/ Gross loans

Capital Tangible Common Equity/ Risk Weighted Assets

Pro tability: Net Income/ Total Assets

Liquid Resources Liquid Assets/ Total Assets

These will be supplemented by additional metrics relevant to each issuer.

KEY

CH

AN

GES

Source: Moody’s Investor Services

7© 4th March 2015

IFN REPORTS

Recognized as one of the most coveted and prestigious distinctions in the Islamic fi nance industry, the IFN Awards has for 10 years honored the industry’s crème de la crème who excelled in their particular fi eld with unusual fi nesse; and this year was no exception. Rewarding market-leading practitioners’ exceptional performance in 2014 as decided by the illustrious IFN Deals of the Year (DOTY) and IFN Best Banks, IFN Service Providers and IFN Law Awards series, the IFN Awards 2014 ceremony gathered over 400 industry movers and shakers at Ritz Carlton DIFC, Dubai on the 2nd March 2015 for an evening of global recognition and validation.

A total of 56 awards were given out that night including the hat-trick honors (IFN DOTY, Sovereign DOTY and Sukuk DOTY) awarded to the UK for its groundbreaking sovereign Sukuk deal, which were received by

Her Majesty’s Consul General to Dubai Edward Hobart on behalf of the UK government. Republic of Senegal’s minister of economy, fi nances and planning, Amadou Ba, also graced the event as he represented the Senegalese government to accept the Africa DOTY for its landmark Sukuk debut. The evening’s list of distinguished award recipients included: Khaled Al Aboodi, CEO of Islamic Corporation for the Development of the Private Sector, also for Africa DOTY and Cross-Border DOTY; Mohamed Jamil Berro, CEO of Al Hilal Bank, for Commodity DOTY, Perpetual DOTY, Regulatory Capital DOTY and the UAE DOTY; Derya Gurerk, CEO of Turkiye Finans, for Turkey DOTY and Best Islamic Bank in Turkey; Mohammed Abdulla, CEO of Sharjah Islamic Bank, for Perpetual DOTY and Regulatory Capital DOTY;

Ali Al Obaidli, group CEO of Ezdan Holding Group, for Qatar DOTY; Hani Baothman, CEO of Sidra Capital, and Nabil Marc Abdul-Massih, CEO of INOKS Capital, for Most Innovative DOTY, among other leading lights of the Islamic fi nance fraternity.

Selected through a rigorous and robust process, which included either peer nomination and expert independent analysis or industry voting, the IFN DOTY, IFN Best Banks and IFN Law Awards of 2014 respectively reached new milestones as the accolades gathered more votes/responses (IFN Best Banks and IFN Service Providers) and adopted even more stringent criteria and methodology (IFN DOTY and IFN Law Awards) to truly refl ect the performance of market players, and highlight industry leaders.

IFN Awards 2014 in Dubai gathers over 400 of Islamic inance’s leading lights

The IFN DOTY, IFN Best

Banks and IFN Law Awards of 2014 respectively reached new milestones as the accolades gathered more votes/responses and adopted even more stringent criteria and methodology

8© 4th March 2015

IFN REPORTS

One of the many concerns of small and medium enterprises (SMEs) is suffi cient funding to facilitate growth and expansion. Following the implementation of Basel III, companies are fi nding it diffi cult to obtain fi nancing as the Basel III rules limit a bank’s ability to fund long-term projects. The only available route for these enterprises would be via venture capital and private equity. In a bid to facilitate this segment of Bahrain’s economy, Bahrain Bourse (BHB) proposed the establishment of the Bahrain Investment Market (BIM) as a platform for SMEs to obtain funding. NABILAH ANNUAR explores this creative initiative.

It is an acknowledged fact that many privately-owned companies are hesitant to go into the capital markets to raise monies due to the high costs involved in every initial public off ering (IPO). The BIM is an initiative which off ers a solution to these enterprises to list themselves on the bourse without having to go through an IPO. Gaining market sentiments, BHB last December issued a consultation paper on the bourse’s website in order to assess the views and opinions of legal and consultancy companies, as well as brokers and asset

managers prior to the implementation and launch of the BIM.

According to the Ministry of Industry and Commerce, SMEs today form 99% of companies registered in Bahrain with a total committ ed capital of BHD1.7 billion (US$4.48 billion) (excluding individual companies). The ministry estimated that contribution of the SME sector to Bahrain’s GDP is around 28% and aims to grow those fi gures to 35% in the next three years. Said to be the fi rst of its kind, the BHB aims to launch BIM this year. Shaikh Khalifa Ebrahim Al Khalifa in a

statement explained that the BIM seeks to provide a mechanism of fi nancing for the rapidly growing companies and businesses in Bahrain and GCC by providing a suitable environment for companies that are willing to share risk and returns with investors and benefi t from the opportunities of this market.

Based on local reports, the concept is founded upon an idea of creating a symbiotic ecosystem of companies seeking investors and assisting potential investors looking for robust investment opportunities. Among the factors that have been identifi ed preventing venture capital funding is the diffi culty of identifying the right investment targets as well as the overall lack of transparency. The bourse is optimistic of its capability to att ract Bahraini and GCC companies to list on the BIM. The BHB has coordinated with various local institutions such as Tamkeen and Bahrain Development Bank to provide legal, technical, and fi nancial solutions to allow as many Bahraini companies as possible that meet the requirements to apply for listing at the BIM. It is hoped that the proposed platform would provide more options and alternatives for both issuers and investors and enhance trading activity at BHB in the coming years.

BIM — the irst of its kind in the Middle East

This is a must-attend program for all those involved in, or preparing to be involved in Takaful. The course will suit those working for Takaful operators, brokers, insurance companies, banks and consultancies.

www.REDmoneytraining.com | dubaicourse@redmoneygroup.com

22nd – 24th March 2015, DUBAI

UNDERSTANDING, DEVELOPING

& MARKETING TAKAFUL

PRODUCTS

It is hoped that the

proposed platform would provide more options and alternatives for both issuers and investors

9© 4th March 2015

IFN REPORTS

What’s been going on in the world this week? LAUREN MCAUGHTRY brings you an update of the most signifi cant economic, regional and global events, issues and trends that have the potential to aff ect the Islamic fi nance industry.

• Arrival of new CEO Bill Winters sees Standard Chartered’s share price rise almost 4%, despite a signifi cant fall in earnings expected to be announced next week. With an executive cull including Jaspal Bindra (head of Asia), what lies ahead for the struggling giant — and what impact will this have on its Islamic operations? Asian retail banking is expected to be a strong focus given the Temasek shareholding — will StanChart follow HSBC and continue scaling back in the Islamic market, or recognize its potential and be brave enough to step ahead of the pack?

• Dollar surges and treasury yields jump on the back of rate raise expectations from the Fed following strong US economic data including positive infl ation news.

• EU sovereign yields slide to new lows, reports the FT, as the ECB quantitative easing program looks to launch.

• Oil industry could see slump continue for another two years, warns the FT, with a record number of off shore rigs retired from active service.

• IMF gives US$1 billion to Ghana in one of its biggest deals in sub-Saharan Africa.

• Ivory Coast issues US$1 billon bond to high demand – but government says Sukuk plans may be postponed

to next year. Investor interest in African bonds seems to be staying high, but falling commodity prices and concerns over fi scal stability could impact appetite — will these nations then fi nally turn to the Islamic capital market for sustenance?

• Lebanon raises US$2.2 billion in debt issuance, the biggest in its government’s history, and meeting an enthusiastic reception from international investors that pushed it to 6.2% over 10 years. Will this encourage an Islamic issuance to follow?

• Singapore looks to raise taxes for the wealthy from 20% to 22%, to fund an increase in welfare spending. Will this increment see a departure of funds — and where will they go? Could Malaysia benefi t?

IFN Global Trendswatch

Last week, IFN explored the exciting Islamic fi nance opportunities the Central Asian region has to off er (See IFN Cover Story Vol 12 Issue 07: ‘Commonwealth of Independent States: A Central Asian success story’ and IFN Report Vol 12 Issue 06: ‘Azerbaijan — a market to watch in 2015’), in which Azerbaijan through its largest bank — International Bank of Azerbaijan (IBA) — plays a central role. This week the bank again made news as it successfully secured a US$150 million Shariah compliant syndicated fi nance facility from a consortium of six regional and international fi nancial institutions: Al Hilal Bank, Barwa Bank, Citigroup, Dubai Islamic Bank, JP Morgan Bank and Noor Bank. VINEETA TAN however highlights that as the bank forges ahead championing the Islamic fi nance proposition in the Caucasus region, another Middle Eastern player is also gaining momentum in spreading its international footprint.

Kuwait’s Warba Bank, which not only provided US$20 million to IBA’s latest deal but also arranged the facility, is looking outward as part of its regional and global expansion strategy.

“Such transactions are part of Warba Bank’s continuous eff orts in expanding its business around the world to avail from favorable developments in the economies of these countries and a part of the geographic diversity and growth of Warba Bank’s investment portfolio by which we aim to achieve valuable gains for our customers and shareholders,” explained Shaheen Al Ghanem, the bank’s deputy CEO, in a statement.

Emerging markets seem to be part of the bank’s strategy. In addition to this Central Asian transaction, the Islamic bank also tapped the Turkish market through a US$15 million contribution to an US$80 million Islamic facility arranged by HSBC for the Turkish Ozun Group, one of the largest retail chains in the Republic. Other international deals arranged by the bank include a US$155 million syndicated facility for an oil and gas fi rm in the UAE. The bank also has investments in international markets including in the UK — one of which was a real estate asset in West Bromwich which gained the bank KWD640,000 (US$2.16 million) in net profi t when the bank offl oaded its investment.

Warba Bank is not the only Islamic bank eyeing international markets, as other players are also keen to spread their wings on the back of growing acceptance of Shariah compliant fi nance. Dubai Islamic Bank is one of them; the bank last year announced intentions to establish an African presence, and early this year it received in principle approval from the Kenyan regulator for its Kenyan unit. Other banks include Malaysia’s Maybank Islamic which also previously mentioned that it is keen to establish itself in ASEAN markets its parent bank is already anchored in.

As Islamic fi nance continues to gain global recognition, which in no small part was accelerated by the entrance of new non-traditional markets into the Sukuk market last year, Shariah compliant players are more motivated to tap cross-border opportunities, boding well for the internationalization of the Islamic fi nance industry.

Islamic banks increasingly looking towards international and regional expansion

10© 4th March 2015

IFN REPORTS

The Insurance Authority (IA) of the UAE last month introduced new rules modeled after the European experience for its Takaful and insurance operators (See IFN Report Vol 12 Issue 05: ‘European Insurance model for the UAE’). With new actuarial requirements and new parameters for investments, how will the UAE domestic and foreign insurance players fare in light of more stringent regulatory environment? VINEETA TAN explores.

Despite solid underwriting performance, unleveraged balance sheet and strong risk-adjusted capitalization, UAE insurers and Takaful operators, according to AM Best, face common challenges brought on by skewed exposure towards high-risk assets, a lack of standardization in accounting treatment, unsophisticated measurement of technical reserves and sub-par enterprise risk management (ERM) practices. These impediments have pushed IA to design new rules which analysts are saying are a positive move forward for the Takaful and insurance industry of the emirate, provided the rules are implemented timely and eff ectively.

Conservative approachWith investment portfolios heavily weighted in real estate and equity with litt le to no exposure to international markets, UAE insurance players are signifi cantly vulnerable to market volatility, notably in the level of shareholders’ equity. This makes IA’s decision to limit investment allocation to equity and real estate assets within the UAE to 30% a prudent strategy.

“The new investment rules are designed to improve the asset profi le of insurers by reducing insurance companies’ exposure to higher-risk assets. This should provide greater stability of returns to insurers’ investment profi les and thereby reduce volatility arising from fl uctuating asset prices on their operations and balance sheets,” explained Mahesh Mistry, AM Best’s director of analytics.

However, despite this, it should be noted that the new regulations maintain high combined exposure to these asset classes within the domestic market (up to 80% of asset allocation), potentially creating a leeway for operators to continue their aggressive investment strategy. Although insurers may rethink their position as a

possible higher charge for holding these asset classes could be in place due to revised solvency requirements.

Another potential eff ect from this new guideline is the potential gravitation towards foreign equities, driven by insurers looking to bypass the 30% domestic equity ceiling. Bahrain, Oman, Qatar and Saudi Arabia were highlighted by AM Best as potential markets for the UAE in this respect, due to the allure of minimal currency risks underpinned by dollar-pegged currencies.

“Capital requirements are currently unduly balanced towards investments as compared to underwriting risk. De-risking investment portfolios will result in more balanced risk profi les refl ecting a stronger emphasis on insurance activities,” according to AM Best. A strengthened focus on insurance activities will subsequently boost players to achieve greater underwriting leverage.

Greater standardizationWith varying fi nancial reporting practices, the IA has made it mandatory for insurance companies to adopt International Financial Reporting Standards as well as to abide with standardized actuarial practices while subjecting reserves to annual actuarial reviews. This is a lauded move to remove inconsistencies.

However, the feature of the new regulation which deserves att ention is the introduction of new solvency margin regulations – a landmark evolution in

the UAE’s insurance industry, which was previously without adequate benchmark. Prior to this, market players were subject to an over-simplistic minimum requirement of AED100 million (US$27.23 million) and AED250 million (US$68.06 million) for insurers and reinsurers respectively, in paid-up capital.

As expected, the new solvency margin rules — an improved mechanism using a risk-based measure according to the key principles of Solvency II — will therefore allow for more sophisticated and personalized operational management, and bett er protection against market shocks. Potential risks are further minimized as the new framework in place also requires operators to incorporate a risk management system.

Right stepSo it seems that the IA has taken a comprehensive and holistic approach towards mitigating risks and fl aws of the UAE insurance industry, and it is likely that the sector would gain signifi cantly from the new rules. With a grace period of two to three years to assume full conformity with the regulation, AM Best however warns of caveats in terms of timeliness and eff ectiveness of the new regime. “Given the substantial changes that many companies will need to make, there is the potential for deadlines to slip, as has happened with the separation of life and non-life activities,” notes the rating agency. “Additionally, it will be important that the eff ectiveness of implementation and enforcement match the lett er of the new rules.”

UAE: New insurance rules, new game

Chart 1: Investment volatility has historically driven shareholders' equity of UAE insurers

UAE insurers

% Change in shareholders' equityReturn on investment (including gains/losses)

Source: AM Best research. Based on 27 UAE insurers with su cient reporting history

20.000%

15.000%

10.000%

5.000%

0.000%

5.000%

10.000%

15.000%

20.000%

25.000%

2007 2008 2009 2010 2011 2012 2013

11© 4th March 2015

IFN REPORTS

If materialized, Niger will

join the ranks of its regional peers and solidify its position in the Islamic inance

community

Following our in-depth exploration last week of Africa’s slow Islamic fi nance growth despite its tremendous potential (See IFN Cover Story Vol 12 Issue 08: ‘Africa: The lost continent?’), the region seems to be making a bid to detract sceptics as Niger steps up its game by revealing plans for a sovereign Sukuk issuance — the West African republic’s fi rst. VINEETA TAN reports.

To be implemented in two equal phases, the government of Niger will sell XOF150 billion (US$259.46 million) in Sukuk within the next fi ve years, proceeds from which will be used to fund the Republic’s development project pipeline.

“This Sukuk program is the fi rst of its kind in Niger. We already have a number [of] projects that we would like to fi nance through this Sukuk issuance,” confi rmed Dr Amadou Baubacar Cisse, the country’s senior minister, minister of economic planning, land management and community development, in a statement to IFN.

Supporting this initiative is the Islamic Corporation for the Development of the Private Sector (ICD) which formally agreed to assist the government in sett ing

up the Islamic bond program. By way of this agreement, the ICD will coordinate with the relevant parties and oversee the execution of this off ering in its capacity as the transaction (fi rst tranche of XOF75 billion (US$129.73 million))’s advisor and global coordinator.

“The ICD will do its best to see the issuance is successful and hopes this will contribute to transform the West African Economic and Monetary Union capital market,” affi rmed its CEO, Khaled Al Aboodi.

In the grand scheme of things, Niger remains a relatively small player in the Islamic fi nance universe; however, the ICD has been strongly pushing for the development of the sector in the

Republic. A major and signifi cant eff ort by the multilateral organization in realizing Niger’s Islamic fi nance potential is the establishment of Banque Islamique du Niger through its subsidiary, Tamweel Africa Holding. This proposed Sukuk is yet another momentous step towards that direction. If materialized, Niger will join the ranks of its regional peers such as Senegal, South Africa and Nigeria as sovereign Sukuk issuers, and solidify its position in the Islamic fi nance community while providing a catalyst for the growth of the industry.

Niger eyes sovereign Sukuk issuer title

Course Highlights:• Essential Shariah contracts for Islamic Capital Markets activities• Key characteristics, uses and issues in Sukuk structuring• Analysis of the differences in Sukuk structures and applications• Case study discussion and practical exercises

www.REDmoneytraining.com | dubaicourse@redmoneygroup.com

STRUCTURING SUKUK &ISLAMIC CAPITAL MARKETS PRODUCTS15th – 17th March 2015, DUBAI

12© 4th March 2015

IFN REPORTS

Over the past two years, there have been numerous reports on mergers between Islamic fi nance institutions from various countries. Consolidation is undoubtedly a popular method in att aining a larger piece of the pie. Some mergers have successfully gone through, while the majority of att empts failed. Would the trend continue this year? What will 2015 bring to the table? NABILAH ANNUAR writes.

Since 2013, there were at least fi ve potential mergers on the cards. In Bahrain, the domestic market witnessed the successful amalgamation between Al Salam Bank and BMI Bank in February 2014. On the other hand, the att empted merger between Khaleeji Commercial Bank and Bank Al Khair fell through as both parties mutually decided not to proceed with the union due primarily to non-agreement on the structure and valuation of the deal. In Oman last year the market saw an att empt between Bank Sohar and Bank Dhofar, while this year Bank Nizwa and United Finance are currently exploring the prospects of a merger. The proposal is subject to both parties agreeing to the terms of the arrangement and obtaining the necessary approvals from the respective shareholders and regulators.

In Southeast Asia, such as countries like Malaysia and Indonesia, the idea of an Islamic megabank appears to be a hot topic. Malaysian fi nancial institutions, CIMB Group, Malaysian Building Society and RHB Capital were extensively pursuing the possibility of a tripartite merger, creating a mega Islamic bank since July last year. However, due to

several complications and the inability to arrive at a value-creating transaction for all stakeholders, the unifi cation was called off in January. Dabbling in the same idea, local reports in Indonesia have confi rmed that the Financial Services Authority of Indonesia (Otoritas Jasa Keuangan (OJK)) is currently developing a mechanism with the State-Owned Enterprises Ministry to consolidate state-owned Islamic banks into one entity. The country is looking to merge the republic’s state-owned Islamic banks, Bank Syariah Mandiri, BRI Syariah and BNI Syariah, and said that it is a main priority for the OJK this year.

On the back of these developments, the poll results depict a positive outlook on M&A activities. Seventy-two percent opined that the market would see more att empts by Islamic banks this year to consolidate in order to increase market share. Speaking to IFN, Hussain Kureshi, the head of mergers and acquisitions at Millennium Capital, said: “Mergers and acquisitions are not always signs of good news especially in the case for banks. Banks that suspect a growing number of non-performing loans (NPLs) on their balance sheets, or a growing number of assets that are making losses which may require additional capital to buff er, may choose to merge with another bank.” The combined capital of both banks would then in fact disguise the NPL growth and would possibly eliminate the need for additional capital.

According to Hussain, if the bank being acquired also expects lower spreads in the future, shareholders may again opt for a merger to ‘leverage off synergies’.

“In reality it is a mechanism to cut costs and to lay off staff politely. Quite frankly banks tend to have branches in the same location, and usually after mergers one branch is closed (the smaller one), some staff is retained [and] the rest is laid off . Only top performing front end staff ers like relationship managers are retained, the underperforming ones are let go, often both banks would have some common institutional clients in common.”

With many complications and repercussions associated with M&As, it is typically diffi cult for all parties to come to a consensus. As positive market sentiment surround the M&A landscape, perhaps it is not entirely impossible to see more consolidation across the industry this year.

IFN Weekly Poll: With several M&A activity reported over the past weeks, could we see more attempts from Islamic banks to merge in 2015 to gain market share?

28%

72%

With several M&A activity reported over the past weeks, could we see more a empts from Islamic banks to merge in 2015 to gain market share?

Yes No

Are you using ourunique and exclusive

RESEARCH REPORT?This excellent and easy-to-use service is available only to subscribers.Generate personalized research reports based on your search criteria. A customized report can be easily generated to a PDF fi le through 8 simple steps

13© 4th March 2015

IFN REPORTS

Islamic fi nance growth in India may be staggered (See IFN Analysis Vol 12 Issue 07: ‘India — one step forward, two steps back’); however, the lack of political will and less-than-encouraging growth are not dampening market player enthusiasm, VINEETA TAN writes.

This week, the Republic’s Infrastructure Leasing & Financial Services (IL&FS) made a commitment to the Shariah compliant fi nancial industry by offi cially signing an agreement with the Islamic Corporation for the Development of the Private Sector (ICD).

Paving the way for mutual collaboration between the two entities in the area of project evaluations, project fi nance,

advisory services and asset management in ICD member countries, the cooperation agreement will essentially see the ICD and IL&FS joining hands in evaluating and structuring infrastructure opportunities, as well as achieving fi nancial closure of projects.

“We are excited by this partnership and we are confi dent that the strong capabilities developed by IL&FS Group in successful project development, execution and fi nancing across a wide spectrum of sectors in India will complement ICD in its various initiatives in all their member countries,” commented Shahzaad Dalal, CEO of IL&FS Groups International Business, in a statement to IFN.

As a major player in India with over two decades of industry experience and an established presence in the Middle East, Africa and Southeast Asia, the Indian fi rm could prove benefi cial in assisting the ICD in promoting economic development in member countries

through the utilization of Islamic fi nance via private sector development.

“This cooperation will enhance and strengthen the coordination of complementary activities, interests and capacities between the ICD and IL&FS towards promoting private sector development, providing advisory services and fi nancing infrastructure projects in our member countries,” agreed Khaled Al Aboodi, CEO of the ICD.

Although India is not listed as a member country of the IDB (the ICD’s parent group), we cannot deny the possibility of this partnership potentially opening up avenues for infrastructure projects in India to be fi nanced in a Shariah compliant manner, as IL&FS navigate the Shariah compliant fi nancial world. This could be a much-needed impetus for the South Asian nation’s domestic Islamic fi nance industry, whose growth could be more encouraging.

Indian irm joins the international Islamic inance scene

The year 2015 has been a strong one for the ICD as the multilateral organization embarks on multiple partnerships to expand its reach and propel its cause. This week alone, the IDB unit announced four diff erent agreements in a variety of jurisdictions across diff erent matt ers.

• African Export-Import Banko The two entities will collaborate in joint operations, expansion of fi nancial products and the exchange of information to

develop the private sector in the continent. Both the parties will also cooperate in structuring Sukuk opportunities, co-invest in Islamic leasing companies and support African fi nancial institutions through raising of capital.

• El Wifack o Tunisia’s El Wifack has signed an advisory services contract and term sheet with the Islamic Corporation for the

Development of the Private Sector (ICD) to facilitate the leasing company’s conversion into a fully-fl edged Islamic bank. The ICD will support El Wifack by providing seven teams to assist in areas including project management, Shariah compliance, treasury, accounting, human resources, information technology, marketing and legal framework.

• The government of Nigero To facilitate the sub-Saharan republic’s debut Sukuk program (See IFN Report page 11: ‘Niger eyes sovereign Sukuk

issuer title’)

We cannot deny the possibility

of this partnership potentially opening up avenues for infrastructure projects in India to be inanced in a Shariah compliant manner

14© 4th March 2015

IFN REPORTS

The primary sovereign Sukuk market was lit up last week with two announcements from the Middle East and Africa. Oman was reported to have set a target deadline for its proposed OMR200 million (US$517.58 million) Sukuk, while Niger confi rmed the sale of its XOF150 billion (US$256.74 million) within the next fi ve years. NABILAH ANNUAR provides a succinct overview of these exciting developments.

AfricaTogether with the Islamic Corporation for the Development of the Private Sector (ICD), the Niger government plans to auction XOF150 billion in Sukuk, implemented in two equal phases within the next fi ve years. Proceeds therefrom will be used to fund the Republic’s development project pipeline. Due to be the country’s fi rst Sukuk issuance, the ICD will coordinate with the relevant parties and oversee the execution of this off ering in its capacity as the transaction (fi rst tranche of XOF75 billion (US$128.37 million))’s advisor and global coordinator.

South Africa has no plans to issue a US dollar-denominated Sukuk in 2015, reported Reuters. The country, which is also planning to off er domestic South African-rand denominated Sukuk, may, however, consider selling Sukuk next year. Tunisia revised its plans expecting to debut its Sukuk off ering in the second half of 2015 to allow parliament time to amend a law concerning the sale. According to the newswire, the Republic picked four banks including Citigroup, Natixis and Standard Chartered for the proposed US$500 million US-dollar denominated issuance.

With a fi nal decision to be made, UMOA-Titres, the region’s development planning agency reported that Ivory Coast has plans to tap the international Sukuk market with an estimated off ering of XOF200 billion (US$342.32 million) this year. Kenya announced that it has set a target to issue its maiden Sukuk in the next fi nancial year (ending June 2016) as the parliament considers a recommendation by its fi nance committ ee to double the government’s external debt ceiling to US$28 billion. Although it would require regulatory

change, Egypt has been exploring the idea of issuing international Sukuk. The country’s Sovereign Sukuk bill was under review by the fi nance ministry last June and is yet to be presented to the parliament for approval.

Middle EastTo address in part the Sultanate’s 2015 budget defi cit of OMR2.5 billion (US$6.47 billion) due to the fall in oil prices, Oman according to Reuters has targeted to make the debut of its fi rst sovereign Sukuk by mid-2015. Reports have suggested that the OMR200 million off ering could be made with maturities of fi ve or seven years and is believed to adopt an Ijarah structure, with the underlying asset being a selected public project with a readily available income stream of the right proportions. To be issued through the central bank for the local market, the paper is also expected to boost Oman’s Islamic banking industry, giving it a pricing benchmark and a liquidity management tool.

Similarly, Jordan is also expected to raise JOD564 million (US$794.03 million) in Sukuk as early as next month to narrow the country’s budget defi cit. Bloomberg reported that the central bank expects to sell Sukuk valued between JOD300 million (US$422.36 million) and JOD400 million (US$563.14 million) on behalf of the Jordanian government, who aims to att ract the JOD1.4 billion (US$1.97 billion) of excess liquidity held by the nation’s four Islamic banks. Jordan’s budget defi cit has been estimated to narrow 24% to JOD688 million (US$968.6 million) this year.

AsiaThe Indonesian government recently announced that it will auction a three-year Sukuk of up to IDR5 billion (US$389,499) through its SPV Indonesian SBSN Issuer Company on the 11th March 2015. According to the statement, the target investors for the Sukuk are ‘individual, Indonesian citizens’, to be sold at an indicative fi xed coupon rate of 8.25% per year. The government is also currently assessing the feasibility of the utilization of state-owned goods and services such as tables, chairs, computers and cars as underlying assets for Sukuk issuances. The country intends to issue IDR7.14

trillion (US$571.2 million)-worth of project-based Sukuk this year, auction Sukuk 22 times, launch a retail Sukuk program of up to IDR20 trillion (US$1.57 billion) in April and issue global Sukuk within the fi rst quarter.

The Malaysian government is (according to Bloomberg) planning to tap the global Islamic bond market for the fi rst time in almost four years, instructing banks to submit proposals for a US dollar-denominated debt off ering. Other countries that have come forth with Sukuk plans include: Bangladesh, Ningxia Hui Autonomous Region, Turkey and Kazakhstan.

IFN’s Bangladesh correspondent Md Shamsuzzaman confi rmed that the country is actively considering the introduction of Sukuk in the domestic market. Ningxia Hui Autonomous Region located in the northwest part of the People’s Republic of China intends to issue up to US$1.5 billion-worth of instruments including Sukuk, with maturities up to fi ve years.

The Turkish Treasury said that it plans to issue Sukuk worth TRY1.5 billion (US$609.87 million). Kazakhstan could also potentially tap the international Sukuk market this year with a possible quasi-sovereign off ering. Pakistan’s fi nance minister on the other hand has affi rmed that the government will not tap the international debt markets, both Islamic and conventional, until the 30th June 2015, after the republic completes its global capital market transaction portfolio.

EuropeGlobal Sukuk market constituents can expect another Sukuk off ering from Luxembourg as its fi nance minister, Pierre Gramegna, confi rmed that the country is open to the idea of making more sovereign issues after conducting its maiden Sukuk last September. In a previous interview, Gramegna disclosed to IFN that authorities are working towards developing a new structure for future Sukuk utilizing investment funds instead of real estate assets.

Sovereign Sukuk: Oman and Niger

15© 4th March 2015

ANALYSIS

RegulationIn order to facilitate the development of Islamic banking and fi nance, Russia’s lower house of parliament is looking to review the law to accommodate Shariah compliant banking in the next two months — with the eventual goal of introducing a comprehensive legislative framework for Islamic banking in the second half of 2015, according to Bloomberg.

Banking and inanceInternational Bank of Azerbaijan, which has been spearheading the development of Islamic fi nance in the CIS region, in December 2014 began extending Shariah compliant fi nancial services to customers in Russia through its Russian unit, IBA-Moscow.

There have also been reports circulating in the local media indicating that the Federation is likely to welcome its fi rst Islamic bank this year, an endeavor reportedly supported by the IDB, with possible participation by Malaysia. It has also been suggested that the new Shariah bank, to be headquartered in Tatarstan, would either be a new entity itself, or an off shoot of an existing bank.

Following its US$60 million Islamic deal in 2011, AK BARS once again tapped the Shariah compliant market with another US$100 million syndicated Murabahah fi nancing facility, the bank announced in January 2015. Citi, Commerzbank and Emirates NBD Capital acted as mandated lead arrangers and bookrunners.

Apart from AK BARS, other banks have also expressed keen interest in furthering the Islamic fi nance proposition, including: Skerbank and VTB Bank.

Foreign relationsRussia has in the past year been forging stronger relationships with foreign peers as western sanctions loom over the country. More notably, the Federation has been making a conscious eff ort with Islamic countries. In February, president Rustam Minnikhanov met with the Malaysia External Trade

Development Corporation in his bid to strengthen relations with members of the Organization of Islamic Corporation.

Iranian ambassador to Russia, Mehdi Sanaei, also revealed to news agency RIA Novosti earlier this year that Moscow and Tehran are exploring the possibility of creating a joint bank, or joint account for national currency trade — the creation of a working group to facilitate this plan has already been agreed upon. As Iran’s banking system is inherently wholly Shariah compliant, this joint bank/account initiative is most likely to pave the way for greater Shariah compliant opportunities and developments for Russia.

Education/awarenessIn tandem with the development of the country’s legal and banking infrastructures, there has also been a concerted rise in educating and raising Islamic fi nance awareness among the public. In November, the International Bureau of Fiscal Documentation (IBFD) joined hands with the Russian Center of Islamic Economy and Finances, Kazan Federal University, Russian Islamic University and Allianz Life to conduct a fi ve-day training course on Takaful.

Islamic fi nance (including Sukuk) and Shariah investment opportunities in the Federation have also been a topic widely discussed among market players including during a roundtable discussion of the Bashkortostan Council, a federal subject of Russia located east of Moscow, as well as during programs hosted by Kazan Federal University in December exploring the Islamic world and Russian economy.

TakafulIt is during these discussions (particularly the one involving IBFD and Allianz Life) that it was announced that Takaful products would be introduced to the market this year. While Islamic insurance is currently unavailable in Russia, according to Olga Stepanova, the deputy director general of Allianz Life as reported by Islamic-Finance.RU, the

underlying framework for Takaful has been prepared except for some technical adjustments.

ConclusionThere is no denying Russia’s Islamic fi nance enthusiasm in diversifying its funding pool as well as in creating closer relations with and garnering support from Islamic countries. Apart from considering a legislation review and launching a test pilot Islamic banking project, the nation is indeed making a concerted eff ort to augment existing infrastructures to accommodate Islamic fi nance and banking. This includes the provision of Shariah quality compliance ratings via the National Rating Agency to businesses, performed in accordance with criteria approved by the Russian Association of Experts in Islamic Finance. And it looks like the North Eurasian nation is on the right track — however, could it be premature to expect Islamic fi nance to be its savior? After all, with the country’s GDP shrinking and infl ation escalating, it will take more than Islamic fi nance to boost its health. Nonetheless, Russia has made great strides in the Islamic fi nance area, arguably more in the last year than in the preceding several years; and with its strong momentum, it is likely that it will be able to consolidate Halal funds to ameliorate its economy, albeit slightly.

IFN COUNTRY ANALYSISRUSSIA

Russia — moving strong, but will it make it?With the west imposing sanctions on Russia, the Eurasian country has been urgently seeking alternative funding sources in order to rise above the restrictions, which has led to a stronger and greater push from the Federation in the Islamic fi nance space. However, VINEETA TAN asks, is that enough for the country to lift itself from the rut it is in?

Russia has made great

strides in the Islamic inance area, arguably more in the last year than in the preceding several years

16© 4th March 2015

ANALYSIS

IILMA good start to a new year, the IILM on the 19th January auctioned short-term three-month Sukuk worth US$860 million. The auction closed on the 22nd January 2015 at a profi t rate of 0.55%, with the paper due to mature on the 22nd April 2015. The following month, on the 24th February, IILM auctioned two tranches of Sukuk collectively worth US$990 million. As a measure to enhance the appeal of its regular issuance program, the IILM expanded beyond its usual three-month issuances with another six-month tenor facility following its debut of a six-month Sukuk last August. The six-month US$500 million facility received US$1.12 billion in bids while its three-month US$490 million paper garnered US$1 billion in bids. The papers carry profi t rates of 0.79% and 0.56% respectively. These issuances have thus far brought the value of IILM’s short-term Sukuk program to over US$2 billion.

Central banksThe Central Bank of Bahrain, as early as the 8th January 2015 successfully auctioned the new issue of its long-term Islamic leasing, three-year Sukuk Ijarah. The BHD100 million (US$263.55 million) issue was oversubscribed by 321%, receiving subscriptions worth BHD321 million (US$846 million). The expected return on the issue is 3% due to mature on the 8th January 2018. Subsequently on the 13th January, CBB concluded its latest Sukuk Ijarah worth BHD20 million (US$52.69 million) with an oversubscription of 270%. The 182-day facility, which carries an expected return rate of 82bps, received BHD54 million (US$142.25 million) in subscriptions, and will mature on the 16th July 2015.

On the 19th January it completed the issuance of its long-term Islamic leasing, 10-year Sukuk Ijarah with subscriptions worth BHD367 million (US$966.8 million) for the BHD250 million issue (US$658.58 million). The expected return on the paper was set at 5.5% and matures on the 19th January 2025. In February CBB

sold BHD20 million (US$52.74 million) in short-term Sukuk Ijarah. The issue was oversubscribed by 250% carrying a maturity of 182 days at an expected return of 0.75% on the 13th August 2015. Later in the month, the central bank issued Sukuk Salam worth BHD36 million (US$94.9 million), carrying a maturity of 91 days at an expected return of 72bps. Off ering short-term Ijarah and Salam programs every month on behalf of the government, these facilities have proven highly successful as evidenced by its consistent oversubscription.

In Bangladesh, the Bangladesh Bank has started to provide local lenders with a short-term liquidity management tool through a weekly Sukuk issuance program. The central bank auctioned three-month and six-month Sukuk on the 1st January 2015, off ering BDT855 million (US$10.79 million) and BDT936 million (US$11.81 million) respectively, with future auctions of the profi t-sharing Sukuk to be held every Thursday.

On the 6th February 2015, Bank Negara Malaysia, the country’s central bank auctioned Islamic treasury bills worth RM100 million (US$27.99 million) due to mature on the 5th February 2016. On the 26th February 2015, it auctioned RM4 billion (US$1.11 billion) in government

investment issues. The paper was structured according to the Murabahah principle and carries a tenor of fi ve years maturing on the 27th August 2020.

The government of Indonesia plans to issue IDR7.14 trillion (US$571.2 million)-worth of project-based Sukuk this year for three infrastructure programs and to develop the local Sukuk market. In January, the Indonesian fi nance ministry increased the size of its latest Sukuk auction to IDR6.8 trillion (US$544 million) from the initial target of IDR2 trillion (US$157.4 million). Auctioned on the 13th January 2015, the paper was 11 times oversubscribed att racting incoming bids of IDR13.7 trillion (US$1.07 billion), representing a more than six-fold oversubscription.

Later that month the fi nance ministry sold IDR2.2 trillion (US$176 million) in a three-tranche Sukuk auction on the 27th January 2015. The weighted average yield for the six-month Islamic T-bill was 6.07%, while its 1.4-year project-based Sukuk had a weighted average yield of 7.12%, and its 25-year project-based Sukuk had a weighted average yield of 8.15%. There were, however, no winning bids for the government’s fi ve-year project-based Sukuk.

OutlookAccording to S&P, the global Sukuk market would continue to be buoyed by healthy economic growth in the GCC (average 3.7%) and Malaysia (5.5%), and is expected to see a continuation in the trend of new sovereign issuers tapping the Islamic debt capital markets. The implementation of Basel III and the dearth of high-quality Shariah compliant liquid assets may prompt governments and central banks to issue Sukuk to meet the industry’s need for liquidity management instruments. Continued volatility in the commodity markets and its falling prices may have an impact on commodity Murabahah transactions aff ecting sustainability of liquidity management instruments.

IFN SECTOR ANALYSISLIQUIDITY MANAGEMENT

Liquidity management: An improving sectorAlways a sticky topic, liquidity management remains one of the primary concerns of the Islamic fi nance sector. Although only two months into the new year, the industry has seen very encouraging developments from central banks and institutions such as the International Islamic Liquidity Management Corporation (IILM) in managing liquidity in their respective jurisdictions. NABILAH ANNUAR brings an overview of this constructive progress and provides an outlook on the subject.

The global Sukuk market

is expected to see a continuation in the trend of new sovereign issuers tapping the Islamic debt capital markets

17© 4th March 2015

SHARIAHPRONOUNCEMENT

Pronouncement:In a Salam sale transaction, the price is paid on the spot and the delivery of the sold goods is made on a deferred basis. Such deferment constitutes a debt obligation on the seller in the form of a certain quantity of agreed described goods.

In principle, the prime obligation on the customer, being the seller under the Salam sale transaction, is the agreed quantity of the agreed commodity, irrespective of price fl uctuation of the commodity. In order to avoid an unwanted and unexpected situation, it is preferred in Shariah to select for the Salam sale transaction a commodity which is often available in the market.

However, if it happens that the agreed commodity disappears from the market, or if the seller is unable to deliver the same for any genuine reason, one of the following options may be opted:

1. To extend the delivery date with mutual consent of the buyer and seller until such time the commodity is available in the market, ensuring strictly that the quantity of the deliverable commodity must not be increased due to such delay since it will be tantamount to Riba.

2. To terminate the Salam contract, and in this case the seller (the customer in this case) will return the amount of sale price to the purchaser, again ensuring that the same amount is returned which was received, irrespective of the current market price of the commodity. In case the seller has delivered part of the commodity, the price amount shall be returned on an exact proportional basis for the remaining (undelivered) quantity of the commodity.

3. To substitute the original commodity with another available commodity with mutual consent, provided the quantity of the new commodity is equal to the remaining unfulfi lled fi nancial commitment of the seller.

It is important to note that such a substitution process cannot be stipulated in the agreement, and may be decided with mutual consent upon arising of the need.

Dr Hussain Hamed Hassan Chairman of the DIB Shariah Board, Managing director, Dar Al Sharia Legal & Financial Consultancy, Dubai, UAE

Query: An Islamic bank has launched a product based on Salam in order to provide cash fi nance for its retail and corporate customers.

As per the product structure, the customer will sell to the Islamic bank a certain quantity of a described commodity in consideration of the price paid by the Islamic bank on an upfront basis immediately upon signing the Salam sale agreement. The delivery of the goods will be on a staggered basis on defi ned future dates.

In order to address all possible scenarios related to the product, the Islamic bank has requested to know the Shariah compliant solution if the agreed commodity is not available in the market, making it diffi cult for the customer to adhere to the committ ed delivery schedule.

This Fatwa is brought to you exclusively by IFN in collaboration with Dar Al Sharia Legal & Financial Consultancy-Dubai. The Fatwa appearing in this space was obtained by Dar Al Sharia for issues faced by their clients and the documents stated in the Fatwa were developed at Dar Al Sharia. This Fatwa was compiled by Dr Muhiuddin Ghazi.

www.daralsharia.com

18© 4th March 2015

IFN COUNTRYCORRESPONDENTS

INDONESIA

By Farouk Abdullah Alwyni

In an eff ort to further boost the role of the Islamic capital market in the country, Indonesia’s Financial Services Authority (OJK) has declared the year of 2015 as the Shariah capital market year. According to its press release, the OJK will do three things to accelerate the development of the Shariah capital market industry as follows.

Firstly, strengthening regulations that can support the acceleration of the development of the Shariah capital market. In 2015, OJK is working on improving some rules related to the issuance of Shariah securities. In addition, OJK is also studying the possibility of giving lower fees for Shariah products in the capital market and to cooperate with relevant institutions to clarify further issues related to tax.

Secondly, developing a Shariah capital market road map as guidance for regulators and stakeholders in determining the policy direction in the next fi ve years. The road map will focus on fi ve sectors: strengthening regulations; increasing supply and demand; developing human resources; promotion and education; along with policy synergy with related stakeholders. Thirdly, increasing market penetration for Shariah products in the capital market through increasing awareness and outreach. The implementation of this activity will, among others, include entering the market for state-owned enterprises (SOEs) and potential issuers; increasing awareness of religious mass organizations like Nahdatul Ulama and Muhammadiyah; and calling for paper, educational programs for market players, journalists, universities, and the public in general.

Considering that there has been relatively low growth in corporate Sukuk issuance and Islamic mutual funds in the last three years along with the fact that the market shares of those corporate Sukuk and Islamic mutual funds are still less than 5%, the initiatives taken by the OJK need to be appreciated. It shows that there is a

willingness to see the Islamic capital market play a more important role in the country. Learning from Malaysia, the role of the regulators is critical to achieving that objective, especially in a country like Indonesia where there has been a pressing need for reforms in bureaucracy in general for some time, to make it more business-friendly.

Farouk Abdullah Alwyni is the chairman of the Center for Islamic Studies in Finance, Economics, and Development (CISFED) and a senior lecturer in the Graduate Program at Perbanas (National Banking Association) Institute, Jakarta, Indonesia. He can be reached at faalwyni@alwynicapital.co.id.

2015: Indonesia’s Shariah capital market year

Learning from Malaysia,

the role of the regulators is critical to achieving that objective, especially in a country like Indonesia where there has been a pressing need for reforms in bureaucracy in general for some time, to make it more business-friendly

IFN Country CorrespondentsAFGHANISTAN: Manezha Sukhanyarhead of Islamic banking, Ghazanfar BankAUSTRALIA : Chaaban Omran,Principal, Crescent Professional Services

BAHRAIN: Dr Hatim El-Tahirdirector of Islamic Finance Knowledge Center, Deloitt e & Touche BANGLADESH: Md Shamsuzzamanexecutive vice president, Islami Bank BangladeshBELGIUM: Prof Laurent MarliereCEO, ISFIN BERMUDA: Belaid A Jheengoordirector of asset management, PwC BRAZIL: Fábio Figueira, partner, Veirano AdvogadosBRUNEI: Dr Aimi Zulhazmi, Islamic fi nance consultant, Draznine Advisory CANADA: Jeff rey S Grahampartner, Borden Ladner Gervais EGYPT: Dr Walid Hegazymanaging partner, Hegazy & AssociatesFRANCE: Kader Merbouhco head of the executive master of the Islamic fi nance, Paris-Dauphine UniversityHONG KONG: Amirali Bakirali NasirChairman, The Law Society of Hong Kong working party on Islamic fi nanceINDIA: H Jayeshfounder partner, Juris CorpINDONESIA: Farouk A AlwyniCEO of Alwyni International Capital and the chairman of Centre for Islamic Studies in Finance Economics and Development IRAN: Majid PirehIslamic fi nance expert, Securities & Exchange Organization of Iran IRAQ: Khaled Saqqafpartner and head of Jordan & Iraq offi ces, Al Tamimi & Co JAPAN: Tareq Rahman Islamic fi nance consultantJORDAN: Khaled Saqqafpartner, Al Tamimi & CoKENYA: Mona K Doshi, senior partner, Anjarwalla & Khanna AdvocatesKOREA: Yong-Jae Changpartner, Lee & KoKUWAIT: Alex Salehpartner, Al Tamimi & CoLEBANON: Johnny El Hachempartner – corporate, Bin Shabib & Associates LUXEMBOURG: Said Qacemesenior manager of Advisory & Consulting, Deloitt e Tax & Consulting MALAYSIA: Abdullah Abdul Rahmanpartner, Cheang & Ariff MALDIVES: Aishath Muneezadeputy minister, Ministry of Islamic Aff airs, MaldivesMALTA: Reuben Butt igiegpresident, Malta Institute of ManagementMAURITIUS: Sameer K Tegallyassociate, Conyers Dill & PearmanMOROCCO: Ahmed Tahiri Joutimanaging consultant, Al Maali Consulting GroupNEW ZEALAND: Dr Mustafa Faroukcounsel member for Islamic fi nancial institutions, The Federation of Islamic Associations of New Zealand (FIANZ)NIGERIA: Auwalu Ado; Shariah auditor, Jaiz BankOMAN: Riza Ismail; senior associate, Trowers & HamlinsPAKISTAN: Muhammad Shoaib Ibrahimmanaging director & CEO, First Habib ModarabaPHILIPPINES: Rafael A Moralesmanaging partner, SyCip Salazar Hernandez & GatmaitanQATAR:Amjad Hussain partner, K&L GatesRUSSIA: Roustam Vakhitovmanaging partner, International Tax AssociatesSAUDI ARABIA: Nabil Issapartner, King & SpaldingSENEGAL: Abdoulaye MbowIslamic fi nance advisor, Africa Islamic Finance Corporation SOUTH AFRICA: Amman MuhammadCEO, First National Bank-Islamic FinanceSINGAPORE: Yeo Wicopartner, Allen & GledhillSRI LANKA: Imruz Kamilhead of Islamic banking, Richard Pieris Arpico FinanceSWITZERLAND: Khadra Abdullahiassociate, Investment banking, Faisal Private BankSYRIA: Gabriel Oussi,general manager, Oussi Law FirmTANZANIA: Khalfan Abdullahihead of product development and Shariah compliance, Amana BankTHAILAND: Shah Fahadvice-president and head of strategic marketing and product development, Islamic Bank of ThailandTURKEY: Ali Ceylanpartner, Baspinar & PartnersUK: Fara Mohammaddirector of Islamic fi nance, Foot Anstey US: Joshua Brockwellinvestment communications director, Azzad Asset ManagementYEMEN: Moneer Saif; head of Islamic banking, CAC BankIFN Correspondents are experts in their respective fi elds and are selected by Islamic Finance news to contribute designated short country reports. For more information about becoming an IFN Correspondent please contact sasikala.thiagaraja@redmoneygroup.com

19© 4th March 2015

IFN SECTORCORRESPONDENTS

IFN COUNTRYCORRESPONDENTS

Despite the economic

scenario, entrepreneurs are still seeing good opportunities of doing business and are certainly expecting to attract investors

BRAZIL

By Fábio Amaral Figueira

Readers who follow events occurring in Brazil, mainly those related to the Brazilian economy, are aware that the re-elected president, the ministers and the president of the Brazilian Central Bank are making eff orts to take measures aiming at allowing the country to have a bett er growth rate and, at the same time, at avoiding recession. In addition to that, the government also knows that such measures should not have a signifi cant impact in social programs, since Brazil is a country which is still fi ghting poverty and has in the last decade been able to create a new middle-class by making the economy grow as a whole and by fostering social programs.

As reported by IFN, Ritz Property and construction company G5 have created through a partnership a premium residential project — Majestic Village — in the city of Parnamirim, state of Rio Grande do Norte, which is neighbor to

the state capital city Natal. This project would mean a Shariah compliant investment opportunity.

The news about this residential project is very encouraging. A fi rst reason for that is the fact that, despite the economic scenario, entrepreneurs are still seeing good opportunities of doing business and are certainly expecting to att ract investors.

Moreover, the Brazilian northeastern region, which encompasses other states in addition to the state of Rio Grande do Norte, has a tremendous touristic vocation and resorts and condominiums are very common in the region. Therefore, entrepreneurs may see in the region opportunities in this economic segment by using Shariah compliant funding.

On the 13th February 2015, Valor Econômico published a note, informing that Mubadala, Abu Dhabi’s sovereign fund, has assumed corporate control of the Brazilian gold mining company AUX. AUX would be part of the EBX Group held by the Brazilian entrepreneur Eike

Batista. Mubadala already has corporate participation in other EBX Group companies.

Fábio Amaral Figueira is a partner at Veirano Advogados Brazil. He can be contacted at fabio.fi gueira@veirano.com.br.

MOROCCO

By Dr Ahmed Tahiri Jouti

The Royal Decree no 1.15.02 published on the 9th February 2015 in the Offi cial Journal of Morocco related to the reorganization of the higher council of Ulamas to offi cially create a new commission specializing in participative fi nance as stipulated in the banking law that recognizes Islamic banks.

According to the decree, this new commission will play the role of a central Shariah board for the whole Islamic fi nance industry and it will take charge of the issuance of Fatwas and opinions related to the Shariah compliance of:

• The products off ered and the contracts used by participative banks, fi nance companies and microfi nance institutions

• The Central Bank regulatory framework for participative banks

(products off ered, investment deposits, operations of the guarantee fund of deposits)

• Takaful and re-Takaful operations and transactions, and

• Sukuk issuances.

The new commission is composed of three diff erent categories of members:

• The fi rst category: 10 scholars with a deep knowledge of Islamic law appointed by the general secretary of the Higher Council of Ulamas among the council’s members.

• The second category: at least fi ve permanent members with a proven expertise in the diff erent issues related to participative fi nance (banking transactions, Takaful, capital markets). The fi ve permanent members only play an advisory role.

• The third category: the commission can be assisted by experts in diff erent fi elds to have a bett er understanding before issuing its opinions.

The diff erent issues that need to be discussed by the Central Shariah Board are submitt ed exclusively by the central bank, the securities commission and the insurance authority. The opinions and Fatwas of the Central Shariah Board are issued by consensus.

After the fi nal vote of the new banking law, the royal decree and the constitution of the Central Shariah Board are seen as the most important steps in establishing a Moroccan Islamic fi nance industry.

In this context, delegations of the Higher Council of Ulamas visited Bahrain and Malaysia to learn more about the local experiences and the Shariah governance systems in both countries for more inspiration.

Dr Ahmed Tahiri Jouti is a managing consultant at Al Maali Consulting Group. He can be contacted at a.tahiri@almaaligroup.com.

Shariah compliant investment opportunities growing in Brazil

A royal decree to create the Central Board for participative inance

20© 4th March 2015

IFN SECTORCORRESPONDENTS

22nd – 23rd March 2015, Dubai

www.REDmoneytraining.com

What You Will Learn?• Better understanding of International Best Practices in

Regulation, Corporate Governance, AML, Sanctions &

Compliance

• Some key regulatory impacts on the business and how to

manage them in compliance with the applicable rules and

legislation

• An overview of some very basic concepts pertaining to

corporate governance and various regulations, that are

overshadowed by the focus on its application in day to day

activities

• Methods to put Corporate Governance in practice

INTERNATIONAL BEST PRACTICES & REGIONAL STANDARDS IN REGULATION, CORPORATE

GOVERNANCE, AML, SANCTIONS & COMPLIANCE

dubaicourse@redmoneygroup.com

REAL ESTATE

By Philip Churchill

My observation within these very pages in December last year that Middle East investor interest in real estate was increasing as the oil price fell has now been substantiated by Savills’s latest research.

Looking back at data for the last 30 years they have identifi ed that real estate investment rises when oil prices fall, with a potential GBP7-10 billion (US$10.84-15.49 billion) allocation to the European markets, observing that the falling price’s impact on their domestic economy serves as a reminder of the need to diversify away from non-renewable energy sources.

While they project that this could mean a greater allocation to emerging markets, they also rightly record the eternal affi nity that the Middle East has with central London, commenting that: “Middle Eastern investors accounted for 11% of the central London market last year at circa GBP2.4 billion (US$3.72 billion), and we would suggest that their spend will increase over the next year in line with previous falls in oil prices.”

Providing almost instant evidence of this,

apart of course from the headline news of Qatar’s acquisition of Songbird Estates’s Canary Wharf which has been widely publicized, was news this week of a client of Knight Frank, understood to be from Saudi Arabia, paying a yield of just 1.7% for the Rolex store within Candy & Candy’s One Hyde Park development in Knightsbridge. This makes the purchase by a Hong Kong investor of the McLaren car showroom next door at a heady yield of 3.3% in 2011 look very shrewd.

While I continue to argue that ‘return on equity’ is more important to investors than ‘return on ego’, I guess it is fair to assume that both the heart and the mind ruled this acquisition, but you cannot argue against the scarcity that such an investment opportunity represents, particularly with a lease of more than 10 years remaining. Meanwhile, with a low headline rent less than 50% of the levels achieved nearby, there is plenty of room for rental growth.

I hope they are able to negotiate a landlord’s discount…diversifi cation has never been so fun!

Philip Churchill is the founder and managing partner at 90 North Real Estate Partners. He can be contacted at pchurchill@90northrep.com.

Falling oil prices…time to buy a Rolex IFN Sector CorrespondentsCROSS-BORDER FINANCINGFara Mohammad, Director Of Islamic Finance, Foot Anstey

DEBT CAPITAL MARKETS: Muhammad Shoaib Ibrahim, managing director & CEO, First Habib Modaraba

DERIVATIVESSuhaimi Zainul - Abidin, treasurer for Gulf-Asia Shariah Compliant Investment Association and advisor to 5Pillars

LAW (EUROPE):Ayhan Baltaci, att orney at law, Bereket & Baltaci Law Firm

LAW (MIDDLE EAST) Bishr Shiblaq, head of Dubai offi ce, Arendt & Medernach

LEASING : Prof Shahinaz Rashad Abdellatif, executive director, Financial Services Institute, Egyptian Financial Supervisory Authority.

MERGERS & ACQUISITIONS Jamal Hijres, CEO, Cappinova Investment Bank

MICROFINANCE (ASIA):Dr Mahmood Ahmed, executive vice president and director training, Islami Bank Training and Research Academy

MICROFINANCE (AFRICA): Mansour Ndiaye, director of microfi nance, Assistance and Consulting for Development

PRIVATE BANKING & WEALTH MANAGEMENT: Thomas Woods, product development, wealth management, The Islamic Bank of Asia

PRIVATE EQUITY & VENTURE CAPITAL : Arshad Ahmed, partner, Elixir Capital

PROJECT & INFRASTRUCTURE FINANCEAnthony Coleby, head of corporate commercial department, Said Al Shahry Law Offi ce (SASLO)

REAL ESTATEPhilip Churchill, founder partner, 90 North Real Estate Partners

REAL ESTATE (MIDDLE EAST): Yahya Abdulla, head of capital markets — Middle East, Cushman & Wakefi eld

REGULATORY ISSUES (ASIA)Intan Syah Ichsan , chief operating offi cer, Samuel Aset Manajemen

REGULATORY ISSUES (MIDDLE EAST): Mohammad Abdullah Malik Dewaya, head of Shariah compliance and audit, Maisarah Islamic Banking ServicesRETAIL BANKING : Chowdhury Shahed Akbar, Offi cer, Southeast Bank, Bangladesh.RISK MANAGEMENT : Hylmun Izhar, economist, Islamic Research and Training Institute, Islamic Development Bank Country

SECURITIES & SECURITIZATION : Nidhi Bothra, executive vice president, Vinod Kothari Consultants

STOCK BROKING & TRADING : Athif Shukri, research analyst, Adl Capital

STRUCTURED FINANCE:John Dewar, partner and head of Islamic fi nance, Milbank, Tweed, Hadley & McCloy

SUKUK Anthony Coleby, head of corporate commercial department, Said Al Shahry Law Offi ce (SASLO)

SYNDICATED FINANCEElina Khayrullina, investor relations manager, AK BARS Bank

TAKAFUL & RE-TAKAFUL : Dr Sutan Emir Hidayat, assistant professor and academic advisor for Islamic fi nance, University College of Bahrain

TAKAFUL & RE-TAKAFUL (AFRICA):Uwaiz Jassat, acting head of Islamic banking, Absa Islamic Banking

TAKAFUL & RE-TAKAFUL (EUROPE): Ezzedine Ghlamallah, director, Solutions Insurance and Islamic Finance in France (SAAFI)

TRADE FINANCEAnthony Coleby, head of corporate commercial department, Said Al Shahry Law Offi ce (SASLO)

TREASURY PRODUCTS : Nafi th ALHersh Nazzal, certifi ed fi nancial & investment advisor

IFN Correspondents are experts in their respective fi elds and are selected by Islamic Finance news to contribute designated short sector reports. For more information about becoming an IFN Correspondent, please contact sasikala.thiagaraja@redmoneygroup.com

21© 4th March 2015

SPECIAL REPORT

SRI LANKA

By Raleena Thassim Junkeer

Unlike prior to 2011, today Islamic banking and fi nancing facilities are conveniently available for Muslims in Sri Lanka. Would this improvement in the fi nancial services industry result in the active transfer of funds from the conventional fi nancial system to the Islamic fi nancial system because Muslims’ faith infl uences their economic behaviour? An RIU survey conducted in the last quarter of 2014 shows a signifi cant percentage of Muslims tend to compromise their religious beliefs when making fi nancial decisions.

Surprisingly, only 40% of the respondents considered Shariah compliance as a top priority when selecting a fi nancial service provider. These respondents expressed strong faith in Islam and believed Islam should be practiced in all aspects of life. The majority (86%) of them had a clear understanding about Islamic fi nance. This segment of the customers is loyal to the industry and actively contributes to its growth. On the contrary, Shariah compliance was not a top priority to the remaining 60% of the respondents. This trend is distressing due to two reasons. Firstly, it questions the sincerity of Muslims to Allah (SWT) and secondly, it questions the strength of the most prominent unique selling proposition of its niche market. Thus, a company highly capitalizing on ‘Shariah compliance’ to position its products and services may not be able to reap the expected results.

Reliability is also an important determinant of Muslims’ choice of a fi nancial service provider. Some 30% of the respondents preferred a conventional fi nancial service provider over an Islamic fi nancial service provider if the latt er is proven to be more reliable although they were aware of prohibition of interest in Islam and had a good

perception about Islamic fi nance. The faith of these customers has very litt le infl uence on their economic decisions. They give priority to the security and effi cient management of their funds. As building credibility requires a long time, the transfer of funds of this type of customers from a conventional to the Islamic system will take place at a rather sedate pace.

Even though the percentage is insignifi cant, 8% of the respondents selected their fi nancial service provider based on economic returns. The positive indication of this trend is that the majority of the respondents are willing to pay a litt le more or willing to accept a litt le less for a reliable and Shariah compliant Islamic fi nancial institution. The study also indicates that industry players are required to divert their att ention to address the misconceptions about Islamic fi nance among Muslims. Sixty percent of those who based their fi nancial decisions on economic value believed Islamic fi nance is no diff erent from conventional fi nance. Clearing their misconception may encourage them to switch from a conventional to the Islamic fi nancial system. The other 20% of the respondents understood the concept of Shariah compliant fi nancing and yet, preferred to select their fi nancial service provider based on cost and returns as their faith had no infl uence on their economic behavior.

It is noteworthy that 22% of the respondents compromised Shariah compliance for aff ordability. Nearly 70% of them exhibited a strong faith in Islam and Islamic fi nance but are forced to seek conventional fi nancial solutions due to their fi nancial constraints. This segment of customers believes Islam permits such compromises in order to fulfi ll necessities. However, they will readily shift from a conventional system to the Islamic system if the rates of Islamic fi nancial service providers are aff ordable. Competitively pricing its products and services is challenging to the industry players because Shariah compliant institutions incur additional costs and cannot benefi t much from economies of scale like its counterparts. However, if the Islamic fi nancial service providers can ease the fi nancial constraints of this segment of customers, they will become loyal customers of the industry.

In a nutshell the faith had a substantial infl uence on the economic behavior of 40% of the respondents. However, the remaining 60%’s economic behavior was driven based on assurance, aff ordability and economic benefi ts. Therefore, fi rstly the Islamic fi nancial institutions should actively be involved in educating Muslim communities and creating awareness about the graveness of the Islamic rulings they conveniently compromise, to create the correct mind-set of its target market. Secondly, the industry players should try to make its products more appealing in terms of what customers value rather than heavily depending on the ‘Halal’ status to promote its products to customers. The correct mind-set and appropriately packaged products will accelerate the growth of the Islamic fi nance industry of Sri Lanka.

Raleena Thassim Junkeer is a consultant at Research Intelligence Unit. She can be contacted at raleena@riunit.com.

In luence of faith on Sri Lankan Muslims’ economic behavior“Those who live on usury will not rise up before Allah except like those who are driven to madness by the touch of Shaitan. That is because they claim: ‘Trading is no diff erent than usury, but Allah has made trading lawful and usury unlawful. He who has received the admonition from his Rabb and has mended his way may keep his previous gains; Allah will be his judge. Those who turn back (repeat this crime), they shall be the inmates of hellfi re wherein they will live for ever (Al-Baqarah,275).” On that note, RALEENA THASSIM JUNKEER analyzes whether Sri Lankan Muslims’ faith infl uences their economic behavior.

Chart 1: Customer priorities

Shariahcompliant

Economicreturn

ordability Reliability ofservice provider

40%

8%

22%

30%

22© 4th March 2015

SPECIAL REPORT

MURABAHAH

By Mohd Bahroddin Badri

Murabahah is basically a cost plus profi t sale contract, whereby the seller discloses the cost price of the commodity, and sells it to the purchaser at a marked-up price. In the industry practice of Murabahah, the payment by the purchaser is made on a deferred basis, which thereafter creates a fi nancial obligation upon the purchaser. The overwhelming use of Murabahah as the underlying contract for Islamic banking products invites much criticism. The core critique is that Islamic fi nance is mimicking conventional fi nancial products in substance. In other words, it is claimed that only the procedures and paperwork for the processing of the products are Shariah compliant whereas the outcome is apparently similar to conventional fi nance.

Interest rate benchmark Most of the IFIs — off ering credit fi nancing via a Murabahah transaction — use interest rate as a benchmark to determine the profi t rate. This practice raised a perception that Murabahah fi nancing is mimicking the conventional interest practice. Using interest rate as a benchmark for fi nancing makes the transaction similar to the conventional mode of fi nancing in substance. This is more obvious when a fi nancial institution off ers both conventional and Islamic fi nancing facility at a similar rate. Is this true?

On the affi rmative, IFIs are using interest rate to determine a Halal profi t. However, to claim that the Islamic fi nancing product is non-Shariah compliant merely because of such a benchmark is prett y excessive.

From a Shariah perspective, the basic principle for the legality and validity of a Murabahah contract is that it must be a genuine sale that fulfi lls all the conditions and requirements of Murabahah. Therefore, so long as the Murabahah contract meets all the conditions of a true sale contract, the mere usage of interest rate as a benchmark to determine the profi t will not make the transaction or sale invalid. As an analogy, would it be a non-Shariah compliant issue to sell Halal meat at the same price as a non-Halal meat? Of course, it would not be. Nevertheless, it is desirable for IFIs to develop its own benchmark to indicate profi t.

Late payment chargeAs a conventional practice, a customer who fails to repay his/her debt on a specifi ed due date would be subjected to a penalty fee over the amount due. The interest portion will continue to increase based on the extension of the default period. This was contrary to the practice of the Islamic banking industry during its early development in Malaysia,

which did not charge a late payment penalty. The reason is that, the price of commodity is fi xed at the execution of the Murabahah contract and cannot be increased after the execution. Any incremental value charged on the debtor for late payment is tantamount to Riba. However, currently most IFIs in Malaysia charge customers a fi xed 1% rate as a penalty for failure to pay their debt on its due date.

This practice att racted severe criticism with many accusing IFIs of mimicking its conventional counterpart. However, based on reliable sources, the previous restriction was exploited by dishonest clients who intentionally delayed repayment of the installments. Hence, as a deterrent mechanism against such practice, the Shariah Advisory Council of the central bank of Malaysia allows IFIs to impose Ta’widh (compensation charge) of 1% on late payment of the

This has been a subject of

long debate among contemporary scholars: is it lawful for the third party to charge a fee for being a guarantor?

continued...

Conventional features in Murabahah-based inancing: Shariah issues

Indeed, it is of great admiration to see more Islamic banking products being developed based on Mudarabah and Musharakah, which promotes the profi t and loss sharing (PLS) concept. Nonetheless, functioning in today’s fi nancial environment, which is largely dominated by the conventional banking system, it is quite a big challenge for Islamic fi nancial institutions (IFIs) to indulge in genuine PLS-based fi nancing. It is claimed that over 95% of the asset-side fi nancial products being utilized by Islamic banks worldwide, are based on trading and leasing contracts – Murabahah and Ijarah respectively. MOHD BAHRODDIN BADRI highlights some issues on the features of the current practice of Murabahah as a fi nancing tool in IFIs and what the Shariah position is on those issues.

23© 4th March 2015

SPECIAL REPORT

Continued

fi nancing, which refl ects the actual cost incurred by the IFI. IFIs are also allowed to charge Gharamah (fi ne or penalty); however, the monies received will not be treated as income, rather it must be channelled to charity, which is strictly monitored by the regulator. Another alternative that is practiced by some IFIs in the Middle East is, prior to the execution of the Murabahah contract, the client undertakes that he will pay a certain amount to a charitable fund managed by the bank, in case the customer defaults on purpose. With that being said, it is still expected that IFIs should take their customers’ fi nancial capability into consideration in the imposition of the late payment charge.

Third-party guarantee This has been a subject of long debate among contemporary scholars: is it lawful for the third party to charge a fee for being a guarantor? The classical jurists unanimously disallowed charging a fee as guarantor. The reason is that a guarantee is a Tabarru’ (charitable) contract which takes the ruling of a loan, therefore, any excess fee imposed is prohibited. How is a guarantee equivalent to a loan? To illustrate, in the event of default, the guarantor is obliged to perform full sett lement to the fi nancier, which thereafter creates a debt owed by the client to the guarantor (now becomes creditor). Hence, the fee imposed is deemed to be similar to interest on a loan.

On the other hand, a group of contemporary scholars hold the view that the prohibition of charging a fee on guarantee is not directly deduced from the Quran or the Sunnah. The argument is that though the guarantee is Tabarru’ in nature, it is not similar to a loan. The fee is not charged for the loan, rather the client is charged due to the benefi t it obtains from the reputation of the guarantor which gives the fi nancier confi dence. They further argue that a guarantee in the present commercial activities diff ers from that of the past, such as the administrative work needed to be performed by the guarantor in issuing the guarantee. Based on this argument, they allow the guarantor to charge fees. In harmonizing these two views, it is proposed that any IFI acting as a guarantor may charge a guarantee fee based on the reputation and assessment service provided to the client.

However, in the event that the client, that is, the guaranteed party, defaults and the guarantor made the sett lement to the fi nancier on the client’s behalf, no more fees should be imposed. The guarantor can only claim the sett led debt principal.

Ibra (rebate) for early settlement In conventional banking practice, should the client choose to sett le its debt earlier than the agreed tenure, the bank will not charge interest for the remaining years. To create a competitive alternative, IFIs take a similar approach by granting Ibra (rebate) to clients. Is it permissible, from a Shariah perspective, to grant rebate on early sett lement? According to the majority of classical jurists this practice is not permissible. However, some scholars considered this to be permissible based on a famous Hadith (tradition of the Prophet) narrated by Abdullah Ibn Mas’ud. According to this Hadith, when the Jews of Banu Nadir were exiled from Madinah (because of their conspiracies), a few people came to the Prophet (peace be upon him) and said: “You have

ordered them to be expelled, but some people owe them debt which have not yet matured.” Thereupon, the Prophet (peace be upon him) said to the Jews: “Give discount and receive your debt soon”.

The Islamic Fiqh Academy of the Organization of Islamic Cooperation (OIC) stated that Ibra is permissible as long as it is not made contingent on early sett lement. Hence, if the IFI grants rebate voluntarily without any upfront agreement, then it is permissible. The rebate should not be stipulated in the master agreement and should remain at the sole discretion of the IFI.

However, in the Malaysian context, the central bank, as the authoritative body of the country, has obliged IFIs to grant Ibra for early sett lement and to include it as a clause in the legal documentation. The calculation formula of Ibra is also disclosed in the documentation. This approach is taken on the basis of the principle Tasarruf Al-Imam ’Ala Ra-’iyyah Manut Bi Al-Maslahah, which basically means the authoritative body’s disposition should be to safeguard Maslahah (public interest) and ensure justice to those under its authority.

Conclusion Islamic fi nance has always been criticized for mimicking its conventional counterpart. However, the fact is IFIs having some conventional features in its Islamic products does not necessarily mean it is against Shariah. Having said that, the IFIs operate under the conventional regime which put them in challenging situations. The Islamic fi nance industry is in a ‘between the hammer and the anvil’ situation, that is, obliged to satisfy Shariah requirements and meet commercial objectives concurrently. Despite all the constraints and challenges facing the Islamic fi nance industry, there has been a lot of enhancements and improvements. Nevertheless, admitt edly there are still many areas that need to be improvised. Continuous eff ort is needed to ensure that the Islamic fi nance industry is not only Islamic, but also looks Islamic!

Mohd Bahroddin Badri is a researcher at the International Shariah Research Academy for Islamic fi nance (ISRA) and deputy chairman of the Citibank Shariah Committ ee. He can be contacted at bahroddin@isra.my.

Islamic inance

has always been criticized for mimicking its conventional counterpart. However, the fact is IFIs having some conventional features in its Islamic products does not necessarily mean it is against Shariah

24© 4th March 2015

ASSET MANAGEMENT FEATURE

ASSETS

By Hussain Kureshi

From an economic point of view any ‘thing’, physical, tangible or intangible that generates revenues or income is deemed to be an asset.

Land can be an asset, as when it is employed it can generate revenue by farming activities, by constructing a commercial enterprise on it, by leasing it and so on. In fact, any element which generates some usufruct of economic value can be deemed an asset. In today’s world, internet bandwidth can be deemed an asset, a manufacturing company’s inventory of stock can be an asset, or a telecommunication company’s network can be deemed as an asset and thus may be intangible in nature. Furthermore, labor can be an asset, as when it is employed revenues are generated. From the perspective of the unit of labor, skills can be deemed an asset as well. From another perspective, a government’s education system is an asset, natural resources are an asset, and the right to use these assets, which is separated from the right to own these assets which is again separated from owning these assets, is in and of itself an asset class as well. The right to use or lease an asset owned by a government or a corporation has been the underlying asset in several issuances of Sukuk.

Challenges emerge in valuing assets, and these are linked to the complexity of the markets in which these assets are traded. Pricing a new car is easy as there is a ready market for it, but pricing a used car may not be so easy. The more unique the features of an asset, like a vintage car for instance, the more opaque the pricing mechanism as there is no ready market for a vintage car. The liquidity of an asset or the ease with which it can be sold or resold in a market is an essential variable in the pricing function of an asset. Thus a simple equation that expresses the pricing function may look something as follows:

P(asset) = f(demand) + f(supply) + f(interest rates) + f(ease of selling in secondary market).

If an asset is purchased with borrowed monies, the cost of borrowing can also prevail on the price of an asset. The demand of an asset would be a function of the asset’s ability to satisfy wants if it is a consumer good, or its ability to generate future revenue if it is a commercial asset.

Pricing of an asset can therefore either be a function of market forces or can also be regulated by regulators. These assets can be bought and sold in normal transactions of sale whether they are on spot, or on credit. Assets can be traded in forward contracts as well. Financial assets pose another issue altogether. Cash or currency is the simplest fi nancial asset, but in and of itself, does not generate revenue. However, when money is lent between two parties, and the loan is repaid with a premium, the loan itself becomes a fi nancial asset of the simplest form. A fi xed deposit (FD) placed by a customer in a bank is an asset for the customer as the deposit will be repaid with interest; essentially an FD is a loan to the bank by the customer. Bonds are just merely loans where the exposure is absorbed by a multitude of investors instead of a single bank. Instruments that refl ect equity are fi nancial instruments as they provide an owner a residual claim over a company’s assets as well as ensure profi t or losses to the instrument owner in terms of revenue earned from dividends and from capital gains. Of course, losses can also be incurred.

As such however, all assets have two values, a market value for which the asset may be sold today, and what I call a contingent value, a value at which the asset can be sold in the future. If an asset is priced at US$100 at the time, t=0, then one can predict that at the time t=1, it may be US$100.5 or $99.5. However, predicting the value of an asset well into the future becomes an educated guessing game. We may not be able to determine the price of the same asset at the time t+365 (Pundits of the oil industry should know this by now).

Do fi nancial assets represent any value of their own? Are they real assets from the perspective of Shariah? If a loan is taken by a businessman to fund a business expansion plan, or to pay for working capital, the receivables of the loan are indirectly linked to real economic activity. However, if a loan is used to pay off a previous loan (the opium of many sovereigns today), the relationship between receivables and any real economic activity may be disguised by multiple layers. However, it is a valid question that if beyond certain layers a set of receivables is linked to real economic activity, then why receivables generated by a fi nancing contract not be used and treated as an asset in and of itself? Thus, can a fi nancial asset be traded, can a fi nancing contract be traded, can receivables against a lease contract be traded, and can these receivables be kept as collateral to obtain additional fi nancing? If not, why not? If yes, then how is the environment of Islamic fi nance not as vulnerable to over leverage than that of conventional fi nance?

Furthermore, can a company record the abilities of its employees as an intangible asset? Can these abilities be quantifi ed and if so can this asset be traded? If this asset comes under goodwill, then can a fi nancial asset or product be developed that refl ects the value of a company’s goodwill and then be traded? Would such an asset class be acceptable to the community of Shariah scholars?

Hussain Kureshi is the head of mergers and acquisitions at Millennium Capital. He can be contacted at husseinkureshi@gmail.com.

What is an asset?Ever since stepping into the domain of Islamic fi nance, HUSSAIN KURESHI has often addressed the issue of what constitutes an asset and here he delves further into the subject.

The liquidity of an asset or

the ease with which it can be sold or resold in a market is an essential variable in the pricing function of an asset

25© 4th March 2015

ASSET MANAGEMENT FEATURE

ASSET MANAGEMENT

By Jonathan Culshaw & Sean Scott

Historically, the most popular jurisdictions for the incorporation of Shariah compliant funds have always been Saudi Arabia and Malaysia, with their strong domestic demand. Together with other traditional jurisdictions such as Kuwait, Bahrain and Indonesia, the market for Shariah compliant investment funds was heavily concentrated in a handful of domestic markets across the Islamic world.

Part of the growth story of Shariah compliant funds is undoubtedly due to the increasing accumulation of wealth in some of these petroleum-rich economies. However, focusing solely on this aspect ignores other signifi cant contributing factors.

Geographical diversi icationThe increased integration of international fi nance centers (IFCs) in the facilitation of global trade and investment over the last 20 or so years has diversifi ed the global landscape for Shariah compliant funds away from the traditional jurisdictions. IFCs such as Cayman, Luxembourg, Jersey and Ireland now account for more than 20% of incorporations of all Shariah compliant funds. This geographic diversifi cation has expanded not only the potential investor universe for Shariah compliant funds but has also now carved a niche for these products in the global wealth management space facilitated by IFCs.

Product diversi icationIFCs, including those mentioned previously, are sophisticated and innovative fi nancial centers that provide an effi cient bridge into global capital markets and investment fl ows. These

jurisdictions provide the necessary legislation, regulation and international best practice standards required in order to design and operate the investment structures and products to meet the needs of the international fi nancial community and the expectations of the global investors.

Recent eff orts in respect of the Cayman Islands for example, include the revisions to the laws governing limited partnerships (a popular vehicle for structuring Mudarabah and Musharakah arrangements) to provide a modern, fl exible investment fund framework with minimal regulatory intrusion, while still maintaining strict compliance with international standards for tax cooperation and exchange of information in structuring fi nancial products.

Providing a robust framework for investment structures and products has also encouraged more investment choices. Shariah compliant funds are no longer consigned to just equities; Shariah compliant funds can be

structured to provide off erings across a variety of asset classes and investor types. Professional and institutional investors now have access to Shariah compliant fund platforms established in IFCs which off er regional and global investment opportunities. Regional asset managers, sponsors and promoters can now leverage their local knowledge in conjunction with international partners in order to gain access to the global capital market.

Investment appeal Shariah compliant investments also present distinct risk management advantages to investors. General prohibitions on investment in certain industries and sectors, leverage restrictions and a requirement for ‘real assets’ make Shariah compliant funds an interesting investment proposition for western investors who want investment returns but in a manner they perceive to be ethical, responsible and socially benefi cial.

For many investors burned by the wave of investment banking collapses, fraud or investment failure following the global fi nancial crisis of 2007-08, Shariah investment principles off er an alternative model which is not driven by greed, uncertainty or excessive speculation. This perspective has gained much coverage in the fi nancial press which has compared the virtues of Shariah compliant investment with ethical or responsible investment.

However, some institutional investors have begun to look past the simple ‘ethical investment’ matrix and identifi ed a more fundamental aspect. To pension funds for example, who are among the largest allocators to alternative investments, the principles of Shariah compliant investment have much in common with the investment mandates of pension trustees.

The expanding market for Shariah compliant investment fundsGlobalization is playing its part in the proliferation of Shariah compliant investment funds. Whereas a generation ago, Shariah compliant funds were largely domestic products developed for Islamic investors, they have a signifi cantly broader appeal and application today. JONATHAN CULSHAW and SEAN SCOTT share their thoughts on the expanding Shariah compliant investment market.

continued...

Among the leading IFCs,

Cayman remains in a dominant position dwar ing competitors in terms of both numbers of funds and assets under management

26© 4th March 2015

ASSET MANAGEMENT FEATURE

Shariah principles can provide a frame of reference for assessing the ‘fi nancial health’ of an investment which is a considered set of investment criteria that can assist institutional investors such as pension funds that are building investment portfolios focused on responsible investing over long-term horizons and sustainability of returns.

The Cayman Islands as a destination for Shariah compliant investment fundsThe Cayman Islands remains one of the world’s leading jurisdictions for the establishment of investment funds. Among the leading IFCs, Cayman remains in a dominant position dwarfi ng competitors in terms of both numbers of funds and assets under management.

The political stability of the Cayman Islands, its compliance with the Organization for Economic Co-operation and Development and international best practice standards, and the speed, cost and fl exibility with which investment products can be structured and established, are all major contributing factors. In addition, the pragmatic and effi cient legal and regulatory systems play a signifi cant role in its att ractiveness as a jurisdiction for investment funds.

The Cayman Islands is a common law jurisdiction where the principle of freedom of contract is paramount and bonafi de contractual relations are not subject to judicial or governmental interference. Investment funds may be structured as companies, limited partnerships or trusts and there are no limitations on the asset classes which a fund can acquire, the investment activities it may undertake or the types of equity or debt securities which it can issue, making it an ideal jurisdiction to effi ciently negotiate and document Shariah compliant investment fund structures.

Jonathan Culshaw is the Asia managing partner and global head of investment funds and regulatory, Harneys (Hong Kong) while Sean Scott is a partner in the London offi ce of Harneys. They can be contacted at jonathan.culshaw@harneys.com and sean.scott @harneys.com respectively.

Continued

Topics to be discussed:

• Key Growth Markets for Islamic Investments in 2015

• Sector Focus: Global Investment Opportunities in the

Transportation Sector

• Transaction Roundtable - The Battersea Power Station

Redevelopment Project

• Interview: How will Economic and Geopolitical Events

Shape Investment Trends?

• Global Trends in Islamic Asset Management

• Asset Allocation Strategies and Cross Border Distribution

• Is Crowdfunding the Next Big Thing in Islamic Investing?

• Sector Focus: Where is the Shariah-Compliant Real

Estate Investment Market Headed?

• Sector Focus: What Investment Opportunities

Exist in Global Commodities?

Investor Forum1st April 2015 - Dubai

US Investor Forum2nd April 2015 - Dubai

Global Investment Trends and Outlook for Islamic Financial Markets

Trends, Innovation and Opportunities in Shariah Compliant Investments in the USA

Topics to be discussed:

• Key Markets and Asset Classes in the Americas

• Sector Focus: Opportunities for Shariah Compliant Real Estate Investments in North America

• Panel Session: Attracting Cross Border Investments

• CEO Interview: How will the US Economy Shape the Growth of Islamic Investments in North America?

• Sector Focus: Agriculture Investment in South America

REGISTER FREE NOW atwww.REDmoneyevents.com

SPONSORSMULTILATERAL STRATEGIC PARTNER STRATEGIC EXCHANGE PARTNERLEAD PARTNER

LANYARDS SPONSOREXECUTIVE PARTNERS

27© 4th March 2015

ASSET MANAGEMENT FEATURE

LIQUIDITY MANAGEMENT

By Jassim Mahadik

Sukuk trading remains one of the most widely used options for IFIs for managing their liquidity. The total worth of Sukuk issued globally in the year 2014 was US$116.4 billion, which was 4.58% higher than the issuance in 2013.

It is to be noted that due to an underdeveloped secondary market, most Sukuk buyers have the tendency of buying and holding back the Sukuk until maturity. This propensity results in less availability of liquidity management instruments for IFIs.

In order to address this issue, some central banks and government organizations have taken some initiatives. For example, Central Bank of Bahrain (CBB), Central Bank of Gambia (CBG), Bank Negara Malaysia (BNM), etc, have issued short-term Sukuk with small tenors.

In this regard, CBB issued two types of short-term Sukuk in 2014, namely, Sukuk Ijarah and Sukuk Salam. While Sukuk Ijarah – issued at regular intervals – carried a tenor of six months, the maturity period for Sukuk Salam was three months. Due to the voracious demand, all Sukuk issuances by CBB in 2014 were overwhelmingly oversubscribed. This is a clear indicator that the demand of Sukuk outpaces its supply.

In 2015, CBB has plans to issue 12 tranches of Sukuk Salam and Sukuk Ijarah each, whereby each tranche of Sukuk Salam will be worth BHD36 million (US$94.93 million), whereas, Sukuk Ijarah will be worth BHD20 million (US$52.74 million) per tranche. As usual, CBG continued to issue short-term Sukuk Salam with diff erent maturities (three months, six months and

nine months). BNM issues Malaysian Islamic treasury bills (MITBs) on behalf of the government on a weekly basis with an original maturity of one year. These MITBs are actively traded in the secondary market.

Due to the absence of a developed secondary market for Sukuk trading, the industry is facing a dearth of short-term liquidity management options. In relation to this, commodity Murabahah is the most common liquidity management instrument used by IFIs to facilitate fund transfer between cash surplus and defi cit IFIs. London Metal Exchange remains the most utilized commodity exchange for buying and selling of commodities under the commodity Murabahah arrangement. Dubai Multi Commodities Center (DMCC) came up with an innovative approach to commodity trading for the purpose of conducting commodity Murabahah transactions for Islamic

banks. DMCC reported a 30% increase in member companies in the fi rst quarter of 2014 itself. Noor Bank was the fi rst Islamic bank to conclude a commodity Murabahah transaction on the DMCC platform.

Wakalah deposit is another product used for transfer of funds between IFIs. It is considered to be an alternative to the commodity Murabahah deposits, due to its controversial nature from a Shariah perspective. Under this arrangement, the surplus bank invests in the defi cit bank wherein the defi cit bank acts as the Wakil (investment agent/manager) and charges a fee for managing the investment as per the agreement. The International Islamic Financial Market released a standardized contract for unrestricted Wakalah deposits in 2013.

Islamic liquidity management products – an in-depth lookOne of the major challenges facing Islamic fi nancial institutions (IFIs) is liquidity management. Due to this challenge, IFIs are usually more liquid than conventional fi nancial institutions. The major reason behind this is the fact that IFIs have less liquidity management instruments and avenues to park their liquid assets when compared to their conventional counterparts. JASSIM MAHADIK critically analyzes various Islamic liquidity management products available in the market with a special focus on the year 2014.

Table 1: Sukuk issuances by IILM in 2014

Date Issuance/Re-issuance Tenor Value Yield

20th Jan 2014 Issuance Three months

US$860 million 0.56%

25th Feb 2014 Re-issuance Three months

US$490 million 0.55%

17th April 2014 Re-issuance Three months

US$860 million 0.53%

22nd May 2014 Re-issuance Three months

US$490 million 0.52%

17th July 2014 Re-issuance Three months

US$860 million 0.52%

25th August 2014 Issuance

Three months

US$390 million 0.52%

Six months US$400 million 0.73%

Total: US$790 million

20th October 2014 Re-issuance Three months

US$860 million 0.51%

25th November 2014 Both Three

months

US$390 million re-issuance

0.53%

US$200 million new issuance

*The data has been extracted from diff erent press releases by IILM available on its website.

continued...

28© 4th March 2015

ASSET MANAGEMENT FEATURE

Inter-bank Mudarabah is another product used for liquidity management purposes wherein the surplus Islamic bank places funds with the defi cit bank. This instrument is prominent in the Malaysian Islamic inter-bank market.

Many central banks provide Shariah compliant lending and borrowing facilities. For instance, the Central Bank of the UAE off ers Islamic certifi cates of deposit which are again based on the principle of commodity Murabahah. It also off ers borrowing facilities through a product ‘collateralized Murabahah’. BNM also off ers similar types of products.

All the abovementioned liquidity management instruments are mostly used in their respective domestic markets. Even the short-term Sukuk are issued with the main objective of providing liquidity management instruments for their domestic Islamic banks. However, International Islamic Liquidity Management Corporation (IILM) was established in October 2010 by central banks, monetary authorities

and multilateral organizations specifi cally in order to create and issue short-term fi nancial instruments for facilitating cross-border Islamic liquidity management. IILM played a comparatively much wider role by issuing some short-term Sukuk. Table 1 lists the Sukuk issuances by IILM in 2014 and related information to the same.

There is a lack of availability of internationally recognized and widely accepted instruments for liquidity management in Islamic fi nancial institutions. Most of the instruments and facilities are mostly concentrated in the domestic spheres. However, the recent initiative by IILM seems promising, despite the fact that the number of products and the frequency of issuance is still inadequate and defi nitely needs to be increased in order to meet the industry demand.

Jassim Mahadik is the project manager at Al Maali Consulting Group. He can be contacted at j.mahadik@almaaligroup.com.

Continued

The recent initiative

by IILM seems promising, despite the fact that the number of products and the frequency of issuance is still inadequate and de initely needs to be increased in order to meet the industry demand

Maximizing opportunities for Islamic banking, Sukuk and Takaful in IndonesiaTopics to be discussed:

• Gameplan for 2015: Growth Strategies for Indonesia's Islamic Financial Institutions

o Widening customer base: MSME financing, microTakaful, Islamic cooperatives and rural banks

o Consolidation of the state-owned Islamic banks: what does it mean to the market players?

o New Insurance Law: The effect on full-fledged Takaful operators and the effects on Takaful

windows

• Regulators Roundtable: Indonesia's Blueprint for Islamic Finance Development

o Advancing from a sub-segment of Indonesia’s banking landscape to effectively competing with

conventional banks: What needs to be done by Islamic banks and regulatory bodies?

o Strengthening Islamic finance services industry regulation, governance and supervision through

a centralized model

o Recent regulatory and taxation changes relevant to Islamic finance in Indonesia, and what they

really mean for investors

• Deal Dialogue: Indosat - Indonesia's First Shelf-Registered Sukuk Issuance

• The Islamic Investment Landscape: Market Trends and Strategies for 2015

o Risk vs. Opportunity: Understanding the risks and impact on the Islamic asset management

industry

o The changing face of the institutional investment market: Discussing investment strategies and

product trends for 2015

o Capitalizing on key advantages in the real estate and property sector

• Attracting Inward Investment and Cross Border Collaborationo Recent regulatory changes: Key issues and concerns facing foreign investors

o Investment mandates and options for Takaful funds: effectively managing investment risk and

maximizing returns

o ASEAN Banking Integration Framework: Encouraging bilateral and multilateral trade and

cross-border investment

REGISTER FREE NOW atwww.REDmoneyevents.com

Indonesia Forum22nd April 2015 - Shangri-La Hotel, Jakarta

MULTILATERAL STRATEGIC PARTNER ASSOCIATE PARTNERS

LANYARDS SPONSOREXECUTIVE PARTNERS

29© 4th March 2015

NEWS

DEALSIDB to issue benchmark SukukSAUDI ARABIA: The IDB has selected nine banks to arrange investor meetings in the Middle East and Asia and was scheduled to meet fi xed income investors on the 1st March 2015 ahead of a potential benchmark US dollar-denominated Sukuk transaction, reported Reuters. The banks are: CIMB, Dubai Islamic Bank, GIB Capital, HSBC, Natixis, NCB Capital, National Bank of Abu Dhabi, RHB Islamic Bank and Standard Chartered. The Sukuk will be auctioned subject to market conditions.

BNM’s GII MurabahahMALAYSIA: Bank Negara Malaysia (BNM) in an announcement on its website auctioned RM4 billion (US$1.11 billion) in government investment issues. The paper is structured according to the Murabahah principle and carries a tenor of fi ve years maturing on the 27th August 2020.

GIAA to tap global Sukuk marketINDONESIA: Indonesia’s fl ag carrier Garuda Indonesia (GIAA) plans to issue a US$500 million global Sukuk this year, making its way to becoming the fi rst Indonesian corporate to tap the international Sukuk market, according to The Jakarta Post. Quoting the airline’s chief fi nancial offi cer, I Gusti Ngurah Askhara Danadiputra, the off ering will most likely be executed mid-April and will be listed in the Middle East as the company seeks to att ract Middle Eastern investors. GIAA secured a US$400 million bridge loan from Dubai Islamic Bank and National Bank of Abu Dhabi which will function as a ‘back stop facility’ to the Sukuk issuance.

IILM’s Sukuk oversubscribedMALAYSIA: International Islamic Liquidity Management Corporation

(IILM) has concluded the auctions of two Sukuk programs, according to a statement on Bank Negara Malaysia’s website. Its six-month US$500 million facility received US$1.12 billion in bids while its three-month US$490 million paper garnered US$1 billion in bids. The papers carry profi t rates of 0.79% and 0.56% respectively.

GFH eyes SukukBAHRAIN: Gulf Finance House (GFH) intends to auction a US$230 million Sukuk issue this year to fund acquisitions of two to three regional companies, according to Reuters. Shareholders granted approval to GFH in April last year to raise up to US$500 million via convertible Sukuk to help fund its expansion plans and service debt. However, the Sukuk issuance is up for re-evaluation if oil prices remain weak over the long-term.

Weststar’s early Sukuk redemptionMALAYSIA: Weststar Capital in a statement to Bursa Malaysia announced that it conducted an early redemption of its total outstanding RM900 million (US$250.25 million) Sukuk Mudarabah on the 27th February 2015.

QIIB postpones meetingQATAR: Qatar International Islamic Bank (QIIB) according to an announcement to the Qatar Stock Exchange has decided to postpone its Ordinary General Assembly meeting on the 15th March 2015. In the absence of the required quorum, a second meeting will be conducted on Wednesday the 25th March 2015. One of the agendas that will be discussed during the meeting is the approval of the board’s recommendation to issue Additional Tier 1 Sukuk (non-convertible into ordinary shares) of up to QAR3 billion (US$823.18 million), and delegate the bank’s board of directors to decide the size of each issuance, terms and conditions and issuance currency.

Khazanah’s social impact SukukMALAYSIA: Khazanah Nasional has revealed plans to issue Sukuk of up to RM1 billion (US$278.05 million) to fund schools, reported Reuters. The planned ‘social impact Sukuk’ is currently awaiting approval from the country’s fi nancial regulators. The Sukuk is reportedly aimed at opening funding for education to a broad pool of investors rather than fi nancing it out of its own reserves.

QIB plans Tier 1 SukukQATAR: Qatar Islamic Bank (QIB) in an announcement on its website conveyed that its shareholders have approved the issuance of up to QAR5 billion (US$1.37 billion) of Tier 1-boosting Sukuk. According to the statement, the Sukuk would be structured in compliance with the Basel III and Qatar Central Bank capital adequacy requirements. The fi nal amount of the Sukuk will be decided by the board at a later date.

IDB cancels facilityMALAYSIA: The IDB has cancelled the RM300 million (US$83.42 million) trust certifi cates under its RM1 billion (US$278.05 million) trust certifi cate issuance program following its purchase of all outstanding trust certifi cates, according to an announcement to the central bank by the program’s facility agent, Standard Chartered Bank.

Oman’s impending SukukOMAN: The Central Bank of Oman plans to make the country’s fi rst sovereign Sukuk issue worth OMR200 million (US$517.58 million) by mid-2015, reported Reuters. According to the newswire, the Sukuk is aimed at helping fi nance a budget defi cit caused by the plunge of oil prices. To be issued through the central bank for the local market, the paper is also believed to boost Oman’s Islamic banking industry, giving it a pricing benchmark and a liquidity management tool.

DEAL TRACKER Full Deal Tracker on page 34EXPECTED DATE COMPANY’S NAME SIZE STRUCTURE ANNOUNCEMENT

DATEMid-2015 Central Bank of Oman OMR200 million Sukuk 2nd March 2015TBA Khazanah Nasional RM1 billion Sukuk 27th February 20152015 Gulf Finance House US$230 million Sukuk 26th February 20152015 Garuda Indonesia US$500 million Sukuk 25th February 2015TBA IDB TBA Sukuk 25th February 2015

30© 4th March 2015

NEWS

AFRICASKCB receives approval for Islamic windowKENYA: Kenya Commercial Bank (KCB) has received necessary approvals from the National Treasury to set up an

Islamic banking window, reported The Business Daily. KCB’s Islamic banking products according to the report will also be available in Tanzania, targeting Muslims and non-Muslims as well as the unbanked population in both markets.

Afriland sets targetCAMEROON: According to news portal

Business In Cameroon, Afriland First Bank expects to achieve XOF3 billion (US$5.19 million) in Islamic checking accounts for its recently-launched Islamic banking window. Quoting Youssoufa Bouba, the bank’s director of specialized fi nance, the bank also intends to extend XOF2 billion (US$3.46 million) in Shariah compliant fi nancing this year.

AMERICASSEDCO acquires US real estateUS: Shariah compliant SEDCO Capital, together with US commercial real estate investment and operating company Madison Marquett e, in a press release announced the acquisition of Coral Landings III, a 176,575 square feet, neighborhood retail center in Coral

Springs/Margate, Florida. Said to be the fi rst in a programmatic joint venture that will target high-value retail, offi ce, mixed-use and multi-family assets in the US markets, Coral Landings III is located in the heart of one of Broward County’s most highly traffi cked retail hubs and off ers convenient access to over 90,000 vehicles daily at the intersection of US-441 and West Sample Road.

ASIATrowers & Hamlins eyes Malaysian licenseMALAYSIA: According to The Lawyer.com, UK fi rm Trowers & Hamlins has become the fi rst company to apply for Malaysia’s fi ve qualifi ed foreign law fi rm licenses issued to fi rms with proven expertise in international Islamic fi nance. The outcome of its application is expected this month, while Allen & Overy and Norton Ruse Fulbright are also anticipated to follow suit.

BSM outlines growth plansINDONESIA: Bank Syariah Mandiri (BSM) is targeting double-digit expansion in its fi nancing and funding portfolios this year; 14-16% for fi nancing and 10-12% for third-party deposits, reported The Jakarta Post. According to the local daily, the Islamic fi nancier is expecting the retail segment to drive growth in the next two-three years, accounting for 75% of its total fi nancing in 2018 with the remaining 25% from the wholesale segment.

The bank is also looking to grow its involvement in the Islamic capital market by managing more Sukuk and Shariah mutual funds as it hopes to grow its Shariah portfolio to IDR2.7 trillion (US$216 million) within the next 10 months from IDR1.8 trillion (US$144 million) in January. With that in mind, the bank intends to directly manage

the next Sukuk off ering, instead of going through its parent company Bank Mandiri.

This growth plan was announced on the back of poor performance in 2014 in which the non-performing fi nancing ratio reached 6.8% exceeding the 5% benchmark set by regulators, leading to an 89% decline in net profi t to IDR71.78 billion (US$5.74 million).

Japan explores possibility of Islamic inanceJAPAN: The Financial Services Agency (FSA) is considering relaxing its rules to allow banks to provide Islamic fi nancial products in the domestic market, according to Reuters. The regulator has requested for public comments on the matt er and would later present results of the consultation at the end of April.

Bank Islam-MBSB tie-up?MALAYSIA: Following the collapse of the tripartite merger between Malaysia Building Society (MBSB), CIMB Group and RHB Capital, rumors have circulated that a merger plan is now being fl oated between MBSB and Bank Islam Malaysia at the shareholder level of both companies, according to local newspaper The Star. The interest for both parties to go into a corporate exercise was fi rst explored early last year. However, by the time any formal move could be taken, CIMB Group had already entered the fray to initiate the proposed merger

between MBSB and RHB Capital. As the tripartite merger fell through, the plan is reportedly being revisited but is still at preliminary stages.

Maybank to become top Islamic lender in IndonesiaINDONESIA: Malaysia’s Maybank Islamic expects its Shariah banking units (UUS of Bank International Indonesia and Maybank Shariah Indonesia) to become Indonesia’s top-fi ve largest Islamic banking operations by the end of this year, reported The Jakarta Post quoting the bank’s chairman Megat Zaharuddin. This expectation is driven by the positive performance of the bank’s Islamic units.

EUROPEGatehouse to launch new brandUK: Shariah compliant Gatehouse Bank informed IFN that the fi rst tenants are moving into the fi rst completed new homes under its private rented sector (PRS) joint venture with residential and urban regeneration specialist Sigma. Concurrently, the bank confi rmed that together with Direct Lett ings (the manager of lett ings on behalf of Sigma) they will be launching a dedicated lett ing brand, DifRent, which will support the Sigma/Gatehouse PRS platform and will be used for the rental of all units.

Receive all the latest news via the No.1

Islamic fi nance based feed

31© 4th March 2015

NEWS

GLOBALUAE and Lux explore Islamic banking cooperationGLOBAL: The UAE’s minister of state for fi nancial aff airs, Obeid Humaid Al-Tayer, met with Luxembourg’s fi nance minister,

Pierre Gramegna, on the 3rd March to further discuss cooperation frameworks between the two countries as well as the activation of the memorandum of understanding in the fi eld of Islamic banking, according to a press release.

MIDDLE EASTADCB’s home inance offerUAE: ADCB Islamic Banking has signed an agreement with Sharjah Holding to provide a home fi nancing scheme for customers, according to a press release. The agreement will provide customers looking to purchase property in Al Zahia (Sharjah’s fi rst integrated mixed-use gated community) an opportunity to avail special home fi nance terms through ADCB Islamic Banking.

GFC widens reachUAE: Gulf Finance Corporation (GFC), a wholly-owned subsidiary of SHUAA Capital which provides funding solutions to SMEs, is expanding its healthcare and medical fi nancing off ering. According to a press release on its website, GFC’s newly launched platform will allow SMEs in the healthcare sector access to aff ordable fi nancing in one of the fastest-growing sectors in the UAE. The product suite will include term loans, fi nance leases, and working capital fi nance. Additional services such as fi nancial planning and technical assistance will also be made available to help businesses develop and invest appropriately.

Muzn expandsOMAN: Muzn Islamic Banking, the Islamic banking arm of National Bank of Oman, has opened a new branch in Sohar, according to local news portal Times of Oman. The branch will serve all Islamic banking customers in Sohar and the surrounding areas, providing a complete range of Shariah compliant products and services.

GFH appeals against suspensionBAHRAIN: The Capital Market Authority (CMA) of Kuwait on the 22nd February suspended the shares trading of Gulf Finance House (GFH) for not disclosing its ownership percentage in

a notifi cation regarding the intended exit of a London residential property project. In response to that, GFH in a notice to the Bahrain Bourse, announced that it intends to appeal against the CMA’s decision, and will proceed with fi ling a case in Kuwait’s Market Court to nullify the decision should the appeal be rejected as it believes that the notifi cation fi led was fair and transparent and in line with market disclosure standards.

SIB opens new Abu Dhabi premiseUAE: Sharjah Islamic Bank (SIB) in a press release announced the launch of its latest branch in Abu Dhabi. The new branch, located in the heart of Mussafah, Abu Dhabi’s biggest industrial area, is easily accessible and has many parking facilities. It will meet the demands of its customers including residents, employees and business people in a move that is in line with the bank’s expansion plans to increase its presence throughout the UAE.

In separate press release, SIB’s board of directors have approved a cash dividend worth AED242.6 million (US$66.05 million), at 10% of the nominal share value, following the approval of the UAE Central Bank.

Amlak Finance-Tanmiyat Global collaborationUAE: Shariah compliant home and real estate fi nance provider, Amlak Finance has signed an MoU with Tanmiyat Global, an investment and real estate development fi rm based in Dubai to provide mortgage services for the latt er’s Living Legends development project, reported CPI Financial. The deal covers current and future clients at Living Legends, as well as Tanmiyat’s other development projects. Amlak Finance will off er up to 50% of the mortgage before handover with the option to re-fi nance up to 75% upon completion,

in line with the UAE’s central bank regulations.

SEWA secures Ijarah facilityKUWAIT: Sharjah Electricity & Water Authority (SEWA) has secured a US$500 million syndicated Ijarah facility, guaranteed by the government of Sharjah, according to an offi cial statement by Kuwait Finance House, who along with GIB Capital are the transaction’s fi nancial advisors. The fi ve-year facility was arranged by ABC Islamic Bank, Barwa Bank, Gulf International Bank (GIB) and Sharjah Islamic Bank, who all acted as joint lead arrangers.

Warba Bank expands product suiteKUWAIT: Shariah compliant Warba Bank on the 2nd March launched its Investment Saving Account, returning competitive quarterly profi ts to clients.

DIB distributes dividendUAE: Following the conclusion of its annual general meeting, Dubai Islamic Bank (DIB) in a press release announced the approval of a 40% cash dividend distribution for 2014, a 60% increase from the previous year.

ASSETMANAGEMENTDIB sells stake in Emirates REITUAE: Dubai Islamic Bank (DIB)’s 25% stake in Shariah compliant Emirates REIT has been purchased by Eiff el Management for an undisclosed amount, according to a press release. As a result, Eiff el Management now owns 100% of Emirates REIT Management’s total issued share capital.

Are you receiving our dailyIFN Alerts?

The Number ONE news service with over 20,000 registered daily readers

No.

32© 4th March 2015

NEWS

RESULTSAl Madina TakafulOMAN: Al Madina Takaful approved its fi nancial statements for the year ended the 31st December 2014 which recorded a consolidated post-tax net profi t of OMR1.02 million (US$2.64 million), less than half of the OMR2.34 million (US$6.06 million) registered the previous year. According to an announcement to the Muscat Securities Market, the fi rm’s Family Takaful business reported a net loss of OMR167,150 (US$432,695) while its General Takaful operations realized OMR173,104 (US$448,108) in net profi t.

Amãna Bank SRI LANKA: Islamic fi nancier Amãna Bank managed to reduce its pre-tax loss for 2014 to LKR80.3 million (US$590,259), as compared to negative earnings of LKR438 million (US$3.22 million) made the previous year, the bank informed IFN. This improvement was driven by the bank’s profi table last quarter of 2014, a profi t of LKR88.5 million (US$650,534) before tax. Total assets accrued by 49% to LKR34.9 billion (US$256.54 million).

ABC Islamic BankBAHRAIN: ABC Islamic Bank in a press release disclosed a net profi t of US$15.1 million for 2014, registering a 23% growth against the previous

year. Total assets at the end of the 31st December 2014 stood at US$1.33 billion, as compared to US$1 billion at the end of 2013.

Takaful International CompanyBAHRAIN: Takaful International Company made an operational loss of BHD859,271 (US$2.27 million) for the 2014 fi nancial year att ributed to major claims during the year, according to its latest annual report.

Maybank IslamicMALAYSIA: Maybank Islamic recorded a 9.2% year-on-year growth in profi t before tax to RM1.61 billion (US$445.4 million) in 2014 with total income for the year reaching 16.4% higher at RM3.27 billion (US$904.63 million), driven by stronger contributions from international markets, according to a press release. The bank’s parent, Maybank, registered a 2.5% increase in group net profi t during the period, standing at RM6.72 billion (US$1.86 billion).

Sharjah Islamic BankUAE: Sharjah Islamic Bank’s latest annual report shows that the bank’s profi t for the year 2014 (att ributable to its equityholders) stood at AED377.17 million (US$102.67 million), as compared to AED307.07 million (US$83.59 million) the year before. Total assets were up to

AED26.01 billion (US$7.08 billion), from the previous year’s AED21.73 billion (US$5.92 billion).

Arab Banking Corporation BAHRAIN: Arab Banking Corporation disclosed in a press release, a consolidated group net profi t of US$256 million for the 2014 fi nancial year, marking a 7% growth from the year before. Total assets were up 11% to US$29.4 billion as at the end of 2014, with the asset book remaining primarily short-term (59% of assets were of less than one year tenor).

United Gulf BankBAHRAIN: United Gulf Bank in a press release revealed a net consolidated profi t of US$1.8 million in 2014, lower than the US$4.2 million gained the previous year. Net profi t att ributable to shareholders of the parent (KIPCO Group) stood at US$18.8 million, marking a 623.07% surge from 2013 fi gures. Total assets for the year 2014 stood at US$2.78 billion, as compared to US$1.26 billion in 2013.

BLMEUK: Shariah compliant BLME Holdings reported a 55% increase in 2014 profi t to GBP6.7 million (US$10.4 million) from the year before while total assets were up 13% to GBP1.4 billion (US$2.2 billion) as at the end of 2014, according to a press release.

TAKAFULAvicennia targets Turkey’s Takaful marketMALAYSIA: Khazanah Nasional’s insurance unit Avicennia is looking to develop Takaful in Turkey as well as build best practices in Malaysia,

reported StarBiz quoting Avicennia CEO Alexander Ankel. The operator is targeting to invest in Malaysia, Indonesia, the Philippines, Singapore and Thailand.

Doga eyes Takaful businessTURKEY: Doga Group is looking to tap the Takaful market, reported Reuters. Quoting the company’s insurance unit

(Doga Sigorta)’s chairman Nihat Kirmizi, it is said that the operator is close to signing a cooperation agreement with Swiss Re as well as other reassurance companies from the Gulf and Malaysia. Kirmizi also said that the fi rm has received verbal permits from the Treasury and will be ready by May. He added that at least three other operators are planning to launch Islamic insurance operations by 2018.

IFN ONLINE DIRECTORYOver 4,000 individual companies directly involved in the Islamic fi nance industry

33© 4th March 2015

NEWS

RATINGSJIB reaf irmed at ‘AA’JODRAN: Jordan Islamic Bank (JIB)’s Shariah quality rating of ‘AA’ has been reaffi rmed by Islamic International Rating Agency, the latt er informed IFN.

Emaar Properties’s ratings af irmedUAE: Moody’s has in a statement changed to positive from stable the outlook on the ‘Ba1’ corporate family rating and the ‘Ba1-PD’ probability of default rating of Emaar Properties. At the same time, Moody’s affi rmed all ratings including the ‘Ba1’ ratings for the two Sukuk issued under Emaar Sukuk. The outlook on all ratings is positive, refl ecting the improving sentiments on Emaar’s operations as well as a disciplined approach to capital expenditure during the recent market up-cycle.

Albaraka Turk obtains ratingsTURKEY: The Islamic International Rating Agency (IIRA) in a statement has assigned a foreign currency rating of ‘BB+/A3’ and a local currency rating

of ‘BBB-/A3’ on the international scale to Albaraka Turk. IIRA also assigned a national scale rating of ‘AA-(tr)/A1(tr)’ to the Turkish participation bank. The assigned ratings have also been given a stable outlook.

Omani banks receive negative outlookOMAN: Moody’s has in a statement revised the outlook from stable to negative on the ‘A1’ senior unsecured debt and deposit ratings of Bank Muscat, the ‘A2’ deposit ratings of Oman Arab Bank and the ‘A3’ deposit ratings of Bank Dhofar, National Bank of Oman and HSBC Bank Oman. All bank ratings were affi rmed. The negative outlook on the banks’ deposit ratings is driven by Moody’s assessment that the government’s capacity to support the banks is weakening, as implied by the recent change in outlook on the government bond rating to negative from stable.

Stable outlook for Saudi ArabiaSAUDI ARABIA: Fitch in a statement has affi rmed Saudi Arabia’s long-term foreign and local currency issuer default ratings (IDRs) at ‘AA’, with

stable outlooks. The country ceiling has been accorded an ‘AA+’ rating while its short-term foreign currency IDR is affi rmed at ‘F1+’. The affi rmation refl ects Saudi Arabia’s substantial external and fi scal buff ers as a key support for the ratings in an environment of lower oil prices. Sovereign net foreign assets have declined since reaching an all-time high of around 114% of GDP at end-August and are expected to be drawn down over 2015 and 2016.

SPRINT’s Islamic certi icates ratings af irmedMALAYSIA: MARC has affi rmed ‘A+ID’ ratings on Sistem Penyuraian Trafi k KL Barat (SPRINT)’s RM510 million (US$141.08 million) Bai Bithaman Ajil Islamic debt securities (BaIDS), with a stable outlook according to a press release. The ‘A+’ rating on the BaIDS is underpinned by the adequacy of SPRINT’s actual and projected cash fl ow from its relatively matured highways to meet debt service obligations. Constraining the rating on the BaIDS are SPRINT’s signifi cant reliance on timely government toll compensations in lieu of toll hikes and aggressive debt repayment schedule from 2017 onwards.

MOVESSGXSINGAPORE: Magnus Bocker, CEO of the Singapore Exchange (SGX), has notifi ed the SGX board of directors that he is not seeking an extension of his appointment beyond his current contract, which will be completed on the 30th June 2015, according to an announcement on the bourse’s website. The board is moving forward with its CEO succession plan and is assessing internal and external candidates on a shortlist. Bocker has been the CEO of the SGX since the 1st

December 2009.

Al Salam Bank Bahrain BAHRAIN: In a bourse announcement, Al Salam Bank Bahrain confi rmed the constitution of its board of directors following an election held at its recent annual general meeting. The Islamic bank’s board now consists of: Shaikha Hessa Khalifa Al Khalifa, Shaikh Khalid Mustahail Al Mashani, Mohamed Ali Alabbar, Hussain Mohammed Al Meeza, Essam

Abdulkadir Al Muhaidib, Salman Saleh Al Mahmeed, Sulaiman Mohammed Al Yahyai, Hisham Saleh Al Saie, Mohammed Ghanem, Khalid Al Halyan and Yousif Abdullah Taqi.

EIIBUK: European Islamic Investment Bank (EIIB) according to Alliance News has appointed Neil McDougall as its interim fi nance director. The company has continued the search for a fi nance director after the appointment of Michael Warren Kidd, the chief operating offi cer of its majority-owned Rasmala Investment Bank and head of strategy and principal investment at EIIB, fell through in July 2014.

Allen & GledhillSINGAPORE: Allen & Gledhill in a statement announced the return of Lee Kim Shin as managing partner of the fi rm in March 2015. Lee was managing partner of Allen & Gledhill between the 1st August 2012 and the 31st December 2013. He served as a judicial commissioner of the Singapore High

Court from the 2nd January 2014 to the 1st

January 2015.

Barwa Real Estate GroupQATAR: Barwa Real Estate Group has appointed Salman Mohamad Amad Al Hasan Al Muhannadi as group CEO eff ective the 1st March 2015, according to a bourse fi ling. Salman was previously CEO of QNB Capital.

Maybank InvestmentMALAYSIA: Maybank Investment Bank has named Fad’l Mohamed as its deputy CEO, reported BERNAMA. Fad’l was previously the managing director of corporate fi nance advisory fi rm Maestro Capital.

34© 4th March 2015

DEAL TRACKER

Expected date Company's name Size Structure Announcement DateMid-2015 Central Bank of Oman OMR200 million Sukuk 2nd March 2015

TBA Khazanah Nasional RM1 billion Sukuk 27th February 2015

2015 Gulf Finance House US$230 million Sukuk 26th February 2015

2015 Garuda Indonesia US$500 million Sukuk 25th February 2015

TBA IDB TBA Sukuk 25th February 2015

TBA Qatar Islamic Bank QAR5 billion Sukuk 23rd February 2015

11th March 2015 Government of Indonesia IDR5 billion Sukuk 23rd February 2015

TBA Al Baraka Bank TBA Sukuk 17th February 2015

18th February 2015 Turkish Treasury TRL1.8 billion Sukuk Ijarah 17th February 2015

TBA Government of Malaysia TBA Sukuk 16th February 2015

2016 Government of South Africa TBA Sukuk 13th February 2015

3rd quarter 2015 SGI-Mitabu AU$150 million Sukuk 13th February 2015

TBA Petroliam Nasional (Petronas) US$ 7 billion Sukuk 12th February 2015

TBA Abu Dhabi Islamic Bank TBA Sukuk 11th February 2015

TBA Qatar International Islamic Bank QAR3 billion Sukuk 10th February 2015

10th February 2015 Government of Indonesia IDR2 trillion Sukuk 5th February 2015

TBA BNI Syariah IDR500 billion Sukuk 3rd February 2015

TBA K-Electric PKR22 billion Sukuk 3rd February 2015

6th February 2015 Bank Negara Malaysia US$100 million Islamic Treasury Bills 2nd February 2015

TBA Emirates Airline US$1 billion Sukuk 30th January 2015

TBA Qatar Islamic Bank QAR2 billion Sukuk 19th January 2015

1st quarter 2015 Bank Islami Pakistan PKR3.5 billion Sukuk 15th January 2015

TBA Pakistan Mobile Communications (Mobilink)

PKR6.9 billion Sukuk 14th January 2015

2015 International Bank of Azerbaijan TBA Sukuk 13th January 2015

3rd quarter 2015 Government of Tunisia US$500 million Sukuk 13th January 2015

Feb-15 Government of Jordan TBA Sukuk 6th January 2015

TBA Turkiye Finans TRY71 million Sukuk 5th January 2015

TBA Turkiye Finans TRY143 million Sukuk 5th January 2015

2015 Government of Indonesia IDR7.14 trillion Sukuk 15th December 2014

TBA UniTapah RM600 million Sukuk 9th December 2014

Apr-15 Government of Indonesia IDR20 trillion Sukuk 4th December 2014

H2 2015 Government of Indonesia TBA Sukuk 3rd December 2014

2015-16 Government of Kenya TBA Sukuk 2nd December 2014

TBA KPJ Healthcare RM1.5 billion Sukuk 28th November 2014

TBA ICD US$1.2 billion Sukuk 27th November 2014

Q2 2015 Khazanah Nasional TBA Sukuk 26th November 2014

2nd December 2014 Indosat IDR2.5 trillion Sukuk + conventional 13th November 201418th November 2014 Government of Turkey TRY1.84 billion Sukuk 30th September 20142014 Adira Dinamika Multi Finance IDR1.5 trillion Sukuk 2nd July 20142014 Bank Islam Malaysia Up to RM1 billion Sukuk 2nd June 20142H 2014 Felda Global Ventures Holdings US$1 billion Exchangable Sukuk 22nd May 2014Nov-14 1MDB RM8.4 billion Sukuk 9th October 2014Nov-14 Government of Tunisia US$140 million Sukuk 7th February 2014Q1 2015 Meethaq Up to OMR500 million Sukuk 5th May 2014pre-2015 Government of Indonesia IDR6.4 trillion Sukuk 18th August 20142015 International Finance Corp TBA Sukuk 17th June 2014Q1 2015 Government of Oman OMR300-400 million Sukuk 27th October 2014Q1 2015 Etisalat US$500 million Sukuk 13th October 2014Q2 2015 Export-Import Bank of Malaysia US$200-300 million Sukuk 12th November 20142016 Government of the Philippines TBA Sukuk 26th May 2014TBA Turkiye Finans Katilim Bankasi TRY71 million Sukuk 25th November 2014

35© 4th March 2015

SHARIAH INDEXES

SAMI Halal Food Participation (All Cap) 6 months

REDmoney Asia ex. Japan 6 Months REDmoney Europe 6 Months

REDmoney GCC 6 Months REDmoney Global 6 Months

REDmoney MENA 6 Months REDmoney US 6 Months

1700

1780

1860

1940

2020

2100

Mar-2015Feb-2015Jan-2015Dec-2014Nov-2014Oct-2014

All Cap Large Cap Medium Cap Small Cap

650

830

1010

1190

1370

1550

MarFebJanDecNovOct800

880

960

1040

1120

1200

MarFebJanDecNovOct

All Cap Large Cap Medium Cap Small Cap

500

660

820

980

1140

1300

MarFebJanDecNovOct

All Cap Large Cap Medium Cap Small Cap

680

864

1048

1232

1416

1600

MaFebJanDecNovOct

All Cap Large Cap Medium Cap Small Cap

500

630

760

890

1020

1150

MarFebJanDecNovOct

All Cap Large Cap Medium Cap Small Cap

800

1090

1380

1670

1960

2250

MarFebJanDecNovOct

All Cap Large Cap Medium Cap Small Cap

36© 4th March 2015

SHARIAH INDEXES

For further information regarding REDmoney Indexes contact:

Andrew MorganManaging Director, REDmoney Group

Email: Andrew.Morgan@REDmoneygroup.comTel +603 2162 7800

RED

REDmoney Global Shariah Index Series

REDmoney Global Shariah Index Series (All Cap) 6 Months REDmoney Global Shariah Index Series (Large Cap) 6 Months

REDmoney Global Shariah Index Series (Medium Cap) 6 Months REDmoney Global Shariah Index Series (Small Cap) 6 Months

Utilities2%Telecomunication Services

2%

Technology14%

Basis Materials15%

Non-CyclicalConsumer Goods Services

7%

Energy8%

Financials4%

Healthcare11%

Industrials22%

Consumer Goods Services15%

REDmoney Global Shariah

Equities are considered eligible for inclusion into the REDmoney Global Shariah Index Series only if they pass a series of market related guidelines related to minimum market capitalization and liquidity as well as country restrictions.

Once the index eligible universe is determined the underlying constituents are screened using a set of business and fi nancial Shariah guidelines.

The REDmoney Global Shariah Index Series powered by IdealRatings consists of a rich subset of global listed equities that adhere to clearly defi ned and transparent Shariah guidelines defi ned by Shariyah Review Bureau in Jeddah, Saudi Arabia.

The REDmoney Shariah Indexes provides Islamic investors with an accurate and Shariah-specifi c equity performance benchmark with optimized compliance credibility due to the intensive research conducted to ensure that index constituents do not confl ict with the defi ned Shariah requirements.

IdealRatings™ is the leading provider of Shariah investment decision support tools to investors globally, including asset managers, brokers, index providers, and banks to empower them to develop, manage and monitor Shariah investment products and Shariah compliant funds. IdealRatings is headquartered in San Francisco, California. For more information about IdealRatings visit: www.idealratings.com

REDmoney Asia ex. Japan REDmoney Europe REDmoney GCC

REDmoney Global REDmoney MENA REDmoney US

550

720

890

1060

1230

1400

MarFebJanDecNovOct450

620

790

960

1130

1300

MarFebJanDecNovOct

REDmoney Asia ex. Japan REDmoney Europe REDmoney GCC

REDmoney Global REDmoney MENA REDmoney US

500

850

1200

1550

1900

2250

MarFebJanDecNovOct

REDmoney Asia ex. Japan REDmoney Europe REDmoney GCC

REDmoney Global REDmoney MENA REDmoney US

500

800

1100

1400

1700

2000

MarFebJanDecNovOct

REDmoney Asia ex. Japan REDmoney Europe REDmoney GCC

REDmoney Global REDmoney MENA REDmoney US

37© 4th March 2015

FUNDS TABLES

Comprehensive data from Eurekahedge will now feature the overall top 10 global and regional funds based on a specifi c duration (yield to date, annualized returns, monthly returns), Sharpe ratio as well as delve into specifi c asset classes in the global arena – equity, fi xed income, money market, commodity, global investing (which would focus on funds investing with global mandate instead of a specifi c country or geographical region), fund of funds, real estate as well as the Sortino ratio. Each table covering the duration, region, asset class and ratio will be featured on a fi ve-week rotational basis.

Eurekahedge Middle East/Africa Islamic Fund Index

Top 10 Monthly Returns for Asia Pacifi c Funds

Fund Fund Manager Performance Measure Fund Domicile

1 Pakistan International Element Islamic Asset Allocation

Arif Habib Investment Management 10.68 Pakistan

2 Al-Ameen Shariah Stock UBL Fund Managers 9.95 Pakistan

3 Atlas Pension Islamic - Equity Sub Atlas Asset Management 9.61 Pakistan

4 Meezan Tahaff uz Pension - Equity Sub Al Meezan Investment Management 9.35 Pakistan

5 Atlas Islamic Stock Atlas Asset Management 9.29 Pakistan

6 Meezan Islamic Al Meezan Investment Management 8.30 Pakistan

7 Al Meezan Mutual Al Meezan Investment Management 7.97 Pakistan

8 JS Islamic JS Investments 7.41 Pakistan

9 RHB-OSK Dana Islam RHB Asset Management 6.90 Malaysia

10 Taurus Ethical B Taurus Asset Management 6.85 India

Eurekahedge Islamic Fund Index 2.51

Top 10 Monthly Returns for Middle East/Africa Funds

Fund Fund Manager Performance Measure Fund Domicile

1 Saudi Companies The Saudi Investment Bank 8.19 Saudi Arabia

2 Al Yusr Aman Multi Asset Saudi Hollandi Bank 7.57 Saudi Arabia

3 FALCOM Saudi Equity FALCOM Financial Services 6.98 Saudi Arabia

4 Amanah Saudi Industrial SABB 6.97 Saudi Arabia

5 Al Rajhi Local Shares Al Rajhi Bank 6.77 Saudi Arabia

6 Banque Misr No. 4 HC Securities & Investment 6.47 Egypt

7 Al-Mubarak Pure Saudi Equity Arab National Bank 5.67 Saudi Arabia

8 Riyad Equity 2 Riyad Bank 5.49 Saudi Arabia

9 Al Rajhi GCC Equity Al Rajhi Bank 5.45 Saudi Arabia

10 Osool & Bakheet Saudi Trading Equity Bakheet Investment Group 4.60 Saudi Arabia

Eurekahedge Islamic Fund Index 1.53

Based on 99.23% of funds which have reported January 2015 returns as at the 2nd March 2015

Based on 84.72% of funds which have reported January 2015 returns as at the 2nd March 2015

Inde

x Va

lues

95

115

135

155

175

195

215

235

255

Dec

-99

Apr

-01

Jul-0

2

Oct

-03

Jan-

05

Apr

-06

Jul-0

7

Oct

-08

Jan-

10

Apr

-11

Jul-1

2

Oct

-13

Jan-

15

38© 4th March 2015

FUNDS TABLES

Top 10 Islamic Equity Funds by 3 Months Returns

Fund Fund Manager Performance Measure Fund Domicile

1 JS Islamic JS Investments 26.05 Pakistan

2 Pakistan International Element Islamic Asset Allocation

Arif Habib Investment Management 23.35 Pakistan

3 Meezan Tahaff uz Pension - Equity Sub Al Meezan Investment Management 18.25 Pakistan

4 Atlas Pension Islamic - Equity Sub Atlas Asset Management 15.99 Pakistan

5 Meezan Islamic Al Meezan Investment Management 15.36 Pakistan

6 Al Meezan Mutual Al Meezan Investment Management 15.06 Pakistan

7 Atlas Islamic Stock Atlas Asset Management 14.59 Pakistan

8 AmOasis Global Islamic Equity AmInvestment Management 10.30 Malaysia

9 PB Islamic Asia Equity Public Mutual 9.10 Malaysia

10 Public China Itt ikal Public Mutual 8.68 Malaysia

Eurekahedge Islamic Fund Index (2.97)

Top 10 Islamic Globally Investing Funds by 3 Months Returns

Fund Fund Manager Performance Measure Fund Domicile

1 AmPrecious Metals AmInvestment Management 12.59 Malaysia

2 CIMB Islamic Greater China Equity CIMB-Principal Asset Management 11.72 Malaysia

3 Deutsche Noor Precious Metals Securities - Class A

DWS Noor Islamic Funds 10.51 Ireland

4 AmOasis Global Islamic Equity AmInvestment Management 10.30 Malaysia

5 ETFS Physical Gold ETFS Metal Securities 8.14 Jersey

6 RHB-OSK Muhibbah Income RHB Asset Management 4.65 Malaysia

7 ETFS Physical PM Basket ETFS Metal Securities 4.65 Jersey

8 ETFS Physical Silver ETFS Metal Securities 4.32 Jersey

9 QInvest JOHCM Sharia'a J O Hambro Capital Management 3.15 Cayman Islands

10 Oasis Crescent Global Property Equity Oasis Global Management Company (Ireland) 3.00 Ireland

Eurekahedge Islamic Fund Index 1.36

Based on 92.56% of funds which have reported January 2015 returns as at the 2nd March 2015

Contact EurekahedgeTo list your fund or update your fund information: islamicfunds@eurekahedge.comFor further details on Eurekahedge: information@eurekahedge.com Tel: +65 6212 0900

DisclaimerCopyright Eurekahedge 2007, All Rights Reserved. You, the user, may freely use the data for internal purposes and may reproduce the index data provided that reference to Eurekahedge is provided in your dissemination and/or reproduction. The information is provided on an “as is” basis and you assume and will bear all risk or associated costs in its use, and neither Islamic Finance news, Eurekahedge nor its affi liates provide any express or implied warranty or representations as to originality, accuracy, completeness, timeliness, non-infringement, merchantability and fi tness for any purpose.

Eurekahedge Islamic Fund Equity Index over the last 5 years Eurekahedge Islamic Fund Equity Index over the last 1 year

Perc

enta

ge

Perc

enta

ge

Based on 97.73% of funds which have reported January 2015 returns as at the 2nd March 2015

90

100

110

120

130

140

150

160

Jan-

10

Jun-

10

Nov

-10

Apr

-11

Sep-

11

Feb-

12

Jul-1

2

Dec

-12

May

-13

Oct

-13

Mar

-14

Aug

-14

Jan-

15

959799

101103105107109111113

Jan-

14

Mar

-14

Apr

-14

May

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep-

14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

39© 4th March 2015

LEAGUE TABLES

Global Sukuk Volume by Month Global Sukuk Volume by Quarter

0250500750100012501500

02468

1012

5 12111098764321

2014

US$mUS$bn

Value (US$bn)Avg Size (US$m)

0100200300400500600

02468

1012141618

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 4Q3Q2Q1Q4Q3Q2Q2010 2011 2012 2013 2014

US$mUS$bn Value (US$bn) Avg Size (US$m)

Most Recent Global Sukuk

Priced Issuer Nationality Instrument Market US$ (mln) Managers28th Jan 2015 National Higher

Education FundMalaysia Sukuk Domestic market

public issue139 Maybank, CIMB Group

22nd Jan 2015 Danga Capital Malaysia Sukuk Domestic market public issue

445 RHB Capital

14th Jan 2015 Dubai Islamic Bank UAE Sukuk Euro market public issue

1,000 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Dubai Islamic Bank, Sharjah Islamic Bank, Emirates NBD, Noor Bank, Al Hilal Bank

19th Dec 2014 DRB-HICOM Malaysia Sukuk Domestic market private placement

206 CIMB Group

19th Dec 2014 Northport (Malaysia)

Malaysia Sukuk Domestic market public issue

101 Maybank, Affi n Investment Bank

15th Dec 2014 Malaysia Airports Holdings

Malaysia Sukuk Domestic market public issue

286 HSBC, Maybank, CIMB Group

12th Dec 2014 Unitapah Malaysia Sukuk Domestic market public issue

146 Kenanga Investment Bank

11th Dec 2014 Suria KLCC Malaysia Sukuk Domestic market public issue

172 CIMB Group

9th Dec 2014 National Higher Education Fund

Malaysia Sukuk Domestic market public issue

287 Maybank, CIMB Group

8th Dec 2014 Malaysia Building Society

Malaysia Sukuk Domestic market public issue

201 RHB Capital, DRB-HICOM, AmInvestment Bank

5th Dec 2014 Jana Kapital Malaysia Sukuk Domestic market public issue

270 RHB Capital

25th Nov 2014 Islamic Republic of Pakistan

Pakistan Sukuk Euro market public issue

1,000 Standard Chartered Bank, Deutsche Bank, Dubai Islamic Bank, Citigroup

25th Nov 2014 IFFIm Sukuk United Kingdom

Sukuk Euro market public issue

500 Saudi National Commercial Bank, Standard Chartered Bank, National Bank of Abu Dhabi, CIMB Group, Barwa Bank

18th Nov 2014 Hazine Mustesarligi Varlik Kiralama Anonim Sirketi

Turkey Sukuk Euro market public issue

1,000 HSBC, CIMB Group, Citigroup

17th Nov 2014 Flydubai UAE Sukuk Euro market public issue

500 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Dubai Islamic Bank, Emirates NBD, Noor Bank, Credit Agricole

17th Nov 2014 Mumtalakat Sukuk Holding

Bahrain Sukuk Euro market public issue

600 Standard Chartered Bank, Deutsche Bank, BNP Paribas, Mitsubishi UFJ Financial Group

17th Nov 2014 Advanced Petrochemicals

Saudi Arabia Sukuk Domestic market private placement

267 HSBC, Riyad Bank

14th Nov 2014 Tan Chong Motor Holdings

Malaysia Sukuk Domestic market public issue

225 CIMB Group, AmInvestment Bank

13th Nov 2014 Imtiaz Sukuk II Malaysia Sukuk Domestic market public issue

150 Maybank, CIMB Group

11th Nov 2014 DanaInfra Nasional Malaysia Sukuk Domestic market public issue

720 RHB Capital, Maybank, Bank Islam Malaysia, CIMB Group, AmInvestment Bank

40© 4th March 2015

LEAGUE TABLES

Top 30 Issuers of Global Sukuk 12 MonthsIssuer Nationality Instrument Market US$(mln) Iss(%) Managers

1 Saudi Electricity Saudi Arabia

Sukuk Euro market public issue

2,500 6.6 HSBC, RHB Capital, Maybank, CIMB Group, AmInvestment Bank, Standard Chartered Bank, Affi n Investment Bank, Bank Islam Malaysia

2 DanaInfra Nasional Indonesia Sukuk Domestic market public issue

2,337 6.2 HSBC, RHB Capital, Maybank, CIMB Group, AmInvestment Bank

3 IDB Trust Services Saudi Arabia

Sukuk Euro market public issue

1,881 5.0 Standard Chartered Bank, Deutsche Bank, HSBC, National Bank of Abu Dhabi, First Gulf Bank, Maybank, Gulf International Bank, Natixis, CIMB Group

4 Perusahaan Penerbit SBSN Indonesia III

Indonesia Sukuk Euro market public issue

1,500 4.0 Standard Chartered Bank, HSBC, CIMB Group, Emirates NBD

5 National Higher Education Fund

Malaysia Sukuk Domestic market public issue

1,500 4.0 Maybank, CIMB Group

6 Islamic Republic of Pakistan

Pakistan Sukuk Euro market public issue

1,000 2.7 Standard Chartered Bank, Deutsche Bank, Dubai Islamic Bank, Citigroup

6 Hong Kong Sukuk 2014

Hong Kong

Sukuk Euro market public issue

1,000 2.7 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, CIMB Group

6 Hazine Mustesarligi Varlik Kiralama Anonim Sirketi

Turkey Sukuk Euro market public issue

1,000 2.7 HSBC, CIMB Group, Citigroup

6 Dubai Islamic Bank UAE Sukuk Euro market public issue

1,000 2.7 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Dubai Islamic Bank, Sharjah Islamic Bank, Emirates NBD, Noor Bank, Al Hilal Bank

10 Bank Pembangunan Malaysia

Malaysia Sukuk Domestic market public issue

948 2.5 HSBC, CIMB Group

11 Rantau Abang Capital

Malaysia Sukuk Domestic market public issue

781 2.1 RHB Capital, Maybank, Bank Islam Malaysia, CIMB Group, Standard Chartered Bank, HSBC

12 Sharjah Sukuk UAE Sukuk Euro market public issue

750 2.0 Standard Chartered Bank, HSBC, Kuwait Finance House, National Bank of Abu Dhabi, Sharjah Islamic Bank

12 Government of Dubai

UAE Sukuk Euro market public issue

750 2.0 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Dubai Islamic Bank, Emirates NBD

12 Emaar Malls Group UAE Sukuk Euro market public issue

750 2.0 Mashreqbank, Standard Chartered Bank, Morgan Stanley, National Bank of Abu Dhabi, First Gulf Bank, Dubai Islamic Bank, Union National Bank, Abu Dhabi Islamic Bank, Emirates NBD, Noor Bank, Al Hilal Bank

15 ICD UAE Sukuk Euro market public issue

700 1.9 Standard Chartered Bank, HSBC, Dubai Islamic Bank, Citigroup, Emirates NBD

15 Dubai International Financial Centre

UAE Sukuk Euro market public issue

700 1.9 Standard Chartered Bank, Dubai Islamic Bank, Emirates NBD, Noor Bank

17 DAMAC Real Estate Development

UAE Sukuk Euro market public issue

650 1.7 Deutsche Bank, National Bank of Abu Dhabi, Barclays, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD

18 Syarikat Prasarana Negara

Malaysia Sukuk Domestic market public issue

610 1.6 RHB Capital, Maybank, Kenanga Investment Bank, CIMB Group

19 TDIC Finance UAE Sukuk Domestic market private placement

600 1.6 National Bank of Abu Dhabi

20 Mumtalakat Sukuk Holding

Bahrain Sukuk Euro market public issue

594 1.6 Standard Chartered Bank, Deutsche Bank, BNP Paribas, Mitsubishi UFJ Financial Group

21 Saudi Telecom Saudi Arabia

Sukuk Domestic market public issue

533 1.4 Saudi National Commercial Bank, Standard Chartered Bank, JPMorgan

22 ZAR Sovereign Capital Fund

South Africa

Sukuk Euro market public issue

500 1.3 BNP Paribas, Industrial & Commercial Bank of China, Kuwait Finance House

22 Turkiye Finans Katilim Bankasi

Turkey Sukuk Euro market public issue

500 1.3 HSBC, Citigroup, Emirates NBD, QInvest

22 Kuveyt Turk Katilim Bankasi

Turkey Sukuk Euro market public issue

500 1.3 Standard Chartered Bank, HSBC, Kuwait Finance House, Citigroup, Emirates NBD

22 JANY Sukuk US Sukuk Euro market public issue

500 1.3 Saudi National Commercial Bank, Goldman Sachs, National Bank of Abu Dhabi, Abu Dhabi Islamic Bank, Emirates NBD, QInvest

22 IFFIm Sukuk United Kingdom

Sukuk Euro market public issue

500 1.3 Saudi National Commercial Bank, Standard Chartered Bank, National Bank of Abu Dhabi, CIMB Group, Barwa Bank

22 Flydubai UAE Sukuk Euro market public issue

500 1.3 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Dubai Islamic Bank, Emirates NBD, Noor Bank, Credit Agricole

22 Al Hilal Bank UAE Sukuk Euro market public issue

500 1.3 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Citigroup, Emirates NBD, Al Hilal Bank

29 Aman Sukuk Malaysia Sukuk Domestic market public issue

491 1.3 RHB Capital, Maybank, Bank Islam Malaysia, CIMB Group, AmInvestment Bank

30 Midciti Sukuk Malaysia Sukuk Domestic market public issue

476 1.3 Maybank, CIMB Group, AmInvestment Bank

37,684 100

41© 4th March 2015

LEAGUE TABLES

Top Managers of Sukuk 12 Months

Manager US$ (mln) Iss %1 CIMB Group 5,450 48 14.5

2 HSBC 4,498 29 11.9

3 Maybank 4,254 37 11.3

4 Standard Chartered Bank 3,174 23 8.4

5 RHB Capital 2,952 42 7.8

6 National Bank of Abu Dhabi 2,008 13 5.3

7 AmInvestment Bank 1,941 26 5.2

8 Emirates NBD 1,726 14 4.6

9 Deutsche Bank 1,541 6 4.1

10 Citigroup 1,125 7 3.0

11 Dubai Islamic Bank 1,072 8 2.9

12 JPMorgan 1,011 2 2.7

13 Natixis 547 2 1.5

14 Kuwait Finance House 518 4 1.4

15 Kenanga Investment Bank 450 3 1.2

16 BNP Paribas 442 3 1.2

17 Noor Bank 440 4 1.2

18 Bank Islam Malaysia 389 4 1.0

19 Saudi National Commercial Bank 361 3 1.0

20 QInvest 345 4 0.9

21 Al Hilal Bank 326 4 0.9

22 Sharjah Islamic Bank 275 2 0.7

23 Abu Dhabi Islamic Bank 244 3 0.7

24 First Gulf Bank 235 2 0.6

25 Hong Leong Financial Group 234 8 0.6

26 Barwa Bank 217 3 0.6

27 Affi n Investment Bank 198 6 0.5

28 Industrial & Commercial Bank of China

167 1 0.4

28 Gulf International Bank 167 1 0.4

30 Mitsubishi UFJ Financial Group 149 1 0.4

31 Riyad Bank 133 1 0.4

32 Goldman Sachs 133 2 0.4

33 UOB 111 3 0.3

34 Barclays 93 1 0.3

Total 37,684 127 100.0

Top Islamic Finance Related Project Financing Legal Advisors Ranking 12 Months

Legal Advisor US$ (million) No %1 Allen & Overy 6,538 6 38.3

2 Baker & McKenzie 3,220 3 18.8

3 Cliff ord Chance 1,790 5 10.5

4 Linklaters 1,631 2 9.5

5 Salans FMC SNR Denton Group 1,280 2 7.5

6 Chadbourne & Parke 660 1 3.9

7 White & Case 650 1 3.8

8 Latham & Watkins 433 2 2.5

9 Norton Rose Fulbright 354 1 2.1

9 Pekin & Pekin 354 1 2.1

Top Islamic Finance Related Project Finance Mandated Lead Arrangers 12 Months

Mandated Lead Arranger US$ (million) No %1 National Commercial Bank 2,909 4 25.92 HSBC 648 2 5.83 Samba Capital & Investment

Management604 3 5.4

4 Riyad Bank 588 3 5.25 Banque Saudi Fransi 574 3 5.16 Al Rajhi Capital 486 3 4.37 National Bank of Kuwait 290 1 2.68 First Gulf Bank 281 2 2.58 Union National Bank 281 2 2.510 Att ijariwafa Bank 267 1 2.410 BMCE Bank 267 1 2.4

Sukuk Volume by Currency US$ (billion) 12 Months

Sukuk Volume by Issuer Nation US$ (billion) 12 Months

Global Sukuk Volume by Sector 12 Months

Global Sukuk Volume - US$ Analysis

19.2

16.4

0.8

0.6

Malaysian ringgit

US dollar

Saudi riyal

Euro

Hong Kong

15.4

1.0

2.0

2.6

5.6

6.9

1.0

Malaysia

Saudi Arabia

UAE

Indonesia

Pakistan

Turkey

Finance

Real Estate/PropertyTransportation

GovernmentUtility & Energy

Other

9%

9%

6%

45%

11%

20%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 4Q3Q2Q1Q4Q3Q2Q2009 2010 2011 2012 2013 2014

0100200300400500600

02468

1012141618

US$mUS$bnNon-US$ US$

42© 4th March 2015

LEAGUE TABLES

Top Islamic Finance Related Financing Mandated Lead Arrangers Ranking 12 Months

Mandated Lead Arranger US$ (mln) No %1 Abu Dhabi Islamic Bank 1,320 9 13.0

2 First Gulf Bank 902 8 8.9

3 National Bank of Abu Dhabi 880 4 8.7

4 Mashreqbank 644 4 6.4

5 Dubai Islamic Bank 625 5 6.2

6 Samba Capital 613 2 6.1

7 Abu Dhabi Commercial Bank 561 4 5.5

8 HSBC 483 3 4.8

9 Banque Saudi Fransi 433 2 4.3

10 Al Hilal Bank 406 5 4.0

11 Noor Islamic Bank 395 3 3.9

12 Emirates NBD 362 6 3.6

13 Standard Chartered Bank 253 5 2.5

14 Alinma Bank 220 1 2.2

14 Al Rajhi Capital 220 1 2.2

16 Union National Bank 194 3 1.9

17 Saudi National Commercial Bank 171 1 1.7

17 Saudi Investment Bank 171 1 1.7

17 Riyad Bank 171 1 1.7

20 Commercial Bank of Dubai 167 2 1.7

21 Ahli United Bank 145 2 1.4

22 Barwa Bank 139 3 1.4

23 Commercial Bank International 134 2 1.3

24 Arab Banking Corporation 126 2 1.2

25 National Bank of Kuwait 87 1 0.9

25 Kuwait International Bank 87 1 0.9

27 Bank Islam Brunei Darussalam 58 1 0.6

28 United Bank 25 1 0.3

28 Commercial Bank of Ceylon 25 1 0.3

30 Taiwan Business Bank 20 1 0.2

Top Islamic Finance Related Financing Mandated Lead Arrangers12 Months

Bookrunner US$ (mln) No %1 Samba Capital 1,327 1 35.52 Abu Dhabi Islamic Bank 1,201 5 32.13 Barwa Bank 405 2 10.84 Standard Chartered Bank 171 4 4.65 Emirates NBD 141 3 3.86 Arab Banking Corporation 126 2 3.47 Noor Islamic Bank 100 2 2.78 Abu Dhabi Commercial Bank 70 1 1.99 United Bank 30 1 0.89 Al Hilal Bank 30 1 0.811 Taiwan Business Bank 20 1 0.5

Top Islamic Finance Related Financing by Country 12 Months

Nationality US$ (mln) No %1 UAE 4,885 13 48.22 Saudi Arabia 3,467 4 34.23 Turkey 573 2 5.74 Qatar 350 1 3.55 India 272 1 2.76 Kuwait 261 1 2.67 Sri Lanka 150 1 1.58 Indonesia 90 1 0.99 Taiwan 80 1 0.8

Are your deals listed here?If you feel that the information within these tables is inaccurate, you may contact the following directly: Shireen Farhana (Media Relations) Email: shireen.farhana@dealogic.com Tel: +852 2804 1223

Top Islamic Finance Related Financing by Sector 12 Months

0US$ bln 1 32 654

Professional Services

Construction/Building

Finance

Real Estate/Property

Mining

Global Islamic Financing - Years to Maturity (YTD Comparison)

0% 20% 40% 60% 80% 100%2008200920102011

201220132014

0-3yrs 3-5yrs 5-7yrs 7-10yrs 10+yrs

Top Islamic Finance Related Financing Deal List 12 Months

Credit Date Borrower Nationality US$ (mln)

30th Jun 2014 Ma'aden Waad al-Shamal Phosphate

Saudi Arabia 2,350

21st May 2014 Emaar Malls Group UAE 1,500

19th Nov 2014 Saudi BinLaden Group Saudi Arabia 1,327

7th May 2014 Emirates Steel Industries UAE 1,300

8th Sep 2014 Atlantis The Palm UAE 1,100

24th Dec 2014 National Central Cooling - Tabreed

UAE 706

7th Dec 2014 Utilities Development Kuwait 624

20th Jan 2015 Al-Waha Petrochemical Saudi Arabia 523

31st Jul 2014 Emirates Airlines UAE 425

10th Nov 2014 Zakher Marine International

UAE 420

43© 4th March 2015

EVENTS DIARY

APRIL 2015

1st IFN Investor Forum Dubai, UAE

2nd IFN US Investor Forum Dubai, UAE

22nd IFN Indonesia Forum Jakarta, Indonesia

MAY 2015

3rd IFN Qatar Forum Doha, Qatar

25th – 26th IFN Asia Forum Kuala Lumpur, Malaysia

JUNE 2015

10th IFN Europe Forum Luxembourg

SEPTEMBER 2015

13th IFN Issuer Forum Dubai, UAE

13th IFN Iran Forum Dubai, UAE

OCTOBER 2015

5th IFN Kuwait Forum Kuwait City

27th IFN Egypt Forum Cairo, Egypt

NOVEMBER 2015

17th IFN Turkey Forum Istanbul, Turkey

30th IFN Saudi Arabia Forum Jeddah, Saudi Arabia

events

DISCLAIMERAll rights reserved. No part of this publication may be reproduced, duplicated or copied by any means without the prior consent of the holder of the copyright, requests for which should be addressed to the publisher. While every care is taken in the preparation of this publication, no responsibility can be accepted for any errors, however caused.

Group Lauren McaughtryManaging Editor lauren.mcaughtry@REDmoneygroup.com

Associate Sandra SpencerPublisher sandra.spencer@REDmoneygroup.com

Tel: +9714 427 3624

Contributions Sasikala ThiagarajaEditor sasikala@REDmoneygroup.com

Features Editor Nabilah Annuarnabilah.annuar@REDmoneygroup.com

News Editor Vineeta Tanvineeta.tan@REDmoneygroup.com

Senior Copy Kenny NgEditor kenny.ng@REDmoneygroup.com

Head of Hasnani AspariProduction hasnani.aspari@REDmoneygroup.com

Senior ProductionNorzabidi AbdullahManager zabidi.abdullah@REDmoneygroup.com

Senior Graphic Eumir Shazwan Kamal BahrinDesigner eumir.shazwan@REDmoneygroup.com

Senior ProductionMohamad Rozman BesiriDesigner rozman.besiri@REDmoneygroup.com

Business Steve StubbsDevelopment steve.stubbs@REDmoneygroup.comManager Tel: +603 2162 7800 x 55

Subscriptions Faizan HaiderManager faizan.haider@REDmoneygroup.com

Tel: +603 2162 7800 x 24

Subscriptions Ifran TarmiziManager ifran.tarmizi@REDmoneygroup.com

Tel: +603 2162 7800 x 63

Head of Mithun N Gangolli (Dubai offi ce)Subscriptions mithun.gangolli@REDmoneygroup.comEMEA Tel: +971 4 427 3638

Financial Faizah HassanDirector faizah.hassan@REDmoneygroup.com

Deputy Publisher Geraldine Chan (Dubai offi ce)& Director geraldine.chan@REDmoneygroup.com

Managing Andrew Tebbutt Director andrew.tebbutt @REDmoneygroup.com

Managing Director Andrew Morgan& Publisher andrew.morgan@REDmoneygroup.com

Published By:

MALAYSIASuite 22-06, 22nd FloorMenara Tan & Tan207, Jalan Tun Razak50400 Kuala Lumpur, MalaysiaTel: +603 2162 7800 Fax: +603 2162 7810

UAEPO Box 126732, 3rd Floor, X2 Tower, Jumeirah Lake Tower (JLT), Jumeirah Bay, Dubai, UAETel: +971 4 427 36 23Fax: +971 4 431 4614

trainingMARCH 2015

9th –10th Fixed Income Products & Bond Markets

Kuala Lumpur, Malaysia

9th –11th Islamic Finance Qualifi cation(IFQ)

Kuala Lumpur, Malaysia

11th –13th Understanding & Applying Structured Products

Kuala Lumpur, Malaysia

15th –17th Structuring Sukuk & Islamic Capital Markets Products

Dubai, UAE

17th –19th Islamic Treasury & Risk Management Products

Riyadh, Saudi Arabia

19nd –20rd Shariah Audit for Islamic Investment & Capital Market Instruments

Kuala Lumpur, Malaysia

22nd –23rd International Best Practices & Regional Standards in Regulation, Corporate Governance, AML, Sanctions & Compliance

Dubai, UAE

22nd –24th Understanding, Developing & Marketing Takaful Products

Dubai, UAE

25th –26th IFT: Structuring Islamic Legal Documentation

Kuala Lumpur, Malaysia

26th –27th Shariah Issues for Takaful: Trends, Legislation & Governance

Kuala Lumpur, Malaysia

29th –31st Islamic Law of Business Transactions & Sharia`a Governance

Dubai, UAE

COMPANY INDEX

90 North Real Estate Partners 20ABC Islamic Bank 31,32ADCB Islamic Banking 31African Export-Import Bank 13Afriland First Bank 30AK BARS 15Al Hilal Bank 7,9Al Maali Consulting Group 19,28Al Madina Takaful 32Al Salam Bank 12Al Salam Bank Bahrain 33Albaraka Turk 33Allen & Gledhill 33Allen & Overy 30Allianz Life 15AM Best 10Amãna Bank 32Amlak Finance 31Arab Banking Corporation 32AUX 19Avicennia 32Bahrain Bourse 8,31Bahrain Development Bank 8Bahrain Investment Market 8Bangladesh Bank 16Bank Al Khair 12Bank Dhofar 12,33Bank International Indonesia 30Bank Muscat 33Bank Negara Malaysia 16,27,29Bank Nizwa 12Bank Sohar 12Bank Syariah Mandiri 12,30Banque Islamique Du Niger 11Barwa Bank 9,31Barwa Real Estate Group 33BLME Holdings 32BMI Bank 12BNI Syariah 12Brazilian Central Bank 19BRI Syariah 12Capital Intelligence Ratings 1Central Bank of Bahrain 16,27Central Bank of Gambia 27Central Bank of Oman 29Central Bank of the UAE 28CIMB 29CIMB Group 12,30CISFED 18Citi 15Citigroup 9,14Commerzbank 15Dar Al Sharia 17Direct Lett ings 30Doga Group 32Doga Sigorta 32Dubai Islamic Bank 9,29,31

Dubai Multi Commodities Center 27EBX Group 19ECB 9Eiff el Management 31El Wifack 13Emaar Properties 33Emirates NBD Capital 15Emirates REIT 31Enoks Capital 7European Islamic Investment Bank 33Ezdan Holding Group 7Financial Services Agency 30Fitch 1,3G5 19,33Garuda Indonesia 29Gatehouse Bank 30GIB Capital 29,31Gulf Finance Corporation 31Gulf Finance House 29,31Gulf International Bank 31Harneys 26HSBC 9,29HSBC Bank Oman 33IBA-Moscow 15ICD 7,11,13,14IDB 29IILM 16,27,28,29IMF 9Infrastructure Leasing & Financial Services 13Insurance Authority of the UAE 10International Bank of Azerbaijan 9,15International Bureau of Fiscal Documentation 15International Islamic Financial Market 27Islamic Fiqh Academy 23Islamic International Rating Agency 1,33ISRA 23Jordan Islamic Bank 33JP Morgan Bank 9Kazan Federal University 15Kenya Commercial Bank 30Khaleeji Commercial Bank 12Khazanah Nasional 29,32KIPCO Group 32Kuwait Finance House 31Maestro Capital 33Malaysia Building Society 12,30Malaysia External Trade Development Cooperation 15MARC 1,33Maybank 32Maybank Investment Bank 33Maybank Islamic 9,30,32Maybank Shariah Indonesia 30Mc Laren 20Medicine Marqueett e 30Millennium Capital 12,24Moody’s 1,4,5,6,33

Mubadala 19Muzn Islamic Banking 31National Bank of Abu Dhabi 29National Bank of Oman 33National Rating Agency 15Natixis 14,29NCB Capital 29Noor Bank 9Norton Ruse Fulbright 30Oman Arab Bank 33Otoritas Jasa Keuangan 12,18Ozun Group 9Perbanas 18Qatar Central Bank 29Qatar International Islamic Bank 29Qatar Islamic Bank 29QNB Capital 33RAM Ratings 1Rasmala Investment Bank 33Research Intelligence Unit 21RHB Capital 12,30RHB Islamic Bank 29Ritz Property 19Rolex 20Russian Center of Islamic Economy and Finances 15Russian Islamic University 15S&P 1,3,4,16Savills 20SBSN Issuer Company 14SEDCO Capital 30Sharjah Electricity & Water Authority 31Sharjah Islamic Bank 7,31,32SHUAA Capital 31Sidra Capital 7Sigma 30Singapore Exchange 33Skerbank 15Songbird Estates 20SPRINT 33Standard Chartered 9,14,29Swiss Re 32Takaful International Company 32Tamkeen 8Tamweel Africa Holding 11Tanmiyat Global 31Temasek 9Trowers & Hamlins 30Turkiye Finans 7UMOA-Titres 14United Finance 12United Gulf Bank 32UUS 30Veirano Advogados Brazil 19VTB Bank 15Warba Bank 9,31Weststar Capital 29

NE-IFN12/9

INDIVIDUAL SUBSCRIPTION

US US

Subscribe me to

YOUR DETAILS

Full Name:(First Name) (Surname)

Company Name: Job Title:

Address:

Telephone: Fax:Work Email:

Country:Postal/Zip:

COMPANY WIDE SUBSCRIPTION

Year at US ne Years at US ne

(Max: 10 Individual Subscriptions)

GROUP WIDE SUBSCRIPTION

1 Year: US$12,5002 Years: US$22,500

Credit Card Go to islamic nancene s com/subscribe asp Check Telegraphic Transfer (T/T)Please send your T/T advice ith your subscription form to us either by post or fax A con rmation ill be sent once payment is received Subscription is not con rmed until payment has been made in full

Payment can be made in US$ by:

Daily ne s alerts

Each subscription will receive: 50 issues of Islamic Finance news available

every Wednesday

Exclusive login details for each subscriber Unlimited access to entire archived library All additional supplements, guides and reports

How to subscribe:T +603 2162 7800 F +603 2162 7810T +971 4427 3600 F +971 4431 4614

Subs@IslamicFinanceNews.com

si o ce Suite 22-06, 22nd Floor, Menara Tan & Tan, 207, Jalan Tun Razak, 50400 Kuala Lumpur, MalaysiaDub i o ce PO Box 126732, 3/F, X2 Tower, Jumeirah Lake Towers (JLT), Jumeirah Bay, Dubai, UAE