A New Opportunity for Islamic Finance

The World’s Leading Islamic Finance News Provider

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Powered by: IdealRatings® market...11 COVER STORY 16th December 2015 (Volume 12 Issue 50) Capitalizing on corporates: A new opportunity for Islamic finance

It’s the end of the year, and what a year as Malaysia and growing competition it has been! We have a bumper IFN within the industry, banks will have to for you this week to celebrate our fi nal broaden their horizons and seek new issue of 2015: including all the usual CORPORATE opportunities in order to survive. Opening doors to new opportunities LAUNCH ISSUE 2015 market news, analysis and insights, Welcome to IFN Corporate: Islamic finance explained What is Islamic finance, how does it work, and why should I care? These might seem like simple an exclusive cover story from CIMB questions, but behind them lies a wealth of information, understanding and analysis that IFN So where can these opportunities be believes is currently not available to the market in a comprehensive format. Welcome, therefore, to the inaugural publication of IFN Corporate: the first journal to provide you with a clear and outlining the prospects for the global concise introduction to the world of Shariah compliant finance from a straightforward commercial found? IFN fi rmly believes that the perspective. Join us as IFN Group Managing Editor LAUREN MCAUGHTRY opens the door to a world Sukuk market in 2016, and — most of opportunity. best way for the industry to thrive Many people reading this will have a the global financial market. With an average basic understanding of the concept of annual growth rate exceeding 15%, total excitingly — a brand new concept Islamic finance — and perhaps you have assets in 2015 have reached approximately and grow is to expand its reach, even come across it in a commercial US$1.8 trillion, and are expected to exceed context. But what can it do for you, US$3.2 trillion by 2020 — and could reach and how can it help your business? The as much as US$6.5 trillion, according to a launch which we hope will intrigue, simple answer is that Shariah compliant recent report from the Asian Development open its doors and access new clients structures offer a unique alternative to Bank. traditional forms of commercial banking and finance, and can provide a valuable While retail banking is of course the bedrock through dissemination, education and involve and inspire our readers to new and viable option for corporates of all of the industry, the capital markets are what shapes and sizes: from international drive Islamic finance forward – and Islamic conglomerates and government-related bonds, or Sukuk, are the star player of the heights in the new year. LAUREN entities seeking to raise finance all the sector. They may only be a drop in the ocean communication. Islamic fi nance has way to SMEs and family businesses compared to the conventional global bond looking for business loans, capital raising market, but the three years from 2011-14 or letters of credit. have seen the global Sukuk market double, MCAUGHTRY explains all. with a compound annual growth rate of reached a size and stature where it Impressive growth 33% for the previous decade. With annual The Islamic finance industry has from small Sukuk issuance increasing from just US$32 beginnings developed into one of the billion in 2010 to a record US$118 billion is able to off er a viable and att ractive fastest growing and prominent sectors of continued next page… CONTENTS

It has been a volatile year. Federal reserve COVER STORY ...... 1 Sharing the risk: An introduction to Islamic syndicated finance alternative to conventional corporate Welcome to IFN Corporate: What are the benefits for corporates looking towards Islamic finance explained new channels of capital raising? Each issue of IFN Corporate will introduce you to a new sector, structure tightening along with a strengthening CAPITAL MARKETS ...... 4 or strength of the Islamic capital markets to ﬁ nancing — but how easy is it for the CORPORATE FINANCE...... 5 demonstrate the comprehensive range of options RETAIL FOCUS...... 6 offered by the industry. This month, we bring you an US dollar, volatile commodities, an oil REGULATORY & COMPLIANCE ...... 7 overview of the Islamic syndicated finance market. 4 everyday corporate CFO or head of FEATURE ...... 8 SME opportunity: Islamic finance offers new Vodafone Qatar’s conversion — the first non-finance company price ﬁ nally plunging below US$40 per lifeline for small businesses in the region to go compliant treasury to access these opportunities or CASE STUDIES ...... 10 Vodafone Qatar in 2014 revealed plans to become Vodafone 100% Shariah compliant in its operations. Receiving Emirates Airline good market response, the company’s stock price barrel, weak growth in China, European INTERVIEW ...... 12 increased 20% immediately following the discover their applications? Chairman, Capital Market Authority, KSA announcement. Employing an agency (Wakalah) NEWS ...... 13 structure for the arrangement, the quantitative easing and geopolitical MARKET DATA...... 15 telecommunications company successfully... 10

“ Wealth, properly employed, is a blessing CIMB Islamic. troubles across the Middle East and and a man may lawfully endeavour to Artisans of That is where we come in. Welcome to Islamic Finance™ increase it by honest means.” Russia have ensured that global bond Hadith narrated by Bukhari IFN CORPORATE — the new name in yields remain low; while emerging global Islamic fi nancial information. markets have seen headwinds buff et their future prospects and foreign investors pull across the Middle East and Asia are A vital channel of billions of dollars back into safe havens. facing new challenges as they struggle Deteriorating local currencies such as the to handle declining deposits, tightening communication Malaysian ringgit or Turkish lira have liquidity, increasingly stringent The biggest challenge to the growth and seriously impacted market confi dence, regulatory requirements, Basel III dissemination of the industry remains challenging banks and testing the capital implementation and scarcer credit education: and there is currently market as 2015 draws to a close. availability. With economic headwinds no resource to provide existing and and low oil prices looking to continue potential corporate clients with the Against this turbulent backdrop, into the new year, along with a new information and insight they require to fi nancial institutions across the globe raft of mergers and consolidations and especially in key Islamic markets expected to occur in core markets such continued on page 3

REAL-TIME ONLINE ISLAMIC BANKING SOLUTION www.eigertrading.com IFN RAPIDS

Volume 12 Issue 50 of independent dispute Fitch revises outlook on DEALS resolution body; to fully National Bank of Bahrain IFN Rapids ...... 2 Malaysia issues RM3 billion operate early next year and BBK to negative IFN Reports: (US$710.77 million) GII RHB Investment Bank to Fitch accords ‘BBB-’ rating • Turkey targets Gulf wealth with new listing rules; Murabahah expand Islamic treasury to Sberbank a more spirited Islamic capital market in 2016? Export-Import Bank of off ering for 2016 • Gloomy outlook for emerging markets… or is Wego proposes Sukuk Malaysia issues US$30 Musharakah to fi nance it? • IFN Global Trendswatch • South America million Sukuk under its ASSET construction project; to open doors to fi rst fully-fl edged Islamic bank • multicurrency Sukuk secures ‘AAA/Stable’ rating LA fi rm to capture Gulf wealth with new fund as issuance program MANAGEMENT Fitch affi rms rating on Shariah investors turn to US property market for Pakistani government to Tadhamon Capital exits Mumtalakat’s Sukuk capital gains • IFSB gears up for 2016; names new issue Sukuk Ijarah using investment in UK-Coxlease certifi cates at ‘BBB-’ chairman, new members and approves new strategic Jinnah International School; achieves total Treet Corporation’s plan • Turkish banks to lean on Tier 2 issuance for Airport Karachi as return on capital of over proposed Sukuk maintain underlying asset 60% support amid economic uncertainties • Sovereign ‘AA-’ rating Sukuk: The regular jurisdictions • IFN Weekly Poll: Indonesia issues IDR1 trillion Al Meezan Investment Kyrgyz Republic wins ‘B/B’ As a Muslim investor/issuer, are you comfortable (US$71.4 million) Sukuk to Management launches prefund 2016 budget rating from S&P dealing with gold in Shariah compliant fi nancial Meezan Asset Allocation transactions? ...... 8 Indosat lists Sukuk on Plan-II Islamic International Rating Agency reaffi rms Indonesian Stock Exchange Al Wasatah Al Maliah Bank of Khartoum ‘AA- IFN Analysis: Company obtains approval KDU University College to (sd)/A-1(sd)’ ratings based th for public off ering of equity South Korea: Uphill batt le ...... 14 pay Sukuk profi t on the 28 on its standing as the fund Luxury and lifestyle ...... 15 December 2015 nation’s largest commercial Case Study: Majid Al Futt aim lists KFH Capital Investment bank Company receives green PIA’s Islamic syndicated financing: A testament of US$500 million Sukuk on Outlook on Bahrain and light to market new confidence from the market ...... 17 NASDAQ Dubai its central bank remains property fund in Kuwait Columns: Nakheel makes Sukuk negative, says S&P Thinking big ...... 18 profi t payment on the 15th Daud speaks...... 19 December TAKAFUL MOVES IFN Country Correspondents: The UK’s insurance Special Power Vehicle London Stock Exchange industry to operate under Iran; Hong Kong ...... 20 redeems Islamic facility on Group appoints Professor th new Solvency II regime in Event Report the 15 December Lex Hoogduin and David 2016; regulator approves 19 Consolidation required to create institutions of Nish to its board insurers’ internal models size ...... 22 NEWS Grant Thornton Phoenix Assurance of Special Reports: strengthens Islamic fi nance Al Baraka Bank-Egypt Zambia launches Takaful Beyond Halal — An evolution of Shariah off ering; hires KPMG’s to launch new saving window compliant products ...... 23 certifi cate in the next few Samer Hijazi to lead Abu Development of Islamic banking in Iraq ....24 months Islamic insurance in Dhabi practice Bahrain commanded 21% of The intrinsic link between Islamic fi nance and Sabb Takaful Company Abu Dhabi Islamic Bank- total gross contributions in the real economy ...... 25 appoints Anthony Bentley Egypt receives approval 2014, says central bank Takaful Feature: from ministry to provide to its board replacing Harble Karlket Malaysian Takaful industry set for a busy year Shariah compliant fi nancing RATINGS despite ongoing challenges ...... 27 to Egyptian Electricity Rafe Haneef to start at Transmission Company The treatment of Qard in Takaful ...... 29 Weakening operating CIMB Islamic as CEO on Bank of Maldives launches performance and fi nancial the 4th January 2016 profi le prompt negative Islamic Finance news ...... 31 Wadiah Business Account President Zuma replaces outlook revision on UMW Deal Tracker ...... 38 for enterprises fi nance minister again Holdings’s Islamic debt within the span of one week REDmoney Indexes ...... 39 Halal Industry program Eurekahedge data ...... 41 Development Corporation Gulf African Bank MARC downgrades ratings Performance League Tables ...... 43 introduces world’s fi rst appoints Nawaal Mohamed on Tesco Store’s Islamic and Global Halal Data Pool Salim to its board Events Diary...... 47 conventional medium-term Company Index ...... 48 Otoritas Jasa Keuangan note programs; outlook Subscription Form ...... 48 fi nalizing establishment remains negative

Disclaimer: IFN invites leading practitioners and academics to contribute short reports each week. Whilst we have used our best endeavors and eﬀ orts to ensure the accuracy of the contents we do not hold out or represent that the respective opinions are accurate and therefore shall not be held responsible for any inaccuracies. Contents and copyright remain with REDmoney.

Capitalizing on corporates: A new opportunity for Islamic fi nance Continued from page 1 demystify and decipher the market. This corporate world and Shariah compliant is where IFN CORPORATE intends market can communicate. Corporate to change the game. Leveraging the issuers will market-leading expertise of Islamic Exciting opportunities Finance news and the unrivaled global The current global asset value of the remain cautious network of REDmoney Group, IFN Islamic fi nance sector is in excess of CORPORATE is a brand-new monthly US$1.6 trillion and is expected to reach in implementing publication aiming to revolutionize US$3.4 trillion by the end of 2018. Yet the commercial application of Islamic while the sector as a whole has seen funding plans and fi nancial services through education, rapid growth, if we look at global information and communication. debt capital markets, Islamic issuance only tap the Sukuk accounted for just 2% of the US$5.7 Designed specifi cally for the global trillion raised in 2014. This in itself is market if projected corporate market, IFN CORPORATE a remarkable achievement given the is a simple, sensible and straight- youth and size of the Islamic fi nance investment returns talking summary of Islamic fi nancial industry — but there is so much more instruments, concepts, structures, that can be done. are higher than products and trends that off ers an easy-to-understand avenue into The potential for growth is historical averages the compelling opportunities self-evident, but education to buffer against of Shariah compliant and awareness remain key alternatives. barriers to entry. In more slower economic mature markets, Islamic Clear, concise and fi nance can already rival conditions eroding comprehensive, it off ers the conventional: Islamic invaluable insight transactions already proϔit into the Islamic account for 49% of industry and creates total bond and Sukuk margins an essential platform volume in the GCC for through which the 2015. However, in other continued on page 4

Capitalizing on corporates: A new opportunity for Islamic fi nance Continued from page 3 jurisdictions the sector is less established and services to the people both the Islamic and conventional — and the opportunities less easy to who matt er — and create fi nancial markets. access. new business opportunities that will directly generate Looking to the future revenue for your fi rm. “Islamic fi nance is one of the Islamic ϔinance most promising innovative Each market will feature one mechanisms to enhance is one of the lead industry sponsor and SMEs’ access to fi nancial one service provider services,” emphasized most promising sponsor only: giving Gloria Grandolini, the senior you exclusive access to director of the fi nance and innovative your target market. markets global practice at the World Bank Group, speaking to IFN. mechanisms to A challenging market enhance SMEs’ The fi nancial markets are wary and the corporate world is tough to tap Issuers access to ϔinancial — especially in such stringent market conditions. “Corporate issuers will can beneϔit services remain cautious in implementing funding plans and only tap the Sukuk market if projected investment returns from an informed are higher than historical averages publication that to buff er against slower economic conditions eroding profi t margins,” demystiϔies the A global publication, IFN CORPORATE warned Angus Salim Amran, the head will provide a direct channel of of global fi nancial markets at RHB space and educates communication to corporates Investment Bank. worldwide. Building on IFN’s industry- potential leading brand and leveraging over In tough times, people stick with what a decade of experience, the new they know — tried and tested methods issuers publication will target corporates and that may not be the most appropriate potential issuers across all relevant but are at least the most familiar. global jurisdictions: from emerging This makes it all the more imperative “Every potential issuer in the Islamic markets such as Indonesia and Turkey for Islamic institutions to develop a world should evaluate the possibility to established industry leaders such concise conduit for communication of raising debt on a Shariah compliant as Malaysia, Dubai and Saudi with potential corporate clients — basis. Not going through the analysis Arabia and on to developed and only those who are able to is not prudent,” agreed Jawad Ali, the nations in Europe and the evolve, adapt and att ract new managing partner of King & Spalding’s US. business will survive. Middle East Offi ces. “Issuers can benefi t from an informed publication that For banks, law fi rms, From blue chip fi rms to SMEs demystifi es the space and educates rating agencies, service and everyone in between, potential issuers.” providers and anyone else Islamic fi nance off ers a working within the Islamic compelling opportunity IFN CORPORATE off ers the ideal fi nance industry, this new to raise capital in a platform for effi cient education and publication will provide challenging world dissemination to a world of awaiting a unique and invaluable — and has been opportunity. We are excited for what the platform through which recognized as such by future will bring…. Are you? to promote your products leading players within

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EXCLUSIVE: Past, present and future – a unique industry analysis

The past year has been turbulent while the prospects for 2016 are both promising and perilous. In an exclusive interview for IFN, group managing editor LAUREN MCAUGHTRY speaks to NOR MASLIZA SULAIMAN, the senior managing director and global head of capital markets for CIMB Investment Bank and MOHAMAD SAFRI SHAHUL HAMID, the senior managing director and deputy CEO for CIMB Islamic for an invaluable analysis of the global and Malaysian Islamic capital markets including a comprehensive review of the past year and key predictions for 2016.

IFN: What were the key trends of 2015?

MASLIZA: The overall market conditions in 2015 have been volatile to say the least. Despite this, the growth of Islamic fi nance has been nothing short of healthy. The (asset) size of the Islamic fi nance industry globally is estimated at US$1.8 trillion in 2014. We expect the Islamic fi nance market to record a compounded annual growth rate (CAGR) of 19% in terms of size between 2015-19. The growth is complemented by trends that suggest a deeper and more sustainable Islamic fi nance ecosystem. This has translated into positive results on the Sukuk sovereign Sukuk issuances (totaling IFN: What were the biggest front where 2015 saw a host of global US$30.7 billion thus far) despite the challenges, and what was your biggest expected global slowdown, including achievement? landmark issuances by Malaysia, Hong In the Kong and Indonesia, as well as other MASLIZA: Our ‘common’ challenges corporate issuers such as Axiata and include lack of market awareness, as Malaysian PETRONAS; sending strong signals to well as familiarity/acceptance/of the the markets on the growing acceptance Islamic fi nancial products and services market, we are and att ractiveness of Islamic fi nance as especially in the developed countries. a whole. From the origination perspective, conservatively an Islamic-friendly framework or 2015 also saw a rise in perpetual hybrid jurisdiction needs to be in place to projecting RM70-75 securities, where equity recognition for ensure that potential Sukuk issuers are both accounting and rating purposes accorded neutrality treatment from a billion (US$16.19- provided a powerful tool for companies tax, accounting and legal perspective to overcome any leverage constraints, when compared to a conventional bond 17.34 billion) of defend and manage credit ratings as issuance. Notwithstanding this, we have well as to help strengthen a company’s been seeing Islamic fi nance growing at corporate bond capital structure. Transactions out of a phenomenal rate over the last decade, Malaysia (which CIMB led-managed) with a growing number of prominent issuances for FY2016 included the fi rst-ever rated perpetual issuers including sovereign Sukuk transaction in the world issuers tapping the Sukuk in the ringgit bond by Malaysian Airports Holdings market actively especially — which was also the largest in the last two years. market out of which corporate perpetual securities These issuances will issuance in Malaysia to date; and go a long way toward Sukuk historically the fi rst-ever single ‘A’-rated building benchmarks for perpetual Sukuk transaction by other new issuers and makes up about 70- DRB-HICOM. Arising from the pave the way for more 80% of the annual continued investor education Sukuk issuances in the process, investors have developed global market, going issuance a bett er understanding of the forward. instrument and as a result have become more receptive toward perpetuals. continued on page 6

Continued from page 5

CIMB worked with Khazanah Nasional the primary issuance of bonds/Sukuk investors opening up to longer-tenured to establish the fi rst program approved in 2016 to be robust. In the Malaysian Sukuk issuances — hence aff ording under the Securities Commission market, we are conservatively projecting issuers the fl exibility to term out their Malaysia’s SRI Sukuk framework. RM70-75 billion (US$16.19-17.34 debt maturity profi le. Corporates should The Sukuk issuance was the fi rst-of- billion) of corporate bond issuances for be more open to tap the Sukuk market its-kind in the Malaysian markets, FY2016 in the ringgit bond market out following the establishment of new allowing investors to participate in of which Sukuk historically makes up benchmark sovereign Sukuk curves, socially responsible fi nancing while also about 70-80% of the annual issuance. hence providing corporates with pricing receiving returns from their investments. This estimate is on the back of (among transparency and comparability. In addition to creating a new asset class others) infrastructure projects which for investors in the Malaysian market, had been deferred from 2015, and which IFN: What are your top three the Sukuk issuance provides a new are expected to come on stream in 2016 predictions for 2016 for the global funding avenue for issuers promoting as well as corporate bonds maturing Islamic fi nance market? SRI projects and provides an opportunity in the ringgit market amounting to for private sector participation in socially approximately RM34 billion (US$7.86 MASLIZA: We expect more Sukuk issues responsible fi nancing. billion). from Middle Eastern sovereigns and quasi sovereigns as a result of lower oil The recent sovereign Sukuk issuance prices. The lower oil prices will have a from the government of Malaysia was larger impact on sovereign and quasi- a landmark transaction as the longest We may sovereign issuers due to their higher tenured Sukuk issued by a sovereign see higher reliance on direct oil revenues. Most and the world’s fi rst sovereign Sukuk to oil-exporting countries in the Middle adopt a structure using, among others, issuances of East are facing sizeable fi scal defi cits as non-physical income-generating assets. a result of the depressed oil prices, and CIMB was able to apply its expertise and unrated Sukuk are expected to rely on a combination of capitalize on its wide investor network Sukuk issuances and internal reserves enabling the issuance to be priced out of Malaysia as to fi nance the defi cit. As such, we inside of its theoretical comparable would expect to see higher sovereign conventional curve. these instruments Sukuk issuances going forward as these governments maintain their investment The Republic of Indonesia also achieved are set to become spending to sustain economic growth. a new milestone with its US$2 billion The Kingdom of Saudi Arabia, the UAE Sukuk issuance, which was the largest- fully tradable and Qatar each have signifi cant pipelines ever single-tranched US dollar Sukuk of high-profi le infrastructure projects issued globally where a quasi project and transferrable pending over the next few years. The fi nancing asset-based Sukuk issuance Kingdom plans to boost capacity in was successfully completed. beginning its power and water industries while Dubai aims to complete various logistics IFN: What will be the biggest factors 2017 megaprojects, including the US$32 billion infl uencing the global Islamic fi nancial Dubai World Central project. market next year — how will we see Malaysia is expected to launch several Sukuk perform and what can we expect infrastructure projects including roads We may also see higher issuances of in terms of pricing and volume? and railways worth at least RM75-80 unrated Sukuk out of Malaysia as these billion (US$17.34-18.5 billion) in 2016 as instruments are set to become fully MASLIZA: The impending Fed rate hike part of the government’s pump-priming tradable and transferrable beginning in December will resolve the year-long measures, which bodes well for the 2017. This will encourage issuers, market uncertainty as market rates Sukuk market considering Sukuk is an especially household names, to tap the are expected to react to the hike which ideal choice for corporates looking to tap bond/Sukuk market in a more effi cient means issuers will have greater certainty infrastructure funding given the wider manner. on their funding costs going forward. investor base in the ringgit market. In We expect markets to return to normal this regard, we expect 2016 to potentially We also expect the growth in perpetual very soon after the Fed rate hike as the surpass 2015 in terms of Sukuk and hybrid securities to continue given rate lift-off has been long anticipated overall bond sales. that it is a cheaper alternative to equity by the market. This will bode well for fundraising and its equity recognition issuers that are planning to raise funds On the global front, we continue to for both accounting and rating purposes in the capital markets. We expect there to expect a continuous fl ow of issuers provides a powerful tool for companies be further increases in rates in 2016, but tapping the Sukuk markets as long as to overcome any leverage constraints, these are expected to be gradual, which market conditions remain conducive and defend and manage credit ratings as well should still provide comfort for issuers to investors are still fl ushed with liquidity. as to help strengthen a company’s capital continue tapping the markets next year. Rates are still accommodative for longer- structure. term fi nancing and following recent deals If a period of relative stability in rates which we have arranged, we are seeing and credit follows, we would expect continued on page 7

Continued from page 6

IFN: What are your top predictions for the creation of more stand-alone mega acquire more customer deposits. There the Islamic fi nance market? What will Islamic banks in the future. will be renewed consolidation and be your biggest challenges and key regulatory changes against a background opportunities? Some of the opportunities we foresee of further liberalization of the industry in include: ASEAN. SAFRI: Our top three predictions for the • Government incentives and local Islamic fi nance market are: competitive advantage (Islamic However, there will also be continued fi nance tax exemptions) opportunities for the bank to increase 1. Sukuk issuances for 2016 to surpass the its market share in selected business amount set in 2015 • Further internationalization of Islamic segments while maintaining margins Sukuk, being the darling of Islamic fi nance and ensuring Shariah compliance and fi nance, would naturally top our list governance standards across the entity. in terms of predicting the signifi cant • Further requirements for companies outcomes of 2016. With a conservative to be classifi ed as Shariah compliant, We intend to continue to look out for projection of RM70-75 billion of corporate and more opportunities in the region to grow bond issuance for 2016 of which 70- the Islamic banking business through 80% is historically Sukuk issuance, • Increased infrastructure Sukuk a series of strategic actions including on the back of deferred infrastructure issuance. reasserting profi tability from our core projects and a large pipeline of corporate businesses, product innovation and bonds maturing as well as several new development, deepening of customer and infrastructure projects from Malaysia in client relationships, development of new an eff ort to sustain economic growth, we We predict fee income segments and increasing the predict 2016 to potentially surpass 2015 deposit franchise. in terms of Sukuk and overall corporate 2016 to bond sales. IFN: What new products and/or pipeline potentially surpass do you have for the coming year? 2. Growing Islamic deposits and customers The size of the Islamic fi nance market 2015 in terms of SAFRI: CIMB is one of the youngest (asset and liability) has been hovering Islamic fi nancial institutions in the region at between 22-25% of the industry and Sukuk and overall (that started focusing on the Islamic market players generally have about balance sheet business in 2006), yet it is fi ve years to literally double that to meet corporate one of the fastest-growing Islamic banks the central bank (Bank Negara Malaysia bond sales in the world. In terms of initiatives, the (BNM))’s target. 2016 will see banks bank through various collaborations, competing for cheap and sticky deposits aims to promote research and product to maximize margin and meet Basel III Some of the challenges we foresee development in all aspects of Islamic Liquidity Coverage Ratio requirements. include: banking, demonstrating the growing Banks may end up paying more to entice • Stiff er competition symbiosis between industry and customers, and this will be an interesting academia, and most importantly, enhance development to watch out for. Wholesale • Islamic product development in and strengthen Malaysia’s position as deposits are expected to grow steadily tandem with changing regulations a globally recognized marketplace for as a result of government and agencies/ (for instance, reclassifi cation of Islamic banking and Islamic fi nance. GLCs’ push for Islamic products. investment accounts), and Product-wise, CIMB seeks to Listed companies will also emphasize • Acquiring and maintaining Islamic continuously enhance products in Islamic deposits to maintain their status fi nance experts/expertise within the tandem with the evolving Islamic fi nance as Shariah compliant companies. On local market. landscape. With a fl urry of further Sukuk the asset management side, there will innovations expected in 2016, CIMB be substantial growth expected from IFN: What are your top Islamic is expected to be in the forefront commercial and corporate fi nancing goals for 2016 – what of more dynamic Sukuk issuances to customers in line with the Securities are the targets and come. In terms of product development, Commission Malaysia’s quantitative focus areas for your CIMB Islamic is working on a number of screening methodology. bank? Where do new initiatives to deepen Islamic you see growth, and off erings including the Islamic version of 3. Islamic banks merging and where will you be Stock Borrow & Lending (together with consolidating scaling back? Bursa Malaysia) as well as Islamic equity With news surrounding derivatives. the central bank granting SAFRI: We will approvals for merger continue to negotiations, we can expect experience intense a domino eff ect and further competition as merger announcements on banks grapple to

Turkey targets Gulf wealth with new listing rules; a more spirited Islamic capital market in 2016?

Effi ciency, foreign investments, market one of the issues that the market players vibrancy — these are the few goals Changes introduced under are highlighting is amending tax Borsa Istanbul wishes to achieve Listing Directive legislation covering all issuance types so with its new listing rules introduced • National Market and Second that we can see issuance from corporates recently. Will these measures of National Market dissolved; as well.” He added: “We believe that market liberalization support the replaced with two new sub- the market’s message about amending stock exchange’s drive to enhance markets: BIST Star and BIST Main the tax regime to expand the Sukuk its appeal to att ract foreign capital? • Modifi ed listing requirements and issuances is taken into consideration by And more pertinent to our industry, delisting conditions the regulatory bodies.” how will these new rules aff ect the • Introduced listing of Special Islamic capital markets of Turkey? To Purpose Acquisition Companies Existing tax legislation covers mainly help us navigate the new regulatory • Established the Equity Market for Ijarah transactions and is generally landscape, VINEETA TAN speaks to Qualifi ed Investors unfavorable toward other Shariah Mufi t Arapoglu, a partner and the head • Facilitated dual-listing structures. This poses a challenge to of capital market practice at Istanbul- • Modifi ed the structure of asset-light corporates which are not based law fi rm, Balcioglu Selçuk Emerging Companies Market able to utilize the Ijarah contract and Akman Keki Avukatlik Ortakligi (Gelişen İşletmeler Piyasası), and are seeking to issue in other Shariah (BASEAK), who tells us that interesting • Amended requirements for structures. developments are indeed brewing for companies to remain listed. 2016. Fewer TRY issuances? Source: Arapoglu, BASEAK So what else is in store for 2016? More th Coming into eff ect the 30 November, regulatory changes, it seems. the new Listing Directive, which government’s priorities to increase the consolidated 14 diff erent circulars, was market share of participation banks from Apart from the new Listing Directive, rolled out as part of the restructuring 5% to 15% by 2023 — and positive steps the Capital Markets Board also recently of Borsa Istanbul in conjunction with are taken to achieve this goal,” explained circulated a draft regulation relating the implementation of the new trading Arapoglu. “These developments would to the debt capital markets, potentially platform BISTECH, which was developed defi nitely help Islamic issuances on imposing more stringent criteria on in cooperation with NASDAQ. Aiming the capital market side as state-owned issuers as the regulator is calling for these to provide greater clarity and to ease banks are also becoming players on the companies to acquire ratings for their listing processes on the exchange, the participation banking side” debt instruments. Listing Directive comprises substantial amendments including the creation of Government-backed Ziraat Bank is the “There have been some concerns in the new sub-markets and a new category of latest entrant to the Turkish participation market that the rating requirement in the companies. banking market and other state-owned draft legislation may negatively impact banks are expected to join the fray the domestic TRY bond issuances but The changes are comprehensive and sooner rather than later, which Arapoglu until a fi nal draft is released, and the real touched a variety of elements including believes will help boost Sukuk issuances impacts are seen, it is still too early to listing (and delisting) requirements, as the banks tap market liquidity. tell,” opined Arapoglu. dual-listing, listing of Special Purpose Acquisition Companies and the creation It is also hoped that the new rules which Wave of optimism of the Equity Market for Qualifi ed facilitate dual-listing would drive up the Despite being bogged down by Russian Investors, among others. In a nutshell: fi gures of Sukuk listed by foreign entities; sanctions and geopolitical pressures the new regime is more conducive the number has traditionally stood in the from Iraq and Syria, Turkey’s most recent and more issuer/investor-friendly. For range of 50-65%, with the Middle East parliamentary elections — won by the example, there is no longer a need for accounting for a majority of that. a minimum issuance requirement for ruling party — has instilled back market confi dence and much-needed stability in the listing of Sukuk or lease certifi cates Tax reforms needed as colloquially known, on the Debt the Turkish political sphere, and many However, while this new progress bodes Securities Market. investors are riding on this wave of well for the burgeoning Turkish Sukuk optimism as they usher in the new year. market, however, it is also a reality that There is anticipation for an uptick in the A more vibrant market the market has in the main been driven capital market space — both equity and With a more supportive regulatory by participation banks and the Treasury, debt — and Sukuk will most certainly infrastructure, we then can expect a more with litt le activity from the corporate factor prominently into the equation. vibrant market — more issuances, more side. As in many emerging Islamic trading activities, more foreign investors fi nance economies, taxation is a main “As far as I can tell, the market is also — including in the Shariah space. hurdle. trying to digest the new changes but the general sentiment is largely positive,” “The Islamic market has big potential Arapoglu agrees: “The new listing rules confi rmed Arapoglu. to grow because it is one of the will encourage new issuances; however,

Gloomy outlook for emerging markets… or is it?

Emerging markets face their highest- ever debt levels, even as the US Fed prepares to raise rates and headwinds buﬀ et their capital markets. The World Bank has warned that emerging economies are at a crossroads, and could be facing a whole new era of lower growth. As the year draws to a close, are we looking at a grim prospect for 2016? LAUREN MCAUGHTRY explores.

Poor performance and plummeting currencies for many emerging markets over the past few years have seen the sector receive a pummeling. The Malaysian ringgit has lost over 30% this year, the South African rand fell to a offi cer for global fi xed income at global good opportunities across local debt, record low and lost almost 10% against investment management fi rm PIMCO, external debt, across corporate debt.” the dollar last week and Turkey has presenting his fourth quarter cyclical seen almost US$8 billion in outfl ows outlook for emerging market economies. “Our outlook for 2016 is more from foreign investors. The IMF in its constructive than this time last year most recent growth forecast warned of a because of signifi cantly improved slowdown in emerging markets growth Despite the valuations,” Mohieddine Kronfol, the for 2016 even as developed economies chief investment offi cer for global Sukuk pick up speed. With many of these fact that and Middle East fi xed income at Franklin markets key jurisdictions for Islamic Templeton, told IFN. “Despite the fact fi nance, and banks in some markets many themes, such that many themes, such as the probable already struggling, if this gloomy outlook Fed rate hike, the trajectory of Chinese continues, the industry could be severely as the probable growth and lower commodity prices, aff ected by such under-performance. remain in focus today, valuations of Fed rate hike, the the investments we are making imply For the third year in a row, the trajectory of Chinese scenarios that appear too pessimistic to MSCI Emerging Markets index us.” underperformed the MSCI World Index growth and lower (representing developed markets), A contributing factor is that of cheap on the back of the China slowdown. commodity prices, currencies and rebounding growth, The Institute of International Finance especially driven by initiatives such as also warns that foreign capital infl ows remain in focus the new ASEAN Economic Community, into emerging markets are expected to which are likely to att ract international fall. Companies and governments in today, valuations investors back into the area, while fi scal developing nations owe US$262 billion of stimulus measures, positive growth notes in all currencies outside domestic of the investments and growing confi dence could translate markets in 2016, according to Bloomberg to more bullish demand. “One of the – more than half the US$444 billion we are making high conviction positions we have in they sold this year. Debt levels are set our portfolios is to be underweight [on] to rise further in 2017 to US$352 billion, imply scenarios emerging Asian currencies versus the US while emerging market borrowers dollar, refl ecting the slowdown in the missed payment on US$5.6 billion of the that appear too region and the policies in the region,” debt this year, the highest since 2002. noted Balls. A Federal Reserve rate hike, strong pessimistic dollar and low commodity prices will “We fi nd value in domestic currencies continue to exert downward pressure, to us in Asia and in several credits across with returns on emerging market debt the GCC and Turkey, and importantly, expected to be a low 1-3% in the fi rst fi nd the prospect for increased half of 2016, according to JPMorgan Yet many investors are more positive sovereign and bank issuance out of forecasts. With non-fi nancial corporate than you might expect, with an optimistic the GCC as a catalyst for continued debt estimated at 76.2% across emerging outlook for the new year that defi es market development,” agreed markets in 2015, a potential debt crisis the seemingly gloomy forecast. Asset Mohieddine. “2016 may prove to be amid worsening economic conditions is managers on both the debt and equity volatile, but the global Sukuk market a real concern. “We see overall weaker side are once more allocating to emerging is well positioned for continued strong growth in emerging markets,” confi rmed markets, with Balls noting that: “We will relative performance with att ractive Andrew Balls, the chief investment be cautious but we will be looking for diversifi cation benefi ts.”

IFN Global Trendswatch

What’s going on in the world this week? Saudi Arabia, which met in Paris at • Investors have withdrawn over IFN brings you a selection of relevant, the COP21 meeting. US$7.6 billion from Turkey this year, important and downright interesting according to Bloomberg fi gures, economic, global and regional events, • A new McKinsey report warns that including US$1.4 billion during issues and trends that have the potential Saudi Arabia must signifi cantly election month in November. The to aff ect the Islamic fi nance industry. increase the pace of reform to avoid Istanbul Borsa benchmark index “a rapid economic deterioration over has lost around 10% in November • ASEAN Economic Community is the next 15 years”. The fi rm called on and has returned a negative 12.92% formally created, aiming to integrate the Kingdom to treble its job creation year-to-date, while the iShares MSCI a single market. The 10-member to meet an expected 10 million strong Turkey has returned a negative group is due to be established on the labor market by 2030, warning that 31.24% as of the 11th December. 31st December 2015 to permit a free unemployment could rise to 22% and fl ow of services, investment, labor household income could decline to • Large current account defi cit and and capital between countries. US$3,000 per month. declining rand leave South Africa vulnerable, says the Rand Daily Mail; • China to re-regulate IPO approvals • The World Bank warns that emerging while in the past three months, within two years, a move seen as markets are at a crossroads, and foreign investors have sold ZAR33 important for streamlining capital could be facing a new era of lower billion (US$2.19 billion) in South allocation and encouraging young growth. For the third year in a row, African equities and ZAR7 billion companies to raise funds. the MSCI Emerging Markets Index (US$463.56 million) in bonds. Could underperformed the MSCI World Index the nation be on the verge of a • The US joins infl uential ‘high (representing developed markets), on defi ning economic event? “Investors ambition coalition’ pushing for the back of the China slowdown. The need to be on the lookout for a climate change measures that are Institute of International Finance also potential risk event,” warned Lesiba being resisted by emerging economies warns that foreign capital infl ows into Mothata, the chief economist at including China, India, Malaysia and emerging markets are expected to fall. Investment Solution.

South America to open doors to ϐirst fully-ϐledged Islamic bank

South America and the Caribbean are poised to welcome their fi rst With a fully-fl edged Islamic bank, a hopeful indication, VINEETA TAN writes, for stronger positive Islamic fi nance developments in a region virtually left untouched by relationship with Shariah fi nance. the IDB and the Engaging the advisory services of the Islamic Corporation for the presence of a fully- Development of the Private Sector, Trust Bank, a Suriname-based private ϔledged Islamic bank, With a stronger relationship with the fi nancial institution, is one step closer IDB and the presence of a fully-fl edged to converting its operations to fully the country would Islamic bank, the country would comply with Islamic laws with the full be able to build a stronger case for support of the multilateral fi nancier be able to build a Islamic fi nance, which has been mainly since announcing its intentions to adopt concentrated in Brazil — the world’s Islamic principles in June. stronger case for largest Halal meat producer — but even so, such activities have been few. “[The] ICD will scale up its continuous Islamic advisory support and technical Maureen Badjoeri, CEO of Trust Bank, assistance to Trust Bank to deliver the ϔinance revealed that the bank will focus best value and achieve the ultimate goal primarily on boosting the SME segment. of converting Trust Bank to become resource and biodiversity which has “Once becoming an Islamic bank, and the fi rst Shariah compliant bank not catapulted the country to become one with the collaboration with [the] ICD, only in Suriname but the whole of [the] of the best-performing economies of the Trust Bank wants to facilitate SMEs in Caribbean and South America,” affi rmed Caribbean. And now Suriname is looking more ways than just fi nancially. With this Khaled Al Aboodi, CEO of the ICD. toward the rising Islamic world for approach, SMEs will be able to start- more opportunities demonstrated by it up or expand production of goods and The Christian-majority Republic undertaking a two-year (2014-15) Interim services with a spin-off in job creation, may be the smallest nation in South Member Country Partnership Strategy trade, export and adding to [the] America but its economic prowess is (MCPS) with the IDB, after which a fully- GDP growth and strengthening of the formidable owing to its rich natural fl edged MCPS will follow. Surinamese currency and economy.”

LA ϐirm to capture Gulf wealth with new fund as Shariah investors turn to US property market for capital gains

Sophisticated Muslim investors are as a preferred real estate investment among the target market of a California- destination for Muslim investors. Cities based real estate private equity fi rm such as New York, San Francisco and Los which is looking to raise US$250 Angeles are prime markets for investors, million for its new property fund, with particularly sovereign-related investors; a Shariah compliant feeder, focused on however, other cities are also gaining assets across the US. VINEETA TAN popularity. takes a closer look at the deal. Over the past year, several signifi cant If the target is met, the Ethika Investment Islamic real estate transactions took place Diversifi ed Opportunity Fund II will including: Kuwait-based Warba Bank’s allow Ethika Investments to fund new investment strategy which includes acquisition of The Nathaniel in New acquisitions of nearly US$1 billion sourcing underpriced real estate assets York as part of a US-focused real estate over the next few years in 30 key US in top markets across the US, conducting strategy fund managed by the Wafra markets, building on the success of its physical upgrades, improving property Investment Advisory Group; and SEDCO fi rst fund which is expected to deliver a management and executing fresh Capital’s purchase of three properties net internal rate of return of 22.3% and marketing initiatives to draw in private across the US including a neighborhood 2.1x net equity multiple to investors and institutional buyers. For its latest retail center in Florida, senior housing in from investing in 17 properties across 13 fund, Ethika will capitalize on growing Chicago and the construction of a private diff erent markets. industries including fi nancial services, school in Texas, collectively worth energy, technology, health care and US$145.5 million. “Nearly six years beyond the last period education. of signifi cant commercial real estate London-based 90 North Real Estate acquisition, now is an opportune time “These underperforming assets are still Partners is also an active player in for Ethika to launch our second fund very well-priced with a great deal of the US market having made three US dedicated to seeking out value-added upside potential, versus core real estate acquisitions in 2014: the Lenovo Global investments, with a focus on maximizing assets that have been overbought and Server Division headquarters in Raleigh, end values,” shared Andres Szita, the co- overpaid for over the last several years,” North Carolina; The Reserve at Deer founder of Ethika Investments. explained Szita. Park, suburban Chicago, Illinois; as well The Los Angeles fi rm, with a large as an interest in the FBI headquarters in portion of its clientele (nearly 45%) from Shariah dollar is steadily fl owing into the Denver, Colorado. outside the US, employs an integrated US property market as it grows in appeal

IFSB gears up for 2016; names new chairman, new members and approves new strategic plan

Passing the torch from Indonesia to Valiollah Seif, as Tarek’s deputy. impending plans by its international Egypt, the IFSB in 2016 will welcome peers namely the Basel Committ ee on a new chairman who will oversee The council concurrently admitt ed six Banking Supervision, the International the implementation of a more robust new entities as members including the Association of Insurance Supervisors Strategic Performance Plan (SPP) as Bank of England (associate member), and the International Organization of the Islamic fi nance standard-sett ing a positive recognition of both the Securities Commissions as well as the body pledges to maintain the resilience organization and the Islamic fi nance Financial Stability Board. of the industry in the wake of rising industry from global players. The other interconnectedness with the wider new entrants are: the National Bank of “It builds on the previous SPP, and the global fi nance market. VINEETA TAN the Kyrgyz Republic, the Securities and lessons learnt in executing it, along with brings an overview of the new changes Exchange Commission of Pakistan, Abu the recognition of the need for the IFSB at the Islamic fi nance organization. Dhabi Islamic Bank (Egypt), Sri Lanka’s to evolve in response to changes in its Amana Bank and Turkey’s Ziraat Katilim. operating environment,” said the IFSB. Tarek Amer, the recently-appointed The National Bank of Kazakhstan on the The SPP 2016-18 includes revamped governor of the Central Bank of Egypt other hand gained voting rights as its strategic key results areas and a tasked with resolving the country’s associate membership has been upgraded remodeled IFSB Strategic Results foreign exchange crisis, is to assume the to full membership. Framework as well as a more streamlined IFSB chairmanship on the 1st January, and detailed technical and awareness- succeeding his Indonesian counterpart Supported by a wider membership raising plan across the Shariah banking, Agus DW Martowardojo. The IFSB base, the standard-sett ing body will Takaful and Islamic capital market Council in its latest meeting also named initiate its second three-year SPP next segments for the organization over the the governor of the Iranian apex bank, Dr year which takes into consideration the next three years.

Turkish banks to lean on Tier 2 issuance for support amid economic uncertainties

Turkey’s economy may be hit by Tier 2 issuances — to support solvency Beginning from next year, Turkish banks the raft of sanctions orchestrated by ratios over the near and medium-term. will need to augment their Tier 1 capital Russia, casting a further shadow over conservation buff er equal to 2.5% of risk its fi nancial health in 2016 which “Now that election season is over, weighted assets (RWAs) under the more has already been weighed down by some Turkish banks are seeking to take stringent Basel III rules expected to be escalating geopolitical confl ict and advantage of greater market stability to fully executed by 2019. domestic concerns. However, VINEETA tap international markets,” said Fitch. TAN reports that analysts are confi dent Citing Kuveyt Turk’s expected Basel III- “They will also have to hold a buff er, that the Republic’s banking sector compliant Tier 2 Sukuk as an example, with size dependent on systemic remains well-positioned to weather the rating agency added: “We understand importance. This buff er will range from the storm, especially as banks plan that other banks are also considering 1-3% of RWAs, but we understand it to bolster capital levels under a new Tier 2 issues, seeking to lock in still is set to be capped at 2% for the larger regulatory regime in the new year. relatively low interest rates. We expect banks. The minimum CET1 ratio will Turkish banks to retain external market therefore rise to 9% for larger institutions Assigning a stable outlook to the Turkish access for new capital issues and to roll by 2019 from 4.5%, initially stepping up banking sector, Fitch Ratings noted that over outstanding senior borrowings.” to 5.625% in 2016,” explained Fitch. impending Basel III implementation Albaraka Turk earlier in December issued (translating into higher minimum capital the fi rst Basel III-compliant Tier 2 Sukuk At ‘BBB-’, Turkey holds the lowest requirements and increased risk weights) out of the country, with a US$250 million investment grade according to Fitch’s scale and a weakening lira, among other subordinated Tier 2 trust certifi cated — a rating similar to that from Moody’s factors, are likely to spur banks to boost issuance listed on the Irish Stock Investors Service (‘Baa3’), and higher than capital levels — either through equity or Exchange. the ‘BB+’ junk rating by S&P.

Sovereign Sukuk: The regular jurisdictions

In the past week, governments have Upcoming sovereign Sukuk fairly increased their eff orts as the year Country Amount Expected date comes to an end. Over the last few Tunisia US$500 million 2015 days, the market saw Malaysia issue Jordan JOD200-300 million Before end of 2015 its regular Murabahah paper, Pakistan UAE TBA 2015 realigning its plans to issue Sukuk Indonesia IDR150 trillion 2016 before year-end, and Indonesia’s pre- Pakistan TBA Second quarter of emptive measure in making an issuance 2016 to prefund its 2016 budget. As usual, Shandong Province CNY30 billion TBA NABILAH ANNUAR keeps updated Egypt TBA 2015/16 fi scal year with the latest developments in the Sindh Province US$200 million TBA sovereign Sukuk space. Kazakhstan TBA 2016 Turkey US$1.1 billion TBA The government of Malaysia on the Bangladesh TBA TBA 11th December 2015 issued its RM3 Hong Kong US$500 million to US$1 billion TBA billion (US$689.5 million) government Ningxia Hui Autonomous Region US$1.5 billion TBA investment issues (GII) Murabahah at Kenya TBA 2016 a profi t rate of 3.99%. According to an South Africa TBA 2016 announcement on Bank Negara Malaysia Senegal TBA TBA (BNM)’s website, the issue will mature Niger XOF150 billion TBA on the 15th October 2025 and BNM may Luxembourg TBA TBA purchase up to 10% of the issuance size. Moving over to South Asia, the Separately, the government has also In a bid to prefund its 2016 budget State Bank of Pakistan will auction a announced new plans for its recently requirements, the Indonesian government of Pakistan Sukuk Ijarah delayed Sukuk. Originally scheduled for government on the 10th December issued with Jinnah International Airport Karachi the end of November after the maturity IDR1 trillion (US$70.7 million) in Sukuk as the underlying asset, the central of its PKR212 billion (US$2 billion) st Ijarah via Perusahaan Penerbit SBSN bank announced in a statement on the Sukuk Ijarah on the 21 November, the th Indonesia. According to a statement, the 9 December. No auction date has been government of Pakistan’s PKR315 billion privately-placed facility underpinned by announced for the three-year paper; (US$2.98 billion) Sukuk Ijarah (GIS-16) sale state-owned assets and projects outlined however, industry participants expect did not take place and has been delayed. in its 2015 state budget carries a fi xed the sale — anticipated to be worth about According to an industry source, details of annual coupon rate of 7.75% and will PKR300 billion (US$2.84 billion) — to the delayed auction will be made available mature on the 25th January 2018. take place before the end of the year. in the last week of December.

IFN Weekly Poll: As a Muslim investor/issuer, are you comfortable dealing with gold in Shariah compliant ϐinancial transactions?

Gold — commodity or currency? This “Statistics show that the global Islamic As a Muslim investor/issuer, are you is a question common in the fi nancial community owns only 1% of gold,” comfortable dealing with gold in universe and refl ects the uniqueness confi rmed El Mostafa Belkhayate, the Shariah compliant ęnancial transactions? of the yellow metal, a uniqueness that CEO of Konooz Capital, a Dubai-based holds particularly true in the Islamic Islamic fi nancial fi rm which is working world. Yet despite the special place it on launching a gold reserve Sukuk. 60% Yes has, there is a general uneasiness when “Ideally, 5-10% of an institution’s No it comes to dealing with gold in Shariah investment portfolio should be in gold; compliant fi nancial transactions. however, Islamic banks have generally VINEETA TAN explores. trailed behind.”

While deemed as legal tender, gold Shariah complexities aside, Mostafa may also take on other forms including explained to IFN that another reason as a commodity or usable element in why gold does not feature prominently technology and ensuring its Shariah in the Islamic investment landscape compliance may be more complicated is due to the pervasiveness of other than desired as in addition to Sarf asset classes such as the US dollar — a (currency exchange) rulings, these motivation for him to create a gold transactions may also be subjected to Sukuk product to fi ll that gap. Approved 40% other Shariah principles. by three prominent scholars, the US$5 billion trust certifi cate program will be From the time aspect (spot basis), to listed on NASDAQ Dubai for trading. a much-needed internationally-accepted counter values of exchange and issues of Mostafa revealed that the fi rst tranche Shariah standard on gold (See IFN segregation and allocation of gold, there will be worth US$100 million. Report Vol 12 Issue 39: ‘Shariah standard are many elements to consider when on gold to broaden Islamic investment it comes to gold and these perceived So while Shariah investors and Islamic options for consumers’). complexities have largely kept many fi nance players may not have warmed Muslims (both investors and issuers) up to the idea of gold as of yet, however As one Islamic asset manager tells IFN: at bay — evident by the result of this that is gradually changing. Products such “There are more technical aspects to week’s IFN poll. as Konooz’s gold reserve Sukuk aside, consider in terms of regulations and many more Islamic banks are exploring what not, but with an international “Gold is a class of its own and I think it gold-based instruments such as gold Shariah gold standard, this will defi nitely can get rather complicated — so just to deposit accounts and gold certifi cates. provide greater clarity and confi dence for be safe, I invest in other asset classes,” players, including us, to come into [the] shared one Muslim investor to IFN. And And we can expect more institutions to market with gold products.” this sentiment is refl ected in the holding jump on the bandwagon as the World of gold by Muslims worldwide. Gold Council is determined to introduce

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Over 6,599 individual companies directly involved in the Islamic ﬁ nance industry

South Korea: Uphill battle

In terms of regulatory development for Islamic ﬁ nance, progress has largely stagnated for South Korea due to the social and religious atmosphere in the country. Yet, despite development being curtailed, market participants are not giving up in trying to build a presence in the industry to att ract Middle Eastern capital. VINEETA TAN provides a market snapshot of South Korea’s arduous Islamic ﬁ nance journey.

Regulatory landscape the Bank of Korea — the nation’s central in the Gulf and the sophistication of South Korea has had a long and bank — in March 2014 joined the IFSB South Korea’s manufacturing industry. frustrating journey trying to pass as an associate member. In the same Construction is another area of legislation favorable to Islamic fi nancial year, Korea Investment and Securities investment; in fact, the MoU between transactions but to no avail. Prepared revealed plans to att ract oil wealth by Emirates NBD and Construction and submitt ed for the fi rst time in partnering with Shariah compliant Guarantee focuses on joint marketing September 2009, the Ministry of Strategy fi nancial institutions in Malaysia as to South Korean contracting companies and Finance was unsuccessful in it embarks on an overseas expansion in the GCC given the industry gett ing the amendment to the Special drive. opportunities ahead of Expo 2020 in Tax Treatment Control Act, containing Dubai and the FIFA World Cup in Qatar provisions which would neutralize the In March 2015, the country’s largest in 2022. It was reported that the Korean existing double tax treatment of Sukuk bank, Woori Bank, and Qatar’s Finance Corporation is working with a transactions, approved by the National pioneering fully-fl edged Islamic bank, MENA fi nancial institution to establish a Assembly’s Strategy and Finance Qatar Islamic Bank (QIB), sealed Shariah compliant investment fund. Committ ee. a partnership aimed at facilitating bilateral trade fi nance and corporate Challenges and market Amendments were introduced again businesses between both existing and outlook in February 2011 only to be rejected future Qatari and South Korean entities in Qatar and/or South Korea. Double taxation, the lack of enabling again due to strong opposition from regulations, and unfavorable public Korean Christian groups, and there have The Export-Import Bank of Korea perception about Islam along with an been no signs from the government in absence of a strong Islamic fi nance talent att empting to re-introduce a bill which (KEXIM) also has the ability to issue Sukuk through its RM3 billion (US$689.5 pool are some of the major impediments would create a level-playing fi eld for to the development of Shariah fi nance in Shariah fi nancial transactions. million) in nominal value conventional and/or Islamic medium-term note South Korea. Recent activities (MTN) programs. The programs were assigned ratings of ‘AAA/AAAID’ by Yet despite so, the Republic cannot Despite the inability of the Islamic MARC in March 2015. The affi rmed ignore the fact that an increasing fi nance industry to take off due to ratings incorporate MARC’s assessment number of MENA players — who are a matrix of religious sensitivity, the of support uplift from the government the country’s major trade partners — dearth of human capital and a lack of the Republic of Korea to KEXIM’s are gravitating toward utilizing Islamic of political will, however there is a stand-alone rating. fi nance instruments and are demanding resilient minority on the ground still the same from their partners. In order to steadily pushing for Shariah fi nance diversify foreign investment to maintain including the Islamic Finance Forum Middle Eastern ties stability and long-term capital, the (IFF) established in 2013 by the Korea The QIB-Woori agreement is built upon government realizes that it has to make Institute for International Economic strong bilateral trade relations between a greater concerted push for Islamic Policy, a government think tank. Qatar and South Korea, and explains fi nance. why South Korea is still interested in Since its inception, the IFF has been entering the Islamic fi nance market But the reality is, the current producing research articles as well as despite the challenging domestic environment in South Korea makes it conducting annual seminars on Islamic atmosphere – to strengthen its ties with challenging for domestic fi rms to tap fi nance. In addition to that, it has been the Gulf. According to QIB, South Korea this burgeoning market and therefore, hosting bi-monthly meetings to discuss is a leading importer of Qatar-supplied perhaps the game plan forward is not Islamic fi nance-related developments. liquefi ed natural gas, with 30% of the to focus inwards but to look outwards Abu Dhabi Islamic Bank (ADIB) and Republic’s energy demand being met at other established Islamic fi nancial Emirates NBD, which off ers Shariah by oil and gas products provided by markets to circumvent legal (and compliant products, in December 2013 the Middle Eastern state. Qatar on the social) obstacles back at home and both signed MoUs with Construction other hand imports electronics and instead take advantage of the existing Guarantee, a South Korean government automobiles from South Korea. infrastructures, network and expertise organization to aid South Korean of existing industry players as well as construction companies in the GCC. The relationship between South Korea established markets to enter into the and the GCC dates back to the 1970s Islamic fi nance space. And while political actors are pressured and is deeply embedded in trade due to appease domestic religious groups, in large part to the abundance of oil

Luxury and lifestyle

While the high-net-worth Muslim population is cagey about its investments and few concrete fi gures are to be found regarding trends and opportunities — even regarding private banking and wealth management, let alone specifi c asset classes, there is no doubt that luxury and lifestyle fi nancing is a lucrative (if opaque) market. LAUREN MCAUGHTRY off ers a brief update on a secretive sector.

Luxury investments are a growing trend noticeably absent from the top players collectable cars, all of which have seen for the super rich — in 2014, the Knight due to a weakening in commodity- strong performance in recent years. The Frank Luxury Investment Index grew fuelled wealth — something that going Historic Automobile Group International 6% (compared to -2.72 for the FTSE 100) forward is likely also to aff ect high-net- (HAGI) Top Index, published by with the group highlighting the benefi t worth players in key Islamic markets in the Financial Times and which is an of luxury investments as a valuable Asia such as Malaysia and Indonesia. acknowledged benchmark for classic cars diversifi cation tool within a long- as an alternative asset class, returned term portfolio. “The general outlook Investments 15.52% year-to-date as of November 2015 for luxury spending continues to be “Since 2007, an increasing number of — compared to a negative 4.79% return positive. Almost a third of respondents millionaires have shown interest in for the S&P Global 1200, for example. to The Wealth Report’s Att itudes alternative investments, such as art, Over the past 10 years, the HAGI Top Survey expect their wealthy clients to classic cars, wine, jewelry, gems and Index has risen by an astonishing 487%. spend more on luxury goods in 2015,” watches, which in times of economic The art market is also performing well, confi rmed the latest Knight Frank uncertainty can deliver higher with the sector seeing 15% growth last Wealth Report. Over the past decade, returns than equities,” according to year according to data from Art Market the index has risen 205%. WealthInsight’s 2020 Foresight Luxury Research. Coins are another asset Investment Report, which forecasts performing well, with 13% gains last And the Islamic world is a key player luxury investments to grow at a year. in the space. The Knight Frank Big compound annual growth rate (CAGR) Spenders Index 2015 (based on six of 10.34% to reach US$621 billion by Funds factors including luxury store footprint; 2017. In the fi ve years from 2008-13, Luxury funds are a growing area that premium travel and spending; big-ticket luxury investments grew at a CAGR of is useful as a diversifi cation tool. While luxury goods spending; wealth growth; 14.58% from US$210 billion to US$362 there is litt le information on Islamic- spending on luxury imported items; billion. And while developed markets specifi c funds, the majority of luxury and ultra-high-net-worth individuals contributed the largest share, millionaires and lifestyle funds are equity-based and (UHNWI) population) lists three GCC from emerging markets registered the therefore (unless investing in hotels, countries in its top 10 — Qatar in third strongest growth at a CAGR of 22.24% casinos or other Halal areas) Shariah place, Saudi Arabia at number six and since 2007, with luxury investments compliant. “[The] luxury consumer Kuwait at number 10. Interestingly, all growing from US$43 billion in 2008 to follows the fast-growing trend in three countries scored 10/10 for spending US$96 billion in 2013. With the global aspirational spending,” explains luxury on luxury imported goods, and Qatar economy volatile and capital markets fund provider Dominion. “This trend is and Saudi Arabia also scored 9/10 for shaky, high-net-worth individuals are heavily infl uenced by the global growth premium travel and spending — while likely to look increasingly toward real in wealth, the rapid growth of middle Qatar topped the table for wealth growth assets, collectables and luxury classes as classes in developing markets, and fi nally with 10/10. a replacement and diversifi cation tool for by the global trend of urbanization their traditional investments. which is driving growth in consumer The report notes that wealth growth and spending.” Year-to-date, the Dominion international luxury goods consumption Key investment areas for Islamic high- are key trends for 2015, while Africa was net-worth players include art, luxury and continued...

Table 1: The Big Spenders Index 2015 Rank Country Luxury store Wealth growth Premium Spending on Big-ticket UHNWI population footprint travel and luxury imported luxury goods spending items spending 1 UK 9/10 5/10 8/10 7/10 5/10 5/10 2 China 10/10 7/10 2/10 6/10 7/10 7/10 3 Qatar 7/10 10/10 9/10 10/10 2/10 2/10 4 Canada 9/10 8/10 5/10 10/10 3/10 4/10 5 India 8/10 10/10 10/10 5/10 1/10 4/10 6 Saudi Arabia 8/10 5/10 9/10 10/10 4/10 3/10 7 Switz erland 10/10 8/10 6/10 6/10 3/10 4/10 8 Mexico 9/10 8/10 6/10 6/10 3/10 4/10 9 Hong Kong 9/10 9/10 9/10 2/10 2/10 3/10 10 Kuwait 6/10 7/10 8/10 10/10 2/10 2/10 Source: Knight Frank Wealth Report

Continued

Euro IC fund share class has risen 3.82%, and has grown over 42% over the last ﬁ ve years.

Amundi Asset Management, majority- owned by French bank Credit Agricole and with an Islamic funds vehicle listed in Luxembourg, also off ers an Equity IFN OMAN SEMINAR, DIALOGUE Global Luxury & Lifestyle vehicle, which has seen its euro sub-fund return 14.61% & REPORT 2016 in the past year and 75.38% in the past fi ve years. In 2013 RHB, which also In Partnership with Capital Market Authority Sultanate of Oman has a strong Islamic off ering, launched its Leisure, Lifestyle & Luxury Fund which year-to-date (as of October 2015) returned 26.63%. th In the last year, hedge funds have also 8 March 2016 begun targeting luxury brands for Grand Hyatt Muscat diversifi cation, driven by the strong demand for luxury brands in the Middle East and Asia — especially China. With share prices of luxury brands falling as the global economy struggles and purchasing power in key regions declines, funds are snapping up bargains.

Opportunities Muslim high-net-worth individuals hold an estimated US$3.35 trillion in total wealth while the 2014 New Wealth World Report identifi es Muslims as one of the fastest-growing millionaire groups globally. Knight Frank in its 2015 Wealth Report identifi es Indonesia and Kazakhstan as two of the top fi ve countries with the highest forecast growth in UHNWI for 2014-24. This half-day seminar will focus on the opportunities available today in the Omani market for The opportunities are clear and with the turbulence expected to continue both capital raising and investment in the Shariah compliant space. With an expected audience in the global markets, the demand for of approximately 100, this intimate event will gather the leading players with an active interest diversifi cation and new asset classes in the local and international Islamic financial markets. This Seminar will be filmed and made will only increase. The question is, why available exclusively on IFN-TV to a truly global audience. so few Shariah compliant vehicles exist to meet this growing need? Yes, private banks and wealth managers target clients by wealth rather than religion, and many REGISTER NOW at off er a Shariah compliant solution. www.REDmoneyevents.com

And yes, many luxury and lifestyle funds are equity-based and generally compliant anyway. But surely targeting and IN PARTNERSHIP WITH EXCLUSIVE LEAD PARTNER branding these solutions and marketing them to a growing and enthusiastic Islamic audience would both raise the proﬁ le of the sector and oﬀ er new opportunities to providers and investors ASSOCIATE PARTNERS LEAD MEDIA PARTNER alike? It seems an obvious opportunity for a high-net-worth population so focused (both by inclination and religion) on long-term asset-based investment and W: www.redmoneyevents.com | E: [email protected] | T: 603 2162 7800 ext. 43 luxury spending.

PIA’s Islamic syndicated ϐinancing: A testament of conϐidence from the market

Traditionally tapping the banks for its requirements on its balance sheet Pakistan International Airlines and cash fl ows, Pakistan International Airlines (PIA) turned to the market again with a successful closure of a US$120 million US$120 million structured syndicated Islamic facility in late November. Speaking to Mashreqbank, the joint initial mandated lead arranger, bookrunner and coordinator for the facility, NURUL HALIM provides plans being delivered,” concurred 23rd November 2015 a detailed account of the exciting Iqbal Hassan Khanyari, the head of the transaction. International Corporate Division and Islamic banking. Obligor Pakistan International Utilizing the structured syndicated Airlines (PIA) Islamic facility as it is deemed as one In terms of the market participants Aggregate US$120 Million of the most natural structures for such of the syndication, Iqbal highlighted: principal amount transactions, the three-year tenor facility “This transaction once again reiterates Type of facility Structured syndicated is secured against irrevocable assignment the multitude of synergies developing Islamic facility of receivables from IATA and World between the Middle East and Pakistan”. Structure Syndicated and Pay. The proceeds from the facility will Typically, PIA raises fi nancing from its structured in accordance be used to support the airline’s ongoing relationship banks in Pakistan and the with Shariah principles strategic growth plans and general UAE and the latest deal received an based on the Airline corporate purposes. overwhelming response from the market Ticket Voucher and oversubscribed by a diverse set of Distribution structure banks spread across the GCC and South Use of proceeds To support the Arranging Asia — of which many were not its company’s ongoing existing relationship banks. Participating strategic growth plans a syndicate banks in the syndication included Askari and general corporate Bank, National Bank of Pakistan, Noor purposes comprising a Bank, United Bank, Warba Bank and Tenor Three years Bank Islam Brunei Darussalam. Benchmark 3-month US dollar diverse set of banks LIBOR Some of the unique features of the across [the] GCC transaction are as follows: the fact Margin 4% that the transaction received an Profi t rate 3-month US dollar and South Asia was overwhelming response proved to be LIBOR +4% a testament of market confi dence in Repayment Over three years a key challenge PIA’s growth plan; oversubscribed by a diversifi ed pool of banks of which many Frequency of Monthly as the transaction were not existing relationship banks; and profi t payment structured around the cash fl ows of the Mandated lead Mashreqbank and involved a company. arranger(s) Citibank, Askari Bank, National Bank of government of Commenting on the challenges, Iqbal Pakistan, Noor Bank, said: “Arranging a syndicate comprising United Bank and Warba Pakistan-owned a diverse set of banks across [the] GCC Bank and South Asia was a key challenge as Lead arranger(s) Bank Islam Brunei enterprise without the transaction involved a government of Darussalam Pakistan-owned enterprise without any Arranger(s) Bank Alfalah any sovereign sovereign guarantee.” Documentation Mashreqbank and guarantee agent and Citibank Employing about 16,000 people, PIA is coordinator one of the Republic’s largest public sector Investment agent Mashreqbank “It has been a pleasure to work with PIA entities and holds strategic importance and help realize their aspirations. The to the government. The airline has Legal advisor Hogan Lovells (Middle successful closure of this transaction is previously raised 100% Shariah East) evidence of the banking community’s compliant secured debt instruments from Governing law English law confi dence in PIA’s strategic growth international markets.

Thinking big

By Kavilash Chawla services and, of those willing to pay a premium, how much of a premium For my fi nal column of 2015, I would In terms were they willing to pay? Broadly like to focus my commentary on 2016 of ‘thinking speaking, Islamic retail banking has more explicitly, and a key step the become more cost-competitive with Islamic fi nance industry can take in big’ for 2016, its conventional counterpart over 2016 to continue its growth, both with the past decade, but Islamic fi nance its current consumer base, and in research is a key institutions, by and large, still lack increasing its crossover appeal to ethical the depth of consumer insight to fully and purely fi nancial return-focused factor in staying understand and deliver value-added customer segments. retail banking products to their competitive globally consumers. In other words, Islamic In 2015, two key underlying forces retail banks are not winning as many that signifi cantly infl uenced not just and leveraging customers as they can, and they are the fi nancial services space but the not deriving as much revenue per global economy more broadly were big data to drive customer as they can because they the continued integration of big data do not fully understand the current into business strategy and operations, performance day customer and tomorrow’s target and the complimentary acceptance customer. that, in a data-driven, digital world, we compete in a truly global marketplace. 2. Capital markets: the risk-return The eff ect of these two parallel forces deep consumer insights, and building customized research teams to exploit that performance diff erences between within any given business is twofold. Sukuk and conventional bonds Firstly, business leaders have accepted data toward creating and strengthening are well known within Islamic that leveraging big data requires both a their competitive advantage. fi nance circles, and within a limited strategic commitment to building a data- number of conventional institutional driven organization, and an investment In 2015, investments in research were investors. Where a signifi cant of fi nancial and human resources signifi cant, especially outside of the awareness gap exists is with the to deliver on the strategy. Secondly, Islamic fi nance space, though we did broad majority non-OIC investors business leaders have realized that global see some snippets of activity within the and asset managers, including competitiveness requires a fi ne balance industry itself. In terms of ‘thinking pension funds. Given a research between supporting an innovative and big’ for 2016, research is a key factor and data-heavy tradition within entrepreneurial culture while developing in staying competitive globally and effi cient, outcome-driven operations. leveraging big data to drive performance. fi nancial services globally, and Two specifi c areas of research that could with western investors and asset In 2015, these two underlying trends (big help fundamentally support the growth managers in particular, an academic- data integration and global competition) of the Islamic fi nance industry in industry research partnership into were evident in the funding fl ows 2016 include: Sukuk could be seminal. Deeper toward internal and external research. research into the risk-return Specifi cally, 2015 witnessed an increasing 1. Consumer analytics: performance of Sukuk against level of cooperation and partnership a litt le less than a other fi xed income assets, between academia and industry. In the decade ago, one of and the demonstration of Islamic fi nance space, for instance, the the fundamental the role Sukuk assets play in Qatar Faculty of Islamic Studies hosted questions being constructing well-balanced a roundtable discussion in Doha that raised within the portfolios can provide a brought a select handful of Islamic Islamic fi nance signifi cant body of research banking CEOs and Islamic fi nance industry was the and data to support the global academics together to discuss key issues question of Islamic development of Islamic fi nance. in the industry. In the impact investment retail banking’s industry, we saw a signifi cant investment cost competitiveness ‘Thinking big’ for 2016 means by a family offi ce to have a top 10 US against its conventional moving beyond accepting, and business school do a customized research counterpart. even beyond embracing the fact that piece on the fi nancial and social impact Understanding the cost we live in a data-driven world where return for private equity investors within competitiveness was our competitors span the globe. the impact investment space. In terms important, but so was ‘Thinking big’ for 2016 means of internal investment, we have seen understanding the price investing in a global, data-driven leading corporates invest in cutt ing- elasticity of demand. In reality through research, through edge research toward helping them other words, what percentage fostering a culture of innovation and bett er assess and respond to global risk; of consumers would be entrepreneurship, and in building and there are leading fi nancial service willing to pay a premium effi cient, outcome-focused providers investing in the collection of for Islamic banking organizations.

Daud speaks

By David Vicary Abdullah capital? Is this system really more responsible? These are some of the Research is Another busy month as the end of questions that are being asked of us 2015 approaches. Travel, as ever, was continually. We must respond with facts, so vital to included. During this period I had the fi gures, data and analysis to provide opportunity to visit Australia, Belgium the demonstration eff ect. That is why everything that and the UK (twice). The discussions in research is so vital to everything that all locations revolved primarily around we do, linked with thought leadership, we do, linked quality, responsible fi nance and talent critical thinking and robust professional development. standards. It is no longer with thought satisfactory to talk about Let me try to draw these threads concepts and theories, leadership, critical together and to give, I hope, an interesting though they encouraging message for the may be to some. What thinking and end of the year, despite the is required is empirical trying and troubling times research, a clear robust professional that we live in currently. demonstration eff ect and I have for a long time robust arguments that standards writt en, spoken about and support the theories. encouraged the need for greater professionalism in Here education, talent everything that we do as well development and industry- both convincing and empowering answers. as the need for examples of the focused research have a If we do not take up these challenges, demonstration eff ect of the value vital role to play. We must then we will remain on the boundary, proposition of Islamic fi nance. not only play the game, marginalized and ineff ective. The challenge With audiences from Brisbane to but also up our game with is now and we must rise to it. Antwerp, while including London continuous improvement. several times along the way, We must be prepared to In readiness for the new year that is just what is resonating with those debate, discuss and to around the corner, I wish you all well. audiences are facts and relevant demonstrate our value Stay focused, be professional and be analysis. proposition. We must be prepared. willing to subject ourselves to the How do you show you are bett er? closest possible scrutiny and As ever, there is much to do and not a Why is this a bett er way to raise be confi dent that we have moment to lose! RESEARCH

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First Sukuk Istisnah in Iran IFN Country Correspondents AFGHANISTAN: Dr Alam Khan Hamdard president, Afghanistan Islamic Finance and Consulting Co AUSTRALIA: Dr George Mickhail IRAN senior lecturer, School of Accounting, Economics and Finance, University of Wollongong, Australia BAHRAIN: Dr Hatim El-Tahir By Masoud Gholampour director of Islamic Finance Knowledge Center, Deloitt e & Touche BANGLADESH: Md Shamsuzzaman deputy managing director, Islami Bank Bangladesh Novin Investment Bank has issued BELGIUM: Prof Laurent Marliere, CEO, ISFIN the fi rst Sukuk Istisnah in the Iranian BERMUDA: Belaid A Jheengoor director of asset management, PwC capital market on behalf of Tose'e BRAZIL: Fábio Figueira Melli Mining and Industries Company, partner, Veirano Advogados BRUNEI: Dr Aimi Zulhazmi, Islamic fi nance consultant, raising IRR1.62 trillion (US$54.15 Draznine Advisory CANADA: Jeff rey S Graham million) on the Tehran Stock Exchange partner, Borden Ladner Gervais rd CHINA: Abdullah Han on the 23 November 2015. The Sukuk partner, Al-Sadiq Consulting pay 23% profi t annually with quarterly EGYPT: Dr Walid Hegazy managing partner, Hegazy & Associates payments and will mature in three FRANCE: Kader Merbouh co-head of the executive master of the Islamic fi nance, Paris- years. The proceeds from this issue Dauphine University HONG KONG: Amirali Bakirali Nasir are to facilitate the completion of two chairman, The Law Society of Hong Kong working party on Islamic fi nance iron ore concentrate and pellet plants, guaranteeing the principal, the total INDIA: H Jayesh with a 2.5 million ton annual output. amount of IRR1.62 trillion was fully founder partner, Juris Corp INDONESIA: Farouk A Alwyni The plants are located in the city of subscribed with a total demand of IRR9 CEO of Alwyni International Capital and the chairman of Centre for Islamic Studies in Finance Economics and Sangan in northeastern Khorasan trillion (US$300.85 million). Development IRAN: Majid Pireh Razavi Province. One is 60% complete Islamic fi nance expert, Securities & Exchange Organization of Iran while work on the second plant has Iran's capital markets are rapidly IRAQ: Khaled Saqqaf partner and head of Jordan & Iraq offi ces, Al Tamimi & Co progressed by only 25%. expanding. The two-year bear market ITALY: Stefano Padovani, partner and head of Banking & that has reigned on equities has Finance, NCTM Studio Legale Associato JAPAN: Kaoru Haraguchi Istisnah or ‘production order securities’ redoubled the conviction of the regulator founding att orney, Haraguchi International Law Offi ce JORDAN: Nafi th Al Hersh Nazzal, Islamic banking specialist, are an Islamic form of fi nancing used to Securities and Exchange Organization certifi ed fi nancial and investment advisor fund the manufacturing of goods. Based to expedite the process of introducing KAZAKHSTAN: Timur Rustemov, deputy chairman, association for development of Islamic fi nance on the contract, the issuer fi nances the newer fi nancial products. According KENYA: Mona K Doshi originator for a specifi ed product that senior partner, Anjarwalla & Khanna Advocates to the Tehran Chamber of Commerce, KOREA: Yong-Jae Chang, partner, Lee & Ko can later be given to the issuer to operate Industries, Mines and Agriculture, the KUWAIT: Alex Saleh, partner, Al Tamimi & Co via other Islamic contracts, such as Ijarah LEBANON: Johnny El Hachem capital markets raised IRR292 trillion partner – corporate, Bin Shabib & Associates and Murabahah. (US$9.76 billion) in the 2013-14 fi scal LUXEMBOURG: Said Qaceme, senior manager of Advisory & Consulting, Deloitt e Tax & Consulting year — 7.6% of total fi nancing — through MALAYSIA: Ahmad Mukarrami Ab Mumin head, Shariah division, RHB Islamic Bank capital increases, IPOs and the sale of MALDIVES: Aishath Muneeza Islamic corporate bonds (including deputy minister, Ministry of Islamic Aff airs, Maldives To gain MALTA: Reuben Butt igieg Musharakah, Murabahah and Ijarah). president, Malta Institute of Management MAURITIUS: Mohammad Akshar Maherally market share Director (taxation), International Financial Services MOROCCO: Ahmed Tahiri Jouti To gain market share from banks in managing consultant, Al Maali Consulting Group Iran, the exchanges are off ering fi nancial NEW ZEALAND: Mohamed Nalar from banks in Iran, trustee and board member, Awqaf New Zealand instruments that provide versatility to NIGERIA: Auwalu Ado; Shariah auditor, Jaiz Bank the exchanges are investors and companies looking for OMAN: Muhammad Abdullah Dewaya funding or risk management tools. Islamic fi nance scholar PAKISTAN: Muhammad Shoaib Ibrahim offering ϔinancial managing director & CEO, First Habib Modaraba PHILIPPINES: Rafael A Morales Sukuk Ijarah (in addition to Murabahah managing partner, SyCip Salazar Hernandez & Gatmaitan QATAR:Amjad Hussain instruments that and Musharakah) have been traded for partner, K&L Gates a few years now. This year, stock futures RUSSIA: Roustam Vakhitov managing partner, International Tax Associates provide versatility were legalized, along with stock options, SAUDI ARABIA: Nabil Issa partner, King & Spalding though they have not yet been put up for SENEGAL: Abdoulaye Mbow to investors and trading. Islamic fi nance advisor, Africa Islamic Finance Corporation SOUTH AFRICA: Amman Muhammad CEO, First National Bank-Islamic Finance companies looking SINGAPORE: Suhaimi Zainul-Abidin, Iran Mercantile Exchange's CEO recently advisor, 5Pillars said that they are sett ing up their SRI LANKA: Imruz Kamil head of Islamic banking, Richard Pieris Arpico Finance for funding or risk exchange to off er foreign exchange SWITZERLAND: Khadra Abdullahi associate, Investment banking, Faisal Private Bank futures. In the fi xed income category, SYRIA: Gabriel Oussi, management along with the more mainstream Sukuk general manager, Oussi Law Firm TANZANIA: Yassir Masoud Musharakah, Islamic treasury notes were head, Islamic banking, retail banking, National Bank of Commerce TURKEY: Ali Ceylan tools off ered for the fi rst time this year to start partner, Baspinar & Partners UAE: Rima Mrad building a sovereign debt market. partner, Bin Shabib & Associates For this fi rst Sukuk Istisnah in the Iranian UK: Fara Mohammad director of Islamic fi nance, Foot Anstey capital market, where Novin Investment Masoud Gholampour is the manager of the US: Joshua Brockwell investment communications director, Azzad Asset Management Bank is the advisor and underwriter, Research and Marketing Department at YEMEN: Moneer Saif; head of Islamic banking, CAC Bank Novin's brokerage is the broker and IFN Correspondents are experts in their respective fi elds and Novin Investment Bank. He can be contacted are selected by Islamic Finance news to contribute designated Tose'e Melli Investment Company is short country reports. For more information about becoming at [email protected]. an IFN Correspondent please contact sasikala.thiagaraja@ redmoneygroup.com

China’s ‘One belt, one road’ initiative IFN Sector Correspondents CROSS-BORDER FINANCING Fara Mohammad, director of Islamic ﬁ nance, Foot Anstey HONG KONG CAPITAL MARKETS: By Amirali Nasir Suhail Ahmad, CEO, Hikmah Capital Corp

DERIVATIVES The government of Hong Kong Suhaimi Zainul - Abidin, treasurer for Gulf-Asia Shariah Compliant Investment Association and advisor to 5Pillars continues to be optimistic about GLOBAL ECONOMIC OUTLOOK the prospect of developing Islamic Tariq Alrifai, expert, Islamic investment products and fi nance in Hong Kong, initially by market trends LAW (EUROPE): facilitating the launch of Sukuk. Two Ayhan Baltaci, att orney at law, Bereket & Baltaci Law Firm sovereign Sukuk have been issued after LAW (MIDDLE EAST) appropriate legislative changes, training Bishr Shiblaq, head of Dubai offi ce, Arendt & Medernach and establishing links at diff erent levels LEASING: locally and internationally. Youssef Aboul-Naja, Ijarah specialist, a supranational The ‘One belt, one road’ initiative banking institution involves many countries in the Middle The Hong Kong government facilitates MERGERS & ACQUISITIONS: East and Asia, where banks, Takaful Tushar Garg, associate, bulge bracket investment the development of the fi nancial market bank companies and investors will be looking by the private sector through free market MICROFINANCE (ASIA): for Shariah compliant investment Dr Mahmood Ahmed, executive vice-president and policies with strong regulatory controls director training, Islami Bank Training and Research opportunities. The majority of the Academy according to international standards. ‘One belt, one road’ initiative involves MICROFINANCE (AFRICA): Given these free market conditions and Mansour Ndiaye, director of microfi nance, Assistance and infrastructure development, which is the Consulting for Development the simple tax structure in Hong Kong, at purest form of underlying investment PRIVATE BANKING & WEALTH MANAGEMENT: Thomas Woods, product development, wealth least compared to other jurisdictions, it structures that could be hoped for in management, The Islamic Bank of Asia is surprising that issuers have not chosen structuring an Islamic contract. Hong PRIVATE EQUITY & VENTURE CAPITAL: Hong Kong as a place for the issuance of Kong has to develop its Islamic fi nance Arshad Ahmed, partner, Elixir Capital Sukuk. PROJECT & INFRASTRUCTURE FINANCE platform to take advantage of the Anthony Coleby, head of corporate commercial opportunities off ered by the ‘One belt, department, Said Al Shahry Law Offi ce (SASLO) REAL ESTATE one road’ initiative. Philip Churchill, founder partner, 90 North Real Estate Hong Kong has Partners REAL ESTATE (MIDDLE EAST): The IFN Seminar in Hong Kong on Yahya Abdulla, head of capital markets — Middle East, to analyze the the 29th October 2015 was a great Cushman & Wakefi eld REGULATORY ISSUES (ASIA) success, att ended by a large contingent Intan Syah Ichsan , chief operating offi cer, Samuel Aset reasons for issuer from mainland China signifying Manajemen their interest, commitment and focus REGULATORY ISSUES (MIDDLE EAST): Mohammad Abdullah Malik Dewaya, head of Shariah reluctance to enter toward alternative forms of investment compliance and audit, Maisarah Islamic Banking Services RETAIL BANKING: opportunities. Hong Kong has to match Chowdhury Shahed Akbar, offi cer, Southeast Bank, Hong Kong, if it is that commitment if it is to succeed in Bangladesh. establishing an Islamic fi nance market. RISK MANAGEMENT: Dr Ken Baldwin, CEO, Islamic Financial Analytics to catch up with Hong Kong can play a key role in the SECURITIES & SECURITIZATION: ‘One belt, one road’ initiative and secure Nidhi Bothra, executive vice-president, Vinod Kothari the international a strong foundation upon which to build Consultants STOCK BROKING & TRADING: an Islamic fi nance market. Government- Athif Shukri, research analyst, Adl Capital markets led initiatives will be a key determinant STRUCTURED FINANCE: and broader and more liberal policies John Dewar, partner and head of Islamic fi nance, Milbank, Tweed, Hadley & McCloy will be required to facilitate these SUKUK initiatives. Anthony Coleby, head of corporate commercial department, Said Al Shahry Law Offi ce (SASLO) An Islamic fi nance market has to be an While Hong Kong’s low and simple tax SYNDICATED FINANCE integrated market with banks, Takaful Damir Galiev, portfolio manager, AK BARS Bank structure is clearly a competitive companies, trainers and investment TAKAFUL & RE-TAKAFUL: advantage, it does not seem to be companies all committ ed to the Dr Sutan Emir Hidayat, assistant professor and academic enough. Perhaps a tax break is required, advisor for Islamic fi nance, University College of Bahrain development of such a market. With even for the short term, to compete and TAKAFUL & RE-TAKAFUL (AFRICA): the fast-paced development of Islamic Uwaiz Jassat, acting head of Islamic banking, Absa Islamic att ract business. This would inevitably Banking fi nance in the west and other areas of bring in invisible earnings from which TAKAFUL & RE-TAKAFUL (EUROPE): Asia and in particular Malaysia, Hong Ezzedine Ghlamallah, director, Solutions Insurance and the government, treasury and local Islamic Finance in France (SAAFI) Kong has to analyze the reasons for businesses could benefi t, albeit TRADE FINANCE issuer reluctance to enter Hong Kong, Anthony Coleby, head of corporate commercial indirectly. department, Said Al Shahry Law Offi ce (SASLO) if it is to catch up with the international TREASURY PRODUCTS: markets. This is crucial as Hong Kong is Nafi th Al Hersh Nazzal, Islamic banking specialist, certifi ed fi nancial and investment advisor ideally located to take advantage of the Amirali Bakirali Nasir is the managing future development of Islamic fi nance partner and solicitor at Nasirs Solicitors and IFN Correspondents are experts in their respective fi elds the chairman of the Law Society of Hong and are selected by Islamic Finance news to contribute through China’s ‘One belt, one road’ designated short sector reports. For more information Kong working party on Islamic fi nance. He about becoming an IFN Correspondent, please contact initiative, which is the largest long-term [email protected] international project available to issuers. can be contacted at [email protected].

Consolidation required to create institutions of size

The world’s largest annual gathering of international Islamic ﬁ nance leaders, the World Islamic Banking Conference (WIBC) was a three-day event (1st-3rd December 2015) held under the patronage of prime minister Prince Khalifa Salman Al Khalifa at the Gulf Hotel in Bahrain. Over 1,300 Islamic ﬁ nance leaders from more than 50 countries att ended representing over 300 organizations.

WORLD ISLAMIC BANKING Speaking at the IIFM seminar on Islamic CONFERENCE IN BAHRAIN fi nancial markets, Ismail Dadabhoy from the IIFM said: “Sukuk will play a major By Sajida Ali part in the next two years and we will see more issuance of Sukuk from Morocco, The conference, structured under Kazakhstan and Pakistan.” the theme of ‘New Realities, New opportunities’, discussed the progress of To promote the growth of Sukuk the Islamic fi nance industry, identifi ed markets, Islamic fi nance market players key opportunities and challenges in the need to develop diff erent platforms of Islamic fi nance market, and discussed Sukuk especially for domestic markets what could be done to stimulate future as there is currently no real focus on growth in order for the Islamic fi nance domestic markets which is needed to market to operate as a sector within a create more local opportunities. broader ethical fi nance industry. The deliberations were supported by strong The pre-conference day also included the participation and contributions from launched with the Bahrain Institute launch of Islamic fi nance country reports high-level policymakers and regulators of Banking and Finance, including from Thomson Reuters on Kazakhstan which included central bank dignitaries the Advanced Diploma in Islamic and Canada which aimed to capture from Turkey, Bahrain, Kazakhstan, Commercial Jurisprudence program growth opportunities in those emerging Oman, Pakistan, Sudan, South Africa, and the Advanced Shariah Reviewer markets. and Indonesia as well as global Islamic Development program, to broaden the leaders from the US, the UK, Nigeria, horizon of resources and plug knowledge Australia, Azerbaijan, Russia and China. Consolidation urged gaps. On the fi rst offi cial day of the WIBC, the In addition, the debate included governor of the Central Bank of Bahrain The executive president of the Central discussions on technology and its role in (CBB), Rasheed Al Maraj, in his keynote Bank of Oman, Hamood Sangour facilitating fi nancial services inclusion address renewed his emphasis on the Al-Zadjali, said: “The Islamic fi nance and to integrate Islamic fi nance not just merger and acquisition of Bahraini industry will benefi t from and lead wider with Muslim communities but to reach Islamic banks, particularly, Islamic socioeconomic development once an out to non-Muslim countries. investment banks in order to create operational framework is set up.” institutions of size and increase the Emphasis on developing chances of survival. Some of the sessions addressed and assessed the impact of oil prices which Islamic capital markets Rasheed also announced that the CBB is is seen as one of the largest macro forces On the fi rst day of the event, the introducing a centralized Shariah Board aff ecting Islamic fi nance’s development International Islamic Financial Market with a broad mandate, which includes and growth. (IIFM) hosted a pre-conference seminar overseeing product development on Islamic fi nancial markets speaking by Islamic fi nancial institutions and Overall, the three-day event provided a about the way forward in standardizing Islamic windows, strengthening Shariah practical platform for industry dialogue and harmonizing various Shariah compliance, providing guidance to the which debated growth challenges in the compliant products as per market CBB in issuing rules and regulations for face of prevailing global and regional requirements. The seminar highlighted the sector, providing guidance to the economic constraints. Some of the key global Sukuk market trends and potential courts in legal cases involving Islamic takeaways can be summarized on three opportunities and challenges that fi nancial institutions and acting as the fronts: contribute to the development of Sukuk Shariah Board for the CBB. • Addressing good governance practice markets internationally and locally. in relation to regulatory compliance Referring to human resources • An emphasis on upholding Shariah The seminar also discussed the impact development, the CBB has taken several compliance and practice integrity, and of adopting more comprehensive initiatives toward raising human • Development of talents, leadership standardized documentation, the resources capabilities to be a key driver and human capital. importance of Islamic hedging products of the future growth and success of the and its benefi ts in minimizing and Islamic fi nance industry worldwide. Sajida Ali is a business analyst at the Deloitt e mitigating risk as well as developments ME Islamic Finance Knowledge Center to broaden the availability of Islamic Rasheed also said that a number (IFKC) of Deloitt e & Touche-Bahrain. She hedging alternatives. of training programs had been can be contacted at SajAli@deloitt e.com.

Beyond Halal — An evolution of Shariah compliant products

Focusing on the spirit and purpose (Maqasid) of Shariah, MUJTABA KHALID proposes a move past Halal and Haram, to emphasize the clear gradations in the actions of a Muslim that have been deﬁ ned in Islamic teachings.

HALAL PRODUCTS as Tayyab, Mandoob (recommended) using Maqasid Shariah-based equity and Makruh (disliked) are equally investment decisions as well as within By Mujtaba Khalid relevant when creating a certifi cation equities trading. This is not only to and eventually a range of products that appease the devout Muslim investor, Although growing rapidly, averaging provides a choice to the ultimate user of but according to conventional academic double-digit growth in the past Halal products to opt for enhanced value. research, social responsibility has a decade, the modern Islamic fi nance industry faces a number of challenges. positive impact on a fi rm’s profi tability Practitioners and academics alike Deϐinition of Tayyab and investors’ earnings. have pinpointed a number of issues The Quran mentions the word Tayyab including a lack of secondary markets over 40 times in a number of contexts but For example, King and Lenox (2001) for Shariah compliant products, a lack the general meaning purports to goodness showed that an increase in the value of consistency of standards in diff erent within an action or object. We read it to of US fi rms is directly related to a fi rm jurisdictions and a shortage of qualifi ed describe food, income, spouses, wealth, adopting environmental standards. professionals (lawyers, bankers and agricultural products, character, property, Feldman et al (1996) from their analysis academicians among others) who speech and manners. The meaning of found that improvements in a fi rm’s adequately understand both the Islamic Tayyab, therefore, covers a range of goodly environmental performance result in and conventional sides of the equation. descriptions: wholesome, enjoyable, the stock price being less susceptible to Most importantly though, for an industry delicious, pure, beautiful, soft, safe, fertile, market movements, which in turn leads based on faith, credibility presents a chaste and fresh. to an increase in a public company’s stock fundamental challenge for Islamic fi nance price thus making it a bett er investment. to demonstrate how Shariah compliant Its applicability is vast and is arguably Similarly, according to Abramson et al products provide an authentic alternative a subjective concept but in Arabic, to (2000), socially responsible screened to interest-based conventional products. appreciate the meaning of a word, one portfolios off er competitive returns both must look at its antonym; which in this in the short and long run, compared to case is Khabeeth. This is understood to Islamic fi nance appears to have entered the benchmark return. into a new era in its evolution where mean that which is fi lthy, foul, corrupt, and dirty. Tayyab is its opposite. Tayyab can previously frowned upon areas are Moving forward now coming to the fore. Sectors such as only be understood once consideration is Current Islamic fi nance products derivatives, hedge funds, the extensive given to the Halal. Ibn Khatir notes that and structures — both fi nancial and use of Tawarruq/commodity Murabahah Tayyab has been mentioned many times in the Hadith in conjunction to what is Halal. otherwise — have a single dimension of and other structuring methods to create However, Tayyab is more than just Halal. either being Halal or Haram (permissible eff ective cash raise many questions on the authenticity and direction of the industry. or non-permissible). The evolution of the It is mentioned in the Quran: “He (the This phenomenon has been referred Halal economy would be the formation Prophet) will make good things (Tayyibat) to as Shariah arbitrage, that is, Islamic of a new genre of products and services lawful to them and forbid them the structured products created using wrappers that are based on being Tayyab – being bad things (7:157).” Ibn Al Qayyum to overcome restrictions. This excessive wholesome and more benefi cial than explains this verse as meaning those engineering of basic structures and products basic Halal options. Moving forward, things permitt ed by the Prophet were designed to clone conventional structures broadly, the following paradigms should already among the ‘good things’ in life. By will eventually result in the Islamic banking be assessed vis-a-vis Islamic teachings declaring it lawful, he had vested another industry losing the opportunity to defi ne its in both the fi nancial and business arena level of goodness in them. The things diff erentiating factor. to defi ne the next generation of Islamic which are Tayyab are naturally Halal. products: Conversely, Ibn Al Qayyum explains that This article looks at creating a higher Allah has only forbidden deeds that are certifi cation within the Halal products • Corporate governance and general shameful (Khabeeth) from the perspective universe which not only complies with internal business practices of any reasonable person. In the Quran, Shariah concepts but fulfi lls the actual • External business practices (including Allah states that: “A good (Tayyib) deed is spirit and Maqasid of Islamic teachings social responsibility) like a good (Tayyib) tree: The roots are fi rm – an Islamic version of corporate social • Financial product structuring, and and its branches are in heaven (14:24).” responsibility certifi cations which uses • Underlying asset selection. Maqasid Shariah as a benchmark. The approach is about moving beyond Proposed applications: Private Mujtaba Khalid is a senior associate at the compliance to the law, and providing equity and equity investments IFC UK and also an assistant professor at something extra and benefi cial, be it in One possible use of the Tayyab COMSATS IIT. He can be contacted at the product or behavior. Concepts such methodology, among many others, is [email protected].

Development of Islamic banking in Iraq

The Islamic banking industry in Iraq has, for many years, operated under the umbrella of laws and regulations aimed at conventional banks. Aligning conventional banking structures with the requirements of Shariah laws and ideology has had a profound impact on the ability of Islamic banks to prosper and grow within the Iraqi market. Importantly, most Islamic banking products entail the purchase, sale or leasing of moveable or immoveable property; resulting in signifi cant taxes, charges and fees, and thereby, more often than not, aff ecting the att ractiveness and profi tability of the Islamic fi nancial product. KHALED SAQQAF and DANA ABDULJALEEL explore.

IRAQ The Islamic Banks Law also defi nes issued by the bank’s Shariah Compliance certain compliance and risk controls Committ ee. By Khaled Saqqaf and applicable to Islamic banks as follows: Dana Abduljaleel Islamic banks shall appoint a Shariah Islamic banks shall further ensure that Compliance Committ ee composed the value of fi xed assets acquired for its In response, the Iraqi government has of fi ve members, of whom at least use shall not exceed 30% of its net core proactively worked to create a legal three members shall possess Islamic assets, and that the percentage of its environment more accommodating jurisprudence expertise and two investments in fi xed assets (including the to the needs of Islamic banking members shall be experienced in aforesaid 30%) shall not exceed 50% of stakeholders. These included banking, legal and fi nancial works. The the value of its investment portfolio, provisions for the establishment said committ ee shall be responsible of Islamic banking windows at for monitoring the extent of the bank’s Such controls are particularly important conventional banks, as well as compliance with Shariah, and shall in the Islamic banking sector, on regulations and instructions organizing give its opinion on the workings, account of the need to balance between the activities and operations of Islamic activities, and agreements of the bank in the requirements of Shariah ideology banks in 2011. accordance with Shariah. and between ensuring the fi nancial sustainability of the bank. More recently, the Iraqi parliament has endorsed, for the fi rst time, a federal law In addition to the controls imposed on dealing exclusively with Islamic banks; The Islamic Islamic banks, Article 13(2) of the Islamic namely the Islamic Banks Law No.43 of Banks Law exempts Islamic banks 2015 (the Islamic Banks Law). The Islamic Banks Law and branches of foreign Islamic banks Banks Law is expected to come into force from taxes and fees accruing on sale in 2016. It defi nes the incorporation and is expected to and purchase agreements of real estate, licensing requirements applicable to come into force lands and vehicles under Murabahah, Islamic banks and details the activities Musharakah and Ijarah-Muntahia-Bil- Tamlik transactions, with the exception of which Islamic banks may and may in 2016. It deϔines real estate acquired by the bank as part of not undertake. For instance, under the the sett lement of a debt or as housing for its Islamic Banks Law, Islamic banks are the incorporation employees. prohibited from: and licensing This is perhaps the most signifi cant change 1. Dealing with interest (usury), brought about by the Islamic Banks Law, whether by accepting or granting the requirements and is expected to allow for the more cost- same effi cient structuring of Islamic fi nancial and 2. Investing in or funding any product applicable to Islamic lending products in Iraq, thereby enabling or project contrary to Shariah, and Islamic banks to eff ectively compete in 3. Funding brokerage transactions banks and details Iraq’s fi nancial market. relating to real estate projects. the activities which The Iraqi banking sector continues to The said restrictions aside, Islamic undergo major changes and development banking activities are widely defi ned Islamic banks may and these changes, including in under the Islamic Banks Law, and particular, the introduction of the new include activities such as funding of and and may not Islamic Banks Law, are to be welcomed investment in any project or activity as a key step to establishing a developed (provided the same is not contrary to undertake and eff ective fi nancial sector in Iraq. Shariah), the establishment of investment portfolios and the issuance of Sukuk Islamic banks are further required to Khaled Saqqaf is a partner and head of in accordance with the Central Bank dedicate an Internal Shariah Audit the Jordan and Iraq offi ces at Al Tamimi of Iraq’s instructions, purchase, sale Department responsible for auditing & Company while Dana Abduljaleel is or leasing of assets, and (subject to the bank’s works and evaluating the an associate in the Banking and Finance obtaining the Central Bank’s approval) extent of the bank’s compliance with the Department of the same company. They can principles and provisions of Shariah, the acquiring or participating in the share be contacted at [email protected] and AAOIFI standards and the instructions [email protected] respectively. capital of certain companies.

The intrinsic link between Islamic ϐinance and the real economy

The role of the fi nancial system, which include fi nancial institutions and markets, is to facilitate the fl ow and effi cient allocation of funds between lenders and savers for the purpose of generating productive economic growth. In essence, the fi nancial system functions to serve the real economy.

ASSET MANAGEMENT must be supported by underlying productive activities. Therefore, based By ICD The ICD on Shariah principles, Islamic fi nance warrants a close relationship between While there is consensus that regulatory recognizes fi nancial transactions and the real failures played a major role in steering economy, where intermediation must the entire global fi nancial system to the that the Islamic be aligned to generating productive brink of collapse in 2008-09, a much economic activities. In addition, risk- more alarming discovery has been made ϔinance industry sharing re-allocates the emphasis from in connection with the state of modern creditworthiness of the borrower to fi nancial intermediation, and that is the requires effective be placed on the value creation and glaring absence of ethical foundations economic feasibility of investments and moral compasses. A fl urry of holistic measures to that generate new wealth. All in all, irresponsible mortgage lending by the prohibition of assuming excessive fi nanciers set the ball rolling, coupled focus on efforts to leverage, risk, and speculative elements with the assumption of unhealthy insulates the Islamic fi nancial system, risk and debt levels by stakeholders, facilitate and ensure thus supporting fi nancial stability and while numerous institutions (more inclusive ϔinancial long-term sustainability. prominently, involving rating agencies) pursued their self-interest fi rst to the sector In this regard, the Islamic Corporation detriment of others. As a result, the for the Development of the Private proliferation of events ultimately led to development Sector (ICD) has been instrumental in the devastating loss of trust in fi nancial supporting the growth of the industry systems. to real activity. The core proposition of and the role that it plays in the economy. Islamic fi nance derives from its inherent The ICD continues to provide lines of After the turbulent episode of 2008- features and the values that it brings to fi nance to private sector projects through 09 and with half a decade’s hindsight, the economy, and the enormous potential Shariah compliant means, targeting signifi cant reform eff orts were carried that it off ers in supporting sustainable projects that are specifi cally geared to out in order to enhance the resilience of economic growth and in safeguarding contribute to economic development, the fi nancial sector. At the same time, fi nancial stability. Islamic fi nance rulings such as the creation of employment the potential of Islamic fi nance as an are derived from Shariah, which dictates opportunities and contribution to alternative and more equitable model that Islamic fi nancial transactions exports. for the global fi nancial system began to appeal to the masses, especially given the fact that the Islamic fi nance industry weathered through the storm and was relatively unscathed compared to its conventional peers. Meanwhile, the recent shift toward a more socially- responsible fi nancial system has shed light on its commonalities with the underlying principles of the Islamic fi nancial system, such as risk-sharing contracts and the prohibition of interest payments, excessive uncertainty and gambling, and the focus on ethics and promotion of social-welfare activities. This is a stark contrast to traditional fi nance, which typically focuses on the eff ort to maximize risk-adjusted returns.

Indeed, the ﬁ nancial crisis of 2008-09 was a stark reminder that the ﬁ nancial system needs to be more closely-linked

Continued

Furthermore, the ICD has recently adopted a strategy that will focus on the development of what is called ‘Islamic Finance Channels’. These channels are designed to widen the reach of Islamic ﬁ nance products and services with the objective of contributing signiﬁ cantly to the developmental goals of ICD member countries and thus, sustainable economic development. This will be achieved substantially through the sett ing up of Islamic banks, investment and Ijarah companies, Takaful and re-Takaful companies in member countries via the ICD’s numerous advisory services programs.

In addition, the unprecedented growth of the industry has put increasing pressure on IFN CIS & RUSSIA FORUM the supply of high-quality human capital. 15th March 2016 As a result, there is an urgent need for Renaissance Moscow Monarch Centre Islamic ﬁ nance-tailored programs which SUPPORTED BY are able to produce highly competent and motivated professionals with the required knowledge of conventional banking and ﬁ nance as well as knowledge of Shariah. As a means of addressing this shortfall, the ICD established the Islamic Finance Talent Development Program in 2011 to develop Russia and the CIS: Realizing potential and exploring Islamic superior talents and best practice for the industry. finance opportunities in a promising new market

More recently, the ICD recognizes that The active integration process in CIS markets towards the formation of the Eurasian Economic Union the Islamic fi nance industry requires eff ective holistic measures to focus on coupled with the increased awareness of Islamic finance in Russia and CIS countries such as Kazakhstan, eff orts to facilitate and ensure inclusive Kyrgystan and Azerbaijan have spurred investor interest but locally as well as internationally. fi nancial sector development. In REDmoney Events in partnership with the Islamic Business and Finance Development Fund (IBFD Fund) collaboration with Thomson Reuters, will organize the IFN CIS & Russia Forum on the 15th March 2016 in Moscow. The event is expected to the annual ICD-Thomson Reuters draw market players and regulators from key Islamic finance markets globally and within Russia. Islamic Finance Development Indicator Report, now in its third consecutive year, assesses the current overall health of the Islamic fi nance industry and measures growth potential across 108 REGISTER NOW at countries. The indicator is the leading www.REDmoneyevents.com global reference for Islamic fi nance development for all users including policymakers and regulators, investors and fi nance institutions, Shariah scholars, and research and training departments interested in Islamic fi nance. ASSOCIATE PARTNER EXECUTIVE PARTNER LEAD MEDIA PARTNER

Moving forward, as Islamic fi nance is one of the fastest-growing segments of the MEDIA PARTNERS global fi nancial industry, it will continue to create value for the global economy by facilitating the growth of various economic sectors and the infrastructure needed to support business activity. In some countries, Islamic fi nance has W: www.redmoneyevents.com | E: [email protected] | T: 603 2162 7800 ext. 43 become systemically important and, in many others, it is too big to be ignored.

Malaysian Takaful industry set for a busy year despite ongoing challenges

Generally, the Takaful sector has been making steady progress over the years. Growth in the ﬁ rst half of this year has been positive and encouraging, amid the moderating current growth rate of the Malaysian economy. AHMAD MAHFUZ ISMAIL provides IFN with an overview of the industry and an outlook for 2016.

TAKAFUL The implementation of the Goods & It is a misconception in the Malaysian Services Tax or GST in the fi rst half of market that the Takaful brokerage service By Ahmad Mahfuz Ismail 2015 has not been a deterrent for the is seen as a ‘cost-add-on’, and ‘another industry to grow. intermediary’. Brokers enhance clients’ According to Bank Negara Malaysia, bargaining power by way of stimulating earned contribution income for the market competition, and challenging General Takaful sector in the fi rst half Industry challenges the present paradigm, thus optimizing of 2015 amounted to RM803.5 million A major concern would be the growth their investment in risk management (US$187.88 million) compared to rate for the sector which is expected to and Takaful contribution altogether. In RM706.7 million (US$165.25 million) moderate with the current economic addition, many brokers are equipped in the fi rst half of 2014. For the Family environment. At the same time, Takaful with resources to manage the challenges Takaful segment, net contribution for operators will have to prepare to in the employee health and benefi ts and the fi rst half of 2015 increased to RM2.64 compete in a more liberalized market General Takaful portfolio. For Takaful billion (US$617.31 million) compared environment and to comply with the operators, brokers can assist in mitigating to the fi rst half of 2014 which recorded regulatory requirements, such as the clients’ services liability exposures. RM2.36 billion (US$551.84 million). ongoing Risk-Based Capital (RBC) Framework and the Life Insurance and Family Takaful or LIFT Framework. Overall, Takaful broker services are Since the usually rigorous and specialized, The RBC and LIFT frameworks will bring providing risk advisory services for both mechanism in a new operating environment for the the clients and the industry that remove Takaful industry and help to boost the the need for investment in additional for Takaful products market for Takaful products. specialist advisory services. differs from that Capturing opportunities Current Takaful solutions Takaful operators would have to look at Since the mechanism for Takaful of conventional overall cost and to focus on the smaller products diff ers from that of contribution-based products. They conventional products, the biggest products, the biggest should look into products where there is consideration for clients is usually to continuous demand with lower pricing, look at the components that are Shariah consideration for such as personal accidents, medical cards compliant. Takaful adopts mainly the or even disability cover. A change of Wakalah contract, which is used to help clients is usually strategy in managing their risk pool would manage expected distribution of the also help in managing the claims ratio. operators, which is cost-eff ective for the to look at the client. components that In certain segments where there is a de-tariff of the General Takaful pricing, In terms of product development and are Shariah such as for motor products, pricing and innovation, currently we are still in services will have an edge for operators the ‘plain vanilla ‘stage, but with the compliant who are ready. However, the key will upcoming liberalization of the market, it be the outcome of the LIFT framework, is hoped that more products to support where we expect a more competitive the growth of the Takaful market would Growth in the second half of 2015, pricing of products under the family be made available. For example, the however, will depend on external and segment. Islamic Financial Services Act 2013 (IFSA internal factors that dictate the market. 2013) emphasizes responsibilities to For example, the weakening of the The role of brokers the industry’s players. This could lead ringgit could aff ect the purchasing power to risks being breached and fi nancial Takaful brokers such as Marsh focus of consumers and this could lower the institutions and industry players could on delivering insights of risks and expectation for new business. be held responsible in paying out the Takaful solutions that benefi t clients by penalty. There are also potential risk helping them to focus on their business Nonetheless, we are expecting Takaful exposures in the Halal industry. With activities. They work directly, though contributions this year to grow by these in mind, Takaful operators should independently, with Takaful operators, to around 10% for General Takaful and by take the opportunity to create products develop the capacity to underwrite risks about 12% for the family-based portfolio. through clear objectives. continued...

Continued that help protect them from these unique risks. SUBMISSIONS

A new regulatory landscape NOW OPEN! The IFSA 2013 requires a Takaful DEALS OF THE YEAR Closing Date: operator other than a professional re- th Takaful operator with a composite license 2015 18 December 2015 to separate its Family Takaful business from its General Takaful business. Each We are pleased to announce the launch of the 10th regulators, the Islamic Finance news Deals of the Year ﬁ rm is given a grace period of ﬁ ve Islamic Finance news Deals of the Year Awards. Awards offer its winners a truly global audience and a years to separate its entities and this is phenomenal vehicle in which to reach ones clients, currently in its third year. Over 450 individual deals in 32 categories were potential clients and peers. nominated in 2014. The size and scope of the annual IFN Deals of the Year Awards continues to grow, ensuring it There are 22 global categories at stake this year, in The challenge here lies with the remains the most respected and sought-after accolades addition to the individual country awards. shareholders wanting to gain their return in the industry. on investment soon, and Family Takaful Below is the full list of categories for which accolades has more att ractive margins. With this, Islamic Finance news is categorically recognized as the will be awarded. Individual deals may be nominated for industry's leading publication and authority on the more than one category. However, only one deal per it is strategic for Takaful operators to Islamic banking and finance industry. With a world-wide category. Submission guidelines and a list of criteria are choose a partner or share with other readership in excess of 23,000 industry practitioners and also provided. General Takaful operators to save operational costs and time. THE CATEGORIES

With the liberalization of the market, • Deal of the Year • Perpetual Sukuk the landscape is changing. What • Best Country Deals* • Project & Infrastructure General Takaful operators with larger • Cross Border Finance underwriting capacity can do is to • Corporate Finance • Real Estate merge with foreign partners and acquire • Commodity Murabahah • Regulatory Capital expertise to create a more competitive • Equity • Restructuring and robust General Takaful market. It • Ijarah • Hybrid is also expected that these operators • Initial Public Offering • Social Impact may acquire a public company status, • Most Innovative • Sovereign enabling them to become a wholly • Mudarabah • Structured Finance commercial venture. • Murabahah & Trade Finance • Sukuk • Musharakah • Syndicated Finance While this is not prohibited under Shariah, it will be bett er if the Takaful * Country accolades will be awarded to those countries which have witnessed a minimum of three non-private companies also have the option to placements during the calendar year. Verification may be required of these transactions. set themselves up as co-operatives or mutuals. Furthermore, tighter Shariah Submission Guidelines • Only those deals which have been completed may be governance is expected with the new submitted • Submissions must be no more than two pages in length, in • Submissions to be provided in soft format in either excel, word landscape and this will deﬁ nitely incur bullet format or PDF format further cost in compliance. In the end, • State clearly at the top of the deal page, which categories that • Closing date for submissions: Friday 18th December 2015 there could be further changes in pricing particular deal is being nominated for. If it is not clearly stated • Deals which close between the 18th December and the 31st and margins of products in the coming it will not be considered. December 2015 may be submitted up to and including st years. • Please mark ‘Confidential’ if certain information should not be Thursday the 31 December 2015 published • All submissions should be emailed exclusively to: • Only one submission per category (Individual deals may be [email protected] Market outlook nominated for more than one category) • Results will be announced in the Wednesday 6th January 2016 st Despite the challenges faced by Takaful • Only those deals which were closed after the 1 January 2015 issue of Islamic Finance news will be considered brokerage and risk advisory, we see the Takaful sector to be very positive in the Submissions criteria to include the following (where applicable): Instrument, Issuer, Issuer principal activities, Issue size & Pricing, Date, long-run. We remain optimistic about the Issuances, Bookrunner, Arrangers, Legal counsel for issuer, Legal counsel for arrangers, Guarantor, Trustee, Shariah advisor, Method of growth of the Takaful sector not only in issue, Purpose of issue, Rating, Road-shows, Subscription, Investors, Time, and a short brief on why this deal is being nominated. Malaysia, but also in the region. This is The decision of the “Awards Committee” is final. A short brief will be published for each award providing the committee's reasoning. All because we have seen a steady growth of criteria of the submitted deals will be considered. more than 20% in our Takaful business since the establishment of Marsh Takaful Awards Dinners in 2008. • Kuala Lumpur: 22nd February 2016 (Shangri-La Hotel) th Ahmad Mahfuz Ismail is CEO of Marsh • Dubai: 29 February 2016 (Ritz Carlton DIFC) Takaful Brokers. He can be contacted at [email protected]. If you have any questions regarding the submission of your deals then please contact [email protected]

The treatment of Qard in Takaful

Takaful or Islamic insurance is a booming industry around the world. In fact, many western insurance companies already engage in the Takaful business abroad in the Middle East and Malaysia including AIG and Lloyd’s. CAMILLE PALDI believes that Takaful can be launched as a major insurance product in the west, as cooperative insurance is not a new or foreign concept in Western countries especially in the shipping and construction industries; in fact, westerners are excited about the Takaful concept, which includes return on investment and return of premiums at the end of the policy.

TAKAFUL for the ability to draw upon that pool upon a valid claim. The word Takaful By Camille Paldi In contrast to originates from the Arabic world Kafalah, which means ‘guaranteeing each other’ Takaful is almost the same concept conventional or ‘joint guarantee’. Takaful is essentially as conventional mutual insurance, a concept where the participants are both except that the Takaful operator can insurance the insurer and the insured. inject an interest-free loan called Qard Hasan into the fund in the event of companies, Takaful In a Takaful fund, the participants may get insolvency. Islamic insurance is based a return on investment plus the premiums companies must on cooperative risk-sharing and joint returned at the end of the policy. The guarantee, which is a concept already funds remaining in the Takaful fund on make disclosures widely used in the west and favored by maturity of the policy are distributed back ethical people, Christians, Muslims, and to the participants after deduction of the about the Jews. charges due to the operator and according underwriting pools Takaful can be considered a form of to the type of Takaful management model investment insurance with coverage and utilized by the fund. In a situation where and underlying is a valuable fi nancial tool for people the Takaful fund is not able to meet its seeking coverage, investment returns, current and future obligations, the Takaful assets diversifi cation of portfolios, wealth operation will be deemed insolvent (ie the Takaful fund has less assets than management, and innovative retirement into the risk fund and is a particular use plans. It is also quite useful and widely liabilities). The term solvency means the fi nancial ability to pay debts when they of the operator’s capital (which ultimately used by people of all faiths, nationalities, comes from shareholders of the operator). become due. The fund’s inability to pay and backgrounds in international trade There is an opportunity cost for the claims is contrary to the intent of the fi nance. If marketed properly, Takaful can Takaful operator when the operator’s participants in joining the scheme and become a wildly popular mass consumer capital is used for the Qard Hasan. It hence, a primary objective of everyone product in the west and the world. This is the availability of aff ordable capital concerned is to ensure that fund solvency short article aims to describe the Takaful (either for the Takaful operator to inject is maintained at all times. concept and gives an overview of the into the Takaful fund as a Qard Hasan Takaful business while addressing the or as the surplus available in the Takaful The Takaful operator plays an treatment of Qard Hasan or the interest- fund, which is not locked up to ensure important role that the management of free loan in the operation of a Takaful continuing solvency) that determines the a conventional mutual fund does not fund. speed at which a Takaful business can play in the event of a periodic defi cit grow. Thus, the use of the Qard Hasan in a Takaful fund that exceeds the A conventional insurance company may stifl e profi tability, growth, and/or reserves of the fund, thereby making it speculates on the risk by making expansion of the Takaful business. an assessment of the risk and then potentially insolvent. In this case, the Takaful operator acts as a lender of last pre-determining profi t based on the The Takaful operator grants a Qard resort by providing a Qard Hasan or estimated payout versus the premium. or interest-free loan in the event of a interest-free loan to the Takaful fund. It is in a sense gambling. Proprietary defi cit in the Takaful fund (in contrast to Such a loan shall be repaid out of future insurance is concerned with risk transfer, mutual insurance). The Takaful operator underwriting surpluses. insured risks being transferred from is expected to off er a Qard loan facility, the insured to the insurer in return for a which can be drawn down if the fund is However, the terms and conditions premium. Takaful is concerned with risk- unable to meet its obligations (because of repayment are often unclear and pooling, whereby policyholders (Takaful of a defi cit or lack of liquidity). The loan sometimes not stipulated. In the event participants) mutually insure one another does not remove a defi cit, as it increases of non-recovery of a Qard Hasan, is in a common risk pool fi nanced by their the fund’s liabilities simultaneously the Takaful operator willing to write it contributions (premium payments). with the assets, but it provides liquidity off as the defi cit increases? What will to enable the fund’s obligations to be happen to the Qard Hasan in the event Takaful, or Islamic insurance, is a met. The loan should be recoverable of insolvency? From the operator’s cooperative scheme where participants by the Takaful operator through future pay a premium in the form of a donation perspective, the Qard Hasan is a or Tabarru in a common pool in return temporary injection of operator capital continued...

Continued underwriting surpluses. As a Qard resolution mechanism. A unique and of surplus and fi nancing of defi cits. Hasan is considered a loan injection harmonized regulatory and reporting However, the requirements in respect of into the Takaful fund, repayment of regime is required for Takaful for many movements between the funds should such loans should take precedence over reasons including the two-tier structure be enhanced and the individual rights of surplus distribution to participants. of Takaful companies, which includes policyholders should be clearly stated in shareholder and policyholder funds. the fi nancial statements. Considering that the Takaful fund is Shareholder and policyholder funds are under the direct management of the managed separately and capital may There is also a lack of transparency in Takaful operator, such a loan may fall not be fungible or transferable between the fi nancial statements of some Takaful under the broader context of ‘related the two separate accounts. Furthermore, companies with regards to undistributed party.’ Related party transactions must be Takaful funds have unique policyholder fund balances. Overall, the current publicly disclosed and only carried out on entitlements and rights, diff erent fi nancial reporting practices of Takaful an arm’s-length basis without any unduly structures, and face diff erent risks companies do not provide adequate favorable terms. In some jurisdictions, compared to conventional insurance. information regarding the company’s independent valuations and appraisals are investment strategy, funds allocation, and required before the regulatory authorities revenues and expenses accruing to their will allow substantial related-party Takaful particular investment funds. Exacerbating transactions to take place. This is in order the situation, Takaful companies have to avoid the directors and management of companies not yet adopted a single framework for the company manipulating the movement fi nancial reporting and this has resulted in of funds or assets of the company in favor have not yet adopted the lack of transparency and comparability of certain parties who are related to or of fi nancial statements. favored by them. a single framework In many jurisdictions, solvency and Should the requirement to publicly for ϔinancial capital requirements for Takaful disclose the Qard facility be similarly companies remain simple; however, imposed on Takaful operators on the reporting and this several countries including Malaysia, basis that it is a related-party transaction? Indonesia, and certain GCC countries Should the existence of the facility be has resulted in the are moving toward risk-based capital disclosed or only the loan if the facility (RBC) regulation. In terms of capital is actually drawn down? While it would lack of transparency adequacy regulation, it may be diffi cult seem desirable to disclose the existence to apply ratio-based methods as it can and amount of the facility, transparency and comparability be diffi cult to accommodate them to the would also require the disclosure of the diff erent structures adopted by Takaful drawdown amount when made. of ϔinancial operations and their diff erent risk profi les. For this and other reasons, it is Furthermore, certain safeguards may statements more advantageous to develop RBC also be required in order to ensure that regulation for the Takaful industry. In the Qard is not employed in a manner One of the main diff erences between the RBC, calculating the capital that favors certain pools among the conventional and Islamic insurers lies in requirement is combined with many pools of Takaful funds under the fact that in Islamic fi nance, the assets evaluating management practices and the management of a Takaful operator. underlying the underwriting pools are internal controls. In this process, there is In countries such as Malaysia, Takaful owned by policyholders, whereas assets a major role for the regulator in operators are obliged to give an in conventional proprietary insurance reviewing and evaluating the process by undertaking to the regulator to provide companies are owned by shareholders which the calculated capital requirement a Qard facility to be drawn down in and must at all times be suffi cient to was arrived at and imposing additional the event of a defi cit of a Takaful fund. cover their obligations to policyholders. capital add-ons if the regulator is not Without proper regulation of the Takaful Accordingly, in contrast to conventional satisfi ed with the insurer’s risk industry, there is room for nepotism- insurance companies, Takaful companies management. like behavior, corruption, and non- must make disclosures about the transparent, inadequate, and inaccurate underwriting pools and underlying assets. Camille Paldi is CEO of Franco-American fi nancial reporting, which may result in Alliance for Islamic Finance. She can be the fi nancial collapse and bankruptcy of The AAOIFI regulations FAS 12 General contacted at [email protected]. many Takaful companies and damage to Presentation and Disclosure in the the reputation of Takaful and the Islamic Financial Statements of Islamic Insurance fi nance industry as a whole. Companies and FAS 13 Disclosure of Bases for Determining and Allocating  As only three countries possess Surplus or Defi cit in Islamic Insurance comprehensive Takaful legislation Companies address many of these To read the rest of this article, please (Malaysia, Brunei and Pakistan), the issues. The AAOIFI standards require log on to global Takaful industry is heavily under- disclosures on policyholders’ funds www.islamicfi nancenews.com regulated as well as lacks a proper dispute and the determination and allocation

announced in a statement on the 9th payments for its RM350 million DEALS December. No auction date has been (US$80.92 million) nominal value Islamic Malaysia issues GII announced for the three-year paper; medium-term notes program on the 28th however, industry participants expect December 2015. Murabahah the sale — anticipated to be worth about MALAYSIA: The government of PKR300 billion (US$2.83 billion) — to MAF lists Sukuk Malaysia issued its RM3 billion take place before the end of the year. UAE: NASDAQ Dubai has welcomed (US$710.77 million) government the listing of Majid Al Futt aim (MAF)’s investment issues (GII) Murabahah at a Indonesia issues Sukuk for US$500 million Sukuk, bringing the total profi t rate of 3.99% on the 11th December value of Sukuk listings carried out on 2015. According to an announcement on 2016 budget the exchange during 2015 to US$13.25 Bank Negara Malaysia (BNM)’s website, INDONESIA: The Indonesian th billion and the total nominal value of the issue will mature on the 15th October government on the 10 December Sukuk listed in Dubai to US$36.8 billion. 2025 and BNM may purchase up to 10% issued IDR1 trillion (US$71.4 million) in According to a statement, the Sukuk is of the issuance size. Sukuk Ijarah via Perusahaan Penerbit SBSN Indonesia to prefund 2016 budget the second to be listed by MAF. EXIM Bank issues Sukuk requirements. According to a statement, the privately-placed facility underpinned Nakheel makes Sukuk proϐit MALAYSIA: The Export-Import Bank by state-owned assets and projects payment of Malaysia (EXIM Bank), via EXIM outlined in its 2015 state budget carries th Sukuk Malaysia, on the 10 December a fi xed annual coupon rate of 7.75% and UAE: Nakheel announced in a statement issued a US$30 million Sukuk due 2018 will mature on the 25th January 2018. that it has made a profi t payment of under its US$1 billion multicurrency AED220 million (US$59.88 million) Sukuk issuance program, according on its trade creditor Sukuk on the 15th to an announcement on Bank Negara Indosat lists Sukuk December 2015, with Deutsche Bank, Malaysia’s website. The proceeds will INDONESIA: Indosat on the 10th the registrar and the paying agent for be utilized for EXIM Bank’s Shariah December listed two tranches of Sukuk the Sukuk, instructed to make the profi t compliant working capital, general Ijarah: a seven-year IDR65 billion payment to Sukukholders. banking and fi nancing activities as well (US$4.64 million) facility and a IDR41 as for other Shariah compliant corporate billion (US$2.93 million) 10-year paper S Power redeems IMTN purposes. on the Indonesian Stock Exchange, according to Republika. MALAYSIA: Special Power Vehicle (S Power) has partially redeemed the SBP to auction government secondary stock (stock code: VN050177) Sukuk KDU to make Sukuk proϐit under its Class B Islamic medium-term note (IMTN) facility of RM5.55 million PAKISTAN: The State Bank of Pakistan payment (US$1.28 million) on the 15th December (SBP) will auction a government of MALAYSIA: According to an 2015, according to an announcement on Pakistan (GoP) Sukuk Ijarah with announcement on Bank Negara Bank Negara Malaysia’s website. Jinnah International Airport Karachi as Malaysia’s website, KDU University the underlying asset, the central bank College (KDU) will make profi t

DEAL TRACKER Full Deal Tracker on page 38 EXPECTED DATE COMPANY'S NAME SIZE STRUCTURE ANNOUNCEMENT DATE Dec-15 Government of Pakistan PKR300 billion Sukuk Ijarah 10th December 2015 Dec-15 Government of Pakistan PKR315 billion Sukuk Ijarah 9th December 2015 First quarter of 2016 Government of Egypt TBA Sukuk 7th December 2015 TBA Ahmad Zaki Resources RM1 billion Sukuk Murabahah 7th December 2015 TBA Scientex TBA Sukuk Murabahah 3rd December 2015 TBA Barwa Bank US$2 billion Sukuk 27th November 2015 TBA Sime Darby up to RM3 billion Sukuk 27th November 2015 TBA Samalaju Industrial Port up to RM950 million Sukuk Murabahah 27th November 2015 Dec-15 Government of Kuwait TBA Sukuk 30th November 2015 TBA WAPDA PKR144 billion Sukuk 26th November 2015 TBA WAPDA PKR100 billion Sukuk 26th November 2015 Dec-15 Government of Ivory Coast XOF150 billion Sukuk 23rd November 2015

El-Ghamrawy, the Islamic bank is between EGP2-3 billion (US$251.3- AFRICAS planning to issue a three-year investment 376.93 million) to be repaid over 15 Egypt’s Al Baraka to launch certifi cate, generating a monthly yield to years for the Egyptian Electricity be sold at variable profi t rates. Transmission Company (EETC) has new product been approved by the Ministry of EGYPT: Al Baraka Bank-Egypt is ADIB-Egypt’s ϐinancing bid Electricity. According to Amwal Al Ghad seeking to off er a new saving certifi cate quoting unnamed sources, the state- in Egyptian pounds in early 2016 and is approved run electricity company is reportedly waiting for approval from the Central EGYPT: Abu Dhabi Islamic Bank negotiating fi nancing worth EGP7 Bank of Egypt. According to Amwal Al (ADIB)-Egypt’s bid to secure a Shariah billion (US$ 879.52 million) with local Ghad quoting the bank’s CEO Ashraf compliant fi nancing facility ranging banks to fund a number of projects.

(LAPSPI), will be part of the Indonesian the state of Kedah as well as to fi nance ASIA Alternative Agency for Dispute existing quarry operations and road BML introduces Islamic Resolution that commenced handling construction projects. The company disputes in the insurance and capital said in a statement that the fi nancing deposit account market sectors on the 10th December. cost of the facility is not expected to MALDIVES: Bank of Maldives (BML) Still under the purview of OJK, LAPSPI have a signifi cant impact on the group’s has introduced a new Islamic deposit will operate independently and will earnings per share and net tangible assets account, the Wadiah Business Account, commence full operations early next per share for the current and incoming for enterprises, according to Haveeru year (with banking dispute resolution to years. Online. Under the new service, be added later) featuring three services customers’ deposits will be collected in (adjudication, mediation and arbitration) a separate fund which will be used for as stated in a 2014 OJK regulation. Are you receiving our daily processes that are Shariah compliant. IFN Alerts? RHB to expand Islamic HDC launches GHDP treasury offering MALAYSIA: Halal Industry MALAYSIA: RHB Investment Bank Development Corporation (HDC) on the plans to expand its treasury portfolio for th 14 December launched the Global Halal the coming year in a bid to diversify its Data Pool (GHDP), a central depository products to meet client requirements in No. of authenticated Halal trade information a challenging economic environment. to connect Malaysia to the international “A key strategy is to increase the depth Halal supply chain, confi rmed a press and breadth of treasury products statement. The GHDP was developed in and services... to meet the diversifi ed collaboration with GS1, an international hedging, investment and funding non-profi t organization dedicated to requirements of our clients throughout developing and supporting global supply Malaysia and across Asia,” confi rmed chain standards and technologies. Angus Salim Amran, the head of global fi nancial markets, speaking to IFN. LAPSPI to take over dispute resolution activities from OJK BDB Infra secures Islamic INDONESIA: Otoritas Jasa Keuangan ϐinancing facility (OJK) is fi nalizing the establishment MALAYSIA: BDB Infra, a subsidiary of an agency that will take over its of Bina Darulaman, has secured a mediation function in dispute resolution RM40.4 million (US$9.34 million) Islamic activities, according to The Jakarta Post. fi nancing facility from OCBC Al-Amin The agency, the Indonesian Alternative Bank to fund the construction of a new Agency for Banking Dispute Resolution asphalt plant and quarry facilities in

second half of 2014, Gatehouse Bank will EUROPE be investing a further GBP100 million Gatehouse boosts PRS (US$150.69 million) to develop a portfolio of private rented sector (PRS) homes investment across the UK, according to a press UK: Following its initial investment release. The Islamic bank’s PRS program of GBP110 million (US$165.76 million) is in partnership with Sigma Capital The Number ONE news service with to build over 900 homes in Greater Group, a UK-listed residential and urban over 20,000 registered daily readers Manchester and Merseyside in the regeneration specialist.

and formalize the existing cooperation IIFM plans more standards in GLOBAL between the two exchanges and explore 2016 Investcorp acquires new future opportunities in matt ers relating to capital market development among GLOBAL: In line with its standardization properties others, according to a bourse fi ling. initiatives, the International Islamic GLOBAL: The US-based real estate arm Financial Market (IIFM) is planning of Investcorp has, through four separate Stable outlook for GCC to complete the Islamic FX Forward transactions, acquired a portfolio of offi ce standards for risk mitigation and develop and industrial properties in Atlanta, San banking sector in 2016 the Islamic Credit Support Arrangement Francisco and Boston for approximately GLOBAL: According to Moody’s in a in 2016. According to a statement, US$400 million. According to a statement, public spending will continue the standard-sett ing body will also statement, the fi rm’s real estate group has to support operating conditions for banks develop a standard on risk participation approximately US$1.4 billion in assets in the GCC, allowing performance to arrangements to support the Islamic under management as of the 30th June remain resilient into 2016, but liquidity corporate and trade fi nance segment. 2015, primarily in commercial, offi ce and will continue to tighten. The rating residential properties within the top 30 agency notes that the outlook for the Separately, the IIFM has welcomed largest markets in the US. GCC banking sector in 2016 is stable. NASDAQ Dubai’s CEO Hamed Ali as a Credit is forecasted to grow in the new director on its board. Lebanese banks welcomed in 4-10% range as private sector declines are moderated by new government Iran ADB seeks Islamic ϐinancing borrowings from local banks helping to opportunities GLOBAL: Iran and Lebanon are set support profi tability and margins. to strengthen their economic ties and GLOBAL: Asian Development Bank will work to expedite and expand their Substance over form for (ADB) is looking to co-fi nance projects cooperation in the fi eld of fi nancial in a Shariah compliant manner in and banking exchanges. According to AOSSG collaboration with new partners and IRNA, a preferential trade agreement GLOBAL: The Islamic Finance Asian Infrastructure Bank, according to was signed between the countries and a Working Group of the Asian-Oceanian Pakistan’s Observer quoting the ADB’s working group was formed to examine Standard-Sett ers Group (AOSSG) has country director Werner Leipach. The the details of the agreement. The Islamic welcomed the explicit statement that bank also plans to provide fi nancing of Republic also welcomes Lebanese banks “a faithful representation provides around US$1.2-1.5 billion in 2016, mainly to open branches in the country, Central information about the substance of in the fi eld of infrastructure under the Bank of Iran governor Valiollah Seif was an economic phenomenon instead of public-private partnership mode, Leipach quoted as saying. merely providing information about added. its legal form” as outlined by the IASB Tough month for Pan Arab ED/2015/3 Conceptual Framework for Iran and Kazakhstan sign Financial Reporting. In its published markets comments on issues specifi c to Islamic MoU GLOBAL: The S&P MENA Sukuk index fi nancial reporting, the AOSSG also GLOBAL: The export credit agencies in November dropped 1.02%, a trend noted its support to the statement that of Iran and Kazakhstan have signed an replicated in the S&P MENA Bond “providing information only about a MoU to deepen collaboration between Index which fell 1.44%. S&P Dow Jones legal form that diff ers from the economic the two countries especially in the Indices, however, noted in a statement substance of the underlying economic reinsurance segment. According to that: “With fi nancials largely suff ering, phenomenon would not result in faithful the Times of Oman, the agreement November provided our Shariah indices representation”. will see the Export Guarantee Fund of with a chance to shine; excluding Europe, Iran and KazExportGarant exchange they outperformed in each of the major Oil price slump takes its toll technical information and jointly support markets shown in this report — the reinsurance projects. Middle East included.” For the month of on GCC banks November, S&P GCC Composite Shariah GLOBAL: The outlook for GCC banks in ICD and EBRD collaborate 2016 is negative as the oil price weakness Index rose 0.08%, S&P TOPIX 150 GLOBAL: Independent Egyptian oil is slowing economic growth and taking Shariah was up 2.31%, S&P Developed services company Advanced Energy its toll on bank liquidity and earning, BMI Shariah appreciated 0.05%, while Systems SAE has secured a US$170 according to Fitch in a statement. With S&P Europe 350 Shariah declined 2.1%, million syndicated loan facility, of which Kuwait an exception, the rating agency S&P Pan Arab Composite Shariah fell US$25 million will be provided for by the forecasts that GDP growth for Saudi 0.08%, S&P Pan Arab Investable Shariah Islamic Corporation for the Development Arabia, Qatar and Oman will decline in dropped 6.16% and S&P Emerging BMI of the Private Sector, according to a 2016 to 1.9%, 3.7% and 2.7% respectively, Shariah was down 1.9%. press release. Led and arranged by the while a moderate downturn is forecasted European Bank for Reconstruction and for Bahrain and the UAE. Approximately Saudi and Algiers bourses Development (EBRD), the Islamic tranche 16% of ratings assigned to GCC banks are is the fi rst transaction cooperation collaborate on a negative outlook with the bulk of between the ICD and the EBRD. SAUDI ARABIA: The Saudi Stock these concentrated in Saudi Arabia. Fitch, Exchange and the Algiers Stock Exchange however, expects capital levels to remain have entered into an MoU to deepen sound for rated GCC banks.

also expects that the government’s fi scal million). The facility is intended to MIDDLE EAST surplus will decline to 6.4% of GDP in fi nance working capital requirements UAE banks’ Basel III 2015, from 16.7% in 2014 and will turn among others. into a small defi cit of 2.4% of GDP in compliance on the cards 2016, based on its Brent crude oil price UAE issues new law to boost UAE: The Central Bank of the UAE will projections of an average US$55 per begin engaging with banks nationwide barrel in 2015 and US$53 in 2016 and Islamic economy for full compliance with the Basel III set assumptions regarding spending growth. UAE: Mohammed Rashid Al Maktoum, of global banking regulations, according Qatar’s debt-to-GDP ratio is projected to the vice-president and prime minister to Reuters. Although he did not specify reach about 35% in 2016. of the UAE as well as the ruler of Dubai, when the engagement would begin, has issued a new law, which will see the the central bank’s governor Mubarak Stable outlook for the UAE’s establishment of the Emirates Global Rashed Khamis Al Mansoori was quoted Center for Accreditation. According to as saying that full implementation is banking system Emirates News Agency, the center aims targeted by the end of 2018. UAE: Moody’s has maintained a stable to strengthen Dubai’s position as the outlook on the UAE’s banking system global Islamic economic capital among AAOIFI welcomes new based on its expectation of resilient capital others. and liquidity buff ers as well as how bank member creditworthiness will evolve in the system SIB to increase capital PALESTINE: Palestine Islamic Bank over the next 12 to 18 months, according SAUDI ARABIA: Saudi Investment has joined AAOIFI, allowing the bank to a statement. Credit growth is expected Bank (SIB) announced in a fi ling to to participate in the latest accounting to slow down to 3-5% annually for 2015 Tadawul that it has obtained approval and auditing standards applied, which and 2016 from around 9% for 2014 while from the authorities to increase its capital will refl ect positively on its performance asset quality is expected to remain stable. by 7.7% from SAR6.5 billion (US$1.73 and growth, as it aims to apply bett er The rating agency also expects the UAE billion) to SAR7 billion (US$1.86 billion) accounting practices, according to a authorities to remain highly supportive to support the bank’s capital base and statement. of local banks over the outlook period meet future increases in activities. The despite fi scal pressure from falling oil capitalization will be conducted through Qatar’s economy to remain revenues. the transference from its retained resilient in 2016 earnings (SAR500 million (US$133.17 GIB to provide Murabahah million)) representing a distribution of 1 QATAR: Moody’s, in a statement, bonus share for every 13 shares. estimated that Qatar’s average real GDP facility to SASCO growth to remain at around 5% until SAUDI ARABIA: Saudi Automotive 2017, driven by growth in the non- Services Company (SASCO), on the 13th BIM to support petchem hydrocarbon sector and the Barzan gas December, completed the signing of a projects project coming on stream. Steff en Dyck, a banking facility agreement of SAR150 IRAN: The Bank of Industry and vice-president-senior analyst at Moody’s, million (US$39.96 million) against Mine (BIM) is willing to underwrite observed: “However, we expect low oil a signed promissory note with Gulf petrochemical projects once sanctions prices to lower the government’s revenue International Bank (GIB). According to on the Republic are lifted, according streams. Qatar Petroleum (‘Aa2/Stable’)’s a bourse fi ling, a fi ve-year Murabahah to IRNA quoting the bank’s managing profi ts, which accounted for 33% of total Islamic medium-term loan of SAR50 director, Ali Ashraf Afk hami. The government revenues in 2014, will likely million (US$13.32 million) is part of the country according to the news agency decline, although they will remain at facility in addition to a lett er of guarantee has 67 half-completed petrochemical fairly high levels.” The rating agency amounting to SAR100 million (US$26.64 projects up for grabs.

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US Real Estate Fund I, a Cayman exceeding 60%, translating to an internal Islands-domiciled fund established rate of return of over 12%, with a ASSET with a capital up to US$100 million minimum annual cash dividend of 9% and a nominal value of 1 US cent per distributed quarterly to investors over MANAGEMENT unit. According to a statement by the the last fi ve years. Public offering for Wasatah regulator, the maximum limit of units Saudi Equity Fund approved allowed by the company to market in Al Meezan unveils MAAP-II Kuwait is 250,000. SAUDI ARABIA: The Capital Market PAKISTAN: Al Meezan Investment Authority of Saudi Arabia has approved Management announced in a statement the public off ering of the Wasatah Saudi Tadhamon exits Coxlease the launching of its Meezan Asset Equity Fund by Al Wasatah Al Maliah School investment Allocation Plan-II (MAAP-II), an asset Company, according to a fi ling to GLOBAL: Tadhamon Capital, the allocation plan for investors who Tadawul. Bahrain-based investment arm of wish to earn a potentially high return Tadhamon International Islamic Bank, through asset allocation between Shariah CMA grants license to KFH announced in a statement that it has compliant equity schemes and Shariah compliant income/money market Capital Investment exited from its investment in Coxlease School, a UK-based specialist residential schemes and want an actively managed KUWAIT: The Capital Market Authority education facility for children aged 9 investment portfolio with diversifi cation. (CMA) of Kuwait has granted KFH to 19 with severe behavioral, emotional The plan, with an initial term of two Capital Investment Company a and social diffi culties. The investment years, is now open for subscription. license to privately market the KFHC achieved a total return on capital

million. According to CPI Financial, total (US$5.85 million) in the third quarter, a RESULTS assets for the reported period surpassed 114% year-on-year growth. According to Palestine Islamic Bank US$635 million, referring to the increase the bank, total assets increased by 24% in net equity of up to US$70.8 million. to KES23.7 billion (US$229.4 million) as PALESTINE: For the third quarter of September 2015 from KES19.1 billion of 2015, Palestine Islamic Bank’s pre- Gulf African Bank (US$184.88 million) in the similar period tax profi t exceeded US$10 million, last year. registering a 22.77% year-on-year growth, KENYA: Gulf African Bank posted while its net profi t amounted to US$7.6 an after-tax profi t of KES577 million

for model approval later than the 1st Takaful products due to an increase in TAKAFUL January as these insurers are continuing policy cover in the last year. New regulatory regime for UK to develop internal models to the standards required by the directive. insurers Marginal growth for Bahraini Takaful segment UK: The UK insurance industry will Phoenix Assurance of Zambia operate under a new regulatory regime, BAHRAIN: The Bahraini Takaful Solvency II, eﬀ ective from the 1st January launches Takaful window sector in 2014 generated BHD57.29 2016, according to a statement by the ZAMBIA: Phoenix Assurance of Zambia million (US$149.12 million) in gross Bank of England. Under Solvency II, an (Phoenix) launched its Takaful window contributions (against BHD57.22 insurer can apply for use of an internal on the 4th December, according to Zambia million (US$148.94 million) in 2013), model in order to calculate the amount of Daily Mail News. The Pension and accounting for 21% of the year’s capital it needs to hold in recognition of Insurance Authority (PIA) had earlier total gross premiums, according to a the risks it faces. consulted with international insurance statement by the Central Bank of Bahrain. companies before granting the license Gross contributions for the Kingdom’s The Prudential Regulation Authority to Phoenix, PIA’s registrar Martin reinsurance and re-Takaful sectors grew has also approved 19 insurers’ internal Libinga was quoted as saying. The 23% year-on-year to reach BHD412.52 models for use under the new regime. A ﬁ rm has collected over ZWK3 million million (US$1.07 billion) in 2014. number of insurers are planning to apply (US$274,260) in premiums through its

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agreement dated the 18th February 2015. bank’s position as the country’s largest RATINGS The proposed Sukuk has been assigned a commercial bank as well as a diverse and RAM revises UMW’s Sukuk to preliminary ‘AAA/Stable’ rating by RAM cost-eff ective retail deposit base. based on a performance guarantee of up negative to RM210 million extended by United The Islamic bank, which recently MALAYSIA: RAM announced in a Overseas Bank (Malaysia) (‘AAA/Stable/ expanded into Bahrain, also had its statement that it has revised the outlook P1’), eff ective during the construction fi duciary score reassessed in the range on the long-term ratings of UMW period. According to a statement, the of 71-75, refl ecting adequate fi duciary Holdings’s Islamic debt programs rating is also further supported by standards whereby the rights of various to negative on the premise of its Wego’s superior debt-servicing ability. fund providers are adequately defi ned weakening operating performance and and protected, said the IIRA in a fi nancial profi le which may not recover Mumtalakat’s Sukuk afϐirmed statement. to previous levels in the short term. at ‘BBB-’ The rating agency has concurrently S&P maintains negative reaffi rmed the ‘AAA’ and ‘P1’ ratings of BAHRAIN: Bahrain Mumtalakat the programs. Holding Company (Mumtalakat)’s outlook on Bahrain US$600 million Sukuk certifi cates BAHRAIN: S&P has maintained a Tesco Store’s IMTN rating due 2021 have been affi rmed at ‘BBB- negative outlook on the Kingdom of ’ by Fitch, according to a statement. Bahrain and the Central Bank of Bahrain, downgraded Concurrently, its long-term issuer default refl ecting uncertainties in the rating MALAYSIA: MARC has downgraded rating (IDR) and senior unsecured rating agency’s fi scal forecast. According to the long-term ratings on Tesco Store’s have been affi rmed at ‘BBB-’ with its a statement, the Kingdom’s long and RM3.5 billion (US$829.23 million) short-term IDR at ‘F3’. Fitch also revised short-term foreign and local currency Islamic and conventional medium-term the company’s outlook to negative from sovereign credit ratings and its central note programs to ‘AA-(cg)’ and ‘AA- stable. bank’s long and short-term foreign and ID(cg)’ from ‘AA(cg)’ and ‘AAID(cg)’ local currency issuer credit ratings have respectively. The rating agency noted in a TCL proposes Sukuk both been affi rmed at ‘BBB-/A-3’. statement that the outlook on all ratings PAKISTAN: JCR-VIS Credit Rating remains negative. Company has reaffi rmed the preliminary MARC afϐirms Alpha Circle’s rating of ‘AA-’ on Treet Corporation Sukuk Fitch revises Bahraini banks (TCL)’s proposed Sukuk issue with a MALAYSIA: MARC has affi rmed the BAHRAIN: Fitch has revised the outlook stable outlook, according to a press respective ‘AA-IS’ and ‘AIS’ ratings on on the National Bank of Bahrain and BBK release. TCL is planning a perpetual Alpha Circle’s RM540 million (US$124.11 to negative from stable while affi rming Sukuk amounting to PKR539.5 million million) senior Sukuk Musharakah their long-term issuer default ratings (US$5.09 million) to meet working capital and RM55 million (US$12.64 million) at ‘BBB-’, according to a statement. The requirements. junior Sukuk Musharakah with a stable revision refl ects the increased likelihood outlook. In a statement, the rating of a downgrade of the support ratings Concurrently, the rating agency also agency noted that the ratings incorporate and support rating fl oors following the reaffi rmed TCL’s entity ratings at ‘AA- Alpha Circle’s steady cash fl ows from weakening of Bahrain’s ability to support /A-1’ and the rating of its participation an assured payment stream from the its domestic banks as indicated by the term certifi cates at ‘AA’. Malaysian government for undertaking negative outlook on the sovereign rating the registration of foreigners and the and a downgrade of both banks’ viability ‘B/B’ for Kyrgyzstan issuance/renewal of work permits. ratings if the operating environment KYRGYZSTAN: The Kyrgyz Republic weakens. has received ‘B/B’ long and short-term MRCB Southern Link’s Sukuk foreign and local currency sovereign downgraded Sberbank afϐirmed at ‘BBB-’ credit ratings from S&P. According to a RUSSIA: Sberbank of Russia, which is statement by the rating agency, the stable MALAYSIA: RAM has downgraded the exploring Islamic fi nance opportunities ratings are constrained by the Republic’s respective ratings of MRCB Southern in the region, has had its long-term low GDP per capita and narrow Link’s RM845 million (US$194.21 foreign and local currency issuer default economic base, as well as perceived weak million) senior Sukuk and RM199 million ratings affi rmed at ‘BBB-’ by Fitch with governance, monetary policy fl exibility (US$45.74 million) junior Sukuk to ‘BB3’ a negative outlook, according to a and external profi le. The ratings are (from ‘BB1’) and ‘C3’ (from ‘B1’) with a statement. supported by the government’s modest negative outlook. debt, which consists mainly of offi cial concessional loans. The rating agency noted in a statement RAM assigns top rating to that the downgrade is premised on the Wego’s proposed Sukuk company’s tightening liquidity and the IIRA reafϐirms BoK’s ratings MALAYSIA: Wego is proposing a delay in its proposed refi nancing plans. Sukuk Musharakah of up to RM210 SUDAN: The Bank of Khartoum (BoK)’s The heightened likelihood of a deferment rd million (US$49.1 million) to fi nance the ‘AA-(sd)/A-1(sd)’ national scale credit on its profi t payments due on the 23 construction cost of six Islamic religious ratings have been reaffi rmed by the December 2015 also contributed to the schools, awarded to it by the Perak state Islamic International Rating Agency rating downgrade of the junior Sukuk. government under a 17-year concession (IIRA), with a stable outlook based on the

Lebanon afϐirmed at ‘B’ Underpinning its credit strength are million) Islamic commercial paper/ the country’s huge sovereign wealth — Islamic medium-term note (ICP/IMTN) LEBANON: Lebanon’s long-term foreign accumulated from past fi scal surpluses program (2012/2018) (currently rated and local currency issuer default ratings — and reserves totaling 172% of its at ‘AAA(bg)/Stable/P1(bg)’) ahead of (IDRs) have been affi rmed by Fitch at ‘B’ GDP, which should help it weather a its maturity, upon completion of the with a negative outlook, according to a period of low oil and gas prices. Qatar debt-refi nancing exercise by year-end. statement. The ratings refl ect political is still expected to record a current According to RAM in a statement, there risks exacerbated by the ongoing account surplus of 4.6% of GDP in 2015 will be no annual rating review for the Syrian war, very weak public fi nances as the downtrend in liquefi ed natural facility at the request of the client and and anaemic economic performance. gas prices lags that of oil. Nonetheless, the ratings of the ICP/IMTN will be Concurrently, Lebanon’s country ceiling persistently low hydrocarbon revenue withdrawn following the cancellation of and short-term foreign currency IDR and continuous capital expenditure are the debt facility. have been affi rmed at ‘B’. expected to tip the fi scal balance into defi cits of between 1% and 3% of GDP IFFIm’s IDRs afϐirmed RAM reafϐirms Qatar in 2016 and 2017, in sharp contrast to GLOBAL: The International Finance QATAR: Strong external position, vast previous years. Facility for Immunization (IFFIm) which savings in its sovereign wealth fund and issued its second Sukuk in September, steady economic growth are factors that No annual rating review of has had its long-term issuer default have prompted RAM’s reaffi rmation of Aspion’s Islamic facility rating (IDR) affi rmed at ‘AA’ by Fitch, Qatar’s respective global and ASEAN- with a stable outlook. Concurrently, its scale sovereign ratings of ‘gAA3(pi)/ MALAYSIA: Aspion is planning to short-term IDR has been affi rmed at Stable’ and ‘seaAAA(pi)/Stable’. terminate its RM150 million (US$34.47 ‘F1+’, according to a statement.

role of CEO/executive director of CIMB as the fi nance minister from 2009-14, MOVES Islamic and CEO of the group’s Islamic according to a press release. LSEG banking division, eff ective the 4th January 2016. UK: The London Stock Exchange Group Grant Thornton (LSEG) has appointed the chairman UAE: KPMG’s global Islamic fi nance of LCH.Clearnet Group Professor Gulf African Bank leadership team head, Samer Hijazi, Lex Hoogduin and the former CEO KENYA: Gulf African Bank has has joined Grant Thornton as a partner of Standard Life David Nish as non- appointed Nawaal Mohamed Salim and head of Islamic fi nance, leading the executive directors to its board, eff ective to its board of directors, according to a accounting fi rm’s practice in Abu Dhabi, from the 4th December 2015, according to notice by the bank. according to a statement. a statement. South African Ministry of Sabb Takaful Company CIMB Islamic Finance SAUDI ARABIA: Anthony Bentley has MALAYSIA: Following IFN’s SOUTH AFRICA: Following the removal been appointed to the board of directors announcement in September of Rafe of Nhalanhle Nene as South Africa’s of Sabb Takaful, replacing board member Haneef tendering his resignation as CEO fi nance minister on the 10th December Harble Karlket, and has also become a of HSBC Amanah to succeed Badlisyah who was replaced with David van representative of HSBC with eff ect from th Abdul Ghani as CEO of CIMB Islamic, Rooyen, president Jacob Zuma on the the 13 December 2015. The appointment th CIMB on the 14 December confi rmed in 14th December replaced van Rooyen with will be ratifi ed at the next ordinary a bourse fi ling that Rafe will assume the Pravin Gordhan, who previously served general assembly meeting.

REDmoney Ideal Ratings Indexes

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.

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.

Expected date Company's name Size Structure Announcement Date Dec-15 Government of Pakistan PKR300 billion Sukuk Ijarah 10th December 2015 Dec-15 Government of Pakistan PKR315 billion Sukuk Ijarah 9th December 2015 First quarter of 2016 Government of Egypt TBA Sukuk 7th December 2015 TBA Ahmad Zaki Resources RM1 billion Sukuk Murabahah 7th December 2015 TBA Scientex TBA Sukuk Murabahah 3rd December 2015 TBA Barwa Bank US$2 billion Sukuk 27th November 2015 TBA Sime Darby up to RM3 billion Sukuk 27th November 2015 TBA Samalaju Industrial Port up to RM950 million Sukuk Murabahah 27th November 2015 Dec-15 Government of Kuwait TBA Sukuk 30th November 2015 TBA WAPDA PKR144 billion Sukuk 26th November 2015 TBA WAPDA PKR100 billion Sukuk 26th November 2015 Dec-15 Government of Ivory Coast XOF150 billion Sukuk 23rd November 2015 TBA Kuveyt Turk US$400 million Sukuk 13th November 2015 TBA Widad Capital RM120 million Sukuk Murabahah 13th November 2015 TBA Oman Telecommunications OMR50 million Sukuk 10th November 2015 TBA Hascol Petroleum PKR2 billion Sukuk 9th November 2015 TBA Emirates Airline US$500 million-US$1 Sukuk 9th November 2015 billion TBA CIMB Islamic RM5 billion Sukuk 6th November 2015 2016 Government of Indonesia IDR150 trillion Sukuk 9th October 2015 TBA MMC Corporation RM1.5 billion Sukuk Murabahah 13th October 2015 TBA Country Garden Real Estate RM1.5 billion Sukuk Murabahah 6th October 2015 First quarter of 2016 National Home Mortgage Finance PHP2 billion Sukuk 29th September 2015 Corp By end of 2015 HNA Group US$150 million Sukuk 11th September 2015 TBA Government of Jordan JOD200-300 million Sukuk 4th September 2015 TBA Saudi Electricity Company US$1.5 billion Sukuk 1st September 2015 TBA Turkiye Finans TRY1.5 billion Sukuk 1st September 2015 2016 Government of Indonesia IDR12.2 trillion Sukuk 1st September 2015 By 2017 KT Bank EUR100 million Sukuk 11th June 2015 Before end of 2015 National Commercial Bank SAR2 billion Sukuk 24th August 2015 TBA TIME dotCom UP to RM1 billion Sukuk 19th August 2015 2016 Government of South Africa TBA Sukuk 13th February 2015 TBA Government of Niger XOF150 billion Sukuk 26th February 2015 Third quarter of 2015 Government of Tunisia US$500 million Sukuk 13th January 2015 2016 Al Baraka Bank (Egypt) US$100 million Sukuk 12th August 2015 2016 Jordan Islamic Bank US$100 million Sukuk 12th August 2015 2016 Al Baraka Bank (South Africa) US$50 million Sukuk 12th August 2015 2015 Government of UAE TBA Green energy Sukuk 12th March 2015 TBA Turkiye Finans US$400 million Sukuk 20th July 2015 TBA Eskom TBA Sukuk 25th June 2015 Fourth quarter of 2015 Republic of Turkey TBA Sukuk 25th June 2015 TBA 1Malaysia Development RM5 billion Sukuk 18th June 2015 TBA Toyota Capital Malaysia TBA Sukuk 17th June 2015 TBA Sindh Province US$200 million Sukuk 15th June 2015 TBA Grand Sepadu RM210 million Sukuk Murabahah 5th June 2015 TBA Abu Dhabi Islamic Bank US$3 billion Sukuk 29th May 2015 2015 Government of Oman US$1 billion Waqf Sukuk 26th May 2015 TBA Masraf Al Rayan TBA Sukuk 14th May 2015

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 2500 1200

2130 1120

1760 1040

1390 960

1020 880

650 800 Jun Jul Aug Sep Oct Nov Dec Jun Jul Aug Sep Oct Nov Dec

REDmoney GCC 6 Months REDmoney Global 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap 1300 2200

1140 1896

980 1592

820 1288

660 984

500 680 Jun Jul Aug Sep Oct Nov Dec Jun Jul Aug Sep Oct Nov Dec

REDmoney MENA 6 Months REDmoney US 6 Months

All Cap Large Cap Medium Cap Small Cap All Cap Large Cap Medium Cap Small Cap 1150 1150

1020 1020

890 890

760 760

630 630

500 500 Jun Jul Aug Sep Oct Nov Dec Jun Jul Aug Sep Oct Nov Dec

SAMI Halal Food Participation (All Cap) 6 months

2250

2110

1970

1830

1690

1550 Jun-2015 Jul-2015 Aug-2015 Sept-2015 Oct-2015 Nov-2015 Dec-2015

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 1400 1300

1230 1130

1060 960

890 790

720 620

550 450 Jun Jul Aug Sep Oct Nov Dec Jun Jul Aug Sep Oct Nov Dec

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 2250 2450

1900 2060

1550 1670

1200 1280

850 890

500 500 Jun Jul Aug Sep Oct Nov Dec Jun Jul Aug Sep Oct Nov Dec

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%

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 North America Islamic Fund Index 180 175 170 165 160 155 150 145 140 135 130 125 120 115 110 105 100 95

Index Values 90 85 80 75 70 65 60 55 Dec-99 Dec-03 Dec-07 Dec-11 Apr-01 Apr-05 Apr-09 Apr-13 Aug-02 Aug-06 Aug-10 Aug-14 Nov-15

Top 10 Monthly Returns for Globally Investing Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 QInvest JOHCM Sharia'a J O Hambro Capital Management 2.15 Cayman Islands 2 WSF Global Equity - USD I Cogent Asset Management 1.15 Guernsey 3 QInvest GAM Sharia'a GAM International Management 0.73 Cayman Islands 4 Watani KD Money Market National Bank of Kuwait 0.04 Cayman Islands 5 Watani USD Money Market National Bank of Kuwait 0.01 Cayman Islands 6 Al Rajhi Commodity Mudarabah - USD Al Rajhi Bank 0.00 Saudi Arabia 7 BLME Sterling Liquid Bank of London and The Middle East -0.29 Luxembourg 8 BLME Umbrella Sicav - SIF - USD Income - Class B Bank of London and The Middle East -0.32 Luxembourg 9 Al Rajhi Global Equity UBS -0.52 Saudi Arabia 10 Emirates Islamic Global Balanced EIS Asset Management -0.64 Jersey Eurekahedge Islamic Fund Index (1.99) Based on 57.58% of funds which have reported November 2015 returns as at the 14th December 2015 Top 10 Sortino Ratio for ALL Funds Fund Fund Manager Performance Measure Fund Domicile 1 CIMB Islamic Money Market CIMB-Principal Asset Management 59.11 Malaysia 2 Atlas Pension Islamic - Debt Sub Atlas Asset Management 25.51 Pakistan 3 Meezan Tahaff uz Pension - Debt Sub Al Meezan Investment Management 24.63 Pakistan 4 AlAhli US Dollar Sukuk and Murabaha NCB Capital Company 3.50 Saudi Arabia 5 Atlas Pension Islamic - Money Market Sub Atlas Asset Management 3.30 Pakistan 6 BLME Sterling Liquid Bank of London and The Middle East 2.77 Luxembourg 7 Pacifi c Dana Murni Pacifi c Mutual Fund 2.31 Malaysia 8 Emirates Global Sukuk Limited USD Institutional Emirates NBD Asset Management 2.29 Jersey Share Class (Acc) 9 BLME Sharia'a Umbrella SICAV-SIF Global Sukuk Bank of London and The Middle East 2.27 Luxembourg - Class A USD 10 QInvest Edgewood Sharia'a QInvest 2.19 Cayman Islands Eurekahedge Islamic Fund Index 0.14 Based on 45.64% of funds which have reported November 2015 returns as at the 14th December 2015

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 Fixed Income Index over the last 5 years Eurekahedge Islamic Fund Fixed Income Index over the last 1 year

120 105

115 100 110

105 95

Percentage 100 Percentage 90 95

90 85 Jul-15 Jul-10 Jul-11 Jul-12 Jan-15 Jun-15 Jan-10 Jan-11 Jan-12 Oct-15 Sep-15 Jun-13 Jun-14 Jun-15 Dec-14 Dec-12 Dec-13 Dec-14 Aug-15 Mar-15 Mar-15 Nov-15 Nov-14 May-15 May-15 Nov-15 Top 10 Islamic Fixed Income Funds by 3 Months Returns Fund Fund Manager Performance Measure Fund Domicile 1 CIMB Islamic Enhanced Sukuk CIMB-Principal Asset Management 2.67 Malaysia 2 Meezan Islamic Income Al Meezan Investment Management 1.58 Pakistan 3 CIMB Islamic Sukuk CIMB-Principal Asset Management 1.04 Malaysia 4 Meezan Tahaff uz Pension - Debt Sub Al Meezan Investment Management 0.77 Pakistan 5 Atlas Pension Islamic - Debt Sub Atlas Asset Management 0.71 Pakistan 6 Pacifi c Dana Murni Pacifi c Mutual Fund 0.66 Malaysia 7 AlAhli Diversifi ed US Dollar Trade The National Commercial Bank 0.14 Saudi Arabia 8 AlAhli International Trade The National Commercial Bank 0.12 Saudi Arabia 9 BIMB Dana Al-Fakhim BIMB UNIT Trust Management (BUTM) 0.06 Malaysia 10 AlAhli Euro Murabahat The National Commercial Bank 0.00 Saudi Arabia Eurekahedge Islamic Fund Index 1.72

Based on 42.31% of funds which have reported November 2015 returns as at the 14th December 2015

Top 10 Sortino Ratio from ALL Funds Fund Fund Manager Performance Measure Fund Domicile 1 CIMB Islamic Money Market CIMB-Principal Asset Management 59.11 Malaysia 2 Atlas Pension Islamic - Debt Sub Atlas Asset Management 25.51 Pakistan 3 Meezan Tahaff uz Pension - Debt Sub Al Meezan Investment Management 24.63 Pakistan 4 AlAhli US Dollar Sukuk and Murabaha NCB Capital Company 3.50 Saudi Arabia 5 Atlas Pension Islamic - Money Market Sub Atlas Asset Management 3.30 Pakistan 6 BLME Sterling Liquid Bank of London and The Middle East 2.77 Luxembourg 7 Pacifi c Dana Murni Pacifi c Mutual Fund 2.31 Malaysia 8 Emirates Global Sukuk Limited USD Institutional Emirates NBD Asset Management 2.29 Jersey Share Class (Acc) 9 BLME Sharia'a Umbrella SICAV-SIF Global Sukuk Bank of London and The Middle East 2.27 Luxembourg - Class A USD 10 QInvest Edgewood Sharia'a QInvest 2.19 Cayman Islands Eurekahedge Islamic Fund Index 0.14

Based on 45.64% of funds which have reported November 2015 returns as at the 14th December 2015

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 3rd Dec 2015 Prasarana Malaysia Sukuk Domestic market 459 RHB Capital, Maybank, Kenanga Investment Malaysia public issue Bank, CIMB Group, AmInvestment Bank 26th Nov 2015 Rantau Abang Malaysia Sukuk Domestic market 238 RHB Capital Capital public issue 24th Nov 2015 Albaraka Turk Turkey Sukuk Euro market 250 Standard Chartered Bank, Nomura, Dubai Katilim Bankasi public issue Islamic Bank, Emirates NBD, QInvest, Barwa Bank, Noor Bank 23rd Nov 2015 Jimah East Power Malaysia Sukuk Domestic market 2,100 HSBC, Maybank, CIMB Group public issue 13th Nov 2015 Axiata SPV2 Malaysia Sukuk Euro market 500 Deutsche Bank, CIMB Group public issue 13th Nov 2015 Cagamas Malaysia Sukuk Domestic market 114 CIMB Group public issue 3rd Nov 2015 MMC Malaysia Sukuk Domestic market 279 RHB Capital Corporation public issue 2nd Nov 2015 DanaInfra Malaysia Sukuk Domestic market 727 HSBC, RHB Capital, Maybank, CIMB Group, Nasional public issue AmInvestment Bank 27th Oct 2015 Majid Al Futt aim UAE Sukuk Euro market 500 Standard Chartered Bank, HSBC, National Properties public issue Bank of Abu Dhabi, Dubai Islamic Bank, Abu Dhabi Islamic Bank 20th Oct 2015 Qatar Islamic Qatar Sukuk Euro market 750 Standard Chartered Bank, HSBC, Citigroup, Bank public issue QInvest, Barwa Bank, Noor Bank 19th Oct 2015 Arab Petroleum Saudi Sukuk Euro market 500 Saudi National Commercial Bank, Standard Investments Arabia public issue Chartered Bank, Goldman Sachs, First Gulf Bank, Emirates NBD, Noor Bank 13th Oct 2015 Malaysia Malaysia Sukuk Domestic market 217 RHB Capital Building Society public issue 13th Oct 2015 Jana Kapital Malaysia Sukuk Domestic market 217 RHB Capital public issue 8th Oct 2015 Rantau Abang Malaysia Sukuk Domestic market 358 CIMB Group, AmInvestment Bank Capital public issue 5th Oct 2015 IDB Trust Saudi Sukuk Euro market 336 Natixis Services Arabia public issue 18th Sep 2015 International UK Sukuk Euro market 200 Standard Chartered Bank, National Bank Finance Facility public issue of Abu Dhabi, Maybank, Emirates NBD, for Immunisation National Commercial Bank Jamaica 15th Sep 2015 Pengurusan Air Malaysia Sukuk Domestic market 362 Maybank, Bank Islam Malaysia, CIMB Group SPV public issue 8th Sep 2015 Arab National Saudi Sukuk Domestic market 533 JPMorgan, Deutsche Bank, HSBC, Arab Bank Arabia public issue National Bank 2nd Sep 2015 SapuraKencana Malaysia Sukuk Domestic market 200 Maybank TMC public issue 26th Aug 2015 Almarai Saudi Sukuk Domestic market 427 HSBC, Samba Capital Arabia public issue

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 1500 18 600 Value (US$bn) 16 10 1250 14 500 Avg Size (US$m) 8 1000 12 400 10 300 6 750 8 4 500 6 200 4 100 2 250 2 0 0 0 0 11253 4 5 6 7 8 9 101112 2 3 4 6 7 8 9 101112 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q 2Q 3Q 4Q 2014 2015 2010 2011 2012 2013 2014 2015

Top 30 Issuers of Global Sukuk 12 Months Issuer Nationality Instrument Market US$ Iss Managers (mln) (%) 1 Jimah East Power Malaysia Sukuk Domestic market 2,100 6.5 HSBC, Maybank, CIMB Group public issue 2 Perusahaan Penerbit Indonesia Sukuk Euro market 2,000 6.2 JPMorgan, HSBC, Dubai Islamic Bank, CIMB Group SBSN Indonesia III public issue 3 Dubai Islamic Bank UAE Sukuk Euro market 1,750 5.5 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, public issue Dubai Islamic Bank, Sharjah Islamic Bank, Emirates NBD, Al Hilal Bank, Noor Bank, First Gulf Bank, Maybank 4 DanaInfra Nasional Malaysia Sukuk Domestic market 1,670 5.2 RHB Capital, Maybank, CIMB Group, Aﬃ n Investment Bank, public issue AmInvestment Bank, HSBC 5 Malaysia Sovereign Malaysia Sukuk Euro market 1,500 4.7 Saudi National Commercial Bank, Standard Chartered Bank, Sukuk public issue HSBC, National Bank of Abu Dhabi, RHB Capital, Dubai Islamic Bank, Gulf International Bank, Natixis, CIMB Group 6 IDB Trust Services Saudi Sukuk Euro market 1,336 4.2 Saudi National Commercial Bank, Standard Chartered Bank, Arabia public issue HSBC, National Bank of Abu Dhabi, RHB Capital, Dubai Islamic Bank, Gulf International Bank, Natixis, CIMB Group 7 Petronas Global Malaysia Sukuk Euro market 1,250 3.9 RHB Capital Sukuk public issue 8 National Shipping Saudi Sukuk Domestic market 1,040 3.2 JPMorgan, HSBC, Samba Capital Co of Saudi Arabia Arabia public issue 9 Hong Kong Sukuk Hong Sukuk Euro market 1,000 3.1 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, 2015 Kong public issue CIMB Group 9 Government of Ras UAE Sukuk Euro market 1,000 3.1 JPMorgan, National Bank of Abu Dhabi, Citigroup, Al Hilal Bank Al Khaimah public issue 11 Prasarana Malaysia Malaysia Sukuk Domestic market 999 3.1 RHB Capital, Kenanga Investment Bank, CIMB Group, Aﬃ n public issue Investment Bank, AmInvestment Bank, Maybank 12 Danga Capital Malaysia Sukuk Domestic market 992 3.1 RHB Capital, CIMB Group public issue 13 Khadrawy UAE Sukuk Euro market 913 2.8 Standard Chartered Bank, JPMorgan, HSBC, National Bank public issue of Abu Dhabi, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD 14 Qatar Islamic Bank Qatar Sukuk Euro market 750 2.3 Standard Chartered Bank, HSBC, Citigroup, QInvest, Barwa public issue Bank, Noor Bank 15 Jana Kapital Malaysia Sukuk Domestic market 622 1.9 RHB Capital public issue 16 Rantau Abang Malaysia Sukuk Domestic market 595 1.9 CIMB Group, AmInvestment Bank Capital public issue 17 Jambatan Kedua Malaysia Sukuk Domestic market 560 1.7 RHB Capital, Maybank, Kenanga Investment Bank, public issue AmInvestment Bank 18 Arab National Bank Saudi Sukuk Domestic market 533 1.7 JPMorgan, Deutsche Bank, HSBC, Arab National Bank Arabia public issue 19 Pengurusan Air SPV Malaysia Sukuk Domestic market 525 1.6 Maybank, Bank Islam Malaysia, CIMB Group public issue 20 Sharjah Islamic UAE Sukuk Euro market 500 1.6 Standard Chartered Bank, HSBC, Kuwait Finance House, Dubai Bank public issue Islamic Bank, Abu Dhabi Islamic Bank, Emirates NBD, Al Hilal Bank, Noor Bank 20 Noor Bank UAE Sukuk Euro market 500 1.6 Standard Chartered Bank, Dubai Islamic Bank, South Indian public issue Bank, Citigroup, Emirates NBD, Al Hilal Bank, QInvest, Barwa Bank 20 Axiata SPV2 Malaysia Sukuk Euro market 500 1.6 Deutsche Bank, CIMB Group public issue 20 Arab Petroleum Saudi Sukuk Euro market 500 1.6 Saudi National Commercial Bank, Standard Chartered Bank, Investments Arabia public issue Goldman Sachs, First Gulf Bank, Emirates NBD, Noor Bank 24 Majid Al Futt aim UAE Sukuk Euro market 499 1.6 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Properties public issue Dubai Islamic Bank, Abu Dhabi Islamic Bank 25 Garuda Indonesia Indonesia Sukuk Euro market 496 1.6 Standard Chartered Bank, Deutsche Bank, ANZ, National Bank Global Sukuk public issue of Abu Dhabi, First Gulf Bank, Maybank, Dubai Islamic Bank, Sharjah Islamic Bank, Emirates NBD, Al Hilal Bank, Warba Bank, Noor Bank 26 Malaysia Building Malaysia Sukuk Domestic market 452 1.4 RHB Capital Society public issue 27 Almarai Saudi Sukuk Domestic market 427 1.3 HSBC, Samba Capital Arabia public issue 28 SABB Saudi Sukuk Domestic market 400 1.3 HSBC Arabia private placement 29 Sarawak Energy Malaysia Sukuk Domestic market 386 1.2 RHB Capital, Kenanga Investment Bank, AmInvestment Bank public issue 30 AmIslamic Bank Malaysia Sukuk Domestic market 332 1.0 AmInvestment Bank public issue Total 32,114 100

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

Manager US$ (mln) Iss % US dollar 15.0 1 CIMB Group 5,261 44 16.4 Malaysian ringgit 14.3 2 HSBC 4,360 23 13.6 2.4 3 RHB Capital 4,126 35 12.9 Saudi riyal

4 Maybank 3,082 28 9.6 Euro 0.3

5 Standard Chartered Bank 1,931 19 6.0 6 AmInvestment Bank 1,681 18 5.2 Sukuk Volume by Issuer Nation US$ (billion) 12 Months

7 JPMorgan 1,483 6 4.6 Malaysia 17.3 8 Dubai Islamic Bank 1,302 11 4.1 UAE 5.2 Saudi Arabia 4.2 9 National Bank of Abu Dhabi 1,181 10 3.7 Indonesia 2.5 10 Citigroup 691 5 2.2 Hong Kong 1.0 11 Emirates NBD 565 8 1.8 Qatar 0.8 12 Deutsche Bank 564 4 1.8 Turkey 0.5 13 Samba Capital 560 2 1.7 14 Al Hilal Bank 541 5 1.7 Global Sukuk Volume by Sector 12 Months 15 Kenanga Investment Bank 512 14 1.6 16 Noor Bank 473 6 1.5 15% Finance 5% 17 Natixis 447 2 1.4 39% Government Transportation 18 Aﬃ n Investment Bank 409 5 1.3 11% Construction/Building 19 Abu Dhabi Islamic Bank 276 3 0.9 Oil & Gas 12% Other 20 Hong Leong Financial Group 264 6 0.8 18% 21 First Gulf Bank 250 3 0.8 22 QInvest 223 3 0.7 Global Sukuk Volume - US$ Analysis 22 Barwa Bank 223 3 0.7 24 Saudi National Commercial Bank 194 2 0.6 US$bn US$m 25 Sharjah Islamic Bank 166 2 0.5 18 600 16 Non-US$ US$ 500 26 Bank Islam Malaysia 157 3 0.5 14 12 400 10 27 Morgan Stanley 139 1 0.4 300 8 27 Mitsubishi UFJ Financial Group 139 1 0.4 6 200 4 100 27 Bank of America Merrill Lynch 139 1 0.4 2 0 0 30 Arab National Bank 133 1 0.4 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q 2Q 3Q 4Q 2010 2011 2012 2013 2014 2015 Total 32,114 116 100

Top Islamic Finance Related Project Finance Mandated Lead Top Islamic Finance Related Project Financing Legal Advisors Arrangers 12 Months Ranking 12 Months Mandated Lead Arranger US$ (million) No % Legal Advisor US$ (million) No % 1 Sumitomo Mitsui Financial Group 1,354 1 25.2 1 Salans FMC SNR Denton Group 3,334 2 34.9 2 HSBC 750 3 13.9 3 Riyad Bank 417 1 7.8 2 Milbank Tweed Hadley & McCloy 2,704 1 28.3 4 Mitsubishi UFJ Financial Group 354 1 6.6 4 Mizuho Financial Group 354 1 6.6 6 Banque Saudi Fransi 346 2 6.4 2 White & Case 2,704 1 28.3 7 Mashreqbank 224 2 4.2 7 Union National Bank 224 2 4.2 4 Allen & Overy 411 2 4.3 9 First Gulf Bank 210 1 3.9 10 BNP Paribas 104 1 1.9 10 Citigroup 104 1 1.9 5 Linklaters 311 1 3.3 10 Credit Agricole Corporate & 104 1 1.9 Investment Bank 6 Baker & McKenzie 100 1 1.0 10 Norinchukin Bank 104 1 1.9 10 Sumitomo Mitsui Trust Holdings 104 1 1.9

Top Islamic Finance Related Financing Mandated Lead Arrangers Ranking 12 Months Top Islamic Finance Related Financing Deal List 12 Months Mandated Lead Arranger US$ (mln) No % Credit Date Borrower Nationality US$ (mln) 1 First Gulf Bank 1,516 16 7.3 th 2 Banque Saudi Fransi 1,279 6 6.2 30 Mar 2015 Saudi Aramco Saudi Arabia 9,999 3 HSBC 1,215 11 5.9 16th Mar 2015 Rabigh Reﬁ ning & Saudi Arabia 2,870 Petrochemical 4 Saudi National Commercial Bank 1,131 7 5.5 15th Jan 2015 SapuraKencana TMC Malaysia 2,239 5 Samba Capital 1,100 7 5.3 24th Jun 2015 Jazan Gas Projects Co Saudi Arabia 1,790 6 Abu Dhabi Islamic Bank 830 11 4.0 th 7 Abu Dhabi Commercial Bank 662 5 3.2 18 Jun 2015 Emirates National Oil UAE 1,500 8 Standard Chartered Bank 655 8 3.2 10th Mar 2015 Port & Free Zone World UAE 1,100 9 Riyad Bank 644 3 3.1 17th Apr 2015 Turkiye Vakiﬂ ar Bankasi Turkey 1,021 10 Mashreqbank 614 7 3.0 15th Dec 2014 Arab Petroleum Saudi Arabia 949 11 Emirates NBD 591 8 2.9 Investments 12 National Bank of Abu Dhabi 499 6 2.4 28th Jul 2015 GEMS Education UAE 817 13 Noor Bank 496 6 2.4 16th Aug 2015 ACWA Power International Saudi Arabia 769 14 Alinma Bank 490 2 2.4 15 Sumitomo Mitsui Financial Group 489 4 2.4 Top Islamic Finance Related Financing by Country 12 Months 16 Dubai Islamic Bank 458 6 2.2 Nationality US$ (mln) No % 1 UAE 7,167 18 34.6 17 Arab Banking Corporation 371 6 1.8 2 Saudi Arabia 6,718 6 32.4 18 Gulf International Bank 347 4 1.7 3 Malaysia 2,411 3 11.6 19 SABB 342 3 1.7 4 Turkey 1,890 4 9.1 20 Barwa Bank 340 5 1.6 5 Qatar 1,200 3 5.8 21 RHB Capital 322 3 1.6 6 Kuwait 622 3 3.0 22 Union National Bank 285 5 1.4 7 Cayman Islands 325 1 1.6 8 Egypt 212 1 1.0 23 SG Corporate & Investment Banking 274 3 1.3 9 Pakistan 71 1 0.3 24 ING 269 2 1.3 10 Oman 55 1 0.3 25 Ahli United Bank 258 3 1.3 11 Italy 51 1 0.3 26 Maybank 247 2 1.2 Top Islamic Finance Related Financing by Sector 12 Months 26 AmInvestment Bank 247 2 1.2

28 Kuwait Finance House 241 2 1.2 Oil & Gas 29 Qatar Islamic Bank 222 4 1.1 Utility & Energy 30 Mizuho 221 2 1.1 Finance

Top Islamic Finance Related Financing Mandated Lead Arrangers Transportation 12 Months Real Estate/Property Bookrunner US$ (mln) No % US$ bln0 128 3 4 5 6 7 1 Maybank 2,239 1 23.0

2 Noor Bank 748 4 7.7 Global Islamic Financing - Years to Maturity (YTD Comparison) 3 Mashreqbank 731 3 7.5 2015 4 Saudi National Commercial Bank 666 1 6.8 2014 4 Riyad Bank 666 1 6.8 2013 2012 4 Alinma Bank 666 1 6.8 2011 7 Abu Dhabi Islamic Bank 521 4 5.3 2010 2009 8 Emirates NBD 519 4 5.3 2008 9 Dubai Islamic Bank 376 2 3.9 0% 20% 40% 60% 80% 100% 0-3yrs 3-5yrs 5-7yrs 7-10yrs 10+yrs 10 Standard Chartered Bank 304 2 3.1

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

events training MARCH 2016 JANUARY 2016 IFN CIS & Russia 15th Moscow, Kazakhstan Forum 26th – 28th Islamic Finance Jakarta, Indonesia Qualiﬁ cation 22nd IFN China Forum Beijing, China th Shariah Risk & Kuala Lumpur, APRIL 2016 27 Governance for Islamic Malaysia 6th – 7th IFN Asia Forum Jakarta, Indonesia Financial Institutions

th 21st IFN Europe Forum Luxembourg 28 Legal & Operational Kuala Lumpur, Impact of Regulatory & Malaysia MAY 2016 Shariah Standards for Islamic Banking Products

May IFN Iran Forum Tehran, Iran FEBRUARY 2016

2nd – 4th Advanced Asset & Kuala Lumpur, IFN Project & Liability Management for Malaysia 24th Infrastructure Finance Dubai, UAE Financial Institutions Forum 21st – 23rd Structuring Sukuk & Dubai, UAE SEPTEMBER 2016 Islamic Capital Markets Products 6th IFN Investor Forum Kuala Lumpur, Malaysia 24th – 25th Islamic Trade Financing Kuala Lumpur, 28th IFN Turkey Forum Istanbul, Turkey Products: Key Shariah, Malaysia Structuring & Legal OCTOBER 2016 Issues

Africa Islamic Finance 28th – 29th Islamic Financial Muscat, Oman 17th – 18th Abidjan, Côte d’Ivoire Forum Products: Best Practices & Applications 24th IFN Kuwait Forum Kuwait City, Kuwait MARCH 2016 NOVEMBER 2016 15th – 17th Islamic Investment Kuala Lumpur, IFN Saudi Arabia Products & Investment Malaysia 28th Jeddah, Saudi Arabia Forum Strategies

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90 North Real Estate Partners 11 European Bank for Reconstruction National Bank of Pakistan 17 AAOIFI 24, 30, 34 and Development 33 National Bank of the Kyrgyz Republic 11 Abu Dhabi Islamic Bank 14 EXIM Bank of Malaysia 31 Noor Bank 17 Abu Dhabi Islamic Bank (Egypt) 11, 32 Export Guarantee Fund of Iran 33 Novin Investment Bank 20 AIG 29 Financial Stability Board 11 OCBC Al-Amin Bank 32 Al Baraka Bank – Egypt 32 Fitch 12, 36, 37 Pakistan International Airlines 17 Al Meezan Investment Management 35 Franco-American Alliance for Islamic Finance 30 Palestine Islamic Bank 34, 35 Al Tamimi & Company 24 Franklin Templeton 9 Pension and Insurance Authority 35 Al Wasatah Al Maliah Company 35 Gatehouse Bank 32 Phoenix Assurance of Zambia 35 Algiers Stock Exchange 33 Grant Thornton 37 PIMCO 9 Alpha Circle 36 Gulf African Bank 35, 37 Qatar Faculty of Islamic Studies 18 Amana Bank 11 Gulf International Bank 34 Amundi Asset Management 16 Halal Industry Development Corporation 32 Qatar Islamic Bank 14 AOSSG 33 Historic Automobile Group International 15 Qatar Petroleum 34 Asian Development Bank 33 Hogan Lovells (Middle East) 17 RAM 36, 37 Asian Infrastructure Bank 33 ICD 10, 25, 26, 33 RHB 16 Askari Bank 17 IDB 10 RHB Investment Bank 4, 32 Aspion 37 IFFIm 37 S&P 12, 33, 36 Bahrain Mumtalakat Holding Company 36 IFSB 11 Sabb Takaful 37 Balcioglu Selçuk Akman Keki Avukatlik Ortakligi 8 IIFM 22, 33 Saudi Automotive Services Company 34 Bank Alfalah 17 IIRA 36 Saudi Stock Exchange 33, 35 Bank Islam Brunei Darussalam 17 IMF 9 Sberbank of Russia 36 Bank Negara Malaysia 7, 12, 27, 31 Indonesian Stock Exchange 31 SECP 11 Bank of England 11 Indosat 31 Securities and Exchange Organization of Iran 20 Bank of Industry and Mine 34 Investcorp 33 Securities Commission Malaysia 6 Bank of Khartoum 36 IOSCO 11 SEDCO Capital 11 Bank of Korea 14 Iran Mercantile Exchange 20 Sigma Capital Group 32 Bank of Maldives 32 JCR-VIS Credit Rating Company 36 Special Power Vehicle 31 Basel Committ ee on Banking Supervision 11 KazExportGarant 33 BDB Infra 32 KDU University College 31 State Bank of Pakistan 12, 31 BISTECH 8 KEXIM 14 Tadhamon Capital 35 Capital Market Authority of Kuwait 35 KFH Capital Investment Company 35 Tadhamon International Islamic Bank 35 Capital Market Authority of Saudi Arabia 35 Khazanah Nasional 6 Tehran Chamber of Commerce, Industries, Capital Markets Board of Turkey 8 King & Spalding 4 Mines and Agriculture 20 Central Bank of Bahrain 22, 35, 36 Knight Frank 15, 16 Tehran Stock Exchange 20 Central Bank of Egypt 32 Konooz Capital 13 Tose’e Melli Investment Company 20 Central Bank of Iran 33 Korea Investment and Securities 14 Tose’e Melli Mining and Industries Company 20 Central Bank of Iraq 24 KPMG 37 Treet Corporation 36 Central Bank of Oman 22 Lloyd’s 29 Trust Bank 10 Central Bank of the UAE 34 London Stock Exchange Group 37 UMW Holdings 36 CIMB 6, 7 Malaysian Airports Holdings 5 United Bank 17 CIMB Investment Bank 5 MARC 14, 36 United Overseas Bank 36 CIMB Islamic 5, 37 Marsh Takaful Brokers 28 US Federal Reserve 9 Citibank 17 Mashreqbank 17 Wafra Investment Advisory Group 11 COMSATS IIT 23 McKinsey 10 Warba Bank 11, 17 Construction Guarantee 14 Moody’s 33, 34 Credit Agricole 16 MRCB Southern Link 36 Wealth Insights 15 Deloitt e & Touche-Bahrain 22 Nakheel 31 Wego 36 DRB-HICOM 5 NASDAQ 8 Woori Bank 14 Egyptian Electricity Transmission Company 32 NASDAQ Dubai 13, 31, 33 World Bank 9, 10 Emirates Global Centre for Accreditation 34 Nasirs Solicitors 21 World Bank Group 4 Emirates NBD 14 National Bank of Bahrain 36 Ziraat Bank 8 Ethika Investments 11 National Bank of Kazakhstan 11 Ziraat Katilim 11

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