ANALYSIS: Kazakhstan’s Islamic finance market starts to grow

Eight months after Kazakhstan’s law on Islamic finance and banking was adopted, a handful of local and international Islamic institutions have already set up in the country. Looking ahead, the issuance of Islamic bonds by Kazakhstan-based companies is expected to drive the market for Sharia finance.

Within Kazakhstan, Fattah Finance, the country’s first brokerage specialising in Islamic finance, started work in March, a month after the law was adopted. The firm has put together a team of around 15 professionals, with experience in the stock market, and Islamic finance and banking. Although the firm still works with traditional instruments, its main purpose is Islamic finance. Kazakhstan also has its first consultancy focussed on Islamic finance, Kausar Consulting.

Meanwhile, from the United Arab Emirates, Al Hilal Bank is already present in Kazakhstan, and is planning to open two branches – in Almaty and Astana – by the end of 2009. It is expected to focus on the industry, agriculture, real estate and tourism sectors. In May, Qatar Islamic Bank and Bahrain’s Ithmaar Bank also announced their intention to enter Kazakhstan, though concrete plans haven’t yet been announced.

Financial hub

The new law is part of Kazakhstan’s efforts to develop its financial infrastructure and establish Almaty as a regional financial centre.

Chingiz Kanapyanov, deputy chairman of the Agency of the Republic of Kazakhstan on Regulation of Activities of the Regional Finance Centre of Almaty (RFCA), which pushed for the law’s adoption, stresses that Islamic finance will exist alongside traditional finance in Kazakhstan. “We are not switching the system completely, but would like to create another opportunity for both Kazakh and global players to invest in this country,” he tells bne.

As the first country of the Commonwealth of Independent States (CIS) to introduce legislation on Islamic finance, Kazakhstan hopes to open up new investment opportunities for domestic actors and build new links with the Islamic world. According to Kanapyanov, interest from investors in the Middle East and Malaysia has been very strong.

Astana’s policy of maintaining friendly relations with other nations encompasses the Islamic world. These efforts have been stepped up recently. Kazakhstan is organising investment conferences in both Bahrain and Abu Dhabi later this year, and on October 31 national carrier Air Astana will launch weekly flights to the Malaysian capital Kuala Lumpur. “We would like to see more investors operating in the Sharia-compliant sectors, and to see more bridges being built between Kazakhstan and the Islamic countries. This will be very beneficial for our country,” Kanapyanov says. “At the same time, banks such as Al Hilal that choose to come here from abroad will gain access to Kazakhstan and Central Asia. Despite the international turmoil, Central Asia is still one of the fastest growing economies, and there are definitely opportunities here.”

Research carried out by Fattah found that institutional investors, pension funds, insurance companies and individuals in Kazakhstan would be interested in buying sukuks. “The pension funds are increasing their activities, and would like to start buying sukuks to diversify their investment portfolios,” says Fattah chairman Aidos Demeshev. “Individual people are also interested. It’s not just Muslims; other people are attracted because Islamic financial products are connected to something real, and all risks and profits are shared.”

Demeshev stresses that sukuks must be issued in Kazakhstan if the new law is to have a real effect on the economy. Under the law, only wholly owned state companies – those within the Samruk-Kazyna and KazAgro groups – and Islamic banks can issue sukuks. As yet, none have been issued in Kazakhstan, although some are understood to be in the pipeline. “We want and we are ready to work with other actors in the market to start this process,” says Demeshev. “Our company will grow at the same speed as the sukuk market in Kazakhstan. We would like to work with other foreign partners and we are open for cooperation for developing our market.”

Until domestic sukuks are issued, Kazakhstan-based institutions and individuals will have to invest in foreign Islamic financial instruments. “We can invest in sukuks on world capital markets. However, we want to invest domestic capital into sukuk bonds on the domestic market,” says Demeshev. “It would be very good if we could attract investors from both world and domestic market to projects in Kazakhstan. Investors from the Middle East and Islamic countries are likely to become more interested in Kazakhstani projects.”

Early stage

Islamic finance is still at a very early stage in Kazakhstan, and market participants acknowledge that it will take time for the market to grow. In the longer term, new legislation is expected to be adopted, allowing a wider range of Islamic financial products to be used, and more institutions to be set up. “Islamic finance is still in its infancy in Kazakhstan, and we need to develop this market,” says Demeshev.

It does, however, benefit from strong support from President Nursultan Nazarbayev, who was a driving force behind the law’s adoption, as well as other top government officials and the RFCA.

Now that the first steps have been taken, Kazakhstan has started working with the Islamic Development Bank to draft a roadmap on Islamic finance and economic development. This will form a central part of the IDB’s strategy in Kazakhstan, and is expected to be announced in early 2010.

 Source : skilledroadintelligent

Islamic Banking – A perception

Islamic law or Sharia prohibits the payment and receipt of interest, as it is intended that the money will make money.  However, that does not mean that the Muslim community does not need financial instruments, as the Muslim community also needs to cover its financial needs, although it should look like and avoid paying interest charges.

The major obstacle is in Islamic finance is the prohibition of usury or Riba. Apart from the prohibition of interest, the Islamic rule prevents investing in certain sectors, such as alcohol, pork products, casinos, pornography etc..  For this reason the areas where an investment fund that follows Islamic law can invest is limited.

The most common contracts of Islamic finance are Ijara, Murabaha, Sukuk and Musharakah.  This type of financial products are common in Islamic countries, although they are becoming more common in the West due to immigration.

• Ijara is a contract type that is often used as an alternative to a mortgage, or any type of loan that is intended for the acquisition of an asset.  In a traditional mortgage a person buys a house and asked for a loan whose interest consists of the property, something not allowed.

In ijara the bank acquires the property at your request, agreeing a final price of sale and periodic payments (equivalent to rent).  The property can be sold, but implies that the Ijara contract is sold with it.  As I have discussed this type of agreement can also be performed for any durable good, such as a car.  There is also a loan Qardo-al-Hasan, who is a benevolent loan without interest.  But usually need some kind of warranty.

• Another example is the Murabaha financing, a type of financial product in which a contract is agreed repurchase of an asset depending on its cost plus a commission has been agreed.  However is limited to commercial transactions, and not be seen purely financial product.

• To finance a project, such as the construction of a residential complex, normally tends to borrow money, although in Islamic finance is often opt for Musharakah.  Basically it is a joint venture in which the bank and client come together to fund a project, both parties may be involved in project management, but that does not mean they are obliged to do.

• Like all not going to be loans, there are also investment vehicles, such as Sukuk.  They are technically a type of contract, but in practice a kind of promissory notes are equivalent to bonds.  Such bonds must be invested only in areas accepted and can not charge interest, so the rate of Sakkara (the Sukuk individual) will prevent these two prohibitions in one way or another.  Thus the Sukuk can be quite heterogeneous and before investing in them should be studied individually.

Although Islamic finance usually associated with Arab sheikhs typically not all Muslim countries have adopted, for example Morocco, Geographically its peak is in the Middle East and Southeast Asia, Singapore being one of the largest centers in the world of Islamic finance and Malaysia among the countries which succeed in retail banking.  Besides the United Kingdom have Abora from commercial banking and investment banking.  Commercial banks typically offer halal finance (which comply with Shariah) in some of its branches, especially those with large percentage of customers who preactican Islam long politicians who seek to convert the city of London into a major center of Islamic finance , which investment banks seem to like.

When asked if Westerners can access these products, the answer is yes, of course.  However, we should take into account the lack of experience in our country (of advisers, judges, etc.) and lack of regulation, which leaves us to grant a private contract or legal system of a foreign country whose laws may be very different.


Misys Sees Growth in Islamic Banking’s Global Market Drive Demand for Specialised Software Solutions

The rapid growth of the global Islamic banking market over the last five years has boosted the demand for specialised Islamic banking and finance software solutions, reports Misys plc (LSE: MSY), the global application software and services company. With the influx of mainstream banking institutions, particularly leading Western brands, into Islamic banking throughout the world, the support from specialist solution vendors has become a necessity to ensure a smooth transition to Shariah-based banking.

“Banks embarking on Islamic banking operations in key markets around the world are searching for partners with a thorough understanding of the sector and a proven track record in delivery,” states Samir Safa, Business Development Manager, Islamic Banking at Misys. “Islamic banking has opened new and exciting growth possibilities, but it remains a challenge for banking institutions to work within the Shariah-based banking system and adopt its distinct practices. The core banking technology used by financial institutions that operate in this market is essential for meeting local customers’ needs, regulatory reporting, operational requirements and Shariah boards’ approvals.”

Research from the analyst community estimates that the global Islamic banking market is now worth over USD 500 billion, with growth forecast of between 10 and 15 per cent during 2010. Samir Safa continues: “Misys has provided specialised services and software solutions for over two decades that have enabled banking institutions to maintain their competitive edge in this burgeoning market. Although the Middle East has in the past been the primary market for Islamic banking, we have been expanding our presence in other regions as the market grows globally. The experience and knowledge we have built from more than 25 years of delivering integrated, comprehensive solutions to customers puts us at the forefront of the marketplace.”

Misys provides its BankFusion Equation Islamic Banking and Finance solution for retail and corporate banking clients that helps them deliver robust and efficient products and services to their customers. The solution supports a wide range of Islamic Finance products, including Murabaha, Ijarah, Istisna, Musharaka and Al Tawarruq, together with fully automated Islamic Profit calculation and distribution. BankFusion Equation uses our revolutionary BankFusion platform to deliver re-usable components. This brings customers state-of-the art technology and unique flexibility, re-architecting Equation into a service-oriented environment.

Misys also offers a world-class Islamic treasury solution in Misys Opics Plus, a service-oriented, treasury and capital markets solution with unsurpassed STP and back-office capabilities. Misys Opics Plus is a comprehensive solution for front-to-back office, cross-asset processing of a wide range of financial instruments. The solution provides support for Commodity Murabaha (including Contributor Trades), Reverse Murabaha, Wakala Investment and Financing, Deposit Exchange, Sukuk, Al Tawarruq and FX spot.

The two systems are fully integrated for financial institutions that require total Islamic coverage (including operational window) to satisfy all the needs of their customers.

About Misys plc

Misys plc (LSE: MSY), provides integrated, comprehensive solutions that deliver significant results to organisations in the financial services and healthcare industries. We maximise value for our customers by combining our deep knowledge of their business with our commitment to their success.

In banking and treasury & capital markets, Misys is a market leader, with over 1,200 customers, including all of the world’s top 50 banks. In healthcare, Misys plc owns a controlling stake in NASDAQ-listed Allscripts-Misys Healthcare Solutions, Inc, a clear leader in the provision of healthcare technology, serving more than 150,000 physicians, 700 hospitals and nearly 7,000 post-acute and homecare organisations. Misys employs around 6,000 people who serve customers in more than 120 countries

source : Misys

ABSA Islamic Banking SA`s best

Absa Islamic Banking is the inaugural recipient of the 2009 Best Islamic Bank in South Africa award, according to the Islamic Finance news, a leading industry publication. The accolade, determined on a poll basis by the publication’s readers, recognises excellence, achievement and leadership in Islamic banking and finance. It is the first time that the awards are designated by country, and not by continent.

Amman Muhammad, Managing Director of Absa Islamic Banking, described the accolade as an “honour and a vote of confidence in our products and services from our customers across the globe”. He added: “The fact that this is the result of an international poll augurs well for our future growth and ongoing expansion of our suite of products.”

He added that at 98%, ABSA Islamic Banking boasts one of the best retention rates in the conventional banking environment; an achievement Muhammad attributes to the customers’ endorsement of Absa’s response to their needs. “ABSA Islamic Banking has certainly mastered the art of turning customer approval into tangible outputs, most notably in the form of awards,” he said.

In the recent past, Islamic Finance News voted Absa Islamic Banking as the Best Islamic Bank in Africa for two consecutive years – 2007 and 2008. The same publication had also bestowed Absa with the 2006 Shariah Deal of the Year award for South Africa. Most recently, the editors of the Global Finance Magazine – following extensive consultation with bankers, corporate finance executives and analysts throughout the world – voted ABSA Islamic Banking as the 2009 World’s Best Islamic Financial Institution Award in the category for the non-Gulf Cooperation Council Middle East/Africa region.

According to Global Finance Magazine, criteria that counted in Absa’s favour included its growth in profitability, its strategic relationships, new business development and innovation in products. “The winning banks were all noteworthy in their dedication to satisfying their customers’ needs in accordance with the rules of Islamic finance,” the magazine declared.

source  voc


Thomson Reuters Launches Next Generation Islamic Finance Gateway

Thomson Reuters announced that it has launched its next generation Islamic Finance Gateway to guide the emerging industry to the next stage of growth and development.

Rushdi Siddiqui, Global Head of Islamic Finance, Thomson Reuters, said, “Despite its image as an emerging industry, Islamic finance has now grown to be worth around US$1trillion and the Thomson Reuters Islamic Finance Gateway truly opens up this world of possibilities and opportunities for financial market participants and professionals. The conventional, western finance industry is accustomed to clean, crisp, robust information, real-time news, connectivity to communities and the ability to act and transact with trusted counterparties. By providing these ‘must have’ features the Thomson Reuters Islamic Finance Gateway demonstrates the industry’s true breadth and makes the transition for all to Islamic Finance a seamless one.”

The Thomson Reuters Islamic Finance Gateway is a global, neutral platform and directory consisting of details for and links to Islamic finance professionals, rating agencies, industry standards bodies, Islamic finance hubs, index providers, consulting firms, 400 Shariah scholars and Islamic subsidiaries from over 25 countries. Reuters Messaging is embedded within the Gateway to foster communication and create the connections required to build and grow communities.

Available on its flagship Thomson Reuters 3000 Xtra desktop, The Thomson Reuters Islamic Finance Gateway improves transparency through lower information search costs and provides greater global connectivity and insight into the industry’s opportunities.

By bringing together neutral, intelligent, Islamic, ‘trading-ready’ finance information and analytics on a common platform, the Thomson Reuters Islamic Finance Gateway addresses the complete Islamic Finance work-flow.

Market professionals will now be able to access comprehensive, trusted multi-asset class information on a wide range of Islamic finance instruments such as Sukuks, Islamic leveraged loans, funds, Islamic money market, Takafol and currencies; alongside embedded real-time news stories from Reuters, and correlation analytics for Islamic versus western conventional market views. The Gateway will also include news of related industries to Islamic finance, like the $641 billion Halal food sector.

The rich data and breaking news is complimented by a global rolling tickertape of Islamic and conventional indexes, multi-currency real time inter-bank conventional versus Islamic inter-bank rates, an information fund supermarket(1) and click-through links to Gateways for the; Organisation of Islamic Conference (OIC), Gulf Cooperation Council (GCC), Association of South East Asian Nations (ASEAN) and G-20 countries.

A unique heat map of Shariah-compliant and Shariah-based companies developed by IdealRatings, creates a diverse universe of publicly listed companies. The Shariah-compliant companies are screened according to global index providers’ methodologies, plus Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and Malaysia’s Securities Commission. The Shariah-compliant companies are screened by various economic sectors and regions. They are complimented by more than 100 publicly listed Shariah-based companies in regions and countries like GCC, Turkey, Pakistan, Malaysia and the UK.

The global Islamic finance community can take the Thomson Reuters ‘trading-ready’ information one step further, by turning ideas into action. Publicly listed Shariah-based and screened companies and Islamic or commodity ETFs can be traded over the Thomson Reuters Trading for Exchanges (TRTex) platform, which has been integrated within the Gateway.

Basil Moftah, Managing Director, Middle East and Africa, Thomson Reuters, said, “Islamic finance is an important part of our Middle East growth strategy, and the Thomson Reuters Islamic Finance Gateway will not only address the Islamic banking industry’s needs, but will also enhance our ties to the greater MENA region.”

Following the launch in the GCC, the Thomson Reuters Islamic Finance Gateway will be introduced to the market in Asia, via a launch in Kuala Lumpur on February 22.

source : earthtime

The Islamic Bank of Thailand plans to float 55 billion baht worth of Islamic bonds

The Islamic Bank of Thailand plans to float 55 billion baht worth of Islamic bonds in the local and overseas markets in 2010, says bank president Dheerasak Suwannayos.

He said the bank hoped to raise 5 billion baht from a local Islamic bond issue in the second quarter, the first issued in the Thai market.

Another 50 billion baht in funds would be raised as a sovereign bond issue in the international market by the third quarter.

“We hope to raise funds from the petrodollar market, using interest in basic infrastructure investments and funding from Islamic infrastructure funds,” Mr Dheerasak said.

The Islamic bonds would be issued in strict compliance with Islamic law, with investor returns projected at 3% to 4% per year. Bonds would be offered to individual and institutional investors.

The Finance Ministry and the Revenue Department are in the process of drafting regulations to remove tax obstacles related to the issue of Islamic bonds, including tax liability from the transfer of assets to a special purpose vehicle typically used in Islamic finance structures.

The Islamic Bank posted a net profit of 334 million baht in 2009, a sharp increase from profits of 2.08 million the year before.

Outstanding deposits stood at 41 billion baht at the end of last year, more than double the year before. Outstanding credit showed similar growth at 38 billion baht at the end of December, up from 16.7 billion the year before.

Net assets for the bank at the end of 2009 were 45.2 billion baht, compared with 23.8 billion the year before.

Mr Dheerasak said the bank, also known as I Bank, expected to reach net assets of 100 billion baht by the end of the year, with outstanding deposits of 78.7 billion and credit of 88.7 billion. Profits are projected at 668 million baht, double last year’s figures.

He said the bank would require additional capital to reach the growth target. The Finance Ministry has already approved a plan to raise paid-up capital for the bank to 9.87 billion baht from 3.48 billion now.

“But at the end of the day, I Bank is not solely oriented on generating profits, but also helping society as well,” Mr Dheerasak added.

For instance, the bank diverts a portion of its late-payment fees to a special fund to assist the poor. I Bank is also helping credit card borrowers refinance loans as part of a broader government programme to address the problems of low-income debt.

Source : Bangkok post

Islamic Banking: A Global Necessity – Seminar organized by Karachi University

Islamic principles provide us every opportunity to live a peaceful social life, Islamic Banking is one of those blessings that are brought to us by the new era of technology and banking.  

Islamic principles provide us every opportunity to live a peaceful social life, Islamic Banking is one of those blessings that are brought to us by the new era of technology and banking.

Islamic banking gives us facilities similar to the conventional banking but it never leaves the sphere of Islamic law and principles. The problem is that we lack the psyche that probes inquiry into such matters.

These notions were expressed by Vice Chancellor Karachi University (KU) Prof Dr Pirzada Qasim Raza Siddiqui, while presiding over a seminar organised by University of Karachi in collaboration with United Chartered Bank, USA at a local hotel titled Islamic Banking: A Global Necessity on 13th February 2010.

The VC encouraged linkages between Islamic Banks worldwide and the Universities of Pakistan.

Asif Aslam (CEO) United Chartered Bank USA declared that in the last decade, Islamic finance has enjoyed robust growth rates of 15-20 percent per year.

“There are now approximately 500 Islamic financial institutions in over 51 countries. The largest market in this field comprises of more than 1.39 billion Muslims worldwide.

Other speakers highlighted the benefits of Islamic Banking which includes an additional check and balance because of which they were able to survive the recent global recession,” he said.

It was also told that Islamic banking was trying to convert challenges into business opportunities with Islamic (Ethical) finance.

Prof Dr Abdul Rashid, Prof Masroor Ali Qureshi, Dr Muhammad Ilyas, Maulana Dr Khalil Ahmed Azmi, Syed Tanveer Hussain, Prof Muhammad Saleem Memion, Dean Faculty of Arts, KU, and others spoke on the occasion. Whereas, Prof Dr Abuzar Wajidi, Dean Management Sciences, KU, and a number of teachers and students from madarsaas and from various Universities of Pakistan attended the seminar.

source : nation