Islamic Bank: Global asset worth 750bn US dollars

The global asset of Islamic banking industry has been estimated at 750 billion United States dollars, an Islamic financial expert and Chief Executive, Metropolitan Skills Ltd, Abuja, Hajia Ummahani Amin, has said.

She spoke in Kano at a workshop entitled: Fundamentals in Islamic Finance Workshop for International Islamic Economics and Management of Sciences Project. She observed that the quoted estimate above is without some major Sukuk issues and structured deals, which analysts estimate will run into trillions of dollars in the years to come.

She explained that Islamic banking practices have taken root in the Middle East and Malaysia, while adding that Europe and North America have recorded giant strides in offering Shariah acceptable products in an attempt to satiate an ever-increasing demand for interest-free banking and profitable returns that fall within the parameters of the Islamic law.

She maintained that the quest for Islamic banking is currently moving towards the African continent, pointing out that, at present, only a handful of countries in the continent have an effective Islamic banking infrastructure even though the scope of the section is immense.

She noted that, “in Nigeria, the banking system is about experiencing a proliferation of Islamic banks as the Central Bank of Nigeria is about to introduce new measures that will encourage and facilitate the existence of Islamic banks.”
She argued that Nigeria has an approximately 50 per cent Muslim population, adding that providing a banking framework that would be acceptable to their belief system would not only increase the bankable population but would bring about the benefits of social responsibility and economic empowerment.

She noted that the integration of Islamic Economics has been successfully implemented in Islamic schools in South Africa in the last two years while adding that Kenya, Tanzania and Mauritius have expressed interests in its implementation. She urged the Federal Government, which she said had taken interest in this project, to introduce the Islamic Economics in the educational policy of the country.

source : sunnewsonline

Consolidation seen amongst takaful companies

The Islamic insurance industry, known as takaful, is seeing more interest in consolidation as companies face increasing competition, weak market penetration and a higher expense base than conventional counterparts

The financial crisis is also putting pressure on smaller and mid sized companies to consider merging with another company, said Hisham Solaiman, financial manager at Kuwait based National Takaful Insurance Co.

He said: “We’ve had offers for two mergers at our company but after some negotiations, we decided against the deal,” adding that National Takaful Insurance wasn’t actively looking to merge, but was open to discussions when approached.

Experts say that discussions are increasingly common with many international players also looking to enter the takaful space.

Peter Hodgins, partner, Clyde & Co, said: “Most weeks I have conversations with international insurers eager to break into the insurance market here.”

The company advised RSA Insurance Group’s acquisition of Oman’s third largest insurer Al Ahlia, for $49.35 million in February.

He added: “It’s fairly early on in discussion but there’s a lot of interest in takaful with insurers asking if it’s the way to go in the region.”

Buying a company would be one way in, he said, adding that he expects to see more consolidation among takaful companies over the next 12 months to 24 months.

From a growth perspective, takaful is expected to be a clear growth driver within the $1 trillion Islamic finance industry over the next five years.

The Gulf Cooperation Council (GCC) area is home to more than 40 million of the world’s 1.6 billion Muslims, but insurance penetration within the region is still limited.

With potential demand in place for sharia compliant products, including takaful, the region has seen a rush of new players eager to tap into the market in its early stages.

But it has resulted in a fragmented market with a few large players dominating the market, while smaller and mid-size firms struggle to make a profit.

 Tommy Trask, executive director, Alpen Capital, said: “The smaller players are having a tougher time because they don’t have economies of scale or distribution capability.”

 He added: “They also have a high exposure to motor insurance where it is competitive and profitability is weak.”

 Takaful insurers also have the added expense of paying for a overseeing sharia board while having limits on the investments they can make, due to issues of sharia compliance.

 That puts pressure on profitability, especially when takaful companies are competing with conventional players.

 Consolidation could also be spurred on as regulatory bodies become more reluctant to give out new insurance licenses in markets such as the UAE and Saudi Arabia.

 The UAE, which currently has 56 licensed onshore insurers servicing a population of 5 million, recently put a moratorium in place on new licenses.

 While an official stance has not been taken in Saudi Arabia, Clyde’s Hodgins said his clients have reported that they are being discouraged from obtaining a new license while there are acquisition opportunities to enter the market.

 And some existing conventional insurers in the region are keeping an eye out for opportunities. Omer Elamin, senior managing director of Arab Orient Insurance, said the company is adopting a wait-and-see approach to entering the takaful market given uncertain financial conditions.

Elamin said: “But if things pick up here, we might consider entering the takaful sector by acquiring or buying a major share of a company.”

He also added that the UAE’s restrictions on new licenses would prevent the company from starting its own takaful firm.

For international players eager to enter the takaful market, experts see more joint ventures between existing companies and established players abroad.

Trask, from Alpen Capital, said: “There is a clear advantage for participants to choose an efficient and strong operator.”

He added: “I think we will see more joint ventures because international players can provide technical expertise as well as make operations more efficient with administration.”

Zurich Financial Services Group entered a joint venture deal with Abu Dhabi National Takaful Company in late 2008 and Italy’s Assicurazioni Generali SpA said in December that it was looking into a joint venture with Qatar Islamic Bank to offer takaful.

source : INNEWS