Nigeria: Deposit Insurance Corporation to Develop Insurance for Non-Interest Bank

Nigeria Deposit Insurance Corporation (NDIC) has said that it is developing a deposit insurance framework for the operation of non-interest (Islamic) banking in the country.

Central Bank of Nigeria (CBN) is also developing framework for the regulation of non-interest banking and Islamic financial institutions.

The proposed Islamic banking in Nigeria – Jaiz Bank – will commence operation before the end of this year, its Managing Director/CEO Mohammed Mustapha Bintube has said.

Islamic Finance Working Group of Nigeria visited NDIC, Securities and Exchange Commission (SEC) and Debt Management Office (DMO) yesterday in Abuja to work out modalities for the commencement of non-interest banking in the country.

Acting Managing Director of NDIC Ibrahim Umaru said the Corporation will work with the team for the speedy commencement of Islamic Finance in Nigeria.

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“You need to have appropriate legal framework for it. You need to develop compliance. You need to educate consumers who would want to avail themselves on the opportunities of non-interest bank”, Umaru said.

Current operators of non-interest banking in Nigeria include the Standard IBTC, Bank PBH, Diamond bank and the proposed Jaiz Bank.

“All stakeholders are working together to make sure that non-interest bank or Islamic bank takes off successfully in Nigeria. We have challenges in policy framework, on capacity building and on customers orientation”, Jaiz’s MD said.

He said they are visiting regulators so that Islamic and non-interest banking can be strengthen in Nigeria to be able to compete favourably with other countries like Egypt and South Africa.

He said the reason why Jaiz Bank is slow in commencing operation is because there is no compliance instrument for Islamic finance or non-interest banking in Nigeria.

“The second reason why we have not started is that the share size of the capital was increased from N2 billion to N25 billion and therefore the level of risk has increased significantly and people did not want to take bigger risk on something that is new”, he said.

“All these obstacles are been taken care off and before the end of the year you would hear good news from CBN on the JAIZ operation”, Bintube said.

source : allafrica

Islamic Finance in Russia: New Scope for Thinking

Islamic finance seems to be starting to be implemented in Russia, although by very careful steps. The potential size of the market has received various estimates, from a modest 10 percent of the practicing Muslims to the whole ethnic Muslim population of more than 30 million, or even more.

There is no doubt that the near future will witness rapid development of the industry. Already a number of Russian companies like Linova, Safinat and Islamic Finance House are half way through starting new Islamic finance projects.

At the same time, the Russian Islamic finance professional business community is being formed. One of the examples of this is the working group on alternative (Islamic) financial institutions and products that grew into the Russian Association on Islamic Finance Experts in 2010. A number of business and trade unions have been formed in the Tatarstan republic.

In May this year, two sharia standards were translated and published in the Russian language. These are sukuk and murabaha, the most-used Islamic finance transactions by the Islamic finance institutions around the world. The other standards on takaful (Islamic insurance), ijara and mudaraba are to be published in the near future.

It is to be expected that Russia, although having a centuries-old history of Islam, will hardly follow the way of its neighbor Kazakhstan, whose President Nursultan Nazarbayev made a decisive political contribution to the development of the Islamic finance industry.

However, at the same time, strengthening economic ties with Middle Eastern countries is another important incentive for the industry. The Islamic bankers from the Gulf and other Arab and Muslim countries find Russia an attractive and promising market given the guarantees for investors and partners. Islamic finance at the moment is seen as one of the most reliable ways of cooperation and hence is becoming one of the bridges uniting Russia to the rest of the Muslim world.

During the last 12 months Russia has been visited by many international experts specializing in Islamic finance or representing Islamic finance institutions, including Islamic banks from Malaysia, Indonesia, Bahrain, Kuwait, Turkey, France, the United Kingdom and others.

The foreign experts point out that the main requirements for the development of Islamic finance in Russia are: speeding up the process of document registration; improving the understanding of Islamic finance on the part of the authorities responsible for policy on taxation and financial regulation; formulating a special law to attract Islamic investors to the country; and overcoming the legacy of the Soviet mindset as a whole, where the culture of business and service is new and needs to be cultivated further.

It should be noted that Islamic finance should not be regarded as separate from the real sector of the economy, that is why what is on the agenda is the halal industry representing all spheres where Islamic investment can be made.

source : the moscownews

Sri Lanka Amana Bank eyes Gulf money, infrastructure lending

A start-up Sri Lankan bank that has just raised 3.2 billion rupees in capital through a private placement wants to lure Middle Eastern funds and lend for infrastructure projects, an official said.

Amana Bank is part of Sri Lanka’s Amana Islamic finance group that already has insurance and merchant banking units and wants to get into commercial banking with a post-war economic boom anticipated in the island.Amana Bank Limited said it had raised 3.2 billion in capital through a private placement by selling 631.9 million 5.00 rupee shares from both foreign and local investors.

A company spokesman said the Amana group has a deposit base of seven billion rupees and a lending portfolio of three billion.

The bank, which will start operations after getting a formal banking license from the central bank, will use the Amana group’s network of 14 branches.

“Amana Bank will be the first fully-fledged (Islamic finance) commercial bank to operate on the Sharia principal,” said Riyaz Mihular, partner and head of advisory services at KPMG Ford, Rhodes, Thornton & Co, financial advisors and placement agents for the private placement.

“All other Islamic finance operations are windows of normal commercial banks or financial institutions.”

Islamic finance, where formal interest is not charged and instead lending is structured on a profit-sharing, asset-backed basis, is a growing form of alternative financing.Mihular said Amana Bank wants to attract funds from the cash-rich Middle East which is looking for investments for its surplus cash generated from oil and to fund badly needed infrastructure projects in the island.

Sri Lanka’s 30-year ethnic war ended in May 2009 resulting in an immediate economic revival with growth forecast at seven percent this year.

“Amana Bank intends going heavily into infrastructure financing,” Mihular said. “In the next few years we’ll have to rebuild and modernise our infrastructure.

“Amana Bank hopes to tap Middle East investment flows whose avenues of investment are limited; for examples hotels without liquor, no gambling, and they are not allowed to buy stock derivatives. So infrastructure lending is preferable,” he said.

“There’s lots of money sitting in the Gulf with which Sri Lanka has very good ties.”

Mihular said Islamic financing is ideally suited for infrastructure financing which generally involves a long-term gestation period with around five years before a project starts generating cash flows.

“In conventional finance you might be given a moratorium on the repayment of capital but you pay interest from day one.

“In Islamic finance, all lending is asset-backed, so you won’t find bubbles like in the West. And you don’t begin repaying until you start generating cash flows. Lending is based on profit and loss which can sometimes be more expensive than conventional lending, and linked to cash flows and profitability.”

Mihular said that in Islamic finance borrowers don’t have to pay overdue interest or penal interest on late payments.

 source : lbo.lk

Japanese institutions go for Islamic financing

After a hiatus of over three years largely due to inertia from regulators and head offices, Japanese institutions are finally going to the market to raise millions of dollars in Islamic financing. The good news is for Malaysia because much of this activity is centered in or out of Kuala Lumpur.

Over the last two weeks Nomura Holdings, Inc. appointed Kuwait Finance House (Malaysia) as the mandated lead arranger for its debut $100 million Sukuk Al-Ijara. The two-year issuance will be the first US dollar denominated issue by a Japanese corporation out of Malaysia.

Similarly Sumitomo Corporation, according to Malaysian banking sources, plans to go one step further by issuing the first yen-denominated Shariah-compliant paper in Japan. The paper will not be a classical Sukuk because Japanese regulations and tax laws do not facilitate the issuance of Sukuk currently, but may mirror an asset-backed Islamic bond type structure.

These developments follow the successful closure of Nomura’s $70 million syndicated commodity murabaha facility, which was lead, arranged by ABC Islamic Bank, the Islamic finance subsidiary of Arab Banking Corporation. Due to increased demand for both short-term investments and for investment grade Japanese risk, the issuance was increased from the original target of $50 million.

The Nomura issuance however is bound to set the pace for increased Japanese involvement in the Islamic finance industry. Not that Japanese institutions have been absent from the sector. Several Japanese sogo soshos have in the past accessed the odd commodity Murabaha structured primarily through London banks. Nomura itself was the fund manager for Al-Tawfeek Investment Company’s Islamic Japanese Equity Fund. Daiwa Securities two years ago launched an Islamic ETF (exchange-traded fund) which is listed on the Singapore Stock Exchange and which tracks the FTSE Asia Shariah 100 Index. In the Takaful sector, Tokyo Marine & Fire Insurance Company has a thriving joint venture in Malaysia with Hong Leong Islamic Bank and has a regional company in Dubai serving the GCC markets.

Japanese government agencies such as the Institute of Developing Economies have for the last two decades been studying Islamic finance and collating research on the industry. More recently the Islamic Financial Services Board (IFSB) organized the first Islamic banking seminars in Tokyo. Since then several have been held in Japan.

The Japan Bank for International Cooperation (JBIC) seriously raised expectations in 2007 when it announced that it plans to issue a debut Sukuk in Malaysian ringgit to fund its activities in Malaysia and the ASEAN region. JBIC appointed lead arrangers CIMB and Citigroup with the hope of attracting investors from both Asia and the GCC markets. Unfortunately, the proposed issuance was dragged out due to differences between the two lead arrangers over the appropriate Sukuk structure. Then the credit crunch and financial crisis set in which put paid to any JIBIC issuance.

However, privately, JBIC managers keen on tapping the Islamic finance market have been frustrated by the lack of Japanese government involvement and facilitation of Islamic finance in Japan and the lack of enthusiasm shown by the powers that be at JBIC itself. Because of Japan’s complex system of government, it seems that only the ruling prime minister can initiate changes in primary legislation to facilitate say the introduction of Sukuk and other Islamic finance products.

In the meantime, the Japanese Ministry of Finance in cooperation with the Bank of Japan, the central bank, did amend last year some of the provisions relating to the foreign subsidiaries of Japanese financial institutions, which are now allowed to conduct certain activities in the Islamic finance sector including the issuance of Sukuk in local currencies and the launching of investment funds.

With the global sukuk market now getting a second wind in the wake of the financial crisis and with Asia leading the way, does it mean that JBIC will also change its strategy, especially after the Nomura sukuk issuance and the planned one by Sumitomo?

Takumi Shibata, deputy president and chief operating officer of Nomura Holdings, could not be more to the point, stressing that “with this landmark transaction, Nomura has further diversified its funding sources and tapped the large and growing Islamic finance market for the first time. This issuance is part of Nomura’s ongoing push to diversify its funding sources to drive growth. Islamic investors and Islamic finance are a very important and rapidly growing sector globally and this transaction is highly significant for Nomura and for corporate Japan.”

The book for the issuance was opened on July 5 and closed the next day, according to Jamelah Jamaluddin, CEO, KFH (Malaysia). But Jamaluddin, a controversial doyen of the Malaysian Islamic finance sector and the first woman to head an Islamic bank in the world, RHB Islamic Bank, also threw down the gauntlet to other potential Japanese issuers: “I am pleased to inform you that this sukuk marks Nomura’s first step in diversifying its funding sources to include Islamic financial solutions. It involves financing the purchase of two aircrafts. I hope that Nomura’s sukuk will pave the way for more discerning Japanese clients, as well as other international corporations, to consider migrating or co-opting Islamic finance products in meeting their investment and financing requirements.”

The Nomura Sukuk is also listed on Bursa Malaysia, just becoming the second foreign listing on the bourse and the first sukuk listing by an Asian and a Japanese international entity. At the listing signing ceremony, Yusli Mohamed Yusoff, chief executive officer of Bursa Malaysia, explained that “Malaysia remains the world’s single most active corporate Sukuk market at present. We certainly have made great strides in the sukuk market and the listing of Nomura’s sukuk is a further demonstration of foreign players’ confidence toward Islamic securities and instruments issued out of Malaysia. The sukuk listing from Nomura will further strengthen Bursa Malaysia as a preferred Sukuk listing destination, elevating the overall position of Malaysia as an international Islamic financial hub.”

With this listing, Bursa Malaysia’s total Sukuk listings amount to $20.9 billion comprising 15 sukuk listed by 13 issuers, of which two are international issuers.

Nomura is of course elated by the investor demand to its two forays into the Islamic market this month — the sukuk and the Murabaha facility. According to Takuya Furuya, chairman of Nomura Middle East and Africa, “It reflects the strength of the Nomura brand and its reputation in the region. The issuance is part of Nomura’s strategy to diversify funding both geographically and by product and comes at a time when we have simultaneously launched a Sukuk in Malaysia. This Murabaha facility marks the first Islamic funding exercise by a Japanese corporate in the region and we hope that it will strengthen the financial ties between the Far East and the Middle East.”

The Murabaha facility has a three-year tenor and offers a profit margin of 175 basis points per annum. The facility will be used for general liquidity management purposes. Participants in the syndication included ABC Islamic Bank, Islamic Development Bank (IDB), Samba Financial Group, Sumitomo Mitsui Banking Corporation Europe Limited and Ahli United Bank.

source : arabnews

Justice Krishna Iyer backs Islamic banking in India

A major campaign to introduce Islamic banking and finance into India was kicked off in the Kerala city of Kochi on Friday with Justice Krishna Iyer taking the lead. “I welcome Islamic finance in India,” said Iyer, a former Supreme Court judge.

“Islamic finance has proven successful in poverty alleviation and promoting sustainable growth in many countries, including the United States, and it is very relevant in our country where 20 million people are starving,” Iyer said.

The justice made this statement while proclaiming the plan to hold an international seminar in Kochi on Oct. 4-6 on the prospects of introducing Islamic finance in India. He said Islamic finance, which is based on humane principles, was good for all of humanity.

“Those who support humanism should welcome Islamic banking and finance in India,” Iyer told the gathering, which was attended by a large number of prominent personalities including TPM Ibrahim Khan, additional solicitor general of India.

The seminar is organized by the Islamic University in Shanthapuram in cooperation with the Jeddah-based Islamic Research & Training Institute (IRTI) of Islamic Development Bank. International speakers include Bambang Brodjonegoro (Indonesia), Omar Chapra (Saudi Arabia), Mohammed Obaidullah (IRTI), Monzir Kahf (USA), Nazim Ali (Harvard University), Ali Quradagi (Qatar), Hussain Hamid Hassan (UAE) and Nizam Yakuby (Bahrain).

Iyer criticized those who oppose Islamic finance on religious grounds. “The interest-free Islamic finance is a better option for countries like India. People may doubt whether this system can survive without taking interest. But I can tell you that a system that supports social development will never fail,” he said.

T. Arifali, chairman of the Islamic University’s council, delivered the keynote speech and said Islamic finance would contribute to further strengthening the Indian economy.

“India is a pluralistic society. There is nothing wrong in introducing Islamic finance in the country if it is good for our country and its people,” he said. “If we can accept cultural pluralism, why don’t we try economic pluralism?” he said, adding that all religions have prohibited usury.

Arifali said he believed the introduction of Islamic banking would encourage millions of Muslims in the country to pump their funds into the economy. A substantial number of India’s nearly 200 million Muslims do not like to deal with interest-based banking because of religious objections.

Brodjonegoro, director general of IRTI, pledged his organization’s support to the seminar to spread awareness about Islamic banking and finance in India. “I am quite happy to learn that India is actively considering introduction of the interest-free banking system,” he said in a statement on the occasion.

The three-day seminar is titled “Islamic Finance in India: Products, Institutions, and Regulations.” It will be attended by representatives from regulatory bodies, professional organizations, business firms and foreign and Indian financial institutions as well as university students and social activists.

“The seminar will discuss regulatory and Shariah issues in implementing Islamic finance in India,” said H. Abdur Raqeeb, chairman of the organizing committee, who has been spearheading the campaign to introduce Islamic banking in the country.

Papers to be presented at the seminar will deal with various products and structures of Islamic banking and finance that fit to India. Matters relating to commercial banking, insurance, investment funds, microfinance, Zakat and endowments will also be discussed.

The seminar comes at a time when Islamic finance has become a hot topic for discussion across the world, especially since the global economic crisis. Leading economists and financial experts have recognized Islamic finance as a sustainable alternative to the interest-based conventional financial system.

Many non-Muslim countries such as the UK, US, Singapore, France and Australia are competing with one another to become Islamic finance hubs. Raqeeb urged India to join the bandwagon to benefit from the development-oriented system.

Abdussalam Ahmed, director of the Islamic University and general convener of the seminar, thanked the IDB and IRTI for their support to the event. He described IDB as the most successful institution under the Organization of the Islamic Conference. IDB has financed several educational and health projects in India.

Justice Iyer is the seminar’s chief patron while businessmen Gulfar Mohammed Ali and P.V. Abdul Wahab are patrons. The organizing committee includes Justice Abdul Gafoor, M.D. Nalapat, Justice P.K. Shamsudheen, Mohammed Babu Sait and T. Balakrishnan.

source : arabnews

Bahrain sees market in Islamic paper

BAHRAIN, the Middle Eastern country with the largest number of Islamic banks, aims to grab a greater share of trading in sukuk, or Islamic financial paper, from Britain, Dubai and Malaysia with a bourse dedicated to securities that adhere to sharia.

The Bahrain Financial Exchange, scheduled to open in October, will start trading in Islamic debt next year, its chief executive, Arshad Khan, said.

Eight sukuk valued at about $US2.9 billion ($3.3 billion) trade on the existing Bahrain Stock Exchange, compared with 20 with a face value of $US16 billion listed on NASDAQ Dubai. The London Stock Exchange has attracted $US17.7 billion from 26 securities.

Issuers are favouring the most active markets to ensure investors can trade their securities, with General Electric Capital, the world’s biggest non-bank finance company, listing $US500 million of sharia-compliant debt sold in November in Malaysia, London and Dubai.

”We are quite hopeful that we’ll see a very liquid secondary market in sukuk, which does not exist right now, whether in London or anywhere else,” Mr Khan said in Bahrain’s capital city, Manama.

The smallest oil producer among Gulf Arab states is using money from the Gulf’s energy boom to establish an exchange that would allow investors to list Islamic bonds, real estate investment trusts, exchange-traded funds and options.

It will also create an electronic platform this year that will allow banks and companies to trade commodities used to back so-called Murabahah transactions, Mr Khan said.

Sukuk are typically backed by assets and pay profit rates instead of interest, which is prohibited under sharia principles. A Murabahah contract is a sale and deferred-payment accord based on an asset, usually a commodity such as oil, sugar or metals, in which the cost and profit margin are agreed beforehand.

Last year Malaysia introduced an online trading platform for Murabahah transactions. Hong Kong, Singapore and Britain are easing rules on Islamic banks and products to woo investors from the Middle East.

Dubai responded by starting NASDAQ Dubai, previously known as the Dubai International Financial Exchange, in 2005 as the Gulf’s first bourse open to investors and issuers of any nationality.

Bahrain is ”trying to sustain a niche, which has traditionally been in the area of Islamic finance,” John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, said. ”Islamic banking is under a lot of competition from the regional competitors such as Dubai, Qatar, Kuwait and Saudi Arabia.”

Bahrain, the smallest of the six Gulf Co-operation Council states, wants to increase its share of the industry, which is estimated by the Islamic Financial Services Board in Kuala Lumpur to almost triple to $US2.8 trillion in assets by 2015.

The central bank’s governor, Rasheed al-Maraj, said in May that the economy may expand 4 per cent this year. Economic growth slowed to 3.1 per cent in 2009 as Bahrain halted about $US13 billion of projects as the global financial crisis sapped demand for real estate and prices fell across the Gulf.

Bahrain has ”dwindling hydrocarbon reserves and it needs to diversify very fast” to stay a regional financial hub, Mr Sfakianakis said. The nation’s crude oil production dropped 0.5 per cent to 66.5 million barrels last year as reserves declined.

The recovery of the financial industry may be slow as low property prices weigh on lending, Bahrain’s Economic Development Board said in its annual report on Sunday.

There were 27 Islamic banks registered in Bahrain in June, and eight in the United Arab Emirates. Malaysia, the Islamic finance hub in Asia, has 18 Islamic banks.

source  : the age

Education : LSBF MSc in Finance Programme is #4 in the Financial Times 2010 Listings

In April 2010 the LSBF MBA Online Programme was listed 19th in the Global Financial Times Online MBA Listings 2010. A few months later London School of Business and Finance, one of only two private institutions in London, was awarded the Highly Trusted Sponsor status by the UK Border Agency. Now according to the latest FT Master in Finance Programmes 2010 Listings, the LSBF MSc in Finance Programme is listed 4th.

The LSBF MSc in Finance course is a groundbreaking Master’s degree programme, designed to reflect the latest trends in the business world. The MSc in Finance Programme combines the expertise of award-winning lecturers, qualified accountants and experienced consultants, with relevant, highly marketable real-world skills. The programme offers a wide range of specialist pathways to choose from, including cutting-edge subjects like Islamic Finance, Risk Management, and International Banking.

source : melodikanet