Whirlybirds: the Latest Flight for Islamic Aviation Finance

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(All Cap) UK unveils The IDB makes Sukuk market Halal Sky: 1200 ambitious Indonesia a forecasted to Bringing 1150 0.28% investment top priority to perform well Shariah 1100 expectations become a world- across the GCC compliant 1,040.93 1,037.98 1050 aimed towards leading Islamic this year; resilient real estate

1000 Islamic ﬁ nance hub...7 to global macro crowdfunding W T F S S M T Powered by: IdealRatings® investors...5 moves...7 to the US...9 COVER STORY 12th August 2015 (Volume 12 Issue 32) Whirlybirds: The latest flight for Islamic aviation finance

Aviation fi nancing has picked up the have been paid by lessors through types of fi nance will be essential, and pace in the Shariah compliant fi nance unsecured loans and we were really we’re delighted to be debuting this arena in recent years; with Sukuk keen to re-connect the debt markets with Islamic-structured arrangement with and other forms of Islamic fi nancing true secured PDPs,” said Jaspal Jandu, LCI,” commented Simon Lefevre, the becoming increasingly accepted and CFO of LCI. “This is a true PDP where director of leasing at BLME. The bank ever more popular both as Gulf airlines the banks are taking real asset risk.” is no stranger to the area, having also expand and as institutions look to tap closed a US$25 million pre-delivery the Muslim money pool. But in the A major player in the market, LCI facility for LCI last December to fi nance last few months a new trend has been Helicopters has a total fl eet of 90 AgustaWestland purchases — while gathering momentum — helicopter delivered and ordered helicopters, Airbus is also familiar with Islamic fi nancing. LAUREN MCAUGHTRY including the market-leading fi nance through its involvement in the looks to the skies. AgustaWestland AW139, AW169 and Shariah compliant Alif Fund. AW189 helicopters, and next-generation A landmark deal Airbus Helicopters H175 and H225e. “As a major lessor in the helicopter Last month LCI, the aviation arm of The fi rm is also the launch customer marketplace, we are continually looking Libra Group, closed a pre-delivery for both the AW169 and the H225e. for new and innovative means of payment (PDP) facility with Bank of LCI’s helicopters are currently in fi nancing,” said Jandu. “This agreement London and The Middle East (BLME) operation across four continents — Asia, is just that, and is also an excellent and Lloyds Bank for a three-year Australasia, Africa and Europe. template for future fi nancing deals.” delivery program of US$250 million- Jean-Michel Cerf, the head of customer worth of the Airbus H175 (Airbus Breaking the mould fi nancing at Airbus Helicopters, also Helicopters’s new-generation medium- The deal was based on a master commented that: “LCI is a growing sized seven-ton class rotorcraft) and Murabahah facility while customer of Airbus Helicopters, and H225e (for which LCI Helicopters is the Lloyds also provided a we’re delighted to be partnering with launch customer). conventional loan and them on this innovative fi nancing acted as the mandated agreement.” The facility is the world’s fi rst-ever lead arranger, security secured helicopter PDP, and represents agent and intercreditor A growing market an innovation in the fi eld, with an agent for both facilities. While helicopter fi nancing may Islamic and conventional bank to “As the dynamic currently represent only a tiny work together to create a positive new helicopter leasing portion of the current opportunities solution for the client based on real marketplace continues in aviation fi nancing, it is Shariah principles of risk and profi t- to expand rapidly, nevertheless a growing market sharing. “Recently, most PDP facilities new sources and continued on page 3

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Volume 12 Issue 32 Tata Consultancy Services DEALS introduces new Islamic ASSET IFN Rapids ...... 2 Indonesian government banking solution through IFN Reports: sells Islamic treasury revamped version of TCS MANAGEMENT • UK unveils ambitious investment bills at a discount on the BaNCS Al Meezan Investments th expectations • The IDB makes Indonesia a top 11 August to fund State KT Bank opens new unveils Meezan Asset Budget branches; looking to expand Allocation Plan-I for priority • Sukuk market forecasted to perform investors to benefi t from Bank Negara Malaysia to more cities well across the GCC this year; resilient to Islamic equity market issues discount-based global macro moves • Sovereign Sukuk: Gatehouse Bank looking Murabahah facility to expand PRS program PMB Shariah Aggressive Back to basics • SECP moves beyond main Fund realizes 8.3% returns Viable Chip seeks to as part of initiatives by the despite 7.9% drop in market financial center; targeting smaller cities to extend maturity dates for government in promoting bolster capital markets • Halal Sky: Bringing its Islamic debt securities Islamic fi nance in the UK Standard Chartered Bank Malaysia wins mandate Shariah compliant real estate crowdfunding Sunway Treasury Sukuk AAOIFI’s Shariah as trustee for fi rst Shariah to the US • IIFM to provide guidance on sells one-month Islamic Standards Review and compliant ASEAN Passport Islamic derivative instruments; issuing commercial papers Translation Committ ee holds meeting in Pakistan Fund new standards this year • IFN Weekly Poll: Pension Funds Association Azzad Asset Management rejects debt-to-equity swap ISFIN partners with Does the weakness of the Malaysian ringgit completes external Shariah proposal from Sukuk Slovenian law fi rm Rojs, have an effect on pricing of the global Sukuk audit; fi rst US investment issuer Berlian Laju Tanker; Peljhan, Prelesnik & fi rm to do so market? ...... 5 demands payment of debts Partners to welcome Islamic accordingly investment IFN Analysis: Al Othaim Real Estate and AlBaraka Turk Katilim TAKAFUL Morocco: Connecting Europe and Africa ...... 11 Investment Co confi rms Bankasi selects banks to Shariah compliant life arrange US$400 million Regulatory advancements in Islamic marketing its fi ve-year insurance premiums debut Sukuk dual currency syndicated command 11% market finance ...... 12 Murabahah fi nancing share in Egypt, says National Shipping Case Study: facility authority Company of Saudi Arabia Maxis Sukuk: Proof of the demand for high commences listing and Islamic fi nance could quality unrated papers ...... 13 trading of Sukuk on the 11th help meet Africa’s large RATINGS IFN Country Correspondents: August infrastructure needs but Moody’s revises Emirates regulatory reforms needed, Jordan; Kazakhstan; Kyrgyzstan; Morocco ...... 14 NBD’s outlook to positive says S&P IFN Sector Correspondents: NEWS Fitch affi rms UAE banks’ Emirates NBD ready to ratings; upgrades one non- Islamic fi nance ...... 17 BMI Off shore Bank fi nance Suez Canal projects; bank fi nancial institution Special Report: to convert into Shariah demonstrates support and Japanese initiatives in Islamic finance ...... 18 compliant bank confi dence in the Egyptian MARC affi rms Ranhill Group’s Sukuk ratings Country Feature: Malaysia Building economy at ‘AAAIS(bg)’ and Society dismisses report Islamic fi nance: An aid to India’s infrastructure Center for Islamic ‘AAAIS(fg)’ with a stable on unoffi cial regulatory needs ...... 20 Banking, Finance and outlook approval of merger with Management signs MoU Sector Feature: Bank Muamalat with International Islamic Masraf Al Rayan receives Capital strategies of Islamic banks in rating outlook upgrade as Islamic Finance Educators University College UK unit registers profi ts Malaysia likely to evolve under new Bill to be tabled in Selangor regulatory framework ...... 22 parliament soon; aims to Iran stresses need for Fitch assigns Iraq’s fi rst monitor quality of Islamic brokerage ties with rating at ‘B-‘ with a stable fi nance educators outlook Islamic Finance news ...... 23 Azerbaijani banks; wants banks and insurers to Deal Tracker ...... 28 Bank Islam concludes syndicated Tawarruq resume activities in MOVES REDmoney Indexes ...... 29 fi nancing facility for Kerian Azerbaijan David Tayeh joins Eurekahedge data ...... 31 Energy Jordan Islamic Bank Investcorp as head of Performance League Tables ...... 33 Pak-Kuwait Takaful inaugurates new cash offi ce corporate investment in Events Diary...... 37 escapes huge fi ne due to in Sameh Mall North America Company Index ...... 38 a lack of provision in the Subscription Form ...... 38 Insurance Ordinance 2000

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Whirlybirds: The latest ﬂ ight for Islamic aviation ﬁ nance Continued from page 1

— and MENA is leading the charge. “Near-term demand appears stable and more innovative models to meet According to the latest forecasts from despite a pullback in 2014 deliveries future demand — as seen in the recent Honeywell Aerospace in its 17th annual and ongoing concerns with the energy LCI deal. “It’s triggering eff orts from turbine-powered civil helicopter sector,” said Mike Madsen, the president customers to reduce their costs,” noted purchasing outlook (see Chart 1), the for defense and space at Honeywell Airbus CEO Guillaume Faury at the Middle East and Africa region has Aerospace, to Arabian Aerospace. Paris Airshow in June this year. the highest new helicopter purchase “Purchase interest for helicopters in rate in the world, with up to 32% of training, tourism, fi refi ghting and law Islamic opportunity respondent fl eets due for new helicopter enforcement categories is trending up, A 2014 report from Frost & Sullivan replacements or additions this year. infl uenced by increased utilization estimated that emerging markets rates and helicopter replacement cycles. especially in Asia and the Middle Interest across these mission sectors is East are now driving global demand. Purchase helping to sustain near-term demand. “Emerging markets comprise signifi cant Looking ahead, several new platforms opportunities among new helicopter interest are scheduled to enter service over the procurements, with a forecast market next few years, also bolstering overall size of US$146.84 billion between 2014- for helicopters in helicopter demand.” 22 for military and civil new platform deliveries, and a related market size training, tourism, And while the bulk of civil helicopters of US$46.33 billion for service support globally (29%) are used for emergency during the same period,” noted the ϔireϔighting and medical services and law enforcement, report. this segment is negligible in many law enforcement large emerging markets such as China, So where does Islamic fi nance come India and the Middle East — sending in? The demand is there and the categories major helicopter manufacturers such opportunities are obvious. In February as Bell Helicopter, Eurocopter and MD this year, the UAE signed a US$200 is trending Helicopters into a spin as they strive million contract with AgustaWestland up, inϔluenced to capture a share of this tempting for nine military helicopters, while untapped opportunity. US-based Bell has already signed three by increased lett ers of intent with Middle Eastern According to ‘The Global Commercial operators in 2015. Saudi Arabia just utilization rates Helicopter Market 2013-23’, China bought 10 Sikorsky-made Sea Hawk expects to add at least 2,000 new helicopters from the US in a US$1.9 and helicopter helicopters and 6,500 pilots over the billion deal in a major modernization projected period, and Southeast Asia of its eastern fl eet, and is reported to replacement cycles. is also a focus area for manufacturers. be considering further purchases from “Asia Pacifi c and Middle East are Sikorsky Aircraft. Saudi is also believed Interest across expected to be the growth centers for to be negotiating a US$12 billion deal commercial helicopters during the with France for contracts for navy these mission forecast period owing to the huge additions — including 23 helicopters potential in countries such as China, and 50 Airbus jets. sectors is helping to India, Australia, Japan, UAE and Qatar,” noted the report. “Additionally, the Yet the latest LCI deal is one of only a sustain near- steadily growing oil and gas industry few Shariah compliant participations in of the Middle Eastern countries is the sector, and few banks off er a specifi c term demand creating substantial demand helicopter option, leading many for commercial helicopters to players to utilize conventional Between 4,750-5,250 civilian-use meet its increasing need for facilities. On the capital market helicopters will be delivered worldwide off shore transport in the side, Weststar Capital, a during 2015-19, with demand remaining coming years.” subsidiary of off shore helicopter steady due to improvement in new operator Weststar Aviation purchase plans off sett ing the shorter- And while the helicopter Services (the largest provider term uncertainty of low energy prices market has seen a slump of chartered helicopters to oil and volatile currency fl uctuations. Over recently due to low oil and gas companies in South- the next fi ve years, the Americas and prices, leading to some East Asia) in 2014 launched a Canada are set to account for 53% of delivery deferrals, this RM900 million (US$228.58 million) total global demand, followed by 24% has also led to a Sukuk Mudarabah, but this too from Europe, 14% from Asia-Oceania trend of innovation has yet to be followed by any and 9% from the fast-growing Middle as fi rms seek East region. greater effi ciencies continued on page 4

Whirlybirds: The latest ﬂ ight for Islamic aviation ﬁ nance Continued from page 3

subsequent issuance despite being (as could be of signifi cant benefi t to the Additionally, with aviation fi nance) a good match for Islamic industry. As the recent boom in Islamic structures due to its asset base — aviation fi nancing demonstrates, the steadily for the Weststar Sukuk, 11 helicopters innovations in Shariah compliant are charged to Sukukholders. structures can lead to huge growing oil and And like aviation fi nancing, leaps forward not only for the helicopter Sukuk can also be specifi c sector but for the gas industry of the secured by rights to contracts industry as a whole (such as — the Weststar issuance with the recent UKEF/ Middle Eastern is secured by the rights to Emirates deal, or the receive 40% of revenue from developments in countries is creating fi ve off shore service contracts securitization in the aviation between Weststar and fi ve sector). Helicopters simply substantial demand oil fi rms, including represent the next logical PETRONAS. step forward. BLME for commercial have already grasped the This sector is a lucrative opportunity — surely helicopters and growing area for other Islamic banks will fi nancing, and one that not be far behind…?

Chart 1: The 17th annual turbine-powered civil helicopter purchasing outlook by Honeywell Aerospace

This analysis is based on Honeywell customer Purchase plans by region Global purchase expectation surveys, an plans rose 3 points assessment of consensus 5-Year Survey respondent – U.S. leads improvement forecasts, a review of Ěeet replacement and 18% FOR 25% factory delivery rates and expansion plan percentages SALE analysis of future new 20% Europe helicopter introductions Middle East and Africa North America replacement and 32% Asia Pacięc 28% addition rates highest in the world Middle East & Africa Latin America 2015

Global deliveries Purchase plans by size Planned usage of new helicopters Projected 10% to 22% Light single-engine Utility and law enforcement trend up improvement during and twin-engine 2015–2019 period models account for 67% of expected purchases

2010–2014 2015–2019 30% General utility/ other/incl. tourism 49% Light single-engine 18% Emergency medical Dual-use or services/SAR multi-purpose 18% aircraĞ allocated to 8% Light twin-engine primary usage Oil & gas

category 25% Corporate 4,300 31% Intermediate & 18% medium twin-engine Law enforcement 4,750–5,250 2% 1% =250= 275HelicopterHelicopter deliveries deliveries Heavy multi-engine News & television

Source: Honeywell

UK unveils ambitious investment expectations

The UK government through its UK pipeline of GBP115 billion (US$178.38 international investors with a suitable Trade & Investment arm this month billion) (gross development value) of project pipeline. published its most ambitious outline projects, the listed opportunities are yet for Islamic investment into the all either fully Shariah compliant or “Our ambitions in this industry go far country: with the launch of a brochure at a stage where investors are able beyond our capital city,” explained detailing projects worth over GBP17 to contribute to discussions around UK prime minister David Cameron, billion (US$26.37 billion) specifi cally the fi nance and project structure speaking to potential investors. “The aimed at Shariah compliant investors. with the project promoters in order projects… are a win-win. They’re a LAUREN MCAUGHTRY explores to ensure compliance with their win for you because they help you the opportunities and evaluates their religious principles. The promotion make a return, manage risk, and do potential impact on the nation’s Islamic process is being managed by the UK’s good with your money — all within a fi nance industry. Regeneration Investment Organization fi nancial framework that suits you. And (RIO) as part of a nationwide drive to they’re a win for Britain, too, because The new developments represent over help international investors identify and each of these developments will bring GBP17 billion of potential investment fund regeneration opportunities in the prosperity and opportunity to every options, specifi cally aimed toward UK. The RIO acts both as a one-stop- part of our country.” While the cant may Islamic investors. Part of a wider shop and an ‘honest broker’ to match continued

Table 1: Listed projects in the UK Project name Project type Project size Investment type Completion Location Gatehouse PRS PRS GBP325 million Funding partner From Q2 2016 Across UK Residential Fund (US$504.11 million) (expected gross asset value GBP1 billion (US$1.55 billion)) Manchester Place Residential development GBP3 billion (US$4.65 Investor/developer Manchester billion) Mayfi eld Quarter Offi ce-led mixed use GBP500 million Developer fi nance/co- 7-10 years Manchester City (US$775.56 million) investor Center Middlewood Locks 2,000 unit PRS GBP650 million (US$1 Co-investor/ 3-5 years Manchester City billion) development fi nance Center Alderley Park Commercial (laboratory, offi ce & GBP325 million Co-investor 5 years Cheshire associated amenities) & supporting tranche of GBP1.2 investment fund billion (US$1.86 million) program Smithfi eld Mixed use regeneration GBP2 billion (US$3.1 Co-investor 10 years Birmingham billion) Legal & General Multiple asset classes Dependent on project Co-investor N/A National Regeneration Partnership Proposal East of Leeds Orbital New orbital road, unlocking land for GBP200 million Co-investor/ Phased East of Leeds Route 5,000 new homes (US$310.22 million) investment funder City Center Thorpe Park New offi ce/retail mixed use GBP500 million Co-investor Phased East of Leeds City Center Atlantic Gateway, Mixed use Dependent on project 20 years North West Liverpool-Manchester England Old Oak Common Signifi cant mixed-use regeneration N/A Developer/investor 25-30 years West London and development opportunity Center for Advanced Big data/business park GBP189 million Funding partners West Norfolk Knowledge, (US$293.16 million) Cambridge (Phase 1 development cost) Healthy Ageing Life science/education GBP167 million Equity/debt Lancaster Innovation Campus (US$259.04 million) Stephenson Quarter PRS residential (Mixed use) GBP200 million Various 10 years Newcastle Park Hill Phase 2 Residential GBP78 million Joint venture Sheffi eld (US$120.99 million) London Cancer Medical campus GBP100 million Various Sutt on, London Campus (US$155.11 million) Silvertown Quays Mixed use/residential GBP2.5 billion Funding partner East London (US$3.88 billion) Slough Town Center Mixed use/residential GBP747 million Various 5 years Slough (US$1.16 billion)

Continued sound familiar and the promotional developing the Atlantic Gateway, a 40- terms of infrastructure, governance, aims of the interest in Islamic fi nance are mile, GBP75 billion (US$116.33 billion) lawyers, accounting expertise and so clear, the logic is sound and the appeal strategic corridor between Manchester on — but apart from its single (and is obvious. and Liverpool focusing on low-carbon surprisingly small) Sukuk issuance in economic growth, water projects and 2014, what else has it done to cement its renewable energy. status as a center for Islamic fi nance? The projects… Manchester City Council is collaborating Criticism of this kind has been leveled are a win-win. with London City Railways and at the country for years but in fact, Transport for Greater Manchester the answer is increasingly optimistic. They’re a win for to pool land in order to unlock new In 2015, UK Export Finance became mixed-use development opportunities the fi rst export credit institution to you because they in the Mayfi eld Quarter. The project underwrite Sukuk with the recent is expected to deliver over 7,500 jobs Emirates Airline issuance; and although help you make a through the creation of 75,000 square there is litt le expectation of a follow-up meters of offi ce space, together with Sukuk issuance, the Bank of England is return, manage risk, 1,300 homes, a 350-bedroom hotel, retail currently working on the provision of and leisure facilities and a new six-acre Shariah compliant liquidity facilities, and do good with city park. Manchester City Council is while Shariah compliant reinsurance also seeking investors for a residential will also be off ered through Lloyd’s of your money — all project worth more than GBP3 billion London this year — and the recently (US$4.65 billion) to build over 10,000 published Islamic investment brochure within a ϔinancial homes with the fi rst phase due next is the fi rst of its kind in any G7 or EU framework year. country. that suits you On the health care side, Alderley Park “Where products are not yet available in is an internationally famous bioscience compliant form, our industry can help R&D center, the former home to global manage the interaction with The upcoming projects cover a wide pharmaceutical fi rm AstraZeneca conventional fi nance,” claimed range of diverse asset classes: from and the best-invested drug discovery Cameron. Yes, this could be read as investment funds to vast residential and development campus in the UK: paying lip service to a compelling and commercial developments across now planning to redevelop with a customer segment instead of backing it the north of England to cutt ing-edge further GBP325 million in commercial up through a full product suite — but it educational institutes, research and development. could equally be interpreted as a healthcare facilities. The Gatehouse PRS commitment to the continued Residential Fund, currently seeking The Center for Advanced Knowledge development and progression of the GBP325 million (US$504.11 million) and Engineering in Cambridge hopes to sector. Let us hope, for the sake of both aiming for a gross asset value of GBP1 become an internationally renowned the industry itself and the investment billion (US$1.55 billion) at completion facility providing commercial, prospects of the UK, that it’s the latt er. and a total portfolio of 6,500 homes, has research and education facilities in the already identifi ed its initial portfolio in rapidly expanding fi eld of knowledge under-supplied markets across the UK. engineering (including data analytics, Receive all the latest news via the digital forensics and data security) while No.1 Islamic fi nance based feed New players, seeing Gatehouse’s Lancaster University is also developing success, are now also gett ing involved: a GBP167 million (US$259.04 million) Legal & General has committ ed Healthy Ageing Innovation Campus. principal capital to invest in UK regeneration projects in partnership Yet while capturing the Islamic dollar with RIO, and is now seeking off ers undeniable benefi ts for the UK- international co-investors across based owners and developers of these multiple asset classes — especially projects, could the focus on att racting pension and sovereign wealth funds. Islamic investment risk coming across The group is also looking for a fund as a litt le one-sided? Muslim clients manager to invest its own balance sheet may want to invest in the UK for its and to deploy joint capital as well as stability, safe haven status and economic manage the projects. opportunities but there are plenty of other options throughout Europe On the infrastructure side, Leeds City — and plenty of other countries that Council is looking for Islamic investors are fast coming up on the inside to to help it develop the East of Leeds extend incentives appealing to Islamic Orbital Route; while Peel Holdings is investors. The UK is a global hub in

The IDB makes Indonesia a top priority

Indonesia’s ambition to become a center of excellence for microfi nance to signifi cant development in the Islamic world-leading Islamic fi nance hub at be based in Jakarta. capital market space evident by the par with its neighbor Malaysia is likely improved take-up of the country’s to receive a boost as the Republic Although the Southeast Asian nation sovereign Shariah securities. The recent forges a stronger relationship with the boasts the world’s largest Muslim arrangement with the IDB is yet another IDB. VINEETA TAN reports. population, however, the development step by the OJK to bolster its industry of its Islamic banking and fi nance by consolidating the long-standing Indonesia’s Financial Services Authority, industry has lagged behind Islamic partnership with the Islamic multilateral or Otoritas Jasa Keuangan (OJK), fi nance powerhouse Malaysia due fi nancier. this week signed an MoU with the largely to its fragmented regulatory multilateral institution under which infrastructure among others. The IDB recognizes the potential in both the entities will jointly collaborate Nonetheless, Indonesia is renewing its Indonesia and having chosen the to propel the Islamic banking and approach towards the Shariah fi nance Republic to co-found its proposed fi nance industry in Indonesia through industry via its comprehensive fi ve-year Islamic infrastructure bank, IDB group a slew of initiatives including in the roadmap which seeks to consolidate chairman Dr Ahmad Mohamed Ali also areas of research, training and advisory and enhance all segments of the Islamic stressed that the cooperation with OJK services, as well as facilitate the fi nance landscape through signifi cant will further pave the ground for exchange of expertise with the larger reforms. The country’s recent standard materializing the IDB’s top priority Indonesian community including agreement on the Islamic repurchase development programs in Indonesia. private sector institutions. Also in the agreement is a result of the regulator’s pipeline is the creation of a dedicated new strategy, which has also seen

Sukuk market forecasted to perform well across the GCC this year; resilient to global macro moves

As global economic climate Markets appeared to be less liquid in the defi cit this year, with the exception of deteriorates, one cannot help but summer months as trading slowed and Qatar. “This will be a welcome bout of wonder how this would aff ect Islamic price movements were to a large degree supply but could cause some short-term markets. There are currently many because of mark-to-market valuation, weakness to the issuing Sukuk curves as factors to take into consideration: refl ecting the move in interest rates. the supply is absorbed.” weak global growth, Greek debt “The volatility in rates coupled with negotiations, Chinese equity market wider bid off er spreads have resulted However, it was noted that a gradual volatility, timing of a rate hike in the in some softening in the Sukuk space; uptick in borrowing costs in the bond US, selling pressure in commodities, as however, the lack of supply and credit market has also led to issuers being well as an undercurrent of geopolitics spread compression due to positive apprehensive to borrow in the Sukuk that could result in volatile fi xed earnings has helped to mitigate some of market; instead issuers are tapping the income yields. Amidst these woes, this move,” commented Jamil. local loan market where the banks are the Sukuk sector in the GCC is still familiar with their credit and banks still believed to be able to weather these The notable slowdown in Sukuk remain very liquid, therefore they are conditions. NABILAH ANNUAR issuances this year is believed to have able to provide competitive pricing. explores this premise. buoyed a market where demand was Nevertheless, despite an initial rise in already outstripping supply. “The initial rates BLME projects that the Federal In spite of oil prices remaining at read was that lower oil prices would lead Reserve is not likely to raise rates depressed levels, the GCC remains to a cut in infrastructure spending and considerably while the economy is still on strong ground as Sukuk prices therefore lower borrowing requirements. in a recovery stage. Therefore, although continued performing well on a However, although infrastructure there is likely to be volatility in fi xed relative basis, with demand technically spending has stalled for new oil and income markets, there is not likely to be a outstripping supply so far this year. In gas-related projects, due to the prolonged pronounced sell-off . a recent asset management report by nature of the oil price weakness, the Bank of London and The Middle governments are trying to grow their BLME estimates that the Sukuk market East (BLME), portfolio manager Jamil tertiary industries to lessen their reliance should continue to perform well even Mufti conveyed that this premise is on the sector,” opined Jamil. though supply has waned this year, as primarily att ributed to the current there is an expectation that some GCC account surpluses accumulated over the Jamil conveyed that this could in fact countries may want to fi nance their years while oil traded at a high price as spark GCC sovereign issuances in the budget defi cits by borrowing in the debt well as due to an eff ort to diversify away second half of the year as most of the capital markets which would lead to from oil revenues. GCC countries are forecasted to be in some welcome supply in the market.

Sovereign Sukuk: Back to basics

Sovereign Sukuk markets this week Upcoming sovereign Sukuk have been relatively quiet. Only two Country Amount Expected date regular Sukuk announcements were Ivory Coast XOF300 billion Fourth quarter of made from Bank Negara Malaysia and 2015 the Indonesian government. NABILAH Sindh Province US$200 million TBA ANNUAR takes a look at these Oman US$1 billion 2015 transactions. Kazakhstan TBA 2016 Turkey US$1.1 billion TBA Bangladesh TBA TBA Bank Negara Malaysia (BNM) in an Hong Kong US$500 million to US$1 billion TBA announcement on its website stated that Ningxia Hui Autonomous Region US$1.5 billion TBA it plans to issue a six-month BNMN(i) Kenya TBA 2016 discount-based Murabahah paper worth South Africa TBA 2016 RM500 million (US$127.96 million) on the Senegal TBA TBA 11th August. In another announcement Niger XOF150 billion TBA regarding the net asset value (NAV) of Tunisia US$500 million 2015 its Mudarabah certifi cate on the same Jordan JOD400 million 2015 date, BNM relayed that the NAV of its UAE TBA 2015 Sukuk Ijarah stood at RM15.19 billion Luxembourg TBA TBA (US$3.86 billion), while its commodity a statement. The sale will include the Sukuk market in the fi rst half of 2015, Murabahah was valued at RM34.8 billion reopening of four project-based Sukuk as representing 75.6% of the total amount, (US$8.84 billion), coming up to a total of well as new issuance of Islamic treasury or US$14.99 billion, and were the most RM50 billion (US$12.7 billion). Proceeds bills. active in terms of issuance frequency of the BNM Mudarabah certifi cate with 99 issuances. will be invested in a maximum of 70% In a short overview of the GCC markets, commodity Murabahah placement Sukuk issuances saw a year-on-year As of the 30th June 2015, the total amount with BNM and a minimum of 30% decline for the fi rst half of the year. In outstanding of corporate and sovereign government-guaranteed Sukuk Ijarah. a recent report by the Kuwait Financial bonds issued by GCC entities was Center (Markaz), GCC Sukuk issuances US$242.04 billion. Corporate issuances Similarly on the 11th August, the shrunk by 26.45% from US$6.55 billion constituted the majority of total amount Indonesian government conducted a raised in the fi rst half of 2014 to US$4.82 outstanding with US$205.41 billion, or Shariah securities auction to raise IDR2.5 billion raised in the corresponding 84.87% of the total amount. Sukuk trillion (US$185 million) in funds for period this year. Markaz pointed out issuances represented 34.33% of the total initiatives outlined in the State Budget that issuances by UAE entities raised the amount. 2015, confi rmed the fi nance ministry in largest amount in the GCC bonds and

SECP moves beyond main ϐinancial center; targeting smaller cities to bolster capital markets

Determined to broaden its investor into the Islamic and conventional capital sector under the leadership of chairman base, Pakistan recently confi rmed that markets and encourage greater take-up Zafar Hijazi, who is also an ardent it will establish capital market business of non-banking fi nancial services as the proponent of Islamic fi nance. In less hubs in various cities nationwide to regulator targets modest non-Tier 1 cities than a year since he came on board, the facilitate the fi nancial community in with small industries and signifi cant SECP has introduced sweeping reforms reaching out to investment communities infl ows of foreign remitt ance. The fi rst including a new streamlined Shariah beyond that of main focal point Karachi of these centers will be set up in Khyber board and the creation of a dedicated as well as Lahore and Islamabad. Pakhtunkhwa’s Abbott abad. Islamic Finance Department as well as VINEETA TAN explores how this mobilized the development of an Islamic initiative could bolster the Republic’s The SECP confi rms in a statement capital market roadmap. Islamic capital markets. that 11 entities (including fi ve asset management companies, two brokerage Despite being one of the world’s largest Part of the Securities and Exchange fi rms and one bank) will launch branches Muslim nations with approximately Commission of Pakistan (SECP)’s strategy in the Abbott abad hub. The soon-to-be- 174.58 million Muslims according to the to ease investor access to the capital inaugurated hub will also house a unit Central Intelligence Agency, Islamic markets and non-bank fi nancial services of the Central Depository Company and banking assets only command 10.4% of by assisting Modarabas, mutual funds, stock exchanges. total banking market share while Shariah investment banks, insurers, leasing mutual funds stand at about 5% of the companies and stockbrockers to set up Since the beginning of 2015, the regulator total mutual fund industry, offi cial shop in smaller cities such as Mirpur, has been more proactive in pushing for fi gures show. Sialkot and Dhadial among others, this greater participation in the fi nancial move is anticipated to boost investments markets and support for the non-banking

Halal Sky: Bringing Shariah compliant real estate crowdfunding to the US

When Naeem Randhawa was Att racting both accredited and non- approached by his personal network accredited investors mostly from the of friends and investors for joint real middle to upper class segment, Naeem estate investment opportunities, it revealed that Halal Sky is targeting to roll did not take long for the technology out its fi rst crowdfunding deal within the innovator and seasoned property next 90 days as it continues to work with investor to decide that crowdfunding its legal team, the Texas State Securities was the way to go. What makes board and JOBS Act expert Dr Richard Naeem’s proposition interesting is that Swart to realize the maiden transaction. he decided to build his business on a Shariah compliant platform in a market “We’ve participated in more than a half where Islamic investment opportunities dozen private placements, and we’re are scarce: the US. VINEETA TAN talks anxious to meet the demand from new with Naeem to bring you an inside look investors, but we’re cautiously taking all at Halal Sky. steps to ensure we comply with all state and federal securities law,” said Naeem. “Living in the US, fi nding and participating in Shariah-based To ensure that all its transactions do not platform plans to broaden its scope to investment opportunities is challenging go against Shariah, the fi rm under the Chicago, Florida and California next to say the least,” shared Naeem with guidance of a three-member Shariah year. The fi rm’s strategy is two-pronged: IFN. But with an estimated six million board has developed an end-to-end buy-to-let and buy-to-fl ip beginning Muslims in the US who are for the most Shariah compliant model, which Naeem with single family properties and to part ignored by Wall Street, the CEO of says does not touch Riba. “One of the big eventually include multi-unit and Halal Sky notes that there is a growing risks and what gets investors in trouble commercial assets in the near future. recognition that the niche Shariah- is leveraged capital — we avoid that seeking investor can be a very lucrative through a cash-based network. All of the “Our goal is to leverage Title II (506b or customer. And it looks as if Naeem is capital is held in zero-interest bearing 506c) as well as Texas Intrastate rules for about to be proven right as the Islamic trust accounts, and meets the criteria of local and national deals,” explained real estate crowdfunding platform, in the Shariah board.” Naeem who also hinted that while Halal the short period since its launch in July, Sky has no immediate plans to go has received numerous inquiries by Halal Sky has narrowed the Dallas- international just yet — indicators are investors, partners and dealer brokers Fort Worth metroplex as its maiden showing that they will need to be ready alike. investment focus, and the Texas-based for that possibility later down the road.

IIFM to provide guidance on Islamic derivative instruments; issuing new standards this year

International Islamic Financial Market IIFM’s Tahawwut Master Agreement Not immune to the volatility of the (IIFM) is targeting to issue two new — the world’s fi rst international currency rate or interest rate markets, standard agreements this year as work standardized documentation for over- Islamic cross-currency swap and FX on certain Islamic derivative instrument the-counter Islamic hedging products, forward would provide Shariah fi nancial templates progresses with several other jointly published with the International institutions with the means to manage frameworks in the pipeline, VINEETA Swaps and Derivatives Association. currency fl uctuations and cash fl ow TAN learns. as well as minimize their exposure to Used widely by conventional players changing currency rates. “We are currently working on two to safeguard against market risks, currency standards namely cross- cross-currency swap and FX forward Ijlal also confi rmed that documentations currency and foreign exchange (FX) transactions, however, raise various on trade fi nance and corporate fi nance forward; and will soon commence work Shariah issues as they involve interests are also in the pipeline. on standardization of specifi c Sukuk and speculation as well as uncertainties. structures,” Ijlal Alvi, CEO of IIFM, told There are, however, Shariah structures to IFN. “Our target for this year is to issue replicate the eff ects of these instruments two new standard agreements, by the although they are generally more will of Allah.” complex. Nonetheless, some scholars remain divisive over the validity of such The Islamic cross-currency swap and (FX) arrangements. forward product templates fall under

IFN Weekly Poll: Does the weakness of the Malaysian ringgit have an effect on pricing of the global Sukuk market?

In light of the spiraling Malaysian Does the weakness of the Malaysian ringgit have an eěect on pricing of ringgit currency value, IFN asks the the global Sukuk market? industry how this aﬀ ects the global Sukuk markets. As of last week, the ringgit hit a 17-year low signaling Positive declining conﬁ dence among foreign investors amidst political uncertainty Negative and low commodity prices. As the largest Sukuk market in the world 33% (worth US$16 billion according to Dealogic), what impacts do the 67% country’s weak currency have on the Islamic debt capital markets? NABILAH ANNUAR explores.

The ringgit has fallen 9.8% against the US dollar this year reaching RM3.90 per dollar last week. The deteriorating “The weakness in the Malaysian ringgit billion). commodity prices (as Malaysia depends (RM) would not impact the pricing of In an interview with local press The on oil for about 30% of its revenue), the the global Sukuk but it would be a major Rakyat Post, foreign exchange strategist slowdown in China and the growing consideration point for potential global Dr Suresh Ramanathan explained that likelihood of an interest-rate rise in Sukuk issuers out of Malaysia, excluding with short-term debt of RM2.96 billion America have combined to make 2015 Malaysian ringgit-denominated issuers (US$757.5 million) due, signifi cant a miserable year for emerging-market whose revenues are mainly in RM”, savings in foreign exchange outfl ow currencies. commented Mohamad Safri Shahul can already be realized with the weaker Hamid, the senior managing director ringgit. As Malaysian debt is now largely In addition, the country’s political woes and deputy CEO of CIMB Islamic, a ringgit denominated (as opposed to relating to the indebted state fund subsidiary of CIMB Group and the back in 1997 during the Asian fi nancial 1MDB, as well as corruption allegations leading Sukuk manager globally (17.5% crisis), the positive economic outlook is circling the nation’s prime minister of Sukuk issued in the last 12 months) further buoyed by the sustained push by Najib Razak have resulted in investors according to data from Dealogic. Malaysia to develop the Islamic fi nancing losing confi dence in the country’s assets market with Sukuk largely denominated as the pressure mounts. Macquarie Industry observers have suggested that in ringgit, resulting in a natural hedge Group has estimated that Malaysia’s local Malaysian investors would also against currency volatility. exchange rate will decline another 1.1% have to factor in the depreciation of the before the 31st December 2015. Malaysian ringgit before investing in a Therefore, foreign buyers of Malaysian global paper. The likelihood of hedging debt would be on the losing end should Malaysia’s ringgit Sukuk are would come into place, and based on they decide to cash out within this time outperforming as their relatively higher local reports it currently costs nearly 3% frame, rebutt ing the common perception yields off set the outlook for a weaker annualized to hedge three-month ringgit of investors leaving Malaysian shores currency. Sovereign domestic notes due exposure. which is highly unlikely. Most bond and in 2016 and 2021 returned 2.5% and Sukukholders in Ramanathan’s opinion 3.3% respectively this year, compared Much of Malaysia’s foreign debt — both would hold on to the debt instruments as to 0.8% and 1.8% for similar Islamic government and corporate sector — is it is too high a loss in US dollar terms if Sukuk, while the premium for the 2016 ringgit denominated. Latest Bank Negara they exit now. Also due to the fact that securities over their global counterpart Malaysia fi gures show that as at the 31st they are long-term investors, most will is more than 200bps, according to March this year, slightly more than 90% hold on to the debt until maturity in the Bloomberg data. Malaysia’s currency of the government’s foreign debt was hope that the ringgit value will improve weakness is believed to have a minimal in ringgit at RM160.24 billion (US$41 in due course. eff ect on the pricing of the global Sukuk billion) — with US dollar denominated market as global Islamic papers are debt at RM12.47 billion (US$3.17 billion) priced according to the LIBOR. and yen debt at RM4.76 billion (US$1.22

Morocco: Connecting Europe and Africa

Considered one of the most promising emerging markets of the world, Muslim-majority Morocco has aligned its economic development strategy to include Islamic ﬁ nance as it seeks to diversify its funding sources to rebuild its economy which was shaken by the global ﬁ nancial crisis of 2008 and the Arab Spring of 2011. VINEETA TAN takes a look at the progress so far.

Regulatory landscape as strengthening with good prospects for banks including BMCE Bank and Bank Morocco is somewhat of a newcomer to further growth; the IMF forecast a 4.4% Populaire are looking to open Islamic the Islamic fi nance and banking scene GDP growth in 2015. Nonetheless, while subsidiaries in partnership with a foreign as its parliament only approved an infl ation is expected to remain low (1.5%) partner. The regulations do not make Islamic fi nance bill in November 2014 and fi scal defi cit to continue to shrink, provisions for Islamic banking window after presenting the legislation in 2012. the IMF cautions against the eff ects of operations. Allowing the establishments of Shariah challenging macroeconomic conditions compliant banks (or participative banks), including volatile oil prices and drawn- Takaful the law also enables foreign lenders to set out weak growth in Europe (its main In May 2015, the Moroccan government up Islamic units in Morocco and covers trading partner). approved an insurance bill (project law Takaful as well as Sukuk issuance (for no 59-13 completing and amending law private companies) and paved the way While offi cial regulations were not no 17-99) which introduced the concept for the creation of a centralized Shariah passed until 2014, several Islamic banking of Shariah compliant insurance and board. In July 2015, the Ministry of products such as Ijarah, Musharakah details guidelines for running Takaful Finance and Economy approved an earlier and Murabahah were made available via and re-Takaful operations including circular outlining the banking licensing conventional banks since 2007, although the segregation of funds and Shariah process including for Shariah compliant the take-up was limited. There were governance. Designed based on AAOIFI units (See IFN Correspondent Report Vol eff orts to launch an Islamic window via and acting as a general guideline, further 12 Issue 32: ‘The launch of the licensing Bank Wafa; however, that failed following specifi cs would be revealed after the fi nal process’). political oppositions. Up to date, only one vote of law via circulars/decrees. bank in Morocco (out of 19 commercial banks and six off shore banks) has a Economic environment Shariah compliant spinoff — Att ijariwafa Prospects and challenges Largely dependent on the service industry Bank, the country’s largest bank by assets. Morocco is considered by many as a (50% of GDP) and mining, construction propitious Islamic fi nance market due as well as manufacturing, Morocco is Eighteen banks (15 foreign, three local) to its strategic location as a gateway Africa’s fi fth-largest economy. Like its including Abu Dhabi Islamic Bank, Al between Europe and Africa but it still neighbors, its economy was severely Baraka, Al Rajhi, Dubai Islamic Bank and faces signifi cant hurdles due to the lack aff ected by the Arab Spring of 2011 which Kuwait Finance House as well as domestic of comprehensive enabling regulatory has compelled the country to turn to BMCE Bank have reportedly applied for infrastructure. The Moroccan Association the Middle East (and Islamic fi nance) to participation banking licenses pending of Participative Financiers projects that att ract Gulf wealth as well as introduce approval from the central bank, with the investment in Shariah compliant products reforms to bolster its faltering economy. fi rst fully-fl edged Islamic bank anticipated will hit US$7 billion by 2018, which is The IMF and African Development Bank to open its doors in 2016. Several domestic less than 5% of expected total market Group have described Morocco’s economy share. However, concerted eff orts by the government and the eagerness of market Chart 1: Morocco GDP growth rate players, both international and domestic, supported by a healthy demand for 5.5 Shariah compliant fi nancial instruments 5.1 could see participation fi nance take up 5 a larger slice of the market over the next 4.5 fi ve years. This is further bolstered by 4.5 Morocco’s ambition to create a regional 4.3 4 4.1 fi nancial hub — the Casablanca Finance 4 3.8 City. 3.5 Although Morocco has one of the most 2.9 developed infrastructures in the African 3 region, however, the country is 2.6 nonetheless looking to boost its 2.5 2.3 infrastructure to create a more appealing 2 business environment to att ract foreign 2 1.7 1.8 investment; and this funding gap creates 1.5 opportunities for Sukuk. Other potentially lucrative segments to leverage include the Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jul 2015 SME sector and microfi nance. Source: www.tradingeconomics.com | HAUT COMMISSARIAT AU PLAN

Regulatory advancements in Islamic ϐinance

Charting a steady progress, Islamic ﬁ nance sectors around the world have carried out initiatives to improve the rules and guidelines in their respective markets. NABILAH ANNUAR highlights the changes in Islamic ﬁ nance regulation over the past year.

Africa the general guidelines for permitt ed utilize the scheme for fi nancing of In Zambia, the governor of Bank investments that a project fi nance or renewable energy initiatives and other of Zambia, Dr Michael Gondwe, structured fi nance transaction would environment-friendly projects. launched a regulatory framework for have to observe. Islamic fi nance in the country on the In Afghanistan, the central bank is 30th December 2014. The process of Over in neighboring Indonesia, Otoritas fi nalizing an Islamic banking regulatory developing the framework involved Jasa Keuangan, the country’s fi nancial framework expected to be ready by the extensive internal and external services authority, in November last time a new banking law is adopted. consultations with various stakeholders year issued revised Islamic banking Until the new law, which covers Shariah including the government and the IFSB. rules covering asset quality and capital banking, is in eff ect, the central bank Moving over to Nigeria, the central adequacy to help clarify market has halted processing banking license applications. bank in February issued guidelines practices as the industry’s growth th for the regulation and supervision deteriorates. Announced on the 19 of institutions off ering non-interest November 2014, the move is part of a Middle East fi nancial services, paving the way for package of 20 new rules ranging from The UAE Banks Federation last February the creation of an Islamic banking and corporate governance to microfi nance. adopted a set of clear guidelines to fi nance advisory body — Financial Authorities aim for Islamic banks to provide bank customers in the UAE Regulation Advisory Council of Experts. hold at least a 15% market share by with the standards of service they can The advisory organ will consist of fi ve 2023. expect from their banks. The ‘Customer members, appointed on a part-time Charter’ draws upon international best basis for a term of two years renewable In Pakistan, Ashraf Mahmood Wathra, practice and commits member banks of subject to satisfactory performance. the governor of the State Bank of the UAE Banks Federation to know their Pakistan (SBP) earlier in the year called customers as individuals, to understand Asia on banks to focus on private sector their needs and provide full information lending and deposit mobilization. The about products and services that will Bank Negara Malaysia (BNM) in June SBP will review the position and may meet their requirements appropriately. announced that it expects to fi nalize take regulatory measures to lower the It also outlines the regulations that operating standards for all major Islamic spread. banks need to abide by, in addition to fi nance contracts by the end of this year, requiring banks to handle complaints creating the fi rst comprehensive set On the capital markets side, the effi ciently and to protect customer of practical guidance for the industry. Securities and Exchange Commission information. The set of 11 standards complements of Pakistan last March issued new existing Shariah guidelines issued by Sukuk regulations which underline In Oman, the Central Bank of Oman BNM, aiming to address inconsistencies among other things, the mandatory (CBO) established a Shariah Supervisory in the use of Islamic contracts. requirement for interested Sukuk issuers Authority (SSA), appointing fi ve Shariah to secure a rating of no lower than ‘BBB- scholars to sit on the SSA. Among Separately, the central bank’s new ’, with an instrument rating of no lower the duties of the SSA is to advise the guideline on restructured and than ‘BBB’. The new rules also dictate CBO on matt ers relating to Shariah rescheduled (R&R) loans which was that issuers must also maintain Shariah compliance of products and services and implemented on the 1st April 2015 was compliance in its principal business serve as a reference point for all Islamic viewed by RAM Ratings (RAM) as during the entire tenor of the Sukuk banks/windows as well as regulate the a prudent move towards long-term program. operations of all Islamic banks/windows strengthening of the Malaysian banking in Oman. sector. RAM conveyed that the strength Bangladesh Bank last October of the country’s banking system lies in introduced a new guideline for The Bahrain Bourse last December its regulatory framework, which has fi nancing of green projects by Shariah- signed an MoU with the Dubai Financial raised the bar for banks with the new based banks and non-banking fi nancial Market to introduce an electronic system guideline following on from a series of institutions (NBFI). A refi nancing that allows investors to transfer shares macro prudential measures observed in scheme for Shariah-based funding easily and quickly between the two recent years. has been established, with the size exchanges, eff ective in the second half of of the fund to be between BDT1 2015. The MoU also creates the general RAM expects to see an uptick in the billion (US$12.68 million) and BDT5 framework defi ning guidelines of the industry’s gross impaired loan ratio this billion (US$63.4 million) depending transfer process and administers the year resulting from new R&R activity. on the demand, with the country’s relationship and capacities of both The fi rm in May published a criteria Islamic banks and NBFIs advised to parties. and methodology paper highlighting

Maxis Sukuk: Proof of the demand for high quality unrated papers

Malaysian telecommunications issuer and its subsidiaries as well as Maxis RM840 million (US$217.5 company, Maxis on the 20th June 2015 other general funding requirements and issued the fi rst series of its unrated general corporate purposes of the group, million) Sukuk Murabahah 30-year RM5 billion (US$1.33 billion) in addition to the refi nancing of other medium-term note program. Amounting debt or fi nancing obligations of the group to RM840 million (US$217.5 million) and refi nancing any maturing Sukuk in nominal value, the Islamic medium- Murabahah. term notes carry a tenor of 10 years via a 20th June 2015 Tawarruq arrangement. In an exclusive Sold locally through a private placement interview with CIMB, the deal’s sole exercise, CIMB conveyed that no major Issuer Maxis manager, lead arranger and principal challenges were encountered in the Size of issue RM840 million (US$217.5 advisor, NABILAH ANNUAR provides implementation of the transaction. million) in nominal value a breakdown of the transaction. “At the option of the issuer, the Sukuk Mode of Private placement basis Murabahah is not rated. The issuance issue was done on a private placement basis; Purpose The proceeds from the investors remain interested in Maxis’s fi rst issuance of the Sukuk Murabahah shall be utilized for The success credit profi le. The success of the Sukuk purposes of fi nancing the capital Murabahah issuance has also proved that expenditure and working capital of the Sukuk there is demand for high quality unrated requirements of the issuer and papers. It will further contribute to the its subsidiaries (issuer group) Murabahah issuance growth of the Islamic fi nance industry, and/or other general funding requirements and general particularly increasing the amount of corporate purposes of the issuer has also proved that corporate Sukuk issued in 2015,” said group and/or refi nancing of Mohamad Safri Shahul Hamid, the senior other debt/fi nancing obligations there is demand for managing director and deputy CEO of of the issuer group. All of the CIMB Islamic. above purposes shall be Shariah high quality unrated compliant Tenor 10 years Given that the Sukuk Murabahah were papers. It will Issuance 100% unrated, each of the paper will be price non-transferable and non-tradable for Payment Semi-annual basis further contribute such a period known as the non- Currency Malaysian ringgit transferable and non-tradable period as to the growth Maturity 20th June 2025 stipulated in Chapter 9A of the Securities date of the Islamic Commission’s guidelines on Sukuk as Lead CIMB Investment Bank may be amended or substituted from manager and ϔinance industry, time to time. Upon the expiry of the said principal period, the Sukuk may only be off ered to advisor sophisticated investors. Governing The laws of Malaysia particularly law Are you receiving our daily Legal Albar & Partners (legal counsel increasing the advisors to the principal advisor), Zul IFN Alerts? Rafi que & Partners (legal amount of corporate counsel to the issuer) Listing The Sukuk Murabahah will not Sukuk issued be listed Underlying Shariah compliant commodities in 2015 No. assets (crude palm oil) Shariah CIMB Islamic Bank advisors Having considered Murabahah and Structure Murabahah (via a Tawarruq Wakalah structures, the issuer opted arrangement) instead for a contract of Murabahah (via Tradability Each of the Sukuk Murabahah will be non-transferable and a Tawarruq arrangement) utilizing crude non-tradable during the non- palm oil as the underlying commodities. transferable and non-tradable The unrated Sukuk program (including period the fi rst tranche) was established for Investor Via private placement the issuance of the Sukuk Murabahah The Number ONE news service with breakdown for the purpose of fi nancing Shariah over 20,000 registered daily readers Face value/ RM840 million in nominal value compliant capital expenditure and minimum working capital requirements of the investment

The Islamic debt market in Jordan IFN Country Correspondents AFGHANISTAN: Dr Alam Khan Hamdard president, Afghanistan Islamic Finance and Consulting Co AUSTRALIA: Dr George Mickhail JORDAN The Jordan Securities Commission senior lecturer, School of Accounting, Economics and Finance, University of Wollongong, Australia (JSC) issued the remaining regulations BAHRAIN: Dr Hatim El-Tahir By Nafi th Al Hersh Nazzal director of Islamic Finance Knowledge Center, Deloitt e & necessary for the implementation of Touche BANGLADESH: Md Shamsuzzaman the law. In addition, the JSC has held a deputy managing director, Islami Bank Bangladesh The Islamic debt market in Jordan series of seminars on the Sukuk market BELGIUM: Prof Laurent Marliere, CEO, ISFIN is expected to grow smoothly with a BERMUDA: Belaid A Jheengoor to educate potential participants since director of asset management, PwC sovereign Sukuk issuance (Shariah BRAZIL: Fábio Figueira mid-2013. partner, Veirano Advogados compliant bonds). The Islamic banking BRUNEI: Dr Aimi Zulhazmi, Islamic fi nance consultant, sector consists of four banks with Draznine Advisory CANADA: Jeff rey S Graham a high demand of Islamic banking partner, Borden Ladner Gervais Issuing EGYPT: Dr Walid Hegazy products and services. Jordan has a managing partner, Hegazy & Associates FRANCE: Kader Merbouh well-established Islamic banking sector, co-head of the executive master of the Islamic fi nance, Paris- with the fi rst such bank having opened sovereign Dauphine University HONG KONG: Amirali Bakirali Nasir in 1978. chairman, The Law Society of Hong Kong working party on Sukuk will overcome Islamic fi nance INDIA: H Jayesh founder partner, Juris Corp Experts expect the fi rst sovereign INDONESIA: Farouk A Alwyni the problem of a CEO of Alwyni International Capital and the chairman Sukuk, worth around JOD200 million of Centre for Islamic Studies in Finance Economics and Development (US$281.31 million) for the benefi t of IRAN: Majid Pireh large amount of Islamic fi nance expert, Securities & Exchange Organization the fi nance ministry, to be issued by of Iran September. The new issuance requires IRAQ: Khaled Saqqaf money sitting idle partner and head of Jordan & Iraq offi ces, Al Tamimi & Co sett ing up an SPV for issuing the fi rst ITALY: Stefano Padovani, partner and head of Banking & Finance, NCTM Studio Legale Associato Sukuk (Islamic fi nance bonds). The SPV in Islamic banks JAPAN: Kaoru Haraguchi is considered to be the fi rst executive step founding att orney, Haraguchi International Law Offi ce JORDAN: Nafi th Al Hersh Nazzal, Islamic banking specialist, towards the issuance of Sukuk and is and will increase certifi ed fi nancial and investment advisor KAZAKHSTAN: Timur Rustemov, deputy chairman, established to possess assets and benefi ts association for development of Islamic fi nance KENYA: Mona K Doshi against which Islamic bonds are issued. the debt market senior partner, Anjarwalla & Khanna Advocates Indeed, the projects to be fi nanced by KOREA: Yong-Jae Chang, partner, Lee & Ko the Sukuk will include government and liquidity and act KUWAIT: Alex Saleh, partner, Al Tamimi & Co LEBANON: Johnny El Hachem school buildings, a new fi nance ministry partner – corporate, Bin Shabib & Associates LUXEMBOURG: Said Qaceme, senior manager of Advisory & building, and the purchases of the as a sound source Consulting, Deloitt e Tax & Consulting MALAYSIA: Ahmad Mukarrami Ab Mumin National Electric Power Company and head, Shariah division, RHB Islamic Bank the Water Authority of Jordan. of revenue for the MALDIVES: Aishath Muneeza deputy minister, Ministry of Islamic Aff airs, Maldives MALTA: Reuben Butt igieg The new Sukuk law allows both public government president, Malta Institute of Management MAURITIUS: Mohammad Akshar Maherally and private entities to issue Shariah Director (taxation), International Financial Services MOROCCO: Ahmed Tahiri Jouti compliant bonds in dinars as well as in managing consultant, Al Maali Consulting Group foreign currency, and for Sukuk to be NEW ZEALAND: Mohamed Nalar Sukuk will encourage private companies trustee and board member, Awqaf New Zealand listed on the Amman Stock Exchange. NIGERIA: Auwalu Ado; to take a closer look at raising capital Shariah auditor, Jaiz Bank OMAN: Muhammad Abdullah Dewaya through the debt market. Issuing Islamic fi nance scholar PAKISTAN: Muhammad Shoaib Ibrahim sovereign Sukuk will overcome the managing director & CEO, First Habib Modaraba problem of a large amount of money PHILIPPINES: Rafael A Morales managing partner, SyCip Salazar Hernandez & Gatmaitan sitt ing idle in Islamic banks and will QATAR:Amjad Hussain partner, K&L Gates increase the debt market liquidity and RUSSIA: Roustam Vakhitov act as a sound source of revenue for the managing partner, International Tax Associates SAUDI ARABIA: Nabil Issa government. partner, King & Spalding SENEGAL: Abdoulaye Mbow Islamic fi nance advisor, Africa Islamic Finance Corporation SOUTH AFRICA: Amman Muhammad The past year has seen maiden Sukuk CEO, First National Bank-Islamic Finance launches in a number of locations, SINGAPORE: Suhaimi Zainul-Abidin, advisor, 5Pillars including the UK, Hong Kong and South SRI LANKA: Imruz Kamil head of Islamic banking, Richard Pieris Arpico Finance Africa. In the Middle East, the Central SWITZERLAND: Khadra Abdullahi Bank of Oman announced plans in early associate, Investment banking, Faisal Private Bank SYRIA: Gabriel Oussi, March this year for a OMR200 million general manager, Oussi Law Firm TANZANIA: Yassir Masoud (US$517.7 million) Shariah compliant head, Islamic banking, retail banking, National Bank of Commerce issue by the middle of 2015. Experts TURKEY: Ali Ceylan suggest Jordan is intent on entering the partner, Baspinar & Partners UAE: Rima Mrad market in the near future. partner, Bin Shabib & Associates UK: Fara Mohammad director of Islamic fi nance, Foot Anstey US: Joshua Brockwell Nafi th Al Hersh Nazzal is an Islamic banking investment communications director, Azzad Asset Management specialist, certifi ed fi nancial and investment YEMEN: Moneer Saif; head of Islamic banking, CAC Bank IFN Correspondents are experts in their respective fi elds advisor and statistical analyst in Jordan. He and are selected by Islamic Finance news to contribute designated short country reports. For more information can be contacted at [email protected]. about becoming an IFN Correspondent please contact [email protected]

First Islamic microϐinance company in Kazakhstan

KAZAKHSTAN annual sales from US$50,000 to US$2 health care, transportation and logistics. million, utilizing Musharakah, Ijarah and The company is considering fi nancing By Timur Rustemov Murabahah instruments. In July 2015, small and medium companies with a New Finance announced its desire to proven business model and an att ractive As is known, SMEs are the engines of att ract investors from Southeast Asia and growth potential with annual sales development in developing countries, the Gulf countries. of above US$500,000. Most of these including Kazakhstan that has companies have clear opportunities for more than 350,000 entities. In 2014, The Islamic Corporation for the expansion to wider local and regional the registered share of SMEs in the Development of the Private Sector (ICD), markets, including the states of the country’s annual gross domestic product which is part of the IDB Group, signed Customs Union (Russia, Kazakhstan, (GDP) was 18%. an agreement with the Shariah Review Belarus, Kyrgyz Republic and Armenia). Bureau (SRB), which prepares the due The government of Kazakhstan treats diligence process for potential investors, Initiatives of the government of SMEs as one of the main catalysts of develops new Islamic SMEs and Kazakhstan aimed at supporting Islamic social modernization of the country. microfi nancing products, as well Shariah fi nance investors together with legislative In his programmatic article, ‘Twenty audit and certifi cation for international ‘sweeteners’ and tax incentives provide a Steps to a Society of Universal Labor’, investors. As part of this initiative, SRB conducive environment for direct foreign president Nursultan Nazarbayev noted signed an agreement with New Finance investments in the country and venture that in 2020, the share of SMEs in the to conduct due diligence of agreements capital investments in small and GDP will be 40%. State support for SMEs from the Shariah perspective and to medium-sized industries. benefi ts Islamic fi nance companies. conduct a Shariah audit of its activities. Timur Rustemov is the deputy chairman of Today, New Finance is the fi rst and The second focus of the company is the Association for Development of Islamic only Islamic fi nance company that Islamic asset management in medium to Finance (ADIF). He can be contacted at supports SMEs through microfi nance high risk investment industries, such as [email protected]. in Kazakhstan. The company off ers energy, agribusiness, trade, technology, fi nancing to operating businesses with

Islamic securities law amendments in Kyrgyzstan

KYRGYZSTAN Service, the state agency responsible process, off ering issue prospectus, for regulation and supervision of representative of the Sukukholder By Timur Rustemov fi nancial markets in the country, adopted (broker) and requirements of the Shariah amendments to the law ‘On Securities board. In 2009, the government of the Kyrgyz Market’ in order to introduce Islamic Republic approved the decree ‘On securities (Sukuk).The new document Despite the number of problems Securities Issued in Accordance with clearly defi nes the legal conditions for hindering the further introduction the Islamic Financing Principles’; the introduction of Islamic securities in of Islamic investment instruments, however, it did not fully refl ect Islamic the fi nancial market and the regulatory they do not prevent Kyrgyzstan from characteristics. framework of issuing and circulation of successfully practicing Islamic principles Sukuk. The new law allows Sukuk users of fi nancing in the banking sector. In At present, Islamic investment in the Kyrgyz Republic to utilize the 2014, Kyrgyzstan made over 50,000 instruments are not yet available to following Sukuk structures: transactions in accordance with Islamic the general population of Kyrgyzstan, principles worth over US$112 million. due to the fact that the Islamic fi nance 1) Islamic lease certifi cates (Sukuk Deposit base exceeded US$180 million. system is only starting to spread across Ijarah) the country. The system is plagued by 2) Islamic project fi nancing certifi cates According to the fi rst deputy prime various problems, including a relatively (Sukuk Istisnah) minister of the Kyrgyz Republic, low level of corporate governance and 3) Islamic equity certifi cates (Sukuk Tayyrbek Sarpashev: “The expansion and fi duciary relationships, both at the level Mudarabah) strengthening of Islamic principles of of private investors and at the level of the 4) Islamic investment agency certifi cates fi nancing may be one of the reliable state as a whole. (Sukuk Istitmar), and pillars of [the] Kyrgyz economy.” 5) Islamic certifi cates of partnership In addition, other problems include (Sukuk Musharakah). Timur Rustemov is the deputy chairman of a lack of understanding of the nature the Association for Development of Islamic of the Islamic investment, a lack of In this regard, amendments of the Finance (ADIF). He can be contacted at fundamentals in fi nancial literacy and the law defi ne key concepts such as the [email protected]. absence of an investment culture. originator, Sukukholder, reserve fund, trust management, investment project, With these pertinent issues in mind, requirements for repayment, liquidation on the 18th July 2015, the Kyrgyz Civil

The launching of the licensing process

MOROCCO • A memorandum related to the risk This memorandum needs to describe: management system. By Dr Ahmed Tahiri Jouti 1. The strategy and policies adopted • A memorandum related to anti- for the management of investment Decision n° 2289.15, which was issued money laundering and due diligence. accounts. on the 6th July 2015 and made by the Minister of Finance and Economy • A memorandum related to internal 2. The procedures adopted to protect approving the Circular of Bank Al- and external controls. the investment account holders (The Maghrib n° 5/E/2015 (the Circular) distinction between the investment related to the licensing process and the • A memorandum related to the accounts and other resources). necessary documents and information protection of personal data. to be provided, was published in issue 3. The procedures adopted to handle n° 6380 of the Offi cial Journal of the Furthermore, the article n° 4 lists the situations of confl icts of interests Kingdom of Morocco on the 23rd July documents to be provided by investors between shareholders and investment 2015. willing to launch Islamic fi nance account holders. activities (for banks, fi nance companies, The Circular is composed of six articles microfi nance institutions, investment According to Bank Al-Maghrib, a and two annexes that list the necessary banks): deadline will be determined for all documents and information to be investors willing to launch an Islamic provided by investors when applying for • A memorandum related to the bank to apply for a license. The Circular a license. Indeed, banks need to provide Shariah governance system to be does not address the issues related to the following elements: implemented by the institution to Islamic windows and is limited to ensure its global compliance to the fully-fl edged Islamic fi nancial institutions • A presentation of the project opinions of the higher council of (banks, fi nance companies, microfi nance promoters and shareholders. Ulamas. institutions and investment banks). • A presentation of the project • A memorandum related to the Dr Ahmed Tahiri Jouti is a managing including the strategic business plan, management system of investment consultant at Al Maali Consulting Group. human and technical resources, etc. accounts and the relationships with He can be contacted at a.tahiri@almaaligroup. the investment account holders. com. • A presentation of the governance system of the bank. SHARIAH PORTFOLIOS CRAFTED BY GLOBAL EXPERTS

EXCELLENCE IN SHARIAH INVESTING WORLDWIDE For many, investing is not only about preparing for a better future, but also staying true to personal values. Our Shariah investment strategies combine the best of our global asset management capabilities with insights from leading Islamic finance scholars. Our experts manage a wide range of Shariah-compliant strategies such as global, regional, and country-specific Shariah equities and Sukuk. Learn more about our Shariah expertise at franklintempletonshariah.com.

This document is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specifi c objectives, fi nancial situation or needs of any particular person who may receive it. The value of investments and the income from them can go down as well as up and an investor may not get back the full amount that he invested. Past performance is not an indicator nor a guarantee of future performance. © 2015 Franklin Templeton Investments. All rights reserved.

Is Islamic ϐinance truly an alternative to IFN Sector Correspondents CROSS-BORDER FINANCING conventional ϐinance? Fara Mohammad, director of Islamic fi nance, Foot Anstey CAPITAL MARKETS: ISLAMIC FINANCE In countries where the penetration level Suhail Ahmad, CEO, Hikmah Capital Corp is high, some shy away from Shariah DERIVATIVES By Youssef Aboul-Naja Suhaimi Zainul - Abidin, treasurer for Gulf-Asia Shariah compliant products stressing that they Compliant Investment Association and advisor to 5Pillars are devoid of the Islamic economic GLOBAL ECONOMIC OUTLOOK Islamic fi nance, which is a centuries-old Tariq Alrifai, expert, Islamic investment products and substance or spirit; the products only practice and which was revived and market trends appear Islamic due to their legal form. brought back into the limelight in the LAW (EUROPE): In countries where the penetration level Ayhan Baltaci, att orney at law, Bereket & Baltaci Law Firm mid-1970s, is far more than an alternate is low or nonexistent, the argument LAW (MIDDLE EAST) mode. A simple web search on the term Bishr Shiblaq, head of Dubai offi ce, Arendt & revolves around the lack of available Medernach ‘Islamic fi nance’, or any specifi c Islamic- Shariah compliant services. LEASING: based fi nancial product, will yield Youssef Aboul-Naja, Ijarah specialist, a supranational many results highlighting how it is an banking institution Though conventional fi nance is ‘alternative’ to conventional fi nance. MERGERS & ACQUISITIONS: widespread, it is far from perfect; Tushar Garg, associate, bulge bracket investment These results are a mere refl ection of the bank the 2008 crisis is a good example. existing literature surrounding Islamic MICROFINANCE (ASIA): Coincidentally, conventional fi nance also Dr Mahmood Ahmed, executive vice-president and fi nance. But is it truly an alternative? director training, Islami Bank Training and Research underwent an overhaul in the 1970s, with Academy the introduction of many paradigms, MICROFINANCE (AFRICA): From a Muslim individual’s perspective, Mansour Ndiaye, director of microfi nance, Assistance and resulting in new products. The point is, Consulting for Development Islamic fi nance is not just an alternative with any science, it will always remain PRIVATE BANKING & WEALTH MANAGEMENT: to conventional fi nance. If the Maqasid Thomas Woods, product development, wealth a work-in-progress. Perfection is never management, The Islamic Bank of Asia Al Shariah (the purposes of Shariah law) att ainable. This is also the case with PRIVATE EQUITY & VENTURE CAPITAL: is used as the starting point of reasoning, Islamic fi nance. Since the 1970s, the Arshad Ahmed, partner, Elixir Capital it can be observed that ‘preservation of industry has already cut many miles PROJECT & INFRASTRUCTURE FINANCE wealth’ is one of the fi ve purposes, with Anthony Coleby, head of corporate commercial in the so-called 1,000-mile journey. department, Said Al Shahry Law Offi ce (SASLO) the other four being the protection of Therefore, Muslims must not shy away REAL ESTATE faith, life, lineage and intellect. The term Philip Churchill, founder partner, 90 North Real Estate from it but instead embrace it, which is Partners ‘preservation’ in this context, extends REAL ESTATE (MIDDLE EAST): easier said than done. Yahya Abdulla, head of capital markets — Middle East, beyond one’s self, as man is merely a Cushman & Wakefi eld guardian on this wealth bestowed upon But all fi nancial institutions are REGULATORY ISSUES (ASIA) him by the Almighty God. Intan Syah Ichsan , chief operating offi cer, Samuel Aset eff ectively service providers; the Manajemen investor’s behavior is what dictates their REGULATORY ISSUES (MIDDLE EAST): Accordingly, preservation here embodies Mohammad Abdullah Malik Dewaya, head of Shariah off erings. It is no surprise that many compliance and audit, Maisarah Islamic Banking Services social justice underpinnings, for example, conventional banks are providing RETAIL BANKING: giving the poor their share of wealth Chowdhury Shahed Akbar, offi cer, Southeast Bank, Shariah compliant channels to large Bangladesh. through Zakat (donation). Considering corporate and governmental entities in RISK MANAGEMENT: that Riba (interest) promotes social Hylmun Izhar, economist, Islamic Research and Training the pursuit of the tremendous growth Institute, Islamic Development Bank Country injustice, which goes against Maqasid Al that the industry has been exhibiting. It is SECURITIES & SECURITIZATION: Shariah, it is therefore prohibited; this ban Nidhi Bothra, executive vice-president, Vinod Kothari also not a surprise that these entities Consultants is best highlighted in the Holy Quran: happen to have fi nancial clout. STOCK BROKING & TRADING: “O ye who believe, fear God and quit Athif Shukri, research analyst, Adl Capital Unfortunately, not many channels are what remains of the Riba if ye are indeed STRUCTURED FINANCE: available at the individual level. As part John Dewar, partner and head of Islamic fi nance, Milbank, believers; but if ye do it not, take notice Tweed, Hadley & McCloy of one’s mission in preserving this of war from God and His Messenger.” SUKUK entrusted wealth, Muslim individuals Anthony Coleby, head of corporate commercial As such, painting Islamic fi nance as an collectively should ‘vote’ on how their department, Said Al Shahry Law Offi ce (SASLO) alternative mode of fi nance is true to non- investments are to be placed and SYNDICATED FINANCE Muslims, but is fl awed otherwise. Damir Galiev, portfolio manager, AK BARS Bank handled. Only then, when Islamic fi nance becomes a necessity, will channels be TAKAFUL & RE-TAKAFUL: The discussion thus far has been wholly Dr Sutan Emir Hidayat, assistant professor and academic created, allowing the industry as a whole advisor for Islamic fi nance, University College of Bahrain theological. From a practical standpoint, TAKAFUL & RE-TAKAFUL (AFRICA): to further reach sustainability. Uwaiz Jassat, acting head of Islamic banking, Absa Islamic one must assess the current landscape Banking of fi nancial off erings, and fi gure out Any public opinion or media appearance is TAKAFUL & RE-TAKAFUL (EUROPE): how the theology may be incorporated; Ezzedine Ghlamallah, director, Solutions Insurance and the author's independent personal opinion Islamic Finance in France (SAAFI) in a perfect world, it should be the and should not be construed to represent TRADE FINANCE other way around. Nonetheless, when Anthony Coleby, head of corporate commercial any institution with whom the author is department, Said Al Shahry Law Offi ce (SASLO) undergoing the said exercise, various affi liated. TREASURY PRODUCTS: incompatibilities may be cited. These Nafi th ALHersh Nazzal, Islamic banking specialist, certifi ed fi nancial and investment advisor impediments are usually country- Youssef Aboul-Naja is an Ijarah specialist at specifi c, depending on that country’s IFN Correspondents are experts in their respective fi elds a supranational banking institution. He can and are selected by Islamic Finance news to contribute Islamic fi nance penetration level. But designated short sector reports. For more information be contacted at [email protected]. about becoming an IFN Correspondent, please contact general themes do emerge. [email protected]

Japanese initiatives in Islamic ϐinance

Despite having a minute Muslim population, Japanese governmental, corporate and fi nancial institutions have taken a number of steps in recent years to increase Japanese participation in Islamic fi nance. In 2008, Japan’s Financial Services Agency (the FSA) adopted rules that permit the subsidiaries of Japanese banks to enter into Islamic fi nance transactions. In December 2010, the FSA announced that it would “promote the development of an environment for the issuance of Islamic bonds in Japan”. ANDREW M METCALF delves further.

JAPAN By Andrew M Metcalf To the extent that the In 2011, Japan’s Asset Securitization Act was amended to extend the favorable Sukuk market tax treatment granted to foreign investment in Japanese corporate grows, Japanese bonds to include foreign investment in Japanese Sukuk. Sukuk are often underwriters will described as the Islamic equivalent of bonds. However, Sukuk diff er want to participate. from bonds in that they represent an interest in specifi ed assets, including Their involvement other Shariah compliant endeavors. the cash fl ows generated by those For example, Aeon invested some of assets. Accordingly, Sukukholders do may provide a the proceeds from its issuance in its not receive interest income, as in the Malaysian Shariah compliant consumer case of conventional bonds, but rather source of alternative fi nance business. Funds raised by the payments based on the performance of Toyota Sukuk issuance were used to the relevant underlying Sukuk assets. investments for provide Shariah compliant auto fi nancing After the 2011 Asset Securitization Act to Muslim customers. amendment, if certain conditions are Japanese investors, met, Sukuk distributions to foreign All of these can be seen in the context investors are tax exempt. and help Japan of an overall regional strategy by which Japan seeks business opportunities in key This governmental activity has been remain a leading markets. Japan must do this in the face of echoed by corporate issuances. In 2007, increased regional competition. Recently, Aeon Credit Services Malaysia (Aeon) capital markets for example, China spearheaded the became the fi rst Japanese corporation to formation of the Asian Infrastructure issue Sukuk when it structured a RM400 center Investment Bank to invest in Asian million (US$102.37 million) Sukuk projects. issuance program in Malaysia. Toyota The Islamic fi nance market generally Financial Services began off ering Sukuk Islamic fi nance. By engaging directly in has also gained increased credibility as in 2008 under a seven-year program Islamic fi nance on both a governmental a result of recent off erings and growth. through its Malaysian subsidiary, Toyota and corporate front, Japan may be able The UK, Hong Kong and Luxembourg Capital Malaysia. to strengthen relationships and win have all recently issued sovereign Sukuk. business in these regions. If Japanese In addition, the Islamic fi nance industry Nomura Investment Company followed Sukuk issuances grow, Japanese issuers now has an estimated US$2 trillion in by issuing a US dollar Sukuk in 2010. could gain access to additional fi nancing assets. Nonetheless, the market would In September 2014, Bank of Tokyo- sources and att ract Shariah compliant benefi t from participation by Japanese Mitsubishi UFJ (MUFJ) became the fi rst investors to Japanese investments. Japanese commercial bank to issue Sukuk corporations and fi nancial institutions. by establishing a US$500 million multi- Japan’s fi nancial institutions have an At the beginning of the year, global Sukuk currency Sukuk program through its interest as well. Japan hosts the largest issuances were estimated to be over Malaysian subsidiary, Bank of Tokyo- bond market in Asia, but Malaysia has US$100 billion for 2015, as they had been Mitsubishi UFJ (Malaysia). Notably, the leading Sukuk market. To the extent for 2014. Although new issuers have been this program included the fi rst Sukuk that the Sukuk market grows, Japanese att racted to the market, this 2015 projection denominated in yen. underwriters will want to participate. may not be met because Malaysia’s central Their involvement may provide a source bank stopped issuing short-term Sukuk A number of factors support Japan’s of alternative investments for Japanese in 2015. A major Sukuk issuer, the central recent interest in Islamic fi nance. investors, and help Japan remain a bank did this because of its concern Japanese businesses seek to become more leading capital markets center. active in the relatively higher growth that issuances were being purchased by foreign banks, rather than used to improve markets of the Middle East and Southeast Sukuk may also be issued to fi nance Asia, both regions that encourage liquidity in the domestic fi nancial market.

Continued

Against this backdrop, Japanese Islamic Lumpur high-speed rail project. It is fi nance eff orts continue. The Japan Bank If Japanese understood that JBIC is interested in for International Cooperation (JBIC) is the project, and may consider Islamic said to be considering a Sukuk issuance. Sukuk fi nancing options if it becomes involved The Asian Development Bank has with the project’s fi nancing. Although increased eff orts to promote the use of issuances grow, Najib noted that he thought Japan could Islamic fi nance by its member countries, make a competitive bid, China, France, including Japan. The Japan International Japanese issuers Germany and South Korea have all Cooperation Agency (JICA) and the IDB expressed interest in the project as well. are co-developing Shariah compliant could gain access products. JICA announced that their fi rst A recent Middle Eastern Sukuk off ering project would be to assist Jordan in its to additional also illustrates the role that JBIC could plans to issue Sukuk. play in opening up the Islamic fi nance ϔinancing sources market for Japanese entities. In March Sumitomo Mitsui Banking Corporation 2015, Dubai-based airline Emirates priced (SMBC) has established an in-house and attract Shariah a US$913 million Sukuk off ering to Shariah advisory board after it began fi nance the acquisition of four new off ering Islamic fi nance through its compliant investors Airbus A380-800 aircraft. The off ering Malaysian subsidiary in 2014. SMBC is to Japanese was guaranteed by the UK’s Export also reported to be working with the IDB Credits Guarantee Department (ECGD), to discuss the fi nancing of infrastructure investments and represents the fi rst Sukuk off ering deals. Toyota’s Malaysian subsidiary guaranteed by the ECGD. JBIC could announced plans to raise up to RM2.5 Tokyo in May 2015. Malaysia’s prime play a similar role in supporting Japanese billion (US$639.78 million) through minister Najib Razak spoke during a commercial eff orts in Southeast Asia and Sukuk and conventional bonds, with session entitled ‘Islamic Banking and the Middle East. In short, given that MUFJ acting as one of the joint principal Finance in Japan: Prospects for Growth’ Japan’s success in pursuing projects and advisors and lead arrangers for the and asserted that countries such as business opportunities in these regions off ering. MUFJ also obtained approval Indonesia, the Philippines, Thailand may be linked to its success in promoting from the Dubai Financial Services and Cambodia demonstrate some of the Islamic fi nance, it is to be expected that Authority to operate an Islamic window, untapped potential for Islamic fi nance. there will be continued eff orts by a which will allow the bank to conduct variety of Japanese institutions in Islamic Islamic fi nance by segregating assets During his visit to Japan, he rode on fi nance. from conventional interest-bearing funds. Japan’s high-speed rail as part of a demonstration of Japan’s Shinkansen Andrew M Metcalf is a partner at King & Japan’s eff orts and the stakes involved bullet-train technology. Japan has Spalding. He can be contacted at AMetcalf@ were highlighted at the World Islamic suggested that this technology should kslaw.com. Economic Forum Roundtable, held in be used in the planned Singapore-Kuala SHARIAH AUDIT & GOVERNANCE FOR ISLAMIC BANKING 20th – 21st August 2015, KUALA LUMPUR

Course Highlights: • Understand the Shariah control, compliance and audit systems in Islamic financial institutions • Assess IFSA 2013 and implications for Shariah audit and compliance functions • Analyze key risk and audit areas in retail and corporate financing • Facilitate in developing a Shariah audit programme for deposit mobilization • Identify potential obstacles, pitfalls and areas of improvement in the overall Shariah audit and control process • Study and understand various relevant industry standards and codes

www.REDmoneytraining.com [email protected] SIDC CPE - accredited: 10 CPE Points

Islamic ϐinance: An aid to India’s infrastructure needs

The necessity to enhance India’s infrastructure is particularly severe in its mammoth cities. The urban population is projected to reach 500 million by 2017 (‘Fast Facts – Urbanization in India’). Tasks to connect the infrastructural gaps like civic infrastructure, connectivity and trade-related infrastructure are just a part of a large laundry list of immediate demands. These need to be addressed not in the long term but in the short term. JEET SEN GUPTA takes a look at the role that Islamic ﬁ nance can play in India’s infrastructure needs.

INDIA By Jeet Sen Gupta

The trends in the market show that the infrastructural gap has increased and the investments have reduced. Priorities are to get infrastructure on the ground, and the government has stated that this needs to come from the public-private partnership (PPP) exercise.

The Indian government has called for US$1 trillion in infrastructure spending in the fi ve years through 2017 (‘Planning th Commission – 12 Five-year Plan’). and private participants whether at the fi nance as the existing regulatory According to the Planning Commission, asset allocation stage or at the funding framework does not permit interest- India is facing a funding gap of US$300 stage. free banking. However, most Shariah billion in meeting its infrastructure compliant structures have seen funding requirements until 2017. This resonance in India through the equity viability gap continues to expand. Islamic participation route under the Foreign Direct Investment Regulations where Challenges such as public sector banks, ϔinance is at investments can be made through which have been the main source of compulsorily convertible debentures, funding, are overleveraged. Most a relatively nascent compulsorily convertible preference infrastructure projects have long-term shares and equity where the returns tenures and visibility of cash fl ow is stage in India. What to investors are predominantly risk- protracted. India has already taken steps oriented and principally derived out in the right path by privatizing electricity is required is the of the revenue-generating potential and water supply in certain states. Given of the investee assets. The greater risk the huge funding gap, the policymakers opening of mindsets in equity is that where parameters of the highest level are looking at not are met, buyouts have not happened only building new infrastructure but to and markets toward and transactional covenants have not revitalize the existing infrastructure. been maintained. In a fair number of unexplored funding cases where the equity value has also Today, not only Greenfi eld but even stood eroded, even the original amount Brownfi eld projects are stalled and need methodologies invested has not been recovered. to take off . Thus, the huge gap needs to be fi lled to not only fund future Given the current market scenario, infrastructure needs but to revitalize conventional means of foreign exchange existing projects which are stalled or Policymakers are looking at alternative borrowings leaning toward banks and held up due to a lack of capital adequacy. modes of fi nancing such as fi nancing large institutions are expected to rise methodologies which are Shariah whereas long-term institutional funding The stated objective of the government compliant with a view to raise capital has been seen to be on a decline due has been to do infrastructure on a from economies that are contributing to to banks not being refi nanced, the PPP basis but the same has not been the liquidity glut. A lot of this resonates prevalent high rates of non-performing signifi cantly successful since a true PPP from the prime minister’s widespread assets with limited liquidity, the fall in requires a multifarious participation ‘Make in India’ program. the euro, etc. as opposed to selective participation. In such a model, risk is appropriately In the lending space, India is not fully What is heartening is a trend has been apportioned between the government explored as a viable market for Islamic emerging where synthetic borrowings/

Continued participatory instruments which are asset-backed, principal-protected and fully secured are being considered where the proposed earn out is through the form of redemption premium as opposed to interest. The redemption premium is linked to the performance of the company or the underlying asset.

Given that such synthetic instruments are risk-premised, generally the asset invested into is bett er monitored and administered as greater diligence is exercised by the investors to ensure maximization of returns and for the preservation of the capital value. Various structuring possibilities can be explored such as:

1. The foreign portfolio investment route 2. The sett ing up of Shariah compliant alternative investment funds, and 3. Multi-layered listing arrangements of the participatory instruments to provide liquidity through a trade of securities.

Other signiﬁ cant opportunities exist where securities can be issued as linked to a revenue stream (such as power purchase agreements, long-term toll/ annuity projects) which can be listed and traded on the stock exchanges. Furthermore, since the Securities Exchange Board of India allows such products to be issued and listed in India as ‘market-linked debentures’, oﬀ shore Shariah compliant investor groups can invest in these products in India.

Islamic fi nance is at a relatively nascent stage in India. What is required is the opening of mindsets and markets toward unexplored funding methodologies. There is a distinct possibility then that Islamic fi nance may command a high mind space if appropriate thrust and balance is put behind this by relevant market participants. This in turn would make Islamic fi nance an att ractive and viable alternative over standard fi nancing practices currently in place.

While there are a lot of arguments in favor of the need for Islamic ﬁ nance, it is important that these arguments are heard and demonstrated to create a viable Islamic ﬁ nance market in India.

Jeet Sen Gupta is a partner at Juris Corp. He can be contacted at [email protected].

Capital strategies of Islamic banks in Malaysia likely to evolve under new regulatory framework

A discussion paper issued by the Malaysian regulator, Bank Negara Malaysia, on the Capital Adequacy Framework for Financial Holding Companies has added further dimension to the loss-absorbing terms of Basel III-compliant capital Sukuk. This framework, which will be formally implemented in 2019, will aﬀ ect the capital-raising strategies of Malaysian Islamic ﬁ nancial institutions and their banking groups. JOANNE KEK writes.

REGULATORY ISSUES compliant capital instruments, have integration, similarities in corporate explicit loss-absorption terms which branding and any track record of group By Joanne Kek allow the instrument to be writt en off or support. converted into ordinary shares following The new guidelines, which aim to a NVE. To date, the major Islamic banks ensure that a banking group as a whole Incorporating government in Malaysia have already established is adequately capitalized in relation their Basel III Sukuk programs. The support into Islamic ϐinancial to its risks, allow an Islamic fi nancial principal loss-absorption terms of institutions’ ratings institution’s capital instrument to be the Basel III Sukuk rated by RAM An Islamic fi nancial institution’s credit linked to the non-viability event (NVE) thus far are mostly structured using profi le can benefi t from government or capital trigger of its parent and/or the underlying Murabahah contract, support because of its lineage, its role consolidated banking group for the and involve a write-off of the capital in a nation’s development agenda, or its purposes of group capital regulation. instrument following a NVE. systemic importance. This creates what RAM Ratings (RAM) terms as an ‘intra-group loss-absorption’ This may be applicable if an Islamic feature, where investors are exposed to fi nancial institution is partly or wholly the risks of other entities in a banking To date, the owned by the government, or has group, in addition to the credit profi le strategies and operations which are of the Islamic fi nancial institution. major Islamic infl uenced by the latt er. Such an Islamic fi nancial institution may also have a To optimize group capital ratios, banks in Malaysia specifi c role or mandate vis-à-vis a banking groups may choose to meet government’s socio-economic agenda. an Islamic fi nancial institution’s capital have already Because a government’s fi nancial needs through the issuance of capital backing and propensity to provide instruments by its holding company. established their support will be prioritized for entities These issuance proceeds will then perceived as being more critical, the be channeled to the Islamic fi nancial Basel III Sukuk latt er’s importance and the strength of its institution. programs relationship with the government will be assessed. Once eff ective, fi nancial groups headed by a fi nancial holding company will A systemically important Islamic be required to meet the minimum fi nancial institution’s critical role may capital requirements. Of the 16 Islamic A fresh perspective: Rating also precipitate government support, in a fi nancial institutions in Malaysia, 12 are Islamic ϐinancial institutions bid to preserve or restore confi dence and subsidiaries of Malaysian-domiciled stability in the fi nancial system. Systemic banking groups. within a banking group Regulatory requirements may compel support may be applicable for Islamic fi nancial institutions that account for a RAM’s ‘Rating Methodology for a bank’s Islamic business to be signifi cant share of a country’s deposits, Securities with Intra-group Loss- incorporated as a separate legal entity or entities which are strongly absorption Terms’ (June 2015) addresses but in essence, the Islamic fi nancial interconnected to other institutions in the this recent market development. The institution may be operated like a fi nancial system. Where regimes that approach to rating such securities fi rst division and share a common operating outline a particular framework to resolve assesses the credit profi le of the Islamic platform with other entities within the the woes of troubled banks have been fi nancial institution, followed by the banking group. developed, a government’s propensity to credit profi le of the linked entity. The provide systemic support is perceived to anchor rating for such securities will An Islamic fi nancial institution’s be reduced. be the lower of the two; thereafter, strategic importance to its banking incremental downward notching will be group is a key determinant of its rating. Joanne Kek is a rating specialist in the applied for the capital security’s loss- In assessing this, RAM considers its Financial Institution Ratings Department absorption features. relative contribution to the group, its ownership structure and likelihood of at RAM Ratings. She can be contacted at [email protected]. In Malaysia, Basel III-compliant Sukuk, divestment, its importance to the group’s similar to conventional Basel III- overall strategy, the degree of operational

Ajil Islamic debt securities (BaIDS) from requested to amend the agreement and DEALS the existing dates to the 29th February off ered to convert the bonds to stocks. Indonesia conducts Islamic 2016 for the following stock codes: Series 1 Primary BaIDS A (DI060747), Series Othaim Malls conϐirms securities auction 2 Primary BaIDS A (DJ060746), Series 1 INDONESIA: The Indonesian Primary BaIDS B (DK060749), and Series marketing its Sukuk government conducted a Shariah 2 Primary BaIDS B (DL060748). SAUDI ARABIA: Al Othaim Real securities auction on the 11th August to Estate and Investment Co, also known raise IDR2.5 trillion (US$185 million) STS sells ICP Series 7 as Othaim Malls, has according to in funds for initiatives outlined in the Reuters quoting unnamed sources, MALAYSIA: According to a statement on State Budget 2015, confi rmed the fi nance confi rmed that it is marketing its fi ve- Bank Negara Malaysia’s website, Sunway ministry in a statement. The sale will year debut Sukuk which could raise Treasury Sukuk (STS) was due to issue include the reopening of four project- up to SAR1 billion (US$266.53 million). its RM100 million (US$25.74 million) based Sukuk as well as new issuance of The transaction was launched last week Islamic commercial papers (ICP) Series with pricing earmarked between 165bps Islamic treasury bills. th 7 on the 10 August 2015 via tender. The and 175bps over the six-month Saudi ‘P1(S)’-rated facility will mature on the interbank off ered rate. Investors wanting BNM plans Murabahah th 10 September 2015. to participate in the deal need to submit offering their applications by the 20th August MALAYSIA: Bank Negara Malaysia ADPI rejects Berlian Laju 2015. was due to issue a six-month BNMN(i) Tanker’s swap proposal discount-based Murabahah worth INDONESIA: The Pension Funds Bahri’s Sukuk commences RM500 million (US$127.96 million) on Association (ADPI) has rejected a debt- the 11th August, according to an offi cial listing and trading to-equity swap proposal from Berlian announcement. SAUDI ARABIA: The listing and trading Laju Tanker, demanding the shipping of the National Shipping Company of company to pay off its debts according Viable Chip requests Saudi Arabia (Bahri)‘s Sukuk was due to the original agreement. According to to start on Tuesday, the 11th August extension of BaIDS dates The Jakarta Globe, the freighter defaulted 2015, according to an announcement by MALAYSIA: According to a statement on its IDR1.35 trillion (US$99.77 million)- Tadawul. The stock exchange had earlier on Bank Negara Malaysia’s website, worth of bonds and Islamic bonds in announced that the initial public off ering Viable Chip has requested for consent 2012 which led to an agreement to of Bahri’s Sukuk had been deposited and approval of the holders to extend postpone the debt payment from April into applicable investors’ portfolios on the maturity dates for its Bai Bithaman 2013 to April 2017. The company recently Sunday, the 9th August 2015.

DEAL TRACKER Full Deal Tracker on page 28 EXPECTED DATE COMPANY’S NAME SIZE STRUCTURE ANNOUNCEMENT DATE Fourth quarter of 2015 Government of Ivory Coast XOF300 billion Sukuk 24th April 2015 September Government of Jordan JOD200 million Sukuk 17th June 2015 2015 Government of UAE TBA Green energy 12th March 2015 Sukuk TBA West Coast Expressway RM1 billion Sukuk 21st July 2015 TBA Turkiye Finans US$400 million Sukuk 20th July 2015 TBA Tenaga Nasional Up to RM9.5 billion Sukuk 16th July 2015 TBA Arab National Bank Up to SAR2 billion Sukuk 16th 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

by BMI Bank Bahrain which is in turn a Mohammed Al Meeza, Al Salam Bank- AFRICAS subsidiary of Al Salam Bank-Bahrain, is Bahrain’s executive committ ee chairman, BMIO Seychelles to convert in the process of being converted into a BMIO would remain open to fi nancing of fully-fl edged Islamic bank, a delegation infrastructure projects in Seychelles even into Shariah compliant bank from BMI Bank revealed during its recent after becoming Shariah compliant. SEYCHELLES: Seychelles-based BMI visit to the island nation. According Off shore Bank (BMIO), partly owned to GDN Online quoting Hussein

of the International Council of Islamic in the Insurance Ordinance 2000 (IO ASIA Finance Educators, the bill will ensure 2000) has helped Pak-Kuwait Takaful MBSB unaware of BNM’s continued professionalism development escape from a huge fi ne of PKR1 million among Islamic fi nance educators and (US$9,803.92) and a penalty of PKR10,000 consent position Malaysia as a hub and reference (US$98.04) on a daily basis in case of MALAYSIA: Malaysia Building Society center for Islamic fi nance. Appropriate continued default, according to the (MBSB) has clarifi ed that it is not aware curriculum and training will also be Business Recorder. Instead, the SECP has of any offi cial consent or otherwise determined under this bill, Rais added. imposed a fi ne of PKR50,000 (US$483) to made by Bank Negara Malaysia (BNM) the operator for failing to comply with in relation to a possible merger with First for Bank Islam the minimum solvency requirement. Bank Muamalat, according to a bourse MALAYSIA: Bank Islam Malaysia fi ling. It was reported last week that has concluded a RM121.44 million TCS unveils enhanced Islamic MBSB is on course to obtaining a fully- (US$31.74 million) Tawarruq fi nancing fl edged Islamic banking license with banking solution for Kerian Energy. The bank noted in a plans for a merger with Bank Muamalat INDIA: Global IT services provider statement that the transaction marks its developing. Tata Consultancy Services (TCS) has fi rst involvement as lead arranger for a unveiled a new version of TCS BaNCS, syndicated project fi nancing facility for a New bill to enhance Islamic a market-ready, pre-confi gured solution, hydropower plant project. that facilitates customers to meet their ϐinance educators to be tabled retail, commercial and corporate banking MALAYSIA: An Islamic Finance Pak-Kuwait Takaful escapes needs, and also off ers support for Educators Bill is expected to be tabled huge ϐine from SECP Shariah compliant deposits and fi nancing in parliament soon. According to products for Islamic banks globally, PAKISTAN: In the latest hearing of the Bernama quoting Dr Rais Yatim, the according to a statement. Securities and Exchange Commission International Advisory Panel chairman of Pakistan (SECP), a lack of provision

Gatehouse Bank plans PRS Asia, according to a press release. The EUROPE homes expansion trade mission sought to promote foreign KT Bank expands branch investment into strategically important UK: Gatehouse Bank and partners are sectors of the UK economy and also network looking to expand their program to to promote the country as a center for GERMANY: Since its launch in July in develop private rented sector (PRS) Islamic ﬁ nance. One of the key initiatives Frankfurt, KT Bank has opened new homes as it was discussed during the during the mission was the promotion branches in Frankfurt, Mannheim and bank’s participation in a delegation of Islamic ﬁ nance in the UK, with PRS Berlin according to Saphir News. The organized by the UK Trade & Investment, activities highlighted as part of this Islamic bank is also eyeing to expand to in conjunction with prime minister David initiative. Dusseldorf, Hamburg and Munich. Cameron’s recent visit to Southeast

in Slovenia, to open new opportunities S&P releases Islamic ϐinance GLOBAL for the fi rm in welcoming Islamic report on Africa AAOIFI reviews standards investments in the country and advising clients about Islamic markets, according GLOBAL: Islamic fi nance could help GLOBAL: AAOIFI’s Shariah Standards to a press release. shore up fi nancial support for Africa’s Review and Translation Committ ee held large infrastructure gaps over the th its 7 meeting in Islamabad, Pakistan. AlBaraka Turk mandates next 10 years; however, proper legal The meeting was part of a series of frameworks and fi scal adjustments meetings for revising the existing English banks are needed to facilitate the African translations and completing translation GLOBAL: AlBaraka Turk Katilim market in accessing Sukuk liquidity, of the newly issued standards, which Bankasi has mandated six banks as its according to a recent report by S&P. were originally approved in Arabic. initial mandated lead arrangers and According to the rating agency, against According to a press release, AAOIFI bookrunners: ABC Islamic Bank, Barwa an average of US$100 billion in Sukuk has so far issued 54 Shariah standards Bank, Dubai Islamic Bank, Emirates NBD issuance by global players per year over and 40 other standards in the areas of Capital, Kuwait International Bank and the last fi ve years, African sovereigns accounting, auditing, governance and Standard Chartered Bank, to arrange a have only so far raised US$1 billion via ethics for Islamic fi nancial institutions. US$400 million syndicated Murabahah Sukuk. Nonetheless, the rating agency fi nancing facility. According to a press believes that greater involvement by ISFIN partners with leading release, the facility has been structured as the IDB and the Islamic Corporation for Slovenian law ϐirm a Shariah compliant US dollar and Euro the Development of the Private Sector dual currency, dual tranche Murabahah would gradually lead to more sovereign GLOBAL: Islamic fi nance legal network facility with tenors of 367 days and two issuance in the region including from ISFIN has partnered with Rojs, Peljhan, years three days. Ivory Coast, Nigeria and Kenya. Prelesnik & Partners, a leading law fi rm

Emirates NBD ready to for Emirati investors who want to invest Iran to fully resume activity in ϐinance Suez Canal projects in these projects as well. Azerbaijan GLOBAL: Emirates NBD has CIBFM and KUIS collaborate GLOBAL: Iranian minister of economy demonstrated its readiness to fi nance any and fi nance, Ali Tayebina has highlighted project for the development of the Suez GLOBAL: Center for Islamic Banking, the need to establish brokerage activity Canal Axis as the bank is confi dent that Finance and Management (CIBFM), the between banks of Iran and Azerbaijan it will be essential for the development learning arm of Autoriti Monetari Brunei during a meeting with Azerbaijan’s of the Egyptian economy. According Darussalam, has signed an MoU with minister of economy and industry, to Amwal Al Ghad quoting the deputy International Islamic University College Shahin Mustafayev in Tehran, according managing director and CEO of the risk Selangor (KUIS) to promote and develop to Trend News Agency. Ali added that management sector of the bank, Sahar cooperation and communication between Iranian banks and insurance companies El-Damati, the parent bank in the UAE both institutions on their collective will fully resume their activity in is already keen to partner with the eff ort to enhance awareness, training Azerbaijan in the near future. Egyptian branch to fi nance the projects. and exchange of knowledge on Islamic Emirates NBD will also provide support fi nance, according to a press release.

inclusion. According to Jordan News Banks that participated in the facility MIDDLE EAST Agency quoting Ethmar’s chairman of as mandated lead arrangers were Abu JIB inaugurates new ofϐice the board, Faris Sharaf, Ethmar will Dhabi Islamic Bank, Dubai Islamic begin by providing three specifi c Shariah Bank, Emirates NBD, First Gulf Bank, JORDAN: Jordan Islamic Bank in a compliant products and other Islamic Mashreq Bank, National Bank of Fujairah statement has inaugurated a new cash fi nancial services, in collaboration and Noor Bank. Rothschild acted as the offi ce in Sameh Mall, resulting in the with public and private organizations fi nancial advisor to GEMS Education bank’s branching network increasing to 91 throughout Jordan. whereas Allen & Overy and Morgan, branches and cash offi ces nationwide. Lewis & Bockius acted as the legal MEC, Manateq and Masraf Al advisors for the company and the bank Iran seeking investments for group respectively. Rayan collaborate railway project QATAR: The Logistics Committ ee at the Saudi Hollandi Bank IRAN: With the lifting of sanctions, Iran Ministry of Economy and Commerce is looking to att ract investors for the (MEC) and the Economic Zones introduces Ready Cash Qazvin-Rasht-Astara railway project Company (Manateq) have signed a SAUDI ARABIA: Saudi Hollandi Bank and the country has been considering QAR1.8 billion (US$494.27 million) has introduced Ready Cash, a Shariah several options of investment, according agreement with Masraf Al Rayan to compliant product that off ers customers to Trend News Agency. The head of the fi nance the logistics zone project at fast access to fi nancing and also provides secretariat of the Azerbaijani-Iranian Wakrah, according to a statement to the a full fl exibility to select a repayment intergovernmental commission, Mehdi Qatar Stock Exchange. option that suits their fi nancial Mohtashami, was quoted as saying that circumstances with no early repayment Iran has held discussions with some charges, according to a press release. countries and companies for investment GEMS Education makes loan facility amendment and technical equipment, particularly Uniϐied Shariah authority for with the IDB and Ecobank. UAE: GEMS Education has amended the bank facility for the AED3 billion the UAE Jordan welcomes ϐirst Islamic (US$816.61 million) loan it entered into UAE: The government of UAE is microϐinance institution in 2013 in a bid to support continuing planning to set up a unifi ed Shariah investment in the education sector, authority by the end of September to JORDAN: Queen Noor Al Hussein according to a statement. The seven- act as the country’s ultimate arbiter has inaugurated Ethmar, Jordan’s year loan facility, a mix of Islamic and of jurisprudence on Islamic fi nance, fi rst Islamic microfi nance institution conventional tranches, replaces the according to The National which also which is affi liated to the King Hussein earlier facility in 2013 and includes a quoted the IMF as saying that the UAE Foundation, to promote entrepreneurship tranche of AED915 million (US$249.06 must also continue to develop new among marginalized communities and million) undrawn but committ ed funds. Shariah compliant liquidity management enhancing their fi nancial and social tools for banks. IFN ONLINE DIRECTORY

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

The audit evaluated the fi rm’s Ethical its 2014 transactions to assess their and Shariah Investment Guidelines compliance with Shariah principles, as ASSET (which follow the criteria set by AAOIFI), well as examined how Azzad calculates the eff ectiveness of its internal Shariah purifi cation and Zakat for clients. MANAGEMENT verifi cation procedures and also tested Al Meezan Investments unveils MAAP-I PAKISTAN: Al Meezan Investments in a press release has unveiled the Meezan Asset Allocation Plan-I (MAAP-I). The MAAP-I aims to enable investors to earn a potentially high return through asset allocation between Shariah compliant equity schemes and Shariah compliant income/money market schemes.

PMB declares income IN ASSOCIATION WITH distribution MALAYSIA: For the ﬁ nancial year ended the 31st July 2015, PMB Investment has declared a 2.2 Malaysian sen (0.57 US cents) net income distribution for the PMB Shariah Aggressive Fund, which registered an 8.3% total return despite a 7.9% decline in the FBM Shariah Index, the ﬁ rm said in a statement.

PMB Investment also announced a monthly income distribution (July) of 0.28 Malaysian sen (0.073 US cents) and 0.1 Malaysian sen (0.026 US cents) for its PMB Shariah Wholesale Income Fund 1 and PMB Shariah Cash Management Fund respectively. All income distributions for the three funds were in the form of units.

StanChart Malaysia becomes 29th October 2015 ASEAN fund’s trustee REGAL KOWLOON HOTEL, HONG KONG MALAYSIA: Standard Chartered Bank Malaysia has been mandated as the trustee for the newly-launched Maybank Bosera Greater China Asean Equity-I ISLAMIC FINANCE : Fund, the fi rst Shariah compliant ASEAN Passport Fund under the umbrella of the OPPORTUNITIES FOR HONG KONG AND CHINA ASEAN Collective Investment Scheme (CIS) launched in 2013, according to a REDmoney Group’s latest offering, IFN Seminars, takes Islamic finance to new and press release. The fund was launched developing markets and tackles the industry’s most innovative and imperative topics. The by Maybank Asset Management and upcoming IFN Seminar themed Islamic Finance: Opportunities for Hong Kong and China approved by the Securities Commission would discuss on the recent Sovereign Sukuk activity and what it means for capital raising of Malaysia. in Greater China. The one-day seminar will address the opportunities and tackle the value Azzad Asset Management propositions Islamic finance presents for Hong Kong and Greater China. Audience will be captivated by engaging and lively presentations from over ten world-renowned Islamic enhances Shariah governance finance experts. AMERICAS: Azzad Asset Management has become the fi rst US investment fi rm to complete an independent, external Shariah audit and verifi cation of its REGISTER NOW at policies and procedures which was www.REDmoneyevents.com conducted by the UK-based Islamic Finance Advisory and Assurance Services, according to a press release.

to a statement, the Islamic bank’s balance net earnings for the fi rst six months of RESULTS sheet continues to grow with total assets the year at US$150 million. The Islamic Noor Bank increasing to US$8.6 billion as at the 30th banking group said in a statement that June 2015, up 12.6% year-on-year. income for the second quarter was up UAE: For the fi rst half of 2015, Noor Bank 19% to US$82 million and total assets generated a 26% increase in year-on-year QInvest grew by 2% to reach US$24 billion as at net profi t to AED272 million (US$74.03 the end of June 2015. million). The Islamic bank confi rmed in a QATAR: QInvest for the fi rst half of statement that total assets for the period 2015 achieved a 40% revenue growth was up 28% to AED37.3 billion (US$10.15 to US$53.7 million, as compared to Ibdar Bank billion) while return on equity reached US$38.3 million in the same period for BAHRAIN: For the six-month period 16.8%. the previous year, according to a press ending the 30th June 2015, Ibdar Bank release. Net profi t for the period ending has recorded total revenues of US$11.1 Ithmaar Bank June 2015 rose by 86% year-on-year to million, a 51% year-on-year increase US$24.4 million. owing to increased income generated BAHRAIN: Ithmaar Bank has reported from investment banking services. a net profi t of US$13 million for the Al Baraka Banking Group According to a press release, total assets six-month period ending June 2015 as grew by 3% reaching US$438 million compared to US$1.77 million achieved GLOBAL: Al Baraka Banking Group during the fi rst half of 2015. for the same period in 2014. According reported a 5% year-on-year increase in

insurance market, whereby out of 32 of Takaful operators were EGP485 TAKAFUL companies, eight are Takaful operators, million (US$61.76 million), which EFSA releases Takaful ϐigures according to a statement by the Egyptian indicated an 11% share of life insurance Financial Supervisory Authority. For the premiums in the Egyptian market which EGYPT: Takaful insurance companies in ﬁ ve-month period ending May 2015, life amounted to EGP4.47 billion (US$569.24 Egypt represent a 13% share of the total insurance premiums (new and existing) million).

Sharjah Islamic Bank) have a SR of ‘2’. to profi tability of its recently acquired RATINGS Fitch assesses each bank’s systemic subsidiary, the UK’s Al Rayan Bank. Emirates NBD’s outlook importance relative to other banks in The rating agency has also affi rmed the banking system, and considers, MAR’s issuer ratings at ‘A2/Prime-1’ and revised to positive among other things, market share and baseline credit assessment (BCA) and GLOBAL: Moody’s in a statement has franchise. adjusted BCA at ‘baa3’. revised Emirates NBD’s outlook to positive from stable with a view that Ranhill Group’s Sukuk ratings Iraq’s ϐirst rating assigned the bank will continue to improve its IRAQ: Fitch in a statement has assigned loss-absorption capacity and asset afϐirmed Iraq a long-term foreign currency issuer quality metrics despite the low oil price MALAYSIA: MARC in a statement default rating (IDR) of ‘B-‘ with a stable operating environment. The rating has affi rmed the ‘AAAIS(bg)’ rating outlook and also a country ceiling of ‘B-‘ agency has affi rmed the bank’s long-term on Ranhill Group’s RM300 million and a short-term IDR of ‘B‘. The rating and short-term deposit ratings at ‘Baa1’ (US$76.77 million) bank-guaranteed agency also notes that Iraq scores the and ‘Prime-2’ respectively, and baseline (Tranche 1) and the ‘AAAIS(fg)’ rating worst of all Fitch-rated sovereigns on credit assessment at ‘ba2’. on its RM500 million (US$127.95 million) Danajamin-guaranteed (Tranche 2) the composite World Bank governance indicator, refl ecting not only insecurity Fitch assesses UAE banks Sukuk Musharakah facilities with a stable outlook. The ratings are and political instability but also UAE: As part of Fitch’s second 2015 underpinned by the credit strength of the corruption, government ineff ectiveness peer review of the UAE banking sector, unconditional and irrevocable guarantees and weak institutions. the rating agency has affi rmed nine from Maybank Islamic (Tranche 1) and UAE banks’ long and short-term issuer Danajamin Nasional (Tranche 2). default ratings (IDR), support ratings (SRs) and support rating fl oors, and has upgraded a non-bank fi nancial Masraf Al Rayan’s outlook institution’s long-term IDR, according revised MOVES to a statement. Six out of the nine GLOBAL: Moody’s in a statement has Investcorp banks (Abu Dhabi Islamic Bank, Al upgraded Masraf Al Rayan (MAR)’s GLOBAL: Investcorp has announced the Hilal Bank, Commercial Bank of Dubai, outlook on its long-term issuer ratings appointment of David Tayeh as the head Dubai Islamic Bank, Mashreqbank and to positive from stable refl ecting the of its corporate investment business in Noor Bank) have a SR of ‘1’ whereas ongoing improvements in the bank’s North America, according to a statement. the remaining three (Bank of Sharjah, business and geographic diversifi cation, Tayeh was previously a partner at CVC National Bank of Ras Al Khaimah and including the growth and transition Capital Partners.

Expected date Company's name Size Structure Announcement Date Fourth quarter of 2015 Government of Ivory Coast XOF300 billion Sukuk 24th April 2015 September Government of Jordan JOD200 million Sukuk 17th June 2015 2015 Government of UAE TBA Green energy Sukuk 12th March 2015 TBA West Coast Expressway RM1 billion Sukuk 21st July 2015 TBA Turkiye Finans US$400 million Sukuk 20th July 2015 TBA Tenaga Nasional Up to RM9.5 billion Sukuk 16th July 2015 TBA Arab National Bank Up to SAR2 billion Sukuk 16th 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 Kuveyt Türk TRY200 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 By 2017 KT Bank EUR100 million Sukuk 11th 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 Sukuk 26th May 2015 Aug-15 Turkish Treasury TRY1.5 billion Sukuk 20th 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 TBA Government of Oman OMR200 million Sukuk 11th May 2015 2015 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 TBA CIMB Group Holdings RM1 billion Sukuk 9th April 2015 TBA Government of Senegal TBA Sukuk 6th April 2015 TBA Oman Telecommunications TBA Sukuk 23rd March 2015 TBA Zorlu Energy TRY100 million Sukuk 20th March 2015 TBA Turkiye Finans RM2.05 billion Sukuk 20th March 2015 TBA Bank Muscat OMR500 million Sukuk 20th March 2015 TBA Treet Corporation PKR539.51 million Sukuk 9th March 2015 TBA Tulip Maple US$750 million Sukuk 4th March 2015 2015 Gulf Finance House US$230 million Sukuk 26th February 2015 TBA IDB TBA Sukuk 25th February 2015 TBA Qatar Islamic Bank QAR5 billion Sukuk 23rd February 2015 TBA Al Baraka Bank TBA Sukuk 17th February 2015 2016 Government of South Africa TBA Sukuk 13th February 2015 3rd quarter 2015 SGI-Mitabu AU$150 million Sukuk 13th February 2015 TBA Qatar International Islamic Bank QAR3 billion Sukuk 10th February 2015 2015 Bank Islami Pakistan PKR3.5 billion Sukuk 15th January 2015 TBA Pakistan Mobile Communications PKR6.9 billion Sukuk 14th January 2015 (Mobilink) 2015 International Bank of Azerbaijan TBA Sukuk 13th January 2015 3rd quarter 2015 Government of Tunisia US$500 million Sukuk 13th January 2015 TBA Turkiye Finans TRY71 million Sukuk 5th January 2015 TBA Turkiye Finans TRY143 million Sukuk 5th January 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 Mar Apr May Jun Jul Aug Mar Apr May Jun Jul Aug

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 Mar Apr May Jun Jul Aug Mar Apr May Jun Jul Aug

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 Mar Apr May Jun Jul Aug Mar Apr May Jun Jul Aug

SAMI Halal Food Participation (All Cap) 6 months

2100

2020

1940

1860

1780

1700 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 Aug-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 Mar Apr May Jun Jul Aug Mar Apr May Jun Jul Aug

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 Mar Apr May Jun Jul Aug Mar Apr May Jun Jul Aug

REDmoney Global Shariah

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

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

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

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

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Eurekahedge North America Islamic Fund Index 200 190 180 170 160 150 140 130 120 110 100 Index Values 90 80 70 60 50 Jul-15 Jan-09 Jun-06 Oct-07 Sep-11 Dec-99 Dec-12 Apr-01 Apr-14 Mar-05 Aug-02 Nov-03 May-10

Top 10 Annualized Returns for ALL Funds since Inception Fund Fund Manager Performance Measure Fund Domicile 1 Atlas Pension Islamic - Equity Sub Atlas Asset Management 23.47 Pakistan 2 Meezan Tahaﬀ uz Pension - Equity Sub Al Meezan Investment Management 19.69 Pakistan 3 Atlas Islamic Stock Atlas Asset Management 16.85 Pakistan 4 QInvest Edgewood Sharia'a QInvest 14.54 Cayman Islands 5 AlAhli Saudi Trading Equity The National Commercial Bank 14.42 Saudi Arabia 6 AlAhli GCC Growth and Income NCB Capital Company 12.72 Saudi Arabia 7 FALCOM Saudi Equity FALCOM Financial Services 11.54 Saudi Arabia 8 HSBC Saudi Companies Equity - ASF SABB 10.95 Saudi Arabia 9 AlAhli Saudi Mid Cap Equity NCB Capital Company 10.81 Saudi Arabia 10 Amana Growth Saturna Capital 9.99 US Eurekahedge Islamic Fund Index 3.15 Taking into account funds that have at least 12 months of returns as at the 11th August 2015

Top 10 Annualized Standard Deviation for ALL Funds since Inception Fund Fund Manager Performance Measure Fund Domicile 1 AmItt ikal AmInvestment Management 41.25 Malaysia 2 Deutsche Noor Precious Metals Securities - DWS Noor Islamic Funds 35.77 Ireland Class A 3 AmPrecious Metals AmInvestment Management 31.63 Malaysia 4 HSBC Saudi Companies Equity - ASF SABB 30.06 Saudi Arabia 5 Meezan Islamic Al Meezan Investment Management 28.85 Pakistan 6 NBAD Islamic MENA Growth National Bank of Abu Dhabi 27.76 UAE 7 Atlas Islamic Stock Atlas Asset Management 26.57 Pakistan 8 Al Meezan Mutual Al Meezan Investment Management 26.51 Pakistan 9 Meezan Tahaﬀ uz Pension - Equity Sub Al Meezan Investment Management 25.48 Pakistan 10 AlAhli Emerging Markets Trading Equity The National Commercial Bank 25.38 Saudi Arabia Eurekahedge Islamic Fund Index 2.32 Based on 45.05% of funds which have reported July 2015 returns as at the 11th August 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 Money Market Index over the last 5 years Eurekahedge Islamic Fund Money Market Index over the last 1 year 150 102

140 101 100 130 99 120 98 Percentage Percentage 110 97

100 96

90 95 Jul-14 Jul-15 Jul-15 Jul-10 Jan-15 Jun-15 Jan-10 Jun-11 Oct-14 Feb-15 Sep-14 Oct-12 Dec-14 Feb-15 Sep-13 Dec-10 Apr-15 Apr-13 Aug-14 Mar-15 Aug-14 Nov-14 Mar-14 May-15 Nov-11 May-12

Top 10 Islamic Money Market Funds by 3 Months Returns Fund Fund Manager Performance Measure Fund Domicile 1 Atlas Pension Islamic - Money Market Sub Atlas Asset Management 1.59 Pakistan 2 Meezan Tahaﬀ uz Pension - Money Market Sub Al Meezan Investment Management 1.46 Pakistan 3 FALCOM SAR Murabaha FALCOM Financial Services 0.28 Saudi Arabia 4 CIMB Islamic Money Market CIMB-Principal Asset Management 0.20 Malaysia 5 Al Yusr Saudi Riyal Morabaha Saudi Hollandi Bank 0.18 Saudi Arabia 6 International Trade Finance - (Sunbullah SAR) Samba Financial Group 0.16 Saudi Arabia 7 Al Rajhi Commodity Mudarabah - USD Al Rajhi Bank 0.16 Saudi Arabia 8 Commodity Trading - SAR Riyad Bank 0.13 Saudi Arabia 9 International Trade Finance - (Sunbullah USD) Samba Financial Group 0.11 Saudi Arabia 10 Commodity Trading Fund - USD Riyad Bank 0.03 Saudi Arabia Eurekahedge Islamic Fund Index 0.35

Based on 45.45% of funds which have reported July 2015 returns as at the 11th August 2015

Top 10 Islamic Fund Fixed Income by 3 Months Returns Fund Fund Manager Performance Measure Fund Domicile 1 Atlas Pension Islamic - Debt Sub Atlas Asset Management 1.56 Pakistan 2 Meezan Tahaﬀ uz Pension - Debt Sub Al Meezan Investment Management 1.43 Pakistan 3 AmBon Islam AmInvestment Management 1.39 Malaysia 4 QInvest Sukuk QInvest 1.12 Cayman Islands 5 CIMB Islamic Sukuk CIMB-Principal Asset Management 0.89 Malaysia 6 AlAhli Diversiﬁ ed US Dollar Trade The National Commercial Bank 0.14 Saudi Arabia 7 AlAhli International Trade The National Commercial Bank 0.10 Saudi Arabia 8 AlAhli Euro Murabahat The National Commercial Bank 0.05 Saudi Arabia 9 BIMB Dana Al-Fakhim BIMB UNIT Trust Management (BUTM) -0.02 Malaysia 10 CIMB Islamic Enhanced Sukuk CIMB-Principal Asset Management -0.31 Malaysia Eurekahedge Islamic Fund Index (0.15)

Based on 50.00% of funds which have reported July 2015 returns as at the 11th August 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 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 4th Jun 2015 Pengurusan Air Malaysia Sukuk Domestic market 163 Maybank SPV public issue 28th May 2015 Hong Kong Hong Kong Sukuk Euro market 1,000 Standard Chartered Bank, HSBC, National Sukuk 2015 public issue Bank of Abu Dhabi, CIMB Group 27th May 2015 Garuda Indonesia Indonesia Sukuk Euro market 500 Standard Chartered Bank, Deutsche Bank, Global Sukuk public issue ANZ, National Bank of Abu Dhabi, First Gulf Bank, Maybank, Dubai Islamic Bank, Sharjah Islamic Bank, Emirates NBD, Al Hilal Bank, Warba Bank, Noor Bank 25th May 2015 Benih Restu Malaysia Sukuk Domestic market 278 OCBC, RHB Capital, Maybank, CIMB Group public issue 22nd May 2015 Jana Kapital Malaysia Sukuk Domestic market 419 RHB Capital public issue 22nd May 2015 Malaysia Malaysia Sukuk Domestic market 250 RHB Capital Building Society public issue 21st May 2015 Perusahaan Indonesia Sukuk Euro market 2,000 JPMorgan, HSBC, Dubai Islamic Bank, CIMB Penerbit SBSN public issue Group Indonesia III 18th May 2015 Dubai Islamic UAE Sukuk Euro market 750 Standard Chartered Bank, HSBC, National Bank public issue Bank of Abu Dhabi, First Gulf Bank, Maybank, Dubai Islamic Bank 18th May 2015 THP Suria Mekar Malaysia Sukuk Domestic market 280 RHB Capital public issue 15th May 2015 Jambatan Kedua Malaysia Sukuk Domestic market 560 RHB Capital, Maybank, Kenanga Investment public issue Bank, AmInvestment Bank 21st Apr 2015 Noor Bank UAE Sukuk Euro market 500 Standard Chartered Bank, Dubai Islamic public issue Bank, South Indian Bank, Citigroup, Emirates NBD, Al Hilal Bank, QInvest, Barwa Bank 17th Apr 2015 Aman Sukuk Malaysia Sukuk Domestic market 140 RHB Capital, CIMB Group, AmInvestment public issue Bank 8th Apr 2015 Malaysia Malaysia Sukuk Euro market 1,500 Standard Chartered Bank, HSBC, CIMB Sovereign Sukuk public issue Group 6th Apr 2015 Point Zone (M) Malaysia Sukuk Domestic market 219 Maybank, CIMB Group, Hong Leong public issue Financial Group, Aﬃ n Investment Bank, AmInvestment Bank 25th Mar 2015 Khadrawy UAE Sukuk Euro market 913 Standard Chartered Bank, JPMorgan, HSBC, public issue National Bank of Abu Dhabi, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD 25th Mar 2015 Danga Capital Malaysia Sukuk Domestic market 547 RHB Capital, CIMB Group public issue 24th Mar 2015 Government of UAE Sukuk Euro market 1,000 JPMorgan, National Bank of Abu Dhabi, Ras Al Khaimah public issue Citigroup, Al Hilal Bank

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 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q 2Q 2010 2011 2012 2013 2014 2015

Top 30 Issuers of Global Sukuk 12 Months Issuer Nationality Instrument Market US$ Iss Managers (mln) (%) 1 Perusahaan Penerbit Indonesia Sukuk Euro market 3,500 9.3 Standard Chartered Bank, HSBC, CIMB Group, Emirates NBD, SBSN Indonesia III public issue JPMorgan, Dubai Islamic Bank 2 IDB Trust Services Saudi Sukuk Euro market 2,881 7.7 Standard Chartered Bank, Deutsche Bank, HSBC, National Bank Arabia public issue of Abu Dhabi, First Gulf Bank, Maybank, Gulf International Bank, Natixis, CIMB Group, Saudi National Commercial Bank, RHB Capital, Dubai Islamic Bank 3 Dubai Islamic Bank UAE Sukuk Euro market 1,750 4.7 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, public issue Dubai Islamic Bank, Sharjah Islamic Bank, Emirates NBD, Al Hilal Bank, Noor Bank, First Gulf Bank, Maybank 4 DanaInfra Nasional Malaysia Sukuk Domestic market 1,695 4.5 RHB Capital, Maybank, CIMB Group, AmInvestment Bank, public issue Bank Islam Malaysia, Aﬃ n Investment Bank 5 Malaysia Sovereign Malaysia Sukuk Euro market 1,500 4.0 Maybank Sukuk public issue 6 Petronas Global Malaysia Sukuk Euro market 1,250 3.3 CIMB Group Sukuk public issue 7 Islamic Republic of Pakistan Sukuk Euro market 1,000 2.7 AmInvestment Bank Pakistan public issue 7 Hong Kong Sukuk Hong Sukuk Euro market 1,000 2.7 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, 2015 Kong public issue CIMB Group 7 Hong Kong Sukuk Hong Sukuk Euro market 1,000 2.7 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, 2014 Kong public issue CIMB Group 7 Hazine Mustesarligi Turkey Sukuk Euro market 1,000 2.7 HSBC, CIMB Group, Citigroup Varlik Kiralama public issue Anonim Sirketi 7 Government of Ras UAE Sukuk Euro market 1,000 2.7 JPMorgan, National Bank of Abu Dhabi, Citigroup, Al Hilal Al Khaimah public issue Bank 12 Danga Capital Malaysia Sukuk Domestic market 992 2.6 RHB Capital, CIMB Group public issue 13 Bank Pembangunan Malaysia Sukuk Domestic market 948 2.5 HSBC, CIMB Group Malaysia public issue 14 Khadrawy UAE Sukuk Euro market 913 2.4 Standard Chartered Bank, JPMorgan, HSBC, National Bank public issue of Abu Dhabi, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Citigroup, Emirates NBD 15 Sharjah Sukuk UAE Sukuk Euro market 750 2.0 Standard Chartered Bank, HSBC, Kuwait Finance House, public issue National Bank of Abu Dhabi, Sharjah Islamic Bank 16 National Higher Malaysia Sukuk Domestic market 743 2.0 Maybank, CIMB Group Education Fund public issue 17 Dubai International UAE Sukuk Euro market 700 1.9 Standard Chartered Bank, Dubai Islamic Bank, Emirates NBD, Financial Centre public issue Noor Bank 18 Mumtalakat Sukuk Bahrain Sukuk Euro market 594 1.6 Standard Chartered Bank, Deutsche Bank, BNP Paribas, Holding public issue Mitsubishi UFJ Financial Group 19 Jambatan Kedua Malaysia Sukuk Domestic market 560 1.5 RHB Capital, Maybank, Kenanga Investment Bank, public issue AmInvestment Bank 20 Prasarana Malaysia Malaysia Sukuk Domestic market 541 1.4 RHB Capital, Kenanga Investment Bank, CIMB Group, Aﬃ n public issue Investment Bank, AmInvestment Bank 21 Sharjah Islamic UAE Sukuk Euro market 500 1.3 Standard Chartered Bank, HSBC, Kuwait Finance House, Dubai Bank public issue Islamic Bank, Abu Dhabi Islamic Bank, Emirates NBD, Al Hilal Bank, Noor Bank 21 Republic of South South Sukuk Euro market 500 1.3 BNP Paribas, Standard Bank, Kuwait Finance House Africa Africa public issue 21 Noor Bank UAE Sukuk Euro market 500 1.3 Standard Chartered Bank, Dubai Islamic Bank, South Indian Bank, public issue Citigroup, Emirates NBD, Al Hilal Bank, QInvest, Barwa Bank 21 JANY Sukuk US Sukuk Euro market 500 1.3 Saudi National Commercial Bank, Goldman Sachs, National Bank of public issue Abu Dhabi, Abu Dhabi Islamic Bank, Emirates NBD, QInvest 21 IFFIm Sukuk UK Sukuk Euro market 500 1.3 Saudi National Commercial Bank, Standard Chartered Bank, public issue National Bank of Abu Dhabi, CIMB Group, Barwa Bank 21 Flydubai UAE Sukuk Euro market 500 1.3 Standard Chartered Bank, HSBC, National Bank of Abu Dhabi, public issue Dubai Islamic Bank, Emirates NBD, Credit Agricole, Noor Bank 27 Garuda Indonesia Indonesia Sukuk Euro market 496 1.3 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 28 Rantau Abang Malaysia Sukuk Domestic market 476 1.3 RHB Capital, Maybank, Bank Islam Malaysia, CIMB Group Capital public issue 29 Bumi Armada Malaysia Sukuk Domestic market 474 1.3 RHB Capital, Maybank, CIMB Group, AmInvestment Bank Capital Malaysia public issue 30 Jana Kapital Malaysia Sukuk Domestic market 434 1.2 RHB Capital public issue 37,540 100

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

Manager US$ (mln) Iss % US dollar 22.1 1 CIMB Group 6,672 56 17.8 Malaysian ringgit 14.4 2 HSBC 4,310 25 11.5 0.6 3 Maybank 3,444 36 9.2 Euro

4 Standard Chartered Bank 3,351 24 8.9 Saudi riyal 0.3

5 RHB Capital 3,326 42 8.9 6 AmInvestment Bank 1,887 25 5.0 Sukuk Volume by Issuer Nation US$ (billion) 12 Months

7 National Bank of Abu Dhabi 1,838 13 4.9 Malaysia 16.3 8 Dubai Islamic Bank 1,638 11 4.4 UAE 6.6 Indonesia 4.3 9 Citigroup 1,149 6 3.1 Saudi Arabia 3.1 10 Emirates NBD 1,110 9 3.0 Hong Kong 2.0 11 JPMorgan 1,003 4 2.7 Turkey 1.2 12 Deutsche Bank 745 5 2.0 Pakistan 1.0 13 Natixis 658 3 1.8 14 Al Hilal Bank 541 5 1.4 Global Sukuk Volume by Sector 12 Months 15 Noor Bank 475 5 1.3 10% 16 BNP Paribas 462 4 1.2 3% 4% Finance 17 Kenanga Investment Bank 430 11 1.2 41% Government 9% Transportation 18 Aﬃ n Investment Bank 424 6 1.1 Construction/Building 19 Kuwait Finance House 407 4 1.1 Oil & Gas Other 20 First Gulf Bank 333 3 0.9 33% 21 Sharjah Islamic Bank 316 3 0.8 22 Saudi National Commercial Bank 294 3 0.8 Global Sukuk Volume - US$ Analysis 23 Bank Islam Malaysia 291 3 0.8 24 Mitsubishi UFJ Financial Group 287 2 0.8 US$bn US$m 25 Gulf International Bank 278 2 0.7 18 600 16 Non-US$ US$ 500 26 Abu Dhabi Islamic Bank 260 3 0.7 14 12 400 10 27 Hong Leong Financial Group 195 7 0.5 300 8 28 Standard Bank 167 1 0.4 6 200 4 100 29 Barwa Bank 163 2 0.4 2 0 0 30 QInvest 146 2 0.4 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q2Q 3Q 4Q 1Q 2Q 2010 2011 2012 2013 2014 2015 Total 37,540 136 100.0

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 1,414 2 16.4 1 Salans FMC SNR Denton Group 3,334 2 22.0 2 HSBC 750 3 8.7 2 Milbank Tweed Hadley & McCloy 2,704 1 17.8 3 National Commercial Bank 651 3 7.5 2 White & Case 2,704 1 17.8 4 Riyad Bank 584 2 6.8 4 Linklaters 1,631 2 10.8 5 Samba Capital & Investment 518 3 6.0 5 Cliﬀ ord Chance 1,380 3 9.1 Management 6 Mitsubishi UFJ Financial Group 414 2 4.8 6 Allen & Overy 1,086 5 7.2 6 Mizuho Financial Group 414 2 4.8 7 Chadbourne & Parke 660 1 4.4 8 Al Rajhi Capital 356 3 4.1 8 Baker & McKenzie 433 2 2.9 9 Banque Saudi Fransi 346 2 4.0 9 Norton Rose Fulbright 354 1 2.3 10 National Bank of Kuwait 290 1 3.4 9 Pekin & Pekin 354 1 2.3

Top Islamic Finance Related Financing Mandated Lead Arrangers Ranking 12 Months Top Islamic Finance Related Financing Deal List 12 Months Mandated Lead Arranger US$ (mln) No % Credit Date Borrower Nationality US$ (mln) 1 First Gulf Bank 1,242 14 6.7 th 2 Abu Dhabi Islamic Bank 1,200 7 6.5 30 Mar 2015 Saudi Aramco Saudi Arabia 9,999 3 Samba Capital 1,128 5 6.1 16th Mar 2015 Rabigh Reﬁ ning & Saudi Arabia 2,870 4 National Bank of Abu Dhabi 1,032 7 5.6 Petrochemical 15th Jan 2015 SapuraKencana TMC Malaysia 2,239 5 HSBC 953 10 5.1 6 Banque Saudi Fransi 906 4 4.9 18th Jun 2015 Emirates National Oil UAE 1,500 7 Saudi National Commercial Bank 758 5 4.1 19th Nov 2014 Saudi BinLaden Group Saudi Arabia 1,327 8 Emirates NBD 710 9 3.8 8th Sep 2014 Atlantis The Palm UAE 1,100 9 Standard Chartered Bank 693 8 3.7 10th Mar 2015 Port & Free Zone World UAE 1,100 10 Riyad Bank 644 3 3.5 11 Abu Dhabi Commercial Bank 634 4 3.4 17th Apr 2015 Turkiye Vakiﬂ ar Bankasi Turkey 1,021

12 Dubai Islamic Bank 526 5 2.8 22nd Mar 2015 Arab Petroleum Saudi Arabia 950 13 Mashreqbank 524 5 2.8 Investments th 14 Noor Bank 512 6 2.8 28 Jul 2015 GEMS Education UAE 817 15 Alinma Bank 490 2 2.6 Top Islamic Finance Related Financing by Country 12 Months 16 Arab Banking Corporation 484 6 2.6 Nationality US$ (mln) No % 17 Barwa Bank 331 5 1.8 1 UAE 6,862 16 36.9 18 RHB Capital 322 3 1.7 2 Saudi Arabia 5,637 6 30.3 19 Union National Bank 319 5 1.7 3 Malaysia 2,411 3 13.0 20 Sumitomo Mitsui Financial Group 314 3 1.7 4 Turkey 1,661 4 8.9 21 ING 269 2 1.4 5 Kuwait 661 2 3.6 22 Gulf International Bank 263 3 1.4 6 Qatar 500 1 2.7 7 Cayman Islands 325 1 1.8 23 Maybank 247 2 1.3 8 India 272 1 1.5 23 AmInvestment Bank 247 2 1.3 9 Egypt 212 1 1.1 25 Qatar Islamic Bank 237 4 1.3 10 Oman 55 1 0.3 26 UOB 215 1 1.2 Top Islamic Finance Related Financing by Sector 12 Months 26 CIMB Group 215 1 1.2

28 SABB 197 2 1.1 Oil & Gas 29 Al Hilal Bank 191 2 1.0 Finance 30 Citigroup 180 3 1.0 Professional Services

Top Islamic Finance Related Financing Mandated Lead Arrangers Utility & Energy 12 Months Transportation Bookrunner US$ (mln) No % US$ bln0 128 3 4 5 6 7 1 Maybank 2,239 1 20.6

2 Samba Capital 1,327 1 12.2 Global Islamic Financing - Years to Maturity (YTD Comparison) 3 Abu Dhabi Islamic Bank 1,130 5 10.4 2015 4 Noor Bank 694 3 6.4 2014 5 Saudi National Commercial Bank 666 1 6.1 2013 2012 5 Riyad Bank 666 1 6.1 2011 5 Alinma Bank 666 1 6.1 2010 2009 8 Emirates NBD 431 3 4.0 2008 9 Dubai Islamic Bank 376 2 3.5 0% 20% 40% 60% 80% 100% 0-3yrs 3-5yrs 5-7yrs 7-10yrs 10+yrs 10 National Bank of Abu Dhabi 313 2 2.9

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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SEPTEMBER 2015 AUGUST 2015

17th –19th Understanding Islamic Dubai, UAE 13th IFN Issuer Forum Dubai, UAE Contracts: Structuring & Legal Issues

Africa Islamic Finance th 17th – 18th Abidjan, Cote d’Ivoire 18 & Islamic Financial Services Kuala Lumpur, Forum 25th Act (IFSA) 2013 & Islamic Malaysia Banking Products

OCTOBER 2015 20th –21st Shariah Audit & Kuala Lumpur, Governance for Islamic Malaysia Banking 5th IFN Kuwait Forum Kuwait City 23rd –25th Islamic Finance Dubai, UAE Qualiﬁ cation NOVEMBER 2015 24th –26th Advanced Sukuk & Istanbul, Turkey Islamic Securitization 17th IFN Turkey Forum Istanbul, Turkey SEPTEMBER 2015 IFN Saudi Arabia 30th Jeddah, Saudi Arabia 2nd – 4th Understanding & Kuala Lumpur, Forum Applying Structured Malaysia Products APRIL 2016 6th – 8th Bank Asset & Liability Dubai, UAE Management Simulation 5th IFN Indonesia Forum Jakarta, Indonesia 7th – 8th Undertaking Eﬀ ective Kuala Lumpur, Litigation & Recovery in Malaysia TBC IFN Investor Forum Dubai, UAE Islamic Finance Facilities

8th – 9th Shariah Compliance & Dubai, UAE 21st IFN Europe Forum Jakarta, Indonesia Audit for Islamic Banks 8th – 10th Islamic Treasury & Risk Kuala Lumpur, MAY 2016 Management Products Malaysia 8th – 10th Structuring Islamic Kuala Lumpur, 16th – 17th IFN Asia Forum Kuala Lumpur, Malaysia Financial Products Malaysia

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AAOIFI 11, 24, 26 Dubai Financial Market 12 Manchester City Council 6 ABC Islamic Bank 24 Dubai Financial Services Authority 19 MARC 27 Abu Dhabi Islamic Bank 11, 25, 27 Dubai Islamic Bank 11, 24, 25 Mashreq Bank 25 Aeon Credit Services Malaysia 18 Ecobank 25 Masraf Al Rayan 25, 27 African Development Bank Group 11 Economic Zones Company (Manateq) 25 Maxis 13 AgustaWestland 3 Egyptian Financial Supervisory Authority 27 Maybank Asset Management 26 Airbus 3, 19 Emirates Airline 4, 6, 19 Maybank Islamic 27 Airbus Helicopters 1 Emirates NBD 4, 25, 27 MD Helicopters 3 Al Baraka Bank 11 Emirates NBD Capital 24 Moody’s 27 Al Baraka Banking Group 27 Ethmar 25 Morgan, Lewis & Bockius 25 Al Hilal Bank 27 Eurocopter 3 Moroccan Association of Participative Al Maali Consulting Group 16 Export Credits Guarantee Department of UK 19 Financiers 11 Al Meezan Investments 26 Financial Regulation Advisory Council of Experts 12 National Bank of Fujairah 25 Al Othaim Real Estate and Investment Co 23 Financial Services Agency of Japan 18 National Bank of Ras Al Khaimah 27 Al Rajhi 11 First Gulf Bank 25 National Electric Power Company 14 Al Rayan Bank 27 Fitch 27 New Finance 15 Al Salam Bank-Bahrain 23 Frost & Sullivan 3 Albar & Partners 13 Gatehouse Bank 6 Nomura Investment Company 18 AlBaraka Turk Katilim Bankasi 24 GEMS Education 25 Noor Bank 25, 27 Allen & Overy 25 Halal Sky 9 Otoritas Jasa Keuangan 7, 12 Amman Stock Exchange 14 Honeywell Aerospace 3 Pension Funds Association (ADPI) 23 Asian Development Bank 19 Ibdar Bank 27 PETRONAS 4 Association for Development of Islamic Finance 15 ICD 15, 24 PMB Investment 26 Att ijariwafa Bank 11 IDB 7, 24, 25 Qatar Stock Exchange 25 Autoriti Monetari Brunei Darussalam 25 IDB Group 15 QInvest 27 Azzad Asset Management 26 IFSB 12 RAM Ratings 12, 22 Bahrain Bourse 12 IMF 11, 25 Ranhill Group 27 Bahri 23 International Council of Islamic Regeneration Investment Organization 5 Bangladesh Bank 12 Finance Educators 24 Rojs, Peljhan, Prelesnik & Partners 24 Bank Al-Maghrib 16 International Islamic Financial Market 9 Rothschild 25 Bank Islam Malaysia 24 International Islamic University S&P 24 Bank Muamalat 24 College Selangor 25 Saudi Hollandi Bank 25 Bank Negara Malaysia 8, 12, 23, 24 Investcorp 27 SECP 8, 12, 24 Bank of England 6 ISFIN 24 Securities Commission of Malaysia 13, 26 Bank of Sharjah 27 Islamic Finance Advisory and Assurance Services 26 Securities Exchange Board of India 21 Bank of Zambia 12 Ithmaar Bank 27 Sharjah Islamic Bank 27 Bank Populaire 11 Japan Bank for International Cooperation 19 Sikorsky Aircraft 3 Barwa Bank 24 Japan International Cooperation Agency 19 Standard Chartered Bank 24 Bell Helicopter 3 Jordan Islamic Bank 25 Standard Chartered Bank Malaysia 26 BLME 1, 4, 7 Jordan Securities Commission 14 State Bank of Pakistan 12 BMCE Bank 11 Juris Corp 21 Sumitomo Mitsui Banking Corporation 19 BMI Bank Bahrain 23 King & Spalding 19 Sunway Treasury Sukuk 23 BMI Oﬀ shore Bank 23 KT Bank 24 Tata Consultancy Services 24 BTMU (Malaysia) 18 Kuwait Finance House 11 Central Bank of Oman 12 Kuwait Financial Center (Markaz) 8 Toyota Capital Malaysia 18 Central Depository Company 8 Kuwait International Bank 24 UAE Banks Federation 12 Central Intelligence Agency 8 Lancaster University 6 UK Export Finance 4, 6 CIBFM 25 LCI 1 UK Trade & Investment 24 CIMB 13 LCI Helicopters 1 Viable Chip 23 CIMB Group 10 Leeds City Council 6 Water Authority of Jordan 14 CIMB Islamic Bank 10, 13 Libra Group 1 Weststar Aviation Services 3, 4 Commercial Bank of Dubai 27 Lloyds Bank 1 Weststar Capital 3 CVC Capital Partners 27 Macquarie Group 10 World Bank 27 Danajamin Nasional 27 Malaysia Building Society 24 Zul Raﬁ que & Partners 13

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