Sovereign Sukuk: What Can We Expect in 2013? Continued from Page 1

The World’s Leading Islamic Finance News Provider 10th April 2013

(All Cap) 950 Sovereign Sukuk: What can we 932.28 1.38% 925 expect in 2013? 919.57 900 Much has been said about the growth index. In 2013 yields have continued to of corporate Sukuk and its importance fall, reaching a record low of 2.559% on for the overall market. But in reality it is the 23rd January (see Chart 1) and currently 875 sovereign Sukuk that defi ne the industry: hovering around 2.837% (as of the 5th providing a benchmark for issuance, April). In comparison, conventional Middle 850 stimulating private sector involvement, East sovereign bonds are currently yielding W T F S S M T driving down yields and off ering a vehicle 4.299%, and failed to dip below 3.9% in the Powered by: IdealRatings® for excess liquidity. Sovereign Sukuk whole of the past year (see Chart 2). currently play one of the most important Volume 10 Issue 14 roles in the Islamic fi nance industry – Growth drivers IFN Rapids ...... 2 and in return provide one of the most This yield compression is expected Islamic Finance news ...... 6 cost-eff ective and lucrative avenues for to continue to boost GCC issuance in fundraising in the world. So why are more Shariah Pronouncement ...... 15 particular in the coming year, and Paul- countries not tapping this ideal income IFN Reports: Henri Pruvost, a Dubai-based credit-analyst source? with S&P, confi rms that: “Sovereign and Block trading fuels takeover speculation for sovereign-related issuance will continue to Ajman Bank; Assets yet to be identifi ed for the Although the corporate sector is growing, dominate, shape, and underpin the Sukuk sovereign issuers continued to lead the IILM Sukuk; Playing to its strengths ...... 16 market”, with the GCC and Asia remaining market in 2012 with around 80% of total the key drivers of growth. Special Report: issuance, amounting to US$115 billion. Investor appetite to drive Sukuk issuance in the next In addition, government-related entities Huge infrastructure projects will also few years ...... 16 saw issuance increase by 103% to US$14.5 stimulate issuance, and possibly bring new billion, according to a recent report from IFN Country Correspondents: issuers to market, particularly as the Middle KFH Research, demonstrating growing Qatar; India; Indonesia ...... 22 East capitalizes on its economic recovery confi dence in the public market. and Africa builds on the impetus from the IFN Sector Correspondents: Arab Spring to develop new trade ties and Mergers & Acquisitions; Technology; Private Tempting prospect raise further fi nance. In addition, the large Banking & Wealth Management ...... 24 And in 2013 this trend shows no sign pool of domestic liquidity in the GCC along Features: of abating. In March, sovereign issuers with sustained investment spending will accounted for 42.6% of the primary Sukuk continue to push regular issuers such as Japan: Macroeconomic factors impacting the Islamic market while government-related entities Malaysia and Qatar into the market. fi nance sector ...... 27 made up 37.7%, their highest market share The growth of Islamic equity broking and since 2010; compared to just 19.7% for Why issue? trading ...... 29 corporates. So what are the benefi ts of a sovereign Takaful Feature: Sukuk, and what advantage does One of the key reasons for the regular issuance bring to a country? Bancassurance or bancaTakaful: A money- consistent surge in sovereign Sukuk Rizwan Kanji, a partner with King spinning proposition for banks, insurers and is the att ractive yields, which in & Spalding in Dubai, explains Takaful operators ...... 31 2012 declined by 34 basis points that: “For a fi rst-time issuance, it (bps) to 3.56% according to the Insider: Dubai Financial Market: A key catalyst provides a benchmark pricing for HSBC/Nasdaq sovereign Sukuk corporates and other non- to realizing the emirate’s Islamic fi nance index – 124bps lower than the sovereign issuances. It also aspirations ...... 33 average 4.8% yield on Eurozone provides the ability for Islamic Deal Tracker ...... 34 debt, according to the JPMorgan European sovereign yield continued on page 3 REDmoney Indexes ...... 35 Eurekahedge data ...... 37 Performance League Tables ...... 39 Events Diary...... 43 Company Index ...... 44 Subscription Form ...... 44

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The government of Morocco Central bank of Hungary to Takaful Insurance of Africa DEALS contemplates issuing Sukuk off er interest-free loans reveals long-term expansion in the second half of the year plan Kuveyt Türk Katılım Bankası Mediocre performance for to issue US$55.38 million Al-Azhar University to send GCC banks in the fi rst quarter Sukuk in September redraft ed Sukuk law to Shura Bank Negara Malaysia signs ASSET Council Sharjah Islamic Bank to MoU with Autoriti Monetari issue dollar-denominated, Monetary Authority of Brunei Darussalam MANAGEMENT benchmark-sized Sukuk Singapore reaffi rms its Amanie Advisors Australia GCC states to implement second week of April commitment to growing to invest Islamic funds in value added tax by 2015 Ministry of Finance of Islamic fi nance in the republic asset leasing New research partnership Indonesia Sukuk auction The IDB to fi nance the Albaraka Türk and Kuveyt formed between Deloitt e, raises US$66.24 million redevelopment of educational Türk join forces to institute INCEIF and the University of institutions in Bangladesh private pension fi rm in Turkey Saudi Binladin Group prices Reading Sukuk Islamabad Stock Exchange Standard Chartered Bank to GCC sees record low incentivizes listing of Shariah distribute Shariah compliant Sadara Basic Services issues borrowing costs in the fi rst compliant products Meezan Tahaff uz Pension US$2 billion Sukuk for quarter of 2013 Fund nationwide industrial complex expansion Maybank Singapore Islamic Islamic Financial Services project Banking launches two Al Madina Investment Board admits seven new new products for property Company’s Tilal Fund The IDB approves US$617 members million in funding for fi nancing achieves total returns of 126% Legal fi rms Herbert Smith development projects Khabeer Financial Services Freehills and Al-Ghazzawi launches Islamic fi nancial Qatar Central Bank to issue Professional Association to RATINGS US$274.4 million in Sukuk services portal part ways in August Fitch affi rms Dubai Islamic every quarter Islamic banks in Pakistan to Malaysia reveals new Halal Bank at ‘A’ Bank Negara Malaysia to boost number of branches to food fund worth US$500 PEFINDO affi rms Bank issue US$323.83 million in 229 in 2013 million Muamalat Indonesia at ‘idA+’ Murabahah notes Malaysia to become base for SHUAA Capital’s Gatehouse Bank’s Southeast GCC sovereign rating stands Gulf Finance House gains extraordinary general Asian venture fi rm at ‘A’ approval for the restructuring assembly postponed of WestLB’s Murabahah Islamic banking to hold 15% Capital Intelligence affi rms Sultanate’s Islamic banks facility share of total banking sector ‘A’ rating on Qatar Islamic exempt from ‘Omanization’ in Turkey by 2023 Bank Barwa Bank IPO in the rule pipeline Investments in Pakistan’s MOVES Egyptian regulators still mum securities to spur Islamic TAKAFUL on EFG Hermes-QInvest banking market National Bank of Abu Dhabi Takaful reaches 70% market merger The Securities and Exchange appoints Alex Thursby as its penetration in Nigeria new CEO Sadara Chemical’s Sukuk Commission of Pakistan to oversubscribed by 2.6 times grow its Shariah Advisory The Securities and Exchange Darmin Nasution to step Board Commission of Pakistan down as governor of Bank Thatt a Cement to issue issues seven show-cause rd Government of Indonesia Indonesia come the 23 May Islamic instruments and notices conventional bonds for the to set up country’s biggest Morgan Stanley appoints fi nancing of its Sri Lankan Islamic bank Great Eastern Takaful Sammy Kayello as chief expects US$64.66 million plant KLCC Property Holdings to executive and chairman for in contributions from new become Malaysia’s fi rst Shariah MENA region Family Takaful product NEWS compliant stapled REIT Michael Katounas joins Bangladeshi Takaful fi rms’ International Bank QInvest as head of Libya postpones lack of separate accounts for of Azerbaĳ an gains investment banking implementation of Islamic deposits and investments international certifi cation for banking regulations aff ect solvency margin Ajman Bank appoints its Islamic products Mohammad Zaqout as new Barclays Bank to expand Oman’s new regulations for Omani government rules CEO Islamic banking services to Takaful licensing to boost out sovereign Sukuk due to Egypt competition budget constraints

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Sovereign Sukuk: What can we expect in 2013? Continued from page 1

ﬁ nancial institutions to park excess Chart 1: Sovereign (SUSI): Yield April 2012-13 liquidity in high creditworthy papers, and accordingly manage excess liquidity and risk.”

Apart from playing this vital role in 3.86 terms of ﬁ rst-time entry into the market however, Sukuk also have a longer-term 3.66 impact. Pruvost explains that: “Sovereign Sukuk are generally the ﬁ rst inroad into Shariah compliant funding in any given 3.46 country, enabling the gradual creation of reference prices over time.” This is vital 3.26 for providing the information required to form accurate and competitive prices, 3.06 which is a key pillar in building an active and functioning trading market. 2.86

Sovereign 2.66

Sukuk are Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr generally the first Source: HSBC/Nasdaq inroad into Shariah The only sovereign issuing domestically issuance, compared to around US$100 compliant funding at the moment is Bahrain, in dinars; billion from Malaysian issuers. although some market experts believe in any given country, that that Egypt and Qatar may eventually “Apart from Bahrain” confi rms Fox, follow suit. “US dollar issuance can “there is no regular sovereign issuer enabling the gradual achieve longer maturities and larger of long-term Sukuk in the GCC. Qatar size,” explains Stukenbrock. “That’s the issued a sizeable Sukuk last year, and so creation of reference main advantage.” did Dubai and DEWA. But none of them have so far been a regular, recurring prices over Who issues? issuer in the Sukuk market. Neither Although there have been a couple of Saudi nor Kuwait issue foreign currency time large issuances over the past few years, bonds, while Abu Dhabi is an infrequent Richard Fox, a senior director at Fitch issuer and will stick to conventional Kai Stukenbrock, a senior director at Ratings, comments that: “As regards bonds.” S&P’s sovereign ratings group, agrees; external issuance, there really aren’t any pointing out that a sovereign issuer in the Gulf. Most sovereigns haven’t Bahrain leads the pack also has a role to play in encouraging a issued any foreign Sukuk.” Malaysia Bahrain has been issuing more or less secondary market. “The presence of an remains the dominant market, and even regularly (although not annually) in active sovereign issuer should provide some non-Malaysian issuers (such as the both Bahraini dinar and US dollars for a benchmark and support the pricing Development Bank of Kazakhstan with almost a decade, and is one of the only of Sukuk notes both in the primary its premier Sukuk in 2012) have issued regular Gulf issuers, although Dubai and secondary markets. It should also in ringgit into the Malaysian market. Fox and Ras al Khaimah have also come increase the liquidity of the market by notes that: “Malaysia is way ahead of the to market. Bahrain is an established increasing the supply and over time Gulf, which has a long way to go to catch issuer and with around 33% of GDP of building broader, diversifi ed up.” general government debt in 2012, and demand.” an expected government defi cit from In fact, Sukuk issuance in the 2013, is expected to remain so to cover its Sovereign Sukuk are currently GCC (by all issuers) has remained fi nancing requirements. denominated almost exclusively relatively small compared to global in US dollars, giving them issuance. Fitch Ratings estimates But who else can we expect to pick up the equal appeal to both foreign that in 2012 issuance out of the reins in 2013? Fox has litt le expectation and local investors, as GCC was around US$20 that many other Middle East states GCC countries peg their billion out of approximately will join the market in the near future. currency to the US dollar. US$140 billion in global continued...

Sovereign Sukuk: What can we expect in 2013? Continued from page 3

Akber Khan, the director for asset Chart 2: Middle East Conventional Sovereign (MECS) : Yield April 2012-13 management at Al Rayan Investment in Dubai, in recent interview commented that: “The Qatari sovereign has a 4.73 history of being a savvy issuer and appears to be taking advantage of the extraordinary spread compression 4.61 we’ve seen in GCC Sukuk over the last six months.” And with up to US$200 4.49 billion in infrastructure projects recently announced for Qatar over the next 10 4.37 years, the country looks set to become a booming Islamic capital market center in 4.25 the Gulf.

4.13 Turkey proves demand While other countries both east and west 4.01 are dragging their feet, Turkey is another that has launched itself wholeheartedly into the market; and following its maiden sovereign issuance last year it Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr appears to be reaping the benefi ts. In Source: HSBC/Nasdaq September 2012 the Turkish treasury issued a US$1.5 billion Sukuk – scaled “Kuwait regularly issues conventional of which a quarter will be Sukuk; and up from the planned US$1 billion due to treasury bonds and bills through the is aimed at developing Qatar’s capital exceptional demand, with an orderbook central bank, but mainly for monetary markets, supporting bank liquidity and reaching US$8 billion, and unusually purposes, and we have no indications helping its banks meet Basel III liquidity tight pricing at 2.803%. Although a notch that they would be considering adding requirements. below investment grade due to Turkey’s Sukuk issuance.” And Stukenbrock country rating of ‘BB’ from S&P (‘Ba1’ points out that “there is also limited Stukenbrock comments that: “Our from Moody’s), there was huge investor regular conventional government debt understanding is that the accelerated demand for the paper, demonstrating issuance in the GCC, mainly as a result issuance of Sukuk in Qatar, apart from the dearth of highly rated bonds and the of the large surplus position of most the large double-tranche issue in 2012, hunger from a market starved of quality sovereigns in the region”. Oman, Saudi is going to be in local currency and sovereign paper. Arabia and Abu Dhabi are barely issuing done by the central bank. The Sukuk even conventional government debt and issuance is going to complement the This high demand and low supply of Fox comments that: “Again, we do not domestic treasury bill and treasury bond sovereign Sukuk continues to be an issue. have reason to expect them changing tack issuance.” Qatar is no stranger to the Abrar Hussain, the head of debt capital and issuing more Sukuk going forward.” Sukuk market, and in July 2012 issued markets at Credit Agricole, highlighted in one of the largest deals ever with a a 2012 interview that: “There isn’t a large Qatar’s example US$4 billion dual tranche Sukuk, its fi rst number of highly rated sovereign Sukuk out there. Bond issuers that typically However, one country has made its Islamic issuance in over a decade, which issue conventional debt are looking for intentions clear, bringing its considerable saw the lowest yields of any sovereign ways to issue Sukuk.” clout to add to the sovereign pool in Sukuk to date at 115bps over midswaps. its bid to cement itself as a center for And once sovereign Sukuk is issued, Islamic fi nance. And the country is also Fox notes that: “Qatar is becoming a Turkey is a prime example of the catalyst moving towards local currency issuance regular issuer and has already ventured eff ect it can have on the corporate in a step that could make waves in the into the Sukuk market, although this market. Albaraka Turk has already market. In March the Central Bank is more for market development revived plans to enter the market, while of Qatar issued QAR1 billion purposes rather than to fund the this year Bank Asya also joined in with a (US$300 million)-worth of local government. Bahrain, Dubai and US$250 million issuance in March. And currency Sukuk along with Qatar are all vying to be Gulf government-related entities, state-owned QAR3 billion (US$900 million) fi nancial centers and Qatar’s enterprises and corporates are expected in conventional bonds; and move should probably be seen to follow suit. Dr. Vedat Akgiray, the announced plans to issue local in this context. The need to set chairman of the Capital Markets Board of currency debt every quarter. up domestic capital markets is Turkey, explained at the time that: “[The The issuance is expected to also something common Sukuk] is certainly the needed fi rst step continue at QAR4 billion to all GCC countries, to start an active Sukuk market, both (US$1 billion) quarterly for monetary policy purposes.” continued...

Sovereign Sukuk: What can we expect in 2013? Continued from page 4 primary and also secondary. Now we bonds, so it is important that we have Muslim populations, would reach can expect this market to grow faster.” this alternative.” out to the Sukuk market to fi ll their Meliksah Utku of Albaraka Turk also funding gap – but this simply has not commented to the Saudi Gazett e that: A limited range happened. It seems as though despite its “With the Turkish treasury’s entrance to Given the obvious advantages of advantages, Sukuk has yet to develop the Sukuk market, banks, companies and sovereign Sukuk issuance, why are into a mainstream instrument which utilities will have a trustable benchmark more countries not moving to access countries without an Islamic agenda feel that will help boost private issuance.” this lucrative, liquid and low-yield comfortable enough to access. market? Although a very few countries Indonesia’s issues are regular visitors to market, including What next? However, sovereign issuance is not Malaysia, Indonesia, Qatar and Bahrain, Nevertheless, there are signs that the all plain sailing. Indonesia, one of the others are far more sporadic in their market could be picking up as players most regular domestic issuers, has issuance. And sovereign Sukuk continue such as Turkey set new precedents and shown recently the problems that can to remain largely limited to Asia and the demonstrate the benefi ts that issuance accompany sovereign Sukuk issuance. Middle East, with few countries outside can bring. In addition, an increasing In February of this year the government the core Islamic fi nance strongholds regularity of issuance from countries failed to reach its Sukuk auction target, (apart from a couple in Africa and central like Qatar show that Sukuk as a serious selling IDR1.05 trillion (US$108 million) Asia) venturing forth. This comes as and consistent source of funding (rather out of a targeted IDR1.5 trillion (US$154 even more of a surprise, given the dearth than a grand gesture) is gradually being million) with investors demanding up to of credit and constrained liquidity in accepted; while the growing number 6% on fi ve-year notes yielding just 5.16% European markets, which have seen of local currency issuances suggest that in the secondary market due to high conventional sovereign yields soar as the countries are fi nally beginning to accept infl ation and soaring lending rates. Eurozone debt crisis continues. the opportunities that Islamic paper can off er. The lack of liquidity in government Sukuk has also meant that the The Qatari And several new entrants are rapidly Indonesian government has had coming up to the gate who could develop signifi cant problems issuing Islamic sovereign into real players over the next few paper. Investors, although they are years. Egypt is working on its Sukuk keen to purchase Indonesian Sukuk has a history of legislation and could become a large (demonstrated by the usually high domestic market. Fox also points out that number of bids in government Sukuk being a savvy Saudi Arabian government agencies are auctions) are demanding a premium to issuing increasing volumes of Sukuk, and compensate for the illiquidity, but the issuer and appears believes that the country, despite being government is reluctant to pay more on a minor player at the moment, could Sukuk than conventional bonds. This to be taking in future become a benchmark for the has not only led to dismal auctions in regional market. recent months (with the October 2012 advantage of the auction also failing to meet its target), Pruvost believes that in 2013 we may see but to a very limited secondary market. extraordinary the size of deals increase as well, with Market experts suggest that this may be jumbo issuances expected on the back of dampened still further if the Indonesian spread huge sovereign infrastructure projects government reduces supply, as a means with Turkey, Qatar and Malaysia sett ing of encouraging demand by creating compression we’ve a precedent with US$1 billion-plus deals scarcity, which will encourage buy-to- over the past year. hold behaviour even further. seen in GCC Sukuk over the last However, Stukenbrock thinks that In March, the government announced although we may see new issuers, that it would reduce its use of foreign six months probably sovereigns, these will initially currency bonds to fi nance its budget come to market with modestly sized defi cit, although it confi rmed that it issues “to test the waters and investors’ would not reduce its use of Sukuk Although the UK and Germany continue risk appetite.” (although it has no plans to expand to exert downward pressure on debt either), and plans to issue around IDR57 with yields hovering below 2%, Spain Either way, with expectations from trillion (US$5.9 billion) in 2013. The and Italy are pushing towards 5% while Africa, central Asia and even Europe director of Islamic fi nancing policy at Greece unsurprisingly is towering at over (following the fi rst corporate issuance the fi nance ministry, Dahlan Siamat, 11%. to come out of Germany since 2004), we told Reuters that: “There is no reason can expect the sovereign Sukuk market to stop issuing Sukuk, it has become In the past, many market participants to continue to set new benchmarks in part of our strategy. We don’t want to be expected that developed non-Muslim 2013. — LM completely dependent on conventional countries, especially those with large

includes, among others, US$319.6 million DEALS in electricity fi nancing for Bangladesh, Not just countries Iran and Uganda; US$174 million in Sukuk on its way educational fi nancing for Indonesia and TURKEY: Kuveyt Türk Katılım Bankası, US$80 million in agricultural fi nancing the Turkish unit of Kuwait Finance for Morocco. IrAq House, plans to issue up to TRY100 million (US$55.38 million) of Sukuk Up to US$750,000 was also approved LuxemBourg in September or October this year, as grants under the IDB’s Waqf Fund according to its CEO, Ufuk Uyan. for educational projects in a few non- MoroCco ,, member countries: namely Botswana, ThailanD m m SIB Sukuk imminent Fĳ i, Nepal and Thailand. UAE: Sharjah Islamic Bank (SIB) will IrEland issue a dollar-denominated, benchmark- Quarterly Sukuk for Qatar sized Sukuk during the fi rst week of QATAR: Qatar Central Bank will issue AFghanistan April. Al Hilal Bank, HSBC, Liquidity up to QAR1 billion (US$274.4 million) Management House and Standard in riyal-denominated Sukuk and up SinGapore Chartered have been mandated as to QAR3 billion (US$823.3 million) in CHina the deal’s arrangers for the upcoming conventional bonds every quarter, said issuance. The Sukuk, which will be Sheikh Abdullah Saoud Al-Thani, its BahraIn ,,,,, issued via an SPV, SIB Sukuk Company governor, on the 2nd April. III, are rated ‘BBB+’ by S&P. DJibouti BNM’s upcoming issuance PaKistan Indonesia auctions Sukuk MALAYSIA: Bank Negara Malaysia INDONESIA: The fi nance ministry will issue up to RM1 billion (US$323.83 AustraLia ... of Indonesia raised IDR645 billion million) in Murabahah notes on the 9th (US$66.24 million) through its Sukuk April, maturing on the 11th June 2013. TurkMenistan auction held on the 2nd April. Restructuring for WestLB GermaNy ..... SBG Sukuk priced GLOBAL: Gulf Finance House (GFH) CrOatia SAUDI ARABIA: Construction has gained approval from its syndicate of conglomerate Saudi Binladin Group banks and Sukukholders to restructure JaPan (SBG) has priced its SAR1.3 billion the outstanding US$105 million debt (US$346.6 million) Sukuk at a spread on German-based lender WestLB’s Qatar of 170bps over the three-month Saudi Murabahah facility. GFH is said to be in interbank off ered rate (SIBOR ). The the process of fi nalizing the terms of the FRance paper holds a maturity of two and a half restructuring. years. IndoneSia .... Barwa plans IPO SwiTzerland Project financing from Sadara QATAR: Steve Troop, CEO of Barwa SAUDI ARABIA: Sadara Basic Services, Bank, has confi rmed with Islamic TUrkey a subsidiary of Sadara Chemical, has Finance news that the bank is currently issued a fl oating rate Sukuk worth US$2 planning an IPO, which will be subject MoldoVa .. billion to fi nance the construction of to shareholders’ approval during its KuWait Sadara’s US$19.1 billion chemical and upcoming AGM. He said: “We will be plastic production complex in Jubail asking the bank’s shareholders to vote on MeXico Industrial City II. the subject on the 14th April.” MalaYsia The paper holds a tenor of 16 years. EFG Hermes-QInvest merger AlBilad Investment, Alinma Investment, BraZil Deutsche Securities Saudi Arabia and talk hits wall Riyad Capital are the mandated joint lead GLOBAL: Merger talks between EFG managers and joint bookrunners for the Hermes and QInvest have reached a These are some of the countries we deal. standstill as the two entities wait for have subscribers approval from the Egyptian Financial IDB approves US$617 million Supervisory Authority. The deal, which was fi rst proposed on the 3rd May 2012, Contact us now for a free trial…… in funding will lapse aft er 12 months, on the 3rd May GLOBAL: The IDB recently approved up 2013. Musfaizal Mustafa to US$617 million towards the funding of Subscriptions Director new development projects for a number According to a spokesperson at the [email protected] of its member countries. The funding Egyptian-based investment bank, the Tel: +603 2162 7800 x 24 continued...

continued... billion (US$2.4 billion) from the initial merger — which will see QInvest hold a SAR5.25 billion (US$1.7 billion). Sadara 60% controlling stake, with the option to has also increased the issuance size to acquire the remaining 40% over the next SAR7.5 billion (US$2.4 billion), in light of 12 to 36 months — has been approved the demand. in all other jurisdictions but Egypt. The transaction includes EFG’s brokerage, Thatta Cement seeks The most recognized brand in research, asset management, investment financing banking and infrastructure businesses. ϐ GLOBAL: The National Bank of Pakistan will underwrite a combination of Islamic ǡ ǡ Successful closing for Sadara ﬁ nancing and conventional bonds for ʹͲͳ͵ SAUDI ARABIA: Sadara Chemical’s Pakistan-based Thatt a Cement’s US$15 Ǥ ͺth Sukuk, issued through its subsidiary million project in Hambantota port, ǡ͵rd Sadara Basic Services, received strong Sri Lanka, according to group director ǡʹnd investor demand, resulting in an Nasim Beg. nd oversubscription of 2.6 times to SAR7.5 ǡʹ Ǧ ʹͲͳ͵ DEAL TRACKER Full Deal Tracker on page 34 ISSUER ISSUING SIZE (US$) DATE CURRENCY ANNOUNCED Qatar Central Bank QAR 274.59 million 4th April 2013 Moroccon government TBA TBA 3rd April 2013 Sharjah Islamic Bank TBA TBA 3rd April 2013 15th - 16th April 2013 Tunisian government US$ 700 million 2nd April 2013 Dialog Axiata RM 493.98 million 2nd April 2013

28th - 29th May 2013

19th June 2013

21st - 22nd October 2013

18th - 19th November 2013

Ng also added that MAS will provide Malaysia to become base for AFRICA Islamic fi nance with a conducive environment and talent for development Gatehouse Bank’s Southeast Regulations postponed support while continuing to fi ne-tune its Asian venture LIBYA: The implementation of Libya’s regulatory framework. GLOBAL: UK-based Shariah compliant Islamic banking regulations has been Gatehouse Bank is set to make its put on hold, according to Saddek Omar Educational financing from expansion into Malaysia with the Ali Elkabar, the governor of the Central the IDB opening of a representative offi ce in the Bank of Libya. Islamic Finance news fi rst capital city of Kuala Lumpur. This is the reported in February this year that the BANGLADESH: The IDB will fi nance fi rst time the bank has ventured into the country had passed a law to convert all up to 83% of the cost to redevelop Southeast Asian market, with Richard local banks into Islamic banks within a educational institutions in Bangladesh, Thomas, the bank’s former CEO, at the two-year time frame. according to a statement issued by the helm. Executive Committ ee of the National Barclays expanding Economic Council. The actual cost of the Following the merger of Gatehouse Bank redevelopment project has not yet been with Shariah compliant investment fi rm EGYPT: Barclays Bank is preparing to released. off er Islamic banking services in Egypt Global Securities House UK, a subsidiary as well as looking to boost its branch of Kuwait-based The Securities House network by 10%, according to Omar ISE calls for listing in 2009, Thomas was elected as CEO of Baig, its consumer banking director. PAKISTAN: The board of directors for the bank, and has served as its head for However, Omar added that the bank is the Islamabad Stock Exchange (ISE) the last four years. Prior to that, he was not planning to issue debt or sell shares has approved a plan to introduce new also the head of Islamic fi nancial services to the public to fund its expansion. incentives for the listing of Shariah at the Arab Banking Corporation (ABC) compliant companies, including creating in London, as well as the CEO of ABCIB Islamic Asset Management. Sukuk to fund deficit a separate SME trading counter and adding the Karachi Stock Exchange MOROCCO: The fi nance and economy 30-Index onto its trading platform. Gatehouse specializes in global real minister of Morocco, Nizar Baraka, estate investments and made a GBP165 has announced that the government is million (US$252.54 million) acquisition looking to raise money via Sukuk or New products from Maybank of law fi rm SJ Berwin’s offi ces in London conventional bonds to fund its budget Singapore in September 2012, in collaboration with defi cit, predicted to be between 5-5% of SINGAPORE: Maybank Singapore Khazanah Nasional, Malaysia’s sovereign its annual GDP for 2013. Islamic Banking has launched two new wealth fund. The bank also signed an products for property fi nancing, bringing MoU with the Association of Islamic Shura Council to review its total Shariah compliant product Banking Institutions Malaysia (AIBIM) Sukuk law suite to 11. The Islamic Commercial and to support the operation of an interbank Industrial Property Financing and the Murabahah master agreement and EGYPT: The Al-Azhar Senior Scholars Islamic Home Financing products are Wakalah placement agreement in 2010. Committ ee will re-submit the amended designed for Singaporean buyers with sovereign Sukuk law to the Shura a minimum fi nancing of SG$100,000 Although there have been no offi cial Council for revision, to alter and change (US$80,625) to fi nance both residential announcements on the bank’s plans relevant clauses previously deemed and commercial properties in selected in Malaysia, expectations are high in controversial. Mohamed Morsi, the Malaysian states. terms of the bank’s presence in the president of Egypt, recently sent the draft region and future expansions. Interest legislation to Al-Azhar University for in making Malaysia a home-base for consultation following a constitutional Islamic financial services regional expansions is becoming more procedure. portal goes online commonplace amongst UK-based PAKISTAN: Khabeer Financial Services institutions, with law fi rm Trowers & launched a Shariah compliant fi nancial Hamlins opening up a representative services portal on the 2nd April in order to offi ce, and another Islamic bank also ASIA extend its market reach while educating reportedly looking to establish a presence MAS to develop Islamic potential Islamic banking customers. The in the country. finance portal is targeted at the retail market and aims to facilitate SME investors. SINGAPORE: The Monetary Authority of Singapore (MAS) has reaffi rmed its commitment to developing the country’s Nationwide expansion for Islamic fi nance sector despite the lapse Islamic banks of two tax incentives for Islamic fi nance PAKISTAN: Islamic banks in Pakistan recently. “It is useful to note that Islamic are planning to establish up to 229 fi nance activities will continue to be branches collectively this year, under the incentivized alongside conventional annual branch expansion plan which will fi nance activities under our other existing also see the addition of 486 conventional schemes,” said Ng Sam Sin, its assistant managing director. continued...

© 8 10th April 2013 NEWS continued... Syariah Mandiri, BRISyariah and Bank Omani government rules bank branches. As of 2012 there were Syariah BNI, said Dahlan Iskan, SOE’s minister. out sovereign Sukuk due to 1,026 Islamic banking branches in budget constraints Pakistan. Malaysia’s first stapled I-REIT OMAN: The Sultanate of Oman might Exponential growth for MALAYSIA: KLCC Property Holdings have started 2013 strong with the launch of its Islamic Banking Regulatory Turkey (KLCCP) is looking to become one of the largest listed property groups in Asia, Framework and the establishment of a TURKEY: The country’s Islamic with a market capitalization of RM12 handful of Islamic windows, but a lack of banking sector is expected to grow to billion (US$3.89 billion), following its government funds seems to have thrown US$100 billion from US$31 billion by restructuring to become Malaysia’s fi rst a spanner in the works. 2023, commanding a 15% share of the Shariah compliant stapled REIT. republic’s total banking sector, according The sultanate’s fi nance minister, Darwish to a recent analysis by Ernst & Young. A stapled REIT is an investment vehicle Ismail Al Balushi, announced on the 2nd which includes two or more separate April that there would be no sovereign Pakistani Islamic banks need but related entities which are ‘stapled Sukuk issuances this year due to budget to take risk together’ so that only the overall entity constraints. This contradicts the Central can be bought and sold. Bank of Oman (CBO)’s plans to issue PAKISTAN: Local bankers expect the up to OMR200 million (US$518 million) Pakistani Islamic fi nance market to The Islamic REIT, dubbed KLCCP riyal-denominated sovereign Sukuk on perform bett er than the conventional Stapled Group, will have the Petronas behalf of the government, announced just market in the coming years from Twin Towers, Petronas Tower 3 and the last month. investments in federal government ExxonMobil Tower as its portfolio’s main securities via Sukuk Ijarah. However, constituents. “As far as the budget is concerned, we they also said that weak risk have in this year’s budget taken all the management of Islamic banks will The REIT will comprise of KLCCP’s anticipated expenditure to sustain the restrict growth of Islamic fi nance shares and the KLCC REIT units and will expected growth. We do not see any despite available excess liquidity, as the be traded on the Kuala Lumpur stock unexpected expenditure to occur during banks only focus on low-yield, risk-free exchange from early May. the year,” said the fi nance minister investments. during a press conference held in Dubai. IBA gains international He noted that although the government Haroon Siddiqui, the vice-president and will not tap into the Islamic capital head of Credit Islamic Banking Group certification market this year, there might still be MCB Bank, said: “This patt ern stands to AZERBAĲ AN: The International Bank interest on the corporate level. improve aft er the confi dence of foreign of Azerbaĳ an (IBA)’s Islamic banking investors is restored and policies have products, including its Ijarah and In related news, the CBO has granted been formulated to direct fi nancing Wakalah deposits, have gained the Islamic banks a one-year window towards the private sector, with bett er required certifi cations from Dubai-based allowing the relaxation of rules on the earning opportunities.” He also predicts Shariah fi nancial and legal advisory amount of foreign assets which they can that a large portion of Islamic fi nance company, Dar Al Sharia. Accordingly, will be focused on SMEs, consumer and all documentations and procedures hold, to give time for Islamic fi nancial agriculture sectors, moving forward. provided by IBA’s Islamic banking sector instruments to be developed in the also comply with AAOIFI rules. country. New recruits for SECP PAKISTAN: The Securities and Exchange Commission of Pakistan (SECP) has announced its decision to raise the number of its Shariah Advisory Board (SAB) members from seven to nine, with the new recruits to handle the technical Maybank Islamic has 395 subscribers to Islamic Finance aspects and assisting Islamic scholars, as news, and pays less than US$30 per subscription. well as the management of assessment procedures. IFN is for everyone, not just the CEOs Largest Islamic bank for Indonesia Contact us now and see how we can help your entire team INDONESIA: The government of Indonesia aims to set up the biggest Shariah bank in the country through its Call: +603 2162 7800 or State Owned Enterprises Ministry (SOE). Email: [email protected] The government is currently considering its options, including merging state- owned Shariah banks such as Bank

School in England, to develop Shariah Malaysia reveals new Halal EUROPE compliant fi nance case studies to be used in other business schools. food fund worth US$500 Interest-free financing for million Hungary The main areas of focus are regulation MALAYSIA: A new fund focusing on HUNGARY: In eff orts to boost the and governance, risk management and Halal food opportunities was launched economy, Hungary’s central bank has internal controls, product strategies on the 3rd April, with Malaysia’s former ventured into unconventional terrain in and marketing, and talent leadership prime minister, Abdullah Badawi, and with plans to off er interest-free fi nancing programs. industry veteran Rushdi Siddiqui at its and convert foreign-currency fi nancing helm. Called the ‘Halal Opportunities into local currency, for the fi nancing of GCC countries rallying to issue Fund’ and worth a total of US$500 SMEs in the country. GLOBAL: Sustained positive million, the fund will target the general macroeconomic fundamentals and strong global Halal food industry. Newly- appetite from GCC and international established private equity advisory fi rm investors have spurred a rally to issue Azka Capital, which focuses on Halal GLOBAL high credit quality paper in the Gulf industry initiatives, has been mandated Lower earnings in Q1 region, said global ratings agency S&P in as manager to the fund; while global a recent report. Shariah compliant consultancy Amanie GLOBAL: The performance of GCC Advisors will act as advisor to the fund’s banks in the fi rst quarter of this year upcoming transactions. is expected to be underwhelming, “Positive factors have allowed corporate and infrastructure entities, including according to a report by SICO Research. “The fund will be raised in stages and Qatar Telecom, Dubai Electricity and the aim, through a ‘roll-up’ strategy, is to Water Authority, and Saudi Electric The report stated that the earning acquire, convert [non-Halal companies] Company, to tap the market through US capacity for Saudi-based banks is and grow companies in the food and dollar Sukuk and bonds to meet their expected to weaken due to lower agri-business sectors so as to have global funding needs. The rates achieved for fee income and narrowing margins; reach as well as off er a diverse range of these entities have been signifi cantly while Qatari banks are forecast to gain high quality quick service restaurant lower than just one or two years ago,” lower yields due to heavy lending to products and services,” said Rushdi, government supported projects. UAE- said Karim Nassif, an analyst at S&P. the co-founder and managing director based banks however, are likely to of Azka Capital. He was previously the benefi t from moderating impaired loans Seven new members for IFSB global head of Islamic fi nance and OIC and lower cost of funds, resulting in GLOBAL: The Islamic Financial Services countries at Thomson Reuters. earnings growth. Board (IFSB) council has admitt ed seven more organizations into its list of Rushdi also noted that the highly Malaysia-Brunei economic members. Three supervisory authorities, fragmented nature of the Halal food industry would benefi t from a alliance one fi nancial institution and three professional fi rms have been admitt ed as consolidated strategy, as food security GLOBAL: The central banks of Brunei Associate and Observer members. has become an integral part of national and Malaysia have entered into an MoU security policy. This is mainly because to institute a collaborative framework The new members are: Indonesia many Muslim countries are net importers towards enhancing the progression of Deposit Insurance Corporation; Banque of food and generally do not have the fi nancial services sector, in terms of Centrale Des Etats de L’afrique de L’ouest purview over control of the supply cross-border banking, Islamic fi nance, (Senegal), Central Bank of Tunisia; chains. information exchange and human SAB (France), Finance Accreditation resources. OIC countries import over US$40 billion Agency (Malaysia); RAM Rating Services in food a year, while Brazil is currently (Malaysia) and Fajr Capital (UAE). New tax imposition for GCC the world’s leading Halal food exporter, at US$14.83 billion. These fi gures are IFSB has also upgraded three Associate GLOBAL: The GCC states are anticipated to grow as the Muslim Members from the Republic of Turkey to contemplating the implementation of a population is expected to increase to become full members. value-added tax by 2015 while lowering 2.2 billion by 2030 from the present 1.6 corporate tax rates to spur foreign direct billion. investment, according to a report by the Legal firms to part ways International Finance Corporation, PwC GLOBAL: Global legal fi rm Herbert and the World Bank. Smith Freehills, whose Islamic fi nance portfolio includes advising Qatar New partnership formed Islamic Bank on its dollar-denominated GLOBAL: Deloitt e’s Islamic Finance US$750 million Sukuk, announced on Knowledge Center (IFKC) has formed the 8th April that its partnership with a research partnership with the Saudi-based legal fi rm Al-Ghazzawi International Center for Education Professional Association will end in in Islamic Finance (INCEIF), and the August this year. The partnership was set University of Reading’s Henley Business up in 2008.

royal family, to open up the kingdom’s MIDDLE EAST stock market to foreigners and dilute the Not just acronyms reliance on retail investors to upgrade the SHUAA’s EGM postponed equity markets to international standards UAE: SHUAA Capital’s extraordinary and protect blue-chip companies. The IBA general assembly (EGM) has been kingdom’s capital market authority postponed to the 15th April due to a cautioned that this should be done in an OCBC failure to meet the required quorum. orderly and gradual manner to ensure market stability, according to Reuters. NCB Omani Islamic banks not ADCB affected Saudi Arabian bond market OMAN: The Central Bank of Oman’s takes off INCEIF decision to increase the number of SAUDI ARABIA: As the Saudi Arabian Omanis serving in the middle to upper economy prospers, fi nancing to the DIFX management of banks to 90% by 2018 private sector has seen a hike of 15.6% will not aff ect Islamic banks; as stated in to SAR1.02 trillion (US$272 billion) since EFG circular No.1105 on the 3rd April. February 2012. According to HSBC KFH Global Research, the issuance of riyal- Kuwaiti new law deemed denominated Sukuk surged to SAR27.2 QIB billion (US$ 8.8 billion) compared to unfair SAR11.3 billion (US$3.6 billion) in 2011. IBJ KUWAIT: The Kuwaiti government is In the fi rst quarter of this year alone, a expected to pay up to KWD744 million total of SAR10.3 billion (US$3.34 billion) OSK (US$2.6 billion) to bail out debtors with in Sukuk has been issued. personal loans from conventional banks, BLME following a law that was passed by the Innovative deals for Saudi parliament. However, it was stated that CIMB SAUDI ARABIA: Aft er years of citizens with fi nancing from Islamic dormancy, Saudi Arabia’s bond market banks will be excluded, causing an BNM has begun to escalate as local companies adverse reaction amongst some market rush to issue debt. A spate of riyal- AAOIFI players, including the deputy general denominated debt issuance has been manager at Al Dar Asset Management, observed in the market as companies BNP Fouad Abdulrahman. Speaking to begin to familiarize themselves with Reuters, he said: “It is unfair and bonds, keeping up with a wide demand IBQ unhelpful to the country. Four percent of from investors. The increase of lending the Kuwaiti population benefi ts from it limits by banks to individual companies RBS but it also punishes those dealing with has also contributed to the growth of the Islamic banks.” kingdom’s debt capital markets. HSBC IBT The plan, which is known as the ‘Family Although low returns are still keeping Support Fund’, will be available to up foreign investors on the sidelines for UBS to 74,000 Kuwaitis. The basis of the debt market trades, market players are law, according to reports, is due to the confi dent of the country’s potential. MAVCAP exorbitant interest rates charged by conventional banks in Kuwait, with some Forex Time to offer Amanah PWC banks charging over 4% of the discount rate. accounts BFX UAE: Cyprus-based international Maisarah goes live with iMAL online forex broker, Forex Time, will BNY begin introducing Amanah accounts OMAN: Maisarah, the Shariah compliant specifi cally tailored for Shariah ANZ window of Bank Dhofar, has completed compliant traders as an alternative to its the fi rst phase of integrating Path current interest-based services. Solutions’ iMAL core banking system and They’re our clients. will enter its second phase aft er details Repayment made before due have been fi nalized. Are you? date Saudi calls on foreign UAE: Abu Dhabi Islamic Bank (ADIB), Contact us now for a free trial…… investors Dubai Islamic Bank (DIB) and the National Bank of Abu Dhabi (NBAD) have repaid Musfaizal Mustafa SAUDI ARABIA: Saudi Arabian advancements received from the UAE Subscriptions Director regulators were called on by Prince Al [email protected] Waleed Talal, a member of the Saudi continued... Tel: +603 2162 7800 x 24

continued... SAR314.4 million (US$83.72 million) st RATINGS government which were made during the for the fi nancial quarter ended the 31 thick of the 2008 fi nancial crisis. March 2013, marking a 48% increase Affirmed at ‘A’ compared to the same period last year. The bank, which provides Shariah UAE: Dubai Islamic Bank’s long-term DIB has paid in full the AED3.75 billion issuer default rating has been affi rmed (US$1.02 billion) owed to the UAE compliant consumer fi nancing, reported a 10% growth in operating income to at ‘A’ by Fitch Ratings, while its viability fi nance ministry; while ADIB has repaid rating remains at ‘bb’. the AED2.2 billion (US$598.8 million) it SAR505.4 million (US$134.58 million) received from the government in 2009. and an accretion of 21% in assets to reach NBAD has also received regulatory SAR63.12 billion (US$16.81 billion). Stable outlook approval to repay its government debt INDONESIA: Bank Muamalat amounting to AED3 billion (US$816.5 Gulf Finance House Indonesia’s rating of ‘idA+’ was affi rmed million) in equal installments within the BAHRAIN: Gulf Finance House has with a stable outlook by PEFINDO. The fi rst and second quarter of this year. recorded a net profi t of US$10.03 million bank’s current and proposed Sukuk for 2012, att ributing the growth to strong was also affi rmed a rating of ‘idA(sy)’, Maisarah expands shareholder support and investor loyalty refl ecting the high growth potential of its Shariah banking sector. OMAN: Bank Dhofar has announced the as well as income and debt restructuring opening of two new Maisarah Islamic initiatives by its management team. Banking Services branches in the Azaiba Remaining stable and Salalah districts. Jordan Islamic Bank GLOBAL: According to S&P, all Gulf JORDAN: Jordan Islamic Bank has sovereign ratings currently remain at ‘A’, DIB to hold AGM announced a 28.9% increase in net with a stable outlook. UAE: Dubai Islamic Bank (DIB) will hold profi ts before tax to US$72.21 million in its annual general meeting (AGM) on the 2012, from US$56 million in 2011; and a Ratings affirmed 14th April, according to a statement fi led 28.7% increment in net profi ts aft er tax, QATAR: CI has affi rmed Qatar Islamic on the Dubai Financial Market. registering at US$51.48 million from Bank’s Financial Strength Rating (FSR) US$39.92 million. at ‘A’, refl ecting the bank’s strong Islamic Consensus to a capital hike banking franchise, growth in fi nancing Riyad Bank and deposits, fi rm income diff erential KUWAIT: Shareholders of Kuwait and good capitalization. Finance House (KFH) have agreed SAUDI ARABIA: Riyad Bank has announced a 17.4% increase in net profi ts to a 20% capital increment to boost st capital ratios and fund its expansion for the fi rst quarter ended the 31 March in adherence to its fi ve-year strategic 2013, to SAR951 million (US$253.2 plan, according to a statement fi led on million) from SAR810 million (US$215.7 the country’s bourse. The accretion will million) in the same period last year. raise KFH’s paid up capital to KWD348.5 million (US$1.21 billion) from KWD290.4 Dividends declared million (US$1.01 billion). New shares MALAYSIA: RHB Capital’s OSK-UOB will be issued at 100 fi ls (35 US cents) Investment Management has declared per share, plus a premium of 400 fi ls distributions for its seven funds, (US$1.39). including the OSK-UOB Dana Islam, which saw a net distribution of Malaysia 5.5 sen (US 0.02 cents) for the fi nancial RESULTS year ended the 31st March. Arab Islamic Bank PALESTINE: Arab Islamic Bank reported a decrease of 26.9% in net profi ts aft er ASSET tax to US$648,513 as of the end of 2012, MANAGEMENT compared to US$887,058 in 2011. Amanie Advisors focuses Gulf African Bank funds at asset leasing KENYA: Gulf African Bank has AUSTRALIA: Shariah compliant global announced a growth of 141% in profi ts advisory fi rm Amanie Advisors has before tax in 2012, along with a 154% announced its intentions to concentrate Company-Wide growth in post-tax profi ts. the funds it has raised from Islamic investors on asset leasing in the Subscriber The Saudi Investment Bank Australian sectors of infrastructure, aircraft and property. (Since 2007) SAUDI ARABIA: The Saudi Investment Bank announced a net income of continued...

© 12 10th April 2013 NEWS continued... issued to Takaful operators and two to MOVES The fi rm has also been working on conventional insurance companies. fundraising and deal structuring over the National Bank of Abu Dhabi GETSB’s high expectations of last eight months, and has chosen aircraft UAE: Following the retirement of leasing as its fi rst investment, according new offering Michael Tomalin, National Bank of Abu to Mark Darras, the executive chairman MALAYSIA: Great Eastern Takaful Dhabi has appointed Australia and New of Amanie Advisors Australia. The size of (GETSB) is targeting RM200 million Zealand Bank Group’s Alex Thursby as the fund has yet to be revealed. (US$64.66 million) in contributions its new CEO, eff ective the 1st July. from its newly launched Family Takaful Non-interest pension funds off ering, the i-Great Idaman, by next Bank Indonesia April, according to Zafri Abdul Halim, TURKEY: Albaraka TürkKatılım Bankası INDONESIA: Finance minister Agus its CEO. and Kuveyt Türk Katılım Bankası have Martowardojo has been elected to formed an alliance to come aboard the become the next governor of Bank The fi rm, which currently holds a 4.3% new state-aided private pension system Indonesia, the country’s central share in the local Takaful industry, is also in Turkey. The innovative regulations bank, aft er the move was approved looking to increase its market share by introduced a method for Islamic banks by parliament this week. He will be year-end. to establish non-interest pension replacing Darmin Nasution, whose term funds, enabling them to invest private ends on the 23rd May. pension funds in interest-free fi nancial No separate accounts instruments. BANGLADESH: Experts have noted Morgan Stanley that Takaful fi rms and conventional GLOBAL: Following the relocation of New fund from StanChart insurers in Bangladesh still lack separate Kamal Jabre to London, Sammy Kayello deposits and investments accounts, PAKISTAN: Standard Chartered Bank heads up Morgan Stanley’s Middle East which are essential for solvency Pakistan will now distribute Al Meezan and North Africa business as its new chief margins. Although Bangladesh-based Investment Management’s Shariah executive and chairman. Kayello has been Takaful fi rms are taking premiums compliant pension fund, the Meezan with the bank for over 25 years, and has on a Shariah basis, investments or Tahaff uz Pension Fund, via its 121 been based in Dubai since 2006. branches across the country. The fund keeping of deposits are still carried out is Pakistan’s largest Islamic voluntary according to the conventional system. pension scheme. Solvency margins are also not specifi ed QInvest through regulations, as noted by Kazi QATAR: QInvest has announced the Tilal Fund’s total return Mohammad Mortuza Ali, the managing appointment of Michael Katounas as its director of Prime Islami Life Insurance. head of investment banking overseeing OMAN: Al Madina Investment markets in the Middle East, Turkey Company’s Tilal Fund has achieved total New regulations to boost and other selected countries. Katounas returns of 126% since its establishment brings with him 15 years of industry in 2006, averaging at 21% per year. The competition experience. fund was launched at an initial capital of OMAN: Global ratings agency AM OMR5.54 million (US$14.27 million). Best predicts that Oman’s new Takaful Ajman Bank licensing regulations will prompt an UAE: Ajman Bank has appointed increased number of new entrants into Mohammad Zaqout as the bank’s new the market, causing smaller players to CEO, eff ective the 21st April, following TAKAFUL eventually withdraw as the market is not the resignation of its acting CEO Strong Takaful foothold expected to be able sustain an increased Mohamed Amiri. He was previously number of fi rms in the long run. NIGERIA: Takaful is said to have gained the executive vice president of personal 70% market penetration in Nigeria, banking at Al Hilal Bank. according to Babatunde Omosola, a TIA to offer education and vice-chairman of the Chartered Insurance credit protection Trowers & Hamlins Institute of Nigeria. KENYA: Takaful Insurance of Africa GLOBAL: Legal fi rm Trowers & Hamlins (TIA) has announced a fi ve-year plan to Warning letters for non- has appointed Dominic O’ Neil, expand its reach nationwide, including the resident managing partner of its compliance to the county of Nyanza, Western and Bahrain offi ce, to be its fi rst international PAKISTAN: Various Takaful companies Isiolo, according to Hassan Bashir, its managing partner. O’Neil will retain his have been issued show-cause notices and CEO. “We also want to have a long-term managerial role in Bahrain. warning lett ers for the non-compliance policy plan on education and credit of corporate laws, insurance laws and protection,” said Bashir. accounting standards and regulations by the Securities and Exchange Commission TIA has generated KES15.6 million (US$181,277) in profi t, sharing it with of Pakistan (SECP). Seven show-cause 2,000 clients. notices and three warning lett ers were issued by SECP; fi ve of which were

© 13 10th April 2013 Indo 2013 A4 Ads.ai 1 4/5/2013 2:49:05 PM , SHARIAH RISKS NDONESIA, ISLAMIC SLAMIC PROJECT AN FINANCE, INFRASTRUCTUR ERFORMANCE, FINANCING CHALLENGES, MURABAHAH OVING FORWARD, 15th - 16th April 2013, Hotel Mulia Senayan, Jakarta ISLAMIC COMPETING CAPITAL MARKE GLOBALLY, ISLAMIC USTAINABLE INVESTMENT GROWTH, TAKAFUL ROSS BORDER ISLAMIC STRATEGY & INVESTMENT NVESTMENTS, EGULATORS, EQUITY ORPORATE ISSUERS, MARKETS SLAMIC SHARIAH TRADE, COMPLIAN YNDICATED HEDGING INANCE, ISLAMIC ASSET MANAGEMEN S UKUK EFFECTIVE TAKAFU TRUCTURES PRODUCTS

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AAOIFIACCOUNTING AND AUDITING ORGANIZATION FOR ISLAMIC FINANCIAL INSTITUTIONS SHARIAH PRONOUNCEMENT

SHARIAH PRONOUNCEMENT

Query:

An Islamic bank’s customer has asked it to extend Murabahah ﬁ nancing for the purchase of a boat, which will be completed and delivered by the manufacturer aft er a year. The customer www.daralsharia.com will pay half of the 20% down payment required by the manufacturer, and seeks the Islamic bank to pay the remaining 10% now. The bank will also be required to pay 80% of the purchase price upon completion of the boat. Can this transaction be undertaken on a Murabahah basis?

Pronouncement:

In a Murabahah, it is necessary for the bank to acquire the title and possession of the asset from a third party seller prior to its sale to the customer. Since the boat is not readily available and will take one year to be built, the Islamic bank cannot enter into Murabahah agreement with the customer for the sale of the boat.

However, Shariah provides an alternate arrangement for ﬁ nancing the purchase of the boat while achieving the same desired objectives for the customer and the bank. One alternative is that the transaction can be carried out through Istisnah and a parallel Istisnah structure.

Istisnah is a ﬁ xed price sale and purchase contract for an asset which is yet to be developed, constructed or manufactured, i.e. has not come into existence at the time of entering into the contract.

Here, the bank should enter into an Istisnah contract with the customer and a parallel Istisnah contract with the manufacturer of the boat. The amount of the fi rst Istisnah contract signed by the bank with the customer shall be higher than the amount of the parallel Istisnah contract the bank will sign with the manufacturer, the diff erence being bank’s profi t.

Whilst the technical speciﬁ cations of the boat should be similar in both the contracts to avoid any discrepancy, the bank may keep the delivery date of the Istisnah contract with the customer later than the delivery date of the parallel Istisnah with the manufacturer to ensure timely delivery of the boat to the customer under the Istisnah contract.

While the customer will pay an amount to the bank as down payment under the Istisnah contract (i.e. 10% of the manufacturer’s price), the bank will pay 20% of the purchase price to the manufacturer in terms of the parallel Istisnah contract.

Upon completion of the boat, the bank will take delivery under the parallel Istisnah contract by paying 80% of the cost to the manufacturer and deliver the boat to the customer on agreed deferred payment basis.

In case of delay in completion and delivery of the boat by the manufacturer to the bank, the bank may charge daily liquidated damages to the manufacturer under the parallel Istisnah contract. Similarly, the customer shall be entitled to receive the daily liquidated damages from the bank for the delayed period under the Istisnah contract. Nevertheless, in order to be eligible for such compensation, the appropriate clause pre- deﬁ ning the extent of such damages should be included in the Istisnah and parallel Istisnah contracts from the outset. The bank may keep the amount of daily liquidated damage higher in the parallel Istisnah compared to the Istisnah it will sign with the customer.

Dr Hussain Hamed Hassan Shariah scholar & managing director Dar Al Sharia Legal & Financial Consultancy

This Fatwa is brought to you exclusively by IFN in collaboration with Dar Al Sharia Legal & Financial Consultancy-Dubai. The Fatwa appearing in this space are those which were obtained by Dar Al Sharia for their client institutions and depict issues faced. This Fatwa was compiled by Dr Muhiuddin Ghazi.

Block trading fuels takeover speculation for Ajman Bank

Government-backed Ajman Bank, strategic plan. Ajman Bank has not also awaiting regulatory approval from which has seen strong market issued any statement with regards to the Egyptian Financial Supervisory performance since the beginning of the the 4% stake sale, which has raised Authority as it looks to acquire a 60% year could be, the subject of a possible eyebrows among some players, who have share in Egypt-based investment bank takeover; as speculation rises following demanded more transparency and a full EFG-Hermes. a 38.8 million share purchase by an disclosure of the transaction. unidentifi ed buyer yesterday. The Ajman Bank is currently 25% owned purchase corresponds to a 3.8% stake of There has been a handful of M&As by the government of Ajman and the bank’s share capital. throughout the Gulf region this year, is supported by leading fi nancial beginning with Dubai Islamic Bank’s institutions and private individuals Ajman Bank was also subject to earlier acquisition of mortgage provider from the UAE, according to its website. takeover speculation in 2012. However Tamweel, as well as Gulf Finance The bank took an initial public off ering in November last year, the bank issued a House (GFH)’s 10% stake sale of Leeds of 55% of its equity to raise capital to statement dismissing the rumors, stating United Football Club to Bahrain-based fund its roll-out strategy in 2008; with that they were unfounded and that the International Investment Bank. GFH is reports stating that the IPO was 85 times bank was seeking neither an investment currently reviewing off ers from other oversubscribed. — LR nor a fi nancial partner to oversee its fi rms for a stake in the club. QInvest is

Assets yet to be identified for the IILM Sukuk

Global rating fi rm S&P has assigned benefi t from “a golden share held by Earlier this year, Dr Zeti Akhtar, the an ‘A-1’ rating on the International a nominee trustee”, thus restricting governor of Bank Negara Malaysia — Islamic Liquidity Management the ability of the IILM to change the which is one of the main backers of Corporation’s (IILM) upcoming Sukuk incorporation documentation of the IILM, alongside the IDB and 10 other issuance; a rating which those close vehicle, and protecting its certifi cate central banks — announced that the to the deal claim is “satisfactory”. holders. S&P added that IILM will act IILM Sukuk was in its “fi nal stages”. The rating, which is the highest as the program administrator of the It was subsequently given a proposed short-term rating by S&P’s standards, vehicle. deadline of Q1 2013. Dr Zeti on the refl ects the issuance’s asset eligibility 21st March said: “The shareholders of criteria, liquidity, issuance conditions IILM are in the process of supplying and bankruptcy remoteness of the Currently, the underlying assets for the Sukuk,” vehicle; according to an analyst at adding that the corporation had at the S&P. However, when questioned on the vehicle time already elected the primary dealers the assets of the issuance by Islamic for the issuance. Finance news, the analyst said: has not yet issued “Currently, the vehicle has not yet However, in light of the relatively issued certifi cates and as a result has certificates and as disappointing rating and SAMA’s not purchased any assets.” withdrawal, things are not as rosy as a result has not many would have expected; and the The rating analysis on the IILM 2 SA’s issuance, despite seemingly nearing its US$500 million Sukuk issuance by purchased materialization, is still shrouded in a S&P reads: “The rating on the program myriad of questions. — NH depends on the asset eligibility criteria any assets of the vehicle, which among other requirements limit the purchase of It has been over a year since IILM Have you joined assets to those having a long-term rating fi rst announced the issuance of its corresponding to ‘A-1’. Additionally, landmark Sukuk program, with constant the transaction benefi ts from conditions changes within the corporation — restricting the issuance of certifi cates, from management upheavals to the which include minimum levels of Saudi Arabia Monetary Authority liquidity, non-defaulted assets, and (SAMA)’s last minute decision to pull suffi cient cash fl ows to cover profi t and out announced just this week. However, expenses of the vehicle.” according to S&P, SAMA’s withdrawal from the corporation has not aff ected The vehicle has also been structured the agency’s rating action. The analyst to be bankruptcy-remote, mitigating said: “S&P’s rating is not based upon the the potential for an insolvency of the credit quality of IILM as an institution program, upon an insolvency of the given its role as program administrator our facebook page? IILM. The structure is also said to for the vehicle.”

Playing to its strengths

Contrary to what some might say, Ng also added that the republic has However, although the cost of Singapore is still very much committ ed more to off er than just tax advantages. structuring and executing an issuance to creating a conducive environment “The lapsing of the two incentives is might be proportionately higher than for Islamic fi nance. Ng Nam Sin, the thus no refl ection of MAS’ continuing executing a conventional deal due to assistant managing director at the commitment to develop Islamic fi nancial the level of expertise needed, there are Monetary Authority of Singapore services in Singapore. Here, it is useful some who are optimistic that the demand reiterated the republic’s stand to for me to emphasize that Singapore’s for the paper will be equally high — support the growth and development proposition for Islamic fi nance must particularly amongst international of the sector during the IFN Singapore, be broader than just tax advantage. investors. Roadshow last week. Singapore’s success as an international fi nancial sector stems from its high Perhaps the key strength of Singapore’s standards of regulation; deep and He also addressed the issue of the Islamic fi nance market lies outside liquid capital market, the presence of recent lapsing of the republic’s Islamic of the sector. The country’s fi nancial international buy side players, and a fi nance tax window, insisting that the market, with its robustness and critical mass of fi nancial intermediaries transparency, is a key factor in creating move was not a negative refl ection of with expertise to address a wide range of the government’s commitment to the investor confi dence; particularly for a fi nancing needs. It is these strengths that nascent market. Another point which industry. He said: “Recently, we had allow Singapore to support the growth of was mentioned by the panelists at the allowed two of the tax incentives for Islamic fi nance,” he clarifi ed. roadshow is the amount of untapped Islamic fi nance introduced in Budget talent in the country; being home to the 2008 to lapse. Like all our tax incentives, As with any nascent market, Singapore best international law fi rms and banks they have a fi xed tenure and in this case, has seen its fair share of teething problems; in the world. “All the expertise is here of fi ve years. It is useful to note that with the most prominent being a glaring in Singapore, and perhaps that could be lack of Singapore-based issuances in the Islamic fi nance activities will continue to one of their key exports,” a roadshow Islamic capital markets space. Most would be incentivized alongside conventional participant said. — NH fi nance activities under our other existing argue that the reason for this is that it schemes.” simply “does not make economic sense.”

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Investor appetite to drive Sukuk issuance in the next few years

The Sukuk market has seen exceptional growth over the last few years, but continues to face challenges including a limited secondary market, poor price formation and tight liquidity due to its small size. However, the future looks bright as investors ﬂ ock to market and demand continues to increase. PAUL-HENRI PRUVOST explains the factors that S&P believes are driving the asset class to gain greater acceptance as a mainstream debt instrument.

There is litt le to hinder another strong Chart 1: Total Sukuk issuance by major region performance by the Sukuk market in 160 2013, especially as we anticipate yields on bonds will remain low in the coming 140 Malaysia quarters. Global issuance expanded 120 Asia Pacięc for the fourth year in a row in 2012, (exluding Malaysia) 100 growing 64% to about US$138 billion, GCC and we expect another strong few years. (Bil. $) 80 Europe Despite the growth spurt, the Sukuk 60 (including Turkey) market is still a small segment of the global fi xed-income world. Largely 40 Others dominating issuance are sovereign 20 and sovereign-related issuers from Malaysia, and, to a lesser extent, from 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 the GCC countries comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, sia acięc (excluding Malaysia): Indonesia, Pakistan, Brunei, Singapore, Japan, Iran, and the UAE. China. GCC-Gulf Cooperation Council: comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates. Europe (including Turkey): Germany, UK, Turkey, France. Others: US, Sudan, Gambia, Jordan, Yemen, Kazakhstan. Sustained Sources: Standard & Poor’s. Zawya Sukuk Monitor database suggested by their asset size. Yields in Turkey, Qatar, and Malaysia issued more investment the region have been declining, and even than US$1 billion over the past two years. fell under those on conventional debt. spending and Add to that strong domestic appetite for Sustained investment spending and Islamic fi nance and sound liquidity, as ample domestic liquidity are likely to ample domestic well as greater political willingness to support Sukuk issuance, especially in move ahead with sizable infrastructure Malaysia, Saudi Arabia, Qatar and the liquidity are likely projects. UAE. Investment spending could see high single-digit growth for 2013, if it to support Sukuk We believe that a number of banks, continues at the rates we are seeing in the particularly, will come to market, fi rst quarter. issuance, especially needing to refi nance their existing debt in Malaysia, Saudi and seeking larger amounts to match the We estimate that the real investment credit needs of their corporate clients, growth rate was 6% in Malaysia and 7.4% Arabia, Qatar especially in project fi nance. in Saudi Arabia in 2012. This contributed to real GDP growth that reached 5.2% in and the UAE Large infrastructure projects, Malaysia, and exceeded 5% in some GCC particularly in Malaysia and countries. the GCC, are likely to stoke While still considered an alternative The Malaysia-centered Sukuk market is investment, S&P believes Sukuk have issuance not only vulnerable to weaker economic the potential to grow and join the We believe that new issuance of Sukuk conditions in Asia Pacifi c, especially mainstream. Funding needs and large worldwide could top well above US$100 lower growth in China, but also to the infrastructure investments in Malaysia billion again this year, according to troubles in the Eurozone and the feeble and the GCC, combined with bett er our base-case scenario for investment US recovery. global investor sentiment, are behind spending and economic growth, along today’s momentum in the Sukuk market. with our assumptions about continued We lowered our base-case forecasts high oil prices and low bond yields. for real GDP growth for most Asian For that reason we believe that GCC countries in 2012 and 2013. If Malaysia issuers, especially, are likely to come In addition, jumbo issuance may pick faces a severe drop in external demand, to market with bigger issues that are up further, mainly on the back of huge infrastructure projects from sovereigns. more commensurate with the potential continued...

Continued

Chart 2: Sukuk issuance by currency number of cross-border transactions 100% between the regions picks up, and 90% USD because of the increasing use of the Malaysian ringgit as preferred currency 80% MYR of choice (see Chart 2). 70% IDR Other Asia 60% Both regions have relatively strong Pacięc

(Mil. $) 50% economies and are seeking huge amounts SAR 40% Other GCC of capital to fund new infrastructure, 30% All others support economic development, and 20% entice more private-sector investment. 10% 0% We believe that cross-border issuance 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 will continue to gather steam, with Malaysia as the main benefactor, as GCC: Gulf cooperation council, IDR: Indonesian rupiah, MYR: Malaysian ringgit, SAR: Saudi Arabia riyal in the past few years. By cross-border Sources: Standard & Poor’s. Zawya Sukuk Monitor database issuance, we mean that an entity based in one country chooses to issue and market foreign investment and liquidity could countries, which generally enjoy healthy Sukuk in another country, and in all suff er. fi scal and external accounts. Sovereign- likelihood in that country’s currency. related issuance reached a record US$115 In the GCC, a potential recurrence billion globally in 2012, comprising about For instance, GCC-based entities have in geopolitical tensions could aff ect 80% of total issuance for the fourth year been crossing the fi gurative border investments in Saudi Arabia and Qatar, in a row. The segment also represents with ringgit-denominated issues over two leading issuing countries. For about 70% of the Sukuk that S&P rates. the past few years, beginning with example, political and social unrest in pioneering entities such as Abu Dhabi Bahrain, engendered by the Arab Spring, The GCC and Asia will remain the key National Energy Co., Bahrain-based Gulf resulted in an almost one-third decline engines for growth of the Sukuk market Investment Corp, and National Bank of in Sukuk issuance in 2012 — which in the coming 18-24 months. We may see Abu Dhabi. Even though the amounts investors nevertheless continued to snap new issuers, most probably sovereigns, remain low, ringgit-denominated Sukuk up. though with modestly sized issues to test issuance in the GCC has been steadily the waters and investors’ risk appetite. increasing, to US$571 million in 2012 Less likely, if oil prices were to drop from US$323 million in 2010. More signifi cantly for an extended period, And we may see the debut of issuers generally, last year’s non-Malaysian the GCC would feel the eff ects. The outside these two regions, like the entities, such as China-based Noble concomitant drop in oil revenues, which Development Bank of Kazakhstan with Group and the Development Bank of account for the overwhelming share of its RM1.5 billion (US$400 million) Sukuk Kazakhstan, issued upward of US$1.5 external and fi scal revenues, could lead program in 2012. The pace and frequency billion. to a broad-based tightening in liquidity. of issuance in those frontier markets, in our view, will depend greatly on their The ringgit is becoming a growing, Sovereign issuers dominate capacity to develop Islamic fi nance credible alternative to the US dollar for infrastructure. non-Malaysian issuers. Interestingly, the Sukuk market issuance in the Malaysian currency Sovereign and sovereign-related issuance Further afi eld, we don’t rule out the by all issuers — domestic and foreign will continue to dominate, shape, and possibility that more African sovereigns combined — actually exceeded those by underpin the Sukuk market, as it has in will enter the market. Some African Malaysian entities for the fi rst time in the past several years. Sovereign Sukuk countries have been growing strongly 2012. are generally the fi rst inroad into Shariah over the past few years, and most have compliant funding in any given country, huge infrastructure investment needs. The US traditionally was the only enabling the gradual creation of reference So far, only two African sovereigns alternative for issuers wanting to appeal prices over time, to which private sector have come to the domestic market with to international investors, especially entities can benchmark themselves. Sukuk — Gambia and Sudan — but we in countries where local currencies are understand that a number of them are pegged to the dollar such as the GCC From a sovereign perspective, Islamic considering either domestic or global countries, with shallow pools of domestic bonds can give governments access to issuance (see Chart 1). liquidity such as Indonesia, or with a a new investor class by diversifying short track record of Sukuk issuance — sources of fi scal funding. They can also such as Turkey when it fi rst tapped the help to cover external fi nancing needs The Malaysian ringgit is market in a big way in 2011 and 2012. and support reserve building. This is becoming a currency of choice important for countries with sizable for Sukuk issuance We believe that ringgit-denominated fi scal funding needs, such as Malaysia or The Asian and GCC Sukuk markets are issuance will continue to perform strongly, those in North Africa, but less so for GCC becoming more interdependent as the continued...

Continued benefi ting from, among other factors, We note that DEWA has listed its US$1 Malaysia’s well-defi ned regulations billion Sukuk on the Nasdaq Dubai An increasing and developed capital markets (both market, which bodes well for the conventional and Islamic), large and emirate’s ambitions to become a global number of diversifi ed pool of investors, standardized hub for Sukuk. Sukuk structures with available liquidity, Sukuk are being as well as its status as a potential gateway Listing Sukuk on organized markets to other fast-growing Asian economies and rating them not only bolsters rated and listed on such as Indonesia and China. liquidity, but also makes it easier for institutional investors to assess and international stock Liquidity is picking up, manage these assets. Liquidity has so far grown slowly, partly because it is exchanges, with helping better price building in fragmented domestic pools. formation Malaysia’s success is partly explained healthy competition Future global growth of the Sukuk by the existence of a well-functioning market depends directly on greater and credible debt capital market, which by exchanges to liquidity and bett er price formation. remains shallower in the GCC. Price Liquidity is tight because the market is formation has oft en proved diffi cult, attract issuers still small and viewed as an alternative even for listed Sukuk, because some of asset class. This situation is improving them trade infrequently. When trade is of comparatively brighter economic as larger and more frequent issues thin in a market, there are few prices and prospects in emerging markets. As we come to market, and as Sukuk gain perhaps even no benchmarks, that is, look toward the future, S&P believes the greater acceptance as a mainstream debt weak price formation. ability of the Islamic fi nancial industry instrument. to overcome questions related to Shariah We believe that sovereign issuance is interpretation, standardization of Sukuk An increasing number of Sukuk are being critical for establishing benchmarks and structures and creditworthiness, plays rated and listed on international stock facilitating price formation for private directly into the globalization of the exchanges, with healthy competition by issuance. Sukuk market and its wider acceptance exchanges to att ract issuers. by international investors. Since its infancy in the 1990s, the Sukuk However, most Sukuk issued globally market has experienced exponential Paul-Henri Pruvost is the Dubai-based credit are not listed and remain over-the- growth, that is, until the fi nancial crisis analyst for Standard & Poor’s Financial counter instruments, and rated ones of 2008, which dampened investor Institutions Ratings team in EMEA. He are the exception rather than the rule — appetite globally and across the board. can be contacted at paul-henri_pruvost@ although the absolute number of issuers Growth thereaft er resumed when standardandpoors.com. seeking ratings is on the rise. confi dence returned, largely on the back Is there a topic you’d like to see featured?

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www.trowers.com IFN COUNTRY CORRESPONDENTS

Big numbers for a small country IFN Country Correspondents AFGHANISTAN: Zulfi qar Ali Khan head of Islamic banking division, fi nancial supervision QATAR a staggering 14%, and the country now department, Da Afghanistan Bank ranks as the fastest growing country AFRICA By Amjad Hussain Afzal Seedat, managing director, Islamic banking, Absa for Islamic banking assets in 2012, AUSTRALIA according to the Ernst & Young Islamic Talal Yassine, managing director, Crescent Wealth This last month has seen continued BAHRAIN: Dr Hatim El-Tahir Banking Center. director, Islamic Finance Knowledge Centre, Deloitt e & activity and good news coming out Touche BANGLADESH: Md Shamsuzzaman from the Islamic fi nance industry executive vice president, Islami Bank Bangladesh BELGIUM: Prof Laurent Marliere players in Qatar. Qatar continues to CEO, ISFIN Qatar’s Islamic BERMUDA: Belaid A Jheengoor place itself in the center of activity of director of asset management, PwC the industry in the region and globally. BRUNEI: James Chiew Siew Hua banking assets senior partner, Abrahams Davidson & Co CANADA: Jeff rey S Graham QInvest recently announced the launch partner, Borden Ladner Gervais are estimated to CZECH REPUBLIC: JUDr Ivana Hrdlickova, of the QInvest Managed Account judge, Judiciary, Appelate Court Pardubice EGYPT: Dr Walid Hegazy Platform (QMAP), which is the world’s have grown by managing partner, Hegazy & Associates fi rst Shariah compliant managed FRANCE: Kader Merbouh co head of the Executive Master of the Islamic Finance, account platform. QMAP will be more than 23% Paris-Dauphine University HONG KONG & CHINA: Anthony Chan managing a minimum of 30 Islamic partner, Brandt Chan & Partners in association with SNR funds over the next three years, which during the last year, Denton INDIA: H Jayesh will allow shareholders and investors founder partner, Juris Corp INDONESIA: Farouk A Alwyni to invest in asset classes such as mutual reaching QAR195 chairman, Center for Islamic Studies in Finance, funds and hedge funds, managed Economics, and Development IRAN: Majid Pireh by globally recogonized investment billion (US$53.55 Islamic fi nance expert, SEO IRAQ: Khaled Saqqaf managers. partner and head of Jordan & Iraq offi ces, Al Tamimi & Co billion) IRELAND: Ken Owens Shariah funds assurance partner, PwC Ireland We understand that things are JAPAN: Serdar A. Basara president, Japan Islamic Finance still moving on course for Qatar JORDAN: Khaled Saqqaf partner and head of Jordan & Iraq offi ces, Al Tamimi & Co International Islamic Bank (QIIB) to The minister of fi nance and economy KOREA: Yong-Jae Chang launch a Sukuk program with a value partner, Lee & Ko recently announced that the Qatari KUWAIT: Alex Saleh of up to US$2 billion by year-end. The partner, Al Tamimi & Company government intends to increase its’ LUXEMBOURG: Marc Theisen specifi cations of the tranches are yet to partner, Theisen Law spending by 18% to QAR210.6 billion be determined but we understand that MALDIVES: Aishath Muneeza (US$57.84 billion) in the 2013-14 fi scal head of Islamic fi nance, Capital Market Development the planning around this will be moving Authority year. The Qatari government has also MALTA: Reuben Butt igieg forward imminently. president, Malta Institute of Management confi rmed its commitment to set up an MAURITIUS: Sameer K Tegally Islamic bank with a minimum paid up associate, Conyers Dill & Pearman Whilst Barwa Real Estate Company MOROCCO capital of US$1 billion, in collaboration Mohamed Boulif, principal consultant, Al Maali Islamic recorded a 17.6% decline in net profi ts Finance Training and Consultancy with the IDB and Saudi Arabia-based NEW ZEALAND: Dr Mustafa Farouk for 2012, Barwa Bank recorded a counsel member for Islamic fi nancial institutions, FIANZ Dallah Albaraka Group. NIGERIA: Auwalu Ado staggering 41% increase in net income Shariah auditor, Jaiz Bank as at the end of 2012. The fi nancing OMAN: Anthony Watson The sett ing up of a mega Islamic bank senior associate, Al Busaidy Mansoor Jamal & Co portfolio for Barwa Bank has increased in Qatar could potentially increase the PAKISTAN: Bilal Rasul by 66% to QAR15.3 billion (US$4.2 director (enforcement), SEC of Pakistan country’s global presence and mark PHILIPPINES: Rafael A Morales billion). Barwa Bank’s continuing managing partner, SyCip Salazar Hernandez & Gatmaitan Qatar as a major global platform for QATAR: Amjad Hussain success has set the expectation high for partner, K&L Gates Islamic fi nance. Qatar has the resources, RUSSIA: Roustam Vakhitov its Sukuk trading platform, which the managing partner, International Tax Associates the expertise in Shariah compliant bank expects to become fully-fl edged SAUDI ARABIA: Nabil Issa products and services, as well as a world partner, King & Spalding by the end of 2013. The bank anticipates SENEGAL: Abdoulaye Mbow class regulatory framework. Islamic fi nance advisor, Africa Islamic Finance Corporation taking advantage of the opportunities SOUTH AFRICA: Amman Muhammad within Qatar, where Islamic banking CEO, First National Bank - Islamic Finance For example, apart from Turkey, Qatar SINGAPORE: Yeo Wico, assets have experienced signifi cant partner, Allen & Gledhill is the only country in the region that has SRI LANKA: Roshan Madewala growth and are expected to continue director/CEO, Research Intelligence Unit implemented a specifi c tax regime for this trend. SWITZERLAND: Khadra Abdullahi Islamic transactions. Plans to establish associate of investment banking, Faisal Private Bank TANZANIA: Khalfan Abdallah Qatar as a global and a regional hub head of product development and Sharia compliance, Qatar’s Islamic banking assets are Amana Bank for Islamic fi nance have the potential to estimated to have grown by more than TUNISIA: Karim Amous increase cross-border activity, and allow Managing partner, Smarteco 23% during the last year, reaching TURKEY: Ali Ceylan the country to diversify its GDP growth partner, Baspinar & Partners QAR195 billion (US$53.55 billion). UAE: Moinuddin Malim in sectors other than oil and gas. CEO, Mashreq Al Islami This represents a 9.8% growth since UK: Siraj Ibrahim 2002. Deposits in Islamic banking corporate fi nance manager, QIB UK Amjad Hussain is a partner at law fi rm US: Saeid Hamedanchi, CEO, ShariahShares now equate 26.6% of the total banking YEMEN: Moneer Saif K&L Gates’ corporate and fi nance practices. sector in Qatar, reaching QAR121.6 head of Islamic banking, CAC Bank He can be contacted at Amjad.Hussain@ IFN Correspondents are experts in their respective fi elds billion (US$33.39 billion). Qatar has and are selected by Islamic Finance news to contribute klgates.com. designated short country reports. For more information outgrown the Gulf banking industry by about becoming an IFN Correspondent please contact [email protected]

Ijarah in India

INDIA this market segment and is primarily a but potentially dynamic and innovative venture capital fund, having in-house start-up NBFCs. Foreign owned NBFCs By H Jayesh expertise in the leasing of commercial will however require a license from the and residential real estate projects for its RBI. India currently does not have any investment team. specifi c laws dealing with Shariah Assuming the draft guidelines are compliant fi nancing. Therefore Shariah- However sett ing up a Shariah compliant notifi ed in their current form, it would be based fi nancing has to be conducted NBFC is not without its challenges. The possible for Islamic leasing companies to within the existing legal and regulatory RBI in April 2012 revoked the license of operate under the ‘exempted category’ framework. Taking the example of a Shariah compliant NBFC established (with fewer compliances) thereby further the Ijarah structure: an entity in India, in Kerala, on the grounds of technical catalyzing the growth of this segment in whose principal business is that of non-compliance with RBI regulations. India. leasing and hire-purchase, is required The NBFC has fi led a writ against the RBI to be registered with the fi nancial order before the High Court of Mumbai Based on our discussions with offi cials services regulator, the Reserve Bank of and the matt er remains sub-judice. at the RBI and statements made by India (RBI) as a non-banking fi nancial the governor of the RBI in public fora, company (NBFC). The future for Ijarah we understand that the RBI has been The technical diffi culties posed by evaluating the feasibility of permitt ing We are aware of entities such as Seyad current regulation may soon be a thing Islamic banking and fi nance in India and Shariat Finance, Secura Investment of the past. The RBI earlier this year is considering the relevant amendments Management, Cheraman Financial published draft guidelines for NBFCs that may be required to achieve this Services and Al Barr Finance House, to under which NBFCs may be classifi ed objective. name a few, that actively provide Ijarah under one of two categories — exempted and other Shariah compliant fi nancing and registered. The rationale behind the H Jayesh is the founder partner of Juris Corp. in India. Secura is the biggest player in exempted category is to encourage small He can be contacted at [email protected].

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The development of the Islamic insurance industry in Indonesia

INDONESIA industry, one major international factor predicted to boost the Islamic insurance company stated in a press insurance industry in Indonesia is in the By Farouk Abdullah Alwyni release on the 9th November 2012 that regulatory aspect. Indonesia’s Islamic life insurance has Currently, there are 43 Islamic enormous opportunity based on at least Currently, the government of Indonesia insurance players in Indonesia. Six four main factors: which are the fact that is in the process of revising Law No. of them are fully-fl edged Islamic Indonesia is the most populous Muslim 2/1992 relating to the insurance industry. insurance companies and the country, its increasing GDP, the low In the newly revised law planned to be remaining are Islamic windows of submitt ed to parliament, the Islamic conventional insurance companies. level of insurance penetration, and the insurance industry is mentioned hand- Out of the six mentioned, two are growing middle class. According to this in-hand with the conventional insurance Islamic life insurance companies and release, based on the survey done by the industry, which is not the case in the four are Islamic general insurance company, only 1% of the respondents existing law. companies. had Islamic life insurance. For those who don’t have insurance, 12% are A senior executive of the Indonesian By the end of 2011, the total premium considering it. In fact, by the second Financial Services Authority mentioned of Islamic life and general insurance quarter of 2012, the share of Islamic that the new law will give more amounted to IDR4.03 trillion (US$413.5 life insurance and general insurance certainty for the development of Islamic million) and IDR951 billion (US$97.5 reached 8.3% and 5.19% respectively of insurance in the country. million) respectively. The amounts are the overall industry. still relatively small and accounted for Many industry players have also voiced 4.14% of total all life insurance premium support for the new law, explicitly and 2.83% of all general insurance and By the second recognizing the existence of the Islamic reinsurance. insurance industry. The only thing that quarter of may invite further discussion on the As a whole, the Indonesian life new draft law is the rule related to the insurance market is still small. It is 2012, the share three-year time limit for the spin-off of reported that less than 5% of Indonesia’s an Islamic window of a conventional 240 million-strong population has life of Islamic life insurance company to become a fully- insurance. Out of this number, Islamic fl edged Islamic insurance company. life insurance only accounted for 4.14% insurance and in 2011. However, the growth of the life Some industry players have expressed insurance market has been relatively general insurance reservations over this relatively fast. Conventional life insurance on quick time limit. In any case, further average has grown at 20.8% during the reached 8.3% and deliberation may be expected to take last fi ve years (2007-11). Islamic life place before the new draft law is tabled insurance has grown at a faster rate 5.19% respectively to parliament. with an average of 40.7% during the same period. This shows that there is of the overall Farouk Abdullah Alwyni is the CEO of signifi cant potential to be tapped in the Alwyni International Capital and the Indonesian insurance market including industry chairman of the Center for Islamic Studies the Islamic segment. in Finance, Economics, and Development In 2013, it is expected that the growth of (CISFED). He can be reached at faalwyni@ Relating to the opportunity possessed Indonesian Islamic insurance industry alwynicapital.co.id. by the Indonesian Islamic insurance will continue further. One important

Table 1: Market share of the Indonesian insurance industry Premium/Contribution (IDR billion/US$ billion)

2007 2008 2009 2010 2011

All Life Insurance 45,582/4.67 50,435/5.17 61,726/6.33 75,596/7.75 97,288/9.98

Islamic Life Insurance 1,093/0.11 2,028/0.21 2,509/0.26 3,022/0.31 4,026/0.41

% Islamic Life Insurance 2.4% 4.02% 4.06% 4% 4.14%

All General Insurance & Re-insurance 22,115/2.27 26,934/2.76 28,985/2.97 32,047/3.28 33,625/3.45

Islamic General Insurance & Re-insurance 294/0.03 497/0.05 520/0.05 668/0.07 951/0.09

% Islamic General Insurance & Re-Insurance 1.33% 1.84% 1.79% 2.09% 2.83%

Source: Sharing Magazine

Rise in M&A activity could push overall economic growth

MERGERS & ACQUISITIONS domestic M&A deals at US$5.2 billion, announcement of a US$28 billion joint followed by the telecoms sector at US$4.1 acquisition of food conglomerate By Jamal Hĳ res billion. HG Heinz. The American Airlines/ US Airways merger was also recently The M&A story has come of age. 2013 The M&A space gets activated when approved and they are one step closer to has got off to a fl ying start with the there is a government policy change or forming the world's largest carrier. M&A space being highly active both even due to the availability of liquidity globally and regionally. According to and credit in the market. A company’s So these companies, who have done Dealogic, US companies have spent top management across the globe or their homework well in 2012, will surely US$219 billion on M&A thus far in in the Middle East will not approve stand to benefi t from this year’s M&A 2013, as compared to just US$85 billion expensive acquisitions if they are not opportunities. We will have to wait and in the same period last year. confi dent about future growth prospects see how the European crisis gets resolved of a particular merger or acquisition. and how it will impact the M&A space. Despite the political situation in the These are positive signs and this could But as of now Bahrain and countries Middle Eastern marketplace, according contribute to the economic growth of the in the MENA region are going ahead to Ernst& Young there was a 42% rise respective economies. with M&A in an organic and structured in announced M&A deal value in the manner. M&A defi nitely is for the long- MENA region in 2012 compared to This could be the biggest year for term and will surely contribute to the US$44.8 billion from 2011. The sectors M&A activity since 2000 if companies economy and not just the shareholders of that att racted the most domestic M&A keep up the same momentum. Several these companies. activity in 2012 in terms of volume deals announced already this year included real estate, asset management, include Silver Lake Partners’ US$24.4 Jamal Hĳ res is CEO of Capinnova and consumer products. Banking and billion leveraged buyout of Dell, and Investment Bank. He can be contacted at cc@ capital markets had the highest value of Warren Buff ett ‘s Berkshire Hathaway’s capinnovabank.com.

Online banks

TECHNOLOGY requirements rather than gett ing biased advice towards products sold by banks. By Ali Shervani The Islamic banking industry stands Internet banking is the future for the Chartered Islamic Finance professional (CIFP) to gain from such developments as it Why does it attract students from around the world? banking industry and it is providing will help in increasing its reach. Online a much-needed boost to the global banking products off er basic services at banking industry. The adoption of the branch level and most of the banking internet banking by Islamic banks will services are handled through the internet. play a crucial role in their development This results in providing cost-eff ective and growth. The promotion of internet customer-centric services and products to banking by some Islamic banks has their clients. reinforced this idea. Islamic banking also stands to gain Recent developments in the banking from the technological developments in world towards achieving bett er service the conventional banking; and existing in a more transparent manner have led solutions like KNAB can be utilized aft er to the launch of online banks. Recently customization for the Islamic banking an online bank was launched in Holland industry. INCEIF is driven by and for the industry. named ‘KNAB’. Recognised as a knowledge leader in Islamic finance, INCEIF The need for innovative products and delves into critical spheres such as micro-finance, risk sharing and KNAB aims to make it easier for wealth management to benefit global organisations and services will add to the growth of the communities. customers to gain insight into their industry by keeping the customer as the fi nancial situation and make the best The Chartered Islamic Finance Professional (CIFP) equips students focal point of all the activities. The use of decision based on customer-centric with in-depth knowledge, analytical tools and strategic internet-based banking will ensure the perspectives to fast track their careers in the growing Islamic information provided using the Figlo finance industry. reach of banking services to unbanked fi nancial planning tool. members of societies across the globe. To engage with us explore INCEIF at www.inceif.org The idea is to give customers control of Ali Shervani is the country head at IT fi rm their fi nances by providing unbiased Fin8. He can be contacted at ali.shervani@ fi nancial advice by using fi nancial fi n8.com. planning tools, which off er the customers advice based on their needs and

Industry outlook IFN Sector Correspondents

ASSET MANAGEMENT PRIVATE BANKING & as checking accounts, mortgages, car Sean Daykin, head of investment funds, Emirates NBD WEALTH MANAGEMENT fi nancing, etc., has more than doubled Asset Management in recent years whereas the off ering CROSS-BORDER FINANCING: By Khadra Abdullahi Fara Mohammad, senior lawyer and consultant in Islamic of private banking products has only fi nance increased by 10-20%. Globally, the Islamic banking industry DEBT CAPITAL MARKETS: Muhammad Shoaib Ibrahim, managing director & CEO, continues to experience robust growth Muslim high net worth individuals are First Habib Modaraba with reports indicating a growth rate increasingly expecting their wealth to LAW: that is 50% faster than that of the Bishr Shiblaq, head of Dubai offi ce, Arendt & Medernach be managed in a Shariah compliant overall banking sector. According to manner. Yet, in many cases, their existing LEASING: Ernst & Young’s World Islamic Banking Prof Dr Shahinaz Rashad, chairperson & CEO, Egyptian private banks can only off er limited Leasing Association Competitiveness Report 2013, the products or structures that comply. industry’s assets under management MERGERS & ACQUISITIONS: There is increasing demand for tailor- Jamal Hĳ res, CEO, Cappinova Investment Bank (AUM) are forecast to pass the US$1.8 made Shariah compliant products trillion mark in 2013, up from US$1.3 MICROFINANCE (ASIA): such as succession planning, fi nancing, Dr Mahmood Ahmed, executive vice president and trillion in 2011. Overall, Islamic assets director training, Islami Bank Training and Research discretionary and non-discretionary have grown by an average of 19% per Academy portfolio management, equities and year over the past four years. MICROFINANCE (AFRICA): structured products. Mansour Ndiaye, director of microfi nance, Assistance and Consulting for Development Furthermore, even when Shariah PRIVATE BANKING & WEALTH MANAGEMENT Khadra Abdullahi, associate, investment banking, Faisal Even when compliant products are available, the Private Bank quantity off ered is limited as investors PRIVATE EQUITY & VENTURE CAPITAL: Shariah tend to hold positions until maturity, Arshad Ahmed, partner, Elixir Capital thereby making it diffi cult for new REAL ESTATE (EUROPE) compliant products investors to fi nd them on the market. Philip Churchill, founder partner, 90 North Real Estate Partners are available, the Islamic wealth management, or REAL ESTATE (MIDDLE EAST): Yahya Abdulla, head of capital markets — Middle East, the process of wealth acquisition, Cushman & Wakefi eld quantity offered preservation and distribution, has a long REGULATORY ISSUES: way to go as private banks have been Mohammad Abdullah Malik Dewaya, head of Shariah is limited as focused on product off ering rather than compliance and audit, Maisarah Islamic Banking Services taking a holistic view of the needs of RETAIL BANKING: investors tend to their clients. Ris Rizqullah, lecturer, Trisakti University RISK MANAGEMENT: hold positions until Abu Bakr Abdel Rahman, relationship manager, NBD- Conclusion ADIB maturity, thereby Islamic private banking needs to do SECURITIES & SECURITIZATION: more to cater to the needs of affl uent Nidhi Bothra, executive vice president, Vinod Kothari Consultants making it difficult Muslims. Given the current market conditions and the increasing demand STOCK BROKING & TRADING: Athif Shukri, research analyst, Adl Capital for Islamic wealth management globally for new investors to SUKUK as well as in the traditional markets of Marco Mauri, senior director of asset management, find them on the Middle East and Southeast Asia, it is Alkhair Capital Saudi Arabia time for the industry to further leverage TAKAFUL & RE-TAKAFUL: its inherent strengths of being linked to Sutan Emir Hidayat, senior lecturer, University College the market of Bahrain real economic activities and play a key role in putt ing in place a holistic Islamic TREASURY PRODUCTS: How did Islamic private banking and Nafi th ALHersh Nazzal, certifi ed fi nancial & investment wealth management fare over this economic system. advisor period? Despite the growth of Shariah TECHNOLOGY: compliant products over the past Khadra Abdullahi is an associate, investment Ali Shervani, country head, Fin8 banking at Faisal Private Bank. She decades, Islamic private banking and IFN Correspondents are experts in their respective fi elds can be contacted at Khadra.Abdullahi@ and are selected by Islamic Finance news to contribute wealth management remain the only designated short sector reports. For more information faisalprivatebank.com. about becoming an IFN Correspondent please contact sectors lagging behind. The off ering of [email protected] Islamic products by retail banks, such

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Japan: Macroeconomic factors impacting the Islamic finance sector

With its infl ationary new policy, the Japanese government has taken a drastic step towards driving its economy forward. SERDAR BASARA looks at how the country’s new direction could benefi t from a partnership with Islamic fi nance.

Macro impediments that aff ect The weakened yen demonstrated its economic recovery, because they have the Japanese economy include the immediate impact as record trade defi cits already started paying the cost. following: in January and February were seen, at JPY1.6 trillion (US$16.3 billion) and JPY778 Due to the weakening yen, raw material • Wave of ‘Abenomics’ — infl ationary billion (US$7.9 billion), respectively, due to costs for food, housing, and clothes have measures introduced by prime high raw material costs. increased signifi cantly, as refl ected in minister Shiņzo Abe; rising prices, such as for electricity, gas, However, long-term positive results wheat fl our and tuna fi sh, eff ective from • Monetary easing and asset purchase might be expected since the shipments the 1st April. program by the Bank of Japan (BoJ) to the US and China, Japan’s main trade with the new governor Haruhiko partners, have also increased. Also, a The expectation of the government is Kuroda; surge in the Nikkei of over 40% since that an increase in national income due November 2012 shows that market to the weakened yen, and the economic • Weakening yen; expectations are high. stimulus programs, will eventually be refl ected in household pay rises. • Rising prices on imports and, consequently, rising prices for Islamic In addition to this expectation, the consumers; government has also asked companies financial to raise their employees’ salaries and • Expected increase in exports; pay decided to provide tax incentives to rises by major global corporations; institutions should companies that respond to this request. • Shift ing focus from gross domestic push the Japanese Risks of failure product (GDP) to gross national The main risks concerning ‘Abenomics’ income (GNI). government to are as follows:

Japan’s economic experiment issue government • Expectations for increase in exports with inflation Sukuk so that will not be met, and the trade defi cit Aft er a landslide victory in the December will broaden; 2012 elections, Japan’s Liberal Democratic they can have Party came back into power with its ally, • High government debt may not be New Komeito. Prime minister Shiņzo yen-denominated rolled over with the existing low Abe immediately started to implement rates; his infl ationary economic policies, reliable cash focusing primarily on monetary easing • Household real income will be and public spending. reduced, and people will start management spending less. The government also appointed instruments Haruhiko Kuroda, who is assumed to Opportunities for Islamic have similar policy priorities, as the new finance industry governor of the BoJ. Effects on households and Establishing profi table relations with the individuals Islamic world continues to be a strategic One of the main assumptions behind these ‘Abenomics’ has already become priority for Japan. The prime minister is ‘Abenomics’ might be that a weakened a household term. Many hold the planning to visit Turkey, Saudi Arabia yen will boost the global demand for expectation that general economic and the UAE at the end of April 2013. Japanese products, such as motor vehicles, recovery is on the way and that it will machinery, and consumer electronics. eventually help increase living standards. Large-scale capital investment projects in Public support for Abe’s government energy and infrastructure fi elds as well An increase in exports will save those still represents more than 70% of the as sustainable energy procurement are struggling industries and help them population. Japan’s main concerns for discussion. become more profi table. Those profi ts will eventually be returned to households However, this support may decrease in the form of pay raises. if consumers cannot benefi t from any continued...

Continued

In addition a younger population, with an appetite for economic growth in the Islamic world, is growing. This provides profi table partnership opportunities. The aging population continuously forces Japanese companies to expand to Heading into its 6th year, the Islamic Finance news Roadshow new markets for long-term objectives. ĐŽŶƟŶƵĞƐƚŽƌŽĂŵƚŚĞŐůŽďĞĞĚƵĐĂƟŶŐĂŶĚƵƉĚĂƟŶŐƚŚĞ A shift in focus from real GDP to real ĚĞǀĞůŽƉŝŶŐ/ƐůĂŵŝĐĮŶĂŶĐŝĂůŵĂƌŬĞƚƐ͘/ŶϮϬϭϯ͕ƚŚĞ/&EZŽĂĚƐŚŽǁ GNI forces Japan to continuously ǁŝůůǀŝƐŝƚϭϮŬĞǇŵĂƌŬĞƚƐǁŚŝĐŚǁĞďĞůŝĞǀĞǁŝůůǁŝƚŶĞƐƐ produce cash fl ow from abroad. Thus, ĞǆƉŽŶĞŶƟĂůŐƌŽǁƚŚŝŶƚŚĞĐŽŵŝŶŐǇĞĂƌƐ͘ a boost in Japanese investments in the Islamic world may be expected as soon as political stability has been achieved. MOROCCO Equity investments in Japan’s domestic 27th June 2013 market also provide an alternative for Islamic fi nancial institutions. Aft er the Lehman shock in 1998, Japanese companies started borrowing less to AUSTRALIA th secure saving surpluses for safety 7 May 2013 reasons.

However, with equity investments, JAPAN those companies can follow more 12th June 2013 ambitious growth strategies. Borrowing less also helped them become less leveraged and more Shariah compliant. HONG KONG 25th June 2013 At the same time, Islamic fi nancial institutions should push the Japanese government to issue government Sukuk PAKISTAN so that they can have yen-denominated 27th August 2013 reliable cash management instruments and manage diverse portfolios if they decide to invest in Japan. SRI LANKA 29th August 2013 Conclusion A drastic change in Japan is required; and the new government has taken a TURKEY risk and started the change. This is an 3rd September 2013 important step. My hope is that the policies will succeed and Japan will continue to provide the world with EGYPT excellent products, which will make life 5th September 2013 healthier, easier and more comfortable for people all over the world. THAILAND At the same time, I hope the Islamic 11th September 2013 fi nance industry will take the opportunity to partner with the Japanese government, companies and entrepreneurs and generate sustainable BRUNEI 28th November 2013 income in the Islamic world and in Japan that will benefi t all stakeholders.

Serdar Basara is the president of Japan Islamic ﬁ nance. He can be contacted at Register NOW to secure your FREE seat! basara@japanislamicﬁ nance.com. www.redmoneyevents.com

The growth of Islamic equity broking and trading

The Islamic capital market has grown in leaps and bounds, and as the equity market develops Islamic stockbroking is also on the rise. WAN RIZAIDY W MAMAT SAUFI explores the leading stock exchanges that handle Islamic trading, and looks at the possibility for a dedicated global Islamic stock exchange.

Although the development of Islamic practices guide for Islamic broking may also represent non-listed private fi nance started as early as the 1960s services. To date there are six Islamic equity, it shows that interest in equity with the establishment of various stockbroking establishments in investment has grown signifi cantly in interest-free deposit institutions, the Malaysia, which include fully-fl edged comparison to the early days of modern development of the Islamic capital Islamic stockbrokers as well as window Islamic investment; where previously markets — in particular equity services. GCC-based funds and investment were investment and fundraising — has only keener on real estate investment. really taken off in the last 15 years. But do we really need dedicated Islamic stockbroking? Some even believe we In relation to the development of the In Malaysia it unoffi cially began with need dedicated Islamic stock exchanges. Islamic equity market globally, major the introduction of Shariah compliant Again here we have diff erences of exchanges such as the London Stock stocks by Bank Islam Malaysia in 1983, opinion, with some quarters saying Exchange and Bourse Luxembourg have which later formally made up part of the we need end-to-end Islamic services to stepped up their eff orts to accommodate Shariah compliant stock list introduced support Islamic investment activities; and off er facilitative measures to admit by the Malaysian Securities Commission while others say it would create the listing and trading of Islamic in 1997. ineffi ciency and divide market liquidity. instruments. Both have their justifi cations and reasoning to support their views. Unfortunately, the national exchanges of Listed OIC member countries are still lagging It is not my intention here to put up an behind in tapping this niche market. instruments academic or technical discussion of the OIC member countries’ exchanges are matt er, but rather to explore the actual still struggling to meet international on recognized stock progress of this emerging segment of the standards and many have yet to become Islamic capital market. members of the World Federation of exchanges have Exchanges (WFE) – which would further Apart from Malaysia, globally others facilitate cross-border off ering and become key for have also taken the initiative in response trading of Islamic equities. to the demand for end-to-end Islamic investment house in services, such as the establishment From the WFE member list of 2013, making investment of fully Shariah compliant trading only a few exchanges including the platforms. Some companies are already Saudi stock exchange, the Amman selections off ering Islamic brokerage services on exchange, the Muscat exchange, the top of their Shariah screening processes. Egyptian exchange and Abu Dhabi Unfortunately we don’t have much are members from MENA region; information on how these fi rms have whereas other exchanges such as Qatar, On the global front, index provider progressed or how successful they have Bahrain, Beirut, Tunisia and Palestine Dow Jones initiated the creation of the been. are affi liate members. A coordinated fi rst global Dow Jones Islamic Index or bilateral approach is needed among in 1999. Since then, the screening of Following the global fi nancial crisis, the interested exchanges and brokers listed securities has evolved positively investors globally are moving their in establishing a group of recognized with the introduction of various Islamic investments towards safer and less exchanges for Islamic equities within the equity indexes. complex investment structures. global equity market. Listed instruments on recognized Increased interest from investors stock exchanges have become key for The establishment of the Member State globally has also initiated the investment house in making investment Stock Exchange Forum under the OIC, establishment of a number of Islamic selections. over the past four years, has provided equity funds. The continued interest a platform to discuss international in ethical and Islamic investment has According to Ernst & Young’s Islamic cooperation activities and off er the also instigated the development of Funds and Investments Report 2011, opportunity to share experiences Islamic stockbroking services in several Islamic fund investment in equity amongst exchanges. The forum has jurisdictions, including Malaysia. Bursa represented nearly 39% of the assets created a momentum towards greater Malaysia, the Malaysian exchange, under management of Islamic funds by for example, has come out with a best category in 2010. Although the fi gure continued...

Continued bilateral cooperation and understanding Arabian Capital Market Authority According to HSBC EMEA equity between exchanges in promoting cross- (CMA) in 2004 and the incorporation research in 2012, since April 2009 swap border trading of Islamic equity and of Tadawul in 2007, at the end of 2012 agreements to buy Tadawul listed the development of the Islamic capital market capitalization of the exchange securities have totaled SAR40.7 billion market. stood at SAR1,400 billion (US$373.42 (US$10.8 billion) against SAR35.9 billion billion). Tadawul is the largest exchange (US$9.5 billion) in swap sell agreements in the Arab world based on market over the same period: which translates capitalization. to a net infl ow of just SAR4.8 billion Greater (US$1.3 billion), over the last three According to the Tadawul Annual years. bilateral or Statistical Report 2012, the daily average unified initiatives number of transactions executed in 2012 Looking at Saudi Arabia, Malaysia alone reached 167,750,000 in trade, an and few other growing exchanges, such as the OIC increase of 62.84% from the previous there is ample room for growth and year. The daily average value of shares development. Further awareness and Member State Stock traded in 2012 amounted to SAR7.68 development of the Islamic capital billion (US$2.04 billion), an increase of market globally, focusing on other Exchange Forum 73.48% from 2011. asset class apart from Sukuk, could further increase Islamic stockbroking should be supported One interesting fact about the Saudi and trading activities. Greater bilateral equity market is that the major players or unifi ed initiatives such as the OIC to facilitate cross- in the market are individual investors. Member State Stock Exchange Forum Based on the Tadawul 2011 Annual should be supported to facilitate border trading of Report, individual Saudi national cross-border trading of Islamic equities participation represents more than 80% globally. Islamic equities of the market. Going forward, with the increased globally Another important feature of the Saudi number and volume of Islamic equities market is its increasing accessibility and the continuous liquidity provided for foreign investors. In 2008, the by Islamic funds, perhaps in the near CMA issued a resolution introducing a future we could see the dream of a Among the rapidly developing framework that allowed non-resident global Islamic stock exchange become a exchanges within the MENA region and foreign investors to participate and reality. OIC member countries, the Saudi stock invest in shares listed and traded on exchange (Tadawul) has been growing Tadawul via equity swap agreements, as Wan Rizaidy W Mamat Saufi is an Islamic signifi cantly since its fi rst informal long as they were undertaken through fi nance practitioner based in Saudi Arabia. public share off ering in 1955. Following authorized persons such as licensed He can be contacted at [email protected]. the establishment of the Saudia brokers.

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Bancassurance or bancaTakaful: A money- spinning proposition for banks, insurers and Takaful operators

Bancassurance is one of the most popular distribution channels for conventional insurance and Takaful alike. MUHAMMED ASHFAQ UR REHMAN explores the growth of the sector and looks at the challenges holding it back as well as the opportunities it oﬀ ers.

Bancassurance or bancaTakaful has always wants to put its initial eff orts into high agency costs, as well as leveraging been the most successful distribution gett ing quick and easy business, or ‘low a reputational boost from a marketing channel for many insurance and Takaful hanging fruit’ (quick revenue makers) perspective. It is true that the reason companies across the globe. The term to offl oad the shareholder pressure that for the rapid growth and performance bancassurance, or bancaTakaful, exists in the form of initial set-up costs of both the insurance and Takaful is defi ned as the distribution of (capex) or operational expenses (opex). companies has been somewhat due to conventional or Islamic insurance Thus, by viewing diff erent options the fact that banks have shown incredible (Takaful) products using a bank’s in order for them to quickly get into results in fulfi lling the life-stage needs of distribution network: such as branches, revenue generating rhythm, there is one their customers. service centers, DSRs, telesales, phone att ractive avenue which can provide banking, corporate websites, ATMs and the company a real booster to take the In terms of this bancassurance tying up with third-party call centers. business off right from the start, and that growth, Asian markets such as Hong The products typically include life, avenue is bancassurance. Kong, Singapore, South Korea, Japan investment-linked, health, annuity/ and Malaysia have exploited the pensions and an array of general If we review the performance of the opportunities bett er than markets in the insurance products. Insurance/Takaful insurance/Takaful industry in terms of its Middle East where insurance penetration companies also make product off erings growth over the past few years we notice is still on average below 2% of GDP. through brokerage companies but since that there has been a huge contribution One of the factors involved in such an some markets do not have a well- made by the banks towards such rapid extraordinary diff erence is the prudent established brokerage business, the growth. From an estimate, over 50% of regulatory landscape. However, with the focus of choosing the best distribution insurance or Takaful business is being emergence of Islamic fi nance especially channel naturally shift s towards banks. generated through banks under the in the GCC, Malaysia, and Indonesia, bancassurance model assuming that bancaTakaful success has ramped up. Most banking sectors already have a a company uses all its distribution Indonesia in particular is the largest strong built-in distribution infrastructure channels; agency, direct marketing, Muslim market in the world therefore along with a large customer base. center of infl uence and so on. By virtue of banks and Takaful operators are very That makes bancassurance the natural having a large customer base, banks are keen to harness its potential. distribution channel for insurance seen as the most lucrative distribution products. There are diff erent models centers to many of insurers. That is why Despite the poor insurance penetration used within bancassurance, however. banks have att racted many insurance in the Middle East, Saudi Arabia and the The bank may mobilize its own sales players to forge strategic alliances with UAE, are not only doing well but are at staff , which will be either a synthesis of them. the forefront in the GCC. Alongside these ‘insurance specialists’ and ‘generalists’ or only ‘generalists’ . In this situation countries, Bahrain, Oman and Qatar are the insurer assists business solicitation The distribution of insurance products also making reasonable contributions by providing coordination support via banks is not only a straightforward to the success of bancaTakaful in the through dedicated coordinators way of tapping into a large customer region. As the Middle East is dominated assigned to branches and other related base but also a cost-eff ective proposition. by a Muslim population, the acceptance channels. Alternatively, the insurance/ Such customer base is not merely already of Islamic fi nancial products including Takaful company places its sales agents refi ned from knowing the customer and Takaful over conventional products in the bank under ‘referral model’ understanding issues such as anti-money has already opened up new windows arrangements. The latt er model is more laundering perspectives, but to some of opportunity. The prospects of viable in exclusive agreements or sister- extent they have also passed through the bancaTakaful in the Middle East region concern companies. initial checks such as semi-underwriting are positive and it is expected that of fi nancial and health aspects. These growth is going to be steep, at least for Why are insurers and Takaful pre-fi ltered steps give comfort to the the next 10-15 years. The outcome of insurance companies. The reasons for bancassurance growth is eventually operators running after major insurers to seek opportunities through going to bring about a positive change in banks? signing-off with the banks are primarily the regulatory framework of the region. Any insurance or Takaful company, to exploit a large customer base in a whether a start-up or a mature concern, short span of time without incurring continued...

Continued

Why do customers prefer business as a whole. Consequently, to educate customers particularly to buy insurance/Takaful the key drivers of the business i.e. the in those markets where knowledge customers, banks and insurers, suff er. of such complex fi nancial/insurance products through the bank? To overcome the problems that can products is not high. In many The benefi ts of bancassurance are not potentially impede performance and countries, bancassurance products just limited to banks and/or insurers/ jeopardize the industry in terms of off er high upfront incentives to the Takaful operators but there is a great shrinking its life cycle, following are bank in the initial period and low deal of comfort, convenience and some recommendations. or none with claw-back approach inherent trust for customers as well. in the subsequent policy years. This There is a belief that banks historically 1) The relationships between the makes the customer service jitt ery have built up and won the trust of the partners should be at par: which should not be compromised customers over many years whereas In a bancassurance partnership, throughout the tenor of the policy. insurers have been unfortunately the insurer and the bank should In developing markets elements unable to make such an impression. work on an equal relationship so of customer service is sometime The question to be asked is whether this that nothing is compromised. The not taken up seriously whereas att itude is still true? In my opinion, the distribution power needs to be in markets where there is perfect story of trust in customers is changing tackled by the insurance and Takaful competition and business is highly now due to rapid growth and stiff companies by developing customer- regulated then the customer service competition between the banks. There is centric products and providing becomes an integral part of the not much diff erence left for customers unwavering service support to the overall relationship. The importance showing their confi dence in banking banks. The partnership should have of recurring/renewal premium receipt staff or that of the insurers. equal benefi ts available to both the is considered as the backbone of any parties. The ‘banca distribution life insurer/Famliy Takaful operator, In some cases I have come across, agreement’ (BDA) should not have especially due to the high charges clients prefer to deal directly with the any conditions that favor one party levied in the insurance contract in representatives of insurance/Takaful or put the other in a compromising the early years. Undoubtedly, poor companies instead of the staff of the situation. It is also pertinent to insurance persistency could have banks because of the intricacies involved. make sure that the BDA ensures a negative impact on the Takaful/ This embraces some valid reasons: that customers will not get ripped insurance company’s bott om line. notably a lack of product knowledge; and off due to product high pricing or no fi nancial gain for bank staff in serving poor profi t returns over investment. 4) Training , coaching and customers post-sales, especially once the Ideally BDAs should be draft ed on a incentivizing the staff : claw-back period is over as the recurring standard format provided/approved It is imperative to have fully trained contributions/renewal premiums against by the regulator so as to establish staff for selling insurance investment- insurance policies mostly do not carry a fair market practice and a level linked products. The cost of att ractive incentives in some markets playing fi eld. untrained staff selling such products for the staff . Another fact of the matt er can put the bank and insurance is that their revenue targets are well met 2) A regulatory framework should company in a bad situation from a through new sales, and additionally they be set up to safeguard everyone’s legal as well as a reputation aspect. are supposed to sell and meet targets for interests: In general, this kind of issue surfaces other consumer products as well. This It is proven that where strong more in banks where ‘generalists’ are places considerable pressure on the sales regulations exist alongside an active deployed to sell insurance products. staff and eventually their priorities go regulating authority in any fi nancial These generalists typically are the towards achieving high scoring points for market it upholds the longevity of relationship managers or personal their scorecard/incentive program. the business. It protects the rights of bankers responsible for off ering of the customers and also functions as a multiple fi nancial products, from How can bancassurance/ launching pad. Insurance regulators bank accounts to personal loans, bancaTakaful become in diff erent markets are playing mortgages and to credit cards and pivotal role in terms of putt ing a such. a mature, long-term, bancassurance regulatory framework sustainable and mutually in place. In a recent example, the Muhammad Ashfaq Ur Rehman is an lucrative business? Securities and Exchange Commission independent management consultant & of Pakistan has started working advisor. He can be contacted at M.ashfaq. The marriage of any two ideologies on regulating the bancassurance [email protected]. always carries some serious risks and industry. similarly bancassurance is not risk- IInn ssomeome babanksnks anandd mamarketsrkets sisincence free. An environment of cut-throat 3) Customer experience: these gegeneralistsToneralists read the keepke restep of rotatingrotatin this article,g to competition among banks, which One of the market forces that can ddiiff eerentrent brbranchesanches andand rolesroles theirtheir converts pressure onto sales staff , leads please log on to shape up the bancassurance industry bbancassuranceancassurance trainingtraining is not to unethical activities such as mis-selling. is the customer himself. Insurers and easileasilyy manageable.www.islamicfi EachEnancenews.comach center or This takes its toll on the best business banks need to work together in order brbranchanch shouldshould hahaveve a ddedicatededicated practices and consequently aff ects the

Dubai Financial Market: A key catalyst to realizing the emirate’s Islamic finance aspirations

Since Sheikh Mohammad Rashid Al more than AED201 billion (US$54.72 market standards and stock ownership Maktoum’s call to make Islamic fi nance billion) in orders, and was massively and trading. The Board also followed a priority in the emirate’s fi nancial oversubscribed. up with, and evaluated DFM activities market, the mood on the ground has in terms of compliance with Shariah, been nothing short of enthusiastic. At present, Borse Dubai owns 80% of and provided Fatwas on the subjects According to industry players, Dubai- DFM’s shares, while the Investment presented. based fi nancial institutions, banks and Corporation Dubai (ICD), a Government law fi rms are working fervently to make of Dubai entity, owns 90% of the parent’s Status Quo their ruler’s vision a reality; something shares. DFM currently has a majority At present, the DFM has seven Sukuk which most would agree is not at all stake in NASDAQ Dubai, at 67%, and listed for trading, with fi ve being impossible. has made clear its support towards the issuances by the Dubai Department of growth of its subsidiary. According Finance. Its subsidiary, NASDAQ Dubai In the thick of all this is the Dubai to the DFM’s recently released annual is also aggressively pursuing the listing Financial Market (DFM) — a key player report for 2012, the company is a 100% of international issuances, and is said to in creating a sustainable and att ractive Shariah compliant licensed trader of be looking to overtake the London Stock market for Islamic fi nance in the emirate. fi nancial instruments, and also acts as a Exchange as the largest market for Sukuk Recognizing the value of Islamic fi nance commercial, industrial and agricultural listings. At present, Dubai has a total to the growth of the emirate’s fi nancial holding and trust company, fi nancial of US$10 billion in Sukuk listed on its landscape, the DFM has been actively investment consultancy, and brokerage exchanges. involved in the sector, with its latest in local and foreign shares and bonds. eff ort aimed at creating more assurance It said: “In accordance with its Articles NASDAQ Dubai has seen a spate of to Sukukholders and traders in terms of Association, the Company complies activity during the fi rst three months of structures and permissibility of with the provisions of Islamic Shariah of this year, with the listings of Dubai instruments through the publishing of in all its activities and operations and Electricity and Water Authority’s Sukuk standards. Earlier this year, the invests its funds in accordance with these US$1 billion Sukuk, and airline carrier DFM draft ed its standards for Issuing, provisions.” Emirates’ Sukuk, also worth US$1 Acquiring and Trading Sukuk and had billion. Essa Kazim, the CEO of DFM called for feedback from market players. Islamic activity commented: “Dubai’s capital markets According to those in the know, the fi nal As at the 31st December 2012, the DFM are growing rapidly in scope and standards are set to be published anytime recorded AED9.4 million (US$2.56 sophistication, with Islamic fi nance soon. million) in non-Shariah compliant playing a leading role. The issuance income, which will be donated for of the Emirates Sukuk and its listing Background charitable purposes based on the onus on NASDAQ Dubai demonstrates the The Dubai Financial Market was of the respective shareholders, as agreed strength of Dubai’s fi nancial market’s established as a public institution with upon by its Shariah supervisory board. architecture and its ability to serve its own independent corporate body The report further added that in 2012, leading international companies.” under Resolution no.14 2000 issued the company’s Shariah and Fatwa by the Ministry of Economy. It was supervisory board were responsible for: It seems, everyone from the Dubai subsequently set up as a Public Joint preparing the latest exposure draft of the Economic Council, DFM and NASDAQ stock company at the end of 2005, “DFM Standard for Issuing, Acquiring Dubai are keen to make their ruler’s with a paid up capital of AED8 billion and Trading Sukuk” for a hearing vision a reality, and as the DFM matures (US$2.17 billion) allocated over eight session with experts and stakeholders, and becomes the destination of choice billion shares; at a par value of AED1.6 supervising all procedures by the for domestic and international Sukuk (US$ 43 cents) per share. 20% of the ‘Shariah section’ at the DFM to address issuances, the emirate’s Islamic fi nance DFM’s shares were off ered to the public listed companies to obtain additional industry is sure to fl ourish. — NH in the form of an IPO, which generated data for their classifi cation according to

Next Forum Question: The enormous opportunities awaiting the Islamic ﬁ nance sector within the African region is not in question. But what role will the GCC play in its growth and development?

If you would like to air your views on the next Forum Question, please email your response of between 50 and 300 words to Christina Morgan, forum editor, at: [email protected] before the 12th April 2013.

DATE ISSUER SIZE ANNOUNCED Qatar Central Bank QAR1 billion 4th April 2013

rd Moroccon government TBA 3 April 2013 APRIL Sharjah Islamic Bank TBA 3rd April 2013 Structuring and Shariah Issues in Sukuk Tunisian government US$700 million 2nd April 2013 and Islamic Capital Markets Dialog Axiata RM1.2 billion 2nd April 2013 • 10-11 April, KUALA LUMPUR Al-Aqar Capital RM1 billion 29th March 2013 Islamic Treasury Principles, Products and th PETRONAS Gas RM5 billion 29 March 2013 Operations Pakistan Domestic Sukuk Company TBA 23rd March 2013 • 17-18 April, JAKARTA FWU Group TBA 22nd March 2013 Structuring Islamic Syndicated Türkiye Finans Katılım Bankası TRY100 million 20th March 2013 Transactions th Al Hilal Bank AED1.8 billion 19 March 2013 • 21-22 April, RIYADH Saudi Electricity Company US$2 billion 18th March 2013 Sadara Basic Services Company TBA 18th March 2013 Structuring Islamic Retail Banking Products Shipping Company of Saudi Arabia TBA 18th March 2013 • 21-23 April, DOHA Dubai Islamic Bank US$1 billion 14th March 2013 Riyad Bank TBA 13th March 2013 Islamic Finance Qualiﬁ cation Qatar International Islamic Bank US$2 billion 11th March 2013 • 21-24 April, KUALA LUMPUR Bank Asya US$300 million 11th March 2013 Collateralised Murabahah Bank Muamalat Indonesia IDR700 billion 5th March 2013 • 24 April, KUALA LUMPUR Agaoglu Group US$2 billion 4th March 2013 Exim Bank US$1 billion 26th February 2013 MAY Investment Corporation of Dubai TBA 26th February 2013 Introduction to Islamic Finance and Sukuk Directorate of National Savings TBA 25th February 2013 • 4 May, JEDDAH Dubai Investments AED1 billion 18th February 2013 Barwa Bank TBA 18th February 2013 Islamic Treasury and Risk Management Products SGI-Mitabu AU$100 million 5th February 2013 • 5-7 May, RIYADH Paramount Corporation TBA 31st January 2013 Ma'aden TBA 31st January 2013 Shariah Audit and Compliance for Takaful Qatar sovereign QAR1 billion 31st January 2013 Products • 9-10 May, KUALA LUMPUR Saudi Aramco US$200 billion 31st January 2013 Egypt sovereign TBA 30th January 2013 Islamic Trade Finance TH Heavy Engineering RM70 million 25th January 2013 • 14-15 May, KUALA LUMPUR Bank Muamalat Indonesia IDR700 billion 21st January 2013 Islamic Treasury Principles, Products and Teknologi Tenaga Perlis Consortium US$272.44 million 4th December 2012 Operations • 16-17 May, KUALA LUMPUR Albaraka Türk Katılım Bankası US$200 million 19th November 2012 Dialog Axiata LKR51 billion 2nd November 2012 Sukuk Case Studies Malaysia sovereign RM5.3 billion 6th November 2012 • 22 May, KUALA LUMPUR Almarai Company SAR2.3 billion 6th November 2012 JUNE th Sumberdaya Sewatama IDR1 trillion 24 October 2012 Sukuk and Islamic Capital Markets MNRB Holding RM150 million 16th October 2012 • 2-4 June, RIYADH Banque Saudi Fransi SAR2.5 billion 15th October 2012 Shariah Audit for Islamic Investments th Edaran SWM RM1 billion 5 October 2012 and Treasury Products and Operations International Islamic Liquidity US$200 to 500 million 4th October 2012 • 6-7 June, KUALA LUMPUR Management Corporation Developing Islamic Retail and Commer- th Turkish Airlines TBA 4 October 2012 cial Banking Products Weststar Capital RM900 million 4th October 2012 • 10-12 June, JAKARTA Tunisia sovereign TBA 30th September 2012 www.REDmoneyTraining.com Bank Asya TRY150 million 25th September 2012 Qatar Islamic Bank US$1.5 billion 16th September 2012

REDmoney Asia ex. Japan 6 Months REDmoney Europe 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap 1110 1100

1018 1000

926 900

834 800

742 700

650 600 Nov Dec Jan Feb Mar Apr Nov Dec Jan Feb Mar Apr

REDmoney GCC 6 Months REDmoney Global 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap 850 1300

780 1176

710 1052

640 928

570 804

500 680 Nov Dec Jan Feb Mar Apr Nov Dec Jan Feb Mar Apr

REDmoney MENA 6 Months REDmoney US 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap 850 1800

780 1600

710 1400

640 1200

570 1000

500 800 Nov Dec Jan Feb Mar Apr Nov Dec Jan Feb Mar Apr

SAMI Halal Food Participation (All Cap) 6 months

2000

1825

1650

1475

1300 Nov-2012 Dec-2012 Jan-2013 Feb-2013 Mar-2013 Apr-2013

REDmoney Global Shariah Index Series (All Cap) 6 Months REDmoney Global Shariah Index Series (Large Cap) 6 Months

REDmoney Asia ex. Japan REDmoney Global REDmoney Asia ex. Japan REDmoney Global REDmoney Europe REDmoney MENA REDmoney Europe REDmoney MENA REDmoney GCC REDmoney US REDmoney GCC REDmoney US 1200 1100

1060 970

920 840

780 710

640 580

500 450 Nov Dec Jan Feb Mar Apr Nov Dec Jan Feb Mar Apr

REDmoney Global Shariah Index Series (Medium Cap) 6 Months REDmoney Global Shariah Index Series (Small Cap) 6 Months

REDmoney Asia ex. Japan REDmoney Global REDmoney Asia ex. Japan REDmoney Global REDmoney Europe REDmoney MENA REDmoney Europe REDmoney MENA REDmoney GCC REDmoney US REDmoney GCC REDmoney US 1800 1500

1540 1300

1280 1100

1020 900

760 700

500 500 Nov Dec Jan Feb Mar Apr Nov Dec Jan Feb Mar Apr

REDmoney Global Shariah

Equities are considered eligible for inclusion Utilities Basis Materials Telecomunication Services 2% 15% into the REDmoney Global Shariah Index 2% Series only if they pass a series of market Consumer Goods Services 15% related guidelines related to minimum market Technology capitalization and liquidity as well as country 14% restrictions. Energy 8% Once the index eligible universe is determined Non-Cyclical the underlying constituents are screened Consumer Goods Services 7% Financials using a set of business and ﬁ nancial Shariah 4% guidelines. Industrials Healthcare 22% 11%

The REDmoney Global Shariah Index Series powered by IdealRatings consists of a rich subset of global listed equities that adhere to clearly deﬁ ned and transparent Shariah guidelines deﬁ ned by Shariyah Review Bureau in Jeddah, Saudi Arabia.

The REDmoney Shariah Indexes provides Islamic investors with an accurate and Shariah-specifi c equity performance benchmark with optimized compliance credibility due to the intensive research conducted to ensure that index constituents do not confl ict with the defi ned Shariah requirements.

IdealRatings™ is the leading provider of Shariah investment decision support tools to investors globally, including asset managers, brokers, index providers, and banks to empower them to develop, manage and monitor Shariah investment products and Shariah compliant funds. IdealRatings is headquartered in San Francisco, California. For more information about IdealRatings visit: www.idealratings.com

For further information regarding REDmoney Indexes contact: REDmoney Global Shariah Index Series Andrew Morgan Managing Director, REDmoney Group

RED Email: [email protected] Tel +603 2162 7800

Eurekahedge Middle East/Africa Islamic Fund Index

270

250

230

210

190

170 Index Values

150

130

110

90 Jan-07 Jun-08 Oct-02 Sep-12 Dec-99 Apr-11 Mar-04 Nov-09 Aug-05 May-01

Top 10 Monthly Returns for Asia Paciﬁ c Funds

Fund Fund Manager Performance Measure Fund Domicile

1 CIMB Islamic Small Cap CIMB-Principal Asset Management 4.56 Malaysia

2 AmIslamic Growth AmInvestment Management 3.98 Malaysia

3 Public Islamic Select Treasures Public Mutual 3.83 Malaysia

4 InterPac Dana Saﬁ Inter-Paciﬁ c Asset Management 3.31 Malaysia

5 Public Islamic Opportunites Public Mutual 3.26 Malaysia

6 CIMB Islamic DALI Equity Theme CIMB-Principal Asset Management 3.10 Malaysia

7 CIMB Islamic DALI Equity Growth CIMB-Principal Asset Management 3.01 Malaysia

8 CIMB Islamic Equity Aggressive CIMB-Principal Asset Management 2.93 Malaysia

9 PB Islamic Equity Public Mutual 2.74 Malaysia

10 Public Islamic Sector Select Public Mutual 2.52 Malaysia

Eurekahedge Asia Paciﬁ c Islamic Fund Index 0.67

Based on 49.69% of funds which have reported March 2013 returns as at the 9th April 2013

Top 2 Real Estate Funds by 3 Months Returns

Fund Fund Manager Performance Measure Fund Domicile

1 Al Qasr GCC Real Estate & Construction Equity Banque Saudi Fransi 7.55 Saudi Arabia Trading 2 Al-'Aqar KPJ REIT AmMerchant Bank 1.55 Malaysia

Eurekahedge Islamic Real Estate Fund Index 4.55

Based on 33.33% of funds which have reported March 2013 returns as at the 9th April 2013

Comprehensive data from Eurekahedge will now feature the overall top 10 global and regional funds based on a specifi c duration (yield to date, annualized returns, monthly returns), Sharpe ratio as well as delve into specifi c asset classes in the global arena – equity, fi xed income, money market, commodity, global investing (which would focus on funds investing with global mandate instead of a specifi c country or geographical region), fund of funds, real estate as well as the Sortino ratio. Each table covering the duration, region, asset class and ratio will be featured on a fi ve week rotational basis.

Eurekahedge Islamic Fund Balanced Index over the last 5 years Eurekahedge Islamic Fund Balanced Index over the last 1 year

120.000 104.000

103.000 110.000 102.000

100.000 101.000

100.000 90.000 99.000

Percentage 80.000 Percentage 98.000

97.000 70.000 96.000

60.000 95.000 Dec-12 Jun-12 Oct-12 Aug-12 Nov-12 Apr-12 Feb-13 Jul-12 Jan-13 Sep-12 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 May-12 Mar-12 Mar-13 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

Top 10 Monthly Returns for Middle East / Africa Funds

Fund Fund Manager Performance Measure Fund Domicile

1 Jadwa Saudi Equity Jadwa Investment 7.61 Saudi Arabia

2 Jadwa GCC Equity Jadwa Investment 7.19 Saudi Arabia

3 Jadwa Arab Markets Equity Jadwa Investment 6.90 Saudi Arabia

4 Al-Saﬀ a Saudi Equity Trading Banque Saudi Fransi 5.61 Saudi Arabia

5 AlAhli GCC Growth and Income NCB Capital Company 4.43 Saudi Arabia

6 Al Rajhi Petrochemical and Cement Equity Al Rajhi Bank 4.34 Saudi Arabia

7 AlAhli GCC Trading Equity The National Commercial Bank 4.33 Saudi Arabia

8 Riyad Equity 2 Riyad Bank 4.27 Saudi Arabia

9 AlAhli Saudi Trading Equity The National Commercial Bank 3.91 Saudi Arabia

10 AlAhli Saudi Mid Cap Equity NCB Capital Company 3.86 Saudi Arabia

Eurekahedge Middle East / Africa Islamic Fund Index 2.02

Based on 46.07% of funds which have reported March 2013 returns as at the 9th April 2013

Top 5 Fund of Funds by 3 Months Returns

Fund Fund Manager Performance Measure Fund Domicile

1 Al Yusr Tamoh Multi Asset Saudi Hollandi Bank 5.53 Saudi Arabia

2 AlManarah High Growth Portfolio The National Commercial Bank 4.52 Saudi Arabia

3 Al Rajhi Multi Asset Growth Al Rajhi Bank 4.35 Saudi Arabia

4 AlManarah Medium Growth Portfolio The National Commercial Bank 3.16 Saudi Arabia

5 Al Yusr Mizan Multi Asset Saudi Hollandi Bank 2.73 Saudi Arabia

Eurekahedge Islamic Fund Index 3.13

Based on 80.00% of funds which have reported March 2013 returns as at the 9th April 2013

Contact Eurekahedge To list your fund or update your fund information: [email protected] For further details on Eurekahedge: [email protected] Tel: +65 6212 0900

Disclaimer Copyright 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.

Most Recent Global Sukuk Priced Issuer Nationality Instrument Market US$ (mln) Managers 26th Mar 2013 Saudi Electricity Saudi Sukuk Euro market 2,000 Deutsche Bank, HSBC Company Arabia public issue 21st Mar 2013 Asya Sukuk Turkey Sukuk Euro market 250 HSBC, National Bank of Abu Dhabi, Company public issue Emirates NBD, Bank of America Merrill Lynch 13th Mar 2013 DIB Tier 1 Sukuk UAE Sukuk Euro market 1,000 Standard Chartered Bank, HSBC, National public issue Bank of Abu Dhabi, Dubai Islamic Bank, Emirates NBD 13th Mar 2013 Gamuda Malaysia Sukuk Musharakah Domestic market 129 HSBC and Sukuk private placement Murabahah 12th Mar 2013 Medjool UAE Sukuk Wakalah Euro market 1,000 Standard Chartered Bank, Abu Dhabi public issue Commercial Bank, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD 6th Mar 2013 Khazanah Nasional Malaysia Sukuk Musharakah Domestic market 322 CIMB Group, AmInvestment Bank private placement 28th Feb 2013 Dubai Electricity & UAE Sukuk Ijarah Euro market 1,000 Standard Chartered Bank, RBS, Dubai Water Authority public issue Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD 28th Feb 2013 Aman Sukuk Malaysia Sukuk Musharakah Domestic market 198 Lembaga Tabung Haji, RHB Capital, CIMB public issue Group, AmInvestment Bank, Maybank Investment Bank 27th Feb 2013 Turus Pesawat Malaysia Sukuk Murabahah Domestic market 231 Lembaga Tabung Haji, RHB Capital, CIMB public issue Group, AmInvestment Bank, Maybank Investment Bank 21st Feb 2013 National Higher Malaysia Sukuk Domestic market 388 RHB Capital, AmInvestment Bank Education Fund public issue 15th Feb 2013 TH Plantations Malaysia Sukuk Domestic market 120 RHB Capital, Hong Leong Bank public issue 31st Jan 2013 Cerah Sama Malaysia Sukuk Musharakah Domestic market 136 Maybank Investment Bank public issue 30th Jan 2013 DanaInfra Nasional Malaysia Sukuk Domestic market 390 RHB Capital, Hong Leong Bank, CIMB public issue Group, AmInvestment Bank, Maybank Investment Bank 29th Jan 2013 Teknologi Tenaga Malaysia Sukuk Domestic market 274 HSBC, CIMB Group, Aﬃ n Investment Bank, Perlis Consortium public issue Maybank Investment Bank 29th Jan 2013 Jati Cakerawala Malaysia Sukuk Domestic market 177 HSBC, CIMB Group, Aﬃ n Investment Bank, public issue Maybank Investment Bank 23rd Jan 2013 Turus Pesawat Malaysia Sukuk Murabahah Domestic market 393 Lembaga Tabung Haji, RHB Capital, CIMB public issue Group, AmInvestment Bank, Maybank Investment Bank 22nd Jan 2013 Sime Darby Global Malaysia Sukuk Ijarah Euro market 800 Standard Chartered Bank, HSBC, Citigroup, public issue Maybank Investment Bank 22nd Jan 2013 Dubai DOF Sukuk UAE Sukuk Euro market 750 Standard Chartered Bank, HSBC, National public issue Bank of Abu Dhabi, Dubai Islamic Bank, Emirates NBD 22nd Jan 2013 UMW Holdings Malaysia Sukuk Domestic market 145 Standard Chartered Bank, Maybank private placement Investment Bank 22nd Jan 2013 Savola Group Saudi Sukuk Domestic market 400 HSBC Arabia private placement

Global Sukuk Volume by Month Global Sukuk Volume by Quarter

US$bn US$m US$bn Value (US$bn) Avg Size (US$m) US$m 12 1200 18 600 Value (US$bn) Avg Size (US$m) 16 500 10 1000 14 8 800 12 400 10 300 6 600 8 4 400 6 200 4 100 2 200 2 0 0 0 0 1234567 8 9 10 1112123 4 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2Q 3Q 4Q 2008 2009 2010 2011 2012 2013

Top 30 Issuers of Global Sukuk 12 Months Issuer Nationality Instrument Market US$ (mln) Iss Managers 1 State of Qatar Qatar Sukuk Euro market 4,000 9.1 Standard Chartered Bank, Deutsche Bank, HSBC, QInvest, public issue Barwa Bank 2 Saudi Electricity Saudi Sukuk Euro market 2,000 4.5 Deutsche Bank, HSBC Company Arabia public issue 2 Dubai DOF Sukuk UAE Sukuk Euro market 2,000 4.5 HSBC, National Bank of Abu Dhabi, Dubai Islamic Bank, public issue Citigroup, Standard Chartered Bank, Emirates NBD 4 Turus Pesawat Malaysia Sukuk Domestic market 1,734 3.9 Lembaga Tabung Haji, RHB Capital, CIMB Group, Murabahah public issue AmInvestment Bank, Maybank Investment Bank 5 Celcom Malaysia Sukuk Domestic market 1,590 3.6 HSBC, CIMB Group, Maybank Investment Bank Transmission (M) Murabahah public issue 6 Republic of Turkey Turkey Sukuk Euro market 1,500 3.4 HSBC, Kuwait Finance House, Citigroup public issue 7 National Higher Malaysia Sukuk Domestic market 1,497 3.4 CIMB Group, Maybank Investment Bank, RHB Capital, Education Fund public issue AmInvestment Bank 8 Tanjung Bin Power Malaysia Sukuk Domestic market 1,298 2.9 CIMB Group, Maybank Investment Bank private placement 9 Malakoff Malaysia Sukuk Domestic market 1,260 2.9 Maybank Investment Bank public issue 10 Khazanah Nasional Malaysia Sukuk Domestic market 1,247 2.8 Kenanga Investment Bank, DRB-HICOM, CIMB Group, private placement AmInvestment Bank 11 DanaInfra Nasional Malaysia Sukuk Domestic market 1,242 2.8 Lembaga Tabung Haji, RHB Capital, CIMB Group, public issue AmInvestment Bank, Maybank Investment Bank, Hong Leong Bank 12 Perusahaan Penerbit Indonesia Sukuk Ijarah Euro market 1,000 2.3 Standard Chartered Bank, Deutsche Bank, HSBC SBSN Indonesia III public issue 12 Dubai Electricity & UAE Sukuk Ijarah Euro market 1,000 2.3 Standard Chartered Bank, RBS, Dubai Islamic Bank, Abu Water Authority public issue Dhabi Islamic Bank, Citigroup, Emirates NBD 12 DIB Tier 1 Sukuk UAE Sukuk Euro market 1,000 2.3 Standard Chartered Bank, HSBC, National Bank of Abu public issue Dhabi, Dubai Islamic Bank, Emirates NBD 12 Abu Dhabi Islamic UAE Sukuk Euro market 1,000 2.3 Standard Chartered Bank, Morgan Stanley, HSBC, National Bank public issue Bank of Abu Dhabi, Abu Dhabi Islamic Bank 16 Medjool UAE Sukuk Euro market 993 2.3 Standard Chartered Bank, Abu Dhabi Commercial Bank, Wakalah public issue Dubai Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD 17 Johor Corporation Malaysia Sukuk Domestic market 939 2.1 CIMB Group, Affi n Investment Bank, AmInvestment Bank, public issue Maybank Investment Bank 18 Malaysia Malaysia Sukuk Domestic market 817 1.9 Maybank Investment Bank Murabahah public issue 19 Sime Darby Global Malaysia Sukuk Ijarah Euro market 800 1.8 Standard Chartered Bank, HSBC, Citigroup, Maybank public issue Investment Bank 19 IDB Trust Services Saudi Sukuk Euro market 800 1.8 Saudi National Commercial Bank, Standard Chartered Arabia public issue Bank, BNP Paribas, HSBC, CIMB Group 21 Qatar Islamic Bank Qatar Sukuk Euro market 750 1.7 Standard Chartered Bank, Deutsche Bank, HSBC, QInvest public issue 21 BSF Sukuk Saudi Sukuk Euro market 750 1.7 Deutsche Bank, Citigroup, Credit Agricole Arabia public issue 23 Qatar International Qatar Sukuk Euro market 700 1.6 Standard Chartered Bank, HSBC, Qatar National Bank Islamic Bank public issue 24 Jafz Sukuk UAE Sukuk Euro market 650 1.5 Standard Chartered Bank, Abu Dhabi Commercial Bank, public issue National Bank of Abu Dhabi, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD 25 Syarikat Prasarana Malaysia Sukuk Domestic market 644 1.5 RHB Capital, Kenanga Investment Bank, CIMB Group Negara Murabahah public issue 26 Malakoff Malaysia Sukuk Domestic market 577 1.3 Maybank Investment Bank Corporation private placement 27 Golden Assets Singapore Sukuk Domestic market 571 1.3 RHB Capital International public issue Finance 28 TASNEE Saudi Sukuk Domestic market 533 1.2 HSBC Arabia private placement 29 Emaar Sukuk UAE Sukuk Euro market 500 1.1 Standard Chartered Bank, HSBC, Dubai Islamic Bank, Abu public issue Dhabi Islamic Bank, Emirates NBD, Noor Islamic Bank, Al Hilal Bank, Barwa Bank 29 EIB Sukuk UAE Sukuk Euro market 500 1.1 Standard Chartered Bank, HSBC, Dubai Islamic Bank, public issue Emirates NBD, Credit Agricole 29 DIB Sukuk UAE Sukuk Euro market 500 1.1 Deutsche Bank, HSBC, National Bank of Abu Dhabi, Dubai public issue Islamic Bank, Emirates NBD Total 44,181 100

Top Managers of Sukuk 12 Months Sukuk Volume by Currency US$ (billion) 12 Months

Manager US$ (mln) Iss % Malaysian ringgit 21.7 1 Maybank Investment Bank 7,408 41 16.8 US dollar 20.7 2 HSBC 6,946 33 15.7 3 CIMB Group 5,904 41 13.4 Saudi riyal 1.6

4 Standard Chartered Bank 3,407 22 7.7 Indonesian rupiah 0.1 5 Deutsche Bank 2,671 6 6.1 6 AmInvestment Bank 2,578 28 5.8 Sukuk Volume by Issuer Nation US$ (billion) 12 Months 7 RHB Capital 2,460 35 5.6 Malaysia 20.6 8 Citigroup 1,688 7 3.8 UAE 8.3 9 Dubai Islamic Bank 1,350 9 3.1 Qatar 5.5 10 National Bank of Abu Dhabi 1,159 8 2.6 Saudi Arabia 5.2 11 Emirates NBD 1,100 9 2.5 Turkey 1.8 12 QInvest 988 2 2.2 Indonesia 1.4 13 Barwa Bank 863 2 2.0 Singapore 0.6 14 Abu Dhabi Islamic Bank 688 5 1.6 15 Kuwait Finance House 568 3 1.3 Global Sukuk Volume by Sector 12 Months 16 Hong Leong Bank 490 7 1.1 17 Lembaga Tabung Haji 487 6 1.1 14% 27% Government 4% 18 Kenanga Investment Bank 401 3 0.9 Finance 19 Aﬃ n Investment Bank 396 4 0.9 12% Utility & Energy Transportation 20 Credit Agricole 350 2 0.8 Telecommunications Other 21 Abu Dhabi Commercial Bank 258 2 0.6 16% 27% 22 Qatar National Bank 233 1 0.5 23 Morgan Stanley 200 1 0.5 24 Saudi Hollandi Bank 187 1 0.4 Global Sukuk Volume - US$ Analysis 25 RBS 182 2 0.4 26 DRB-HICOM 169 5 0.4 US$bn US$m 18 600 27 Saudi National Commercial Bank 160 1 0.4 16 Non-US$ US$ 500 14 27 BNP Paribas 160 1 0.4 12 400 10 300 29 Riyad Bank 153 2 0.4 8 6 200 30 OCBC 89 2 0.2 4 100 2 Total 44,181 133 100 0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2Q 3Q 4Q Top Islamic Finance Related Project Finance Mandated Lead 2008 2009 2010 2011 2012 2013 Arrangers 12 Months

Mandated Lead Arranger US$ (million) No % Top Islamic Finance Related Project Financing Legal Advisors Ranking 12 Months 1 HSBC Holdings 548 2 20.2 Legal Advisor US$ (million) No % 1 Public Investment Fund 548 2 20.2 1 Linklaters 684 2 20.8 3 Arab National Bank 398 1 14.7 2 Baker & McKenzie 417 2 12.7 4 Saudi Hollandi Bank 182 2 6.7 3 Al-Jadaan & Partners Law Firm 386 1 11.7 5 Al-Rajhi Banking & Investment 151 1 5.6 3 Cliﬀ ord Chance 386 1 11.7

5 Alinma Bank 151 1 5.6 3 Saudilegal 386 1 11.7 6 Law Oﬃ ce of Hassan Mahassni 298 1 9.0 5 Bank Al-Jazira 151 1 5.6 6 Norton Rose 298 1 9.0 5 Banque Saudi Fransi 151 1 5.6 6 White & Case 298 1 9.0 5 Riyad Bank 151 1 5.6 9 Hogan Lovells International 71 1 2.2 5 Samba Financial Group 151 1 5.6 9 Pinsent Masons 71 1 2.2

Top Islamic Finance Related Loans Mandated Lead Arrangers Top Islamic Finance Related Loans Deal List 12 Months Ranking 12 Months Mandated Lead Arranger US$ (mln) No % Credit Date Borrower Nationality US$ (mln) 1 SABB 1,165 5 5.6 28th Mar 2013 Emirates Aluminium UAE 3,400

2 Arab National Bank 905 3 4.4 25th Jul 2012 Zain Saudi Saudi Arabia 2,600 3 CIMB Group 842 3 4.1 11th Jun 2012 DanaInfra Nasional Malaysia 2,525 4 Maybank Investment Bank 831 4 4.0 18th Dec 2012 Ma'aden Saudi Arabia 2,400 5 AmInvestment Bank 816 3 4.0 6 RHB Capital 794 2 3.9 4th Jul 2012 Dubai Duty Free UAE 1,749 7 Emirates NBD 791 7 3.8 13th Jun 2012 JAFZA UAE 1,198 8 Saudi National Commercial Bank 750 4 3.6 30th Jun 2012 TIBAH Saudi Arabia 1,193 9 Standard Chartered Bank 718 9 3.5 25th Jun 2012 Bawabat Al Shamal Real Qatar 1,154 10 Banque Saudi Fransi 713 4 3.5 Estate Company 11 Abu Dhabi Islamic Bank 691 9 3.4 2nd Jun 2012 DIFC Investments UAE 862 12 Samba Capital 642 5 3.1 9th Oct 2012 Turus Pesawat Malaysia 816 13 Dubai Islamic Bank 596 4 2.9 14 Noor Islamic Bank 587 7 2.9 Top Islamic Finance Related Loans by Country 12 Months 15 HSBC 574 5 2.8 Nationality US$ (mln) No % 16 Al-Rajhi Banking & Investment 541 3 2.6 1 Saudi Arabia 7,449 8 36.1 17 Citigroup 516 4 2.5 2 UAE 7,137 9 34.6 18 Riyad Bank 478 3 2.3 3 Malaysia 3,697 5 17.9 19 Credit Agricole 459 2 2.2 4 Turkey 904 4 4.4 20 Mitsubishi UFJ Financial Group 382 2 1.9 5 Qatar 574 2 2.8 6 Sri Lanka 350 2 1.7 21 National Bank of Abu Dhabi 366 4 1.8 7 Singapore 207 1 1.0 22 Mashreqbank 362 6 1.8 8 Brunei Darussalam 170 1 0.8 23 Al Hilal Bank 351 6 1.7 9 Pakistan 90 4 0.4 24 Abu Dhabi Commercial Bank 291 2 1.4 10 Indonesia 60 2 0.3 25 Standard Bank 289 1 1.4 Top Islamic Finance Related Loans by Sector 12 Months 25 National Bank of Kuwait 289 1 1.4 25 Gulf Bank 289 1 1.4 Metal & Steel 25 DBS 289 1 1.4 Telecommunications 29 Islamic Development Bank 271 4 1.3 Transportation 30 First Gulf Bank 253 5 1.2 Government Top Islamic Finance Related Loans Mandated Lead Arrangers 12 Months Mining US$ bln0 126 3 4 5 Bookrunner US$ (mln) No % 1 Credit Agricole 867 1 11.9 Global Islamic Loans - Years to Maturity (YTD Comparison) 1 Banque Saudi Fransi 867 1 11.9 1 Al-Rajhi Banking & Investment 867 1 11.9 2012 4 QInvest 624 3 8.6 2011 2010 5 Abu Dhabi Islamic Bank 597 5 8.2 2009 6 HSBC 412 3 5.7 2008 7 Emirates NBD 408 4 5.6 2007 8 Citigroup 367 3 5.1 2006 9 Samba Capital 362 2 5.0 0% 20% 40% 60% 80% 100% 0-3yrs 3-5yrs 5-7yrs 7-10yrs 10+yrs 10 Standard Chartered Bank 311 5 4.3

Are your deals listed here? If you feel that the information within these tables is inaccurate, you may contact the following directly: Mandy Leung (Media Relations) Email: [email protected] Tel: +852 2804 1223

APRIL 2013 15th — 16th IFN Indonesia Forum Jakarta, Indonesia REDmoney Events 17th 3rd Annual Middle East Islamic Finance and Investment Conference Dubai, UAE Mega Events (MEIFIC 2013)

MAY 2013 7th IFN Australia Roadshow Melbourne, Australia REDmoney Events 28th — 29th IFN Europe Forum London, UK REDmoney Events 27th — 28th 9th Annual World Islamic Funds and Financial Markets Conference Manama, Bahrain Mega Events (WIFFMC 2013)

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AAOIFI 9,11,14 Deutsche Securities Saudi Arabia 6 Monetary Authority of Singapore 8,17 Abu Dhabi Islamic Bank 11,39,40,41,42 Dow Jones 29 Morgan Stanley 13 Ajman Bank 1,13,16 Dubai Electricity and Water Authority 10 National Bank of Abu Dhabi 11,13 Al Dar Asset Management 11 Dubai Financial Market 1,12,33 National Bank of Pakistan 7 Al Hilal Bank 6,13,34,40,42 Dubai Islamic Bank 11,12 OSK-UOB Dana Islam 12 Al Madina Investment Company 13 EFG Hermes 6,16 PEFINDO 12 Al Meezan Investment Management 13 Ernst & Young 9,12 Prime Islami Life Insurance 13 Al Rayan Investment 4 Faisal Private Bank 22,26 PwC 10,11,22 Al-Azhar University 8 Fajr Capital 10 Qatar Central Bank 6 Albaraka Türk Katılım Bankası 4,5,13,22,34 Finance Accreditation Agency Malaysia 10 Qatar International Islamic Bank 22 AlBilad Investment 6 Fitch Ratings 3,12 Qatar Islamic Bank 10 Al-Ghazzawi Professional Association 10 Forex Time 11 Qatar Telecom 10 Alinma Investment 6 Great Eastern Takaful 13 QInvest 6,7,13,16,22, Alwyni International Capital 24 Gulf African Bank 12 RAM Rating Services 10 AM Best 13 Gulf Finance House 6,12,16 Reserve Bank of India 23 Amanie Advisors Australia 10,12,13 Herbert Smith Freehills 10 Riyad Capital 12 American Airlines 25 HG Heinz 25 S&P 1,4,6,10,12,16,18,19 Arab Islamic Bank 12 HSBC 1,3,11,30 SAB 9,10 Bank Dhofar 11,12 IDB 6,8,16,22 Sadara Basic Services 6 Bank Indonesia 13 Indonesia Deposit Insurance Corporation 10 Saudi Arabia Monetary Authority 16 Bank Muamalat Indonesia 34 Indonesian Financial Services Authority 24 Saudi Binladin 6 Bank Negara Malaysia 6,16 International Center for Education in Islamic Finance 10 Saudi Electric Company 10 Banque Centrale Des Etats de L’afrique de L’ouest 10 International Finance Corporation 10 Saudi Investment Bank 12 Barclays Bank 8 International Islamic Liquidity Management Corporation 1 Saudi Stock Exchange (Tawadul) 29,30 Barwa Real Estate Company 22 Islamabad Stock Exchange 8 Secura Investment Management 23 Berkshire Hathaway 25 Islamic Financial Services Board 10 Securities and Exchange Commission of Pakistan 9,13,32 Bourse Luxemborg 29 Jordan Islamic Bank 12 Securities Commission Malaysia 29 Capinnova Investment Bank 25 Juris Corp 22,23 Sharjah Islamic Bank 6 CI 12 K&L Gates 22 Central Bank of Oman 9 Karachi Stock Exchange 8 SICO Research 10 Central Bank of Qatar 4 Khabeer Financial Services 8 Standard Chartered 6,13 Central Bank of Tunisia 10 KLCC Property Holdings 9 Standard Chartered Bank Pakistan 13 Chartered Insurance Institute of Nigeria 13 KNAB 25 Takaful Insurance of Africa 13 Cheraman Financial Services 23 Kuveyt Türk Katılım Bankası 6,13 Tamweel 16 CISFED 24 Kuwait Finance House 6,12 Thatt a Cement 7 Credit Agricole 4 Leeds United Football Club 16 Trowers & Hamlins 8,13 Dallah Albaraka Group 22 Liquidity Management House 6 US Airways 25 Dar Al Sharia 9,15 London Stock Exchange 29,33 WestLB 6 Dealogic 25 Maisarah 11,12,26 World Bank 10 Dell 25 Maybank Singapore Islamic Banking 8 World Federation of Exchanges 29

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