A Perennial Problem: SME Access to Finance

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(All Cap) Islamic Omani Islamic Consolidation UAE Islamic 1100 investors banks eye a likely reality ﬁ nance market 1050 eyeing Asian opportunities for Malaysian expands with 1,009.02 1000 infrastructure in private Islamic entry of new 994.86 950 1.4% opportunities...6 healthcare insurers in player...12 900 W T F S S M T services...8 2016...10

There are 400 million SMEs in see access to fi nance as a severe barrier. excluded from the formal banking developing countries, yet only 15% While 42% of these businesses have sector, with an Islamic fi nancing gap of have access to credit — while 40% are a checking account, just 8% have an an estimated US$13.2 billion. “Islamic unserved in terms of enterprise fi nance overdraft and 9% a loan, while 12% have fi nance is currently gaining more and 25% see access to fi nance as a major access to credit. and more visibility and is in a bett er barrier to growth. These fi gures are position to assist the SME industry. compelling, but come as no surprise — Interestingly, however, the fi gures Islamic fi nance, with its equity-based the case for SME fi nancing is a constant improve as we move eastward — partnership schemes, off ers a truly call in the industry. So what is actually Indonesia has 41 million enterprises workable alternative to conventional being done to fi ll this gap? LAUREN but a far smaller funding gap of US$27 banking, a partnership that also embeds MCAUGHTRY fi nds out that actions billion and only 15% see access to the participating fi nancial institution as speak louder than words. fi nance as a major barrier — while in a provider of advice and consultancy,” Malaysia 2.6 million SMEs see a gap he commented at the launch of the Facts and ϐigures of just US$19 billion and only 12% are World Islamic Economic Forum in Kuala SMEs contribute 43.5% to total global concerned about fi nancial access. In Lumpur, where SMEs are a focus for the employment (according to the World total, just 17% of SMEs in East Asia see event. Bank) and account for 57.8% of new jobs fi nancing as a barrier, compared to 25% — a vital statistic given the estimated in developing countries as a whole. The correlation between Islamic 600 million jobs the world will need by Sub-Saharan Africa has the biggest fi nancing opportunities and SME 2030 to keep pace with the growth of the problem of the developing nations requirements has long been global labor force. In terms of economic covered by the database, with 49% promoted — in 2012, the OIC growth, SMEs contribute up to 33% of of enterprises struggling with launched a special working GDP in developing countries. Yet the fi nancing requirements. group for SMEs that set IFC estimates a funding gap of up to its key target to: “develop US$2.4 trillion for developing market Islamic opportunity appropriate policies to SMEs — of which around US$1.3 trillion The issue is equally urgent accelerate the convergence is in G20 nations. for the Islamic industry. between Islamic fi nance Malaysian prime and SME It seems as if the problem is more severe minister Najib Razak industries. In in some markets than others. According last week highlighted this context, to the IFC Enterprise Finance Gap that around 35% of promote the database, in the MENA region a total of SMEs in the Middle use of Islamic 21 million enterprises account for a total East and North fi nance credit gap of US$359 billion while 42% Africa are currently continued on page 3

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Volume 12 Issue 45 Association of Chartered Moody’s downgrades DEALS Islamic Financial outlook on Oman’s banking IFN Rapids ...... 2 Indonesia’s Sukuk auction Professionals; to launch system to negative IFN Reports: new qualifi cations in 2016 receives IDR3.33 trillion Fitch affi rms ratings on • Islamic investors eyeing Asian infrastructure (US$244.75 million) in bids; INCEIF launches INCEIF Saudi Arabian banks opportunities • IFN Global Trendswatch • awards IDR1.88 trillion Endowment Fund to invest Islamic International Rising demand for private healthcare services in (US$138.18 million) in Islamic fi nance talent Rating Agency reaffi rms Oman creates opportunities for Islamic banks development Abu Dhabi Islamic Bank ratings of Bank ABC • IFN Weekly Poll: Saudi Arabia’s sovereign repays US$750 million Australia and New Islamic credit rating has recently been downgraded Sukuk in full without Zealand Banking Group RAM revises outlook on by S&P from ‘AA-/A-1+’ to ‘A+/A-1’. Will refi nancing closes fi rst commodity Saudi Arabia’s global-scale Murabahah real estate this downgrade have a signifi cantly negative Majid Al Futt aim’s sovereign rating to negative eff ect on Sukuk issuances out of the country sophomore Sukuk issuance fi nancing in Australia Unfavorable asset in the coming year? • Consolidation a likely att racts US$1.6 billion in orderbook – highest quality trends and reality for Malaysian Islamic insurers as market ASSET oversubscription rate for underperformance push becomes more competitive in 2016 • Cagamas MENA corporate Sukuk in MANAGEMENT Standard Chartered’s stimulates secondary Sukuk market with maiden 2015 ratings down Maybank Asset Islamic paper reopening • Sovereign Sukuk: An Hascol Petroleum proposes Sunway Treasury Sukuk Management partners with Indonesian week • UAE Islamic fi nance market PKR2 billion (US$18.93 to raise RM100 million Hastings Management to expands with entry of new player ...... 6 million) Sukuk to fund (US$22.91 million) via one- establish ASEAN-focused expansion plans and month Islamic commercial Shariah compliant global restructure debt IFN Analysis: papers infrastructure fund Malaysia maintaining lead in the Islamic fi nance AM Best places ratings of Oman Telecommunications Alkhabeer Capital exits world ...... 13 National Takaful Company Co seeking approval to from Alkhabeer Real Estate under review with negative Islamic trade fi nance ...... 14 issue Sukuk Fund I; fund delivers 40.5% implications Case Study: Emirates Airline in net return APICORP Sukuk — the largest debut Sukuk by a CIMB Islamic’s upcoming considering funding fl eet BMA Asset Management RM5 billion (US$1.16 supranational...... 15 expansion with Sukuk of up Company signs trust deed billion) Basel III Sukuk wins Column: to US$1 billion for upcoming Islamic fi nal rating of ‘AA+IS’ A lett er from Amin ...... 16 Jimah Energy Ventures to income fund Lumut Maritime IFN Country Correspondents: pay principal and profi t of Public Mutual expands Terminal’s Islamic Malta; India; Morocco; Saudi Arabia; its Islamic facility on the Islamic fund portfolio with th securities maintain ‘A1/ Kazakhstan ...... 17 12 November 2015 new Shariah compliant Stable’ rating Special Reports: RHB Islamic Bank to pay equity fund Debt capital markets: 2015 update ...... 21 Sukuk profi t on the 16th Fitch affi rms ‘A+’ rating Malaysia: Sailing through the perfect storm ... 22 November 2015 of Kuwaiti Islamic banks TAKAFUL including Kuwait Finance Sources of funds ...... 23 Alizz Islamic Bank House and Boubyan Bank Country Feature: NEWS partners with Takaful Turkey remains an essentially untapped market for Aman Lagenda secures Oman in motor Takaful MOVES Islamic fi nancial services ...... 24 RM25.6 million (US$5.97 policy distribution Obeid Al Zaabi steps up as Sector Feature: million) Murabahah facility IFSB issues exposure acting CEO of Securities Islamic trade fi nance still in its infancy ...... 25 from Affi n Islamic Bank draft on re-Takaful; to and Commodities Takaful Feature: hold public hearing for Otoritas Jasa Keuangan Authority The Takaful impasse – Part 2 ...... 26 due to release six rules comments on Shariah capital market Jaiz Bank appoints Mahe Abubakar as acting Islamic Finance news ...... 27 before end of 2015 RATINGS managing director/CEO Deal Tracker ...... 33 Securities and Exchange The Islamic Corporation Al Rajhi Takaful appoints REDmoney Indexes ...... 34 Commission of Pakistan for the Development of the former Oman Insurance Eurekahedge data ...... 36 grants in-principle approval Private Sector secures ‘AA’ Company CEO as Performance League Tables ...... 38 to integrate existing rating exchanges into one single independent board member Events Diary...... 42 trading platform Moody’s maintains stable Company Index ...... 43 outlook on Kuwaiti banking Subscription Form ...... 43 Chartered Institute of system Islamic Finance replaces

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.

A perennial problem: SME access to ﬁ nance Continued from page 1 products, which are more linked to the Figure 1: Percentage of formal SMEs underserved in emerging markets real economic activity, to enable SMEs in the member countries to tap into Formal SMEs’ use of ęnancial institution loans (bank loans and overdraĞs only) the rapidly growing pool of Shariah and ęnancing constraints Percent of total enterprises in emerging markets (i.e. excluding high-income OECD) compliant funds.”

27-33 100 The G20 presidency of Turkey has also ------propelled the problem once more to the 35-43 fore, and the country has announced ------a number of SME priorities during its tenure including the introduction of 20-25 reforms to unlock private sector SME ------8-10 investment, the creation of a World ------SME Forum to channel SME concerns to B20 and G20 stakeholders, promoting Well-served: Underserved: Unserved: Do not need Total formal non-traditional funding sources such Have a loan and/ Have a loan and/ Do not have a a loan SMEs in as private equity, and developing or overdraĞ or overdraĞ loan or overdraĞ emerging and no ęnancing but ęnancing but need a loan markets innovation and technology. constraint constraints A serious gap This is vitally important because, Source: World Bank/IDB G20 Islamic Finance Policy Paper: ‘Leveraging Islamic Finance for SMEs’ despite all the fi ne words and fancy promises, Islamic SME fi nancing is still extending profi t-and-loss sharing to 4% — eff ectively directing bank funds dismally small compared to total SME equity-based fi nancial instruments toward SMEs by making it cheaper to fi nancing even in its current parlous such as Musharakah and Mudarabah to lend to small businesses than to retail state. Some countries are doing well SMEs, disregarding the core principles customers. — Malaysia, for example, saw its total advocated by Islamic fi nance and SME Islamic fi nancing exposure grow representing a lost opportunity to 40.5% year-on-year to exceed US$10 fi nancially include SMEs underserved billion. However, according to a 2014 by interest-based banking providers,” Islamic ϔinance study from the IFC, the proportion of it stated. “This unmet… appetite by Shariah compliant fi nancing to total Islamic banks is not as perceived only is currently SME fi nancing in a range of sample a matt er of risks anticipated with SME countries is signifi cantly lower than the fi nancing but also a result of depositor gaining more and established preference for compliant expectations and the lack of suffi cient products. human capital capable to structure and more visibility and is manage such equity-based fi nancing In Egypt, for example, Shariah instruments.” in a better position compliant SME loans account for just 7% of total loans — while the demand for Clearly, the issue is not demand but to assist the Islamic products is estimated at around supply. So what can be done on a 20%. In total, the survey estimated SME industry practical level to address this? that across the MENA region around 32% of SMEs were in fact completely This resulted in many Turkish excluded from fi nancing due to a lack Leading by example banks rushing to focus on the newly of compliant products. The World Turkey, although it has struggled with high-margin SME sector, including Bank in a recent report on its own issues over the past year, is Citigroup-owned Akbank, Turkiye Is ‘Leveraging Islamic Finance a pioneer in this fi eld and should Bankasi, Turkiye Vakifl ar Bankasi TAO for SMEs’ also noted that serve as an example to countries and Turkiye Garanti Bankasi. Akbank the risk-averse approach seeking to stimulate and (which last year launched a range of from Islamic banks has serve their SME sector. Two new products including a credit card compounded this problem, years ago, Turkey’s Banking aimed at businesses with less than TRY1 leading to a narrow product Regulation and Supervision million (US$342,384)) saw a 50% growth range and limited options Agency slashed in SME lending in 2013 and targeted for enterprises. “The provisioning ratios 50,000 new customers in 2014. unmet demand of on SME lending SMEs through to 0.5%, as well as The state institutions also support Islamic banks is increasing ratios the sector. Turk Eximbank, the state- mainly att ributable on consumer to the failure in lending by 300bps continued on page 4

A perennial problem: SME access to ﬁ nance Continued from page 3

term Islamic fi nancing for SMEs and Figure 2: Demand and supply side of Islamic SME ęnancing exporters, intermediated by Türkiye 90% Sınai Kalkınma Bankası (TSKB) through the participation banks in Turkey, with the credit line guaranteed by the 67% Turkish government. I suggest the 25% 25% 20% immediate 11% 14% 7% establishment of a working Egypt Pakistan Saudi Arabia Jordan group, among OIC Islamic SME lending to total SME lending Preference for Shariah compliant products institutions and Source: World Bank/IDB G20 Islamic Finance Policy Paper: ‘Leveraging Islamic Finance for SMEs’ specialized business forums like WIEF, to owned export agency, has been active Public-private participation in developing a wide range of products Another key element is the interaction study the ways and designed to develop and support SMEs between development agencies and — including a new post-shipment the private sector. The IDB and the means of leveraging credit program targeted at small ICD are of course invaluable players businesses; and a Eurobond issuance in this area, and IDB president Dr support by Islamic program allowing it to provide long- Ahmad Mohamed Ali at WIEF last week term fi nancing for exporters, which called upon OIC member countries to ϔinance to has seen long-term fi nance increase to collaborate further in developing SME 24% of its total loan portfolio in the last capabilities. “I suggest the immediate SMEs three years. “SMEs were always our establishment of a working group, fi rst priority,” CEO Hayrett in Kaplan among OIC institutions and specialized told WorldFolio this year. The agency business forums like WIEF, to study the requires a bank guarantee for its export ways and means of leveraging support “This line of credit is an example of how loans, but under the new credit program by Islamic fi nance to SMEs, through conventional fi nancing provided by an its credit insurance policy can now be research and exchange of expertise,” he international development organization used as a guarantee — allowing it to said. He confi rmed that the IDG Group can be channeled to meet the demand provide fi nance to SMEs without the is committ ed to providing solutions for for fi nancing according to Islamic law,’” need for further collateral. And despite the development of the required legal, noted the World Bank. The distribution concerns over exposure and risk, Kaplan regulatory, supervisory and Shariah is enacted through a subsidiary highlights the benefi ts: “The loans to frameworks for SMEs and praised the fi nancing agreement under a Wakalah SMEs are much productive and eff ective eff orts of nations such as Turkey in their structure, whereby the participation in terms of export capacity creation, focus on supporting the sector. bank will act as an agent to fi nance the even if the amount is small. As a matt er enterprise on behalf of TSKB. of fact, 70% of our customers are SMEs, Collaboration is already vibrant. In which we are proud of.” 2014, the ICD joined forces with the Cross-border opportunities European Bank for Reconstruction Additionally, as cross-border activity It is not just the conventional space that and Development to launch a fund increases and companies seek is forging ahead with SME lending in targeting SMEs in the southern and new opportunities in competitive Turkey, however. The Turkish Islamic eastern Mediterranean region to environments, Islamic fi nance has the banking sector has almost double the provide fi nancing through equity- opportunity to make a real diff erence SME lending portfolio to total lending based instruments along with technical in developing markets — if only it can portfolio (46%) compared to the assistance and advice to fi nancial do so in time. “The challenge is gett ing conventional sector (25%). “The Turkish institutions and investee fi rms. In July more serious as the economy opens SME fi nancing model should be further last year, the World Bank also approved up with developments like the Asean researched and considered as a potential a US$250 million loan to Turkey — of Economic Community agreement, role model to be replicated across which US$160 million was directed EMDCs,” emphasized the World Bank. toward improving access to long- continued on page 5

A perennial problem: SME access to fi nance Continued from page 4 which will come into eff ect soon, Malaysia and Turkey are making great leading to massive corporate foreign The loans strides forward but there is still a very investments that will bring foreign long way to go. SMEs to Indonesia,” Bank Indonesia to SMEs are deputy governor Perry Warjiyo said The IFC in its latest report highlighted a last month. “This is the growing trend much productive and potential gap of US$8.6-13.2 billion for in the global business model, and has Islamic SME countries across nine become my personal worry. We’re effective in terms surveyed countries in the Middle East not talking about developing Islamic including Iraq, Pakistan, Yemen, Saudi fi nancial services as they are, but the of export capacity Arabia, Egypt, Lebanon, Morocco, development of Indonesia’s economy Tunisia and Jordan. But perhaps more and business environment in general.” creation, even if the worryingly, it found that only 36% of banks (out of over 150 surveyed) had an Bank Indonesia recently started a amount is SME off ering. How can the Islamic pioneering new project to develop SMEs fi nance industry claim to contribute to through Islamic banking in East Java, small the real economy, if it fails to support and Islamic banks are one of the most the very engine of growth on which that concentrated channels of SME fi nancing Searching for an answer economy is built? Perhaps it is time to in the country — with a reported 80% The situation is simple. There is a huge reevaluate priorities, review principles of total fi nancing going to SMEs. But it demand for Islamic SME products, and and return to the basics of what Islamic is by no means the same story across a limited supply. This must change, and fi nance is all about. the board — and while everyone sings the funding must be made available about the importance of SMEs, the to do so, if Islamic fi nance is to make a fi gures clearly show that actions do not real and material impact on the overall always follow words. economy. Markets like Indonesia, SHARIAH PORTFOLIOS CRAFTED BY GLOBAL EXPERTS

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Islamic investors eyeing Asian infrastructure opportunities

World economic powers are shifting. Traditionally concentrated in the west, the rise of Asian economies have placed these nations on the business map and global investors are turning their heads toward this region; but how has this meteoric rise translated into Islamic investment opportunities? VINEETA TAN fi nds the answer in a cross-border partnership which has brought together a conventional player and a familiar name in the Shariah investment landscape. MAMG. This partnership will also pave term investment horizon; and in recent Owing to a burgeoning middle class of the way for MAMG to tap opportunities years, it has increasingly adopted an Asian growing affl uence, rapid urbanization, in China and India for the fi rst time. fl avor. In Malaysia for example, while and disproportionately youthful the Islamic fi nance market is expected population, the ASEAN region is The pioneering dollar infrastructure fund to slow down, however, the country’s experiencing high economic growth is also signifi cant in that not only would robust infrastructure projects under its becoming the fastest-growing economy it broaden and diversify the investment 11th Malaysia Plan are anticipated to drive in Asia after China with GDP expanding product stable for the Shariah-seeking Sukuk sales. On a more global scale, the 300% since 2001 and expected to double community, but it also opens doors for IDB has engaged Indonesia and Turkey to US$4.7 trillion over the next fi ve years Islamic banks to provide Islamic fi nancing to co-found the Islamic Infrastructure (according to IHS). Central to this theme support both at the acquisition stage Investment Bank with talks of anchoring of phenomenal growth is infrastructure and Sukuk at the expansion stage of the the bank in Indonesia. The multilateral development and Malaysia’s Maybank upcoming fund. institution is also exploring opportunities (through its asset management arm) as with the proposed Asian Infrastructure well as Australia’s Hastings Management Infrastructure has long been at the heart Investment Bank, China’s answer to the are leveraging this deep need — US$7 of Islamic fi nance development due to World Bank and a tie-up between the two trillion over the 2014-30 period according its compatibility with Shariah investing organizations would spur the utilization of to McKinsey Global Institute — across the strategies, ie tangible assets on a long- Shariah compliant fi nancing instruments. ASEAN bloc for Shariah capital gains.

“Maybank has identiﬁ ed [Islamic infrastructure investments] as an opportunity and we know enough of the global market to recognize that that is true. There are relatively few avenues for that large growing capital pool to gain exposure into the infrastructure asset class and therefore it is a great business opportunity to create a product to ﬁ ll the gap,” shared Robert Campbell, the director of Asia at Hastings Management, with IFN.

Hastings recently formed a partnership with Maybank Asset Management Group (MAMG) to explore Shariah compliant infrastructure investment opportunities in Asia which is to culminate into a US$1 billion Malaysia-domiciled Islamic global infrastructure fund. IFN has learned that the two entities are looking at an initial close of US$250 million and are planning to host international roadshows in the next few months with an eye on launching the fund in the ﬁ rst quarter of 2016.

This collaboration marks the Melbourne- based infrastructure investment specialist’s foray into the Islamic space and the ﬁ rst Australian partnership for

IFN Global Trendswatch

What’s been going on in the world this week? LAUREN MCAUGHTRY brings you an update of the most signifi cant economic, regional and global events, issues and trends that have the potential to aff ect the Islamic fi nance industry.

• Chinese equities continue their upwards trajectory, but maritime tensions between the US and China are making markets jitt ery.

• Low oil prices are contributing to elevated credit risk for US banks, warns a new report from US banking regulators — with the value of weak loans nationwide up by 9.4% from last year.

• Credit Suisse, JPMorgan, Freshfi elds Saudi Forum Bruckhaus Deringer and Holman 30th November 2015 Fenwick William have all been Le Meridien Hotel, Jeddah censured by the UK Takeover Panel for conduct over the listing of Bumi, a London-listed Indonesian coal mining fi rm, in 2010 — the most Capitalizing on Saudi Arabia's Rapid and Sustainable Growth in the severe reprimand the panel has Islamic Capital Markets issued in over fi ve years, according to the FT. The IFN Saudi Arabia Forum, now in its 4th year consistently attracts global market players eager to gain access to the highly lucrative Saudi Arabian market. With its solid regulatory framework, and firm foundation in Islamic banking • Fitch Ratings’s downgrade of the Saudi Arabian market will continue to prosper and innovate. Standard Chartered from ‘AA-‘ to th ‘A+’ saw shares drop 5% on the 5 As the kingdom continues its drive to open up more opportunities have become available to international banks November, even as the bank tries eager to penetrate the local market. This year’s forum will once again bring together leaders in the local and global to raise support for its upcoming markets to share expertise and discuss cross border opportunities in this thriving market. GBP3.3 billion (US$5.06 billion) rights issue. The bank has seen shares lose almost two-thirds of their value in the last three years.

• Food prices are being hit by the adverse weather conditions of El Nino, with sugar and palm oil the LEAD PARTNER latest to be aﬀ ected by droughts in Asia and ﬂ oods in Latin America.

According to the UN Food and LEAD LAW PARTNER MULTILATERAL STRATEGIC PARTNER ASSOCIATE PARTNERS Agriculture Organization, food prices rose the highest in years this

month — up almost 4%. EXECUTIVE PARTNERS

• The dollar continues to rally against the euro, as the Fed pursues a tightening policy while the European

Central Bank continues its stimulus EXCLUSIVE KNOWLEDGE PARTNER LANYARDS SPONSOR RESEARCH PARTNER LEAD MEDIA PARTNER STRATEGIC MEDIA PARTNERS program.

MEDIA PARTNERS

Rising demand for private healthcare services in Oman creates opportunities for Islamic banks

As Oman’s population continue to retail space within the premises. The expects this complex to support the rise along with the prevalence of initiative is expected to be completed in government’s goal of meeting the chronic diseases, VINEETA TAN 2018. rising demand for international quality explores how the strengthening focus health services and position Oman as a on the healthcare segment has created “Given the exclusive nature of this formidable medical tourism hub. opportunities for Islamic banking project, we have been receiving a lot of institutions as the service continues to interest from investors locally and within Offi cial data from the National Center outstrip supply. the GCC to participate in this healthcare for Statistics and Information (NCSI) opportunity. As we speak, we have local shows that medical tourism in Oman is “The demand for private health care Islamic banks and windows willing to on the rise. More than half (69%) of the is rising due to the changing needs of fund this hospital in a Shariah compliant increased number in outbound visitors the population. There are a number manner,” revealed Abdul Samad Al (up 13.5% year-on-year) in May 2015 are of Omanis seeking treatment abroad Maskari, CEO of Al Madina Investment. local citizens and the NCSI has att ributed because certain specialized treatments it to medical reasons. are not available here yet. This creates Local players are not the only a vacuum in the sector that the private ones looking to capitalize from Health care has become a priority for sector is well placed to fi ll,” explained this opportunity as the project is the government as encapsulated by Abdul Rahman Barham, CEO of Al also receiving strong interest from Oman’s Health Vision 2050 which will Madina Real Estate. international hospital providers from see, among others, the creation of 10,000 Malaysia, Turkey, Singapore, Austria health centers to meet the demand from and Germany to manage and operate the a bigger population; the World Bank proposed hospital, to which Al Bashayer projects the total population of Oman — The demand Clinics is acting as technical partner. which currently stands at 4.2 million — to exceed 6.1 million by 2050. for private Mohsin Shaikh, the director and head of health care is Islamic fi nance at Al Madina Investment, rising due to the 22nd Annual changing needs SUPPORTED BY of the population. There are a number of Omanis 1, 2 & 3 December 2015, The Gulf Hotel, Kingdom of Bahrain seeking treatment NEW REALITIES, NEW OPPORTUNITIES. The Global Islamic Financial Ecosystem Gathers this December abroad because @WIBC_2015 certain specialized treatments are not HIGH PROFILE SPEAKERS available FINANCIAL TECHNOLOGY here yet

Al Madina Real Estate is part of the Al MULTIPLE RESEARCH INSIGHTS Madina Investment Group which on the WIBC LEADERBOARD 4th November 2015 revealed its ambitious 2 STREAMS plans to establish the Sultanate’s ﬁ rst integrated healthcare complex — the Al Madina International Hospital — BANKING LEADERSHIP STREAM ASSET MANAGEMENT STREAM which will comprise a 225-bed tertiary ORGANISED BY care hospital, 120 keys three-star hotel WIBC2015.COM apartments, 180 residential apartments as well as a ﬁ tness center and dedicated

IFN Weekly Poll: Saudi Arabia’s sovereign credit rating has recently been downgraded by S&P from ‘AA-/A-1+’ to ‘A+/A-1’. Will this downgrade have a signiϐicantly negative effect on Sukuk issuances out of the country in the coming year?

Following last week’s downgrade of Saudi Arabia's sovereign credit rating has recently been downgraded by S&P from Saudi Arabia’s sovereign rating from 'AA-/A-1+' to 'A+/A-1'. Will this downgrade have a signięcantly negative eěect on Sukuk ‘AA-/A-1+’ to ‘A+/A-1’, concerns have issuances out of the country in the coming year? circulated on the adverse aff ects of this credit rating cut. IFN therefore asks the industry how this action Yes would infl uence Saudi Arabian Sukuk No off erings over the next 12 months. NABILAH ANNUAR explores.

S&P at the beginning of November lowered its unsolicited (the Kingdom terminated its rating agreement with the agency) long and short-term foreign and local currency sovereign credit 100% ratings on the Kingdom of Saudi Arabia to ‘A+/A-1’ from ‘AA-/A-1+’ with the outlook remaining negative. its rating unchanged. Moody’s says it market sentiment, with 100% voting Not expecting a rebound in oil expects lower oil revenues to result in that the downgrade is not signifi cantly prices, S&P sees general government “continued large budget defi cits” and, aff ecting upcoming Sukuk issuances. defi cits of 10% of GDP in 2016, 8% although, measures have been taken For the fi rst three quarters of the year, in 2017, and 5% in 2018, based on recently to rein in expenditure, further Saudi Arabia recorded the highest value planned fi scal consolidation measures. cuts will be required, without which per deal (in the GCC) of US$1.3 billion Primarily refl ecting the sharp drop in the Kingdom’s creditworthiness will be totaling US$8 billion from six issuances. oil prices, the agency also anticipates aff ected. the Kingdom’s general government “An overall assessment (of the GCC) fi scal defi cit to increase to 16% of its While it has a substantial fi nancial clearly indicates that the issuances of GDP in 2015, from 1.5% in 2014, with cushion to weather the fall in oil prices, debt instruments have increased in hydrocarbons accounting for about 80% its foreign assets reportedly at over 2015 and this could be att ributed to of the country’s fi scal revenues. US$670 billion are down from a peak lower oil prices. A similar trend was of US$746 billion at the end of 2014, observed during the low oil price period The rating agency has also revised its while its debt of 1.6% of GDP in 2014 of 2009. Taking into consideration that transfer and convertibility assessment is expected to rise to 6.4% at the end economies in the GCC region are driven on the Kingdom to ‘AA-’ from ‘AA’. Its of 2015, as the government fi nances its primarily by hydrocarbon revenues, negative outlook refl ects the challenge defi cit by drawing down on reserves the lower oil price is likely to cause a of reversing the marked deterioration and issuing domestic bonds. liquidity drain in the region and the in Saudi Arabia’s fi scal balance. The governments are expected to run into country’s ratings could be further According to Moody’s, government fi scal defi cits. lowered within the next two years if the deposits at the Saudi Arabian Monetary government do not achieve a sizable Authority during the course of 2015 Given the lower oil prices anticipated and sustained reduction in the general through August declined by SAR302 throughout 2016, the corporates and the government defi cit or its liquid fi scal billion (US$80.5 billion), equivalent to governments are likely to turn to debt fi nancial assets fell below 100% of GDP. 73% of its estimated defi cit for the year. capital markets for fi nancing. The recent Nevertheless, it is believed that these debt issuances by Saudi Arabia and A few days later, Moody’s in a report budget and fi nancing estimates would Oman are testament to the increased said it would not change its risk rating still leave the government in a strong issuances that can be anticipated on Saudi Arabia. Although adopting fi nancial position at the end of 2015. in 2016,” commented Irfan Ahmed a diff erent rating stance from S&P, the Naheem, an analyst at Marmore Mena rating agency acknowledged Saudi’s On the back of such critical assessments, Intelligence, in a recent report to IFN. weakening fi scal position while keeping the poll results conveyed an optimistic

Consolidation a likely reality for Malaysian Islamic insurers as market becomes more competitive in 2016

VINEETA TAN writes that 2018 deadline set by the central bank for implementation of new regulations are composite insurers to separate their life/ likely to drive the Malaysian Takaful Family and General insurance business industry toward rationalization as as stipulated by the more stringent players — both domestic and foreign Islamic Financial Services Act 2013. They — grapple with stricter rules and stiff er have since the 30th June 2015 submitt ed competition over the next few years. their license plans to the regulator; however, details of their strategies have The Malaysian Islamic insurance yet to be revealed. landscape is expected to be more competitive next year when a new set Nonetheless, big changes are afoot of liberalization measures come into for the industry. “With license split eff ect including the removal of set tariff s considerations, the next few years will in motor and fi re insurance. These see some restructuring and M&A activity initiatives, spelled under the country’s within the industry,” confi rmed Brandon Life Insurance and Family Takaful Bruce, a partner at EY Malaysia. The Framework, is part of the country’s most recent merger involving a Takaful eff orts to boost the Takaful penetration entity was MetLife’s acquisition of both “Over the medium to longer term, the rate to 25% by 2020 in line with the AmLife Insurance and Am Family growth potential for the Malaysian country’s goal of becoming a high- Takaful last year. Takaful industry will be dependent on a income nation within the set time frame; number of factors, chief of which are its and according to EY and the Malaysian Despite increased competition and a ability to tap underserved markets and Takaful Association (MTA) in their latest slower economy in 2016, the Islamic enhance consumer awareness of Takaful Takaful report, the tougher operating insurance industry is nonetheless and further penetrating commercial environment is likely to compel operators expected to maintain its double-digit risk,” said Bruce. As at the end of 2014, to consolidate in order to bett er navigate growth rate of between 12-13% according the Shariah compliant insurance market the market. to EY, in line with the 12.4% cumulative reached an estimated RM6.3 billion annual growth rate in net contributions (US$1.47 billion) in 2014, according to In addition to these liberalization eff orts, registered over the 2009-14 period. fi gures by the MTA and EY. Islamic insurers are also closer to the

Cagamas stimulates secondary Sukuk market with maiden Islamic paper reopening

VINEETA TAN takes a look at To be listed under the Scripless Securities Cagamas’s eff orts to galvanize the Trading System, the IMTN are unsecured secondary Sukuk market. obligations of Cagamas ranking pari passu among themselves and with other In a bid to spur secondary Sukuk existing unsecured obligations and will activities, the National Mortgage be redeemed at their full nominal value Corporation of Malaysia (Cagamas) on maturity. Proceeds from the exercise on the 10th November reopened its will be utilized to purchase loans from three-year remaining maturity Islamic the Malaysian fi nancial system. medium-term notes (IMTN) totaling to our initiative was encouraging as RM500 million (US$113.94 million) — The move by Cagamas is anticipated the company managed to raise another the fi rm’s fi rst reopening of a Sukuk to inject vibrancy into the lackluster RM500 million of [a] three-year tenure under its RM40 billion (US$9.12 billion) from the market despite raising a total secondary Sukuk market and represents medium-term note program. This follows of RM2 billion (US$455.77 million) in a another step by the quasi-sovereign Cagamas’s fi rst conventional reopening single tenure within the past two weeks.” entity to develop the Islamic fi nance th on the 28 October. market. The company in September Closed at an absolute yield of 4.19% entered the international Sukuk market “It has been one of our objectives to (1bps lower than the fi rm’s conventional by issuing the fi rst Singapore dollar reopen the existing tranches to increase reopening), the paper was competitively Sukuk of the year — a SG$162.75 million trading activity and promote secondary priced at 21bps over the mid-swap rate (US$114.35 million) one-year paper market liquidity of our papers, hence and has brought total issuance for the past under its US$2.5 billion multicurrency our second reopening within a two-week three weeks to RM2.5 billion (US$569.71 Sukuk program. time span,” explained its president/ million) and year-to-date issuance to CEO, Chung Chee Leong. “The response RM4.8 billion (US$1.09 billion).

Sovereign Sukuk: An Indonesian week

While other markets appear to be under Upcoming sovereign Sukuk the radar in the last week, Indonesia is Country Amount Expected date seen to have stepped up its game on the capital market front. From auctioning Ivory Coast XOF300 billion Fourth quarter of 2015 regular liquidity management instruments to revising its Islamic Tunisia US$500 million 2015 capital market regulations, the Republic Jordan JOD200-300 million Before end of 2015 did it all within the week. NABILAH UAE TBA 2015 ANNUAR keeps up to speed with these Indonesia IDR150 trillion 2016 developments. Pakistan TBA Second quarter of 2016 The government of Indonesia on the 4th November received IDR3.33 trillion Shandong Province CNY30 billion TBA (US$241.76 million) in bids from a recent Egypt TBA 2015/16 fi scal year Sukuk auction which saw the sale of Sindh Province US$200 million TBA four facilities. The Ministry of Finance Kazakhstan TBA 2016 confi rmed in a statement that it awarded IDR1.88 trillion (US$136.49 million). Turkey US$1.1 billion TBA Bangladesh TBA TBA With a view to increasing retail bond Hong Kong US$500 million to US$1 billion TBA issuances in 2016, the government is Ningxia Hui Autonomous Region US$1.5 billion TBA reportedly planning for two rounds Kenya TBA 2016 of Shariah compliant government retail bond (in addition to another two South Africa TBA 2016 conventional papers) issuances next year, Senegal TBA TBA which are only available to domestic Niger XOF150 billion TBA investors. News portal Indonesia- Luxembourg TBA TBA Investments, quoting Robert Pakpahan, the director-general of debt management 2016 is to deepen the market and provide six rules on the Shariah capital market at the Ministry of Finance, relayed that more opportunities to Indonesian before the end of 2015. The six rules Pakpahan could not yet inform about investors to invest in these bonds. comprise fi ve regulations on the issuance indicative targets set for next year’s four As such, it will reduce the infl uence of Shariah compliant securities — a retail bond issuances (two Islamic and of foreign ownership in Indonesian perfected version of Bapepam-LK’s rules two conventional). government bonds. No.IX.A.1 — and one new regulation. The rules have been drafted and are Pakpahan further stated that the In terms of regulatory reforms, pending approval from OJK’s chief, government’s decision to increase the Otoritas Jasa Keuangan (OJK) on the 6th Muliaman D Hadad. frequency of retail bond issuances in November confi rmed that it will release

ADVANCED SUKUK & ISLAMIC SECURITIZATION 6th - 8th December 2015, DUBAI

Course Highlights: • Compare and contrast between Sukuk, bonds and asset backed securities (ABS) • Identify different type of Sukuk and debt capital market strategies applied in the market • Examine various current issues related to Sukuk market-covering business, credit, legal, Shariah and other issues • Analyze various deal term sheets to determine risks, legal status and enforcement rights www.REDmoneytraining.com of investors [email protected] • Structure suitable Sukuk solution to meet different financing and investment needs

UAE Islamic ϐinance market expands with entry of new player

With seven fully-fl edged Islamic banks biggest Islamic banking markets in and a number of Islamic windows the world — third-largest after Saudi by both domestic and conventional Arabia and Malaysia. And while the lenders, the UAE Shariah banking landscape is competitive, this has not market is showing no signs of slowing deterred conventional UAE players from down as a new player, att racted by the tapping the market including CBI and lucrative potential of the fast-growing National Bank of Fujairah which rolled sector, joins the fray to grab a slice of out its Islamic banking window last year the Shariah dollar pie. VINEETA TAN as the prospects for the industry shine reports. bright. The latest World Islamic Banking over 50 banks (23 domestic and 28 Competitive Report by EY forecasts for Commercial Bank International (CBI) foreign) serving a population of less than the UAE, which is on track to generate is banking on Islamic fi nancial services 9.4 million. US$263 billion-worth of Shariah to compete with its peers as it looks to compliant assets by 2019, to command command a larger market share in the “Launching this enhanced off er is a up to almost 15% of total Islamic banking UAE and build a solid regional footprint strategic priority for CBI as we transform assets of the world’s six core Islamic in the area of Islamic banking with a the bank and continue to grow market markets, which are estimated to reach new suite of Shariah compliant corporate share across the UAE,” confi rmed US$1.8 trillion by 2019. banking products. Mark Robinson, CEO of CBI, echoing the sentiments of the bank’s chairman, “The future of Islamic banking in the To be off ered under its Islamic banking Mohammed Sultan Al Qadi, who region looks very promising, as Shariah window inaugurated this week, affi rmed the lender’s ambition to become compliant products and services become CBI’s Al Islami brand is part of the a leading Islamic banking provider in the more mainstream and Dubai advances fi nancier’s move to leverage on one of region. toward becoming the global Islamic the fastest-growing segments of the fi nancial capital of the world,” said emirates in order to gain a stronger Estimated to be worth US$127 billion Mamoon Abdelkader, the bank’s head of footing in a market many view as being in 2014 (by EY), the UAE is one of the Islamic banking. overcrowded; the UAE currently has

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is now live on IFN-TV

Malaysia maintaining lead in the Islamic ϐinance world

Malaysia’s Islamic ﬁ nance success story is one the world looks to emulate. Armed with a strong political will to anchor itself as the global Islamic ﬁ nance hub, the top-down approach by the country has proven to be successful as it continues to be a leader across all segments of the industry. VINEETA TAN provides a snapshot of the market.

Regulatory environment Table 1: Sukuk issuances in Malaysia for the fi rst half of 2015 (RM bil) Malaysia is widely recognized as having Total Sukuk issued H1 2015 H1 2014 one of the most sophisticated Islamic Size of Sukuk issued 58.98 135.9 fi nance legal infrastructure globally and the implementation of the Islamic Size of total bonds issued 111.32 236.7 Financial Services Act 2013 has set % of Sukuk issued to total bonds issued 53.0% 57.4% in motion major changes for Islamic Total Sukuk outstanding June 2015 June 2014 fi nancial institutions as the country Size of outstanding Sukuk 580.71 544.6 moves toward greater transparency, Size of total outstanding bonds 1,081.73 1,058.9 innovation and risk-sharing. % of Sukuk to total outstanding bonds 53.7% 51.4% Several major changes introduced under Source: Securities Commission Malaysia the new rules include the mandatory reclassifi cation of Islamic banking Table 2: Islamic assets under management (AUM) in the fi rst half of 2015 in RM billion deposit accounts (eff ective June 2015) June 2015 June 2014 into principal-guaranteed Islamic Islamic AUM of FMCs 117.4 105.2 deposits and non-guaranteed investment Total fund management industry 657.4 628.4 accounts as well as the separation of % Islamic AUM of FMCs to total industry 17.9% 16.7% Family and General Takaful business lines (eff ective 2018). Source: Securities Commission Malaysia to shorten time-to-market for wholesale government in its 2016 budget agreed to Banking and ϐinance products. SapuraKencana Petroleum reduce taxation on SRI Sukuk. There are 17 fully-fl edged Islamic banks became the fi rst entity to initiate a Sukuk in Malaysia including Agro Bank which issuance (or any private debt securities Takaful converted its operations this year and 11 for that matt er) under the new regime: a Islamic windows. Growing at an average Accounting for 28% of the total insurance 30-year multi-currency Islamic medium- industry in 2014 at RM3.4 billion of 18% year-on-year, Islamic banking term note program of up to RM7 billion assets account for approximately 25% (US$774.81 million), Malaysia’s Family (US$1.6 billion) in nominal value (or in Takaful segment continues its positive of the country’s total banking sector US dollar equivalent). and is expected to reach its 40% target trajectory registering a 14% growth in the fi rst seven months of 2015, according by 2020. According to a report by the Bank Negara Malaysia is one of the Islamic Research and Training Institute, to Malaysian Takaful Association; and world’s largest Sukuk issuer accounting Deloitt e in its 2014 research projected for Malaysia’s Shariah banking assets will for almost 40% of total global off erings reach US$296.29 billion in 2019. the country’s Islamic insurance industry in 2014 at US$45 billion out of US$116.4 to expand by 20% annually over the billion, supporting Malaysia’s lead as the 2015-16 period, with Family Takaful Sukuk/capital markets world’s largest Sukuk issuer by volume outpacing the growth of its conventional As with Islamic banking, Malaysia is and its decision to cease issuing short- life peer. In the global context, it is one at the forefront with regards to Islamic term Sukuk caused a 42.5% plunge in of the largest Islamic insurance markets capital markets and Sukuk. Shariah total Sukuk issuance in the fi rst half of in the world with a penetration rate far compliant securities account for a 2015, according to S&P who revised its outstripping that of the GCC (14.5% majority of total listed securities on Bursa global Sukuk projections from US$100- against an average 2%). Malaysia in terms of numbers (674 or 115 billion to US$50-60 billion. 74%) as well as market capitalization In order to reach the nation’s 25% Takaful (61.6%). The year 2015 also saw innovative Sukuk penetration rate target by 2020 from its from Malaysia, namely the world’s current 14.5%, the regulator is focusing on In the spirit of liberalization, the fi rst ringgit-denominated socially developing microTakaful and has released Securities Commission Malaysia (SC) responsible investment (SRI) Sukuk by a draft framework on the segment which in June implemented the Lodge and sovereign wealth fund Khazanah (See has received positive feedback by market Launch framework and the Guidelines Case Study Vol 12 Issue 27: ‘Khazanah players (See IFN Reports Vol 12 Issue 41: on Unlisted Capital Market Products — Nasional — Creating a new asset class’). ‘MicroTakaful — Malaysia’s next focus for a signifi cant overhaul in the SC funds This asset class is likely to feature growth as the country looks to enhance and product approval process in a bid more prominently in the country as the fi nancial inclusion’).

Islamic trade ϐinance

Shariah compliant trade fi nance has been highlighted as having the potential to provide new opportunities and is often seen as the preferred choice for emerging and frontier markets. The sector has benefi ted from both the perception of Islamic fi nance as performing more robustly than the conventional sector during recent fi nancial crises; and from a growing global interest toward Shariah compliant banking. NABILAH ANNUAR provides an overview on the developments in Islamic trade fi nance worldwide.

The ITFC borrow US$1 billion on a short-term other commercial relationships that will An autonomous entity within the IDB Murabahah basis from the ITFC to allow Waratah to rapidly expand its Group, the International Islamic Trade fi nance crude oil imports. Iran in June trading business. Finance Corporation (ITFC) is created announced that it is looking to increase with the purpose of advancing trade to its stake in the ITFC in anticipation of Europe improve economic conditions across the possible sanctions relief. This move The UK Trade & Investment highlighted Islamic world. Having consolidated all could see the Republic becoming the 18 potential Shariah compliant the trade fi nance businesses that used to ITFC’s largest shareholder after the regeneration investment opportunities be handled by various windows within IDB and Saudi Arabia. In its annual in the UK in its bid to att ract foreign the IDB Group, the ITFC’s primary general assembly the same month, the investment into the country and boost focus is to encourage intra-trade among ITFC approved an increase of Iran’s its Islamic fi nance industry. The projects OIC member countries working as a stake by 8,500 shares with each share are listed in the department’s recently- facilitator to mobilize private and public worth US$10,000 via three equal and released brochure focusing on Islamic resources toward achieving its objectives consecutive installments with the fi rst investment opportunities in the UK. of fostering economic development installment due in six months’ time. through trade. Luxembourg is reportedly keen Most recently, the Jordanian government to cooperate with Oman in a wide In November last year, Cameroon signed a US$3 billion framework range of areas and enhance bilateral secured an XAF8.5 billion (US$14.1 agreement with the ITFC in a bid to trade between the two countries, million) facility from the ITFC to fi nance fi nance the Kingdom’s main imports. reported Times of Oman, quoting the 2014-15 cott on season. In Tunisia, the The fi nancing is in the form of soft François Bausch, Luxembourg’s organization signed a US$300 million loans which aim to strengthen Jordan’s minister for sustainable development Murabahah agreement with the Tunisian capacity at fi nancing imported basic and infrastructure. Highlighting the Company for Refi ning Industries and a goods and commodities. Grand Duchy’s prominent standing in guarantee agreement with the Tunisian Shariah fi nancial transactions, Bausch Ministry of Economy and Finance as Africa highlighted that Islamic fi nance is part of the organization’s agreement The government of Sudan and the Saudi one of the main potential areas for the with the government to fi nance strategic Fund for Development (SFD) last month cooperation. sectors in Tunisia through public signed two Shariah compliant fi nancing entities acting on behalf of the Tunisian agreements to fi nance the Republic’s Middle East government. imports of petroleum products and Hong Kong fi nancial secretary John C fertilizers worth US$100 million and Tsang said last December during his Over in Indonesia, Danamon Syariah US$71 million respectively. According visit to Abu Dhabi that he expects the in January partnered with the ITFC to Sudan Vision Daily quoting SFD’s strong bilateral trade ties between Hong targeting to book as much as US$1 vice-chairman and managing director Kong and the UAE to continue in the billion in Shariah-based trade fi nancing Youssef Ibrahim al-Bassam, SFD is ready coming years. Citing immense potential within the next fi ve years, starting to provide all of Sudan’s needs in terms for growth and cooperation, Tsang with US$200 million this year. Later of Saudi exports to develop bilateral reportedly highlighted opportunities in September, the ITFC inaugurated trade. in Islamic fi nance, asset management an offi ce in Jakarta expecting to grow and shares, while affi rming Hong the portfolio with the private sector Asia Kong’s intention to further develop its particularly in the commodities and Australia-based Waratah Resources in Islamic fi nance capabilities following manufacturing sector. Later in March, April entered into a non-binding lett er its successful maiden Sukuk issue in the IDB through the ITFC extended a of intent with Malaysia-based Amanie September. US$27 billion in fi nancing to foreign Holdings to form a joint venture for trade operations, building on the the purpose of funding its commodity Bank of Tokyo-Mitsubishi UFJ, which US$29.4 billion of IDB fi nancing for trading business. Waratah is developing received an Islamic banking window promotion of intra-trade prior to the its presence in the commodity space license from the Dubai Financial creation of the ITFC in 2008. and views the long-term potential with Services Agency in July, launched its Amanie very positively. Under the Shariah operations in the Dubai In a bid to increase foreign exchange agreement, Amanie will assist in the International Financial Center last reserves, Pakistan in May seeked to provision of the necessary fi nance and month.

APICORP Sukuk — the largest debut Sukuk by a supranational

Eff ectively re-opening the GCC Asia, the Middle East and Europe, with primary markets after a four-month over 40 participating accounts and 60% of APICORP Sukuk hiatus, APICORP successfully tapped the orderbook comprising new investors. the Sukuk market when it issued a Additionally, the off ering extended US$500 million paper. Att racting over the boundaries of Islamic fi nance for US$500 million 40 investor orders for a fi nal book size multilateral development banks and of over US$800 million, the Sukuk introduced another high-grade investment priced at MS+100bps equating to a fi nal option for Sukuk market investors. yield of 2.383%. The deal is the largest inaugural supranational Sukuk and the fi rst debut issuance from the GCC region to price intra-day. In an exclusive The deal is interview with APICORP, NABILAH th ANNUAR provides a more detailed the largest 28 October 2015 account of this historic transaction. inaugural As a multilateral development bank Issuer APICORP Sukuk established to foster the development of supranational Obligor Arab Petroleum the Arab world’s oil and gas industries, Investments Corporation (APICORP) APICORP has a wide range of Islamic Sukuk and the ϔirst assets available on its balance sheet. debut issuance Size of issue US$500 million “We wanted to leverage on these Islamic Mode of issue Regulation S only Sukuk assets to set up and structure our Sukuk from the GCC region Purpose APICORP will use the program. The program shall be used proceeds for its general as a source of funding for our ongoing to price corporate purposes. fi nancing activities. From a Sukuk Tenor Five years structuring perspective, the program is intra-day Issuance price 100 based on the concept of Wakalah which Profi t rate 2.383% per annum is a standard structure used by many Payment Semi-annual 30/360 supranationals and fi nancial institutions. With the deal announced at 8 am London Currency US dollars Therefore, investors are quite familiar and priced around 5 pm London on the Maturity date 28th October 2020 with it,” said APICORP, commenting on same day, it is also the fi rst debut Program arranger Standard Chartered the engineering of the Sukuk structure. issuance from the GCC region to price Principal Goldman Sachs intra-day. The pricing was 10bps inside advisor(s) International and The issuance is the inaugural drawdown initial pricing thoughts despite Standard Chartered under its US$3 billion Trust Certifi cate challenging markets and eff ectively Lead managers Emirates NBD Issuance Program. One of the key repositioned APICORP alongside its and bookrunners Capital, First Gulf objectives of sett ing up the program was supranational peers. Bank, Goldman Sachs to provide APICORP with a suitable International, NCB platform to diversify its funding access Rating ‘Aa3’ (Stable) by Capital Company, Noor across geographies, investor types Moody’s Bank and Standard and currencies. The deal successfully Shariah Standard Chartered Chartered provided the bank with more diversifi ed advisor(s) Co-lead manager Qatar First Bank sources of funding, reduced the overall Structure Sukuk Wakalah Governing law English law cost of fi nancing, introduced the Tradability No trading restrictions Legal advisors Maples and Calder (for APICORP credit to a broader investor Investor Distribution by investor issuer) base, and established a tight US dollar breakdown type: Allen & Overy (for Sukuk benchmark for future issuances. • Banks: 57% obligor) • FM: 18% Cliff ord Chance (for arrangers) “On the back of a successful pre- • Insurance/PF/agency: Listing Irish Stock Exchange; marketing exercise, APICORP was able 24% • Others: 1% listing on NASDAQ to access the market with a successful Dubai will be sought benchmark issuance at a time when GCC Investor by geography: subsequent to the issuers were waiting on the sidelines • Middle East: 80% issuance for the market sentiment to recover. The • Europe: 11% Underlying assets Islamic fi nancing deal’s success serves as a testament to • Asia/others: 9% contracts, Sukuk, the depth and resilience of the Sukuk Face value/ US$1,000/US$200,000 Shariah compliant market,” it highlighted. The success of the minimum and integral multiples shares and investments, bank’s strategy can be gauged by a high investment of US$1,000 in excess and the commodity level of participation from investors across thereof Murabahah investment

A letter from Amin

By Mohammed Amin These standardized futures contracts meticulously specify quantities and Speculators always get a bad name grades of cott on, with precisely specifi ed Almost all but who are they? People who buy dates and locations for delivery. something because they expect prices to futures rise, or sell because they expect prices to Some suggest these needs for price contracts are closed decline. Speculators are much maligned, certainty can be met by cott on producers but their critics ignore speculators’ contracting directly with cott on users out by transacting essential role in making markets. to grow and deliver cott on in the future for a price which is fi xed today. While the opposite Look at cott on futures. Each Muslim theoretically possible, I regard it as must decide for himself if he considers unfeasible in practice. The end-user contract; if you have a cott on futures contract to be Shariah would need to fi nd farmers, often located compliant. However, the cott on futures in another country, to agree contracts sold a future, you market undeniably exists because it with many farmers of an uncertain credit meets the real needs of cott on producers rating and agree terms over cott on of close your position (farmers) and cott on users (spinners, which future the quality is unknown weavers and cloth merchants). today, etc. by buying the Before deciding how much The futures market meets identical acreage to plant, how much producer and user needs fertilizer to apply, etc, quite diff erently and future farmers need to know the much more effi ciently. selling price of the cott on to farmer need to fi nd a user to agree the be grown. Similarly, users Most of the market contract; he simply sells futures contracts need to know cott on costs consists of speculators, to speculators. The opposite is done by to calculate prices for future with no need for cott on, cott on users, who buy futures contracts fi nished products. They hoping to make money from speculators. may be printing catalogues from price fl uctuations. A or otherwise quoting fi rm farmer expecting to produce Almost all futures contracts are closed prices for an extended period a quantity of cott on in the out by transacting the opposite contract; of time. Unexpected cott on summer of 2018 can today if you have sold a future, you close your price variations risk turning those sell July 2018 futures contracts position by buying the identical future. fi nished products, with fi xed totaling roughly his expected Delivery is not needed, since the prices, into loss-makers. production. Critically, the cott on producers and users are in most cases he grows does not need to dealing in cott on with diff erent The New York Board of Trade match the precise quality in the characteristics, in diff erent places, to that satisfi es the needs of both producers futures contract; its price will still specifi ed in the futures contract. and users by quoting cott on futures vary roughly in line with the prices as far forward as July 2018. futures contract. Nor does the “Now Live – For All Subscribers”

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Maltese MP Joe Farrugia calls for ϐirst IFN Country Correspondents AFGHANISTAN: Dr Alam Khan Hamdard president, Afghanistan Islamic Finance and Consulting Co AUSTRALIA: Dr George Mickhail Islamically ϐinanced Halal hotel senior lecturer, School of Accounting, Economics and Finance, University of Wollongong, Australia BAHRAIN: Dr Hatim El-Tahir MALTA director of Islamic Finance Knowledge Center, Deloitt e & Touche BANGLADESH: Md Shamsuzzaman By Reuben Butt igieg deputy managing director, Islami Bank Bangladesh BELGIUM: Prof Laurent Marliere, CEO, ISFIN BERMUDA: Belaid A Jheengoor The movement toward catering to director of asset management, PwC BRAZIL: Fábio Figueira the Islamic economy is increasing partner, Veirano Advogados BRUNEI: Dr Aimi Zulhazmi, Islamic fi nance consultant, all the time in Malta. Following the Draznine Advisory government’s announcement that it Parallel to this, member of parliament CANADA: Jeff rey S Graham partner, Borden Ladner Gervais is looking into Sukuk and Islamic (MP) Joe Farrugia has been addressing CHINA: Abdullah Han parliament and encouraging Halal partner, Al-Sadiq Consulting banking, the Malta Stock Exchange EGYPT: Dr Walid Hegazy (MSE) has now mentioned that it is tourism. He said among other things managing partner, Hegazy & Associates FRANCE: Kader Merbouh discussing various possibilities in this is a growing economy that Malta co-head of the executive master of the Islamic fi nance, Paris- Dauphine University order to facilitate Islamic fi nance in the cannot miss out on. He also said that HONG KONG: Amirali Bakirali Nasir chairman, The Law Society of Hong Kong working party on Mediterranean country. he would welcome the fi rst Halal hotel Islamic fi nance INDIA: H Jayesh fi nanced in an Islamic way. It would be founder partner, Juris Corp INDONESIA: Farouk A Alwyni a huge message that Malta could give to CEO of Alwyni International Capital and the chairman the Islamic world according to Farrugia. of Centre for Islamic Studies in Finance Economics and A lot of interest Development IRAN: Majid Pireh Islamic fi nance expert, Securities & Exchange Organization Unfortunately, other MPs in Malta of Iran has been IRAQ: Khaled Saqqaf engaged in a futile discussion on partner and head of Jordan & Iraq offi ces, Al Tamimi & Co ITALY: Stefano Padovani, partner and head of Banking & shown in Malta over the Burqa which may have serious Finance, NCTM Studio Legale Associato repercussions on how people look JAPAN: Kaoru Haraguchi founding att orney, Haraguchi International Law Offi ce the years by Islamic at Malta. It seems Malta wanted to JORDAN: Nafi th Al Hersh Nazzal, Islamic banking specialist, certifi ed fi nancial and investment advisor transmit a message that it is open to KAZAKHSTAN: Timur Rustemov, deputy chairman, all and it defends human rights, civil association for development of Islamic fi nance ϔinance institutions KENYA: Mona K Doshi liberties and personal choices. senior partner, Anjarwalla & Khanna Advocates KOREA: Yong-Jae Chang, partner, Lee & Ko so it may be KUWAIT: Alex Saleh, partner, Al Tamimi & Co Yet in this case hype was created on LEBANON: Johnny El Hachem partner – corporate, Bin Shabib & Associates presumed that this trying to ban the wearing of the Burqa. LUXEMBOURG: Said Qaceme, senior manager of Advisory & Consulting, Deloitt e Tax & Consulting Imam El Sadi said he is very concerned MALAYSIA: Ahmad Mukarrami Ab Mumin step may attract about the matt er given that this is a head, Shariah division, RHB Islamic Bank MALDIVES: Aishath Muneeza choice women make and everyone deputy minister, Ministry of Islamic Aff airs, Maldives MALTA: Reuben Butt igieg further should respect it. There are only three president, Malta Institute of Management MAURITIUS: Mohammad Akshar Maherally women in Malta wearing the Burqa. Director (taxation), International Financial Services interest This in itself may imply other reasons MOROCCO: Ahmed Tahiri Jouti managing consultant, Al Maali Consulting Group for certain MPs to make a national issue NEW ZEALAND: Mohamed Nalar trustee and board member, Awqaf New Zealand out of this. NIGERIA: Auwalu Ado; Shariah auditor, Jaiz Bank The MSE is indeed renowned for its OMAN: Muhammad Abdullah Dewaya The Malta education system is, on Islamic fi nance scholar initiatives although it is an exchange PAKISTAN: Muhammad Shoaib Ibrahim within a small country. In many the other hand, working well with managing director & CEO, First Habib Modaraba PHILIPPINES: Rafael A Morales occasions, it did come up with the University of Malta and the managing partner, SyCip Salazar Hernandez & Gatmaitan QATAR:Amjad Hussain international initiatives that changed Malta College for Arts, Science and partner, K&L Gates Technology going into their second year RUSSIA: Roustam Vakhitov or could have changed the markets. managing partner, International Tax Associates The MSE has an opportunity ahead of introducing Islamic fi nance modules SAUDI ARABIA: Nabil Issa partner, King & Spalding of it given the geostrategic location of and credits into the fi nancial services SENEGAL: Abdoulaye Mbow courses. Islamic fi nance advisor, Africa Islamic Finance Corporation Malta, its culture, the openness of the SOUTH AFRICA: Amman Muhammad regulation and the reputation that Malta CEO, First National Bank-Islamic Finance SINGAPORE: Suhaimi Zainul-Abidin, has gained over the years. The make or break situation of Islamic advisor, 5Pillars SRI LANKA: Imruz Kamil fi nance shall be a political decision. The head of Islamic banking, Richard Pieris Arpico Finance onus is on prime minister Dr Joseph SWITZERLAND: Khadra Abdullahi It is certainly not plain sailing as the associate, Investment banking, Faisal Private Bank MSE shall not be able to engage in Muscat and minister of fi nance Professor SYRIA: Gabriel Oussi, general manager, Oussi Law Firm Islamic fi nance in a feasible way if Edward Scicluna who have the TANZANIA: Yassir Masoud head, Islamic banking, retail banking, National Bank of Commerce it does not employ the appropriate appropriate foresight to increase the TURKEY: Ali Ceylan momentum of Malta in becoming an partner, Baspinar & Partners strategies to att ract Islamic fi nance UAE: Rima Mrad institutions it may aim for. However, Islamic fi nance hub. partner, Bin Shabib & Associates UK: Fara Mohammad a lot of interest has been shown in director of Islamic fi nance, Foot Anstey US: Joshua Brockwell Malta over the years by Islamic fi nance Reuben M Butt igieg is the president of the investment communications director, Azzad Asset Management Malta Institute of Management. He can be YEMEN: Moneer Saif; head of Islamic banking, CAC Bank institutions so it may be presumed that IFN Correspondents are experts in their respective fi elds and contacted at rbutt igieg@maltamanagement. are selected by Islamic Finance news to contribute designated this step may att ract further interest. short country reports. For more information about becoming com. an IFN Correspondent please contact sasikala.thiagaraja@ redmoneygroup.com

Islamic banking increasingly seen as a viable medium of banking and ϐinance in India

INDIA The RBI has also constituted a committ ee substantial sources of savings from other with the objective of working out a fi ve- countries. By H Jayesh and year action plan for fi nancial inclusion Aaheree Mukherjee in terms of its various components like These developments cumulatively payments, deposit, credit, social security evidence that Islamic banking/interest- Earlier this year, the Ministry of Finance transfers, pension and insurance. This free banking is being seen as a viable of the government of India announced committ ee will be reviewing the existing medium of banking and fi nance in India. that an inter-departmental group on policy of fi nancial inclusion including A change in the regulatory scenario is alternative banking (the Group) has been the supportive payment system and the being contemplated and has been set in set up within the Reserve Bank of India customer protection framework taking motion. (RBI) to examine the legal and technical into account the recommendations issues in introducing Islamic banking made by various committ ees. The The RBI has recently also issued in India. The Group has submitt ed its committ ee will study cross-country guidelines for the issuance of rupee- report and the same is currently under experiences in fi nancial inclusion to denominated bonds overseas. This the consideration of RBI. identify key learnings that could inform ushers a completely new era for debt- Indian policies and practices. The raising by Indian companies, and will The Group has been formed pursuant committ ee is to recommend mechanisms integrate fi nancial markets in India to the Committ ee on Finance Sector encompassing both households and further with the rest of the world. The Reforms (CFSR) constituted in 2008 small businesses, with a particular move also follows a robust demand for which was headed by Dr Raghuram emphasis on rural inclusion. such bonds issued by the International Rajan, the current RBI governor. Finance Corporation and the Asian The CFSR had also, inter alia, made Interest-free banking may be seen to Development Bank. This too paves the recommendations on the issue of the broadly fall within the ambit of fi nancial way for the issuance of Sukuk that are provision of interest-free fi nance on inclusion. The non-availability of interest- rupee-denominated. a larger scale, including through the free (ie risk participative) banking banking system. This recommendation products results in some Indians, H Jayesh is the founder partner at Juris of the CFSR had not been considered including those in the economically Corp and Aaheree Mukherjee is an associate further. Even though there has been a disadvantaged strata of society, not being at Juris Corp. They can be contacted at signifi cant time lapse in actively taking able to access banking products and [email protected] and aaheree.mukherjee@ this up, the fact that it is once again being services due to reasons of faith. The non- jclex.com respectively. considered is a notable positive step. availability also denies India access to

Tax amendments for the Moroccan Islamic banking sector

MOROCCO conventional banks and not to favor one the specifi cities of large and medium category over another. It is in this spirit businesses. By Dr Ahmed Tahiri Jouti that those amendments were drafted. The tax framework of Islamic banking Two years ago, the Moroccan The amendments focused exclusively on transactions governed by contracts government and the fi nancial like Istisnah, Salam, Mudarabah or authorities launched the real estate transactions fi nanced through Murabahah and Ijarah. Indeed, the rate Musharakah is not ready yet which implementation process of an Islamic will limit the Islamic banking off erings banking sector. After the vote of the of the value-added tax is established at 10% of the Murabahah margin and the and growth at the beginning. However, new banking law in November 2014 the fi nancial authorities are aware of Ijarah margin, which will reduce the cost that recognizes Islamic banks and the importance of an adequate tax of fi nancing and encourage customers to the publication of a circular related framework in encouraging Islamic subscribe to Islamic banking products. to the licensing process in July 2015, banking in Morocco and are willing to Furthermore, social housing fi nanced by the fi nancial authorities are willing complete it gradually. to encourage the development of the Murabahah and Ijarah will be subject to Islamic banking sector. the same advantageous tax conditions All in all, the tax framework will have a applied to conventional banks. deep impact on the choices of consumers To accompany the process of and will even guide the strategic choices establishment and development of the Nevertheless, other tax amendments of Islamic banks. That is why a special Islamic banking sector in the Kingdom need to be drafted to include economic att ention should be given to adapt it. of Morocco, the government anticipated sectors where Islamic banks can tax issues and included amendments in intervene (such as the automobile sector, Dr Ahmed Tahiri Jouti is a managing the Draft Budget Bill for 2016. The aim the equipment sector, etc) to ensure tax consultant at Al Maali Consulting Group. of these amendments is to ensure the tax neutrality. Moreover, the tax framework He can be contacted at a.tahiri@almaaligroup. neutrality between Islamic banks and of Islamic banks need to be adapted to com.

Disposal of ϐinance assets and their contractual rights in Saudi Arabia

SAUDI ARABIA subject to the conditions contained step in facilitating securitization and therein, fi nance companies licensed in structured fi nance transactions in the By Nabil A Issa and the Kingdom are permitt ed to dispose of Kingdom. The fact that the Rules provide Hamed Afzal fi nance assets or their contractual rights for disposals of real estate (as well as (Finance Assets). non-real estate) assets is also a positive Introduction development, given that this would Further to the issuance of the real estate The Rules provide that a disposal can facilitate the issuance of tradable Sukuk, mortgage laws in the Kingdom of Saudi be eff ected by way of a sale, factoring, which from a Shariah perspective require Arabia (the Kingdom) on the 2nd July pledging or assignment and can be a certain percentage of the underlying 2012 which were designed to improve with recourse, without recourse or portfolio to comprise tangible assets. and develop the Kingdom’s overall real with partial recourse to the disposing estate and fi nancing market, the Saudi fi nance company. The Rules contemplate The Rules do, however, contain some Arabian Monetary Agency (SAMA) has disposals of real estate and non-real areas requiring further consideration, for now issued rules governing the disposal estate assets but stipulate certain example, the Rules state that if the of fi nance assets and their contractual requirements as to the length of time transferee of any disposal is not licensed rights (the Rules). that such assets have been in existence by SAMA to provide fi nance activities, it depending on the type and tenor of the is required to provide a credit assessment relevant assets. of the relevant Finance Assets from a The competent entity approved by SAMA. In Procedure the context of a securitization transaction, introduction To eff ect a disposal, a fi nance company is this may require the issuer SPV to engage required to have an operating history of an authorized person to perform a credit of the Rules at least two years and must apply for a assessment of the portfolio of assets, no-objection lett er from SAMA at least 20 which may be burdensome. The Rules is a positive business days prior to the proposed date also stipulate that SAMA has broad of the disposal. When applying for a no- discretion to deny any request to transfer development objection lett er, a fi nance company must Finance Assets “based on reasons submit to SAMA drafts of the transaction deemed relevant by SAMA, such as and can be seen documents which are intended to eff ect experience, technical capabilities, or risk the proposed disposal as well as: of the fi nance company”. While this as the next step provision is no doubt intended to ensure in facilitating • a description of the portfolio of that SAMA has the appropriate authority Finance Assets to be disposed of to supervise and regulate any proposed securitization and disposal of Finance Assets, such a broad • a description of the overdue discretion may lead to inconsistent and structured ϔinance installments in respect of the portfolio anomalous results in the application of of Finance Assets, and the Rules. transactions in the • a historical record of the previous Nabil Issa is a partner of the Middle East Kingdom fi ve such disposals, if any, eff ected by and Islamic Finance Practice Group at King the relevant fi nance company, in each & Spalding, Dubai and Riyadh and Hamed case in a format prescribed by the Afzal is a senior associate in the debt capital Rules. markets team at King & Spalding based in Types of disposals that can be Dubai. They can be contacted at nissa@kslaw. made Conclusion com and [email protected] respectively. The Rules provide that, within the The introduction of the Rules is a positive framework set out in the Rules and development and can be seen as the next

IFN ONLINE DIRECTORY

Over 4,000 individual companies directly involved in the Islamic ﬁ nance industry

Prospects for the expansion of Islamic IFN Sector Correspondents CROSS-BORDER FINANCING ϐinance in Kazakhstan Fara Mohammad, director of Islamic ﬁ nance, Foot Anstey CAPITAL MARKETS: KAZAKHSTAN Suhail Ahmad, CEO, Hikmah Capital Corp DERIVATIVES By Timur Rustemov Suhaimi Zainul - Abidin, treasurer for Gulf-Asia Shariah Compliant Investment Association and advisor to 5Pillars

nd GLOBAL ECONOMIC OUTLOOK On the 2 November 2015, the Tariq Alrifai, expert, Islamic investment products and educational arm of the National Bank market trends of the Republic of Kazakhstan, the LAW (EUROPE): Ayhan Baltaci, att orney at law, Bereket & Baltaci Law Firm Academy of the Regional Financial LAW (MIDDLE EAST) Center in Almaty (ACRFCA), Bishr Shiblaq, head of Dubai offi ce, Arendt & announced the start of the Islamic Medernach Finance Qualifi cation professional LEASING: Youssef Aboul-Naja, Ijarah specialist, a supranational program administered by the Chartered illustrated the value of Islamic fi nance banking institution Institute for Securities and Investments and its adherence to the strict Shariah MERGERS & ACQUISITIONS: Tushar Garg, associate, bulge bracket investment (CISI) in London in the UK. Since and corporate management practices. bank 2009, ACRFCA has been acting as an The recent drop in oil prices topped MICROFINANCE (ASIA): Dr Mahmood Ahmed, executive vice-president and accredited provider of the CISI in with global political changes pushed director training, Islami Bank Training and Research Kazakhstan and played the leading role Kazakhstan to seek solutions by utilizing Academy MICROFINANCE (AFRICA): in the preparation of human capital for internal fi nancial resources through Mansour Ndiaye, director of microfi nance, Assistance and the growing Islamic fi nance industry in the development of the Islamic fi nance Consulting for Development PRIVATE BANKING & WEALTH MANAGEMENT: Kazakhstan. industry. Thomas Woods, product development, wealth management, The Islamic Bank of Asia The establishment of the Astana PRIVATE EQUITY & VENTURE CAPITAL: Arshad Ahmed, partner, Elixir Capital International Financial Center (AIFC) PROJECT & INFRASTRUCTURE FINANCE The recent drop opens opportunities and prospects Anthony Coleby, head of corporate commercial for the expansion of Islamic fi nance department, Said Al Shahry Law Offi ce (SASLO) REAL ESTATE in oil prices in Kazakhstan, which needs trained Philip Churchill, founder partner, 90 North Real Estate professionals with specifi c knowledge. Partners topped with global REAL ESTATE (MIDDLE EAST): The objectives of the AIFC are to Yahya Abdulla, head of capital markets — Middle East, att ract foreign investors and develop Cushman & Wakefi eld political changes REGULATORY ISSUES (ASIA) fi nancial markets in accordance with Intan Syah Ichsan , chief operating offi cer, Samuel Aset the best global practices, leading to the Manajemen pushed Kazakhstan REGULATORY ISSUES (MIDDLE EAST): recognition of Astana as an international Mohammad Abdullah Malik Dewaya, head of Shariah fi nancial center. The English language compliance and audit, Maisarah Islamic Banking Services to seek solutions by RETAIL BANKING: and English law will operate in the Chowdhury Shahed Akbar, offi cer, Southeast Bank, administration of the AIFC. The center Bangladesh. utilizing internal RISK MANAGEMENT: will be supervised by an administration Dr Ken Baldwin, CEO, Islamic Financial Analytics to be created by the National Bank of ϔinancial resources SECURITIES & SECURITIZATION: Kazakhstan that will be responsible for Nidhi Bothra, executive vice-president, Vinod Kothari the operation of the center, including the Consultants through the STOCK BROKING & TRADING: development of its laws for approval by Athif Shukri, research analyst, Adl Capital development of the the governing body of the AIFC — the STRUCTURED FINANCE: Center Governance Council — to be led John Dewar, partner and head of Islamic fi nance, Milbank, Tweed, Hadley & McCloy Islamic ϔinance by the president of Kazakhstan. SUKUK Anthony Coleby, head of corporate commercial department, Said Al Shahry Law Offi ce (SASLO) industry This announcement coincided with the SYNDICATED FINANCE arrival of the president of Kazakhstan, Damir Galiev, portfolio manager, AK BARS Bank Nursultan Nazarbayev, in London, for a TAKAFUL & RE-TAKAFUL: The Islamic Finance Qualifi cation two-day offi cial visit. Nazarbayev met Dr Sutan Emir Hidayat, assistant professor and academic with UK prime minister David Cameron, advisor for Islamic fi nance, University College of Bahrain program is conducted in English, TAKAFUL & RE-TAKAFUL (AFRICA): structured in nine modules and aims to the Queen and UK business leaders. Uwaiz Jassat, acting head of Islamic banking, Absa Islamic Banking provide practical knowledge and skills More than 500 UK companies are TAKAFUL & RE-TAKAFUL (EUROPE): on the products of Islamic banking, working in Kazakhstan with total Ezzedine Ghlamallah, director, Solutions Insurance and capital markets and Islamic insurance, investments exceeding US$12 billion in Islamic Finance in France (SAAFI) TRADE FINANCE including sections such as the Islamic various sectors, including agriculture, Anthony Coleby, head of corporate commercial economy, Islamic business ethics, basics machinery, pharmaceutical, education department, Said Al Shahry Law Offi ce (SASLO) TREASURY PRODUCTS: of Shariah and Islamic commercial law, and others. Nafi th ALHersh Nazzal, Islamic banking specialist, Sukuk and corporate governance. certifi ed fi nancial and investment advisor Timur Rustemov is the deputy chairman of IFN Correspondents are experts in their respective fi elds and are selected by Islamic Finance news to contribute The relative stability of Islamic the Association for Development of Islamic designated short sector reports. For more information about becoming an IFN Correspondent, please contact economies and fi nancial markets after Finance (ADIF). He can be contacted at [email protected] the 2008-10 global fi nancial crises [email protected].

Debt capital markets: 2015 update

The low price of oil and the continuing uncertainty in the Middle East have aﬀ ected the market, and in July S&P reduced its estimate of overall Sukuk issuance for 2015 to US$60 billion from US$115 billion. RAM also reduced its estimate of Malaysian issuance to RM75-85 billion (US$17.51-19.85 billion) for 2015. FARMIDA BI writes.

DEBT CAPITAL MARKETS been fairly quiet with exceptions such as Turkey and the Middle East. The bank Indonesia’s return to the market in May has also stated its intention to issue a By Farmida Bi with a US$2 billion issuance and Ras GBP100 million (US$154.12 million) Al Khaimah’s US$1 billion issuance in Sukuk by 2017. The positive discussions Issuers that have tapped the market March 2015. as to movement of people which are in 2015 faced uncertain conditions, expected to take place between the at times experiencing lower levels of Oman’s much anticipated sovereign EU and Turkey, leading to accelerated demand and consequently paying a debut issuance took place with a discussions on Turkey’s membership of higher pricing than they have been used OMR250 million (US$647.13 million) the EU, are also likely to help KT Bank’s to. This may be an indication of what Sukuk off ering at the end of October. The activities going forward. potential issuers will face in 2016 as issue was oversubscribed and is part of there appears to be no immediate signs the government’s strategy of developing Asia, particularly Malaysia, is as usual a of higher commodity, and in particular capital markets and Islamic fi nance in powerhouse of domestic Sukuk issuance oil, prices and the prospect of a US Oman, so further issuances may follow despite reduced expectations of overall interest rate rise may draw conventional next year. issuance for 2015. DanaInfra Nasional’s institutional investors away from the recent RM50 billion (US$11.68 billion) Islamic markets. This was only a part of recent solid issuance for Mass Rapid Transit projects activity in the Middle East. The low confi rm Malaysia’s commitment to using Although 2015 has been a quieter year price of oil did not stop Arab Petroleum Sukuk for infrastructure development, than 2014 in the capital markets, there Investments Corp issuing a debut and Malaysia’s budget for 2016 have still been a number of notable US$500 million fi ve-year Sukuk under announced further provisions to increase transactions. Perhaps the most exciting its US$3 billion Sukuk program. Majid Sukuk issuance. deals were the UK Export Finance Al Futt aim also issued only the second (UKEF)-backed US$913 million Sukuk for Middle East corporate Sukuk of the year Cagamas also issued the fi rst Singapore Emirates and The International Finance with its US$500 million Sukuk and Qatar dollar Sukuk of the year with its Facility for Immunisation (IFFIm)’s Islamic Bank tapped the international SG$162.75 million (US$116.41 million) second Sukuk, raising US$200 million for Sukuk market with a US$750 million Sukuk issued in September under its children’s immunization in the world’s fi ve-year Reg S program. Banks such as US$2.5 billion multicurrency program. poorest countries through Gavi, the Dubai Islamic Bank and Sharjah Islamic Vaccine Alliance. Bank also tapped the international dollar It will be interesting to see whether 2016 market. The IDB, a regular issuer, also will result in more issuances than 2015 tapped the market twice, so far, in 2015. and whether the promised expansion Islamic capital of Islamic fi nance into new markets in Europe continued its steady progress as Africa and the former Soviet republics markets are an Islamic fi nance market. The most eye- will take place. Innovation has always catching deal was the UKEF’s backing of been at the heart of Islamic fi nance but closely linked to the Emirates’s US$913 million Sukuk to it has normally been driven by deals fund the acquisition of four A380 aircraft. and the availability of Shariah compliant sentiment in the The UK government announced that the liquidity at competitive prices. UKEF intends to incorporate a Sukuk conventional guarantee into its standard product range The further expansion of Islamic capital and will actively seek additional Shariah markets into corporate issuances and markets compliant transactions. In particular, the project fi nance would be a welcome UKEF has demonstrated that it is in a development and the IFFIm Sukuk position to provide export credit agency issuance has shown that Islamic fi nance There have also been developments backing for Sukuk that can be used to can also provide a source of funding for across the Middle East, Europe and Asia fund project fi nance transactions in the socially important activities. The reduced that off er intriguing possibilities. Middle East and elsewhere. deal fl ow this year has, however, demonstrated again that Islamic capital After the spate of debut sovereign The establishment of KT Bank, the markets are closely linked to sentiment in issuances in 2014 from the non-Islamic fi rst Islamic bank in Germany, also has the conventional markets. world (the UK, Luxembourg, Hong Kong intriguing possibilities. KT Bank is a and South Africa), Hong Kong returned subsidiary of Kuveyt Turk (itself the Farmida Bi is a partner at the London offi ce to the market with another US$1 billion Turkish subsidiary of Kuwait Finance of Norton Rose Fulbright and is the head Sukuk and Luxembourg announced House) and one of its goals is also to of Islamic fi nance for Europe. She can be plans to issue another Sukuk in 2016, but use its connections with its Turkish and contacted at farmida.bi@nortonrosefulbright. until recently the sovereign market has Kuwaiti parents to facilitate business in com.

Malaysia: Sailing through the perfect storm

The year 2015 was certainly a watershed year for Malaysia, in more ways than one. The year witnessed a record depreciation of the ringgit against the US dollar due to multiple factors aﬀ ecting the global and regional economies compounded by domestic geopolitical tensions. SYED ALWI MOHAMED SULTAN explores.

MALAYSIA of products. That moratorium came to pass the revised Sukuk Guidelines (which has at the end of June 2015. As a result, deposit- since been replaced by the Guidelines on By Syed Alwi Mohamed Sultan based products which, hitherto, used to Unlisted Capital Market Products under be off ered under the Shariah contract of the Lodge and Launch Framework – March It was also a year when product Mudarabah, came to an end. Meanwhile, 2015). The SC’s SRI Sukuk guidelines and reclassifi cations under the Islamic deposit products based on the Wadiah Sukuk Ihsan — the fi rst formal framework Financial Services Act 2013 came into concept, though still allowed, are now and fi rst SRI Sukuk in the global Sukuk full eff ect, thus causing somewhat a subject to stricter compliance requirements market – marked another milestone for creative disruption to business models concerning promotional activities and the Malaysian capital market, and further and product development initiatives public displays of indicative rates. As a cements the country’s position as a leader within the Islamic banking sector. result, investment accounts have had to be in the global Sukuk arena. The implementation of GST, issues reclassifi ed and reported in the fi nancial surrounding 1MDB and the divided statements in accordance to the nature of opinions on TPPA all made up the year Preview of 2016 the contractual relationship between the 2015, quite extraordinary. Despite all Any rate hike by the Federal Reserve will investor and the Islamic bank together with the events that occurred during the year, predominantly dictate the mood of things the details on investment, performance and Malaysia continued to lead the way in in the coming year. It is important that the returns. showcasing the value propositions of market fi nds the new normal as quickly Islamic fi nance. as possible so that businesses can have a Sukuk sales witnessed a serious slump frame of reference to rely on in plott ing on a global scale. This was exacerbated Review of 2015 strategies and business plans. China will by the fact that investors demanded be another major factor that will determine The Malaysian economy had to contend higher premiums on yields amid the the health of the global economy in 2016 with the makings of a perfect storm during uncertainties in global markets. Apart from and beyond. the year. The Greek crisis, economic woes the weaknesses in China, Japan and the in China, slump in commodity prices, eurozone and the commodity price slump, The momentum of growth in Malaysia sluggish recovery in the eurozone and the fi ckleness of the Federal Reserve in over the past decade and a half has been on defl ationary concerns in Japan were deciding on the direction of interest rates a downward trend with average growth just among the major global market had also contributed to the volatilities and of 4-5%, compared to 6.5% between 1980 uncertainties that moved the tectonic thus the rise in market rates and yields. to 2000. The remaining half of this decade plates of the Malaysian economy. There is crucial for Malaysia because it has set a were also equally pressing geopolitical As at the date of this article (October 2015), target to become a developed nation at the issues on the domestic front that aff ected the Federal Reserve had just passed up end of this decade, by the year 2020. investor sentiments especially foreign an opportunity to raise interest rates in investors. As a result, the ringgit declined their September 17th meeting, thus leaving by nearly 20% against the US dollar and room for a possible rate hike at their next Conclusion the foreign reserves shrunk by almost the meeting in December 2015. Such a rate Malaysia remains at the forefront of the same percentage, to below US$100 billion. hike will result in possibly, massive shifts Islamic fi nance frontier and will continue Almost a perfect storm. in global liquidity back to the US market. to play a signifi cant role in the growth Such volatile capital fl ows will have an trajectory of Islamic fi nance in the years to Having a GDP which is export-dependent, immense implication on asset and foreign come. the slump in commodity prices such as exchange markets, consequently aff ecting crude oil and the continued sluggishness of fundraising initiatives by corporate With a clear development strategy, robust crude palm oil prices did not bode well for players. Due to that and other related regulatory framework, innovation in the GDP. In the face of external headwinds, market developments, the total Sukuk product development by adopting the economy has had to depend on issuance, which has topped US$100 billion technological capabilities and obviously an domestic demand through consumption in consecutive years since 2012, is now abatement to the geopolitical tensions, spending and private sector-led investment expected to fall below the US$100 billion investors will soon fi nd Malaysia is an activities. Hence, the growth projection has threshold. oversold market. As the saying goes, after a been lowered for the year and the GDP is storm comes a calm. Malaysia should be now expected to achieve a growth in the An interesting development on the Sukuk able to sail through this perfect storm. region of 4.5-5.5%. market is the issuance of the world’s fi rst sustainable and responsible investing (SRI) The views expressed here are entirely the On the Islamic banking front, the Sukuk issued by Khazanah Nasional in author’s own. regulatory reform that resulted in the June 2015 via the SPV, Ihsan Sukuk. It was enactment of the Islamic Financial Services back in August 2014 that the Securities Syed Alwi is the executive vice-president of the Act 2013 a couple of years ago, off ered a Commission of Malaysia (SC) paved Corporate Services Division at Bank Muamalat moratorium period for Islamic banks to the way for such SRI Sukuk with the Malaysia. He can be contacted at syed.alwi@ fully comply with certain reclassifi cations introduction of the SRI framework into muamalat.com.my.

Sources of funds

Banking has evolved considerably over the past 20 years. It was not so long ago that even in countries like the UK, customers walked with a passbook and had their deposits and withdrawals updated with each visit to the bank. HUSSAIN KURESHI delves further.

BANKING Of course, everyone important got to could issue short-term papers to fund keep their titles and their paychecks and their assets and these papers could be By Hussain Kureshi the regulators were satisfi ed. These mega sold to prett y much anyone. Of course, banks then competed with each other this was a slightly more expensive option Brick and mortar branches were and brought about an age of automation but nevertheless beat having to rely necessary and branch managers enjoyed and technology in the industry on retail depositors who prett y much a certain repute in the community of previously associated with a rocket had litt le or no savings in any case. being credible individuals. launch pad. ATMs, electronic banking, For any household to have savings of mega servers, instant transactions and US$10,000 in the US or Europe is quite an Unfortunately, by the time I became online banking mushroomed, and then achievement. a branch manager, the perception of came internet banking. bankers had changed altogether, and no In certain frontier markets however, the one wanted to meet a branch manager, A phenomenal investment was made by age-old banking rules still apply and the whether people at the golf club in the fi nancial industry in software and old model still works. There are no fancy Islamabad, or my cobbler in Kuala hardware (I wonder what the return on trading desks, no commodity desks as Lumpur who very sarcastically referred this investment was), and slowly the such or foreign currency trading desks to my line of work as rather superfl uous. brick and mortar branch began to lose or derivatives desks and these banks Coming from a cobbler, that really hurts. importance. In fact, now one can open are growing with their economies, still an account in a bank on the internet and relying heavily on households for their receive an ATM card by mail, without major chunk of deposits. stepping out of one’s pyjamas. Islamic banks Banks cannot lend more than they have should heed Not only did branches become obsolete unlike in the developed countries and in terms of a place of business but so so you fi nd in countries like Pakistan the warning signs did they as a source of business. Mega a rather robust banking system and banks began to rely on ‘wholesale possibly rather primitive if you were and learn from the funding’ from institutional clients and talking to someone from Bob Diamond’s less on retail clients. In fact, in the more team. Then again where is he at now? mistakes of other developed countries, citizens have less control over their savings plans, Moorad Choudhry often writes about banks and stay close as their employer makes mandatory how banks should revert back to their contributions to pension funds, social traditional models, but it seems no one to their depositors, security funds and of course deducts is listening. It seems as far as banking is taxes at source. This leaves the citizen concerned, the old ways were the bett er big and small with barely enough to pay the bills. ways, but maybe they would not earn the revenue needed to buy buildings in Retail funds were always low cost, but most expensive commercial districts of required large branch networks, a thing the world, or buy jets for the chairman, of the past in many countries. Certainly, or pay the fat bonuses that have made Traditionally, banks relied on their certain functions were even kind of bankers now the least-liked professionals branches for funds, to either lend out to outsourced. The global fi nancial crises in the world. customers, lend surplus funds to other actually would not have been possible banks, or to lend to the government. The if small companies all over the US were Islamic banks should heed the warning basic function was to borrow cheap from not booking mortgages on their own and signs and learn from the mistakes of depositors and lend dear to borrowers. then packaging them and selling them to other banks and stay close to their Of course, as the culture of lending other banks. Banks did not have to incur depositors, big and small. became commonplace along with a the cost of acquiring customers for their culture of consumerism, competition loan portfolios. Hussain Kureshi is CEO of Millenia Global intensifi ed. Ironically, as regulators Research House. He can be contacted at increased the required paid-up capital Then regulations changed. Banks [email protected]. of banks to control risk, banks began previously may have lent out 70-80% to merge, creating megabanks so of their deposits. But they realized they that (possibly without any new cash could lend 120% of their deposit base by involved) both the small banks became relying on interbank funding. Or bett er one large bank and with the combined yet, one could solicit deposits from other capital met all regulatory requirements. countries, and channel the savings of other systems into one’s own. Banks

Turkey remains an essentially untapped market for Islamic ϐinancial services

Islamic banking in Turkey is a relatively young industry where so-called ‘special fi nance’ (fi nancial establishments authorized to operate beyond the scope of conventional banking on an interest-rate free basis) houses only began to see conversion to banking institutions in 2005. GIORGIO MEDDA takes a look at the Turkish Islamic fi nance industry.

TURKEY which also conceals the latent need for a relatively young industry, which in Islamic banking solutions. Participation turn curbs the potential of att racting By Giorgio Medda banks’ assets amount to US$42 billion international Islamic investors (June 2015), or 5.2% of the total industry, committ ing to the local market. Lastly, The commercial penetration of having almost doubled since 2010 and in an industry in which distribution participation banks has increased seen growth at a signifi cantly greater networks still rely on ‘real’ branches to against the strength and dominant pace than experienced by the local enhance market reach, the cost structure position of conventional fi nance conventional industry and international weighs on participation banks, which in a country that has historically peers. also need to add the cost of Islamic experienced high interest rates resulting products that are typically more complex from a structurally high infl ation rate. The distribution channel has also than conventional counterparts. As participation banks cannot use expanded signifi cantly in recent years deposits for funding — they rely on with the fi ve participation banks The challenges off er the industry participation accounts in which no pre- (including the recently launched Islamic signifi cant opportunities ready to be determined returns can be guaranteed arm of Ziraat Bank, the largest state- capitalized on. The fact that Turkey — customers have to trade off their owned bank) counting 1,054 branches is a relatively large economy with an beliefs against conventional fi nancial nationwide, a fi gure which however, elevated standing among international instruments aligned to everyday reality. altogether remains lower than the branch investors is a strong support for both number of the top four conventional government and corporates to create Nevertheless, growth of the industry has banks combined. a sustainable environment for Islamic clearly benefi ted from legislative and fi nancial markets. regulatory eff orts to adapt the overall Expectations for growth remain very legal infrastructure to the requirements solid and EY expects the industry’s assets In particular, the stated intention of of Islamic banking. Since 2010, three key to have topped US$135 billion by the end several conventional banks as well as directives have enabled the establishment of 2019, while government plans indicate industrial corporates to tap the Sukuk of SPVs capable of issuing Islamic a target of US$180 billion by 2023. The market for funding is likely to raise fi nancing instruments. achievement of this target will bring interest among foreign investors, thus the Turkish Islamic fi nancial market to att racting the liquidity that is a necessary The Turkish Treasury is also to issue a size comparable to that of other major condition for the healthy development of Sukuk and more recently, there was the markets such as the UAE, Qatar and the local participation banking industry. introduction of a wider range of Shariah Kuwait, albeit remaining far short of The opening of Islamic windows within compliant solutions such as Murabahah, peers such as Saudi Arabia and Malaysia. the current conventional platforms, or Mudarabah, Musharakah and Wakalah. the launch of brand new franchises will Certain other important benefi ts have Market challenges for Turkish Islamic also surely act as a catalyst for an internal been granted to participation banks such banking are in nature very similar to re-allocation of fi nancial capital within as the right not to carry conventional those of other more developed Islamic the industry. government securities, with most of the fi nancial markets. Firstly, a limited scale restrictions related to the ownership and undermines growth potential as the Turkey, therefore, remains an essentially trading of real estate assets having also dominant larger conventional banks untapped market for a broader off ering been waived. gain a competitive advantage, both in of Islamic fi nancial services to also terms of access to capital markets and include Takaful, asset management and The market reality of Turkish Islamic the ability to off er a wider product pension funds. And as the lack of banking is all the more meaningful range. Competition from conventional substantial supply may partially be when considering Turkey’s population banks is strong considering the level of att ributed to the embryonic nature of the (80 million, where demographics point interest rates and the general ‘secular’ same products in a conventional arena, to a signifi cant young middle income structure of the market, which the devout the opportunities for participation banks class), its signifi cant GDP base (in excess have been accustomed to now for many and conventional fi nancial players alike of US$800 billion, making it the largest decades. are clear. Muslim economy in the G20) and its investment grade rating. According to the Secondly, there is a lack of Giorgio Medda is CEO and the fund manager Global Financial Development Report of standardization in terms of Shariah of Azimut. He can be contacted at giorgiom@ 2013, almost 8% of the adult population fi nancial principles (and moreover, no azglobal.com.tr. is unbanked due to religious reasons, legal framework to enforce them) in

Islamic trade ϐinance still in its infancy

Islamic trade fi nance refers to fi nancing imports and exports through Islamic fi nancing modes and instruments. In this article, CAMILLE PALDI provides an overview of the Islamic trade fi nance industry and its development.

ISLAMIC TRADE FINANCE imports of goods under the principle of Africa in the same time period (Saaid: Murabahah. The shipping guarantee, 2012). Negative growth rates may be due By Camille Silla Paldi based on Kafalah, is a facility granted by to the linkage of fi nancial institutions to the bank to importers for the clearance of western banks to conduct trade fi nance, a In 1995, exports of 52 Muslim countries goods purchased at the port, without the lack of trade infrastructure development, were US$340 billion and imports were original bill of lading being presented. trade performance, foreign resources, US$350 billion. Of these totals, inter- The bank will issue a shipping guarantee debt, exchange rate policies, lack of Muslim countries’ trade does not exceed in favor of the shipping company/agent rules and regulations, and the legal 10% (Kahf: 1997) In 1997, there were 177 to enable the customer to take delivery environment (Saaid: 2012). Improvement Islamic banks and fi nancial institutions of the merchandise. The bank guarantee, is necessary for trade facilitation, which registered with the International based on Kafalah, is an undertaking means the systematic rationalization Association of Islamic Banks with total by the bank to pay the benefi ciary the of procedures and documentation for capital of approximately US$7.3 billion, amount specifi ed in the guarantee if the trade that minimize the transaction cost total assets of US$147 billion, total events stated therein (usually on default) while maintaining an eff ective level of deposits of US$112 billion, reserves have occurred. government control (Saaid: 2012). around US$3 billion, and net profi ts of US$1.25 billion (Kahf:1997). The Export credit refi nancing provides an Furthermore, according to INCEIF, Islamic banks can provide fi nancing alternative short term and pre- and att ention needs to be focused on the to the amount of US$147 billion and post-shipment fi nancing to direct/ ability of Islamic fi nancial institutions to their trade fi nancing is 147x31% = 45 or indirect exporters to promote the export support SME trade and the ability to about two-thirds of the inter-Muslim of manufactured products, agriculture integrate the fi nancial supply chain with countries’ trade (Kahf:1997). products, and primary commodities that the real goods supply chain of exporters, are Halal via the provision of Shariah importers, logistics, inspection/ Islamic trade fi nance products off ered in compliant fi nancing facilities. Accepted certifi cation as well as investors. In 2008, the market today include lett ers of credit bills, based on Murabahah and Bai Al- to address these concerns, the (Wakalah/Musharakah/Murabahah); Dayn, are bills of exchange drawn by the International Islamic Trade Finance trust receipts (Murabahah); Al-Kafalah bank on and accepted by the purchaser/ Corporation (ITFC) was established and (bank and shipping guarantees); export importer (local purchase/import) or operates as an autonomous entity within credit refi nancing (Murabahah/Al-Dayn); drawn by the seller/exporter on and the IDB Group. The purpose of the ITFC accepted bills (Murabahah/Al-Dayn); and accepted by the bank (local sale/export). is to support Islamic trade fi nance, foreign/domestic bills purchased. A lett er Foreign/domestic bills purchased, based encourage intra-trade among the of credit (LC) is a writt en undertaking by on Bai Al-Dayn, is a facility granted by Organization of the Islamic Conference a bank, given to a seller (the benefi ciary) the bank to the customer whereby the states, and to assist member countries to at the request and on the instructions of bank purchases the customer’s foreign/ gain bett er access to Islamic trade the buyer (the applicant), to pay at sight domestic bills. fi nance. The ITFC has been put in place or at a determinable future date up to a to regulate the global Islamic trade stated sum of money within a prescribed The growth statistics for Islamic trade fi nance industry and Islamic banks across time limit and against stipulated fi nance globally are low. In Asia, Islamic the world are now off ering Islamic trade documents, which are in compliance trade fi nance grew by negative 1000% fi nance products and services. with the terms and conditions of the LC. in 2007. In the Middle East, in 2008, global Islamic trade fi nance grew by Camille Silla Paldi is CEO of FAAIF. She can An Islamic trust receipt is a fi nancing negative 800%. Islamic trade fi nance also be contacted at [email protected]. product used to fi nance purchases and experienced a negative growth rate in

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The Takaful impasse – Part 2

In the second part of a special series, AJMAL BHATTY continues to look at the roadblocks of Takaful.

TAKAFUL Figure 1: Who bears the risk of the business? By Ajmal Bhatt y • The co-operative structure is the main pillar of Takaful • The shareholders bring in the enabling capital Expectations misaligned • The co-operative spirit should be broader than just applying to the Roadblocks under misaligned participants • Takaful Tejari works only because shareholder capital makes mutual expectations are: Forgett ing the ethical No risk-sharing to take place shareholders dimension and ignoring the commercial • The shareholder capital is exposed to the very risks the participants (Tejari) nature. are mutiually protecting against except the risk is of a diff erent No Takaful nature. Their capital is undeniably and inescapably exposed to the Forgetting the ethical fi nancial risks emanating from the outcome of insured events that dimension may or may not occur The real meaning of Takaful, explained at the beginning of this series, has not been Source: Author’s own gett ing across to customers. Focusing on providing the basic need for insurance is what has kept the Takaful companies not done enough to promote the ethical like sharing in business risks but not in busy, and not enough att ention has message. its rewards on a commensurate basis. If been given to the ethical dimension. the business risk of defi cit funding were Companies have not been marketing Takaful has a much stronger case in to be removed from the shareholders, Takaful’s unique brand value, which this respect, because of its cooperative then not sharing in underwriting surplus is its goodness for all, protecting the principles that focus on community would be justifi ed. community and investing in it. A lot and society aspects, all the way to the of this has to do with the mind-set of microTakaful level. Figure 1 emphasizes the fact that the practitioners who feel Takaful is a niche Takaful business cannot exist without business, appealing to certain sections Institutions like the IDB can be the shareholder capital; rather it is essentially of society only. We have seen this catalyst between the OIC countries the basic requirement for sett ing up a happening in the UK and some parts of and local and global NGOs in putt ing mutual system. Why then should not the Middle East, but Takaful is becoming together programs in microTakaful with there be a solution where the concepts part of the mainstream insurance or without microfi nance. This can benefi t of cooperation are extended to include industry in countries like Malaysia. millions who are in desperate need to a body of people, those who seek get out of the shackles of circumstance protection (participants) and those The industry has not done enough on and be lifted into fi nancial independence. who can help them to achieve this populating the internet space and search This in itself can propel the awareness protection (shareholders), within their engines about the goodness of Takaful. A and promotion of Takaful concepts, defi ned rights and operational rules? simple search on Takaful on the internet taking this industry into a dimension The solution should ensure that it works gives us an explanation and defi nitions where it should be and has not been so without excesses and exploitation, and that many may fi nd confusing, especially far. still adheres to all the ethical aspects of by customers interested in knowing Shariah compliance. about Takaful before buying a policy. Ignoring the commercial The industry needs to fi nd ways to These defi nitions mostly start off (Tejari) nature rationalize the cooperative Takaful spirit by explaining the form and not the There is a confl ict between Takaful’s of protecting the rights and benefi ts of substance of the Takaful system. These benevolent and charitable nature and insured customers, an approach where harp on matt ers of form and semantics its commercial proposition. Takaful can the Tejari structure of Takaful can work like the derivation of Takaful from the be set up on a charitable basis where an for its investors as fair reward for its word Kafalah and such. This perhaps NGO or government body plays the role business risks. satisfi es only the niche customer of lender of last resort. segments. None of the defi nitions focus This is especially of vital importance for so much on its ethical dimension and However, the Takaful industry as it Takaful companies fl oated on stock social aspects in a simple manner. is, operates on a commercial basis, exchanges inviting investors to invest in where shareholders expect returns to them. The ethical dimension should have a commensurate with the business risks universal appeal; that if it is good for they take. This has led to a confusing Ajmal Bhatt y is CEO and a member of the one, it is good for all. This also applies to picture of shareholder revenues sourced board of directors of Tokio Marine Middle the insuffi cient level of awareness about from Wakalah fees, many a times East. He can be contacted at ajmalbhatt y@ Islamic fi nance generally, where Islamic excessive out of necessity, and the rest tm-mena.com. banks and investment companies have coming from investment returns. This is

have been admitt ed to trading on the and CEO of Emirates Airline, the fi rm, DEALS Irish Stock Exchange and NASDAQ which will fund the aircraft deliveries Sukuk auction surpasses Dubai. The sale received an orderbook of with some of its cash on reserve, is US$1.6 billion. contemplating raising additional capital target either through Sukuk or conventional INDONESIA: The government of Sunway to issue ICP bonds to fund the exercise. Indonesia received IDR3.33 trillion MALAYSIA: Sunway Treasury Sukuk (US$244.75 million) in bids from a recent will issue RM100 million (US$22.91 JEV to pay Sukuk principal Sukuk auction which saw the sale of million)-worth of Islamic commercial four facilities. The Ministry of Finance and proϐit papers on the 12th November. The confi rmed in a statement that it awarded MALAYSIA: Jimah Energy Ventures facility is expected to mature on the (JEV) announced on Bank Negara IDR1.88 trillion (US$138.18 million). th 14 December 2015, according to a Malaysia’s website that it will make statement. ADIB settles Sukuk principal payment for Tranche I Series 6 and Tranche II Series 4 as well as profi t UAE: Abu Dhabi Islamic Bank (ADIB) on Omantel plans Sukuk payment for Tranche I, II, III, IV, V, VI the 4th November repaid in full a US$750 OMAN: Oman Telecommunications and VII under its RM4.85 billion (US$1.11 million Sukuk issued in November 2010 Co (Omantel) is seeking approval from billion) Istisnah medium-term note from its own sources, the bank said in a th the Capital Market Authority to issue facility on the 12 November 2015. statement. OMR50 million (US$129.46 million)- worth of Sukuk, according to Reuters. RHB Islamic to pay Sukuk MAF’s Sukuk oversubscribed proϐit UAE: Shopping mall operator Majid Emirates considers issuing Al Futt aim (MAF) on the 3rd November MALAYSIA: RHB Islamic Bank will Sukuk make a semi-annual profi t payment on completed the issuance of its US$500 th million 4.5% trust certifi cates due 2025 UAE: Emirates Airline may issue Sukuk the 16 November 2015 for the stock code — its sophomore Sukuk sale, according of between US$500 million-1 billion PN140026 under the subordinated Sukuk to a press release. Issued via MAF to fi nance the acquisition of 30 aircraft Murabahah program of up to RM1 Sukuk under the fi rm’s US$1.5 billion scheduled to be delivered next year. billion (US$227.88 million), according hybrid (Murabahah and Wakalah) trust According to Gulf News quoting Shaikh to an announcement on Bank Negara certifi cate issuance program, the papers Ahmad Saeed Al Maktoum, the chairman Malaysia’s website.

DEAL TRACKER Full Deal Tracker on page 33

ANNOUNCEMENT EXPECTED DATE COMPANY’S NAME SIZE STRUCTURE DATE

TBA Oman Telecommunications OMR50 million Sukuk 10th November 2015

TBA Hascol Petroleum PKR2 billion Sukuk 9th November 2015

TBA Emirates Airline US$500 million- Sukuk 9th November 2015 US$1 billion

TBA CIMB Islamic RM5 billion Sukuk 6th November 2015

TBA Axiata Group US$1.5 billion Sukuk 28th October 2015

25-27th November 2015 XL Axiata IDR1.5 trillion Sukuk 15th September 2015

November Tenaga Nasional RM10 billion Sukuk 24th June 2015

2016 Government of Indonesia IDR150 trillion Sukuk 9th October 2015

social, governance (ESG) oﬀ erings — the AMERICAS Parametric ESG Domestic and Parametric Are you receiving our daily Parametric expands ESG ESG International. According to a IFN Alerts? press release, the ﬁ rm recently added No. offerings licensed screens for Shariah compliant, The Number ONE news US: Seatt le-based global asset manager Catholic values, fossil-free and other service with over 20,000 Parametric Portfolio Associates launched environmentally and socially-focused registered daily readers two new proprietary environmental, portfolios.

the 6th November as the new successor Supervisory Board, the bank confi rmed ASIA to the Association of Chartered Islamic in a statement. ALSB secures Murabahah Financial Professionals (ACIFP), according to a press release. The new Separately, HSBC Bank Oman (HBON) facility professional organization, through its also confi rmed in a statement that it MALAYSIA: Aman Lagenda (ALSB), linkage with the Islamic Banking and sold its Pakistan unit to MBL on the a wholly-owned subsidiary of Bina Finance Institute Malaysia, will introduce 6th November 2015. The total gross Darulaman (BDB), has secured a RM25.6 two professional qualifi cation programs, assets of the business sold to MBL as million (US$5.97 million) Murabahah the Chartered Islamic Banker and the at the 30th September 2015 was PKR4.2 Term Financing-i facility from Affi n Chartered Takaful Practitioner, in early billion (US$39.76 million). The sale will Islamic Bank. BDB noted in a statement 2016 as part of its key strategic thrusts, have a negative impact on the overall that the purpose of the facility is to part- according to president Badlisyah Abdul performance of HBON to the value of fi nance the purchase of two parcels of Ghani. US$3 million and will be included in its land valued at RM32 million (US$7.47 consolidated results for the year ended million). The documentation process First Australian commodity the 31st December 2015. th concluded on the 30 October 2015. Murabahah deal concluded Axis REIT forgoes acquisition OJK to release new rules on AUSTRALIA: Australia and New Zealand Banking Group (ANZ) extended plans Shariah capital market a commodity Murabahah fi nancing to MALAYSIA: Shariah compliant Axis Real INDONESIA: Otoritas Jasa Keuangan Tabung Haji to procure an interest in Estate Investment Trust has terminated (OJK) confi rmed that it will release six a Melbourne property at 747 Collins its acquisition and leaseback plans of an rules on the Shariah capital market before St. According to Austalasian Lawyer, industrial facility from the subsidiaries the end of 2015, according to Tempo.co. the transaction marks the fi rst of its of Haisan Resources for a total lump The six rules comprise fi ve regulations kind to be concluded in Australia. sum cash consideration of RM46 million on the issuance of Shariah compliant CIMB-TrustCapital acted as the deal’s (US$10.48 million). According to a securities — a perfected version of investment manager and international bourse fi ling, the termination was due Bapepam-LK’s rules No.IX.A.1 — and law fi rm Ashurst as the transaction’s to the fact that both entities were unable one new regulation. The rules have been advisor. to mutually agree on the terms of the drafted and are pending approval from proposed sale and purchase agreement OJK’s chief, Muliaman D Hadad. IEF to invest in Islamic ϐinance within the timeline contemplated by both talent development parties. SECP grants in-principle MALAYSIA: INCEIF — the Global Bioalpha sees 2016 budget approval for PSE formation University of Islamic Finance — has PAKISTAN: The Securities and launched the INCEIF Endowment Fund incentive as favorable Exchange Commission of Pakistan (IEF) to invest in the development of MALAYSIA: Bioalpha is eyeing research (SECP) granted in-principle approval talent in the Islamic fi nance industry, grants — the RM200 million (US$45.57 to the integration schemes between according to a press release. The fund million) SME Technology Transformation the Karachi Stock Exchange, Lahore will serve as a platform for the university Fund under SME Bank and an additional Stock Exchange and Islamabad Stock to meet the increasing industry demand RM1 billion (US$227.88 million) Shariah Exchange to form the Pakistan Stock for high-caliber Islamic fi nance and compliant SME Financing Scheme (until Exchange, according to a press release. banking professionals over the next the 31st December 2017) — under the 2016 decade by investing in students, budget to conduct preclinical and clinical Following the in-principle approval, curriculum, faculty and research. research on three new herbal products stakeholders are given 15 days from the next year. According to The Edge date of publication of the schemes to MBL acquires HBON Pakistan Markets quoting Bioalpha’s managing submit objections to the SECP. director William Hon, the incentive PAKISTAN: Meezan Bank (MBL) has under the new budget is favorable as acquired HSBC Oman Pakistan and CIIF to replace ACIFP the company is also a Shariah compliant is converting the entire operations SME. MALAYSIA: The Chartered Institute of into a Shariah compliant mode under Islamic Finance (CIIF) was launched on the guidance of the former’s Shariah

trillion) by 2018, driven by a growing Receive all the latest news via the GLOBAL domestic demand in emerging markets. TheCityUK reveals growing The report also reinforces London’s pre- No.1 Islamic fi nance based feed eminence as the leading western center demand for Islamic ϐinance for Islamic fi nance and highlights the UK: TheCityUK revealed in its report important role of supportive government titled ‘The UK: Leading Western Center policies in developing the country’s for Islamic Finance’ that the global position as a center for Islamic fi nance. market for Islamic fi nancial services is projected to reach GBP3 trillion (US$4.62

diversifi ed economies, sturdy fi scal million new ordinary shares having a MIDDLE EAST reserves and the latitude provided by nominal value of BHD0.1 (26 US cents) SIB opens ϐifth branch in their fl ush sovereign wealth funds”. per share and an off er price of BHD0.117 The rating agency in its report on the (31 US cents) per share, according to a Dubai region indicated that GCC economies press release. Each shareholder is entitled UAE: Sharjah Islamic Bank (SIB) has are highly exposed to variations in to purchase approximately two ordinary opened its fi fth branch in Dubai located fossil fuel prices in terms of economic shares for 10 ordinary shares held. The at Port Saeed Road, bringing the total activity, fi scal revenues and forex results of the off er and the allotment number of its branches in the UAE to 31, earnings. Nevertheless, the growth of of shares will be announced on the 1st according to CPI Financial. GCC economies will still be supported December 2015. by a healthy demographic structure RAKBANK offers ϐlexible (supplemented by foreign workers) and OSC to secure Islamic productivity gains arising from ongoing home ϐinancing structural reforms. ϐinancing facilities UAE: National Bank of Ras Al Khaimah OMAN: Meethaq Islamic Banking, (RAKBANK) has partnered with SACO renews Islamic facility the Islamic arm of Bank Muscat, and Dubai Properties to provide the UAE’s Oman Shipping Company (OSC) signed residents, non-residents, expatriates agreement an agreement for long-term fi nancing and GCC nationals with fl exible SAUDI ARABIA: Saudi Company for facilities of OMR78 million (US$201.89 and aff ordable conventional as well Hardware (SACO) on the 5th November million) to refi nance the latt er’s very large as Shariah compliant home fi nance 2015 renewed an Islamic banking crude carriers — Marbat, Manah and solutions through AMAL at competitive facility agreement with the Saudi British Mazyonah, reported Times of Oman. rates. According to a press release, the Bank, according to a bourse fi ling. The facilities extend up to 25 years with SAR104.45 million (US$27.84 million)- Al Salam Bank to part-ϐinance fi nance to value ratios of up to 80% for guaranteed fi nancing is renewed for the UAE nationals and 75% for expatriates duration of one year, beginning on the Dragon City development for completed projects and 50% for off - 30th September 2015, to fi nance working BAHRAIN: Al Salam Bank-Bahrain and plan projects. capital. Diyar Al Muharraq, on the 5th November 2015, signed a US$32 million Islamic Bank Nizwa introduces Al Baraka maintains social fi nancing facility agreement to part- fi nance the development of Dragon Islamic banking app responsibility City, according to a press release. The OMAN: Bank Nizwa has rolled out an BAHRAIN: Al Baraka Banking Group project, having been developed with a Islamic banking mobile app for Android has launched its Social Responsibility total project cost of US$100 million, has and iOS phones and tablets, off ering Report for 2013 and 2014 and announced obtained 100% lease and reached over customers greater banking accessibility its 2016-20 Social Responsibility 90% occupancy rate to date. including the ability to manage personal, Priorities, according to a statement. fi nance and investment accounts as Demonstrating its commitment to BNP Paribas sued well as perform internal, external, and communities through a socially SAUDI ARABIA: Golden Belt 1 Sukuk international fund transfers, according to responsible core business model, the Co is suing BNP Paribas for negligence a statement. bank has also pledged to support the Global Goals for Sustainable and breach of contract during the latt er’s role as the arranger, manager and Qatar and the UAE to Development which were adopted by the United Nations General Assembly on the sole bookrunner for a US$650 Islamic outperform GCC peers 25th September 2015. fi nance transaction in 2007, according to GLOBAL: RAM sees Qatar and the UAE Bloomberg. Due to the failure of securing a proper signature from Maan Al-Sanea, outperforming other GCC peers during BiSB to hold rights issue the current period of sustained low oil the chairman of Saad Group, the deal — BAHRAIN: Bahrain Islamic Bank (BiSB) which the group defaulted in 2009 — was prices. According to Esther Lai, RAM’s th th head of sovereign ratings: “What sets will hold a rights issue on the 15 -29 allegedly rendered worthless. Qatar and the UAE apart are their more November 2015, off ering up to 170.94

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for the fi rst half of 2015, up 13% year-on- ASSET RESULTS year, according to a statement. The bank Amlak Finance also observed a rise in high-quality assets exceeding AED14.02 billion (US$3.82 MANAGEMENT UAE: Amlak Finance registered a net billion) 40 years after its inception. Maybank explores ASEAN profi t of AED57 million (US$15.51 million) for the July-September period of 2015 infrastructure potential compared to AED7 million (US$1.91 Finance House GLOBAL: Maybank Asset Management million) for the corresponding period in UAE: For the nine-month period ending has partnered with Australia’s Hastings 2014. For the nine-month period of 2015, the 30th September 2015, Finance House Management to explore Shariah total assets fell by 8% to AED6.7 billion registered a consolidated net profi t of compliant infrastructure opportunities in (US$1.82 billion), resulting from a lower AED64.7 million (US$17.61 million) the ASEAN region, according to a press fi nancing and investing assets portfolio. versus AED73.3 million (US$19.95 release. Under the new partnership, the million) achieved as at the 31st December two entities will explore establishing KHCB 2014. Net interest income as well as the fi rst Malaysia-domiciled US dollar income from Islamic fi nancing and denominated global infrastructure BAHRAIN: Khaleeji Commercial Bank investing assets grew by 40.7% year-on- fund by a Malaysian institution and (KHCB) achieved a year-on-year growth year to reach AED142.6 million (US$38.81 co-managed by a global infrastructure in net profi t of 117.9% to BHD6.1 million million) for the period under review, asset manager. Other initiatives planned (US$16.06 million) for the fi rst nine according to a statement. include an international roadshow months of 2015. Total assets reached and an infrastructure roundtable in BHD663.6 million (US$1.75 billion) Takaful Emarat November. during the period under review, an 11.2% increase compared to December 2014, UAE: Takaful Emarat achieved a growth according to a statement. in net Takaful income of 110% to Alkhabeer Capital exits from AED27.3 million (US$7.43 million) for the AREF I Warba Bank July-September period of 2015 against AED12.99 million (US$3.54 million) for SAUDI ARABIA: Alkhabeer Capital has KUWAIT: For the fi rst nine months of the similar quarter in 2014. According exited from Alkhabeer Real Estate Fund 2015, Warba Bank posted a net profi t to a press release, earned contributions I (AREF I), a private placement fund that of KWD1.25 million (US$4.12 million) rose 229% year-on-year to AED270.2 aims to generate investor returns through compared to KWD318,000 (US$1.05 million (US$73.54 million) for the quarter the acquisition of income-generating million) achieved for the corresponding reviewed. real estate assets, according to a press period in 2014. Total assets over the release. The fund delivered to investors period grew by 34% year-on-year to a net cumulative return of 40.5% and an KWD682.76 million (US$2.25 billion), annual cash-on-cash return of 8.1%. according to a statement. BMA Funds to introduce Syarikat Takaful Malaysia TAKAFUL Islamic income fund MALAYSIA: According to Syarikat AIB signs MoU with Takaful PAKISTAN: BMA Asset Management Takaful Malaysia’s unaudited third Company (BMA Funds) has formally quarter fi nancial data, the fi rm made a Oman signed the trust deed for its forthcoming RM37.17 million (US$8.51 million) profi t OMAN: Alizz Islamic Bank (AIB) has BMA Minhaj Islamic Income Fund at in the period, bringing year-to-date profi t signed an MoU with Takaful Oman Central Depository Company Pakistan, to RM119.59 million (US$27.39 million). to distribute the latt er’s motor Takaful according to a press release. The fund The profi t posted for the third quarter policies to a growing customer base seeks to generate superior risk-adjusted is a slight increase from the year before in Oman at special rates. According to returns over the medium to long term by which stood at RM34.64 million (US$7.93 a statement, Takaful Oman will issue investing in fi xed income instruments in million). motor Takaful policies through AIB’s Pakistan’s debt market. branches. QInvest Public Mutual launches QATAR: QInvest reported a 69% rise IFSB issues ED-18 Islamic PRS fund in net profi t to US$33.8 million for the MALAYSIA: The IFSB has issued the Exposure Draft on Guiding Principles MALAYSIA: Public Mutual has launched third quarter of 2015 compared to US$20 for ReTakaful (Islamic Reinsurance) the Public Mutual PRS Islamic Strategic million achieved in the corresponding (ED-18), according to a press release. Equity Fund, a non-core Islamic equity period in 2014, according to a statement. The standard-sett ing body will hold a fund under its Private Retirement Revenue for the quarter reviewed was public hearing on the 30th November Scheme (PRS). Off ered from the 6th to up 37% to US$78.7 million from US$57.5 2015 and also a roundtable discussion the 26th November, the fund will invest million in 2014. on re-Takaful in January 2016 to solicit 75-98% of its net asset value (NAV) in feedback on the contents of ED-18 prior Shariah compliant equities and has the Al Masraf to its fi nal submission to the IFSB Council option to invest up to 98% of its NAV in UAE: Arab Investment and Foreign in April 2016. selected foreign markets including Asia, Trade (Al Masraf) reported a net profi t according to a press release. of AED182 million (US$49.54 million)

which refl ects Fitch’s view of a tougher short-term IDRs to ‘F1’ from ‘F1+’. These RATINGS operating environment facing the sector, downgrades, according to a statement ‘AA’ for the ICD mainly due to the eff ect of lower oil by Fitch, are based on SC’s unfavorable prices on government spending. The profi tability and asset quality trends as GLOBAL: The Islamic Corporation for long-term IDRs of the three banks are well as underperformance relative to the Development of the Private Sector driven by their ‘a’ viability ratings (VRs). peers. (ICD) has been assigned a long-term Fitch has maintained a negative outlook foreign currency issuer default rating on the long-term IDRs of Al Rajhi Bank, Separately, Standard Chartered Bank (IDR) of ‘AA’ with a stable outlook National Commercial Bank, Riyad Bank Malaysia’s ‘A3’ long-term deposit and a short-term IDR of ‘F1+’ by Fitch, and SAMBA Financial Group. rating has been placed on review for according to a statement. The rating downgrade by Moody’s based on the agency also assigned Hilal Services’s Separately, Fitch upgraded the VR of review for downgrade on the long- proposed medium-term note program an Alinma Bank, refl ecting the greater size, term ratings of Standard Chartered and ‘AA(EXP)’ rating. maturity and track record of its franchise Standard Chartered Bank (SCB), and as well as its management’s strong track in particular by the review of SCB’s Stable outlook on Kuwaiti record of performance. adjusted baseline credit assessment banking system of ‘a2’ — which is used by Moody’s IIRA maintains Bank ABC to derive parental support for the KUWAIT: Moody’s in a statement Malaysian unit, according to a press maintained a stable outlook on the Islamic’s ratings release. Kuwaiti banking system, refl ecting the BAHRAIN: The Islamic International rating agency’s expectation of sustained Rating Agency (IIRA) has reaffi rmed HPL’s proposed Sukuk gets government spending and how bank Bank ABC Islamic’s ‘A+(bh)/A1(bh)’ creditworthiness will evolve in this national scale ratings (long and short- preliminary rating system over the next 12-18 months. term respectively) and its ‘A-/A2’ ratings PAKISTAN: JCR-VIS Credit Rating According to Alexios Philippides, on the international scale with a stable Company has assigned a preliminary an analyst at Moody’s: “Government outlook on the ratings. The rating rating of ‘AA-’ with a stable outlook spending, accelerated implementation agency noted in a statement that the on the PKR2 billion (US$18.93 million) of infrastructure projects and strong ratings derive signifi cant strength from (inclusive of a Green Shoe Option of domestic consumption will continue the bank’s status as a wholly-owned PKR500 million (US$4.73 million)) to support the banks’ favorable subsidiary of Bank ABC, having close proposed Sukuk issue of Hascol operating environment, despite lower fi nancial and operational support from Petroleum (HPL), according to a press hydrocarbon revenues.” The rating the parent bank. release. The rating refl ects a healthy agency also expects the government to fi nancial risk profi le as evident from step in and provide support to the banks Negative outlook for Saudi the company’s profi tability and cash if needed. fl ow from operations in relation to Arabia outstanding obligations. Negative outlook on Omani SAUDI ARABIA: RAM, according to a banking system statement, revised the outlook on Saudi The proposed Sukuk will have a tenor Arabia’s global-scale sovereign rating of of six years (including a one-year grace OMAN: Moody’s has revised the ‘gAA2(pi)’ to negative from stable but period) and will be utilized for meeting outlook on Oman’s banking system reaffi rmed its ratings. The actions are working capital requirements, funding to negative from stable to refl ect the premised on the country’s steeper-than- expansion plans and the retirement of softening operating environment for anticipated fi scal deterioration with low existing high-cost borrowing. banks in the context of low oil prices oil prices impacting government revenue and the government’s weakening along with expenditure that remains Watania’s ratings under capacity to support the banks when elevated. in need. According to a statement, the review negative outlook also expresses the The rating agency also reaffi rmed the UAE: AM Best has, according to a rating agency’s expectation of how bank Kingdom’s ‘seaAAA(pi)’ ASEAN-scale statement, placed the fi nancial strength creditworthiness will evolve in this rating with a stable outlook, since its rating of ‘B+’ and the issuer credit rating system over the next 12-18 months. fi scal and external balance sheets still of ‘bbb-‘ of the UAE’s National Takaful compare well against peers on this scale Company (Watania) under review with Fitch afϐirms Saudi Arabian after taking into consideration the extent negative implications. The rating action banks’ ratings of credit deterioration. refl ects Watania’s weak underwriting performance since incorporation. SAUDI ARABIA: Fitch, according to SC downgraded The departures of the insurer’s CEO a statement, affi rmed the ratings on and CFO during the year potentially Saudi Arabian banks as part of its 2015 GLOBAL: Standard Chartered (SC) and creates an interim risk to the company’s peer review of the Kingdom’s banking its subsidiary Standard Chartered Bank’s operations. The rating agency will sector. The rating agency has revised long-term issuer default ratings (IDRs) look to understand the near-term steps the outlook on the long-term issuer have been downgraded to ‘A+’ from ‘AA-’ that Watania is taking to stabilize its default ratings (IDRs) of Saudi British by Fitch with a negative outlook. The operations and capital position, given the Bank, Banque Saudi Fransi and Arab rating agency concurrently revised their current strain on the fi rm’s profi tability National Bank to negative from stable viability ratings to ‘a+’ from ‘aa-’ and and balance sheet.

CIMB Islamic receives ratings RAM reafϐirms LMT’s BaIDS coal-unloading requirements of TNB Janamanjung. MALAYSIA: CIMB Islamic’s proposed MALAYSIA: RAM has reaffi rmed the RM5 billion (US$1.16 billion) Basel III- ‘A1/Stable’ rating of Lumut Maritime compliant Tier 2 junior Sukuk program Terminal (LMT)’s RM60 million Fitch afϐirms Kuwaiti banks has been assigned a fi nal rating of (US$13.74 million) Bai Bithaman KUWAIT: The long-term issuer default ‘AA+IS’ by MARC who also reaffi rmed Ajil Islamic debt securities (BaIDS) rating of Kuwait Finance House, the bank’s fi nancial institution and RM2 (2004/2017), according to a statement. Boubyan Bank, Gulf Bank, Commercial billion (US$464.22 million) Tier 2 junior The rating remains anchored by the Bank of Kuwait, Al Ahli Bank of Kuwait, Sukuk ratings at ‘AAA/MARC-1’ and continued steady and predictable Ahli United Bank, Kuwait International ‘AA+IS’ respectively. The rating agency cash fl ow from LMT’s operations and Bank and Industrial Bank of Kuwait have noted in a statement that all ratings carry maintenance agreement with Lekir Bulk all been affi rmed at ‘A+’ with a stable a stable outlook. Terminal, which at present caters to the outlook by Fitch.

the prime candidate to head the entity, whose two-year contract ends on the 17th MOVES said the sources. November 2015. Securities and Commodities Authority Jaiz Bank Al Rajhi Takaful SAUDI ARABIA: Patrick Claude UAE: The Securities and Commodities NIGERIA: Jaiz Bank, Nigeria’s sole Choff el, previously CEO of Oman Authority has appointed its deputy chief Islamic bank, has appointed Mahe Insurance Company, has been appointed executive for licensing, supervision and Abubakar as the bank’s acting as an independent board member of enforcement, Obeid Al Zaabi, as acting managing director/CEO, according to Al Rajhi Takaful, replacing Dr Yusuf CEO to stand in for Abdullah Al Turifi Naija247news. Mahe was previously an Othman Al Huzim who resigned in June, who resigned in October, according to executive director in charge of business according to a bourse fi ling. Reuters quoting unnamed sources. The development at the bank and will be appointment suggests that Obeid may be replacing Muhammad Nurul Islam RESEARCH Got questions? We can answer them… What you need, when you need it.

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Expected date Company's name Size Structure Announcement Date 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 TBA Axiata Group US$1.5 billion Sukuk 28th October 2015 25-27th November 2015 XL Axiata IDR1.5 trillion Sukuk 15th September 2015 November Tenaga Nasional RM10 billion Sukuk 24th June 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 December 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 Albaraka Turk TRY1 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 2015 Al Baraka Turk Participation Bank US$300 million Sukuk 12th August 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 Fourth quarter of 2015 Government of Ivory Coast XOF300 billion Sukuk 24th April 2015 2015 Government of UAE TBA Green energy Sukuk 12th March 2015 TBA Turkiye Finans US$400 million Sukuk 20th July 2015 TBA Arab Petroleum Investment Corp US$3 billion Sukuk 1st July 2015 TBA Eskom TBA Sukuk 25th June 2015 Fourth quarter of 2015 Republic of Turkey TBA Sukuk 25th June 2015 End of 2015 Kuveyt Türk TRY800 million Sukuk 24th June 2015 TBA 1Malaysia Development RM5 billion Sukuk 18th June 2015 TBA Toyota Capital Malaysia TBA Sukuk 17th June 2015 TBA SapuraKencana Petroleum RM7 billion Sukuk Murabahah 16th 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 TBA AEON Credit RM1 billion Sukuk Murabahah 13th May 2015 TBA Bank OCBC NISP TBA Sukuk 13th May 2015 Jun-15 Adira Dinamika Multi Finance IDR500 billion Sukuk 6th May 2015 2015/2016 ﬁ scal year Government of Egypt TBA Sukuk 5th May 2015 2016 Government of Kazakhstan TBA Sukuk 9th April 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 Jun Jul Aug Sep Oct Nov

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 Jun Jul Aug Sep Oct Nov

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 2250

1020 1960

890 1670

760 1380

630 1090

500 800 Jun Jul Aug Sep Oct Nov Jun Jul Aug Sep Oct Nov

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

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 Jun Jul Aug Sep Oct Nov

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 Jun Jul Aug Sep Oct Nov

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

Index Values 95 90 85 80 75 70 65 60 55 Jul-10 Jul-14 Oct-15 Dec-99 Dec-03 Apr-01 Apr-05 Aug-02 Aug-06 Mar-09 Mar-13 Nov-07 Nov-11

Top 10 Monthly Returns for ALL Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 Atlas Islamic Stock Atlas Asset Management 12.60 Pakistan 2 Deutsche Noor Precious Metals Securities - Class A DWS Noor Islamic Funds 11.76 Ireland 3 AmPrecious Metals AmInvestment Management 10.95 Malaysia 4 The Iman Allied Asset Advisors 9.84 US 5 Altaira Funds - Ethical Global High Dividend (I) Altaira Capital Partners 9.57 Luxembourg 6 HSBC Amanah Global Equity Index - AD HSBC Amanah Central Shariah Committ ee 9.49 Luxembourg 7 WSF Asian Paciﬁ c - USD I Cogent Asset Management 8.37 Guernsey 8 Amana Income Saturna Capital 7.93 US 9 Alkhair Capital Index Alkhair Portfoy Yonetimi 7.26 Turkey 10 CIMB Islamic Small Cap CIMB-Principal Asset Management 6.76 Malaysia Eurekahedge Islamic Fund Index 2.53

Based on 100.00% of funds which have reported October 2015 returns as at the 9th November 2015

Top 10 Monthly Returns for Global Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 Deutsche Noor Precious Metals Securities - Class A DWS Noor Islamic Funds 11.76 Ireland 2 AmPrecious Metals AmInvestment Management 10.95 Malaysia 3 Altaira Funds - Ethical Global High Dividend (I) Altaira Capital Partners 9.57 Luxembourg 4 HSBC Amanah Global Equity Index - AD HSBC Amanah Central Shariah Committ ee 9.49 Luxembourg 5 WSF Global Equity - USD I Cogent Asset Management 6.75 Guernsey 6 Emirates Islamic Global Balanced EIS Asset Management 5.42 Jersey 7 CIMB Islamic Greater China Equity CIMB-Principal Asset Management 3.05 Malaysia 8 AmOasis Global Islamic Equity AmInvestment Management 1.37 Malaysia 9 BLME Sharia'a Umbrella SICAV-SIF Global Sukuk Bank of London and The Middle East 0.99 Luxembourg - Class A USD 10 Al Rajhi Global Equity UBS 0.74 Saudi Arabia Eurekahedge Islamic Fund Index 4.30

Based on 100.00% of funds which have reported October 2015 returns as at the 9th November 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 Equity Index over the last 5 years Eurekahedge Islamic Fund Equity Index over the last 1 year 160 105

150 100 140

130 95 120

Percentage 110 Percentage 90 100

90 85 Jul-15 Jul-10 Jul-11 Jan-15 Jun-15 Jan-10 Jan-11 Jun-12 Jun-13 Oct-15 Oct-14 Sep-15 Dec-14 Oct-15 Dec-11 Dec-12 Aug-15 Mar-15 Mar-15 Nov-14 May-15 May-15 Nov-13 Nov-14 May-14 May-15 Top 10 Islamic Equity Funds by 3 Months Returns Fund Fund Manager Performance Measure Fund Domicile 1 Public Islamic Asia Dividend Public Mutual 9.14 Malaysia 2 Public Asia Itt ikal Public Mutual 9.12 Malaysia 3 PB Islamic Asia Equity Public Mutual 8.74 Malaysia 4 Al Rajhi Global Equity UBS 6.96 Saudi Arabia 5 PB Islamic Asia Strategic Sector Public Mutual 6.68 Malaysia 6 Public China Itt ikal Public Mutual 5.65 Malaysia 7 AmOasis Global Islamic Equity AmInvestment Management 3.89 Malaysia 8 CIMB Islamic DALI Equity CIMB-Principal Asset Management 3.72 Malaysia 9 InterPac Dana Saﬁ Inter-Paciﬁ c Asset Management 3.28 Malaysia 10 CIMB Islamic Small Cap CIMB-Principal Asset Management 2.23 Malaysia Eurekahedge Islamic Fund Index (3.90)

Based on 39.29% of funds which have reported October 2015 returns as at the 9th November 2015

Top 10 Islamic Global Funds by 3 Months Returns Fund Fund Manager Performance Measure Fund Domicile 1 AmPrecious Metals AmInvestment Management 21.38 Malaysia 2 Deutsche Noor Precious Metals Securities - DWS Noor Islamic Funds 9.02 Ireland Class A 3 CIMB Islamic Greater China Equity CIMB-Principal Asset Management 8.96 Malaysia 4 Al Rajhi Global Equity UBS 6.96 Saudi Arabia 5 AmOasis Global Islamic Equity AmInvestment Management 3.89 Malaysia 6 BLME Sharia'a Umbrella SICAV-SIF Global Sukuk Bank of London and The Middle East 0.18 Luxembourg - Class A USD 7 Al Rajhi Commodity Mudarabah - USD Al Rajhi Bank 0.18 Saudi Arabia 8 Watani KD Money Market National Bank of Kuwait 0.13 Cayman Islands 9 BLME Umbrella Sicav - SIF - USD Income - Class B Bank of London and The Middle East 0.11 Luxembourg 10 Watani USD Money Market National Bank of Kuwait 0.03 Cayman Islands Eurekahedge Islamic Fund Index 0.71

Based on 40.00% of funds which have reported October 2015 returns as at the 9th November 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 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 24th Aug 2015 West Coast Malaysia Sukuk Domestic market 239 RHB Capital Expressway public issue 6th Aug 2015 Sarawak Energy Malaysia Sukuk Domestic market 386 RHB Capital, Kenanga Investment Bank, public issue AmInvestment Bank 30th Jul 2015 Kuala Lumpur Malaysia Sukuk Domestic market 289 Maybank, CIMB Group Kepong public issue 9th Jul 2015 Putrajaya Malaysia Sukuk Domestic market 237 Maybank, CIMB Group, AmInvestment Bank Holdings public issue 19th Jun 2015 Maxis Malaysia Sukuk Domestic market 226 CIMB Group public issue 18th Jun 2015 National Saudi Sukuk Domestic market 1,040 JPMorgan, HSBC, Samba Capital Shipping Co of Arabia public issue Saudi Arabia 4th Jun 2015 Pengurusan Air Malaysia Medium-Term Domestic market 163 Maybank SPV Note 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 10 11 12 2 3 4 6 7 8 9 10 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q 2Q 3Q 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 DanaInfra Nasional Malaysia Sukuk Domestic market 2,390 7.0 RHB Capital, Maybank, Bank Islam Malaysia, CIMB Group, public issue AmInvestment Bank 2 Perusahaan Penerbit Indonesia Sukuk Euro market 2,000 5.9 JPMorgan, HSBC, Dubai Islamic Bank, CIMB Group SBSN Indonesia III public issue 3 Dubai Islamic Bank UAE Sukuk Euro market 1,750 5.1 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, public issue Dubai Islamic Bank, Sharjah Islamic Bank, Emirates NBD, Al Hilal Bank, Noor Bank, Maybank, Dubai Islamic Bank 4 Malaysia Sovereign Malaysia Sukuk Euro market 1,500 4.4 Standard Chartered Bank, HSBC, CIMB Group Sukuk public issue 5 IDB Trust Services Saudi Sukuk Euro market 1,336 3.9 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 6 Petronas Global Malaysia Sukuk Euro market 1,250 3.7 JPMorgan, Deutsche Bank, Morgan Stanley, HSBC, Maybank, Sukuk public issue Mitsubishi UFJ Financial Group, CIMB Group, Citigroup, Bank of America Merrill Lynch 7 National Shipping Saudi Sukuk Domestic market 1,040 3.1 JPMorgan, HSBC, Samba Capital Co of Saudi Arabia Arabia public issue 8 Islamic Republic of Pakistan Sukuk Euro market 1,000 2.9 Standard Chartered Bank, Deutsche Bank, Dubai Islamic Bank, Pakistan public issue Citigroup 8 Hong Kong Sukuk Hong Sukuk Euro market 1,000 2.9 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, 2015 Kong public issue CIMB Group 8 Hazine Mustesarligi Turkey Sukuk Euro market 1,000 2.9 HSBC, CIMB Group, Citigroup Varlik Kiralama public issue Anonim Sirketi 8 Government of Ras UAE Sukuk Euro market 1,000 2.9 JPMorgan, National Bank of Abu Dhabi, Citigroup, Al Hilal Al Khaimah public issue Bank 12 Danga Capital Malaysia Sukuk Domestic market 992 2.9 RHB Capital public issue 13 Khadrawy UAE Sukuk Euro market 913 2.7 Standard Chartered Bank, JPMorgan, HSBC, National Bank public issue of Abu Dhabi, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD 14 Jana Kapital Malaysia Sukuk Domestic market 816 2.4 RHB Capital, CIMB Group public issue 15 Qatar Islamic Bank Qatar Sukuk Euro market 750 2.2 Standard Chartered Bank, HSBC, Citigroup, QInvest, Barwa public issue Bank, Noor Bank 16 Malaysia Building Malaysia Sukuk Domestic market 645 1.9 RHB Capital, DRB-HICOM, AmInvestment Bank Society public issue 17 Mumtalakat Sukuk Bahrain Sukuk Euro market 594 1.7 Standard Chartered Bank, Deutsche Bank, BNP Paribas, Holding public issue Mitsubishi UFJ Financial Group 18 Jambatan Kedua Malaysia Sukuk Domestic market 560 1.6 RHB Capital, Maybank, Kenanga Investment Bank, public issue AmInvestment Bank 19 Prasarana Malaysia Malaysia Sukuk Domestic market 541 1.6 RHB Capital, Kenanga Investment Bank, CIMB Group, Aﬃ n public issue Investment Bank, AmInvestment Bank 20 Arab National Bank Saudi Sukuk Domestic market 533 1.6 JPMorgan, Deutsche Bank, HSBC, Arab National Bank Arabia public issue 21 Pengurusan Air SPV Malaysia Sukuk Domestic market 525 1.5 Maybank, Bank Islam Malaysia, CIMB Group public issue 22 Sharjah Islamic UAE Sukuk Euro market 500 1.5 Standard Chartered Bank, HSBC, Kuwait Finance House, Dubai Bank public issue Islamic Bank, Abu Dhabi Islamic Bank, Emirates NBD, Al Hilal Bank, Noor Bank 22 Noor Bank UAE Sukuk Euro market 500 1.5 Standard Chartered Bank, Dubai Islamic Bank, South Indian Bank, public issue Citigroup, Emirates NBD, Al Hilal Bank, QInvest, Barwa Bank 22 IFFIm Sukuk UK Sukuk Euro market 500 1.5 Saudi National Commercial Bank, Standard Chartered Bank, public issue National Bank of Abu Dhabi, CIMB Group, Barwa Bank 22 Flydubai UAE Sukuk Euro market 500 1.5 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, public issue Dubai Islamic Bank, Emirates NBD, Credit Agricole, Noor Bank 22 Arab Petroleum Saudi Sukuk Euro market 500 1.5 Saudi National Commercial Bank, Standard Chartered Bank, Investments Arabia public issue Goldman Sachs, First Gulf Bank, Emirates NBD, Noor Bank 27 Majid Al Futt aim UAE Sukuk Euro market 499 1.5 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, Properties public issue Dubai Islamic Bank, Abu Dhabi Islamic Bank 28 Garuda Indonesia Indonesia Sukuk Euro market 496 1.5 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 29 Almarai Saudi Sukuk Domestic market 427 1.3 HSBC, Samba Capital Arabia public issue 30 National Higher Malaysia Sukuk Domestic market 426 1.3 Maybank, CIMB Group Education Fund public issue 34,083 100

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

Manager US$ (mln) Iss % US dollar 17.9 1 CIMB Group 5,124 46 15.0 Malaysian ringgit 13.2 2 HSBC 4,202 26 12.3 2.7 3 RHB Capital 3,937 37 11.6 Saudi riyal

4 Maybank 2,693 29 7.9 Euro 0.3

5 Standard Chartered Bank 2,465 22 7.2 6 AmInvestment Bank 1,924 21 5.7 Sukuk Volume by Issuer Nation US$ (billion) 12 Months

7 Dubai Islamic Bank 1,588 12 4.7 Malaysia 15.7 8 JPMorgan 1,483 6 4.4 UAE 5.7 Saudi Arabia 4.5 9 National Bank of Abu Dhabi 1,353 12 4.0 Indonesia 2.5 10 Citigroup 1,274 7 3.7 Turkey 1.2 11 Deutsche Bank 712 5 2.1 Hong Kong 1.0 12 Emirates NBD 600 8 1.8 Pakistan 1.0 13 Kenanga Investment Bank 562 14 1.7 14 Samba Capital 560 2 1.6 Global Sukuk Volume by Sector 12 Months 15 Al Hilal Bank 541 5 1.6 16 Noor Bank 509 6 1.5 14% 5% Finance Government 17 Natixis 447 2 1.3 5% 41% Transportation 18 Aﬃ n Investment Bank 424 6 1.2 Construction/Building 9% 19 Saudi National Commercial Bank 294 3 0.9 Oil & Gas Other 20 Bank Islam Malaysia 293 3 0.9 26% 21 Barwa Bank 288 3 0.8 22 Mitsubishi UFJ Financial Group 287 2 0.8 Global Sukuk Volume - US$ Analysis 23 Abu Dhabi Islamic Bank 276 3 0.8 24 First Gulf Bank 250 3 0.7 US$bn US$m 25 Hong Leong Financial Group 192 6 0.6 18 600 16 Non-US$ US$ 500 26 QInvest 188 2 0.6 14 12 400 10 27 BNP Paribas 169 2 0.5 300 8 28 Sharjah Islamic Bank 166 2 0.5 6 200 4 100 29 Morgan Stanley 139 1 0.4 2 0 0 29 Bank of America Merrill Lynch 139 1 0.4 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q 2Q 3Q 2010 2011 2012 2013 2014 2015 Total 34,083 121 100

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 18.0 1 Salans FMC SNR Denton Group 3,334 2 26.6 2 HSBC 750 3 10.0 2 Milbank Tweed Hadley & McCloy 2,704 1 21.6 3 National Commercial Bank 651 3 8.7 2 White & Case 2,704 1 21.6 4 Riyad Bank 584 2 7.8 4 Allen & Overy 1,086 5 8.7 5 Samba Capital & Investment 518 3 6.9 5 Cliﬀ ord Chance 720 2 5.8 Management 6 Al Rajhi Capital 356 3 4.7 6 Baker & McKenzie 433 2 3.5 7 Mitsubishi UFJ Financial Group 354 1 4.7 7 Norton Rose Fulbright 354 1 2.8 7 Mizuho Financial Group 354 1 4.7 7 Pekin & Pekin 354 1 2.8 9 Banque Saudi Fransi 346 2 4.6 9 Latham & Watkins 333 1 2.7 10 National Bank of Kuwait 290 1 3.9 10 Linklaters 311 1 2.5

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 Samba Capital 1,501 7 6.8 th 2 First Gulf Bank 1,475 15 6.7 30 Mar 2015 Saudi Aramco Saudi Arabia 9,999 3 Abu Dhabi Islamic Bank 1,412 13 6.4 16th Mar 2015 Rabigh Reﬁ ning & Saudi Arabia 2,870 Petrochemical 4 Banque Saudi Fransi 1,279 6 5.8 15th Jan 2015 SapuraKencana TMC Malaysia 2,239 5 HSBC 1,215 11 5.5 24th Jun 2015 Jazan Gas Projects Saudi Arabia 1,790 6 Saudi National Commercial Bank 1,131 7 5.1 th 7 National Bank of Abu Dhabi 941 7 4.3 18 Jun 2015 Emirates National Oil UAE 1,500 8 Abu Dhabi Commercial Bank 802 6 3.6 19th Nov 2014 Saudi Binladin Group Saudi Arabia 1,327 9 Riyad Bank 644 3 2.9 10th Mar 2015 Port & Free Zone World UAE 1,100 10 Standard Chartered Bank 614 7 2.8 17th Apr 2015 Turkiye Vakiﬂ ar Bankasi Turkey 1,021 11 Emirates NBD 591 8 2.7 15th Dec 2014 Arab Petroleum Saudi Arabia 949 12 Mashreqbank 574 6 2.6 Investments 13 Noor Bank 496 6 2.3 28th Jul 2015 GEMS Education UAE 817 14 Alinma Bank 490 2 2.2 15 Sumitomo Mitsui Financial Group 489 4 2.2 Top Islamic Finance Related Financing by Country 12 Months 16 Dubai Islamic Bank 417 5 1.9 Nationality US$ (mln) No % 1 Saudi Arabia 8,044 7 36.5 17 Arab Banking Corporation 371 6 1.7 2 UAE 7,342 18 33.3 18 Gulf International Bank 347 4 1.6 3 Malaysia 2,411 3 10.9 19 SABB 342 3 1.6 4 Turkey 1,890 4 8.6 20 Barwa Bank 340 5 1.5 5 Qatar 1,000 2 4.5 21 RHB Capital 322 3 1.5 6 Kuwait 622 3 2.8 22 Union National Bank 285 5 1.3 7 Cayman Islands 325 1 1.5 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 1.2 10 Oman 55 1 0.3 25 Ahli United Bank 258 3 1.2 11 Italy 51 1 0.2 26 Maybank 247 2 1.1 Top Islamic Finance Related Financing by Sector 12 Months 26 AmInvestment Bank 247 2 1.1

28 Kuwait Finance House 241 2 1.1 Oil & Gas 29 Al Hilal Bank 226 2 1.0 Utility & Energy 30 Qatar Islamic Bank 222 4 1.0 Finance

Top Islamic Finance Related Financing Mandated Lead Arrangers Construction/Building 12 Months Transportation Bookrunner US$ (mln) No % US$ bln0 128 3 4 5 6 7 1 Maybank 2,239 1 19.5

2 Samba Capital 1,327 1 11.5 Global Islamic Financing - Years to Maturity (YTD Comparison) 3 Abu Dhabi Islamic Bank 941 5 8.2 2015 4 Noor Bank 748 4 6.5 2014 5 Mashreqbank 731 3 6.4 2013 2012 6 Saudi National Commercial Bank 666 1 5.8 2011 6 Riyad Bank 666 1 5.8 2010 2009 6 Alinma Bank 666 1 5.8 2008 9 Emirates NBD 519 4 4.5 0% 20% 40% 60% 80% 100% 0-3yrs 3-5yrs 5-7yrs 7-10yrs 10+yrs 10 Dubai Islamic Bank 376 2 3.3

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

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1MDB 22 Dubai Islamic Bank 21 Moody’s 9, 15, 31 Abu Dhabi Islamic Bank 27 Dubai Properties 29 NASDAQ Dubai 15, 27 Academy for the Regional Center in Almaty 20 Emirates Airline 27 National Bank of Fujairah 12 Affi n Islamic Bank 28 Emirates NBD 15 National Bank of Ras Al Khaimah 29 Agro Bank 13 European Central Bank 7 National Center for Statistics and Information 8 Ahli United Bank 32 EY 12, 24 National Commercial Bank 31 Akbank 3 EY Malaysia 10 Al Ahli Bank of Kuwait 32 FAAIF 25 National Takaful Company 31 Al Baraka Banking Group 29 Finance House 30 NCB Capital Company 15 Al Maali Consulting Group 18 First Gulf Bank 15 New York Board of Trade 16 Al Madina Investment Group 8 Fitch 7, 31, 32 Noor Bank 15 Al Madina Real Estate 8 Freshfi elds Bruckhaus Deringer 7 Norton Rose Fulbright 21 Al Masraf 30 Goldman Sachs International 15 OJK 11, 28 Al Rajhi Bank 31 Gulf Bank 32 Oman Insurance Company 32 Al Salam Bank-Bahrain 29 Hascol Petroleum 31 Oman Shipping Company 29 Alinma Bank 31 Hastings Management 6, 30 Oman Telecommunications Co 27 Alizz Islamic Bank 30 Holman Fenwick William 7 Alkhabeer Capital 30 HSBC Bank Oman 28 Pakistan Stock Exchange 28 Allen & Overy 15 HSBC Oman Pakistan 28 Parametric Portfolio Associates 27 AM Best 31 ICD 4, 31 Public Mutual 30 Aman Lagenda 28 IDB 4, 6, 14, 21, 26 Qatar First Bank 15 Amanie Advisors 14 IDG Group 4, 14, 25 QInvest 30 AmFamily Takaful 10 IFC 1, 3 RAM 29, 31, 32 Amlak Finance 30 IFC 5, 18 Reserve Bank of India 18 AmLife Insurance 10 IFC Enterprise Finance Corp 1 RHB Islamic Bank 27 APICORP 15, 21 IFFIm 21 Riyad Bank 31 Arab National Bank 31 IFSB 30 S&P 9 Ashurst 28 IIRA 31 Asian Development Bank 18 INCEIF 25, 28 Saad Group 29 Asian Infrastructure Investment Bank 6 Industrial Bank of Kuwait 32 SAMBA Financial Group 31 Association for Development of Islamic Finance 20 International Association of Islamic Banks 25 SapuraKencana Petroleum 13 Australia and New Zealand Banking Group 28 Irish Stock Exchange 15, 27 Saudi Arabian Monetary Authority 9, 19 Axis REIT 28 IRTI 13 Saudi British Bank 31 Azimut 24 Islamabad Stock Exchange 28 Saudi Company for Hardware 29 Bahrain Islamic Bank 29 ITFC 14, 25 Saudi Fund for Development 14 Bank ABC Islamic 31 Jaiz Bank 32 SECP 28 Bank Indonesia 5 JCR-VIS Credit Rating Company 31 Securities and Commodities Authority 32 Bank Muamalat Malaysia 22 Jimah Energy Ventures 27 Bank Negara Malaysia 13, 27 JPMorgan 7 Securities Commission of Malaysia 13, 22 Bank Nizwa 29 Juris Corp 18 Sharjah Islamic Bank 21, 29 Banque Saudi Fransi 31 Karachi Stock Exchange 28 Standard Chartered 7, 15, 31 Bina Darulaman 28 Khaleeji Commercial Bank 30 Sunway Treasury Sukuk 27 Bioalpha 28 Khazanah Nasional 13, 22 Syarikat Takaful Malaysia 30 BMA Asset Management Company 30 King & Spalding 19 Takaful Emarat 30 BMTU 14 KT Bank 21 Takaful Oman 30 BNP Paribas 29 Kuveyt Turk 21 TheCityUK 28 Boubyan Bank 32 Kuwait Finance House 21, 32 Tokio Marine Middle East 26 Bursa Malaysia 13 Kuwait International Bank 32 Turk Eximbank 3 Cagamas 10, 21 Lahore Stock Exchange 28 Central Depository Company Pakistan 30 Lumut Maritime Terminal 32 Turkish Treasury 24 Chartered Institute of Islamic Finance 28 Majid Al Futt aim 21, 27 Turkiye Garanti Bankasi 3 Chartered Institute of Securities Investment 20 Malaysian Takaful Association 10, 13 Turkiye Is Bankasi 3 CIMB Islamic 32 Malta College for Arts, Science and Technology 17 Türkiye Sınai Kalkınma Bankası 4 CIMB-TrustCapital 28 Malta Institute of Management 17 Turkiye Vakifl ar Bankasi TAO 3 Citigroup 3 Malta Stock Exchange 17 UK Export Finance 21 Cliff ord Chance 15 Maples and Calder 15 UK Trade & Investment 14 Commercial Bank International 12 MARC 32 UN Food and Agriculture Organization Commercial Bank of Kuwait 32 Marmore MENA Intelligence 9 United Nations General Assembly 29 Credit Suisse 7 Maybank Asset Management 6, 30 DanaInfra Nasional 21 McKinsey Global Institute 6 US Federal Reserve 22 Deloitt e 13 Meethaq Islamic Banking 29 Waratah Resources 14 DFSA 14 Meezan Bank 28 Warba Bank 30 DIFC 14 MetLife 10 World Bank 4, 6, 8 Diyar Al Muharraq 29 Millenia Global Research House 23 Ziraat Bank 24

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