The UK goes right, In this issue the US goes wrongislamicfinancenews.com/sites/default/files/newsletters/v... · 2016-03-31 · He then determines the prospects of getting not only

Vol. 6, Issue 11 20th March 2009

T h e W o r l d ’ s G l o b a l I s l a m i c F i n a n c e N e w s P r o v i d e r

When a fi nancier lends money, he wants to know exactly what it’s going to be used for. He then determines the prospects of getting not only his money back but also some profi t. When he does decide to lend the money, he lays down conditions on its use and the re-payment mode. The larger the loan, the more concerned the fi nancier will be over the proper use of the money.

Barack Obama rode into Washington with a posse of what he claimed were the smartest guys to rescue hapless America — and the rest of the world — from the fi nancial crisis and wrangled astronomical amounts out of Con-gress. But it looks like the Wall Street gang has outwitted the neophyte in the White House.

Last fall, fi nancial conglomerate AIG (“too huge to be allowed to fail”) had already demonstrat-ed it had no qualms about using the taxpay-ers’ bailout money for anything but productive purposes. So, why didn’t treasury secretary Timothy Geithner set out the rules for how this money was to be used? To top it off, the US government, which has an 80% stake in AIG, couldn’t impose on the latter’s managers how to use the public funds.

Baying for Geithner’s blood aside, this epi-sode, which is the news of the week, serves to underline the urgency for ethics, good govern-ance and aboveboard practices.

This, at least, seems to be the train of thought across the Atlantic as the UK busily organizes the agenda for the G-20 summit in London on the 2nd April to fashion a new fi nancial world order.

To set the pace, the UK’s Financial Services Authority (FSA) has begun working on a bank-

ing overhaul which could lead to, among oth-ers, a ban on the complex fi nancial products blamed for triggering the credit crunch. These include instruments such as collateralized debt obligations.

The FSA feels that some sophisticated fi nan-cial instruments are simply too complicated to be used without unacceptable fi nancial risks.

Also expected are much tighter rules on mort-gage lending to prevent the lax credit condi-tions that preceded the current crisis. In the FSA’s crosshairs, too, are an overhaul of the bonus culture of banks and other fi nancial in-stitutions.

The FSA has promised a “revolution” that will lead to simpler banks and tougher regulation. Chairman Adair Turner sees less profi table banks taking fewer risks.

The FSA’s faith in market forces and reliance on management’s scruples was “a mistaken philosophy”, he said, suggesting that a heavy hand will instead guide banks’ choices on what they invest in and how they account for them, whom they appoint to senior manage-ment and their remuneration.

The FSA said its new regime will likely cause banks “to pursue strategies which are primarily focused on classic commercial and retail bank-ing activity”. There will be “fewer resources — in terms of people or total balance sheet — devot-ed to the complex and risky trading activities.”

With the FSA also having set the lead in nur-turing and promoting Islamic fi nance, the UK could well be the role model Obama ought to be looking to. For the well-being of the global economy, he needs to succeed.

The UK goes right,the US goes wrong

In this issue

IFN Rapid ....................... ..............................2

Islamic Finance News ................................ 3

Takaful News ............. ...............................10

Rating News .............................................11

IFN Reports ...............................................13

IFN Roadshow ..........................................15

Articles:Cash Management Evolution...............16

Financial Crisis in the GCC — A Fund Manager’s Perspective .........................18

Gulf Islamic Financial Institutions,Takaful Companies Not Risk Immune (Final Part) ..............................................19

How Riba Hoards Economic Resources (Part I) .....................................................21

Forum .........................................................23

Meet the Head ..........................................24Walid Hegazy, Head of Islamic fi nance practice, Freshfi elds Bruckhaus Deringer

Termsheet ..................................................25Chemical Company of Malaysia’s Sukuk

Moves .........................................................26

Deal Tracker ..............................................28

Islamic Funds Tables ................................29

S&P Shariah Indexes ...............................30

Dow Jones Shariah Indexes ....................31

Islamic League Tables .............................32

Events Diary...............................................35

Country Index ............................................36

Company Index .........................................36

Subscription Form ....................................36

HONG KONG 16 April 2009th

www.islamicfi nancenews.comA round-up of all this week’s news IFN RAPID

Page 2© 20th March 2009

• Eastgate Capital Group invests US$40 million in Sigma Pharmaceutical Industries

• Analyst says it is not the right time for Indonesian government to issue Sukuk

• SC reports Islamic capital market still a core segment in Malaysia

• Cagamas to issue a US$260 million Sukuk

• Unicorn Investment Bank injects US$12.5 million for a 37% share into DIBL

• I-Bhd plans to set up an international Islamic fi nancial hub in i-City

• ICD pledges US$50 million for the development of SMEs in Indonesia

• Malaysia’s fi nancial sectors still hiring despite the global fi nancial crisis

• Sri Lanka should issue Sukuk for the development of infrastructure

• Maybank and CIMB Group merger talks have resumed

• IBB’s losses drop by 15% to US$8.3 million in 2008

• Scotland needs an Islamic bank in the country to attract Gulf investors

• VTB Group keen to issue the fi rst Sukuk for Russia

• KFH-Turkey aims to become one of the 10 largest banks in Turkey

• Council of muftis suggest Russia introduces Islamic fi nance

• Bank Muamalat and Noor Islamic Finance select Path Solutions’ iMAL

• Franklin Resources looks into offering Islamic funds in CEEMEA regions

• Scholars say that Sukuk structured on Ijarah compromises Shariah compliance

• KFH Research launches website offering research services to all users

• Shariah advisor thinks an Islamic LIBOR could cause chaos in the market

• KFHM predicts emergence of local currency Sukuk

• Kuwait Finance House launches Visa Diamond Card for VIP customers

• Deyaar’s fi nancial strategy will help it face the property downturn

• RAKIA approaches S&P for a credit rating to attract investments

• BBK to pursue other opportunities after Shamil Bank merger on hold

• IIB plans a Saudi housing project estimated at US$500 million

• UAE Central Bank declares investment funds can no longer offer loans

• ADIC’s private equity fund hunting for fi rms with solid cash fl ows

• Investment Dar to sell some of its assets to meet debt obligations

• Standard Chartered Saadiq’s fl exible fi nancing with Saadiq Home Finance

• Ajman Bank to become the fi rst to offer e-Dirham cards in Ajman

• EIB gets approval to convert government deposits into regulatory capital

• IDB plans to issue US$500 million worth of Sukuk

• Unicorn Investment Bank’s operating profi t increased to US$74 million last year

• BIsB puts US$663 million Sukuk on hold and cancels its Islamic Bank of Yemen acquisition

TAKAFUL• MAA Holdings to negotiate with AmG

Insurance and Solidarity on acquisition of MAA Takaful

• Takaful IBB and Labuan Re signs fi rst of its kind Retakaful Wordings

• Zurich International Life says the insurance market is growing

• Takaful International increases its paid-up capital to US$17 million

RATINGS• Fitch removes Maybank from Rating

Watch Evolving

• RAM downgrades Oxbridge Height’s debt issues to ‘BB1/NP’

• RAM places New Pantai Expressway’s BBA notes on Rating Watch

• MARC affi rms ‘AAIS’ rating on MNRB Holding’s US$56 million IMTN program

• Dubai Islamic Bank is placed on CreditWatch

• Emaar Properties’ long-term corporate credit rating lowered to ‘BBB+’

• The ‘A+’ rating on DIFC Investments, DP World, Jebel Ali Free Zone and JAFZ Sukuk is lowered to ‘A’

• Possible downgrade on HSBC Middle East’s ‘C+’ bank fi nancial strength rating

• BankMuscat’s ‘A1’ foreign currency debt rating under review

• S&P places Oman Insurance on CreditWatch with negative implications

MOVES• HSBC Holdings’ chief executive Dyfrig John

to retire at the end of this month

• Hiromi Yamaji to be based in London as Nomura’s global markets deputy CEO

• al khaliji’s CEO David Proctor is appointed MD and “special advisor” to the chairman

• John Chrin, to leave JPMorgan Chase in June after 16 years

• Barclays Capital names Gary Posternack as head of mergers and acquisitions

• Mark Echlin joins Credit Suisse’s investment banking division as a MD and head of industrials

• Clyde & Co names Peter Hodgins as the Islamic insurance partner

• Muhammad Kamran Shehzad is appointed deputy governor of the State Bank of Pakistan

• Ali Abbas Zaidi joins Maybank IB as the head of Islamic capital markets

• ADIC hires Samir Assaad Samaan to lead the buy-outs in the MENA region

• BankThai names Subhak Siwaraksa as president and CEO

• Deutsche Bank appoints Bruce Evans as head of M&A in the Americas

NEWS

www.islamicfi nancenews.comNEWS


AFRICAEastgate invests in pharmaceutical fi rmEGYPT: Eastgate Capital Group has invested US$40 million in Egypt-based Sigma Pharmaceutical Industries, via its Shariah compliant Eastgate MENA Direct Equity fund. The investment is the second for the fund, and its fi rst in the healthcare sector.

Eastgate, which is the private equity arm of NCB Capital, has developed a strong inter-est in the regional healthcare sector, said its founder and managing partner, Ghazi Al Rawi.

“Sigma offers us a unique opportunity to tap into the high-potential Egyptian and regional generic pharmaceutical markets, and we are delighted to be investing in such an exciting business,” he added.

Eastgate MENA Direct Equity is mainly focused on growth investments in consumer-centric sectors, mostly in the Saudi Arabian market, and selectively seeks investments in other regional economies such as Egypt and Turkey. The fund had a fi rst closing on US$250 million, and targets a fi nal size of up to US$500 million.

ASIANot the time to issue Sukuk, says analystINDONESIA: The government should have refrained from issuing retail Sukuk as the economy is still unstable, said Johanna Chua, chief economic and market analyst for Asia Pacifi c at Citicorp. “It is not an appropriate time for the government to issue global Islamic bonds amid the current economic uncertainties where risks have the potential to develop continuously,” she explained.

Chua added that the country should make full use of the facilities provided by the International Monetary Fund instead, which were set aside for developing nations.

Indonesia had issued its retail Sukuk last month, which successfully raised IDR5.55 trillion (US$463 million), higher than its target of IDR1.7 trillion (US$142 million). The Sukuk would be used to help plug the republic’s budget defi cit.

www.gbcorponline.com

Global Banking Corporation B.S.C. (c) [GBCORP], incorporated in the Kingdom of Bahrain, is the region’s global Islamic investment bank.

GBCORP is focused on developing strategic investment bridges linking the region to global markets and actively facilitating global investment opportunities through building partnerships for mutual development.

A new era ofGlobal Islamic Investment Banking

GlobalInvestment

GlobalStrategy

GlobalExpertise

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ASIAcontinued...

Islamic capital market maintains dominationMALAYSIA: The Islamic capital market maintains its position as a core segment in the country’s capital market, according to the 2008 annual report by Securities Commission Malaysia (SC).

Islamic equities made up about 64.2% of the total market capitalization in 2008, compared to 63.7% the year before, while the value of Sukuk issued in 2008 went up to RM211 billion (US$57 billion) from RM199 billion (US$54 billion) in 2007.

The SC report noted that the country has the largest Islamic fund management industry globally in terms of number of funds and assets under management.

Eight leading players in the sector received approval to set up operations in Malaysia,

which launched its fi rst Islamic exchange-traded fund last year.

For 2009, the SC will focus on maintaining investor confi dence and ensuring that the markets operate in a fair manner, said chairman Zarinah Anwar.

Cagamas to issue US$250 million SukukMALAYSIA: Cagamas has sold RM2.07 billion (US$566 million) worth of bonds and the proceeds will be used to fi nance the mortgage fi rm’s new purchase of bank loans, said CEO Steven Choy.

The sale was inclusive of RM1.15 billion (US$315 million) worth of conventional bonds and RM915 million (US$250 million) of Islamic bonds. The bonds, which were 2.2 times oversubscribed, will be issued at the end of this month.

The terms range from one to 20 years with average yields of 2.92% to 5.69%, depending on maturity. The issuance was arranged by

Maybank Investment Bank, AmInvestment Bank and Standard Chartered.

Cagamas had last year issued RM18 billion (US$5 billion) worth of debts.

The national mortgage corporation was established in 1986, and is Malaysia’s second-largest debt issuer after the government.

Unicorn injects US$12.5 million into DIBLPAKISTAN: Shariah compliant Unicorn Investment Bank (Unicorn) has injected PKR1 billion (US$12.5 million) into Pakistan-based Dawood Islamic Bank Limited (DIBL), adding to its existing 22.2% stake in the bank. Following the exercise, Unicorn now has a 37% stake.

The Islamic banking sector in Pakistan is rife with opportunities despite the low level of confi dence worldwide in the country’s fi nancial institutions, said Aamir Khan,

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managing director and head of global private equity at Unicorn.

He added that the stake in DIBL will give Unicorn access to the Pakistan market, where 97% of its population are Muslim.

DIBL was launched in 2007 as the result of an initiative of the First Dawood Group, which teamed up with the Islamic Corporation for the Development of the Private Sector, Unicorn, Al Safat Investment Company of Kuwait and Dubai-based Gargash Enterprises.

I-Bhd keen to set up Islamic fi nancial hubMALAYSIA: Local developer I-Bhd plans to set up an international Islamic fi nancial hub in i-City, its commercial development center in Shah Alam, said chairman Hamad Kama Piah Che Othman.

In line with this, he added, i-City’s fi rst phase of development, the Cybercentre 1 Offi ce Suite, is wholly Shariah compliant.

“There are many Malaysian companies which are looking at this sector, and I believe there are opportunities for I-Bhd to work with them to accelerate the i-City development,” said Hamad.

I-Bhd CEO Lim Boon Siong said Cybercentre 1 was completed about four months ago, with 80% sold to Saudi Arabia’s Al Rajhi Bank for RM95 million (US$26 million) in July last year.

ICD pledges US$50 million for SMEs in IndonesiaINDONESIA: The Islamic Corporation for the Development of the Private Sector (ICD) has pledged US$50 million for the development of small and medium-sized enterprises (SMEs) in the republic, said Khaled Al Aboodi, CEO and general manager of ICD.

The move is part of the institution’s aim to develop the Islamic fi nance industry in member countries, he added.

“We are delighted that the Indonesian government has made attempts in creating the necessary infrastructure in this regard,” said Khaled, adding that the Asian country is one of ICD’s important markets.

ICD is also studying the possibility of fi nancing selected companies in Indonesia. Based in Dubai, ICD is the private sector arm of the Islamic Development Bank.

Banking and fi nance sectors still hiringMALAYSIA: The country’s banking and fi nance sectors are still hiring despite the global fi nancial crisis, said Mohd Kamal Khir, CEO of the Institute of Bankers Malaysia (IBBM).

“There are about 80 banking and fi nancial institutions offering jobs to those who have talents in fi nancial services such as insurance, Takaful and sales,” he noted,

after the launch of the new website for the Financial Sector Talent Enrichment Program (FSTEP) lately.

FSTEP targets graduates from local and foreign institutions and those interested in pursuing careers in the fi nancial sector, which will prepare candidates for the banking and fi nancial industry.

‘Sri Lanka will benefi t from Sukuk issuance’SRI LANKA: The untapped pool of money lying dormant in current accounts owned by Muslims can be used for the issuance of Sukuk to benefi t the development of local

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LEADERSHIP

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infrastructure, contends Kingston Ng Jin Keng, country manager for Malaysia-based RAM Ratings in Sri Lanka.

He claimed the money was not being used for religious reasons because interest is not Shariah compliant; however, profi t sharing involved in Sukuk is permissible. Although Muslims comprise only about 8% of the population, they account for 10% of savings in Sri Lanka.

He acknowledged, however, that regulations would have to be amended in order to allow Sukuk issuance on the island.

Maybank, CIMB merger talks resurfaceMALAYSIA: A merger between two of Asia’s banking giants, Malayan Banking (Maybank) and CIMB Group, is said to be on the cards, a source told Islamic Finance news.

Talks on merger fi rst emerged early last year, but it was refuted by Nazir Razak, CEO of CIMB Group. However, he did not rule out the possibil-ity of the merger taking place in the future.

It was also said last year that the planned merger was not expected to be easy as both groups have different government-related entities as major shareholders: Permodalan Nasional and Employees Provident Fund for Maybank, while CIMB is majority-owned by Khazanah Nasional.

Watch this space.

EUROPEIBB losses drop by 15%UK: The Islamic Bank of Britain (IBB) saw a reduction in losses by 15% for last year to GBP5.9 million (US$8.3 million), from GBP6.9 million (US$9.7 million).

The reduction is attributed to the growth in fee and commission income. Income from receivables grew to GBP8.3 million (US$12 million) from GBP7.8 million (US$11 million) in 2007, but impairment charges in the unse-cured consumer fi nance portfolio fell by 50% to GBP300,000 (US$422,000). Despite its losses, the number of customers rose by 10% to more than 47,000 and deposits went up by 15% to GBP158 million (US$222 million).

IBB expects 2009 to be a challenging year. However, directors believe the bank will be well positioned to benefi t from the eventual recovery, particularly with a reinforced capital base.

VTB keen to issue country’s fi rst SukukRUSSIA: VTB Group, one of the largest banks in the country, is planning to issue several million dollars worth of Islamic bonds, which is slated to be the fi rst Sukuk for Russia.

According to the head of the group’s investment business unit VTB Capital, Yuri Solovyov, the bank is seeking opportunities in Islamic fi nance.

VTB Capital recently signed a protocol of intent with Liquidity Management House, a subsidiary of Kuwait Finance House, with the aim of cooperating in the development of Islamic fi nance in Russia and other former Soviet countries.

KFH-Turkey to upgrade its German unitTURKEY: Kuwait Turkish Participation Bank (KFH-Turkey), a subsidiary of Kuwait Finance House (KFH), has obtained regulatory approval to convert its German agency into a fi nancial services branch, said Mohammed Sulaiman Al-Omar, CEO of KFH.

The Turkish bank also plans to leverage on opportunities in the Gulf region by launching a branch in Dubai, besides expanding in Turkey, Europe and Central Asia. KFH-Turkey aims to become one of the 10 largest banks in Turkey, and plans to open seven new branches within the fi rst half of this year to achieve its goal, said Mohammed.

He also announced the fi nancial results for KFH-Turkey, with a 49% increase in total assets, reaching YTL5.8 billion (US$3.4 billion) in 2008. Net profi t also went up by 40% to YTL104 million (US$62 million), while a 39% increase is recorded in clients’ deposits to YTL4.1 billion (US$2.4 billion).

‘Russia should consider Islamic model’RUSSIA: The country should introduce Islamic fi nance as it is an effi cient alternative to the global fi nancial system. Ravil Gainutdin, chairman of the council of muftis, said the current economic crisis is testament that the existing system is unsuitable.

“However, there is an alternative way which was conceived in its current form in the 1960s and has already proved its viability,” said Gainutdin. That system is Islamic banking, he explained, which focuses on moral and ethical values.

GLOBALBank Muamalat, Noor Islamic decide on PathGENERAL: Bank Muamalat and Noor Islamic Finance have selected Path Solutions’ iMAL Islamic banking solution for their operations.

Under the terms of the agreement, Path is to provide Malaysia-based Bank Muamalat a centralized, front-to-back offi ce core-banking platform for its Islamic, retail, corporate and investment banking operations.

The bank is also planning to implement and deploy iMAL on all existing branches by September next year.

Separately, Noor Islamic Finance of Kuwait chose Path as part of its plan to expand in the Middle East and Africa. Its vice-president of technology and treasury Baligh Bedewi acknowledged Path’s excellent

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Scotland told: Go for Islamic fi nanceUK: Scotland needs a dedicated Islamic fi nancial institution to attract more investment from the Middle East, said John Wright, the retired former chief executive of Clydesdale and Yorkshire Banks. He said an Islamic bank in the country, ideally a joint venture between Islamic groups with fi nancial backing and an existing Scots banking institution, would indicate an “open door” for Islamic investors to do business.

The banking veteran sees Scotland as a fi nancial hub with huge fi nancial services capabilities, thus the creation of an Islamic bank makes sense.

“There is a huge opportunity to set up links to sell products and generate investment from the Gulf, which at the moment is left untapped,” Wright further noted.



implementation track record, as well as the fact that iMAL has been certifi ed by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

Franklin looks into Islamic fundsGENERAL: US-based fund manager Franklin Resources is looking into opportunities in Central and Eastern Europe, the Middle East and Africa (CEEMEA) regions to offer Islamic funds.

Its managing director for India and CEEMEA, Vivek Kudva, said the markets in those regions were set to outpace that of the US, and will offer diversifi ed and interesting prospects.

Franklin, which acquired a 25% stake in Dubai’s Algebra Capital in 2007, has a strong balance sheet with more than US$3 billion in cash.

Vivek said that the company’s funds in the CEEMEA region had net infl ows in 2008, when its worldwide assets under management shrunk to US$416.2 billion by the end of December last year from US$643.7 billion a year earlier. It plans to strengthen its business operations across 27 countries in the region, he added.

The company is a global investment management organization known as Franklin Templeton Investments.

Scholar: Ijarah risks Shariah complianceGENERAL: Structuring Sukuk based on Ijarah is not without diffi culties, and extensive use has compromised some of its key Islamic features, said a scholar.

Davide Barzilai, an Islamic fi nance lawyer at Norton Rose, said that one such problem is to fi nd suitable assets to be leased. “Once you have located the assets, you then have to ensure that the sale to the issuer and the leaseback to the sponsor are permitted by law and do not attract any taxes or duties,” he further noted.

Scholars also said that the use of Ijarah has compromised some of its key features; for example, banks are allowed to peg the rental rate to a variable benchmark that leaves

little room for dispute. But some Islamic banks see this as an implied sanction to tie the rental rate to interest rates, which is not Shariah compliant.

Another dispute is that banks noted in the lease that they will sell the asset to the client when the lease is up. However, Islamic jurisprudence does not allow one transaction to be linked to another.

KFH launches website for research unitGENERAL: KFH Research, the full-fl edged global research arm of Kuwait Finance House (KFH), launched its website recently that offers research, studies and analysis services to all users, said Fahad Al Mukhaizeem, the Islamic lender’s marketing and public relations manager. He is also chairman of KFH Research.

The report issued by the unit covers international markets, but mostly focuses on the Asian, American, European and Middle East markets, said Fahad.

KFH Research also provides a paid research and consultancy service for those who want customized studies, such as data on the markets of specifi c countries, or studies about certain economic sectors, or other subjects related to fi nancing major projects and increasing investment opportunities.

The Malaysia-based research entity was established in 2006 and is fully owned by KFH Group.

Islamic LIBOR: Take care, says Bursa MalaysiaGENERAL: It will not be easy for a country to have a dual system of Islamic and conventional benchmark fi nancing rates, as it could create chaos in the market, commented Aznan Hasan, the Shariah advisor to Bursa Malaysia, on news that the Islamic fi nance sector is trying to establish a Shariah compliant benchmark similar to the London Interbank Offered Rate, or LIBOR.

He said that such a system will cause people to arbitrage between the two structures. To avoid this, some Islamic banks adopt rates that track conventional levels, including Malaysia, where a base fi nancing rate system is used that follows the movements of Bank Negara Malaysia’s conventional overnight policy rate.

In Aznan’s view, the matter should be treated with care, as a volatile Islamic benchmark may lead to the perception that Islamic fi nance products are unstable..

Local currency Sukuk could be topsGENERAL: There will be an emergence of local currency Sukuk within the next two years due to the current shortage of US dollars in the market, predicts K Salman Younis, managing director of Kuwait Finance House Malaysia (KFHM). He added that compared to the dollar, there was higher liquidity in the local currencies in the GCC countries and Malaysia.

The Islamic bond market in Asia is also expected to remain healthy. However, Salman said Sukuk issuance is likely to drop further this year, and that major issuances were not expected.

Salman was making his comments during a roundtable discussion hosted by Dow Jones Indexes in Kuala Lumpur recently, to commemorate the 10th anniversary of the launch of the Dow Jones Islamic Market Indexes series.

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MIDDLE EASTKFH’s Diamond a gemfor VIPsKUWAIT: Kuwait Finance House (KFH) has launched the Visa Diamond Card for VIP customers, available only by invitation. The new card joins its existing range which includes Tayseer cards, Platinum, Gold, Classic, as well as prepaid and debit cards.

Visa Diamond’s key features include higher spending limits, free family travel insurance, purchase protection that covers products purchased against theft and accidental damage, and discounts of up to 50% at local and international retailers.

Deyaar’s fi nancial strategy to lower risksUAE: Dubai-based Deyaar will undertake measures to help it face the property downturn in the emirate, such as reducing the price of its units by up to 30%.

Other measures include easing payment plans for investors and giving full refunds on some postponed projects, such as Deyaar Enclave.

The developer said that the Deyaar Park and Mirar Residences projects have been put on hold.

Purchasers can swap their unit for one at another Deyaar development in a more central location, such as Business Bay, and properties handed back to the developer by fi nancially distressed investors are to be put into a fund. The properties will be sold when the market has recovered, said Deyaar.

“The fi nancial strategy has been developed to safeguard our customers by stabilizing their cash fl ows and helping to secure easier access to fi nance,” said CEO Markus Giebel. He added that this will lower the company’s risk of defaults and receivable risks which will then maintain its cash fl ow.

RAKIA seeks S&P ratingUAE: Ras Al Khaimah Investment Authority (RAKIA) has approached Standard & Poor’s (S&P) for a credit rating to attract investments into the emirate, said Khater Massaad, CEO of RAKIA. The rating is

expected to be available within four months, he added.

In late January, S&P assigned an ‘A’ rating to the emirate’s long-term foreign and local currency sovereign credit rating, while Fitch assigned its foreign and local currency sovereign credit rating an ‘A’ as well. The outlook for both ratings is stable.

Khater also said that Ras Al Khaimah will not issue Sukuk this year, and he declined to confi rm if the emirate is planning a sovereign bond.

IIB sets its sights on Saudi housing developmentSAUDI ARABIA: International Investment Bank (IIB) plans to penetrate the kingdom’s real estate market via a major housing project estimated at US$500 million.

CEO and board member Aabed Al Zeera said, “Though we have decided to remain liquid with 70% of the assets in liquid form during this year, the growth prospects for the realty

sector in Saudi Arabia are bright and we will defi nitely invest there.”

IIB plans to sell 5.1 million shares by the second or third quarter, subject to regulatory approvals.

Earlier, IIB’s shareholders had consented to a 7% cash dividend for last year during its annual general meeting, where the Islamic bank also announced a US$13.5 million net profi t for the fi nancial year ended the 31st December 2008.

Emirates central bank restricts lendingUAE:The Central Bank of the UAE has declared that investment funds can no longer give loans or offer fi nancial products involving loans, either directly or indirectly.

Governor Sultan Nasser Al Suwaidi said: “It has been agreed that investment banks or any other body providing loans, regardless of their other activities, would be subject to central bank regulations, regardless of whether these bodies provided loans directly to borrowers or in an indirect way through investment funds”.

A joint committee consisting of central bank offi cials and the Securities and Commodities Authority (SCA) has been set up to oversee the formation, foundation, licensing and management of portfolios and funds for investment in the local and foreign securities. The committee operates following SCA-approved rules.

Fraudulent funds will be dealt by the SCA, which will also be responsible for all follow-up cases, said Sultan.

ADIC’s private equity fund on the lookoutUAE: The credit crunch may have caused the global value of buyouts to decrease in 2008, but reputable funds could still secure bank loans in the Middle East and North Africa to fi nance deals worth up to US$250 million, said Nazem Fawwaz Al Kudsi, CEO of Abu Dhabi Investment Company (ADIC).

“The family-run fi rms that dominate the region are hungry for capital and expertise, to help them make their operations more effi cient, and to expand their businesses across the region,” he added, announcing

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Ithmaar delays BBK and Shamil mergerBAHRAIN: Bank of Bahrain and Kuwait (BBK) will pursue other acquisition opportunities in Bahrain and the Gulf Arab region, following the suspension by Ithmaar Bank of its proposed merger with Shariah compliant Shamil Bank, said Abdulkarim Bucheery, its CEO.

He added that the bank has enough funds for acquisitions, and is also prepared to raise additional debt to fi nance larger ones.

Abdulkarim expressed his disappointment over Ithmaar’s decision to put the merger on hold. BBK had thought that the merger was a good business proposition, as it currently does not have any Islamic commercial banking activities.

The bank, however, does have a wholly owned Islamic investment banking unit, Capinnova Investment Bank, which was launched earlier this year.

Ithmaar put the merger on hold earlier this month due to uncertainties in the market. The Islamic bank owns 25% of BBK and fully owns Shamil Bank.



the appointment of Samir Assaad Samaan as ADIC’s new head of private equity.

Despite the possibility of distressed assets fl ooding the market within the next few years, ADIC’s private equity fund is hunting for fi rms with solid cash fl ows in sectors such as healthcare, education, telecoms, consumer goods, and logistics and distribution, which can weather the economic crisis.

(Also see Moves on page 27)

Dar could dispose of assets to pare debtKUWAIT: Investment Dar plans to sell some of its assets to meet its debt obligations. The Shariah compliant company has presented a plan identifying non-core assets for “potential disposal” to foreign and local banks as well as investors.

The assets expected to be sold are in the banking and industrial sectors, worth around KWD250 million (US$858 million). Dar said that it will not sell its stake in Aston Martin and its share in a London property, Grosvenor House Apartments.

It intends to focus more on core assets across the banking, real estate and luxury sectors. No further details were provided.

Dar is also looking into borrowing up to US$1 billion to refi nance its debts, and has appointed Credit Suisse as its fi nancial advisor.

Flexibility from Saadiq Home FinanceUAE: Standard Chartered Saadiq has launched Saadiq Home Finance, which offers key benefi ts of fl exible fi nance amounts of up to AED10 million (US$3 million), or up to 75% fi nance on the property’s market value, fl exible tenors of up to 25 years and quick fi nance approvals.

“In addition to offering fi nance for ready-built properties, existing homeowners are also able to refi nance their existing home at competitive prices,” said Chris de Bruin, head of consumer banking at Standard Chartered UAE.

Saadiq Home Finance is part of a series of products to be launched this year.

Standard Chartered Saadiq is the global Islamic banking brand of UK-based Standard Chartered.

Islamic bank offers fi rste-Dirham card in AjmanUAE: Shariah compliant Ajman Bank has signed an agreement with the ministry of fi nance to become the fi rst to market and sell e-Dirham cards to public and private sector clients in the Ajman emirate. The card facilitates payment to and revenue collection by the government.

“E-Dirham has succeeded in becoming the modern, safe alternative to manual collection and plays an active role in the application of automated fi nancial control systems, helping senior managers measure performance and make decisions,” said Khalid Ali Al Bustani, executive director of revenue and budget at the ministry of fi nance.

EIB can proceed with conversionUAE: Emirates Islamic Bank (EIB) has received shareholders’ approval to convert federal government deposits into regulatory capital, but the bank did not reveal the amount or when it would take place.

Last October, the UAE fi nance ministry set up an emergency facility worth AED70 billion (US$19 billion) to deposit money into banks. EIB is the latest bank in the UAE looking to strengthen its base of Tier 2 capital as loans default increases, and is making provisions to prepare it against bad loans in the future.

Other banks that have announced intentions for the conversion are Emirates NBD, Mashreqbank and National Bank of Abu Dhabi.

IDB to issue US$500 million in Islamic bondsSAUDI ARABIA: The Islamic Development Bank (IDB) plans to issue US$500 million worth of Sukuk within the next few months. The proceeds from the issuance will be used to help fi nance a 15% increase in the bank’s fi nancing program this year.

Chairman Ahmed Mohammed Ali is confi dent IDB would be able to raise the funds easily, citing the added appeal of Islamic fi nance in the wake of the global fi nancial crisis. “There

are fewer options after what happened with Citigroup and other fi nancial institutions,” he pointed out.

The bank distributed US$4.5 billion last year to member countries and Islamic communities in non-member countries that required assistance.

BIsB cancels Yemeni acquisitionBAHRAIN: Bahrain Islamic Bank (BIsB) has put its proposed BHD250 million (US$663 million) Sukuk on hold due to the global fi nancial meltdown, said chairman Khalid Al Bassam. He added that the issuance will be reconsidered once the situation improves.

BIsB has also canceled plans to acquire an additional 33% stake in the Islamic Bank of Yemen, despite signing the agreement in July last year, as it did not reach a fi nal agreement with all parties involved. BIsB already has a 2% stake in the Yemeni bank.

Established in 1979, BIsB was the fi rst Shariah compliant commercial bank in the kingdom.

continued...

Unicorn’s operating profi t up 46% in 2008BAHRAIN: Unicorn Investment Bank’s (Unicorn) operating profi t before impairments and fair value write-downs for last year increased by 46% to US$74 million from US$50.4 million the previous year.

The Islamic investment bank recorded lower net profi ts for the fi nancial year, to US$35 million from US$50.1 million the year before. Earnings per share stood at US$0.19, compared to US$0.30 in 2007.

Unicorn opted for a conservative and prudent approach which has shielded the bank from the worst of the global economic crisis, claimed managing director and CEO Majid Al-Sayed Bader Al-Refai. The bank managed to maintain a prudent net cash surplus position and minimized its dependency on short-term borrowings, he added.

Unicorn was founded in 2004, and has established its presence in the US, Malaysia, the UAE and Turkey.

www.islamicfi nancenews.comTAKAFUL NEWS


ASIAMAA to hold talks with AmG, SolidarityMALAYSIA: Bank Negara Malaysia has given the green light for MAA Holdings to commence negotiations with AmG Insurance and Bahrain-based Solidarity Closed on the acquisition of its equity stake in MAA Takaful.

In an announcement on Bursa Malaysia, MAA Holdings said that further details would be revealed in due course.

MAA Holdings, the parent of the MAA group of companies including MAA Takaful, is controlled by Melewar Group.

Its Islamic insurance unit was established in 2006 with a paid-up capital of RM100 million (US$28 million).

Takaful IBB, Labuan Re ink agreementBRUNEI: Takaful IBB and Labuan Re recently signed a re-Takaful wording agreement, said to be the fi rst of its kind.

Under the agreement, Brunei-based Takaful IBB is to allow Labuan Re to handle its

Takaful funds in the most effective way. The contents of the re-Takaful Wording defi ne the treatment of the re-Takaful fund, and also provide guidelines and details on claims payment, the mechanisms of the fee generated and the formulation of the distribution of the net re-Takaful surplus to the re-Takaful participants.

MIDDLE EAST‘Insurance market in MENA is growing’GENERAL: There is increased interest in insurance products in the MENA region as people become more aware of the need for protection, said Graham Morrall, Zurich International Life’s (ZIL) head of distribution for the region.

He added that insurance renewal has not been affected by the economic crisis and is especially visible in the corporate segment.

He said, “In terms of the number of new companies, or companies that are not our clients, enquiries have increased by over 50% from levels in December.”

The MENA region offers high potential for

the insurance market, but penetration level is still low mainly due to the lack of awareness and cultural reasons, Morrall noted.

ZIL announced its intention to penetrate the Takaful market in November last year.

Higher paid-up capital for Takaful InternationalBAHRAIN: Takaful International has increased its paid-up capital to BHD6.25 million (US$17 million).

In its recent annual meeting, a total valuation of BHD250,000 (US$664,000) bonus shares was agreed to be distributed to the shareholders.

“Takaful’s successful fi nancial results illustrate the company’s fi nancial strength and ability to rise to all forms of fi nancial challenges, especially in the insurance sector,” said chairman Adel Abdulla Al Mannai.

He added that the Islamic insurance fi rm has developed a long-term plan to face these challenges and to emerge tops among its peers.


www.islamicfi nancenews.comRATING NEWS

ASIAFitch removes Maybank from Rating Watch

MALAYSIA: The long-term local and foreign currency issuer default ratings on Malayan Banking

(Maybank) have been removed from rating watch evolving, while the group’s ‘A-’ rating has been affi rmed with a stable outlook, said Fitch Ratings.

It said the outlook was restored due to the capital replenishment measures being undertaken for core capital in the form of a substantially underwritten rights issue.

The rights issue is expected to raise up to RM6 billion (US$1.7 billion) in new equity, mostly undertaken by existing shareholders including state investment agency Permodalan Nasional and the Employees Provident Fund.

The Malaysian bank was incorporated in 1960 and has a wide range of products and services including Islamic banking, commercial banking, investment banking, insurance and asset management.

RAM downgrades Oxbridge’s debt issues

MALAYSIA: The ‘A1(s)/P1(s)’ ratings assigned to Oxbridge Height’s Islamic medium-term notes (IMTN) program of up to RM104 million (US$30 million)

and Murabahah underwritten notes issuance facility (MUNIF) of up to RM50 million (US$14 million) have been downgraded to ‘BB1/NP’ by RAM Ratings. The negative outlook placed on Rating Watch in November last year is maintained.

The downgrade is based on the signifi cant deterioration in the company’s business and fi nancial profi les as a result of the delayed land sale, deferred property launches in the last few years that have weakened its cash fl ow, reduced launches, sales cancellation, construction hold-ups and increased construction costs.

RAM said that Oxbridge is exploring a possible restructuring of the MUNIF/IMTN. Pending the outcome of this, Rating Watch with a negative outlook on the ratings has been maintained.

Oxbridge is a single purpose company established to develop Bandar Jaya Putra Perdana in Johor and is a subsidiary of Renewed Global, a property and real estate developer.

Toll operator’s BBA notes on Rating Watch

MALAYSIA: The ‘BBB3’ rating on New Pantai Expressway’s (NPE) RM490 million (US$136 million) senior Bai’ Bithaman Ajil notes has been placed

on Rating Watch by RAM Ratings. The agency said this is due to the Malaysian government’s decision to abolish collections at one of NPE’s from the 14th February. The government will compensate the toll operator with RM180 million (US$50 million).

“Given the upfront cash compensation, NPE no longer needs to fully rely on its parent company, IJM Corporation, for discretionary cash infusions to preserve its debt-protection measures,” said RAM.

The agency is currently assessing the company’s cash fl ow projections, which will take into account the compensation package and NPE’s plan on utilizing it. A complete review is expected in the next few weeks.

MARC affi rms MNRBMALAYSIA: MARC has affi rmed its ‘AAIS’ rating on MNRB Holding’s RM200 million (US$56 million)

Islamic medium-term notes (IMTN) program, with a developing outlook.

It refl ects the sustainable business profi le of its core operating subsidiary, Malaysian Reinsurance, and its adequate operating performance. The rating is also based on MNRB’s prudent levels of fi nancial leverage and strong debt service coverage.

The developing outlook, on the other hand, is testament to the challenging underlying operating conditions in the reinsurance and insurance sectors and the possibility for underwriting performance and investment earnings to remain pressured. This could expose MNRB’s reinsurance, Takaful and re-Takaful entities to potential volatility in capital strength.

MNRB is the holding company of Malaysian Re, Takaful Ikhlas and MNRB Retakaful.

Malaysian Re has a 20% stake in Labuan Reinsurance.

MIDDLE EASTDIB on CreditWatch

UAE: The ‘A-’ long-term counterparty credit rating for Dubai Islamic Bank (DIB) has been placed on CreditWatch with negative implications by Standard & Poor’s Ratings Services (S&P),

while the short-term rating was affi rmed at ‘A-2’.

At the same time, the rating agency also placed the long-term counterparty credit ratings of Emirates Bank International (EBI), National Bank of Dubai (NBD) and Mashreqbank on CreditWatch negative.

“This action refl ects our growing concerns regarding the impact on the banking sector of the economic downturn in Dubai,” said S&P.

The rating actions on DIB, EBI and NBD are in view of its concern that the government may use these banks to support the refi nancing that is soon due for the debt of other government-related entities.

On the other hand, Dubai’s establishment of a US$20 billion bond program at the government level and issuance of US$10 billion that was fully subscribed by the Central Bank of the UAE has somewhat alleviated liquidity pressure.

Emaar’s rating loweredUAE: Standard & Poor’s Ratings Services (S&P) has lowered the long-term corporate credit rating of Emaar Properties to ‘BBB+’ from ‘A-’, with a negative outlook. This is

due to the weak real estate market in Dubai, where the developer is based, and S&P’s uncertainty about the depth of the downturn and the pace of eventual recovery.

S&P said the weak market affects its view of Emaar’s business risk, and the developer’s currently healthy fi nancial position is likely to weaken in the near to medium term.

While the rating also refl ects the group’s low debt leverage and strong asset base, the weakening real estate market could put pressure on Emaar’s cash fl ows and

continued...


www.islamicfi nancenews.comRATING NEWS

fi nancial position. It may also lead to a further downgrade in the future. Emaar plays an important role in the Dubai property development sector and 37% of its stake is held by the government of Dubai.

Ratings, outlooks lower on government-related entities

UAE: S&P has reduced the ratings on six government related entities (GREs) in Dubai. The ‘A+’ rating on DIFC Investments, DP World, Jebel Ali Free Zone (FZE) and

JAFZ Sukuk was lowered to ‘A’, while the short-term rating of ‘A-1’ was affi rmed. The ‘A/A-1’ ratings on Dubai Multi Commodities Centre Authority were lowered to ‘A-/A-2’, and the long-term rating on Dubai Holding Commercial Operations Group was also lowered, to ‘A’ from ‘A+’. The outlooks on all the fi rms are negative.

The ratings on the GREs are testament to their individual stand-alone credit profi les and S&P’s expectation that the UAE federal government, backed by its largest constituent, Abu Dhabi, will continue to provide fi nancial support to the Dubai government.

These are also refl ective of the ongoing impact on the entities of the deteriorating economic fundamentals in Dubai as the global fi nancial downturn continues to weaken some of the emirate’s key economic sectors, including real estate, trade, tourism and commerce, said the rating agency.

S&P noted that the negative outlooks refl ect the likelihood of downgrades if their fl exibility is further impaired by the diffi cult economic environment.

Possible downgrade for HSBC Middle East

MIDDLE EAST: Moody’s Investors Service has placed the ‘C+’ bank fi nancial strength rating (BFSR) of HSBC Middle East on a possible downgrade. The

long-term local currency rating as well as the foreign currency deposit and debt ratings — all of which were rated at ‘Aa2’ — were also placed under review for possible downgrade.

Moody’s said the rating action refl ects expected asset quality and profi tability pressures in the countries that the bank

operates in. The review, which is expected to be completed in April 2009, will also consider the level of parental support incorporated in the debt ratings, given increasing pressures on the parent bank’s ratings, added Moody’s.

HSBC Middle East operates in Bahrain, Jordan, Lebanon, Oman, Qatar and Kuwait. It also has an offshore unit in Jersey.

Omani bank under review for downgrade

OMAN: BankMuscat’s ‘A1’ foreign currency debt rating has been placed on review for a possible downgrade by Moody’s Investors Service. It has also assigned the

bank fi nancial strength ratings at ‘C-‘, long-term local currency deposit rating at ‘A1’, long-term foreign currency deposit rating at ‘A2’ and short-term deposit rating at ‘Prime-1’.

The outlook is stable. However, these ratings remain unaffected by the review for possible downgrade action.

Moody’s said the review is aimed at reassessing the appropriateness of the rating being rated higher than the Omani government’s ‘A2’ foreign currency debt rating. “The current global fi nancial and economic crisis has reduced the availability of market funding from outside the region, resulting in the governments in the GCC region assuming a greater role as providers of foreign currency liquidity,” it added.

S&P places Oman Insurance on CreditWatch

UAE: The ‘A-’ rating assigned on Oman Insurance’s long-term counterparty credit and insurer fi nancial strength ratings has been placed on

CreditWatch with negative implications, said S&P. The action refl ects the placement of the long-term counterparty credit rating on Mashreqbank, the insurance fi rm’s parent company, on CreditWatch with negative implications as well.

S&P said the CreditWatch status on Oman Insurance is expected to be resolved in the next six weeks.

The insurance company is based in the UAE and was established in 1975.

continued...

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Glasgow-based Islamic Finance Council UK (IFC) is already in ad-vanced discussions with the Scottish government on the creation of an Islamic fi nance house (IFH), according to the body set up to pro-mote the Islamic fi nance industry in the UK and globally.

“The IFH will act as a conduit between Scotland and the rest of the Islamic fi nance world,” IFC board member Omar Shaikh told Islamic Finance news. “The IFH will work on multiple levels, but mostly to pro-mote Scotland and help empower local fund managers by providing a central resource point.” He added that the strong fund management industry can benefi t greatly from the IFH through research, leadership and innovation.

There is no deadline for the proposed IFH, to be based in either Glas-gow or Edinburgh, as the IFC is more concerned about getting the model right from the start, said Omar. “We are working well in a sys-tematic way, having discussions, tweaking the plans and getting gov-ernment and private sector endorsement, support and funding.”

IFC is driving the concept of an IFH. “We will be the cornerstone and we will also bring in other partners to support us. We want the IFH to be all-inclusive so we are going out and discussing with governments and selected private sector organizations, not only in the UK but also in the Gulf,” said Omar. He described the IFH as a link to countries in the Gulf region, where it can leverage on its existing networks and expand into the rest of the Islamic fi nance world.

IFC, Omar said, is well positioned to lead the proposed IFH because of its access to Islamic fi nance knowledge. “Such knowledge is scarce in the UK as most of the key players are in London, but the IFC board is led by industry practitioners with quality expertise, which makes us unique. This will certainly add value to the proposition for an IFH.”

The IFH will also serve as a service center. “If we want to encour-age Islamic fi nance businesses to start up in Scotland, the center can give support to such businesses. In this way, we create a conducive environment for new players in Islamic fi nance,” he explained. Such a center can also help companies that want to relocate and set up operations in Scotland, which will be a cost-effective move, added Omar.

On the question of funding, Omar said the IFH aims to be self-sustain-able, with support from both the government and the private sector.

In light of recent developments in the Scottish banking industry, which included the near-collapse of the Royal Bank of Scotland and HBOS, Omar had this to say: “Scotland’s heritage of ethical and faith-based fi nance could present a useful proposition in deciding the future of the country’s fi nancial services industry. In that regard, Islamic fi nance, as a subset of ethical fi nance, could have a lot of value to bring.”

Omar also sits on the UK Treasury Islamic Finance Sub-Committee advising the government on fi scal policies for Islamic products, as well as the UK Trade and Investment’s advisory working group, responsible for establishing the country as a leading hub for Islamic fi nance.

By Mary Zachariah

UK Islamic fi nance house concept in motion

Bank of Bahrain and Kuwait (BBK) is confi dent that its existing business-es would be adequate to cater to its customers’ needs, conventional or Islamic, despite the postponement of its merger with Shamil Bank.

Chief executive Abdulkarim Ahmed Bucheery told Islamic Finance news that BBK could still tap its major Shariah compliant corporations through the Islamic investment bank Capinnova, which is its Shari-ah compliant banking arm. “Also, with our joint venture with Shamil Bank, we are providing our customers with Islamic banking facilities in the housing and real estate market through Sakana Holistic Hous-ing Solutions,” he said.

Last week, Middle East dailies reported that the planned merger be-tween BBK and Shamil Bank has been put on hold. Bahraini invest-ment fi nancial institution Ithmaar Bank was cited as saying that the merger of its wholly-owned subsidiary Shamil Bank and BBK, in which it has a 25% share, would be postponed due to market uncertainty. The postponement had been described as a setback for efforts to drive consolidation in the Gulf region’s fragmented fi nancial industry, particularly during the global fi nancial crisis.

Abdulkarim had reportedly said that he was disappointed that the merger had been put on hold disclosed that BBK would pursue acqui-sition opportunities in Bahrain and the Gulf region. He had said that BBK’s balance sheet allowed fi nancing acquisitions with equity, as its capital adequacy ratio was 20%, 8% above the Central Bank of Bah-rain’s requirement. He had also said that BBK would raise additional debt to fi nance larger acquisitions, should the need arise.

Asked about target sectors or areas, Abdulkarim said BBK is looking for opportunities across all business lines and would concentrate on acquisition opportunities that would add value to and build on the bank’s strengths. “The issue of acquisition is defi nitely at the back of our minds as we are looking at different markets and investment opportunities.

“We will be very selective in our acquisition to ensure that it will add value and build on our existing strengths, be it to BBK or even our subsidiaries,” he said, adding that BBK would seek acquisitions in both the conventional and Islamic space.

According to Abdulkarim, BBK will not consider establishing its own Islamic commercial banking unit, explaining that the rationale behind the merger is to provide customers, who adhere strictly to Shariah principles, with a choice of Islamic commercial banking. BBK’s con-ventional commercial banking is one of its most important business-es. “We feel our customers should have an Islamic window but for now, we will continue to concentrate on our conventional commercial banking,” he added.

On its foreign currency deposit ratings being downgraded to negative by Moody’s in January, Abdulkarim said BBK is focused on its long term outlook rating which is still positive. He attributed the downgrade to the current fi nancial situation affecting Bahrain which had inadvert-ently affected BBK as well. “We are very hopeful that the outlook will change for the better later in the year,” he added.

By Raphael Wong

BAHRAINPostponed merger “not a hindrance”

www.islamicfi nancenews.comIFN REPORT


The global economic crisis has not become a damper on Bahrain-based Unicorn Investment Bank’s vision of building a full-service glo-bal Islamic investment bank.

CFO David Pace told Islamic Finance news that Unicorn has always pur-sued its international expansion strategy by not only having a presence in fi ve countries across three continents, but also by being focused on six business lines.

These are corporate fi nance, capital markets, private equity, asset management, strategic mergers and acquisitions as well as treasury. “In the present environment, in particular, it’s important to have prod-uct and geographic diversity in order to spread your risks, and we are confi dent that our business model will continue to serve us well,” he said.

Elaborating on Unicorn’s expansion plans, Pace said the Shariah com-pliant investment bank had recently received a conditional license to establish operations in Saudi Arabia and is currently fulfi lling the regu-latory and operational requirements to commence operations.

“We have also submitted a license application in Canada, and in the near to medium-term, we hope to further expand our presence in the Middle East and Southeast Asia,” he added.

Furthermore, through the Strategic Acquisition Fund (SAF), a fi nancial services acquisition fund promoted by Unicorn and established in co-operation with a number of strategic founding investors from across the GCC, Unicorn hopes to acquire strategic stakes in fi nancial institu-tions globally, with a focus on commercial banks.

“SAF recently participated in Unicorn’s acquisition of Bahrain Financ-ing Company, the oldest and one of the leading foreign exchange and remittance companies in the GCC,” he said.

Unicorn this week announced an operating profi t of US$73.8 million last year, a 46% increase over the US$50.4 million in 2007. Net profi t after impairments and fair value write-downs was US$35 million. Its fourth quarter operating profi t before adjustments was US$15.7 million.

Unicorn said in a statement that in light of the current fi nancial down-turn, it takes a “conservative and prudent approach” to the valuation of its private equity portfolio, and wrote down US$31.8 million. The write-down, combined with other charges of US$7 million, saw Unicorn report a net fourth-quarter loss of US$18.4 million.

Asked about this, Pace said Unicorn has not incurred any direct losses but has taken a very prudent approach by provisioning against po-

tential write-downs as they refl ected the current market uncertainties where liquidity issues were forcing fi re sales of equivalent assets, which is bringing down valuations across the globe.

He said that Unicorn did not envision the sale of these assets. “We are confi dent that the long-term business prospects for the companies in question remain sound.

Furthermore, there are some outstanding private equity (PE) deals out there right now, and this year we will be looking to increase our PE holdings by investing selectively in transactions that make long-term sense.

“In particular, we will be targeting cash-rich companies with relatively low leverage in industries such as oil and gas, healthcare and agribusi-ness, with a specifi c geographic focus on the GCC and wider MENA region,” he said.

On news that Unicorn will launch an Islamic bank this year, Pace said the investment bank will go ahead with its plans. “Despite the global economic crisis, we are confi dent that there is still an appetite for well-structured and innovative investment opportunities,” he said..

By Raphael Wong

BAHRAINUnicorn pursues international expansion

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Understanding the workings of Master Agreement for Treasury Placement (MATP) Initiative

23rd April 2009Manama, Bahrain

“In the present environment, in particular, it’s important to have product and geographic diversity in order to spread your risks...”

www.islamicfi nancenews.comSPECIAL REPORT


Singapore may be a relative latecomer to the Islamic fi nance space but it is more than making up for this, having established an Islamic bank and being the fi rst non-Muslim country to raise a sovereign Sukuk. It was fi tting, therefore, for the Islamic Finance news Roadshow 2009 series to kick off in the island republic.

Andrew Morgan, managing director and publisher of REDmoney Group, the holding company behind Islamic Finance news, Islamic Finance training and Islamic Finance events, spoke of how Singapore’s initiatives to develop its Islamic fi nancial capabilities in both the public and private sectors made it a natural location for the roadshow.

Morgan also told the 240 key practitioners, scholars and other participants that the roadshow provided exposure to how Islamic fi nance can be best used to their advantage. “Though crimped somewhat by the fallout from the woes of the conventional fi nance sector, the pace of growth of Islamic fi nance continues to gather momentum, and the time is opportune to explore its potential as a useful mechanism for certain aspects of your business,” he said.

Monetary Authority of Singapore (MAS) executive director Tai Boon Leong, in his opening address, said the central bank’s policy is to create a level playing fi eld for both Islamic and conventional fi nance so that investors and users as well as fi nancial institutions engaged in Islamic fi nance will not be disadvantaged in terms of tax or regulation. He assured that MAS will continue to create the environment and infrastructure to strengthen and further the development of Islamic fi nance in Singapore.

“This fi nancial crisis offers a unique opportunity for Islamic fi nance to introduce Shariah compliant arrangements for local and regional businesses in need of fi nancing. In so doing, they can tap new markets and diversify their funding sources,” Tai added.

The one-day event comprised panel discussions and presentations, and each session was interactive as participants raised questions for the panelists. Some of the topics raised had a broad perspective, such as “What is Islamic fi nance and where are we now?” and “Issuing and investing in Islamic fi nancial markets”.

Other topics were on specifi c issues to allow in-depth deliberations, for example, “Singapore and the Islamic fi nancial markets”. In this session, panelists discussed local and regional developments in

Sukuk and the Islamic capital markets, including taxation, regulatory and ratings issues.

In the fi nal session, “Issuers and investors roundtable”, the panelists, led by moderator Dayan Candappa, editor of Asian Treasury News at Thomson Reuters, examined current market trends and challenges faced by Islamic fi nance practitioners to ensure the success of Islamic fi nance in markets.

The speakers for this session — Devan Selvanathan, head of debt capital markets at CIMB Bank; Jayant S Parande, treasurer/senior vice-president of Olam International; Charlene Low, regional head of business development for South Asia at FTSE Group; Rafael Martinez Dalmau, director of emerging markets and Islamic investments at BNP Paribas Investment Partners; and Rushdi Siddiqui, global head of Is-lamic fi nance at Thomson Reuters — also discussed the importance of ratings in Islamic capital markets.

Syed Alwi Mo-hamed Sultan, vice-president of Singapore-based The Islamic Bank of Asia, delivered a presentation on “Singapore as a regional fulcrum in the develop-ment of Islamic fi nance”.

The Islamic Fi-nance news Road-show was intro-

duced last year to assist in the development of the global Islamic fi -nancial markets. The roadshows will cover 12 key developing Islamic fi nancial markets, including Singapore, this year, with seven return trips and fi ve new ones including Turkey, India and Japan. For more information, visit www.IslamicFinanceEvents.com. The next roadshow is in Hong Kong on the 16th April.

Islamic fi nance goes on the road again

Tai of MAS giving the opening address

Syed Alwi of The Islamic Bank of Asia spoke on Singapore’s role in the development of Islamic fi nance

One for the road… the fi nal session on ‘Issuers and Investors Roundtable’: (From left) Candappa, Dalmau, Low, Selvanathan, Rushdi and Parande

www.islamicfi nancenews.comSECTOR REPORT


Recent economic setbacks have highlighted the challenges of developing economies. As a result corporations in Malaysia are now aware of the importance of sound fi nancial management strategy to help them survive the cyclical economic trends.

The key issue faced by corporations is how to better manage and control their cash operations. The order-to-cash (collections) and purchase-to-pay (payables) are still seen as a big ineffi ciency to most corporations today. The entire process linking payments to collections are sometimes manually monitored and tracked which inherently increases internal costs and reduces productivity.

Thus, the re-engineering of process information and fi nancial fl ows to provide consistency, speed and consolidated business data across corporations’ disparate business units and across extended value chain linking supplier to customer is critical.

Trends and elements of cash managementMost banks’ business proposition is to develop and enhance cash management services to provide corporations with integrated systems enabling automation and straight-through processing of corporations’ order-to-cash and purchase-to pay cycles and providing timely fi nancial information.

The three main fundamentals of Cash Management that need to be adopted:

Project, Forecast & Manage — A unifi ed view of all company accounts which will optimize liquidity management and hence reduce working capital needs.A unifi ed or fi sh-eye view of all companies’ accounts at a glance provides corporations with their net positions. This allows corporations to improve the control of incoming and outgoing funds. In return, any fi nancing costs will substantially reduce when internal liquidity automatically sets off fund defi cit.

Straight-through Processing & Outsource — Improved payments and collections cycles by outsourcing non-core operations to a bank.Corporations can focus on their core value-added revenue generating activities, where the banks will process the payments and collections transactions on behalf of the corporation, instructed through various straight-through channels like the Internet and/or host-to-host.

Payments transactions include transfers within the corporation’s accounts, payments to supplier/vendors/staff whereas collections transactions can be extended to cash or check collections at customers’ premises or through multi-function machines. Accessible & Secured — Convenience for corporations by accessing information and executing transactions online via secured channel.“Bringing the bank to you” is a common tagline used by banks where banking systems are currently online accessible anywhere via the internet. The Al Rajhi Bank Cash Management System is also accessible online via the internet with multiple layers of security to safeguard confi dentiality, integrity, authentication (through both password and digital certifi cate) and non-repudiation (via digital signing). Hence, accessing and transacting a large volume of transactions online is

effi cient, acceptable and convenient.

Partner Bank for Islamic Cash ManagementThe Islamic banking industry is widely considered to be one of the fastest growing sectors in the world of fi nance. The demand for Islamic Cash Management services is also growing, especially for corporations that have a preference for a complete end-to-end Islamic collections and payment cycle.

As an example, the Al Rajhi Bank Cash Management is governed by the principles of Ijarah and Ijarah ‘ala al-’Amal. The principle of Ijarah is where the bank leases the services to customers and customers subscribe to the service. And the principle of Ijarah ‘ala al-’Amal is where the bank is appointed as a trusted partner to perform payments or collections services on the customer’s behalf in return for an agreed service fee.

Banks play a big role as a trusted partner and should provide a holistic approach to cash management solution, not only by providing integrated systems but also assisting to analyze corporations’ fi nancials in entirety, for them to obtain the best return on surplus funds, as well as fi ne-tune their cash management processes. This in return will improve the predictability of cash fl ows, effi ciency and productivity.

Hence, an effective cash management solution needs to be tailor-

Cash Management Evolution

continued...

By Norliza Mohd Nasir

www.islamicfi nancenews.comSECTOR REPORT


made to suit corporations’ needs which will drive the right results for the corporations.

“Next change”Through research and observations, corporations are seeking to reduce costs and drive effi ciencies in their physical and fi nancial supply chain. In a large corporate environment generally, they have a large number of dealers/vendors where the credit disbursement, monitoring and tracking can be fairly tedious. As pointed out, corporations are driven to outsource non-core activities and focus on their core business. Thus, rather than undertake these in-house, corporations prefer to outsource such fi nancing activities to the banks.

To cater for such necessities, there is an emerging need for integrated cash and trade management services which commonly comes under the supply chain services.

Banks must support corporations by creating value for the entire supply chain — the corporation, suppliers and buyers — by providing corporate/vendor/dealer fi nancing whenever required, an integrated and consolidated information fl ow from order-to-cash to purchase-to-pay, automated exchange of documents in trade fi nance and an

integrated online systems used by corporations, their buyers, suppliers and banks for the settlement of payments and collections.

It is only natural that the “next change” is to extend the existing cash management services to provide an integrated and innovative fi nancial supply chain solution. Coupled with innovative solutions, banks must value partnership. Hence, a continuous customer focused approach or tailor-made solution will be the edge in providing an end-to-end Islamic Cash Management Solution.

Cash Management Evolution (continued)

Norliza Mohd NasirVice President Cash Management OperationsTel: +603 2301 7000 Email: [email protected]

Financial Supply Chain Solution: The “next change”

Electronicinvoice

presentment

Payablesmanagement

Electronicinvoice

paymentReport

management

reconciliation

Financial supplychain solutions

Liquiditymanagement

Electronicinvoice

payment

Receivablesmanagement

Electronicinvoice

presentmentmanagement

BuyersCorporationsSuppliers

Physical supply chain

Raw materialsSale of goods

Dealerfinancing

Vendorfinancing

Payments

Working capitalmanagement

Collections

www.islamicfi nancenews.comINTERVIEW


News of doom and gloom continues to dominate the fi nancial mar-kets globally despite the efforts of governments and regulatory bod-ies to cushion the fall of their economies. According to Mohieddine Kronfol (pic) of Algebra Capital, the downward trend in the Middle East could continue through to the third or fourth quarter.

“This is a diffi cult year but by the third or fourth quarter, things should bottom out and earnings will come back because it will take that much time to put in place all the different policies and measures,” the managing director of asset management explained. “Also, as we move forward, if the pessimistic view of the world comes to naught, we should see some recovery in se-lected fi nancial markets.”

Mohieddine said that amid this chal-lenging environment, Islamic asset

management — just like the conventional space — had been very much affected by the current economic crisis, with Islamic investors suffering losses across the board, from real estate to equities and Sukuk.

He said none of the asset classes have been spared the effects of the global fi nancial crisis, especially in the Gulf Cooperation Council (GCC), because of the structure of the regional markets. He said this was not because the countries and companies in the GCC were unable to deal with the situation but because of the lack of market depth and limited investor diversifi cation.

“The GCC relied on foreign investments and foreign funding to a signifi -cant extent so the infrastructure of the markets is relatively weak. So, even if their fundamentals are good, because the markets are not very developed they were hurt even more than they should have been. This is why we see this as an opportunity as funding will come back eventu-ally, companies are in decent shape and governments are now sup-porting banks and companies to avoid material defaults,” he added.

Mohieddine also said that strict Shariah compliance prohibiting over-leveraging as well as other factors such as adequate capitalization and the requirement for securities to be backed by real assets should give Shariah compliant investments an advantage relative to conventional investments. “Although in the short term everything is being affected, we do feel that Islamic markets and products should come out better (than their conventional counterparts),” he told Islamic Finance news recently.

On the effect of the economic crisis on the Islamic fi nance industry, Mohieddine explained that what has happened is a global phenom-enon because the fi nancial markets have stopped functioning prop-erly, thereby making it an extremely diffi cult environment for both the Islamic and conventional participants.

He believes that if a Shariah compliant company had a good balance sheet, a sound platform and with less leverage when the crisis set

in, it would be in a better position than those operating outside Sha-riah principles. “However, in certain sectors such as manufacturing, if the demand is gone, whether it is Islamic or conventional, they would clearly be affected. It is in these areas that there is a need for govern-ment intervention and for policymakers to play an important role in ensuring that the infrastructure of the Islamic markets remains intact and that Islamic institutions remain solvent to ultimately weather the crisis,” he stressed.

On the current trends of investors, Mohieddine said investors have ad-opted a “wait-and-see” approach. Terming it “cash hoarding”, he said investors globally are now risk averse and very reluctant to deploy cash in risk assets. “That has a lot to do with the global markets and I think that pattern will continue until the markets begin to function properly,” he added.

Mohieddine believes that liquidity exists in different pockets, including countries like Malaysia and the GCC. “We feel that fear needs to be tempered globally and for markets to calm down before you see cash being deployed.” he said. “I think the Islamic universe, being in a bet-ter situation, should distinguish itself in order to attract investments. There are a lot of opportunities in our markets.”

Commending the efforts of the GCC authorities, Mohieddine said the banking crisis in the fourth quarter of 2008 caused the abrupt liquid-ity crisis in GCC banks and fi nancial markets. However, he said, in less than four months, the policy makers have become very aggressive and proactive in dealing with the crisis by guaranteeing deposits, ensur-ing that liquidity is available to banks, lowering reserve requirements, placing deposits in banks and recapitalizing some banks.

They were also trying to encourage spending in addition to increasing budgets to stem the drop in demand. “In implementing these mea-sures, policy makers are making sure that the banks remain in good shape and that liquidity is provided to ensure growth of the economy,” he added.

Mohieddine remains confi dent that the GCC would recover much faster than other economies mainly due to its large reserves and re-sources, with oil as its main commodity. “Although the GCC has issues and needs to address these, it will do much better than the rest of the world; where these countries were growing at 6% to 8% last year, this year the fi gure is likely to be between 0% and 2% but positive growth would be recorded nonetheless. It may feel like a recession, because of the drop in GDP (gross domestic product) growth, but countries in the GCC will be better positioned than many of the world’s economies, especially the developed markets.

“For things to improve, the global economy has to stabilize to a certain extent and liquidity put to use again, and only when you see funding costs come down can you begin to value equities and envision a real estate recovery of any sort.

“Until then, we are going to be under some pressure in the GCC. We have to see spreads come down on Sukuk and conventional bonds. And this is why there are signifi cant opportunities right now as they (GCC Sukuk and bonds) are very attractive,” he concluded.

Financial Crisis in the GCC — A Fund Manager’s PerspectiveBy Islamic Finance news

www.islamicfi nancenews.comMARKET REPORT


Liquidity management is challenging for Islamic fi nancial institutions (IFIs) due to the lack of liquid Shariah compliant asset classes. Certain Islamic banks consequently invested in equities, exposing themselves to the correction in stock markets in recent quarters. The correction’s effects on rated IFIs are likely to be relatively limited, from a solvency perspective.

The Islamic banks we rate carry relatively low exposure to stock markets, amounting to less than 5% of total reported assets on the 30th September 2008. Capitalization is also strong, as shown by the ratio of adjusted total equity (ATE) to assets for the commercial Islamic banks that we rate, at 16.5% on the 30th September 2008.

Stock market volatility is not new in the region. Gulf stock markets experienced a pronounced correction in 2006 when the region’s banking systems displayed resilience. The magnitude of the 2008 fall is greater than past declines, however. We consequently expect to see marked negative effects on profi tability of rated IFIs in the fourth quarter of 2008, possibly spilling over into the ensuing quarters.

Value of Islamic private equity fi rms’ investments in Europe and the US poised to dropIslamic investment banks that operate largely as private equity fi rms are also feeling the impact of global market conditions because they have invested in the real estate markets and companies outside the Gulf region, through private equity transactions.

Falling real estate prices, the credit crunch and the economic recession in Europe and the US are set to lessen the value of these investments and push these Islamic investment banks to either enlist their generally sophisticated clients’ support to share any losses or write down losses to preserve their reputations.

We expect any potential losses to translate into lower fi nancial performance at these banks, compared with results delivered over the past couple of years. Indeed, because investors are deserting alternative asset classes, at least for the moment, rated IFIs’ ability to place or exit deals will be signifi cantly strained.

The adverse impact on their profi tability and liquidity could also be material, in addition to the expected negative revaluation of their investment portfolios and the increase in cost of funds since these institutions are wholesale funded.

Effectively illustrating this is Arcapita Bank, which has reported signifi cantly deteriorated liquidity and where we expect 2009 fi nancial performance to decline versus historical levels. Arcapita is implementing a set of corrective measures; we believe that the impact of these measures will contribute to our assessment of the bank’s credit profi le.

IFIs are not risk freeIFIs take risks: One of the pillars of Islamic fi nance states that all the participants in a transaction must share the risks and rewards. For

further details on our views on the risks associated with IFIs, from a rating perspective, see “Risk Management for Islamic Financial Institutions: A Rating Perspective”, published on the 15th January 2008 on RatingsDirect.

In this report, we focus on various risks that IFIs face in the current environment. The major risk arises from their exposure to the real estate sector and is common to IFIs and their conventional counterparts. We note that real estate fi nancing in the Gulf grew considerably over the past three years.

According to Islamic fi nance principles, all transactions must be backed by tangible assets, and one of the preferred asset classes of Islamic banks is real estate. We calculate total direct exposure to the real estate sector for IFIs that we rate at the equivalent of about 20% of total loans, which, in our opinion, is high and makes IFIs vulnerable to the correction in this previously fast-growing sector.

In addition, we believe that certain loans to individuals granted by Islamic banks were used to fi nance real estate transactions. We consequently expect potentially signifi cant negative repercussions on asset quality and profi tability at rated IFIs if the ongoing correction in the real estate sector in GCC countries, and especially in the Emirate of Dubai, continues.

A second risk stems from certain Islamic banks’ reliance on profi t-sharing investment accounts (PSIA) for funding in an environment where competition to attract deposits is stiff and remuneration has increased. IFIs have some lines of defense, however, primarily in the form of profi t equalization reserves that we believe they could constitute in profi table years to cover for declines in less profi table years.

Moreover, we understand that IFIs could reduce mudarib fees and use investment risk reserves to cover unexpected losses on investments or fi nancing made on behalf of PSIA holders. To date, we understand the Islamic banks that we rate have constituted a fairly limited amount of profi t equalization and investment risk reserves to reduce PSIA risk.

Strong resilience in Takaful insuranceTakaful insurers and reinsurers have so far demonstrated resilience to toughening market conditions, and we expect this to continue. We attribute their resilience to suffi cient liquidity fl ows — in part due to reportedly higher new business — to service normal claims levels, and to capital adequacy, which, despite being affected in the current climate, remains supportive of the ratings across the sector.

These positives are partially offset by an investment focus on assets currently experiencing considerable volatility and high reliance on reinsurance capacity.

Takaful and re-Takaful players, although established for some time now, have achieved critical mass only in the past few years, during which we have witnessed increasing interest and acceptance of their business model.

Gulf Islamic Financial Institutions, Takaful Companies Not Risk Immune (Final Part)

By Standard & Poor’s

continued...

www.islamicfi nancenews.comMARKET REPORT


Gulf Islamic Financial Institutions, Takaful Companies Not Risk Immune (Final Part) (continued)

Attesting to this is these insurers’ reported rapid growth in gross premiums written, which we believe is driven by:

• Consumers switching from conventional insurance or entering the Takaful market for the fi rst time, including for life Takaful products.

• The differences in conventional and Takaful insurance products.

• A widening range of Takaful business lines.• Legislative changes favorable to Takaful insurance activity.

We note that this growth, combined with a stable claims environment, has provided Takaful and re-Takaful operators with a steady cash infl ow through which to settle claims.

Claims settlement appears further supported by operators’ liquid investment portfolios in both participant and shareholder funds. The liquid investment portfolios refl ect the largely short-term nature of their business.

Investment portfolios’ assets range from low-risk Murabahah (bank term deposits) to high-risk non-listed equities, but we believe they currently comfortably exceed net outstanding claims.

For this to continue to be the case, however, markets must remain liquid enough to allow the pricing of such assets. Credit risk, through market volatility and uncertainty in asset pricing, could lead to reduced earnings in the Takaful segment, with lower investment income

combined with high use of reinsurance protection — both regional and international — for certain risks.

However, Takaful and re-Takaful insurers’ generally adequate-to-strong capital adequacy relative to risks written is, in our opinion, a signifi cant compensating factor.

Primary Credit Analyst:Mohamed DamakTel: (33) 1-4420-7322Email: [email protected]

Secondary Credit Analysts:Emmanuel VollandTel: (33) 1-4420-6696Email: [email protected]

Neil GosraniTel: (44) 20 7176 7112Email: [email protected]

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www.islamicfi nancenews.comFOCUS


Riba, as interest is known, is said to be a tool of wealth accumulation through causing injustice in an economy. It is also strictly prohibited under Shariah law.

In this article an attempt is made to show how riba creates wealth for a few individuals and/or institutions by lifting them from a situation where they do not own even a fraction of an economy’s wealth to one where they can have signifi cant control and the power to infl uence the level of economic freedom of individuals and the economy.

Hoarding and the rightful entitlement to economic resourcesWhile zakat is an effi cient tool for the redistribution of wealth to the needy and poor of a community or economy, riba is counter-productive in its impact on the economy as it re-concentrates the wealth which is circulating or available in the economy and hence dries up the disposable income in the hands of the masses and the needy/poor. Wealth goes back to a few which results in the hoarding of wealth.

The terms wealth, money and medium of exchange will be used interchangeably in this article and mean the same. People and businesses are forced to acquire it as a commodity/resource to satisfy their needs (whether personal or commercial) and in turn they have to pay the price of the same in the form of riba.

This process turns the medium of exchange into a commodity which, if it remains with the legitimate owners, would continue to be a cost/price-free resource for fulfi lling their needs.

The rationale for terming wealth as a cost/price free resource is that at the outset the owner of the money pays the cost/price of earning it in one of the ways mentioned in table:

This example establishes that a common factor required to earn legitimate money/wealth in each of the above and any other possible

way is possession and absolute ownership of a certain value or worth by an economic agent that can be parted with for a real economic activity in return for a monetary or other benefi t in exchange.

That is not the case in case of a lending/depository setup which neither owns money nor incurs any cost/price at the time of earning money as a real economic agent (this aspect is dealt with in detail in the forthcoming sections.) Hence the natural principle to earn and hold money and to use it for any lawful purpose as a real owner is appeared to be:

Owner’s real economic value/worth that can be expensed immediately or continues to be expensed = cost of earning money/wealth/medium of exchange

The equal sign above also signifi es the corresponding benefi t in return for foregoing economic benefi t or usufruct instead of disproportionate benefi t in return for any economic activity which will cause the equation to disturb either on the right hand side or on the left hand side.

The disturbance on either side of the equation will create an imbalance because of undue and non-corresponding economic benefi t to either party to any given real economic activity.

How Riba Hoards Economic Resources (Part I)By Mohammad Aamir

continued...

Economic Agent Cost/Price Incurred to Generate Money/Wealth Mode of Earning Money/Wealth

Workers/ Salaried Class

Labor Wages/salaries

Owners of assets Foregoing Usufruct of assets (such as plant & machinery, vehicles, electricity, gas and other utilities).

Rental/ service charges

Owners of assets Foregoing Usufruct of assets (land or building). Rental

Suppliers or sellers of economic resources

Supply of raw materials, that is, by transferring risks and rewards from an owner of a real economic asset to other persons or businesses who become the new owner.

Revenue from sale of real economic assets.

Investor/Partner Parting with money/wealth by investing with other individuals or businesses in the real economic sector or venture as a partner for sharing commercial risk and rewards.

Share of profi t from business (if business has not incurred a loss) after meeting all claims/expenses in the form of labor charges, rental payments and payments to sellers or suppliers of raw materials, taxes and such.

Entrepreneur/Partner Entrepreneur efforts of managing a real economy’s business with or without investing money/wealth (efforts may include knowledge of trade and skills of running the business).

Share of profi t from business (if business has not incurred a loss) after meeting all claims/expenses in the form of labor charges, rental payments and payments to sellers or suppliers of raw material, taxes and such.

“...riba is counter-productive in its impact on the economy as it re-concentrates the wealth which is circulating or available in the economy...”

www.islamicfi nancenews.comFOCUS


It means that either the owner of real economic value/worth would get a share exceeding the cost incurred by that factor causing disadvantage to the recipient of real economic value, or the cost of earning the medium of exchange would exceed the real economic value or worth causing harm or disadvantage to the owner of a real economic resource.

This will be a sure loss to either side of the equation which is not benefi cial to society and the economy as a whole as the loss of either party would become a drag on economic growth.

It will also not result in the wellbeing of each member of society. The ‘excess’ on either side is riba in its broadest sense.

Economic explanation is necessaryThere is a need to present practical evidence on the evil of riba for society. However, the absence of such explanation does not mean that its curse does not exist.

The world is feeling the pain of it. People globally have been suffering from it.

For example, when a person is hit by a stone, he is hurt and in pain. Any knowledge about the scientifi c principle that caused the stone to

move at a speed and force that hurt that man and caused him pain is not going to reduce the suffering.

In the same manner riba will cause suffering to people, whether we believe it or not, just as surely as a piece of wood that burns when it is exposed to fi re. In other words, indulging in riba will have curse as a natural consequence.

(The second and fi nal part of the article will appear in next week’s issue)

How Riba Hoards Economic Resources (Part I) (continued)

Mohammad Aamir is an investment banker with more than 12 years experience in reputable houses and accounting fi rms in Pakistan. He is also a cost and management accountant.

“There is a need to present practical evidence on the evil of riba for society”

www.islamicfi nancenews.comFORUM


As the Islamic fi nance industry has mushroomed over the past fi ve years, we have seen a slew of new banks.Is M&A activity within the Islamic fi nancial services industry necessary and, if so, where?

Next Forum Question

Instead of resuming lending, several banks across the globe plan to convert huge liquidity injectionsby the government into regulatory capital as a way to improve asset quality.Why and what other measures can be taken to spur lending in the market?

If you would like to air your views on the next Islamic Finance Forum Question, please email your response of between 50 and 300words to Christina Morgan, Forum Editor, at: [email protected] before Wednesday, 1st April 2009.

The majority of Islamic fi nancial institutions have a relatively small capital base and total assets. In combination

with regulatory requirements related to concentration risk and large exposure limits, this restricts the individual banks in the amount of lending they can extend to an individual counterparty or an industry.

Currently this is often circumvented by the application of club deals or syndicated transactions.

As the demand for Islamic fi nancial services grows, the banks are likely to start seeing larger funding re-quirements from individual clients.

Although they can continue to be catered for by the club and syndicated deals that we see now, there will be advantages in having a single bank involved in a transaction from a control and effi ciency perspective.

From this point of view, M&A may provide an opportunity, although it could also be possible for banks to increase their capital base in other ways.

In the end, both small and large institutions have their own advantages and disadvantages within the industry, and any M&A activity will have to be driven by an underlying economic requirement.

DR NATALIE SCHOON: Head of product management, Bank of London and the Middle East

M&A activity would be desirable to create larger and better-capitalized institutions, but it is unlikely to occur in practice.

Previous merger attempts, such as that between the Al Baraka Group and the International Investor of Kuwait, failed because of a clash of management cultures, with the institutions agreeing to separate.

Even the merger of Tamweel and Amlak of Dubai into a recapitalized venture is proving diffi cult, despite the exposure each has to the Dubai property market and the precedent set by the merger of the Emirates

Bank with the National Bank of Dubai, two conventional banks.In the case of Islamic fi nancial institutions, the need to merge separate Shariah boards is a further complication.

Although the Gulf Cooperation Council is a single market, there are national legal and regulatory systems governing Islamic fi nance.

Cross-border acquisitions are therefore complicated, and most Islamic fi nancial institutions have focused on their national markets. Nationalistic factors may preclude foreign takeovers.

Although Al Rajhi Bank and Kuwait Finance House have expanded into Malaysia by opening subsidiaries, it is unlikely that they would get permission to take over local Islamic fi nancial institutions.

Dubai Islamic Bank has only been permitted to take minority stakes in the Bank of Khartoum, in which it owns 28.4% of the equity; Bosnia

International Bank, in which it owns 27.3%; and Saba Islamic Bank of Yemen, in which it owns a 18.5%.

It is only in Pakistan that Dubai Islamic Bank has been able to establish a 100% owned subsidiary, but this was a new start up in 2005, not a merger or acquisition.

PROFESSOR RODNEY WILSON: Director of postgraduate studies, Durham University

M&A activity is always helpful if executed well. It helps strengthen the weaker players and can open up new markets and services to those able to sustain growth in this challenging environment.

Most of the players are sub optimal in terms of size, so such activity will also help to create larger banks that are able to compete more effectively with the international and/or conventional banks.

VINCE COOK: CEO, The Islamic Bank of Asia, Singapore

“M&A may provide an opportunity, although it could also be possible for banks to increase their capital base in

other ways”

www.islamicfi nancenews.comMEET THE HEAD


Islamic Finance news talks to leading players in the industry

Could you provide a brief journey of how you arrived where you are today?

I began my legal career shortly after graduating from Cairo University in 1990. During my law school years, I developed a great interest in international corporate law and my dream was to work on large cross-border transactions. This interest was reinforced during my fi rst year of practice as a corporate trainee at the international law fi rm Zaki Hashim & Partners in Cairo.

To further my knowledge in this fi eld, I joined the Egypto-French Institut de Droit des Affaires Internationales where I earned my master’s de-gree in International business law in 1993. Before joining Freshfi elds in 2007, I had the opportunity to practice law at a number of well-known international fi rms in the US, France and the Middle East.

My fi rst encounter with Islamic fi nance as an academic fi eld was during my graduate studies at Harvard Law School in 1995, where I spent con-siderable time researching and studying Islamic law and jurisprudence (Fiqh) and wrote a doctoral dissertation on the subject of Dhaman (liabil-ity) and its implications in the modern practice of Islamic fi nance.

In addition to my academic interest in this fi eld, I have developed a professional career by focusing on the structuring, drafting and advis-ing of the Islamic fi nancial contracts. As Islamic fi nance has increas-ingly become a globally recognized phenomenon, working in this area of practice gives me an excellent opportunity to advance my career in international business law.

What does your role involve?My role is to lead the Islamic fi nance practice group at Freshfi elds. I also oversee the training and professional development of the fi rm’s Islamic fi nance lawyers based in London, Abu Dhabi, Dubai, Bahrain and Riyadh and the development of fi rm-wide practice.

What is your greatest achievement to date?Academically, I consider the completion of my doctorate at Harvard Law School a signifi cant achievement in my life. As a lawyer, I was able to develop some of the pioneer structures for a number of multi-billion dollar transactions, the fi rst of which was in connection with advising Credit Suisse on a US$1.2 billion lease-backed securitization based in Saudi Arabia in 1999.

In this transaction, I developed an innovative Shariah compliant struc-

ture based on Hawala (assignment of debt). I believe this was the fi rst time a Hawala structure was used in a securitization in Saudi Arabia.

Lately, I had the opportunity to lead my Islamic fi nance team on a number of large transactions including advising Sorouh in connection with its US$1.1 billion Shariah compliant asset-backed securitization based on Sukuk Mudarabah in Abu Dhabi (Sun Finance). This deal received two awards from Islamic Finance News: Structured Finance Deal of the Year and UAE Deal of the Year.

My other major Sukuk transactions include advising Saudi Telecom Com-pany on a US$950 million Musharakah-based Sukuk issued as part of its acquisition of a 25% interest in telecoms operator Maxis (Malaysia) and a 51% interest in another telecoms operator NTS (Indonesia).

What are the strengths of your business?As Islamic fi nance practitioners, our strength lies in our profound knowledge and understanding of the Shariah and how Islamic fi nan-cial techniques could be adopted in different legal jurisdictions.

What are the factors contributing to the success of your company?

Freshfi elds has a long history of providing top quality legal service to its clients around the world. We value the trust vested in us by our clients and we always strive to meet their expectations no matter how high such expectations may be.

What are the obstacles faced in running your business today?

One of the major challenges facing the Islamic fi nance industry is the lack of qualifi ed professionals who possess adequate knowledge both in Shariah and the technical aspects of their profession. This is true in the areas of Shariah supervision, legal practice, banking services and accounting.

Where do you see the Islamic fi nance industry in, say, the next fi ve years?

Despite the current global economic crisis, I am very optimistic about the future of Islamic fi nance. However, I think the Islamic fi nance in-dustry is likely to go through some internal changes in response to cur-rent critiques on the validity of some of the structures used by Islamic banks and the overall contribution of such banks to the economic de-velopment of their relevant communities.

Name one thing you would like to see change in the world of Islamic fi nance.

I hope Islamic fi nance practitioners will focus more on the substance of Islamic values than the formalistic adherence to traditional practices. I hope governments, central banks and Islamic fi nancial institutions in general dedicate more efforts and resources to exploring alternative microfi nance solutions inspired by the Islamic principles and values.

The experience of Ahmed El-Naggar, the pioneer Islamic economist and banker, with his Mit Ghamr Local Savings Bank in Egypt in the ear-ly 1960s, serves as a good model for future initiatives in this area.

Name:

Position:

Company:

Based:

Age:

Nationality:

Walid Hegazy

Head of Islamic fi nance practice

Freshfi elds Bruckhaus Deringer

Riyadh, Saudi Arabia

40

Egyptian

www.islamicfi nancenews.comTERMSHEET


INSTRUMENT Musharakah commercial papers (MCP) and Musharakah medium-term notes (MMTN) (collectively, Sukuk)

ISSUER Chemical Company of Malaysia (CCM)

ISSUER’S PRINCIPAL ACTIVITIES

CCM is an investment holding and management company with subsidiaries and an associate company engaged in the manufacture and marketing of fertilizers, chlor-alkali and coagulant products, chemicals and pharmaceuticals products

ISSUE SIZEThe outstanding nominal value of the MCP shall not exceed RM250 million (US$68 million); the outstanding nominal value of the MMTN shall not exceed RM500 million (US$136 million); and the aggregate outstanding nominal value of the MCP and MMTN shall not exceed RM500 million.

MATURITY Seven years for the MCP and 15 years for the MMTN

COUPONThe MCP shall be issued without periodic distribution. In the case of the MMTN issued with periodic distribution, the rate shall be determined prior to the issuance

PAYMENT SCHEDULEThe MCP will be issued without periodic distribution. In the case of MMTN issued with periodic distribution, the periodic distribution shall be made semi-annually and calculated on the basis of the actual number of days elapsed and 365 days in a year

AUTHORIZED AND PAID-UP CAPITAL

Authorized capital: 800,000,000 ordinary shares of RM1 each (US$0.27); and issued and fully paid-up capital: 402,829,865 ordinary shares of RM1 each

IDENTIFIED ASSETS CCM’s Shariah compliant business or part thereof as endorsed by the Shariah Advisor

LEAD ARRANGERS AND MANAGERS

MIDF Amanah Investment Bank, Maybank Investment Bank (formerly Aseambankers Malaysia) and CIMB Investment Bank

LEGAL COUNSEL Zaid Ibrahim & Co, Salleh & Haq

TRUSTEE CIMB Trustee

SHARIAH ADVISOR CIMB Islamic Shariah Committee and Maybank Islamic

METHOD OF ISSUEMCPs: via competitive tender, direct placement or bought deal basis; MMTNs: via book running on a best efforts basis, direct placement or bought deal basis.

PURPOSE OF ISSUE

Up to RM300 million (US$82 million) will be used to refi nance, wholly or partly, the issuer’s existing external borrowings (which may include the existing bonds), and up to RM200 million (US$54 million) to fi nance the issuer’s and/or its subsidiaries’ capital expenditure and/or any investments/acquisitions and/or working capital requirements, and for payments of fees arising from the programs

RATINGS ‘P1’ for the MCP and ‘AA3’ for the MMTN, assigned by RAM Ratings Services

Chemical Companyof Malaysia’s Sukuk

For more termsheets, visit www.islamicfinancenews.com

www.islamicfi nancenews.comMOVES


HSBC HoldingsUK: Dyfrig John, the bank’s chief executive, is to retire at the end of this month after 38 years of service. He will also step down as the bank’s deputy chairman in June.

John began his career with Midland Bank (now HSBC Bank) in 1971 as a graduate man-agement trainee.

He was the retail banking director for Wales and South West England, the CEO of HSBC in India, the deputy chairman and CEO of HSBC Bank Malaysia from 1999 to 2002, chief operating offi cer of HSBC Bank from 2003 to 2005, deputy chief executive from 2005 to 2006 and group managing director of HSBC Holdings since 2006.

Paul Thurston, group managing director for the UK banking, will succeed John on the 1st April, subject to regulatory approval. Thurston also becomes chairman of the European management committee. He has been a director at HSBC since June 2008 and group managing director of HSBC Holdings since last April.

Matthew Cannon has been appointed manag-ing director, treasurer and head of global mar-kets, Korea. He will be responsible for man-aging foreign exchange and money markets, fi xed income and derivative trading and sales.

HSBC Holdings offers Islamic banking serv-ices through its subsidiary HSBC Amanah.

Nomura HoldingsUS/JAPAN: For the fi rst time in the bank’s 84-year history, the global head of the fi rm’s investment banking division will be moved out of Japan.

Hiromi Yamaji will be based in London to assume the newly created role of global markets deputy CEO from the 1st April. He will run Nomura’s worldwide operations from the bank’s European headquarters.

Yamaji joined Nomura in April 1977 and had served as managing director from June 2000 to September 2001, managing director of Nomura Securities, a subsidiary of Nomura Holdings, from October 2001 to June 2001 and president of Nomura Europe Holdings since April 2002.

He has served as the CEO and president of Nomura International, chairman of Nomura Europe Holdings, member of the advisory

board of Thomas Weisel Partners Group and as director of Nomura Holdings since June 1998.

Nomura Holdings has a wholly owned sub-sidiary, Nomura Islamic Asset Management, an Islamic fund management fi rm based in Malaysia.

al khalijiQATAR: David Proctor, the CEO of Al Khalij Commercial Bank (al khaliji), has been ap-pointed managing director and “special advi-sor” to the chairman. No reason was given for the move.

Robin McCall, who is the managing executive of the corporate and institutional division, has been appointed the acting CEO on an interim basis.

al khaliji was granted an Islamic banking branch license last year and has since been involved in landmark Islamic transactions.

JPMorgan ChaseUS: John Chrin, a veteran at the investment bank, is leaving in June after 16 years. He is to take up a position at his alma mater, Lehigh University in Bethlehem, Pennsylvania.

Chrin was one of the key advisors involved in bank deals that transformed the US fi nancial institutions landscape over a matter of months last year as the credit crisis deepened.

Besides the Bear Stearns and Wachovia takeovers, Chrin also worked on JPMorgan’s purchase of Washington Mutual’s bank-ing operations and PNC Financial Services Group’s deal for National City Corp.

JPMorgan Chase has an Islamic banking group unit that provides Shariah compliant banking services.

Barclays CapitalUK: Gary Posternack has been appointed head of mergers and acquisitions (M&A) based in New York. He was the head of natu-ral resources M&A and takeover defense practice. Posternack came to Barclays when it acquired Lehman Brothers’ North Ameri-can investment banking and capital markets businesses, where he worked from 1995 to 2008.

John Glover has been appointed as the direc-tor of foreign exchange sales based in To-ronto. Glover joins from HiFX Canada where he was the head of structured products.David Lau is the managing director of in-vestment banking in China. He will act as the main coverage banker for corporates in China, focusing on telecom, media and tech-nology as well as general industrials.

Lau will be based in Hong Kong. Before join-ing Barclays Capital, he was with Citigroup for 10 years where he was the managing director of telecom, media and technology emphasizing on equities and M&A for the last two years.

Barclays Capital, an investment banking arm of Barclays Bank, has an Islamic banking unit and launched its Islamic investment platform, Al Safi , in June last year.

Credit Suisse GroupUS: Mark Echlin will join the fi nancial serv-ices group’s investment banking division as a managing director and head of industri-als. He will oversee seven groups — capital goods, aerospace and defense, business services, metals and mining, paper and packaging, transport and logistics and build-ing products and materials.

Echlin comes from Merrill Lynch, where he was a managing director and head of indus-trials for Europe, the Middle East and Africa. Before joining Merrill in 2007, he spent 16 years at Morgan Stanley, most recently as co-head of basic materials group.

Credit Suisse launched its fi rst Shariah com-pliant fund in early March 2007.

Clyde & CoUK: Peter Hodgins, an insurance and re-insurance law specialist with 10 years of insurance practice at Clifford Chance and Reynolds Porter Chamberlain in London, has been hired as the Islamic insurance partner to boost its Middle East presence.

Hodgins has worked on a range of Islamic law matters, including Takaful and Islamic fi nance, in Dubai and Riyadh where he was involved in the establishment of DLA Piper’s affi liation offi ce before joining the corporate insurance practice at Clyde & Co at the start of 2009.

continued...

www.islamicfi nancenews.comMOVES


Real estate specialist Scot Aitken has been hired as the real estate partner by the law fi rm. He will head a four-lawyer team based in the fi rm’s Abu Dhabi offi ce advising on on-shore and offshore structuring for ownership, leasing and licensing.

Scott joined Clyde & Co as a consultant in December 2007 following fi ve years with Aus-tralian law fi rms Clayton Utz and Mallesons Stephen Jaques where he was involved in a wide range of top-level Australian property work. Before becoming a lawyer, Scott spent some 15 years working for a major Australian bank across four jurisdictions.

SBPPAKISTAN: The federal government has ap-pointed Muhammad Kamran Shehzad as the deputy governor of the State Bank of Paki-stan (SBP) with immediate effect for a period of three years. Muhammad has been the managing director in SBP’s Banking Services Corporation since February 2007. His dis-tinguished central and commercial banking career spans more than 34 years.

Maybank IBMALAYSIA: Ali Abbas Zaidi has succeeded Wan Asmadi Wan Ahmad as the head of Islamic capital markets at Maybank Invest-ment Bank (Maybank IB), effective the 1st March. Wan Asmadi is to head a joint venture in Saudi Arabia, a source told Islamic Finance news.

Ali Abbas, whose new appointment is still pending approval from Bank Negara Malay-sia, joins from Deutsche Bank in Dubai and was with HSBC.

ADICUAE: Abu Dhabi Investment Company (ADIC) has hired an experienced dealmaker in the region, Samir Assaad Samaan, to lead the buy-outs in the Middle East and North Africa region.

Samir, who brings extensive private equity and regional experience, hails from NBK Capital in Dubai where he headed the fi rm’s private equity operations. He has also man-aged funds for Nova Capital in London and spent the early part of his career at Chase Securities in New York, focusing on leverage fi nance and mergers and acquisitions.

Serkan Kizil, who has been the acting head of private equity since January, will continue with his investment and management re-sponsibilities as a senior member of the pri-vate equity business.

BankThaiTHAILAND: Subhak Siwaraksa, 52, has been named president and CEO of BankThai, tak-ing over from Chin Yuen Yin , the acting CEO.

He was the former chief executive of TMB Bank from 2003 to 2008 where he was in-volved in the 2004 integration of TMB with DBS Thai Danu and the Industrial Finance Corporation of Thailand. He had also served as the president of TMB Asset Management and lately sat on the board of directors of Exim Bank.

Malaysia’s CIMB Group is the single largest shareholder in BankThai after purchasing a 42.13% stake in the bank in November last year.

Deutsche BankUS: Bruce Evans, a 17-year Goldman Sachs veteran, has been appointed as the new head of mergers and acquisitions (M&A) in the Americas succeeding Jean Manas who will be leaving the fi rm to pursue other en-trepreneurial opportunities. Manas, also a former Goldman Sachs banker, had held the post since 2005.

Evans joined Deutsche Bank in early 2007 and currently oversees consumer, retail and health-care M&A businesses in the Americas.

continued...

Islamic Wealth Management: A Catalyst for Global Change and InnovationIslamic wealth management has evolved significantly and offers many opportunities for innovation and global growth. Several providers have diversified their offerings beyond equities and real estate and there is now a wide choice of structured products, multi-manager funds, takaful and alternative investments available from major international, regional and national financial institutions.

Several leading international market practitioners have shared their knowledge and expertise and made this a valuable guide for wealth managers, investment managers, private banks, service providers and regulators.

Edited by Sohail Jaffer with 50 contributors

What does it cover?

Islamic Wealth Management:A Catalyst for Global Change and Innovation

Additional Book Details: £145 / US$270 / €210

WHEN ORDERING PLEASE QUOTE REF 1156How to order:Post: Euromoney Books Email: [email protected]

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● For the ebook version visit www.euromoneybooks.com

Islamic Wealth Management: A Catalyst for Global Change and Innovation

www.islamicfi nancenews.comDEAL TRACKER


Mr Daud Abdullah (David Vicary)Managing Director

DVA Consulting

Dr Mohd Daud BakarChief Executive Offi cer

International Institute of Islamic Finance

Prof Dr Mohd Masum BillahGroup Executive ChairmanMiddle Eastern Business

World Group of Companies

Dr Humayon DarChief Executive Offi cer

BMB Islamic

Mr Badlisyah Abdul GhaniChief Executive Offi cer

CIMB Islamic

Ms Baljeet Kaur GrewalManaging Director/Vice Chairman

Head, Global ResearchKFH Research Limited

Mr Sohail JafferPartner

International Business Development FWU International

Dr Monzer Kahf Consultant/Trainer/Lecturer

Private Practice

Mr Mohamed Ridza AbdullahManaging Partner

Mohamed Ridza & Co

Prof Bala ShanmugamDirector of Banking & Finance Monash University Malaysia

Mr Muhammad Nejatullah SiddiqiAuthor, Scholar, Speaker, Trainer

Mr Rushdi SiddiquiHead of Islamic Finance

Thomson Reuters

Mr Dawood TaylorRegional Senior Executive-Middle East

Prudential PLC

Mr Abdulkader ThomasPresident & CEO

SHAPE – Financial Corp

Mr Paul WoutersPartnerBener

Prof Rodney WilsonDirector of Postgraduate Studies

Durham University

Mr Sohail ZubairiChief Executive Offi cer

Dar Al Sharia Legal & Financial Consultancy

Another Islamic Finance news exclusive

ISSUER SIZE (million) INSTRUMENT

Cagamas US$565.35 Sukuk

Islamic Development Bank US$500 Sukuk

Chemical Company of Malaysia

US$40.61 Musharakah CP/MTN program

Agni US$71 Sukuk

Danga Capital US$2.82 billion Sukuk Musharakah

Tamweel Up to US$544.5 Sukuk

Dubai Bank Up to US$500 Sukuk

Bakrieland Development Up to US$32.85 Sukuk

TSH Resources Up to US$115.3 Sukuk Ijarah

RAK Properties US$2 billion Sukuk

Malaysian Debt Ventures Up to US$449.07 Sukuk

Bumiputra-Commerce US$1.84 billion Islamic and conventional CP/MTN program

Islamic Bank of Thailand US$178.77 Ijarah

ETA Star Property Developers

Up to US$150 Sukuk

Abu Dhabi Commercial Bank US$1.07 billion Islamic MTN

Philippines Up to US$1 billion Sukuk

Qatar Islamic Bank US$300 Sukuk

Barwa Real Estate US$800 Sukuk

Tabreed Up to US$500 Sukuk

Amlak Finance US$260 Sukuk

Al-Zamin US$11.15 Mudarabah

Muhibbah Engineering US$125.41 Mudarabah

Islamic Development Bank US$122.75 Ijarah

UMW Toyota Capital US$306.9 Musharakah CP/MTN

For more details and the full list of deals visit

www.islamicfi nancenews.com

Deal trackerKeeping you abreast of the world’s upcoming Shariah compliant deals

Islamic Finance newsAdvisory Board:

www.islamicfi nancenews.comISLAMIC FUNDS TABLES


Monthly returns for Middle East/Africa funds (as of the 18th March 2009)

FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE

1 Tijari Islamic Money Market Commercial Bank of Kuwait 23.53 Kuwait

2 BIG Dana Muamalah Bhakti Asset Management 9.03 Indonesia

3 Atlas Pension Islamic - Debt Sub Atlas Asset Management 6.51 Pakistan

4 Al Hilal Islamic Kuwait Investment Company 6.13 Kuwait

5 Insight I-Hajj Syariah Insight Investments Management 5.86 Indonesia

6 Atlas Pension Islamic - Money Market Sub Atlas Asset Management 5.76 Pakistan

7 Al Dar Money Market ADAM 5.69 Kuwait

8 Emirates Real Estate - Accumulation Shares Emirates Bank International 5.34 Channel Islands

9 Solidarity Leasing Solidarity Company © 3.56 Bahrain

10 Al Muthanna Islamic Money Market First Investment Company 3.15 Kuwait

Eurekahedge Islamic Fund Index* -0.50

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.

Contact EurekahedgeTo list your fund or update your fund information: [email protected]

For further details on Eurekahedge: [email protected] Tel: +65 6212 0900

Eurekahedge Islamic Fund Index

Monthly returns for Asia Pacifi c funds (as of the 18th March 2009)

FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE

1 ETFS Physical Silver ETFS Metal Securities 15.89 Jersey

2 Meezan Islamic Al Meezan Investment Management 10.99 Pakistan

3 ETFS Physical Platinum ETFS Metal Securities 9.30 Jersey

4 ETFS Physical PM Basket ETFS Metal Securities 8.82 Jersey

5 ETFS Physical Palladium ETFS Metal Securities 6.77 Jersey

6 Atlas Islamic Atlas Asset Management 6.47 Pakistan

7 ETFS Physical Gold ETFS Metal Securities 6.27 Jersey

8 Tijari Islamic Money Market Commercial Bank of Kuwait 6.18 Kuwait

9 Alfalah GHP Islamic Alfalah GHP Investment Management 5.85 Pakistan

10 Meezan Islamic Income Al Meezan Investment Management 4.77 Pakistan

Eurekahedge Islamic Fund Index* -1.82

70

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100

110

120

130

140

150

Dec-99

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0

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0

Dec-00

Apr-0

1

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2

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2

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3

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3

Dec-03

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4

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4

Dec-04

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5

Aug-0

5

Dec-05

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6

Aug-0

6

Dec-06

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7

Aug-0

7

Dec-07

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8

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8

Dec-08

www.islamicfi nancenews.com

SHARIAH INDEXES


S&P Shariah Indices Price Index Levels

The S&P Shariah Indices. Creating opportunity for Islamic investors.To learn more, contact [email protected].

18/3/09 Jan-09 Dec-08 Nov-08 Oct-08 Sep-08Feb-09680

790

900

1010

1120

1230

1340

1450

1560

1670

1780S&P 500 ShariahS&P Europe 350 Shariah S&P Japan 500 Shariah

50

170

290

410

530

650

770

890

1010

1130

1250S&P Pan Asia ShariahS&P GCC CompositeS&P Pan Arab ShariahS&P BRIC Shariah


0

120

240

360

480

600

720

840

960

1080

1200S&P Global Property ShariahS&P Global Infrastructure Shariah


Index Code Index Name 18/3/09 Feb-09 Jan-09 Dec-08 Nov-08 Oct-08 Sep-08

SPSHX S&P 500 Shariah 741.560 700.074 776.118 815.565 807.449 851.669 1001.724

SPSHEU S&P Europe 350 Shariah 805.190 793.619 873.796 958.391 910.501 965.418 1147.329

SPSHJU S&P Japan 500 Shariah 744.070 748.018 820.175 864.821 810.128 848.709 995.079


SPSHAS S&P Pan Asia Shariah 597.660 552.018 578.671 610.200 565.823 623.071 788.016

SPSHG S&P GCC Composite Shariah 499.680 481.323 481.323 532.742 572.370 604.306 722.769

SPSHPA S&P Pan Arab Shariah 86.650 83.589 83.589 575.540 623.186 650.379 762.843

SPSHBR S&P BRIC Shariah 683.270 616.078 616.078 618.487 645.057 631.042 706.192


SPSHGU S&P Global Property Shariah 420.280 383.755 437.696 481.061 447.125 469.889 567.189

SPSHIF S&P Global Infrastructure Shariah 58.650 57.085 64.288 71.25 66.046 71.179 87.066

www.islamicfi nancenews.comSHARIAH INDEXES


DESCRIPTIVE STATISTICS Market Capitalization (US$ billions) Component Weight (%)

IndexComponent

numberFull

Float adjusted

Mean Median Largest Smallest Large Small

DJIM World 2536 11162.02 8979.40 3.54 0.56 351.84 0.00 3.92 0.00

DJIM Asia/Pacifi c 869 1928.41 1260.00 1.45 0.30 68.70 0.01 5.45 0.00

DJIM Europe 355 2574.54 1972.66 5.56 1.14 121.00 0.10 6.13 0.01

DJIM US 613 5304.37 4952.56 8.08 1.77 351.84 0.03 7.10 0.00

DJIM Titans 100 100 5278.72 4718.49 47.18 31.75 285.17 6.24 6.04 0.13

DJIM Asia/Pacifi c Titans 25 25 749.67 490.21 19.61 14.23 53.04 6.24 10.82 1.27

Mean, median, largest, smallest and component weights are based on fl oat adjusted market capitalization, not full market capitalization.

Data as of the 18th March 2009

INDEX PRICE RETURN (%)

1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD

DJIM World 6.21 7.69 2.87 -0.81 -6.05 -27.19 -39.30 -9.49

DJIM Asia/Pacifi c 5.28 7.86 4.30 2.06 -5.04 -25.81 -41.37 -8.39

DJIM Europe 3.69 5.50 1.19 -3.93 -12.81 -30.76 -46.57 -15.37

DJIM US 7.57 8.38 2.63 -0.74 -4.55 -25.29 -33.21 -8.17

PERFORMANCE OF DJ INDEXES

INDEX PRICE RETURN (%)


DJIM Titans 100 5.94 7.10 1.80 -1.76 -8.66 -24.24 -34.76 -11.70

DJIM Asia/Pacifi c Titans 25 4.81 7.26 2.69 1.27 -6.94 -24.27 -36.46 -10.78

PERFORMANCE OF DJ TITANS INDEXES

PRIC

E R

ETU

RN

(%)


DJIM World DJIM Asia/Pacific DJIM Europe DJIM US

PRIC

E R

ETU

RN

(%)


DJIM Titans 100 DJIM Asia/Pacific Titans 25

Sumeet Nihalani Senior Director SalesMiddle EastTel: +971 4364 [email protected]

Anthony YeungRegional Director Hong Kong, China, Philippines, Taiwan, Korea, Japan, Australia & New ZealandTel: +852 2831 2580 [email protected]

Ariff SultanBusiness Development DirectorMalaysia, Singapore, Indonesia, India, Thailand, Pakistan, Sri Lanka & BangladeshTel: +65 6415 4262 [email protected]

For more information, please visit www.djislamicmarkets.com or contact

-50

-40

-30

-20

-10

0

10

20

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

www.islamicfi nancenews.comISLAMIC LEAGUE TABLES


For all enquires regarding the above information, please contact: Jennifer Cheung (Media Relations) Email: [email protected] Phone: +852 2804 1223

TOP ISSUERS OF ISLAMIC BONDS MARCH 2008 – MARCH 2009

Issuer or Group Nationality Instrument Amt US$ m Iss. % Manager

1 SABIC Saudi Arabia Sukuk Istithmar 1,333 1 9.5 Calyon, HSBC Saudi Arabia

2 Sun Finance UAEMudarabah Sukuk Asset backed Securities

1,093 1 7.8Citigroup Global Markets, Abu Dhabi Commercial Bank, National Bank of Abu Dhabi, First Gulf Bank, Noor Islamic Bank

3 Sukuk Funding (No.2) UAE Sukuk Ijarah 1,021 1 7.3

Abu Dhabi Commercial Bank, Barclays Capital, Credit Suisse Securities (Europe), Dubai Islamic Bank, First Gulf Bank, Lehman Brothers International (Europe), National Bank of Abu Dhabi, Noor Islamic Bank

4 Nakheel Development 3 UAE Sukuk Ijarah 980 1 7.0Dubai Islamic Bank, NBD Investment Bank, JPMorgan

5 Khazanah Nasional Malaysia Sukuk Musharakah 840 4 6.0 CIMB, AmInvestment Bank

6 DEWA Funding UAE Sukuk Ijarah 749 1 5.4Barclays Capital, Citigroup Global Markets, Dubai Islamic Bank, Emirates Bank International

7 Cagamas Malaysia Sukuk Murabahah 693 4 5.0 HSBC, CIMB, Aseambankers

8 Syarikat Prasarana Negara Malaysia Sukuk Ijarah 620 1 4.4 CIMB, AmInvestment Bank

9Perusahaan Penerbit SBSN Indonesia

Indonesia Sukuk Ijarah 512 1 3.7Mandiri Sekuritas, Danareksa Sekuritas, Trimegah Securities

10 Lingkaran Trans Kota Holdings Malaysia Sukuk Musharakah 456 1 3.3 Aseambankers

11 Penerbangan Malaysia Malaysia Murabahah MTN 411 1 2.9 CIMB, AmInvestment

12 PLUS SPV Malaysia Sukuk Musharakah MTN 385 2 2.8 CIMB

13 Rantau Abang Capital Malaysia Sukuk Musharakah 381 1 2.7 CIMB

14 Islamic Republic of Pakistan Pakistan Sukuk 350 3 2.5Standard Chartered (Pakistan), Dubai Islamic Bank Pakistan

15 MRCB Southern Link Malaysia Sukuk Istisna 320 2 2.3 HSBC, CIMB, RHB

16 Tamweel Sukuk UAE Islamic Sukuk 299 1 2.1Standard Chartered, Dubai Islamic Bank, Badr Islami

17 RIM City Malaysia Bai Bithaman Ajil MTN 277 2 2.0 CIMB

18 RAK Capital UK Sukuk Ijarah 272 1 2.0 Standard Chartered

19 Purple Island Saudi Arabia Sukuk Mudarabah 267 1 1.9 HSBC

20 Saudi Hollandi Bank Saudi Arabia Sukuk 207 1 1.5 Saudi Hollandi Bank

Total 13,993 89 100.0



ARE YOUR DEALS LISTED HERE?

Jennifer Cheung (Media Relations)Email: [email protected]

Telephone: +852 2804 1223

If you feel that the information within these tables is inaccurate, youmay contact the following directly:

TOP ISSUERS OF ISLAMIC BONDS JANUARY 2009 – MARCH 2009

Issuer or Group Nationality Instrument Amt US$ m Iss. % Manager

1 Penerbangan Malaysia Malaysia Murabahah MTN 411 1 29.2 CIMB, AmInvestment

2 Islamic Republic of Pakistan Pakistan Sukuk 76 1 5.4Standard Chartered (Pakistan), Dubai Islamic Bank Pakistan

3 Saudi Hollandi Bank Saudi Arabia Sukuk 207 1 14.7 Saudi Hollandi Bank

4 Khazanah Nasional Malaysia Sukuk Musharakah 188 1 13.4 CIMB, AmInvestment

5 PLUS SPV Malaysia Sukuk Musharakah MTN 151 1 10.7 CIMB

6 Pinnacle Tower Malaysia Sukuk Musharakah MTN 99 1 7.1 Aseambankers, AmInvestment

7 Perusahaan Listrik Negara Indonesia Sukuk Ijarah 68 1 4.8Indo Premier Securities, Danareksa Sekuritas, Trimegah Securities

8 Offshoreworks Capital Malaysia Musharakah MTN 56 1 3.9 MIDF Amanah Investment Bank

9 TH Group Malaysia Ijarah MTN 35 1 2.5 CIMB

10 Diversifi ed Venue Malaysia Sukuk ljarah 35 1 2.5 HSBC

11 TSH Sukuk Ijarah Malaysia Sukuk Ijarah 28 1 2.0 OSK Investment

12 Mukah Power Generation MalaysiaSukuk Mudarabah and Istisna

20 1 1.4 RHB Investment

13 Cagamas Malaysia Murabahah MTN 18 1 1.3 CIMB, HSBC, Aseambankers

14 Aeon Credit Service (M) Malaysia Musharakah MTN 7 1 0.5Aseambankers, CIMB, Mitsubishi UFJ Securities

15 Instacom SPV Malaysia Murabahah MTN 1 1 0.1 MIDF Amanah Investment Bank

Total 1,408 16 100.0



For all enquires regarding the above information, please contact:

Jennifer Cheung (Media Relations)

Email: [email protected]: +852 2804 1223; Fax: +852 2529 4377

ISLAMIC BONDS BY CURRENCY JANUARY 2009 – MARCH 2009

Amt US$ m Iss. %

Malaysian ringgit 1,060 12.0 66

Pakistan rupee 267 2.0 17

Saudi Arabian riyal 207 1.0 13

Total 1,602 16.0 100

ISLAMIC BONDS BY CURRENCY MARCH 2008 – MARCH 2009

Amt US$ m Iss. %

Malaysian ringgit 6,203 61.0 44

UAE dirham 4,578 7.0 33

Saudi Arabian riyal 1,806 3.0 13

Indonesian rupiah 779 9.0 6

Total 13,993 89.0 100

ISLAMIC BONDS MARCH 2008 – MARCH 2009

Manager or Group Amt US$ m Iss. %

1 CIMB 2,787 31 19.9

2 HSBC 1,471 11 10.5

3 AmInvestment 886 15 6.3

4 Maybank Investment Bank 859 13 6.1

5 Dubai Islamic Bank 741 4 5.3

6 Calyon 666 1 4.8

7 Standard Chartered 608 8 4.4

8 Emirates NBD 514 2 3.7

9 Citigroup 406 2 2.9

10 RHB Capital 375 9 2.7

11 Noor Islamic Bank 346 2 2.5

12 National Bank of Abu Dhabi 346 2 2.5

13 First Gulf Bank 346 2 2.5

14 Abu Dhabi Commercial Bank 346 2 2.5

15 JPMorgan 327 1 2.3

16 Barclays Capital 315 2 2.3

17 (Persero) Danareksa 257 5 1.8

18 BIMB Holdings 237 4 1.7

19 Saudi Hollandi Bank 207 1 1.5

20 Bank Mandiri 202 2 1.4

Total 13,993 89 100.0

ISLAMIC BONDS BY COUNTRY MARCH 2008 – MARCH 2009

Amt US$ m Iss. %

Malaysia 6,203 61.0 44

UAE 4,415 6.0 32

Saudi Arabia 1,806 3.0 13

Indonesia 779 9.0 6

Pakistan 437 8.0 3

Cayman Islands 190 1.0 1

Total 13,993 89.0 100

ISLAMIC BONDS JANUARY 2009 – MARCH 2009

Manager or Group Amt US$ m Iss. %

1 CIMB 357 6 22.3

2 Saudi Hollandi Bank 207 1 12.9

3 AmInvestment 187 2 11.7

4 HSBC 177 3 11.1

5 Maybank Investment Bank 159 4 9.9

6 Standard Chartered 133 2 8.3

7 Dubai Islamic Bank Pakistan 133 2 8.3

8 BIMB Holdings 76 1 4.7

9Malaysian Industrial Development Finance

57 2 3.6

10 OSK Asia Securities 28 1 1.7

11 Trimegah Securities 23 1 1.4

12 Indo Premier Securities 23 1 1.4

13 (Persero) Danareksa 23 1 1.4

14 RHB Capital 20 1 1.3

Total 1,602 16 100.0

ISLAMIC BONDS BY COUNTRY JANUARY 2009 – MARCH 2009

Amt US$ m Iss. %

Malaysia 1,060 12.0 66

Pakistan 267 2.0 17

Saudi Arabia 207 1.0 13

Total 1,602 16.0 100

www.islamicfi nancenews.comEVENTS DIARY


EDITORIAL TEAM

Managing Editor S.Sivaselvam [email protected]

Editor Raphael Wong [email protected]

Senior Copy Koay Sook KuanEditor [email protected]

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Islamic Finance news team Published By: 21/F, Menara Park, 12, Jalan Yap Kwan Seng 50450 Kuala Lumpur, Malaysia Tel: +603 2162 7800 Fax: +603 2162 7810

EVENTS DIARY 2009DATE EVENT VENUE ORGANIZER

March

25th – 27th Islamic Investment World Switzerland Terrapinn

31st – 1st

AprilMines and Money Gulf 2009 Dubai Beacon Events

April

1st – 2nd The Asia Pacifi c Islamic Finance Market Conference 2009

Kuala Lumpur IBFIM

14th – 15th 4th Annual World Takaful Conference 2009 Dubai MEGA Events

16th Hong Kong IFN Roadshow Hong KongIslamic Finance events

20th – 21st Leaders in Islamic Finance 2009 Qatar IQPC

26th – 30th The International Islamic Finance Forum Dubai IIR Middle East

May

4th Indonesia IFN Roadshow IndonesiaIslamic Finance events

26th Kazakhstan IFN Roadshow KazakhstanIslamic Finance events

26th – 27th 4th World Islamic Funds & Capital Markets Bahrain MEGA Events

June

2nd Egypt IFN Roadshow EgyptIslamic Finance events

26th Istanbul IFN Roadshow IstanbulIslamic Finance events

15th Nigeria IFN Roadshow NigeriaIslamic Finance events

July

8th 1st World Islamic Banking Conference-European Summit

London MEGA Events

August

3rd – 5th IFN 2009 Issuers & Investors Asia Forum Kuala LumpurIslamic Finance events

September

16th UK IFN Roadshow UKIslamic Finance events

October

6th Japan IFN Roadshow JapanIslamic Finance events

12th – 13th 5th Middle East Insurance Forum Bahrain MEGA Events

20th Brunei IFN Roadshow BruneiIslamic Finance events

November

3rd India IFN Roadshow IndiaIslamic Finance events

5th Pakistan IFN Roadshow PakistanIslamic Finance events

3rd World Islamic Infrastructure Finance Conference Qatar MEGA Events

Islamic Investment World Middle East 2009 Middle East Terrapinn

December

6th – 8th 16th World Islamic Banking Conference Bahrain MEGA Events

ADIC 8, 27Ajman Bank 9Al Baraka Group 23al khaliji 26Al Rajhi Bank 5, 16, 23Al Safat Investment Company 5Algebra Capital 7, 18AmG Insurance 10AmInvestment Bank 4Amlak 23Arcapita Bank 19Aston Martin 9Bahrain Financial Company 14Bank Muamalat 6Bank of Khartoum 23BankMuscat 12BankThai 27Barclays Capital 26BBK 8, 13BIsB 9BLME 23BNM 7, 10BNP Paribas Investment Partners 15

Bosnia International Bank 23Bursa Malaysia 7Cagamas 4Capinnova 13CBUAE 8CCM 25CBB 13CIMB Bank 15CIMB Group 6CIMB Investment Bank 25Citicorp 3Clyde & Co 27Credit Suisse 24Credit Suisse Group 26Deutsche Bank 27Deyaar 8DIB 11DIBL 4DIFC Investments 12DMCC Authority 12Dow Jones 7DP World 12Dubai Holding Commercial Operations Group 12

DIB 23Durham University 23Eastgate Capital Group 3EBI 11Egypto-French Institut de Droit des Affaires Internationales 24EIB 9Emaar 11Emirates Bank 23Emirates NBD 9Fitch 11Franklin Templeton 7Freshfi elds Bruckhaus Deringer 24FTSE Group 15Gargash Enterprises 5HSBC Holdings 26HSBC Middle East 12IBB 6IBBM 5I-Bhd 5ICD 5IDB 5, 9IIB 8

Investment Dar 9Islamic Bank of Yemen 9Islamic Finance Council UK 13Ithmaar Bank 8, 13JAFZ Sukuk 12Jebel Ali Free Zone 12JPMorgan Chase 26KFH 6, 7, 8, 23KFH Research 7KFHM 7KFH-Turkey 6Labuan Re 10, 11Liquidity Management House 6MAA Holdings 10MAA Takaful 10Malaysian Re 11MARC 11Mashreqbank 11Mashreqbank 9Maxis 24Maybank 11

NE-IFN06/11

Company Index

Company Page Company Page Company Page Company Page

Country Index

Bahrain Higher paid-up capital for Takaful International 10 Ithmaar delays BBK and Shamil merger 8 Unicorn’s operating profi t up 46% in 2008 9 BIsB cancels Yemeni acquisition 9 Postponed merger “not a hindrance” 13 Unicorn pursues international expansion 14Brunei Takaful IBB, Labuan Re ink agreement 10Egypt Eastgate invests in pharmaceutical fi rm 3GCC Financial crisis in the GCC — a fund manager’s perspective 18Global Bank Muamalat, Noor Islamic decide on Path 6 Franklin looks into Islamic funds 7 Scholar: Ijarah risks Shariah compliance 7 KFH launches website for research unit 7 Islamic LIBOR: Take care, says Bursa Local currency Sukuk could be tops 7 Cash management evolution 16 Guf Islamic fi nancial institutions, Takaful companies not risk immune 19 How riba hoards economic resources 21Indonesia Not the time to issue Sukuk, says analyst 3

Indonesia ICD pledges US$50 million for SMEs in Indonesia 5Kuwait KFH’s Diamond a gem for VIPs 8 Dar could dispose of assets to pare debt 9Malaysia MAA to hold talks with AmG, Solidarity 10 Fitch removes Maybank from Rating Watch 11 RAM downgrades Oxbridge’s debt issues 11 Toll operator’s BBA notes on Rating Watch 11 MARC affi rms MNRB 11 Islamic capital market maintains domination 4 Cagamas to issue US$250 million Sukuk 4 I-Bhd keen to set up Islamic fi nancial hub 5 Banking and fi nance sectors still hiring 5 Maybank, CIMB merger talks resurface 6 Termsheet - Chemical Company of Malaysia’s Sukuk 25Middle East ‘Insurance market in MENA is growing’ 10 Possible downgrade for HSBC Middle East 12Oman Omani bank under review for downgrade 12Pakistan Unicorn injects US$12.5 million into DIBL 4Russia VTB keen to issue country’s fi rst Sukuk 6 ‘Russia should consider Islamic model’ 6

Saudi Arabia IIB sets its sights on Saudi housing development 8 IDB to issue US$500 million in Islamic bonds 9 Meet the Head - Walid Hegazy 24Singapore Islamic fi nance goes on the road again 15Sri Lanka ‘Sri Lanka will benefi t from Sukuk issuance’ 5Turkey KFH-Turkey to upgrade its German unit 6UAE DIB on CreditWatch 11 Emaar’s rating lowered 11 Ratings, outlooks lower on government-related entities 12 S&P places Oman Insurance on CreditWatch 12 Deyaar’s fi nancial strategy to lower risks 8 RAKIA seeks S&P rating 8 Emirates’ central bank restricts lending 8 ADIC’s private equity fund on the lookout 8 Flexibility from Saadiq Home Finance 9 Islamic bank offers fi rst e-Dirham card in Ajman 9 EIB can proceed with conversion 9UK IBB losses drop by 15% 6 Scotland told: Go for Islamic fi nance 6

Country Title Page Country Title Page Country Title Page

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The UK goes right, In this issue the US goes wrongislamicfinancenews.com/sites/default/files/newsletters/v... · 2016-03-31 · He then determines the prospects of getting not only