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Islamic Finance Transaction Broadens Investor Base In Nigeria

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In 2016, the Africa Finance Corporation (AFC), a pan-African multilateral lender based in Nigeria, sought to raise financing at competitive pricing levels in a bid to help it fund a number of new infrastructure projects in Africa. It also aimed to diversify its investor base in the process. This objective was achieved through the successful issue of a Murabahah Sukuk.

At the time of the issue, Andrew Alli, AFC president and chief executive said: “The core values of Islamic finance and the need to invest ethically in assets that have a tangible positive social impact, made a Sukuk issuance a natural choice for us. We offer global investors the chance to be involved in high-impact infrastructure projects that not only promote social and economic development across Africa but also generate economic returns for our investors.”

The AFC initially sought to raise US$100 million, but upsized its issuance on the back of strong demand from international investors to $150 million and was still oversubsribed. AFC was able to attract investor interest from Asia, an important part of the bank’s bid to diversify its investor base. Close to two-thirds (63%) of the notes were placed with accounts based in the Asia Pacific region, 23% with accounts in the Middle East, 15% with accounts in Africa and 1% in accounts based elsewhere.

Emirates NBD Capital, a Dubai-based investment bank, Mitsubishi UFJ Financial Group, a Japanese financial services group, and Rand Merchant Bank acted as joint bookrunners and joint lead managers with Emirates NBD Capital also acting as the sole global coordinator.

The innovative solution was structured as a Murabahah Sukuk backed by Shari’ah Compliant cash flows. For this deal to be classified as being Shari’ah compliant, it needed to be reviewed and approved by a Shari’ah Advisory Committee (SAC). This approval was obtained by the Emirates NBD Shari’ah Council and reviewed by the FNB Islamic Banking SAC which houses the SAC that has world-renowned and accredited scholars as members. The SAC is mandated to look after all Shari’ah related issues across the FirstRand Group. A Sukuk al-Murabahah is a Sukuk that is structured based on the contract of Murabahah (cost-plus sale).

Sukuk are defined by the Accounting and Auditing Organisation for Islamic Financial Institutions as certificates of equal value representing undivided shares in the ownership of tangible assets, usufructs and services or (in the ownership of) the assets of particular projects or special investment activity.

A Murabahah contract is an agreement whereby the seller sells to a customer a commodity or an asset, which the seller has purchased and acquired based on a promise received from the customer to buy. The selling price comprises the cost plus an agreed profit margin.

Murabahah Sukuks are generally short term in nature with tenors between two to four years. They are a suitable product for new issuers to use as an entry point to attract targeted investors while allowing the issuer to establish a presence in this market and the opportunity to build a track record which can be used when issuing longer dated Sukuks. According to the Sukuk Perceptions and Forecast Report 2017, these types of Sukuks were the second most used in terms of structure type, valued at around $11 billion, and can play a key role in tapping much needed funds in the future as well as allow for the issuer to diversify its funding base.

The AFC Sukuk demonstrates the possibilities that can be achieved using the right partner who understands the client’s funding needs and objectives and, at the same time, delivers a product that is inclusive in allowing investors requiring a Shari’ah compliant return to meet their objectives simultaneously.

This transaction was awarded the 2017 Deal of the Year in the category Islamic Finance in Africa by The Banker magazine.

Originally published on www.biznews.com

Islamic Finance Not Just For Muslims, But For Everyone

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Professor Binta Tijani Jibril is the Director of International Institute of Islamic Banking and Finance, Bayero University, Kano State. The head of the lone university-based Islamic banking institute in West Africa told CHIJIOKE NELSON in this interview that the model is business, ethical, not religion and about sweeping global economies with its appealing concepts.

Why Islamic financing and how acceptable is the banking model?
We are talking about an alternative system of finance that is viable, resilient, and that is first and foremost ethically compliant. That is the only difference between the Islamic finance and the conventional finance. Islamic finance is not necessarily about charity, it is good for Muslims and equally good for non-Muslims. Countries around the world, both Muslim countries and Muslim-minority ones have tested and attested to the viability of Islamic finance as a good alternative.

In particular, after the global financial crisis of 2008, which was tagged “economic meltdown,” while other conventional banks where suffering, people noticed that Islamic financing institutions remained resilient. They were mostly not affected by that particular crises and the major reason is that Islamic financing is asset backed. So, once you are dealing with assets, it means that there is a direct link between the financial sector and the main sector of the economy. Now Europe, America, and other countries in Africa not necessarily North Africa, are now keying into Islamic finance because its value has been realised by Muslims and non-Muslims alike.

How will the Islamic finance model help Nigerians?
What Islamic banking and finance will do in general is that it will increase financial inclusion. There are so many Muslims and non-Muslims that are not yet engaged in the formal financial system, perhaps because of their religion. Majority of them are Muslims, while some are also Christians because this issue of protection of interest applies to all. Note also that there are Christians that are averse to interest rate, so because of that so many people are operating outside the mainstream financial system and we know inclusion is critical for economic growth. If your rate of financial inclusion is high, it’s very difficult to achieve economic development. So when you have alternatives that many people will feel comfortable with then you are increasing the deepening and making development a reality.

Originally published on www.guardian.ng

Halal Takaful Nigeria Distributes Surplus Bonus To Customers

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The Islamic Insurance division of Cornerstone Insurance Plc, Halal Takaful Nigeria has distributed surplus bonus to its customers in appreciation of their patronage and loyalty for the year 2015.
Justifying the act, Group head of the Islamic Insurance Window of Cornerstone, Hajia Thaibat Adeniran said the decision was to allow customers who have no claim on the General Insurance Product covered within the period under review benefit from the over N6 million bonus.
The N6 million was shared to about 200 customers of the firm under the 2015 Motor insurance scheme who did not make claim in the period under review in Abuja yesterday. Takaful operates from all the 33 branches of its moder-company, Cornerstone across the country.
Hajia Adeniran said the sharing of the fund was to activate public trust and believe in Takaful insurance services and promote financial inclusion and deepen insurance penetration in line with the principles of Takaful.”Takaful has come to add value to the financial inclusion drive of the federal government,” she said.
“Instead of consuming all the profit, we share it with the customers who have not made claim at all or made part claim over the year,” she added while addressing some of the beneficiaries and prospective customers at the Shehu Musa Yar’Adua centre yeaterday.
She lamented the lack of knowledge or poor awareness of the services and benefits of Takaful in the country.
“In Takaful, it is a win-win-situation. If you invest, you either make a claim or share from the bonus,” member of the advisory council of experts with Takaful, Mallam Muhammad Hussaini said in his opening remark. He added that Halal Takaful has all it takes to cover motor and general insurance business in line with Islamic ethics.
Mallam Hussaini explained that Takaful business model eliminates the elements of uncertainty and chance, the twin concepts of which conventional insurance thrives on.
Takaful is centered on transparency of five pillars of Islam – community welfare, piety, brotherhood, charity, and mutual guarantee.
Speaking on the heels of the presentation of cheques to the beneficiaries, Chairman, board of trustees of NASFAT, Alhaji Abdullateef Olasupo enthused that Islamic banking is the best in terms of products. “It not for Muslims alone. It is also for Christians,” he said, while charging the management of the insurance firm to market Islamic finance to the whole public – both Muslims and Christians.
Secretary of computer based test centres in Nigeria, Uche Newton recalled his pleasant experience with Jaize Bank which he said had given him about N100 million loan facility despite being a Christian. “It’s not for Muslims alone. It is for Nigerians because they do not segregate or discriminate. Islamic banking is not exploitative. Am already a beneficiary and I enjoin all Nigerians to come on stage.”
The event was attended by many including representatives from the Islamic Banking Institute of Nigeria.
The principle covering Takaful says there should be joint guarantee – everybody in the scheme is for the benefit of all. If there is no claim, those who did not claim should also benefit. It gives everybody – Muslim, non-Muslim, Corporate bodies and individuals the opportunity to benefit.
Originakky published on www.leadership.ng

Islamic Finance Professionals Train Imams, Others In Nigeria

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THE Lagos State government has commended the Institute of Islamic Finance Professionals (IIFP) for coming up with an initiative to lessen the financial burden of Muslim scholars.

The Commissioner for Home Affairs, Dr Abdul-Hakeem Abdul-Lateef, gave the commendation during an IIFP workshop held at the Lagos Chamber of Commerce and Industry (LCCI), Alausa, Ikeja.

At the workshop, which had over 230 representatives of various mosques in the state, led by the five divisional imams, in attendance, Abdul-Lateef said the outcome of the event would cushion the effects of the current recession in the country among the participants and the communities they represented.

“To the Lagos State government, it is another success story to have people who continue to look for ways out of challenges. This is turning our problems to successes. You have come to increase your skills and knowledge on strategies to increase wealth among Muslim scholars. This workshop will be of immense benefits if well harnessed,” he said.

The commissioner urged Muslims to embrace the halal (lawful) way of creating wealth in an unconventional situation, saying: “The same goes for our way of viewing politics as a dirty game. Politics is not dirty but is rather populated by people who lack the fear of Allah. If many of you are into politics, our society will be better for it.”

IIFP Registrar, Abdul-Jelil Rabiu, said the workshop was meant to equip the management of the mosques, Islamic organisations, schools and asalatu groups on Islamic finance and bring Islamic finance to the grass roots.

Participants, he said, would have been exposed various benefits inherent in Islamic finance.

“The fact that Islamic finance has not been localised does not make the various groups at the grass roots to tap from its benefits. We hope that after this workshop, the mosques, Islamic organisations, schools and asalatu groups can improve on their economic activities and combat poverty with varieties of non-interest banking and financing products,” he said.

According to Rabiu, IIFP is licensed to design banking products, certify conventional banking professionals and ensure compliance with the ethics of the industry.

“We don’t see ourselves as substitute, rather as alternative to the conventional system. We are out to provide a healthy rivalry. We have come as an alternative to complement the efforts of the present government in terms of fighting economic crimes, increasing wealth and stabilising the economy,” he said.

ourselves as substitute, rather as alternative to the conventional system. We are out to provide a healthy rivalry. We have come as an alternative to complement the efforts of the present government in terms of fighting economic crimes, increasing wealth and stabilising the economy,” he said.

Originally published on www.tribuneonlineng.com

East Africa Braces For Islamic Finance

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east-africaNairobi: East Africa could be the new frontier for Islamic finance following the launch of the first East Africa Islamic finance summit in Nairobi.

Financial experts drawn from the region noted that East Africa features a potentially strong demand for Islamic services and that its growing reach promises a number of benefits.

The Islamic finance industry has seen tremendous increase in recent years transcending its traditional geographic boundaries and its entrance into East Africa could revolutionize the financial sector.

Participants attending the first East Africa Islamic Finance summit heard that the region presents significant opportunities to deepen and broaden financial intermediation.

The experts said Islamic finance principles of risk sharing and asset-based financing can help promote better risk management by financial institutions and customers.

The summit which attracted participants and speakers from the region’s key institutions, financial regulators from Mauritius and Malaysia and experts in Islamic Finance charted the way forward for Islamic finance development in the region.

The financial experts also explored how the region’s political and economic prospects may impact on Islamic finance development, trade and investments.

While, Islamic finance institutions can increase the financial inclusion of underserved populations and improve access to finance for small and medium-sized enterprises, challenges in regulations, supervision and conduct of monetary policy have hindered fast penetration into the East African market.

Addressing East Africa Islamic finance summit last Wednesday, Kenya’s attorney general, Dr. Githu Muigai said the country is in the process of reviewing all laws and regulations governing its nascent Islamic finance industry.

The regulations, Dr.Muigai said would aid the issuance of a debut Islamic law-compliant bond known as a sukuk which are well suited for infrastructure financing, thereby supporting growth and economic development.

“We want to be able to facilitate the issuance of the bond, the process will be completed in a maximum of nine months,” said Dr Muigai.

east-africa-becomes-a-frontier-of-islamic-financeThese regulatory and legal issues, Dr Muigai said are particularly important because of the increasing complexity of transactions as they seek to circumvent the prohibition against interest.

The overall supervisory mechanisms for conventional finance and Islamic finance call for protection of investment accounts.

During the summit, a paper presented by Kenya Bankers Association on Islamic banking and economic infrastructure demonstrated Kenya’s potential and efforts towards promoting Islamic finance development.

Islamic finance is one of the fastest growing segments of the financial industry, and not just in the Middle East. The growth of Islamic banking outpaced conventional banking over the past decade and now accounts for more than 20 percent of banking system assets in 10 countries.

The countries include the Islamic Republic of Iran and Sudan, which have full-fledged Islamic financial centers, as well as Bangladesh, Brunei Darussalam, Kuwait, Malaysia, Qatar, Saudi Arabia, the United Arab Emirates, and Yemen.

Originally published on www.saudigazette.com.sa

Nigeria Sets Up Committee To Advise On First Sovereign Sukuk

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nigeria-first-sukuk-debutBy Oludare Mayowa and Chijioke Ohuocha

LAGOS Feb 18 (Reuters) – Nigeria has set up a government committee to advise on issuing the country’s first sovereign sukuk, the Securities and Exchange Commission (SEC) said on Thursday, citing the need to explore alternative funding sources.

Africa’s biggest economy plans to borrow as much as $5 billion to help fund a budget deficit worsened by the slump in oil prices that has slashed revenues and weakened the naira.

SEC spokesman Nalf Abdusalam said the new committee, including officials from the Debt Management Office (DMO), would advise on the amount to be raised, the timing and jurisdiction of the issue.

“Any time from the first week of March, the committee is expected to submit its report,” he said.

Islamic banking assets globally now exceed $1 trillion and could reach $4 trillion by 2020, analysts say.

Nigeria has asked the African Development Bank for a $1 billion budget support loan and has held “explanatory talks” with the World Bank.

Issuance of a sovereign sukuk is part of a strategic plan developed by the DMO three years ago to develop alternative sources of funding and to establish a benchmark curve for corporates to follow.

In 2013, Nigeria’s Osun State issued 10 billion naira ($62 million) of sukuk, but no other sukuk transactions have followed.

Nigeria is home to the largest Muslim population in sub-Saharan Africa, with about half of its 160 million people members of the Islamic faith. It is also home to one of Africa’s fastest growing consumer and corporate banking sectors.

In January, the DMO and SEC agreed to work on a debut issuance of sovereign Islamic bonds (sukuk) before the end of the year. (Writing by Chijioke Ohuocha; Editing by Ulf Laessing and Susan Thomas)

Originally published on www.reuters.com

 

SEC/DMO To Issue Nigeria’s First Sovereign Sukuk In May

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nigeria-to-debut-sukukLagos:- The Securities and Exchange Commission of Nigeria on Wednesday said the nation’s first sovereign “Sukuk” would be issued in May 2016, barring any unforeseen circumstances.
Sukuk is an Islamic financial certificate.
It is similar to a bond in Western finance.
However, this complies with Sharia, the Islamic religious law.
Mounir Gwarzo, the Director-General of SEC, confirmed the development to the News Agency of Nigeria in Lagos.
Gwarzo said the commission was working with the Debt Management Office to ensure issuance of the bond in the next three to four months.
He said the commission would support DMO in capacity building to ensure successful issuance of the bond.
Gwarzo said the slide in crude oil price and drop in revenue generation made it imperative for government to source for alternative sources of capital to finance infrastructure development.
“The need for alternative sources of capital to finance infrastructure becomes increasingly more compelling with fragility of growth from major emerging markets,” Gwarzo said.
He said the country would attract significant amounts of affordable capital from the Gulf countries and other established world issuing a sovereign sukuk.
According to him, SEC and DMO will collaborate on ways to address the country’s investment needs.
The director-general said SEC would equally enable nominated staff of DMO to participate at the Capital Market Committee sub-committee on non-interest products to deepen their capacity.
He added that the sovereign sukuk, when issued, would send the much needed positive message to the market amid the negative investor sentiment that currently persists.
Gwarzo predicted that Nigeria’s maiden sovereign sukuk would be oversubscribed with enhanced participation of domestic and foreign investors.
NAN reports that when SEC released the rules on sukuk issuance in 2013, the Osun State Government took advantage of the robust regulatory framework to issue the nation’s first sukuk in which it raised N11.4 billion.

Nigeria To Issue Maiden Islamic Financial Bond, ‘Sukuk’

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first-sukuk-issuance-in-LagosLagos:- The Securities and Exchange Commission (SEC) has reached an agreement with the Debt Management Office (DMO) to issue Nigeria’s maiden sovereign Sukuk.

Sukuk is an Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia, Islamic religious law.

Under a Sukuk, the issuer sells an investor group the certificate, which then rents it back to the issuer for a predetermined rental fee, while the issuer also makes a contractual promise to buy back the bonds at a future date at par value.

The decision by the two government agencies to collaborate to issue the Sukuk was a major outcome of the visit of the Director General of SEC, Mounir Gwarzo to the DMO on Wednesday.

The visit was a return gesture to a similar exercise by the Director General of DMO, Abraham Nwankwo, in November last year.

During the visit
​, Mr. Gwarzo said the agreement by the two chief executives to partner to deepen the domestic bond market was a clear sign of a closer working relationship they were now enjoy.

Welcoming the SEC delegation to his office, Mr. Nwankwo highlighted the importance DMO attached to the non-interest products in the Nigerian financial market.

He revealed that issuing a sovereign Sukuk has been part of the institution’s strategic plan drawn three years ago, urging Nigerians to support SEC to building capacity in order to realize the goal of issuing Nigeria’s first sovereign Sukuk in 2016.

Responding, Mr. Gwarzo assured the DMO of continued support of SEC, pledging to adopt measures that would enhance the capacity of relevant staff of the debt management agency.

The measures include establishing regular interface between the DMO and key staff of SEC who are very knowledgeable in non-interest finance products.

Mr. Gwarzo said the Commission would equally allow DMO staff to participate in the Capital Market Committee sub-committee on non-interest products to further deepen their knowledge and expertise.

“Within the context of continued decline in the prices of crude oil in the international markets, attendant drop in both foreign exchange and government revenues as well as fragility of growth from major emerging markets like China, the need for alternative sources of capital to finance infrastructure becomes increasingly more compelling,” Mr. Gwarzo stated.

Issuing a sovereign Sukuk, he explained, would attract into Nigeria significant and affordable capital from the Gulf countries and other established Islamic markets around the world.

The SEC Director General said issuing a sovereign Sukuk would send a positive message to the market amidst the negative investor sentiment that persists currently.

He was optimistic that Nigeria’s maiden sovereign Sukuk would be oversubscribed as both domestic and foreign investors have a rich appetite for exposure to Nigeria.

Urging DMO to take advantage of this unique opportunity to make a mark on the Sukuk market, in spite of the challenging times, the SEC boss recalled that after the release of rules on Sukuk issuance in 2013, Osun State was the first to issue Sukuk to raise N11.4 billion.

Islamic Banking: Panacea for dwindling Global Economy- Emir of Kano

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Emir-sanusi-lamido-sanusiEmir of Kano, Mallam Muhammadu Sanusi II has described Islamic Banking as the only panacea for the dwindling global economy as it will impact positively on many developing economies.

Sanusi said Islamic banking was conceived to serve as a force of mediation in circumstances where the need for bridging the deficit of infrastructure was most needed, adding that non-interest capital market could only flourish with the Islamic banking becoming fully operational.

Speaking at a high level regional round table workshop on non-interest capital for the North West region market held in Kano on Monday, the former CBN governor said for decades the global financial system had suffered in the face of inconsistencies in the implementation of viable economic policies in line with the best global practice.

He affirmed that allowing Islamic banking to hold sway would go a long way towards discouraging the forces of artificial economic stagnation.

Originally published on wwwthisdaylive.com

SEC Wants State Govts To Explore Islamic Financing

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islamic-finance-in-nigeriaIn deepening Islamic finance in Nigeria, Securities and Exchange Commission (SEC), is organising a roundtable workshop on non-interest Capital Market in encouraging state governments to explore the alternative model for financing infrastructure projects through Islamic Capital market products such as Sukuk.

The workshop with the theme, “Financing Development through Islamic Capital Market – a Viable Alternative” scheduled for October 19, 2015 in Kano.

According to the press release by the Commission, this is in line with its strategic Ten year Master Plan on Non-Interest Capital Market.

It stated, “Guests expected at the workshop include States Commissioners of Finance for Kano and Jigawa States, States Investment Companies, States Chambers of Commerce and Industries, Manufacturers Associations, SMEDAN, BUK Institute of Islamic Finance, Market Operators within the Region, Corporate Organizations and other Stakeholders.

Recently, at a round table meeting with the Lord Mayor of London, the director-general of SEC, Mr Mounir Gwarzo said the Commission is planning to grow non-interest capital market products to be 25 per cent of the overall market capitalization.

Gwarzo stated that the SEC was considering modalities for setting up a Sharia Advisory Council as a body of experts to advise on non-interest product applications.

To boost liquidity of non-interest products, SEC said, it is working with a committee to support the FMDQ platform to enable secondary market trading of the products, “We are engaging the Central Bank of Nigeria (CBN) to obtain liquidity status for non-interest products, especially the Sukuk.

SEC noted that all these efforts are hinged on the fact that Nigeria has more than 80 million Muslims compared to Malaysia’s total population of 30 million. In addition, Nigeria has a larger economy than Malaysia’s, being the largest economy in Africa.

To harness this potential, Gwarzo said SEC set up an industry-wide Committee of experts last year to produce a 10-year master plan on non-interest capital market product and their recommendations have been incorporated into the broader capital market master plan which we have begun implementing.

Originally published on www.leadership.ng