Malaysia: Islamic finance must include lower income groups for more balanced growth: Zeti

KUALA LUMPUR: Islamic finance must be inclusive and accessible to all particularly the lower income groups and small businesses so as to achieve a more balanced global economic growth with reduced income disparities, Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Azizsaid.

To this end, she said Islamic financial institutions must strive to enhance the access of their financial services to all segments of society by meeting the demand for more Islamic microfinance products.

“In emerging as a new market niche, Islamic microfinance would meet the differentiated demands of low income communities and provide support to entrepreneurial activities,” she said at the 2nd International Shariah Research Academy for Islamic Finance (ISRA) Colloquium 2012 on Tuesday.

Islamic microfinance, if supported by microtakaful, has the potential to provide a more comprehensive, sustainable and accessible financing and protection solution for the lower income groups and small businesses.

Zeti also said the Socially Responsible Investment (SRI) is expected to become a mainstream asset class by 2015, reaching a projected total of more than US$26 trillion of asset-under-management, accounting for 15% to 20% of the global market.

This growth was mainly driven by the demand from institutional investors which are increasingly prioritising the consideration of sustainability and social responsibility in their business conduct and institutional value system.

“SRI has brought to the forefront the need for the financial system to be linked to the economy and for the need for greater and improved levels of transparency, fairness, ethics and social responsibility in modern finance,” she added.

On the Islamic Financial Knowledge Repository Portal that she launched today, Zeti said it can contribute in meeting the need for more efficient information dissemination that would promote greater market transparency, price discovery and industry insights.

As a knowledge database, the portal centralises Shariah rulings and its justifications, legal and regulatory requirements. This is enriched by the latest collection of research and development in Islamic finance.

“This database will become an important source of reference and guidance for Shariah and industry practitioners, policymakers, researchers and academicians,” said Zeti, adding this initiative will not only promote greater understanding but mutual respect and recognition of Islamic finance.

(The Star Online / 27 Nov 2012)

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Malaysia: Centre makes it easier for people to pay zakat

KUALA LUMPUR: Pusat Pungutan Zakat (PPZ) collects tithes and is a subsidiary of Federal Territories Islamic Religious Council (MAIWP).

Its chief executive, Mohd Rais Alias, said people could check with PPZ whether they had to pay zakat as owners of companies or individuals.

"You can come directly to the counter or seek information on our portal. We even calculate the amount you need to pay."

PPZ collects both property tithes and zakat fitrah. The latter is collected during Ramadan. This year, 10 counters in Kuala Lumpur, Putrajaya and Labuan were open every day throughout the fasting month for zakat fitrah collection.

"All counters are also open during office hours daily throughout December. Sometimes, we extend the operating hours. PPZ has been doing this since its inception in 1991."

He said PPZ had taken several measures to raise zakat collection, one of which was having a theme. This year's theme is "Year of Property Tithe".

"Based on the theme, we have an annual collection target."

Rais said these measures had raised the total collection of zakat annually and there had been a 63 per cent increase this year. This was proof that the level of awareness among Malaysians had increased.

He added that PPZ had provided many payment channels.

"We have also come up with an application called 'i-zakat' for Android smartphone users and appointed certain banks and agencies to collect zakat."

(New Straits Times / 25 Nov 2012)

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Malaysia: SC holds Islamic finance public lecture by Iqbal Khan

MALAYSIA (Nov 26, 2012): The Securities Commission (SC) will hold a public lecture by prominent Islamic banker Iqbal Khan, recipient of the prestigious Royal Award for Islamic Finance 2012, in Kuala Lumpur on Monday.

Titled "Our Markets, Our Values – A principles-based approach to creating value in Muslim majority markets", the lecture will focus on the developments and key issues in the Muslim-majority markets including values which had fundamentally driven the history and development of the Islamic finance industry.

The lecture will begin at 2pm and will be followed with a 30-minute Q&A session.

"This will be a platform for intellectual discussion and learning that provides an opportunity for the business community, academics, students and the public to understand the developments in Islamic finance globally," said the SC in a statement today.

Members of the public are invited to attend the public lecture. Attendance, while free, is by registration only.

(The Sun Daily / 26 Nov 2012)

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Malaysia continues to lead in Islamic banking development

KUALA LUMPUR (Nov 19, 2012): Malaysia will continue to be the global leader in developing and promoting Islamic banking systems, according to Roland Berger Strategy Consultants.

Its senior partner for Southeast Asia, Markus Bohme said Malaysia will face competition from member countries of the Gulf Cooperation Council (GCC).

He said there will be an automatic connection with the GCC countries and at the same time competition, but Malaysia is probably set for that in Asia.

"Many people are thinking about Malaysia as a product of Islamic investment banking, automatically the activity will be related to the Gulf region.

"It probably goes beyond the Islamic...Malaysia has relatively strong banks and very international banks which are Maybank and CIMB," he told the media during an Investment Banking Outlook briefing, here today.

However, Bohme said the global investment banking revenues were set to increase this year but more restructuring and consolidation schemes were expected.

He said global investment banking revenues were expected to grow by 10% this year but might post a low double-digit industry return-on-equity (ROE).

"Global investment banks have improved their performances over the past few months, but structural earnings problems persist," he said.

Despite the rebound in revenues and profitability as compared with 2011, he said there would be more restructuring, consolidating and a continued shift into emerging markets, beyond just the traditional financial hubs in Asia.

"Thus, around 40,000 investment banking jobs are expected to be cut in the next two years -- compared with the middle of 2011," he said.

(The Sun Daily / 19 Nov 2012)

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Malaysia: 20-year sukuk with 4.36% yield sold

KUALA LUMPUR: The Finance Ministry paid a 50 basis-point premium for a 20-year sukuk over non-Islamic sovereign debt, the biggest spread this year for government-guaranteed syariah-compliant notes.

Turus Pesawat Sdn, a company set up to sell the securities that will fund aircraft purchases on behalf of loss-making carrier Malaysian Airlined, sold RM3.4bil of debt in total, said two people familiar with the deal who declined to be named because the details are

private. The RM1.65bil portion of 2032 notes yielded 4.36%, the top end of the 40 basis-point to 50 basis-point guidance, they said.

“The higher pricing reflects the lower risk-appetite for the aviation business, which is very volatile, as well as the increase in supply of sukuk,” Michael Chang, who oversees US$1bil as head of fixed-income at MCIS Zurich Insurance Bhd, said in an interview yesterday. “Fifty basis points for a low-risk government-guaranteed paper is attractive, and is definitely worth holding.”

Falling yields on Islamic bonds have spurred a surge in issuance this year in the world’s biggest market for the debt. Sales more than doubled to a record RM84bil from RM35.4bil in the same period in 2011, according to data compiled by Bloomberg.

Turus Pesawat’s offering of sukuk, which pay returns on assets to comply with Islam’s ban on interest, is part of a RM5.3bil 20-year programme.

The company also sold RM500mil each of 10- and 12-year syariah debt yesterday at yields of 3.74% and 3.93%, representing premiums of 30 basis points and 40 basis points,. It issued RM750mil of 15-year notes at 4.12%, a 45 basis-point spread, they said. A basis point is 0.01 percentage point.

MAS sold RM1bil of Islamic bonds with no fixed maturity in June via a private placement at a yield of 6.9%. It also issued RM500mil in September at the same rate.

MAS announced in May it planned to lease six Airbus A380s and two A330s from the government for RM5.3bil.

The airline is seeking to win back business from budget carrier AirAsia Bhd by expanding its fleet after reporting losses for six straight quarters through June.

The sukuk are based on the syariah principle of Murabaha, a three-party transaction where a financial institution buys the goods from the supplier on behalf of the customer and sells them back at a markup.

(The Star Online / 09 Nov 2012)

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Malaysia: TH Plantations, pilgrim's fund set up 1 billion ringgit sukuk programme

TH Plantations said in statement on Tuesday that Hong Leong Islamic Bank and RHB Investment Bank were appointed as the joint principal advisers, joint lead arrangers and joint lead Managers for this sukuk murabahah programme.

The sukuk will be issued to the pilgrim's fund or Lembaga Tabung, making it non tradable and non transferable, TH Plantations said.

TH Plantations issued a first tranche of 200 million ringgit under the programme on Tuesday, which has a tenure of 15 years and will mature on October 2027. The bonds have a profit rate of 6.6 percent yearly, paid every six months.

(Reuters / 30 Oct 2012)

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Islamic banking provides better value propositions to consumers – KFH Malaysia

KUCHING: Kuwait Finance House (Malaysia) Bhd (KFH Malaysia), a pioneering bank that was incorporated in 1975 in accordance with Islamic principles of syariah, is calling for better awareness among customers that Islamic banking is not only an alternative financial approach but also in some aspects provides better value propositions to the consumers.

In an exclusive interview with The Borneo Post, the bank’s chief executive officer (CEO) Datuk Jamelah Jamaluddin pointed out that Malaysia’s Islamic finance industry had been in existence for over 30 years.

“The enactment of the Islamic Banking Act 1983 enabled the country’s first Islamic bank to be established and thereafter, with the liberalisation of the Islamic financial system, more Islamic financial institutions have been established.

“There are over 300 Islamic financial institutions worldwide across 75 countries. According to the Asian Banker Research Group, the world’s 100 largest Islamic banks have set an annual asset growth rate of 26.7 per cent and the global Islamic finance industry is experiencing average growth of 15 to 20 per cent annually.

“Rapid liberalisation in the Islamic finance industry and facilitative business environment has encouraged foreign financial institutions to make Malaysia their destination of choice to conduct Islamic banking business.

“This has created a diverse and growing community of local and international financial institutions. Full-fledged Islamic banks are given permission to conduct both ringgit and non-ringgit businesses,” Jamelah said.

When asked about the growth of clientele base in the country, she said that so far, the growth in Islamic banking had come from customers switching to Islamic banking from the conventional banking space.

Muslims as well as non-Muslims were starting to see the benefits of Islamic banking and explore syariah-compliant products and services, she remarked.

On the key principle differences between conventional or traditional banking and Islamic banking, the CEO pointed out that Islamic banking differed from conventional banking as it emphasised partnership while prohibiting ‘riba’ or interest.

“Islamic banking aims to create business activities that generate fair and equitable profit from transactions that are backed by real assets.

“It also serves the community at large by promoting ethical investment and by being responsible with a customer’s money right from its source to where it is channeled,” she elaborated.

Nonetheless, the Islamic banking sector was not without challenges as she noted, “Despite the growth, there still is a lack of understanding on the concept, potential customers and benefits of Islamic banking.

“There is also a lack of uniformity between syariah views due to the divergences of opinions between the different schools of law and methodologies that may be called upon when elaborating on the law.

“Syariah interpretation also has to consider business practicability/financing commercial viability,” she emphasised.

Jamelah highlighted that in terms of infrastructure financing, KFH Malaysia had became the main financier in the development project of Islamic religious schools in the state of Johor July 2011.

“The Islamic financing, through a Murabahah Tawarruq facility of up to RM160 million, has been provided to MysysNet Development Sdn Bhd, the company appointed by the Johor state government to undertake the project.

“KFH Malaysia financing will be utilised towards the construction of 97 Islamic religious schools from Phase One to Phase Four,” she stated.

With regards to the attractiveness of KFH’s banking products, the CEO cited an example in saying an increasing number of customers had been interested in KFH Gold Account-i, Muslims and non-Muslims alike.

“Since KFH Account-i was introduced in February 2010, close to10,000 account holders have been recorded. Approximately 30 per cent of KFH Malaysia’s customers are Gold account holders.

“This contributed to around 1.5 tonnes of gold sold. KFH Malaysia also recently launched the first Islamic Junior Gold Account-i for customers below 18 years old. The initial deposit can be as low as five grammes. 

(Berneo Post Online / 27 Oct 2012)

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Malaysia: Bank Negara Malaysia (BNM) issues Shariah standards on Mudarabah

KUALA LUMPUR: Bank Negara Malaysia (BNM) has issued the Shariah standards on Mudarabah to all Islamic financial institutions under its purview.

BNM said on Monday the issuance of the Shariah standards on Mudarabah was an important milestone and was part of its continuous efforts to strengthen the Shariah and regulatory framework in Malaysia.

"The standards would serve as guidelines for the Islamic financial institutions in developing Islamic financial products and services based on Mudarabah," it said.

The central bank pointed out the Shariah standards on Mudarabah was to provide a standard on the features of mudarabah contracts applicable in Islamic financial transactions.

"The Shariah standards on Mudarabah also outlines the mandatory and the optional features applicable to the mudarabah contract in which the Islamic financial institution would be required to observe such requirements in developing Islamic financial products and services," said BNM.

(The Star Online / 22 Oct 2012)

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Malaysia: OSKIB aims to unlock value in Islamic finance segment

KUCHING: OSK Investment Bank Bhd’s (OSKIB) Islamic banking division is taking measures to unlock value in the Islamic finance realm, in tandem with its measures in addressing the challenges currently faced in the segment.

The World Bank has valued the global Islamic finance asset size at about US$1.3 trillion currently and expects it to reach US$1.6 trillion by year-end. In Malaysia, the Islamic banking segment represented 18 per cent of the overall banking sector’s RM1.78 trillion total assets as at end-2011.

OSKIB’s Islamic banking division director and head Yazit Yusuff recently told The Borneo Post that the measures included shifting of focus on business development into more Islamic capital market activities.

“The bank has identified various initiatives including the setting up of a full-fledged Islamic fund management company. There are also projects in the pipeline including establishing an Islamic stock broking window and introducing syariah-compliant equity derivative products.”

In addition, he mentioned “continuous sourcing for financing mandates especially on opportunities to participate in syndicated Islamic financing arrangements with other Islamic banks to finance capital market activities.”

With regards to collaboration and consolidation, he also noted the bank’s greater potential via “benefitting from a bigger and stronger balance sheet through the proposed merger initiative with RHB Investment Bank.”

“The new developments include establishing an Islamic stock broking window to offer a full range of syariah-compliant equity businesses from a selection of syariah-compliant stocks to provision of Islamic Share Margin Financing.”

In terms of new products, OSKIB had identified more new syariah-compliant products such as syariah-compliant equity derivative products including warrants, options and dual-currency investments as well as retail deposits in the form of syariah-compliant negotiable instruments of deposits.

The fund management business would be looking at market expansion in which syariah-compliant funds will be issued and marketed out of the regional offices like Singapore and Hong Kong, he said.

“Kuala Lumpur is the hub for our Islamic fund management activities and all products offered will take into account screening methodology used by other jurisdictions to ensure global acceptance.

“In the current changing market, there is a wide range of Islamic banking products offered by many financial institutions to meet the demands and needs of investors in the Islamic capital market.

“OSKIB is dedicated to expand its current Islamic based products into a full-fledged Islamic capital market offering through growing its capabilities in product structuring, asset management, project financing, stock broking and capital services that would be made available to current and future investors.

(Berneo Post Online / 22 Oct 2012)

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European sukuk sellers tapping Malaysia as crisis curbs lending

Malaysian tax breaks on sukuk are luring companies from Germany, France and Turkey to tap the world’s biggest Islamic bond market as Europe’s debt crisis curbs lending.

CIMB Group Holdings and AmInvestment Bank, among the top three sukuk arrangers in Malaysia this year, said they are seeing increased interest after the government extended tax exemptions for foreign issuers to 2014 in the September budget.

Ireland’s state-owned power producer is the only European entity that’s so far revealed plans to sell ringgit-denominated securities complying with religious tenets.

Global sales of Islamic notes climbed 84% in 2012 to an all-time high of $39.1bn, while syndicated loans in Europe, the Middle East and Africa fell 40% to $545.5bn, according to data compiled by Bloomberg.
Shariah banking assets in Malaysia rose 20.6% to a record 469.5bn ringgit ($154bn) as of July from a year earlier, the Finance Ministry said on September 28.

“We are getting enquiries from these countries because the European crisis is making it difficult to source financing in their home nations,” Mohd Effendi Abdullah, the Kuala Lumpur-based head of Islamic markets at AmInvestment Bank, the nation’s third-biggest Shariah-compliant debt underwriter, said.
“Many issuers are beginning to see Malaysia as a good source to tap Islamic funds.”

European roadshows held by the Malaysian International Islamic Financial Center, a government body set up in 2006 to promote the country as a Shariah-compliant hub, are starting to bear fruit, Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank in Kuala Lumpur, said.

Badlisyah and Effendi declined to name the companies considering selling notes in the Southeast Asian nation.
The Electricity Supply Board of Ireland is seeking approval from regulators for a sukuk, Dublin-based Dermot O’Reilly, business development executive at IDA Ireland, the international development agency, said in an e-mail on September 19.

Sales of Shariah-compliant debt by overseas companies increased 93% to 2.7bn ringgit this year, led by issuers from the Arabian Gulf, Singapore, and Kazakhstan.

Abu Dhabi National Energy Co and Singapore-listed First Resources sold 650mn ringgit and 600mn ringgit, respectively, this year. Gulf International Bank BSC and Saudi-Arabia-based Al Bayan Holding Co announced Islamic bond programs totaling 4.5bn ringgit.

“The trend of foreign investors selling ringgit sukuk is more visible as there’s greater awareness of what is available in Malaysia,” said Badlisyah, whose firm is a unit of CIMB Group, the second-biggest underwriter. “The debt crisis in Europe is also a factor that’s making companies look for alternative financing.”
Average yields on global Islamic bonds dropped four basis points, or 0.04 percentage point, to an all-time low of 2.87% in the first four days of the week, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index.
The difference between the average and the London interbank offered rate, or Libor, narrowed 14 basis points to 181 basis points, the least since January 2008.

Islamic bonds sold to international investors returned 8.4% in 2012, according to the HSBC/Nasdaq index, while debt in developing markets climbed 16.6%, JP Morgan Chase’s EMBI Global Composite Index shows.
The Southeast Asian nation pioneered the development of the global Shariah bond market with the sale of the first sovereign Islamic debt worth $600mn in 2002, according to the Malaysian International Islamic Financial Center.

Foreign issuers are interested in selling sukuk in Malaysia because it’s a cost effective destination with a diversified pool of investors, central bank Governor Zeti Akhtar Aziz told reporters in Kuala Lumpur last month.
Borrowing costs for top-rated companies in Malaysia dropped 35 basis points to 4.31% this year, the lowest level since 2003, according to a central bank index. Corporate sales of sukuk rose 34% to 52.3bn ringgit in 2012, data compiled by Bloomberg show.

Issuance reached an all-time high of 75.6bn ringgit last year following the single-biggest offering from highways operator PLUS Bhd. in December of 30.7bn ringgit.

(Gulf Times , 20 Oct 2012)

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