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Singapore Sees Bright Prospects In Islamic Finance
SINGAPORE: Singapore Sees Bright Prospects In Islamic Finance. Singapore’s prospects in Islamic finance look bright, with more funds establishing themselves here to tap the Islamic debt market, the Monetary Authority of Singapore’s (MAS) top executive said on Tuesday (June 3).
“Singapore is the only non-Muslim majority country among the top 15 countries for Islamic finance,” MAS Managing Director Ravi Menon said at the opening of the 5th World Islamic Banking Conference Asia Summit that is being held in the city-state.
“More funds continue to be established here, to meet demand from clients in Asia as well as from the Middle East, while several corporations have established sukuk programmes in Singapore to tap the market over the next few years,” he added.
Sukuks are bond-like structures that comply with Islamic investment principles, which prohibit the charging or paying of interest.
Mr Toby O’Connor, the CEO of Islamic Bank of Asia said: “There is a lot of liquidity in the conventional space that the new Islamic products are competing with, but it’s a huge opportunity. When you look at the wealth management space, there’s a lot of liquidity coming into Singapore, a portion of that will go to Islamic finance, (and) when you look at sukuk, we’ve seen a number of issuances, programmes being set up”.
Syed Abdull Aziz Syed Kechik, Director and CEO of OCBC Al-Amin Bank Berhad added, “Sukuk has arisen to become a key instrument for cross-border capital flows, driven by the ever-growing demand for Shariah-compliant investments that transcend borders. The sobering reality, however, remains that the current demand for sukuk outweighs supply about twice over”.
Islamic finance has been growing by double-digits in recent years, making it one of the star performers in international finance. The industry has also become more international, as seen from recent sovereign Islamic bond issues by newcomers Britain and Hong Kong.
According to Mr Menon, global Islamic financial assets are estimated to have reached US$1.8 trillion by the end of 2013, up from US$1.5 trillion in 2012.
This is a sector that saw double digit growth last year, with more players jumping in to tap growing demand.
“As more countries cater for Islamic finance, the scope for cross-border Islamic finance increases. We are beginning to see more cross-border sukuk issuance within Asia as well as between the Middle East and Asia,” he said.
In Singapore, Mr Menon said Islamic assets under management have surged nearly fourfold over the last five years.
There are now 15 banks in Singapore involved in Islamic banking, double the number five years ago. The city-state also had nearly 30 sukuk issuances to date, with seven in 2013 alone, he added.
However, Kuala Lumpur is currently the world leader in Islamic sukuk market, accounting for 60 percent of the global total.
To tap growing demand, Hong Kong and the UK have recently taken steps to facilitate sukuk issuance.
“These are very important initiatives from an Islamic finance perspective. When you have a sovereign taking the lead, you then have private sector also following suit. It would lead to other UK corporates looking to raise sukuks, (and then) lead to other corporates from other parts of the world looking to issue sukuks in London and similarly out of Hong Kong,” said Mr Wasim Saifi, the Global Head of Islamic Banking in Consumer Banking and CEO of Standard Chartered Saadiq in Malaysia.
Industry players say the increase in trade flows between Asia and the Middle East as well as growing support for Islamic finance will provide significant opportunities. A key to tapping these opportunities lies in driving greater connectivity between the different markets.
According to the latest EY report, global Islamic banking assets are expected to grow to 3.4 trillion US dollars by 2018.
In particular, EY identified six rapid growth markets – Qatar, Indonesia, Saudi Arabia, Malaysia, UAE and Turkey (QISMUT).
The consultancy expects Islamic banking assets with commercial banks to grow at a compound annual growth rate of 19.7% over 2013-2018 across the QISMUT countries, to reach US$1.6 trillion by 2018.
Islamic banking assets in these six countries are set to cross US$662 billion in 2013.
Originally published on www.channelnewsasia.com
BTMU Malaysia To Set Up Multi-Currency Sukuk Programme
The Bank of Tokyo-BTMU Malaysia to set up Multi-Currency Sukuk Programme. Mitsubishi UFJ, Ltd. (BTMU) (President:
Nobuyuki Hirano) is pleased to announce that its subsidiary, Bank of Tokyo-Mitsubishi UFJ (Malaysia)
Berhad (BTMU Malaysia), has set up a USD500 million (or equivalent) multi-currency sukuk programme.
This is the first by a Japanese commercial bank.
Through this programme, BTMU Malaysia has obtained the mandate to raise funds in multi-currencies
including US Dollars, Malaysian Ringgit and Japanese Yen over 10 years. BTMU Malaysia envisages issuing
its first tranche of the sukuk at an appropriate timing in anticipation of strong global demand for sukuk
instruments. The funds raised through this sukuk programme will serve as funding sources for BTMU
Malaysia to keep pace with the increasing demand and its growing exposures to multi-currencies Shariah
compliant financing.
Details of the BTMU Malaysia Sukuk Programme
Programme Amount : USD500 million (or equivalent)
Signing Date : June 5, 2014
Programme Tenor : 10 years
Programme Rating : AAA (bg) / Stable, on the Malaysian national scale
from RAM Rating Services Berhad
Guarantor : The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Joint Bookrunners, Joint Lead : CIMB Investment Bank Berhad, Mitsubishi UFJ Securities
Arrangers and Joint Lead Managers International Plc, Bank of Tokyo-Mitsubishi UFJ (Malaysia)
Berhad
BTMU Malaysia’s Islamic banking business has progressed steadily over the past few years where it has taken
on a proactive role in providing Islamic financial services through its International Currency Business Unit,
since it obtained license from the central bank of Malaysia in 2008. BTMU Malaysia is the only Japanese
bank to have its own in-house Shariah Committee which is formed by a team of Shariah scholars who provide
Shariah compliance supervision and advisory on Islamic financial transactions.
This sukuk programme further underpins BTMU and BTMU Malaysia’s commitment to further contribute to
the development of Islamic finance and provide stronger support to customers’ demands for Islamic financial
services not only in Malaysia, but also in other Asian and Middle East countries.
Japan: BTMU Malaysia Signs MoU with Islamic Corporation for the Development of the Private Sector
The Bank of Tokyo-Japan: BTMU Malaysia Signs MoU with Islamic Corporation for the Development of the Private Sector. Mitsubishi UFJ, Ltd. (BTMU) announced the other day that its subsidiary, Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad (BTMUM), has recently signed a Memorandum of Understanding (MOU) with Islamic Corporation for the Development of the Private Sector (ICD) in Tokyo, Japan on April 25, 2014.
ICD, headquartered in Jeddah, Saudi Arabia, is a multilateral organization established in 1999 as a part of Islamic Development Bank (IDB) Group. The mission of ICD is to promote economic development of IDB’s member countries by providing Islamic finacial services to their respective private sectors.
In 2008, BTMUM obtained an approval from Bank Negara Malaysia for its International Currency Business Unit to conduct Islamic banking business in any currencies other than Malaysian Ringgit. Being the only Japanese bank with its own in-house Shariah Committee, BTMUM is dedicated to provide Islamic financial services. Shariah committee is formed by a team of Shariah scholars who provide Shariah compliance supervision and advisory on Islamic financial transactions.
With the signing of this MOU, BTMU and BTMUM intend to further contribute to the development of Islamic finance and would strive to provide stronger support to customers’ demands for Islamic financial services not only in Malaysia but also in other Asian and Middle East countries.
Ethical Or Islamic Banking To Take Over The Traditional Banking
Islamic Banking
Islamic BankingThe chief executive of Abu Dhabi Islamic Bank (ADIB), the largest Sharia-compliant bank in the United Arab Emirates, believes the banking industry is on the cusp of a historic transformation that will see a convergence between conventional and ethical banking.
“They will come together and they are coming together. Who is doing that to them? The customers on one side, and the regulators on the other side,” Tirad Mahmoud told CNBC’s “Access: Middle East” in an exclusive interview.
Mahmoud, who argues Islamic banking is only part of a larger move towards ethical banking in the post-crisis world, took over the helm of ADIB in 2008 after a 22-year stint at Citigroup. He says the value proposition of Islamic banks already extends to non-Muslim clients.
Earlier in April, ADIB acquired the retail operations of Barclays in the United Arab Emirates for a price tag of $177 million, giving it access to expatriate customers. The purchase will see 110,000 accounts transferred to Sharia-compliant accounts.
Islamic finance asserts that currency has no intrinsic value and must be directly attributed to an underlying asset. It also prohibits the collection and payment of interest, speculative or derivative instruments, as well as investments in breach of its code of ethics.
“It’s all about ethics and I think that’s where the future is going. Can we finance hotels? Yes. Do we finance hotels that sell alcohol and gambling? The answer is no” Mahmoud said.
The global Islamic finance industry is expected to double to $2.6 trillion by 2017, according to a recent report by financial services firm PwC.
“We believe it’s only a matter of time before it achieves critical mass, as the pool of assets broadens and deepens, and enhances liquidity,” Standard & Poor’s said in its 2014 Global Islamic Finance Outlook .
It’s a niche other banks, including Deutsche Bank, Citi, UBS and Barclays, are tapping into, offering their own Sharia-compliant banking products.
Sovereigns are also following. The Hong Kong government plans to issue up to one billion U.S. dollars’ worth of sukuk, or Islamic bonds, in 2014. In October, British Prime Minister David Cameron revealed plans to issue $335 million worth of sukuk.
There is a substantial amount of research emerging about whether Islamic finance offers systemic benefits to the global economy.
“We have been through the biggest stress test, at the end of 2008. I think we all saw who fell down and who didn’t. We do not speculate in derivatives,” Mahmoud said.
“Islamic banks by mandate, by doctrine, are tied to the real economy, to real assets.”
Sharia-compliance doesn’t necessarily make a bank trouble-free, however. In a report on ADIB, Fitch Ratings cited “underlying weak asset quality, exposure to problem financing, sizable loan concentrations and renegotiated loan book, and consequent vulnerability to event risk and potentially high losses.”
But the report also noted the “ability and willingness of the UAE federal authorities to support ADIB” if needed due to the lender’s “systemic importance.”
ADIB has a footing in seven countries including the UAE, and is eyeing Saudi Arabia, Algeria, Turkey, Iraq, Algeria and Iran as strong contenders for future expansion.
“What we look for is an ecosystem that is good for our business model so a large population base with a large economic base is what retail banks look for. We are predominantly a retail bank,” Mahmoud explained.
Last week, ADIB posted a 20.4 percent increase in first-quarter net profit, driven by higher lending. Its stock is up over 40 percent so far this year, outperforming the benchmark Abu Dhabi Securities Exchange (ADX).
Originally published on CNBC New Channel
Malaysia’s Islamic Finance Showcase Churns RM1Billion In Deals
The combined sales generated at the Malaysia International Halal Showcase (Mihas) 2014, comprising the exhibition and the incoming buying mission (IBM) programme rose by 21% to reach RM1 billion, from RM798 million in 2013.
It is the non-food and services sectors such as toiletries, body care, hygiene and financial products that made a significant impact, with a contribution of RM82.9 million from sales of RM489.2 million generated during the event in Kuala Lumpur, the organisers said.
“The key sectors which attracted strong interest among buyers at the exhibition were beverages, processed and ready-to-eat products, frozen Malaysian international halal food, seasonings and spices,” the organisers said in a statement.
Organised by Malaysia External Trade Development Corp (Matrade), an agency of the Ministry of International Trade and Industry, the Islamic trade fair focuses on the sourcing of halal products and services for international markets.
It is in its 11th year and is gaining traction among the foreign Muslim and international traders from 41 countries that participated in the IBM.
Some 521 companies from 26 countries offered 620 booths at the exhibition held at the Kuala Lumpur City Convention Centre.
Among the countries that participated this year were Brunei, South Africa, Turkey, Indonesia, China, Belgium and Chile. The number of participating companies for Mihas 2014 also increased by 21%, compared to last year’s figure of 430 companies.
On the sidelines of the event, several speakers shared valuable insights into the halal market in the UK and Belgium while another segment highlighted opportunities in franchising in the halal industry.
Mihas 2014 is the first in which the organisers partnered with Saudi Arabia, through the Saudi Export Development Authority, in a bid to further strengthen the trade relationship between the two countries.
“The cooperation also helped create more opportunities for both countries to collaborate and tap into the huge halal market demands within the Gulf Cooperation Council,” the organisers pointed out.
The four-day Mihas attracted 20,818 visitors from 60 countries, an increase of 12.5% compared to the number of visitors last year.
Matrade also organised market briefing sessions for Malaysian SMEs during this event.
Originally published in www.themalaysianreserve.com