IFP - May 2012

7/27/2019 IFP - May 2012

http://slidepdf.com/reader/full/ifp-may-2012 1/8

Ernst & Young unveiled the “Ernst & Young’s World Takaful Report 2012: Industry Growthand Preparing for Regulatory Change”, at the 7thAnnual World Takaful Conference 2012Compiled by EYIFSG

The World Takaful Report 2012, unveiled in the 7th Annual World Takaful Conference, held on the 16 April

2012 in Dubai outlined important factors with regards to

overall industry growth and evolving regulations.

Some of the key points discussed in the report, among

others, included the growth and potential of Takaful in

the global markets. Financial analysis, key risks and

challenges for the industry across the globe were also

highlighted.

The report identifies that the two main regions i.e. the

MENA and the South East Asia (SEA) continued to

remain the hubs of global Takaful activity., with Malaysia

and UAE continue to be the leading Takaful markets by

far, besides Saudi Arabian cooperative insurance market.

According to the report, the Saudi Arabian cooperative

insurance market still remains the leader, however the

model followed by them differs from that of the Takaful

operators in other regions. On a continuing trend, Saudi

Arabia with contributions totaling US$ 4.4 billion in

2010, Malaysia with US$ 1.4 billion and UAE with US$

Inside Story 1

Editor’s Message 2

Local andInternational NewsGet a glimpse of

what is happening in

the world of Islamic

finance

4

In the Spotlight

Find our read of themonth

7

Congratulations tothe new CIPAgraduates

8

ISLAMIC FINANCE INDUSTRY NEWSLETTER

ISLAMIC FINANCE PAKISTAN

VOLUME 3 ISSUE 5 MAY 2012

Ayat of the month:

Allah has promised those of you

who believe and do good deeds

that He will certainly make them

(His) vicegerents in the land, as

He made those before them, and will certainly establish for them

their religion which He has

chosen for them, and will

certainly give them peace in

place of fear in which they were

before; (provided that) they

worship Me, ascribing no

partner to Me. And those who

turn infidel after that are the

transgressors.

(Al-Noor: 55)

Inside this issue

Th e Worl d

T a k a f u l

Report 2012,

unveiled in

t h e 7 t h

A n n u a l

W o r l d

T a k a f u l

Conference,

held on 16th

April 2012 in

D u b a i

i d e n t i f i e s

that the two

main regions

i . e . t h e

M E N A and t h e S o u t h

E a s t A s i a

continued to

remain the

h u b s o f

g l o b a l

T a k a f u l

a c t i v i t y .

7/27/2019 IFP - May 2012


Editorial

Page 2 An initiative of IFP forum

Advisory Board

Mufti Irshad Ahmed Aijaz

Mufti Najeeb Khan

Anwar Ahmed Meenai

Mohammad Aslam

Mujeeb Baig

Syed Shahjahan Salahuddin

Faizan Memon

NusratUllah Khan

Muhammad Shahzad

Hussain

Arshad Hussain Zubairi

Ammar Khalid

Rima Farooq

I would like to anticipate that many people judge that Islamic finance is in

many ways parallel to conventional finance. People believe that it is an

artificially created industry thus weakening their beliefs. The doctrine of

Islamic finance is entirely different from the conventional finance and is not

merely based on Shariah. The practice of Islamic financial system has

centuries-old history.

Islamic finance has been growing rapidly in developing and developed

countries in recent years. The strong growth is likely to continue in the

coming years despite the recent financial crisis. Countries like Iran, Pakistan

and Sudan are moving towards Islamic bank alongside what is termed as

conventional banks. Awareness is being created around the world and

countries are moving towards Islamic finance.

The National Bank of Commerce (NBC) and KCB Bank Tanzania havelaunched Islamic banking services to meet market needs. According to

TaGLA (Tanzania Global Learning agency) Interim Executive Director

Charles Senkondo, Islamic banking or finance is TaGLAs newly introduced

programme with a view to raising public awareness and building capacity on

modern banking in compliance with Shariah law. Interestingly, many of the

internationals larger banks (with HSBC, UBS and Citigroup as notable

examples) all have Islamic banking arms, both in the Middle East and the

West. as notable examples. The Islamic Finance Council UK (IFC) is a

specialist Islamic finance body working to promote awareness of this

important and emerging industry both locally and globally. Within the Asia

Pacific region, Malaysia is by far the biggest centre for Islamic finance.

Inaugurating the second two-day International Conference on IslamicBusiness (ICIB) held on 28 February 2012, State Bank of Pakistan (SBP)

Governor Yaseen Anwar has expressed hope that the country‟s Islamic

banking industry will double its market share in the next five years. He said

the Islamic banking industry was growing at a fast pace and maintaining an

average growth of 30 per cent over the past six years and the Islamic banking

industry‟s asset base reached Rs641 billion, which constituted almost 8% of

the overall banking industry. International Conference was being organized

in Karachi in order to strengthen the Islamic finance sector in Pakistan,

Reported The Express Tribune

Happy Reading!

Let us know, if you know friends or colleagues who, in your view, may benefit from this newsletter. Send us their email

addresses at [email protected]

Editor-in-Chief

Associate Editors

7/27/2019 IFP - May 2012


0.82 billion remained the top three

Takaful markets globally.

In GCC, the overall growth was slow

and not up to the precedence of pastgrowth patterns. In the SEA region

besides Malaysia, Indonesia and Brunei

are also coming forward as sizable and

fast-growing markets. Sudan, with

contributions of US$ 363 million,

continued to be the most significant

market outside these regions.

“Continued steady growth in core

markets, the emergence of new fringe

markets such as Indonesia, Brunei and

Bangladesh, and the possibilities of new

upcoming markets like Oman indicate

that the global Takaful market expected

to mark contributions of US$ 7 billion.

On a consolidated basis it is expected

to be a US$12 billion industry by

2012,” says Ashar Nazim, Senior

Director & Islamic Financial Services

Leader, Ernst & Young.

Financial analysis reveals that in the

GCC, average RoE of conventionalinsurers was around the 9% mark while

the Takaful sector managed a nominal

4% in 2010. In contrast to this, the

average RoE for conventional insurers

in the Malaysian market was 17% and,

yet again, 4% for Takaful operators.

These figures indicate an alarming

situation that needs to be addressed by

the industry leaders.

Key developments andevents

Key developments over the past year

was analyzed and highlighted. These

include Saudi Arabian Monetary

Agency ‟s (SAMA‟s) revolutionary

changes in regulations bringing all

cooperative insurance companies on

the same model, AAOIFI‟s decision on

performance incentive to the Takaful

operators and their management and

the effect of upcoming changes in

regulatory standards.

The key global events that impact the

Takaful business and industry include,but are not limited to, the Arab spring,

the separation of South Sudan from

Sudan, the Euro-zone crisis, and the

emergence of SEA region as the next

hub of Takaful keeping in view the

SAMA‟s mandatory shift of all

cooperatives on a single model, curbing

the potential of globally accepted

Takaful model in the Saudi Arabian

market.

Strategic issues facing

Takaful

According to an analysis based on

survey of key executives and experts

across regions, the top strategic issues

facing Takaful industry are competition

for growth, evolving regulations and the

shortage of Takaful expertise.

“Young Takaful operators are facing a

fierce competition from comparatively

older, stronger and larger conventional

companies. They are also having strong

competition amongst themselves;

particularly the new entrants are, at

times, making business difficult. These

all lead to aggressive pricing and

eventual risk of sustainability for the

industry as a whole. The solution lies in

consolidation for the smaller players,

and in better risk management and

pricing, as well as risk retention

practices for the larger players,” says Ashar.

The report suggests that the regulations

from the Islamic finance standard

setting bodies like IFSB and AAOIFI

and the global accounting reporting

standards from IASB need greater

convergence.

Untapped potential

The report has also identified several

areas whereby the Takaful industry is yet to achieve an adequate share, or

even yet to find an entry point, for that

matter. Under-penetrated product lines

in different regions and the availability

of under-penetrated faith-driven

markets are also highlighted in the

report. According to the report, the

overall situation of the Muslim world

with regards to the Takaful industry is a

promising one.

Page 3

Continued…

An initiative of IFP forum

“ A key issue is the solvency

of the policyholders’ funds.

Almost all regulatory

regimes require thecompany as a whole to be

solvent. This is on the

ground that through a

mandatory or constructive

obligation of payment of

interest-free loan, the

T a k a f u l o p e r a t o r s

eventually become subject

to a similar risk level, as of aconventional insurance

company. IFSB’s standard

additionally requires that

the Takaful operators also

need to endeavor to ensure

that the policyholders’ funds

also become solvent at their

own. This will also reduce

the need for interest-free

loan which is considered to

be a less-preferred option by

most scholars,” adds Ashar.

7/27/2019 IFP - May 2012


World Bank managing director Dr

Mahmoud Mohieldin.

The challenges that needed to be

addressed include improving

regulatory oversight, rebalancing tax

treatment, strengthening insolvency

f r a m e w o r k , p r o m o t i n g

standardisation, ensuring adequate

liquidity and establishing sound risk-

management practices.

Meanwhile, INCEIF signed an

agreement with the World Bank todevelop education and executive

programmes in Islamic finance.

Islamic finance industry is facing key

growth constraints that need to be

addressed, Central Bank of Bahrain

(CBB) executive director of financial

institutions supervision AbdulRahman Al Baker claimed.

"We are seeing continuing

fragmentation in Islamic financial

products," he told delegates at an

Indonesia-Bahrain seminar.

Mr Al Baker said Bahrain is the

home of modern Islamic banking

and finance within the GCC.

Deputy Governor of Bank

Indonesia, the country‟s central

bank, Halim Alamsyah, officially

opened the second international

seminar on Islamic finance, 7-8 May

2012, in Bandung.

The seminar was themed „Can

Islamic Finance Focus on Productive

Economic Activities to PromoteGrowth & Financial Stability‟.

P r e s i d e n t o f t h e I s l a m i c

Development Bank (IDB) Group,

HE Dr Ahmed Mohammed Ali was

the keynote speaker.

It has been reported that Qatar has

mandated five banks to help arrange

a new sovereign Sukuk, the Gulf state's first Islamic bond in almost

10 years.

Qatar, the world's biggest liquefied

natural gas exporter, has picked

Standard Chartered, Deutsche

Bank, HSBC, Barwa Bank and

QInvest for the deal.

Qatar last tapped global debt

markets with a $5 billion

conventional multi-tranche bond in

November, capitalising on investor

appetite for safe havens amid market

uncertainty.

The full potential of Islamic finance

could be realised if several challenges

are to be addressed, according to

The government of the Australian

state of New South Wales, home to

the country's financial capital

Sydney, will send a group to Dubai

to discuss ways to develop the

Islamic finance industry.

The delegation, led by New South

Wales premier Barry O'Farrell and

including financial servicesprofessionals, will explore regulatory

and legal issues at a roundtable

discussion with the Dubai Export

Development Corp on 15 May.

Despite the impressive strides

Islamic finance has achieved in

several European countries ,Germany remains wary to adapt its

laws to the Shariah-compliant

i n d u s t r y .

But this attitude has changed after

Islamic finance was introduced by

Malaysia-based CIMB-Principal, the

only registered Islamic investment

fund in Germany.


Disclaimer:

The news included here is on the basis of information obtained from local and international print and electronic mediasources. IFP team does not accept any responsibility about their bona-fide.

Islamic Finance GrowsMore Than 40% a Year

Qatar Picks Banks forSukuk Issue

Islamic finance sectorfacing key challenges

COFIT Backs Tunisia Islamic Finance

The newly-established Council of Islamic Finance in Tunisia (COFIT) held a

press conference today to present the association‟s activities for 2012, as wellas, its twelve ad-hoc committees to publicize Islamic finance to Tunisian

individuals and financial institutions.

"Sixty percent of Muslims worldwide don‟t know about Islamic finance," said

Mohamed Nouri, a professor of Islamic finance and economy at the

European Institute of Humanities in Paris. And Tunisia is no exception.

"Basic Islamic financial products like Ijara, Salam, and Murabaha are

unknown to most Tunisians."

Australia's NSW RevivesIslamic Finance Push

World Bank OutlinesPotential of IslamicFinance

Germany Tastes IslamicFinance

7/27/2019 IFP - May 2012


Dubai Türkiye Finans, Turkey‟s

leading participation bank, has

signed the largest murabaha

syndicated deal of the participation

banking with a sum of $350 million

dollars.

Led by ABC Islamic Bank, HSBC,

Noor Islamic Bank and StandardChartered Bank, the consortium

included a total of 29 banks from 15

countries.

The deal marks the largest

murabaha syndicated loan ever

signed in the Turkish participation

banking sector with $251.5 million,

plus €76.5 million, equivalent to

$350 million.

Australia has tried to implement the

Shariah compliant methods of

financing into the country and are

encouraged to embrace Islamic

banking. Islamic banking could help

the Austral ian Government

overcome infrastructure funding

shortfalls, an Australian finance

head says.The head of Australia's first Islamic

finance company, Talal Yassine, met

with government ministers in

Australia's capital, Canberra, this

week.

The Islamic Financial Services Board(IFSB) organised the 9th IFSB

Summit, themed, Global Financial

Reforms: The Changing Regulatory

Model and Islamic Finance on 16 –

17 May 2012 in Istanbul, Turkey.

The Central Bank of the Republic of

Turkey is hosted Summit.

It has been reported that The

National Bank of Abu Dhabi(NBAD), the Number One Bank in

the UAE, has launched its Sukuk

Income Fund, a unique product

investing in Shariah-compliant

investment instruments that offers

investors attractive returns with low

levels of risk.

Professor Ros Haniffa, Director of

the Centre for Accounting and

Accountability Research, believes

Yorkshire should be taking the lead

for Islamic finance in the UK.

In a statement posted on Hull

University Business School‟s

website, Haniffa talks about theopportunit ies for Yorkshire

businesses to get involved in Islamic

finance.

"A significant proportion of the UK

Muslim community lives and works

in the Yorkshire region. Yet banks

offering the Shari‟ah -compliant

services of Islamic finance are still

few and far between," she said.


Disclaimer:


Banque Saudi Fransi (BSF), the lender part-owned by Credit Agricole,

launched a $750 million five-year Islamic bond, at the tighter end of price

guidance, which indicated strong investor demand for the issue.

BSF, the Kingdom's fifth largest bank by market capitalization, launched the

sukuk at a spread of 185 basis points over midswaps.

Austra lia Urged toEmbrace Islamic Banking

Banque Saudi Fransi Launches $750m Sukuk

Islamic Finance anOpportunity for UK County Yorkshire

9th IFSB Summit“ G l o b a l f i n a n c i a l

reforms: The ChallengingRegulatory Model and

Saudi - UK GBP 100 million Fund Closes with FirstReal Estate Transaction

Sidra Capital and Gatehouse Bank acquire The Cooperative Group

Distribution Centre in Cambridge, UK for GBP 23.55 million

Sidra Capital (Sidra), a CMA regulated Shariah compliant financial servicescompany based in Saudi Arabia and Gatehouse Bank (Gatehouse), an FSA

regulated UK-based Shariah compliant bank specialising in UK real estate,

have announced the first closing of The Sterling United Kingdom Real

Estate Fund (SURF) and their first property acquisition in Cambridge, UK

at GBP23.55 million.

NBAD Launches Sukuk Income Fund

Türkiye Finans in $350mMurabaha syndicateddeal

7/27/2019 IFP - May 2012


The fast-growing Islamic finance

industry (IFI) holds the potential to

boost economy if an efficient

mechanism is in place.

Dr. Ali Hasan Hamdani, an

economist said IFI industry needed

creativity and guidance to ensureShariah compatibility and integrity of

the products offered in the country.

The State Bank of Pakistan (SBP) is

playing a major in role in spreading

the market of Islamic Banking in

Pakistan which is commendable.

This was stated by Vice President -Product Development & Shariah

Compliance Meezan Bank Ltd. ur-

Rehman Khan at a seminar on

"Islamic Banking" organized by

Pakistan's First Islamic Finance Expo

& Conference was held on 18-19

May, 2012 here in Expo centre,

Karachi.

Detail analysis will be covered in our

next issue.

The Frontier Education Foundation

(FEF) has introduced the Islamic

mode of financing being a demand

of Shariah Complaint Financing.

This may now attract the people of

northern and southern regions to

avail the financial assistance facility

for development of education

i n s t i t u t i o n s . T h e p r e s e n tconventional system is discontinued

and in future financial assistance

will be granted on the basis of

Diminishing Musharaka.

Meezan Bank, Pakistan‟s first and

largest Islamic Bank held the PrizeDistribution ceremony of “Car

Ijarah Road Caravan” at Arena,

Karachi. This ceremony was in

continuation of “Road Show 2011”

and was attended by a large number

of participants including car dealers,

manufactures and allied business

companies.

COMMECS Institute of Business and

Emerging Sciences (CIBES).

An International Conference on

Islamic Funds and Investment

opened last week in a local hotel

which was attended by a largenumber of investors from UAE,

USA, UK, Canada, Malaysia and

Qatar. The topics covered on first day

of the Conference were, Investment

opportunities for Islamic Funds,

Shariah status and Mechanism of

Islamic Investments and Funds with

global trends, Standardization and

Brokerage and exchange rules and the

Islamic Exchange Indices. The next

two days have been allocated for

training workshops on the alliedtopics on Islamic Investments,

Marketing and Shariah guidelines.


Disclaimer:


First Islamic FinanceExpo held from 18-19May 2012

FEF Introduces IslamicMode of Financing

SECP publish revised Code for Corporate Governance

The Securities and Exchange Commission of Pakistan (SECP) has said

requirement of the Code of Corporate Governance 2012 to immediately

disseminate any material information relating to the business and other affairs

of a listed company were laid down in the interest of the general public andmarket participants. It will now be mandatory for directors of listed

companies to attain certification under any director training programme

offered by any institution (local or foreign), which meets the criteria specified

by the SECP.

The appointment, remuneration and terms and conditions of employment of

the Chief Financial Officers (CFO), Company Secretary (CS) and the Head of

Internal Audit (IA) of listed companies shall be determined by the board

rather than CEO.

Meezan Bank Car Ijarahholds Prize Distributionceremony of Car IjarahRoad Caravan

Islamic Financial Systemc a n c o n t a i nUnemployment andBoost economy

CIBES Organizes Seminaron 'Islamic Banking'

Islamic finance, fundsI n d u s t r y G a i n i n gPopularity

7/27/2019 IFP - May 2012


and global investors to their

local investments; and

Cyclical market activities in the

form of transnational exchange

between emerging nations.

This book examines how Islamic

banking has capitalized on

innovation over the past two

decades to fulfill its promise of

A New Financial Dawn examines

the global economic crisis in the

context of how western markets

inf luence I s lamic f inancia linnovation. It discusses how market

conditions are creating a fertile

seedbed for the next generation of

innovation in Shariah-compliant

financial services. The authors also

believe that Islamic finance could be

a substitute for capitalism. The

similarities and differences on

Islamic finance from conventional

finance are reviewed in the book.

Islamic finance is gaining market

share over conventional finance due

to four main factors:

Favourable shifts in economic

conditions in countries with

muslim population;

Government support in

improving Islamic finance

industry;

A move back by Middle eastern

equality and fairness by rebuilding

trust in banking and financial

services and fulfilling the needs of

the nation. It tells us about theinnovation in the financial services,

its future potential for additional

growth and the economic centre‟s

and hubs.The book also deals with

the issues and strategies of the

industry and the external factors to

be considered strategically.

Page 7An initiative of IFP forum

Book in the Spotlight

A New Financial Dawn The Rise of Islamic Finance

By Joseph DiVanna and Antonie Sreth

Reviewed by

Bisma Hareem

Published by: Leonardo and

Francis Press

Price: Rs. 1,450/-

About the Author

Joseph DiVanna is an author, global speaker and currently Managing Director of Maris Strategies. He

contributes to a number of journals of banking and finance, including The Banker, Financial World Magazine

and New Horizon. He is the author of Understanding Islamic Banking, Redefining Financial Services, the

Future of Retail Banking and the editor of How to Run a Bank.

Antoine Sreih is the Chief Executive Officer of Europe Arab Bank. He is also Chairman of Wahda Bank in

Libya. He is a highly experienced professional with a strong international background in IT and Operations,

project management and general banking.

7/27/2019 IFP - May 2012


Documents

IFP - May 2012