Digesting Dana Gas: Lessons Learned

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COVER STORY 23rd May 2018 (Volume 15 Issue 21) Digesting Dana Gas: Lessons learned

Almost exactly a year ago, Dana Gas Gas in June 2017, with a few minor Sukukholders and 30% of ordinary declared its maturing Sukuk to be improvements. Sukukholders. The Sukukholders “unlawful and unenforceable” — committ ee also entered into a litigation sett ing in motion a series of convoluted The original deal off ered an exchange of dismissal agreement with Dana Gas that and controversial claims and the 2013 Sukuk in favor of a new four- provides for the dismissal of all pending counterclaims that limped litigiously year instrument with profi t distributions litigation and a release of certain through the courts for 11 long months. at “less than half” of the current profi t outstanding claims. Last week, the company fi nally reached rates, without a conversion feature, and a tentative agreement with its creditors with profi t payments comprising both “We are pleased to have amicably – but will it work, is it fair and, most cash and payment in kind. The company reached a consensual solution with importantly, what implications could also refused to pay the two outstanding the ad hoc committ ee, as indeed was it have for the wider Sukuk market? profi t distributions of July and October always the company’s publicly-declared LAUREN MCAUGHTRY looks at the 2017 on the grounds of unlawfulness, intention from the outset, which off ers lessons to be learned from one of the although it promised that they would Sukukholders the opportunity to cash biggest scandals to hit the industry in be “accounted for” as part of the new out at a premium to current market almost a decade. Sukuk. prices or — individually solely at their election — to achieve a path to full A done deal? The new deal of May 2018 off ers a repayment of the face value of their On the 13th May 2018, Dana Gas similar structure but with some key existing holdings,” said Dana Gas CEO announced an agreement with an ad hoc diff erences in phrasing. Sukukholders Patrick Allman-Ward. committ ee of Sukukholders regarding can immediately redeem their an off er to restructure and refi nance investment at 90.5 cents to the dollar, So is this a positive resolution? its disputed US$700 million Sukuk or they can convert their holdings into Mudarabah, which at issue in May 2013 a new three-year Sukuk instrument “From a commercial perspective, the was split between a US$350 million paying a coupon of 4%, with arrears investors would not have accepted this ordinary Sukuk tranche at 7% and paid at the original profi t rate up until if it did not make sense for them,” thinks a US$350 million convertible October 2017. The new Sukuk Rizwan Kanji, a partner and debt capital Sukuk tranche at 9%, each due will be structured as a simple markets specialist at King & Spalding. in October 2017. Wakalah instrument, based on an But not everyone agrees. underlying Ijarah and a deferred So is it a fair deal, and what payment obligation contract. “I don’t think it is a good outcome for will it mean for investors? In addition, the agreement is creditors,” said Khalid Howladar, the contingent on the termination of founder and CEO of boutique advisory At fi rst glance, the off er looks all current litigation. fi rm Acreditus. “They don’t really substantially similar to the seem to have changed much from the th original restructuring As of the 13 May, the off er sett lement that was proposed this time suggestion made by Dana had received the approval of 52% of convertible continued on page 3 IFN RAPIDS

Volume 15 Issue 21 ready to commence talks agreement with Lycee DEALS with Malaysia on scandal Francais Jean Mermoz IFN Rapids ...... 2 Indonesia privately places Otoritas Jasa Keuangan IFN Reports: new Sukuk series; reopens admits shares of Guna TAKAFUL • North and West African Islamic banks auction for six existing Timur Raya onto list of Al Ahlia Cooperative series Shariah securities tapping the SME market • Ethmar for Islamic Insurance Company Microfi nance seeks funding ahead of expansion • Matrix Concepts raises Amana Bank establishes receives Saudi Arabian RM50 million (US$12.63 1MDB time bomb: The plot thickens • Company third self-banking center in Monetary Authority’s million) through the Thihariya approval for proposed Focus: Bank Al Yousr • Uzbekistan to set up issuance of Islamic merger with Gulf Union Punjab government Islamic development bank as part of plans to commercial paper Cooperative Insurance introduces Islamic crop accommodate Shariah fi nance • PODCAST: Company Sabah Credit Corporation insurance Moody’s bullish on Saudi Arabia’s Vision 2030; issues Islamic commercial Takaful Emarat establishes Punjab University Hailey papers new brand to complement targets corporates as part of expansion strategy • College of Banking & acquisition of Al Hilal Sovereign Sukuk: Only the usual suspects .... 6 Bank Negara Malaysia Finance and Al Baraka Takaful fl oats Islamic instruments Bank enter into agreement totaling RM63.88 billion to facilitate academic Saudi Indian Cooperative IFN Analyses: (US$16.06 billion) excellence Insurance Company Turkey: Uncertainties threaten development 11 receives Saudi Arabian NASDAQ Dubai admits Indonesian Islamic banks to Treasury: Investing in Islamic liquid assets .. 12 Monetary Authority’s Noor Bank’s US$500 enhance Hajj services Case Study: million fi ve-year Sukuk approval for capital Indonesian Stock reduction Sharjah Islamic Bank’s Sukuk: Strong QIIB waiting for the right Exchange launches new Saudi Takaful fi rms appetite...... 13 time to print fi ve-year Islamic index Sukuk, says CEO announce reduction in Back To Basics: Malaysian government’s capital Arguments against the forbiddance of Kuwait Finance House intention to abolish to establish US$3 billion interest ...... 14 highway tolls will impact Sukuk program; receives Sukuk and bond market RATINGS Shariah Standard: provisional rating of ‘(P)A1’ MARC affi rms investment Amana Bank collaborates Controls on Gharar in fi nancial transactions 15 manager rating of IMR-2 on Central Bank of Kuwait with mCash to bring Column: Kenanga Islamic Investors issues KWD160 million easier payment solution to Daud speaks: From awareness to action ...... 16 (US$528.05 million)-worth customers Mashreq Capital’s of conventional bonds and investment manager quality IFN Country Correspondents: Investcorp launches Tawarruq facilities assessment falls one notch Morocco; Qatar; the Philippines; Hong Kong; platform to enter Telekom Malaysia issues to MQ2 Malta; Japan ...... 17 Germany’s dental sector Islamic medium-term with two completed initial Projek Lebuhraya IFN Sector Correspondents: note worth RM250 million investments Usahasama’s Sukuk Islamic Leasing; Islamic Microfi nance; SRI (US$62.92 million) Musharakah program Ethical & Green ...... 20 AEON raises RM100 affi rmed at ‘AAAIS’ Country Feature: million (US$25.17 million) through the issuance of RESULTS VBI: A new phase for Islamic banking and fi nance MOVES Islamic commercial paper Bank ABC Islamic records in Malaysia ...... 23 Five board members of 28.13% increase in net profi t Danajamin Nasional ‘One Belt, One Road’ initiative – what’s in it for for fi rst quarter of 2018 NEWS to retire; Suresh Menon Malaysia’s Islamic fi nance industry ...... 24 Islamic Finance Project appointed as new director Sector Feature: Management Offi ce ASSET Adissadikin Ali now Takaful digital transformation ...... 26 proposes same tax on president of Association News ...... 27 Islamic fi nance products MANAGEMENT of Islamic Banking and with conventional off erings Deal Tracker ...... 34 Blossom Finance opens Financial Institutions REDmoney Shariah Indexes ...... 35 Report on 1MDB says enrollment for its fi rst Malaysia publicly available Islamic proceeds raised via many Abdulkader Thomas Eurekahedge Funds Tables ...... 37 microfi nance fund sources including Islamic resigns from Meethaq Dealogic League Tables ...... 39 papers not fully used for Equitativa, on behalf of Islamic Banking’s Shariah REDmoney Events ...... 43 intended purposes; Swiss Emirates REIT, enters supervisory board Subscription Contact...... 43 and Singaporean authorities into buy and leaseback

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

Digesting Dana Gas: Lessons learned Continued from page 1 last year. I would call this a relatively soared 77% and gross revenues were up convertible option is a signifi cant loss weak deal.” 25%. of value for creditors and was likely a key driver of the whole restructuring,” The fi gures have only got bett er. 2017 he told IFN. “It is a classic example The industry saw Dana Gas post full-year gross of equityholders versus debtholders, revenues of US$450 million, up 15% and at the moment the equityholders as a whole from 2016, along with a net profi t of appear to be winning. I don’t think the US$83 million, compared to a net loss of Sukukholders have done very well out stopped using US$88 the previous year. The company of this so far.” received a long-disputed US$1 billion Mudarabah on its payout from the Kurdistan Regional An additional factor is the question Government which boosted its coff ers of dividends. Dana Gas has been own some time ago, so substantially, and it ended the year with seeking to pay a cash dividend to a cash balance of US$608 million, its its shareholders of 5% for 2017, the a repeat of the crisis highest in 10 years. equivalent of around AED349 million (US$95 million). In April 2018, the UK is, in theory, And the growth story continues. So far courts issued an injunction restricting in 2018, Dana Gas has collected a further the fi rm from paying dividends or unlikely US$14.4 million from Pearl Petroleum increasing its debt levels, but later the for fi rst-quarter sales in Kurdistan, same month a UAE court suspended and in January it signed a new deal to this decision and barred Sukukholders A hidden motive? increase gas production from the Khor from taking legal action against the fi rm. A central issue is the absence of the Mor fi eld by 25% this year, with plans At its latest annual general meeting th convertible element that would have to increase overall gas production by on the 19 April, the shareholders allowed Sukukholders to exchange 125% over the next two years, based voted in favor of a dividend, despite a their debt holdings for equity within an on an investment of over US$600 recommendation to the contrary from agreed period of time. This might seem million. The company is targeting the board of directors, and the matt er is like a relatively minor facet of the deal production increases of 20% in 2018 and currently awaiting a decision as to the but in fact, it could hold the key to the 170% within two to three years, with enforceability of the UK injunction by whole charade. Let’s take a closer look. corresponding revenue increases of 45% the UAE courts. Should the UAE fi nd and 260% respectively. in favor of Dana Gas, a 5% payout to Back in 2013, Dana Gas looked like shareholders is unlikely to be popular a rather riskier bet. The Sukuk had This performance is refl ected in its share with Sukukholders facing a profi t already been restructured once from price, which returned 167.5% over the distribution halved in value. its original 2007 incarnation, and was past month, according to Bloomberg in eff ect simply a rollover of a previous data, reaching AED1.08 (29.4 US cents) Wider implications nd deal. Its share price was down at 59 fi ls as of the 22 May 2018. Looking at the bigger picture, the (16.06 US cents) and it was embarking implications of the Dana Gas Sukuk on potentially risky ventures in Egypt Looking at the fi gures, therefore, reach far beyond its impact on existing and the Kurdistan region of Iraq. This it seems that equityholders of Sukukholders. Has the market been explains the high coupon of the 2013 Dana Gas are in the money. But if irredeemably tainted by the knott y issue Sukuk, which was off ered at 9% for the convertible Sukuk option was of non-compliance? ordinary Sukukholders. Crucially exercised, that shareholding could have however, 50% of the issuance was been potentially diluted. Could this According to Rizwan, the point is off ered at a slightly lower 7% to include have been a possible motive for the moot. “I believe this was never a a convertible feature that gave equity- restructuring? Shariah issue but a credit issue. The type characteristics to the instrument. use of Shariah compliancy may have Dana Gas says not, insisting that the been a convenient, albeit debatable, Fast forward fi ve years, and the latest off er represents genuine value for excuse to perhaps prompt commercial company is actually looking to be in its Sukukholders. “[We] believe that discussions,” he told IFN. “I wonder a prett y good shape. It experienced the off er refl ects the company’s if the proposed sett lement may have temporary cash fl ow diffi culties in signifi cantly improved fi nancial been reached without having to 2016/17, primarily due to issues with position at about 0.3 times net go through numerous judicial payments from its Egyptian and leverage, and removes the risk processes.” Kurdistan operations, but even in June to all parties of continuing 2017 it was already facing the prospect lengthy legal disputes in In fact, Dana Gas itself has of substantial growth in the near term. multiple jurisdictions,” said a admitt ed that the catalyst was Just a few weeks aft er its declaration spokesperson. liquidity. “It was obvious that of “unlawfulness” with regards to its the company merely had maturing Sukuk, the fi rm posted 2017 Khalid disagrees. a cash fl ow problem “The removal of the fi rst half results in which net profi ts continued on page 4

Digesting Dana Gas: Lessons learned Continued from page 3 in meeting its debt obligations, which them to repay upwards of US$75 corporates can use and investors can needed time and patience by creditors to million. take confi dence in.” resolve,” said Christopher Hearne, CFO of Dana Gas, in a press release based on For now, however, the new agreement The industry is already moving coverage by Al-Khaleej issued in April looks as if it could fi nally resolve the toward this, most notably with the 2018. matt er without further acrimony. And publication last year of a new AAOIFI going forward, the issue is unlikely to governance standard on central What confused the Dana Gas case was arise again in relation to the Mudarabah Shariah boards. “This is a giant leap perhaps not the compliance issue, but structure, given that its use in toward improvements in the overall the complexity of having two parallel commercial (non-perpetual) Sukuk is all Shariah governance and compliance court cases in two jurisdictions — at but defunct — with the Dana Gas Sukuk environment for the broader Islamic times ruling in contradiction of each one of the only outstanding instruments fi nance industry. We hope that this other. Yet given the structure of the left using the contract. The industry as a standard will support the regulators Sukuk itself, there is an argument that whole stopped using Mudarabah on its in establishing uniform practices for this was in fact not necessary at all. own some time ago, so a repeat of the establishing and operating Shariah crisis is, in theory, unlikely. boards at jurisdiction level and will help “In the Sukuk documentation in streamlining the Islamic banking and ecosystem, the governing law clauses Sukuk standards fi nance practices, within and across are determined based on Islamic and Does that mean that we can all breathe jurisdictions in line with the tenets of capital markets documents. Under a sigh of relief and move on? Not Shariah” said Dr Ishrat Hussain, the the Islamic documents, the concept necessarily. The situation has stimulated chairman of AAOIFI’s governance and of lex situs is applied to ascertain renewed calls for standardization of ethics board. the appropriate governing law. In a the Sukuk markets. Some claimed that Mudarabah structure, based on lex situs had enough checks and balances been the governing law of the Mudarabah in place, the problem would never have If we had agreement need not have been governed occurred in the fi rst place. by UAE law,” elaborated Rizwan. had Sukuk “There is room for some further analysis “The Dana Gas case absolutely argues standards in place of the documents to ensure that a for the importance of standardization, similar situation of parallel hearings in and without this I don’t think the in the UAE that the future is avoided. market will be able to reach its full potential,” urged Dr Mohamed Damak, were endorsed by On the fl ip side, Dana Gas argued that the global head of Islamic fi nance at in fact, the Sukukholders could owe S&P Global Ratings. “A standardized the Higher Shariah the company money. The UAE Civil Shariah interpretation would reduce Code, said the company, stipulates that the risk of someone being able to claim Board at the UAE under a Mudarabah transaction it is that something is not Shariah compliant, the providers of the capital alone who and would have helped to avoid this central bank, then in bear the losses, and any provision to situation in the fi rst place. In addition, the contrary is void. If the loss exceeds the market urgently needs standardized my opinion this type the profi ts, the balance is therefore in legal documentation to remove all the theory owed by the investors. According uncertainty.” of legal challenge to Duncan Maclean, the legal and commercial director of Dana Gas, the Khalid agrees. “I think Dana Gas would not Sukuk capital was invested in oil and combined the complexity of Shariah gas assets in Egypt, currently assessed compliant instruments with a local law have been to be worth US$500 million, while the issue to put investors into a weaker total cumulative profi ts are estimated position. If we had had Sukuk standards successful to be around US$60 million. Therefore, in place in the UAE that were endorsed he argued to Al-Khaleej, the amount by the Higher Shariah Board at due to Sukukholders should in the UAE central bank, then in fact be only US$560 million. my opinion this type of legal But would a central body have made As Dana Gas has already challenge would not have been any diff erence? So far, Dana Gas made “on account” profi t successful. Also, this is not seems to have paid litt le heed to the payments of US$635 million the best PR [public relations] issue of formal Shariah certifi cation, to Sukukholders, the fi rm had for Dubai as a hub for Sukuk with no public declaration to date of suggested (prior to reaching the fi nance. Perhaps this could be the any specifi c ruling or pronouncement most recent agreement) that trigger the authorities need to from any advisory board on either the the creditors could in fact take a more proactive hand previous “unlawful” Sukuk or the new be liable to an accounting and endorse a market- instrument. reconciliation requiring driven standard that continued on page 5

Digesting Dana Gas: Lessons learned Continued from page 4

“The point remains that the company but understand its limited relevance to to prevent this. If you cite Shariah non- did not, or at least we have not seen, future Islamic issuances based on more compliance as a reason for not fulfi lling [obtain] a scholars pronouncement robust structures. contractual obligations, then in theory to confi rm their structure was the obligor runs the risk of being in subsequently non-compliant, ie it was default.” the company’s unilateral interpretation,” pointed out Rizwan. “Accordingly, I Market On a more practical level, market think having a central advisory body memories are short, and there will with no legal powers of enforcement memories always be new investors coming to would have made very litt le diff erence.” market who are willing to forgive and are short, and there forget for the right price. Finally, the Dana Gas insists, however, that its will always be new bulk of the Sukuk market is made up new off er is legitimate. “The proposed of sovereign and bank issuances, rather new Sukuk instrument to be issued to investors coming than corporate transactions – and these Sukukholders has been legally verifi ed issuances are unlikely to be aff ected to be lawful without question,” said to market who are by non-compliance issues. Perhaps the Allman-Ward. Dana Gas case could have a short-term willing to forgive impact on pricing as wary investors The proof is in the pudding demand a premium for corporate Sukuk Whichever side of the fence you sit on, and forget for — but given the impressive issuance the million-dollar question remains. trend over the past year, volumes do not Will the Dana Gas case have negative the right price appear to have been aff ected. repercussions for the Islamic fi nance industry? “I don’t think investors will be put off by Documentation too has evolved to be this,” said Rizwan. “The proof is in the Overall, we believe the answer is more comprehensive. “Obligors can fl urry and volume of issuances at the end no. Experienced investors already no longer hide behind Shariah in order of 2017 and in the fi rst quarter of 2018 understand Sukuk documentation, to avoid fulfi lling their contractual that the market has already considered and they will not only appreciate the obligations,” noted Rizwan. “Most the problem and moved on.” nuances of the case and its outcome Sukuk issuances now include warranties

The Dana Gas case

October 2007: October 2012: December 2012: April 2013: May 2013: April 2017: Dana Gas Dana Gas defaults Dana Gas Shareholders of Dana Gas Dana Gas renegotiates issues US$1 on Sukuk; reaches proposes new Dana Gas approve completes with Sukukholders on billion Sukuk standstill with Sukuk plan restructuring plan restructuring US$700 million facility to creditors mature in October 2017

2007 2012 2013 2017

November 2017: 25th September 2017: 14th September 2017: August 2017: July 2017: June 2017: UK High Court London High Court Sukukholders Dana Gas Deutsche demands Dana Gas declares declares purchase proceeds with Dana propose plan; Dana withdraws Sukuk payment; Sukuk “unlawful” undertaking Gas trial Gas says no ȱě Dana Gas rejects as no longer enforceable; Dana request Shariah compliant Gas to appeal court decision

December 2017: January 2018: February 2018: March 2018: April 2018: May 2018: UAE court allows UK court rejects UK High Sharjah court UK court Dana Gas Dana Gas to Dana Gas’s Court rules in suspends enforcement restricts Dana reaches participate in UK appeal; Dana favor of Dana of UK court orders Gas from agreement High Court’s Gas fails in talks Gas creditors and issues anti-suit paying with creditors proceedings injunction against dividends BlackRock

2018 Click to launch IFN’s Interactive Dana Gas timeline, compiled by Marc Roussot & Vineeta Tan.

North and West African Islamic banks tapping the SME market

A growing number of North and have had access to a fi nancing against West African banks off ering Islamic 27% in Southeast Asia,” details Binta products have developed dedicated who adds that currently, SMEs represent SME fi nancing strategies in an att empt 40% of Orabank’s outstanding fi nancing to bridge — at least partly — the portfolio. existing MSME fi nancing gap, which is weighing heavily on employment Maghreb and the GDP growth rate in regional Tunisia-based Maghreb Bank for economies. MARC ROUSSOT reports. Investment and Foreign Trade (BMICE), Oragroup, the holding group of Togo- which was set up in 2015, is primarily While being one of the strongest drivers based Orabank, which will use the focusing on catering to the needs of SMEs of economic development, innovation EUR40 million (US$47.07 million) line in a bid to achieve greater integration and employment, MSMEs are facing of fi nancing it recently secured from the between the fi ve countries of the Arab diffi culties in raising funds to grow Islamic Corporation for the Development Maghreb Union, namely Algeria, Libya, and expand — a situation seen as an of the Private Sector (ICD) to off er Mauritania, Morocco and Tunisia. opportunity by a few banks operating fi nancing solutions to West African SMEs. in North and West African countries Through the off ering of Murabahah and that have developed dedicated Shariah In the Maghreb region and West African trade fi nance solutions, BMICE expects compliant fi nancing strategies to tap this Economic and Monetary Union member Islamic fi nancing to att ain US$20 million market. countries, the SME fi nancing gap in 2018 with high demand coming from has reached US$36.18 billion in 2017 Mauritanian banks and enterprises. In Morocco and in Algeria, where Islamic according to SME Finance Forum data banking has been growing at a fast pace and the MSME fi nancing gap is estimated The Maghreb is one of the less integrated over the past year, most Islamic banks at US$53.13 billion. regions in the world as the Arab and windows have included SMEs’ Maghreb Union has never really worked needs in their strategy. In West Africa, “African SMEs represent 90% of private due to existing tensions between Algeria Burkina Faso-based Coris Bank, which is companies operating in the continent. and Morocco following the Sand War. venturing into Mali, Benin and Senegal, About 70-80% of them are MSMEs. has also allocated particular resources for Nevertheless, this preponderance is “Our decision to concentrate our eff orts small businesses. not visible from a macro economy on fi nancing SMEs comes from a simple perspective as SMEs make up only assessment: it is the best way to achieve “While SMEs are pivotal in achieving 20-30% of the African countries’ the integration of the Maghreb region inclusive growth and the rise of African GDP against about 60% in developed considering the current circumstances as economies, they have been long forgott en countries. The role of SMEs is crucial in countries have diff erent agendas, which by traditional banking operators. Hence, reducing unemployment, particularly may diverge from the private sector’s the fi nancing of SMEs is a major focus in rural areas where they are behind goals,” explains Taleb Ould Sid Ahmed of the group’s strategy,” shares Binta the creation of 70% of jobs. Only 6.4% MBareck, the communication advisor at Toure Ndoye, the managing director of of sub-Saharan SMEs affi rm that they BMICE.

Ethmar for Islamic Microϐinance seeks funding ahead of expansion

To serve the growing demand for The Islamic microfi nance company is is open to equity investment. Shariah compliant fi nancing in the targeting to have 25,000 clients and a Middle East, Jordan-based Ethmar fi nancing portfolio amounting to US$38 Launched in December 2015, Ethmar is for Islamic Microfi nance is planning million by 2020 from the respective 3,000 off ering Murabahah and Istisnah, among to expand in the region within the and US$4 million currently. “In Jordan other products, to microentrepreneurs next three to fi ve years and is seeking only, the potential of Islamic fi nance and low-income individuals. It has also funding to achieve its project. MARC is important as about 30-40% of the recently launched an Islamic revolving ROUSSOT learns more. population reject conventional fi nance for fi nancing solution for microbusiness religious reasons. In some cities it reaches owners seeking to cover their working “We are going to study where it is best 70%,” shared Ziad. capital needs. to expand our footprint. We do not have any preference yet. However, Egypt is However, raising funds to fi nance its Trying to tap all economic segments of an interesting market as it is the largest growth plan could prove challenging. Jordan, including commercial, service neighboring country where the demand “There are 29 banks operating in Jordan and agriculture sectors, Ethmar focuses for Islamic microfi nance is high. In but only two are off ering Shariah on youth and start-ups. It has two comparison, Lebanon is a small country, compliant products and services. This branches, one in Amman and the other Syria is at war and Iraq remains unstable,” limited number of players makes things one in Irbid, in the north of the country Ziad Al Refai, CEO of Ethmar, told IFN. more complicated,” explained Ziad who near the Syrian and Israeli borders.

1MDB time bomb: The plot thickens

It has been revealed that the Malaysian RM6.98 billion (US$1.75 billion); Ministry of Finance (MOF) has been another RM810.21 million (US$203.54 bailing the controversy-mired sovereign million)-worth of interest is due between wealth fund 1Malaysia Development September and November this year. (1MDB) including servicing a Sukuk coupon payment of RM143.75 million The president and CEO of 1MDB, Arul (US$36.11 million) last November. Kanda, is expected to brief and clarify This is but the latest revelation in a if the sovereign wealth fund, chaired multibillion dollar fi nancial scandal by the embatt led former prime minister described as one of the world’s largest, Najib Razak who lost his standing as spanning across multiple continents the nation’s leader on the 9th May in an and stunning the world. VINEETA TAN astonishing election that upended the reports. country, would be able to meet its debt obligations due end of this month. The clock is ticking for 1MDB: in less than two weeks, it is to make another “It is clear that the previous government payment of RM143.75 million. has conducted an exercise of deception to the public about certain hot butt on It is clear that items, especially 1MDB, and even misrepresented the fi nancial situation “The government hopes with the the previous to parliament. A thorough investigation sett ing-up of the special task force, and discovery is still ongoing to uncover the country will be able to restore its government the necessary fi nancial information and reputation, while also enabling the data.” return of Malaysian monies and assets following the kleptocracy scandal that has conducted resulted from the mismanagement and The unraveling of 1MDB misappropriation of 1MDB funds,” the an exercise of nd Earlier on Tuesday, the 22 May, Najib Prime Minister’s Offi ce said. deception to the was brought in for questioning by the nation’s anti-corruption agency over In 2009, the sovereign wealth fund raised public about alleged impropriety involving 1MDB. RM5 billion (US$1.26 billion) through Islamic medium-term notes (IMTNs) due certain hot button Since Dr Mahathir Mohamad took to mature in 2039; according to the audit over the government in a historical report, these notes carry a coupon rate items, especially election victory a fortnight ago, which of RM287.5 million (US$72.23 million) a broke the six-decade tight grip of the year. The company also raised US$830 1MDB, and even previous political party, he wasted no million through Murabahah notes in time reinitiating investigations into the 2010. It was also found that not all of the misrepresented alleged misappropriation of public funds proceeds from Sukuk and loans for the via 1MDB whose investment strategy purpose of real estate acquisition were the ϔinancial involved signifi cant Islamic fi nancial channeled to the development of the instruments. Tun Razak Exchange, an international situation to fi nancial center named aft er Najib’s Over the last week, the new father who was the country’s second parliament administration made public the prime minister. offi cial 1MDB audit report, previously “We are extremely concerned with classifi ed as an offi cial secret by the In 2014, 1MDB called off plans to issue regards to the above because I have Najib government, revealing extremely what would have been the largest Sukuk been informed by MOF offi cials that the poor corporate governance and internal off ering of the year, a program of up to MOF has been bailing out 1MDB’s debt controls leading to deeper debts than RM8.4 billion (US$2.11 billion); in March service obligations since April 2017,” previously expected. Police also raided the same year, the state-owned said Lim Guan Eng, the country’s newly Najib’s private residence and properties investment company’s debt reached appointed fi nance minister. “The above linked to him and seized 284 boxes of RM41.9 billion (US$10.53 billion) – but confi rms the public suspicion that 1MDB luxury handbags and 72 bags of cash and now revealed through the audit report, to has essentially deceived Malaysians by jewellery. be nearly double that amount – of which claiming that they have been paid via a US$1.25 billion was raised through ‘successful rationalization exercise’. All Dr Mahathir this week set up a special Sukuk. Two years later, it defaulted on a this while it has been the MOF who has task force to assist with the case which US$1.75 billion bond which triggered bailed out 1MDB.” involved a complex web of shady deals cross defaults on two of its Sukuk – a done in various countries including RM5 billion facility due 2039 and RM2.4 According to Lim, the MOF has helped Malaysia, the US, Singapore and billion (US$602.93 million) paper due 1MDB make 13 payments totaling Switzerland, among others. 2024.

Company Focus: Bank Al Yousr

Ever since Morocco-based Bank Al “Our strategy includes tapping all “Our focus is on implementing our Yousr started its operations nine segments, but until recently, only one quality strategy. We have goals months ago, creating awareness of product, the real estate Murabahah, had for instance in terms of customer Islamic fi nance among the people has been fully accommodated. As a result, satisfaction. If we achieve this strategy, been an important part of its activities. we have mainly been working with the other quantitative goals in terms of MARC ROUSSOT reports. retail market. However, we have closed a clients, deposits, fi nancings or assets will couple of deals with companies seeking follow,” shares Mohamed. “A didactic approach is key as the fi nancing to acquire offi ces. Now that industry is new. Islamic fi nancing we can off er Murabahah fi nancing for Due to the current lack of depth caused mechanisms need to be explained vehicles and equipment, we expect to by the extremely limited number of to customers, dealers, businesses, work more with the corporate sector,” products available, the Moroccan Islamic administrations and even notaries,” explains Mohamed. banking industry is a very competitive affi rms Mohamed Adib, the managing one, as Islamic banks can only tap a small director of Bank Al Yousr. Bank Al Yousr, which started operations portion of the entire Islamic banking and in August 2017, intends to have 10 fi nance market. “In the long term, there This strategy seems to have paid off as branches by the end of the year to will be enough space for everyone,” Bank Al Yousr is already looking for believes Mohamed. funds in order to continue its fi nancing cover all regions of the country. While activity. The bank has recently crossed remaining fl exible in the deployment of its network, depending on how fast the While awaiting for more products to the threshold of 1,000 customers and be approved by the Higher Council of signed real estate Murabahah deals industry unfolds, the bank plans to have 100 branches in the mid-term. Ulemas to be able to venture into other worth a total combined amount of sectors, Bank Al Yousr is developing MAD130 million (US$13.72 million). Funded by Banque Central Populaire specific financing structures in order to differentiate itself from its Participating in the Auto Expo held in in partnership with Guidance Financial competitors and will try to obtain the April, the bank noticed a real demand Group, Bank Al Yousr’s strategy has regulators’ greenlight. Bank Al Yousr for vehicle and equipment Murabahah been developed with the aim of holding is also considering bancaTakaful, fi nancing, a product that has only been a third of Morocco’s Islamic banking Sukuk and asset management once accommodated in late March by the market share in terms of deposit and accommodated. Higher Council of Ulemas. fi nancing within fi ve years.

Uzbekistan to set up Islamic development bank as part of plans to accommodate Shariah ϐinance

Uzbekistan is planning to set up a insurance services; and refi nancing 12-member commission next year to solutions for commercial banks running work on developing a holistic Islamic an Islamic window. fi nance ecosystem to create alternative fi nancing opportunities, mobilize Publicizing the benefi ts and resources from the domestic and opportunities of using Islamic banking foreign markets and meet the growing and fi nancial services, as well as demand for Shariah compliant banking, explaining their main diff erences fi nance and insurance products and from the conventional system to the services from the population which is population and business entities, approximately 90% Muslim. MARC is another task att ributed to the and the deputy chairman of the state tax ROUSSOT brings you the story. commission. committ ee, among others, will develop a draft legal framework for the provision “The analysis of the market for banking In Central Asia, Uzbekistan is yet another of Shariah compliant products and and fi nancial services demonstrates the CIS country on the brink of services, and a draft road map for its presence of increased interest and the accommodating the industry while implementation. need to meet the needs of citizens and Tajikistan has started working on the entrepreneurs in the use of banking development of a dedicated regulatory The commission is also expected to and fi nancial services not burdened by framework with two projects of Islamic work on the establishment of the Islamic bank interest,” according to the draft banks, namely Sohibkorbank and Alif Development Bank of Uzbekistan, resolution currently open for comments Capital, that are currently in the pipeline, st which will off er export-import, housing, until the 31 May 2018, as seen by IFN. whereas in Kazakhstan, Al Hilal Bank commercial real estate and leasing and Islamic Bank Zaman-Bank, two fully- fi nancing; structured complex fi nancial The proposed commission comprising fl edged Islamic banks, have already products such as investments in venture the deputy minister of fi nance, the started operations. deputy chairman of the central bank capital; services in the securities market;

PODCAST: Moody’s bullish on Saudi Arabia’s Vision 2030; targets corporates as part of expansion strategy

What is it about Saudi Arabia that is att racting each of the Big Three international credit rating agencies to its shores? What is its current credit rating environment like and what opportunities of growth are there? IFN Editor VINEETA TAN speaks to Moody’s Investors Service’s president, Rob Fauber; the managing director and head of EMEA corporate fi nance, David Staples; and the general manager of its Saudi operations, Mahmoud Totonji, to fi nd out. It is very in Saudi Arabia as the country takes investors, particularly in the debt capital clear that concrete steps toward realizing its market, will play a huge role in that,” national agenda. shared Fauber who added that: “The diversifying away opening of our Saudi offi ce will help us “The government has a plan to privatize to service both issuers and investors.” from oil and gas is a number of state-owned companies and we think those privatized state- The prospects may be bright, but are the going to require owned companies will turn to the debt current market conditions and reality capital market for funding,” Mahmoud moving in tandem with the hopeful signiϔicant levels of Totonji, the general manager and head promise of the future? of relationship management of Moody’s investment across new Saudi operations, told IFN. “A “Overall, we have a stabilizing number of these companies will be commodity price environment, recovery multiple sectors, a part of the petrochemical industry; in the consumer department and however, there are many opportunities generally, bett er access to fi nance. and international for Moody’s arising from sectors arising Earnings are rising and companies are from Vision 2030.” feeling more optimistic when thinking investors, about long-term investments. This is all Among these sectors include good from a credit perspective,” particularly in the manufacturing and construction. explained David Stables, the managing director and head of emerging EMEA debt capital market, Like Mahmoud, Rob Fauber, the corporate fi nance of Moody’s. president of Moody’s, is optimistic that will play a huge role the Saudi Kingdom’s Vision 2030 would This is an excerpt of a podcast with senior in that be a catalyst of growth for the nation’s offi cials at Moody’s Investors Service fi nancial market. exploring the rating agency’s decision to establish an offi ce in Saudi Arabia following “It is very clear that diversifying away the Kingdom’s decision to grant international Moody’s Investors Service expects from oil and gas is going to require rating agencies licenses. For the full podcast, the corporate sector to contribute to signifi cant levels of investment across log on to IFN Podcasts. a signifi cant portion of its business multiple sectors, and international

DOWNLOAD NOW PODCAST Moody's banking on Saudi Vision 2030

Mahmoud Totonji Rob Fauber David Staples General Manager President MD & Head of EMEA Saudi operations, Moody's Moody's corporate finance, Moody's

Sovereign Sukuk: Only the usual suspects

It has been a rather quiet week in the auction of Islamic papers. Bids worth Gambia Sukuk space with only the usual issuers IDR9.11 trillion (US$642.55 million) were The Central Bank of Gambia was due to from Asia, the Middle East and Africa received for the six securities. sell three-month and six-month Sukuk tapping the Islamic capital market. Salam facilities for GMD10 million MARC ROUSSOT brings you the latest Bahrain (US$210,316) each, as well as a one-year developments. The Central Bank of Bahrain’s monthly paper for GMD5 million (US$105,158) on 91-day Sukuk Salam issuance worth the 23rd May. Malaysia BHD43 million (US$112.93 million) has The Malaysian apex bank issued Shariah been fully subscribed. The facility carries Gambia’s apex bank also sold Sukuk compliant liquidity management an expected return of 3.4%. Salam with tenors of three and six instruments amounting to a combined months for GMD10 million each, and a RM73.76 billion (US$18.53 billion). Kuwait one-year off ering for GMD5 million. The Central Bank of Kuwait printed Indonesia conventional bonds and related Both the three and six-month papers Indonesia privately placed a series of Tawarruq facilities for the total amount were oversubscribed, whereas the Sukuk with a nominal value of IDR1 of KWD160 million (US$527.51 million). one-year paper was undersubscribed by trillion (US$70.53 million). The off erings, which received KWD2.01 GMD3.55 million (US$74,740.5). billion (US$6.63 billion) in bids, have a The Republic also raised IDR4.06 trillion three-month tenor and carry a profi t rate (US$286.36 million) from a separate of 2.25%.

Upcoming sovereign Sukuk

Country Amount Expected issuance date Date of announcement

Saudi Arabia TBA 2018 7th May 2018

Niger state, Nigeria NGN21.5 billion To be issued over a period of two years 17th April 2018 • 1st tranche: NGN12.5 billion • 2nd tranche: NGN9 billion Saudi Arabia TBA (international) Second half of 2018 13th April 2018

Ghana Up to US$2.5 billion (Sukuk, TBA 6th April 2018 Samurai and Panda bonds) Sudan About US$1 billion 2018 6th April 2018

Pakistan • US$3 billion (from Sukuk and • Fiscal year 2019 (starting the 1st October) • 16th April 2018 eurobonds) • PKR100 million • TBA • 20th March 2018 South Africa TBA (domestic) Fiscal year of 2018-19 (starting the 1st April) 6th March 2018

The Maldives MVR100 million TBA 19th February 2018

Oman TBA (international) TBA 9th February 2018

Iran IRR596 trillion (over multiple Throughout the ﬁ scal year of 2018-19 5th February 2018 programs) • IRR20 trillion • TBA • 19th March 2018 Kuwait TBA (conventional bond which Second quarter of 2018 31st January 2018 may include an Islamic tranche) Nigeria TBA TBA 26th January 2018

Tunisia US$500 million 2018 27th November 2017

Turkey TBA (local currency) ; lease 12th June, September and November 2018 2nd November 2017 certiﬁ cates Kazakhstan US$300 million 2018 18th September 2017 UK GBP200 million 2019 12th September 2017 Niger TBA TBA 9th August 2017 Indonesia TBA (international) 2018 28th July 2017 Kenya TBA 2018-19 4th July 2017 Morocco MAD1-2 billion TBA 21st June 2017

Turkey: Uncertainties threaten development

Turkey’s participatory banking landscape has witnessed considerable growth in the past few years, enough to be ahead of its geographical peers. But as political and economic problems brew in the horizon, will the Shariah banking industry suﬀ er? DURGAHYENI MOHGANA SELVAM provides an overview of what has happened in Turkey’s participatory banking industry in the past 12 months.

Regulatory landscape As of March 2018, the fi ve existing November. Halk REIT issued an 87- In Turkey, Islamic banking is more participation banks (Ziraat, Vakifb ank, day lease certifi cate, touted as the fi rst widely known as participation banking AlBaraka Turk, Kuveyt Turk and Sukuk issuance in Turkey’s real estate and is regulated by the Banking Turkiye Finans) collectively registered investment sector, whereas while Kuveyt Regulation and Supervision Agency a surge in assets to TRY112.02 billion Turk and Vakifb ank have received under a single Banking Law and (US$24.58 million) from TRY90.15 regulatory approval to off er Sukuk associated regulations. While there is billion (US$19.78 billion) a year facilities. no separate legislation for participation before, according to the Banking and banking, the law, however, takes into Regulatory Supervision Agency. The Asset management account the uniqueness of Shariah industry took up 4.81% of the overall The local Shariah asset management compliant transactions. banking asset market share in May 2017 industry is nascent. It is challenging to (latest data) — the Republic intends to ascertain the exact number of Islamic Deputy Prime Minister Mehmet Simsek triple the number to 15% by 2025. funds as Shariah terms are avoided in in 2016 did, however, say that the describing Shariah compliant fi nancial government is preparing a draft law Halkbank, a national bank, is expected products. Unlike the banking industry, to harmonize the taxation of Islamic to open a participation window soon. conventional asset managers are allowed fi nancial contracts. Earlier this year, The country is also working with the to off er Shariah compliant products on the possibility of establishing a central IDB and Indonesia to establish an a window basis and need not apply Islamic advisory board was discussed by Islamic megabank, which is expected to for separate Shariah approvals; there the Turkish Treasury. But no news has be launched this year. are three fully-fl edged Islamic asset materialized on both fronts. managers. For the past two years, mergers and With regards to Sukuk or trust acquisitions activity has also increased Last year, Mufakat Portfoy, a Shariah certifi cates, the fi rst regulation was in the local Islamic banking landscape. compliant asset management company, introduced in 2010 by the Capital The Turkish Treasury announced that launched two venture capital funds and Markets Board of Turkey and tax it would be taking over a 58.45% stake one REIT fund. KT Portfoy and Green neutrality was adopted in February. In in Vakifb ank, currently held by the Power in May 2017 signed an MoU to June 2012, Public Finance Law No 4749 General Directorate of Foundations, set up the fi rst Islamic private equity was amended to facilitate sovereign under the Prime Minister’s Offi ce, investment fund in Turkey. The vehicle, Sukuk issuances and at the end of 2012, whereas UAE-based Emirates NBD’s managed by KT Portfoy, will primarily a new Capital Markets Law (Law No discussions with Russia’s Sberbank to invest in the energy industry with a focus 6362) was implemented, laying the acquire the latt er’s stake in Turkey’s on renewables. groundwork for private lease certifi cates DenizBank are currently at an advanced and asset-leasing companies. In April stage. Outlook 2013, the government introduced The Turkish participatory banking changes to the legislation, allowing for Sukuk system is growing at a rapid pace to new lease certifi cates to be structured Sukuk or lease certifi cates were fi rst compete with its peers in the global on the Shariah principles of Istisnah, introduced in Turkey in 2010 when landscape. The progress, if groomed well, Murabahah, Mudarabah, Musharakah Kuveyt Turk Katilim Bankasi raised could bring in more investors and in turn and Wakalah, with other structures US$100 million through the Islamic could help the nation fi x its deteriorating permitt ed subject to regulatory approval. capital markets. The government in infl ation and the volatility of its exchange September 2012 made its US$1.5 billion rate. In 2015, the country set up a dedicated sovereign Sukuk debut. In April this Islamic fi nance coordination committ ee year, it raised raised TRY389.47 million But internal problems, such as major to propel the development of the (US$85.45 million) through an auction political shift s and security threats, pose industry. of gold-based Sukuk, the highest obstacles to the growth of the industry. amount raised this year. Since 2017, The once-fastest developing economy in Banking and ϐinance the government has collected TRY2.43 the world has been downgraded to junk There are 51 banks in Turkey out of billion (US$533.16 million)-worth of gold this year to ‘BB-/B’ on the back of rising which fi ve are participation banks: Bank through this Sukuk so far. imbalances in its economy, widening Asya, once the biggest Islamic bank in debt-fi nanced current account defi cit and the country, was shut down in July 2016 This year, the Turkish Treasury issued high infl ation — factors which may by the regulator as part of a post-coup lease certifi cates maturing in 2020 and impact the performance and development purge due to its strong links to the has plans to auction a two-year lease of its Islamic fi nance sector. Gulenist movement. certifi cate in June, September and

Treasury: Investing in Islamic liquid assets

The treasury department of ﬁ nancial institutions can tap an array of Shariah compliant instruments to manage their liquidity. A non-exhaustive list includes short-term Sukuk, Islamic medium-term notes (IMTNs), Islamic commercial papers (ICPs) and Islamic treasury bills (ITBs), to name a few. MARC ROUSSOT brings you an overview of this sector.

Overview The treasury department of Islamic banks is responsible for balancing and managing, within an acceptable level of risk, the daily cash fl ow and liquidity of funds of the bank. Treasury management is pivotal in the day-to-day activities of Islamic banks. compliant fi nancial institutions manage help fi nancial institutions manage their their treasury. treasury. In many countries where Islamic banks are operating, the central bank issues Tawarruq is one of the most common Since the beginning of the year, the short-term Sukuk — papers with tenors structures for liquidity management — IILM has issued eight short-term papers of less than a year — with the aim of Kuwait’s central bank utilizes it while including fi ve three-month Sukuk. Two, helping Shariah compliant fi nancial fi ve and six-month papers were also institutions manage their treasury. Pakistan’s Islamic banks are also using this instrument for their interbank issued one time each. On average, the three-month papers amounted to US$600 However, in countries where Islamic transactions. million, carrying an average profi t rate fi nance is nascent, like Morocco and of 2.41% and receiving incoming bids Algeria, Sukuk or any other kind In the UK, the Bank of England has been averaging US$2.2 billion. of Shariah securities have not been considering the introduction of short- accommodated yet. The absence of such term Sukuk since 2015 and is working on In 2017, the IILM issued short-term instruments greatly limits possibilities for a Wakalah-based deposit facility using a papers 14 times. Three-month papers Shariah compliant fi nancial institutions fund-based model to be backed by high- were issued 10 times, while two- to properly manage their liquidity quality liquid assets. month Sukuk were issued two times. as they can only use Tawarruq, also On average, the three-month papers known as commodity Murabahah, and Since January, Iran has also been issuing amounted to US$764 million, carrying Islamic banking deposit and investment ITBs in a bid to use up excess liquidity in an average profi t rate of 1.5% and products. the market. At least 18 of the issuances have been listed on the Iran Fara Bourse subscribed by 390%. On average, two-month Sukuk were worth US$250 Shariah securities amounting to a combined IRR197 trillion (US$4.68 billion). On average, IRR15.15 million, carrying a 1.21% profi t rate and Central banks subscribed by 260%. Four-month and six- trillion (US$359.61 million) was issued. The apex banks of Malaysia, Brunei, month Sukuk were issued one time each. Bangladesh, the Maldives, Bahrain, the IILM UAE, Kuwait, Saudi Arabia, Mauritania, IMTNs/ICPs The International Islamic Liquidity Nigeria and Gambia are all printing Besides short-term Sukuk, IMTNs and Management Corporation (IILM) has liquidity management tools including ICPs are also issued on a regular basis been issuing US dollar-denominated, short-term Sukuk and ITBs on a regular by companies and banks, particularly short-term, tradable Sukuk since 2013 to basis with the aim of helping Shariah Malaysian ones, for treasury purposes.

ȱŗǱȱęȱȱȱȱ ȂȱȬȱ In Malaysia, Titĳ aya Land, Skyworld, AEON, UEM Edgenta, Perbadanan 3 Kemajuan Negeri Selangor, Sabah Credit Řǯś Corporation, Bina Darulaman, DanaInfra, Ř Gas Malaysia and Cagamas have ongoing ŗǯś IMTN and/or ICP programs. Pakistan’s ŗ Hascol Petroleum also issues ICPs.

ęȱȱǻƖǼ Ŗǯś On the ﬁ nancial side, Bank Ŗ Pembangunan Malaysia and Maybank Islamic are printing ICPs on a regular basis. Bank Pembangunan Malaysia’s ŘŘȬȬŗŝ ŗŗȬȬŗŝ

ŗśȬȬŗŝ ICP follows the Tawarruq structure while ŘŘȬ¢Ȭŗŝ ŗşȬ ȬŘŖŗŝ ŗŝȬ ȬŘŖŗŞ ŗŞȬ ȬŘŖŗŝ ŞȬȬŘŖŗŝ ŗŚȬ ȬŘŖŗŝ ŗŖȬȬŘŖŗŝ ŗŚȬȬŘŖŗŞ ŗşȬȬŘŖŗŞ ŗŚȬȬŘŖŗŞ ŗŚȬȬŘŖŗŝ ŗŖȬ¢ȬŘŖŗŞ Maybank Islamic’s is a combination of ȱȱ Wakalah Bi Al Istithmar and Murabahah Source: Author’s data, the IILM via a Tawarruq arrangement.

Sharjah Islamic Bank’s Sukuk: Strong appetite

The UAE saw a trio of Sukuk issuances for the issue. The paper, rated ‘A3’ by in April. One of them, issued for Moody’s Investors Service, has a profi t SIB’s Sukuk US$500 million, was from Sharjah rate of 4.23% payable semi-annually. The Islamic Bank (SIB). The issuance, unsubordinated facility will be maturing which is the bank’s second this year, on the 18th April 2023. US$500 million has a profi t rate of 4.23% and was oversubscribed by approximately In mid-April, SIB announced initial price US$450 million. DURGAHYENI guidance in the 160bps over midswaps MOHGANA SELVAM has the details range for a fi ve-year senior unsecured of the transaction. Sukuk facility. Aft er strong interest from investors, the paper was fl oated with a spread set at 150bps over midswaps. The The strong transaction garnered bids worth around 18th April 2018 US$950 million, with investors hailing investor mainly from the Middle East, Europe and interest from the the Asia. “The strong investor interest from the Issuer SIB Sukuk Company III Middle East, Europe the Middle East, Europe and Asia in our latest Sukuk demonstrates continuing Obligor Sharjah Islamic Bank and Asia in our latest regional and international confi dence Size of issue US$500 million in SIB credit as we develop and expand Sukuk demonstrates our suite of services for a wide range Mode of issue Unsubordinated Sukuk of customers. We were able to achieve continuing regional our pricing objectives as well as funding Tenor Five years diversifi cation strategies in a competitive and international market for issuers,” said Mohammed Issuance price 100% Abdulla, CEO of SIB. conϔidence in SIB Profi t rate 4.23% Tapping the debt capital market was not credit as we develop Payment Semi-annually, 18th a new experience for the bank. The latest April and 18th October issuance is its fourth Sukuk since 2015 each year and expand our suite and the third to be listed on NASDAQ Dubai. In January, the bank was under Currency US dollar of services for a wide the spotlight for its convertible Sukuk paper for the amount of AED266.81 Maturity date 18th April 2023 range of million (US$72.63 million), equivalent to 10% of its capital, which saw proceeds Joint lead Bank ABC, Dubai customers from the issuance channeled to Islamic managers and Islamic Bank, Emirates bookrunners NBD Capital, First endowments selected by the government. Abu Dhabi Bank, The bank appointed Bank ABC, Dubai It was a private and unlisted transaction HSBC, Noor Bank and Islamic Bank, Emirates NBD Capital, sold to a single investor and was one of Standard Chartered First Abu Dhabi Bank, HSBC, Noor Bank, the rare convertible papers in the region Bank and Standard Chartered Bank as the at that time. joint lead managers and bookrunners Governing law English law and UAE law

Legal advisor(s)/ Dentons, Cliﬀ ord counsel Chance

Listing NASDAQ Dubai

Rating Moody’s: ‘A3’

Tradability Yes

Investor The Middle East, breakdown Europe and Asia

Face value/ US$200,000 and minimum integral multiples of investment US$1,000 in excess thereof

Arguments against the forbiddance of interest

is the rate committ ed to be paid by the original capital. As such, the declaration bank’s client in the credit card application. of profi t by an enterprise having BACK TO Hence, the usury is classifi ed by supporters received the risk capital from investors of interest as the rate over and above the automatically ensures that the originally BASICS#11 agreed rate, and not based on the high level invested risk capital continues to of the interest rate approved by the client. remain intact. Thus, protection of the by Sohail Zubairi Applying this logic, one would assume risk capital is assured from within the there is rarely any likelihood to apply the Shariah structure and without relying usury on a credit transaction since every on external support in the shape of rate – irrespective of how high it may collateral, guarantees, securities, etc, Sohail Zubairi is the projects advisor with the be – will still be an agreed rate and hence which, if obtained, may nevertheless Dubai Islamic Economy Development Centre. regarded as interest. I believe the point is add to investors’ protection. He can be contacted at sazubairi1979@gmail. now clear to the reader. com. Elaborating on this point further, the Moving on, let us explore the following higher the profi tability in a business Before we take on some of the most arguments in favor of the application of proposition, the greater the fl ow of risk frequently debated arguments in favor interest in an economy. capital toward it. However, if the profi t- of the interest rate regime, I have been making track record of an enterprise is asked to further elucidate what I wrote Inefϐicient allocation of unatt ractive, the owner will indeed fi nd it in the last article, that the proponents diffi cult to secure funding from investors. of interest do not support usury, which resources they also defi ne as excessive interest but It is alleged that in an interest-free As such, while the att ractive level of with the diff erence that it is not based economy, it may not be possible to assign projected profi t may be an important on the high level of the rate but if it was the monetary resources profi ciently aspect in the immediate fl ow of outside the agreed rate. since the charging of interest ensures the investment toward a business, year- appropriate allocation of ‘scarce’ loan on-year actual performance in sharing capital on the basis of the borrower’s the profi t will be a tough criterion in its Risk capital ability to pay its price (common term: ability to continue raising the risk capital ‘debt servicing’). seeks the successfully. A variation in the interest rate thus has Such a mechanism leads to the natural viability of an a direct relationship with the fl uctuation fl ow of capital toward the projects in demand and supply of the loan capital identifi ed, through a constant review enterprise rather and the borrower’s ability to pay the and evaluation process, as feasible and asking price for gett ing the desired credit. profi table. In the process, it also helps to than its debt- This also means the loan capital will only weed out ineffi cient and unproductive be made available to those who already projects, enhancing the level of effi ciency servicing have enough money. in an economy. capability The argument assumes that in the Risk capital seeks the viability of an absence of an interest rate mechanism, enterprise rather than its debt-servicing funds will be available ‘free of cost’ and capability. In other words, conventional I will try to explain the point through a to the ‘in-eligible’ debtors. It is feared lending looks at the second way out fi rst live situation most of us are cognizant that it may lead to the scenario where whereas Islamic fi nance prioritizes the of. Normally, the interest rate charged the demand for capital may balloon economic feasibility before committ ing by conventional banks on personal quite disproportionately to the supply funds. loans ranges between high single to since there will be no ‘mechanism’ for lower double-digits (eg from 8-13% per equating demand with supply – hence a The views and opinions expressed in this annum) on a reducing balance basis. ‘disastrous recipe’ for any economy. article are those of the author and do not Nonetheless, should a client avails the necessarily refl ect the opinions of the Dubai conventional credit card facility, he or Analysis Islamic Economy Development Centre, she shall be required to pay between First of all, in an interest-free economy, nor the offi cial policy or position of the 30-35% per annum on a reducing balance the capital will not be available ‘free of government of the UAE or any of its entities. basis, creating a diff erence of 22-27% cost’ but at a ‘share’ of the profi t. Thus, The purpose of this article is not to hurt any between the two types of credit. Adding the rate of profi t yielded vis-a-vis the religious sentiments either consciously or the penalty interest rate to it, the variance amount of risk capital invested will even unwitt ingly. may widen up to 30%. dictate nondiscriminatory allocation of resources. Despite such a yawning gap between them, Next week: Analysis of remaining the high rate on credit cards is still referred Remember that in Shariah, the defi nition arguments in favor of interest rate. to as the interest and not usury since it of profi t means what exceeds the

SHARIAH STANDARD

This AAOIFI Shariah Standard summary series is brought to you exclusively by IFN in collaboration with Dar Al Sharia. The intention of this is to provide the reader with an initial understanding of the standards and this does not purport to be complete or is intended to replace the standard itself. It is also highlighted that the reader should not rely on the below for any Shariah guidance purposes.

The next standard in the weekly series shall be Shariah Standard No 32 – Arbitration. www.daralsharia.ae

About

Name of the standard: Controls on Gharar in ﬁ nancial transactions Standard number: 31 Standard issuance date: 9th September 2007 Sections: Eight sections; Sections 2 to 7 provide core rules of the standard.

Purpose

The purpose of the standard is to explain from a Shariah compliance perspective the concept of Gharar (excessive uncertainty), its types and implications on the validity of the contract and its applicability in Shariah compliant ﬁ nancial transactions.

Scope

The standard covers the impact of all kinds of Gharar – excessive, moderate and less on the validity of the transactions and contracts both for bilateral exchange-based (Uqud Al-Muawadat) and donation contracts (Uqud Al-Tabarruat). The key aspects covered in the standard include: a) Deﬁ nition and types of Gharar. b) Gharar which vitiates Shariah acceptability. c) Impact of Gharar in exchange-based contracts. d) Impact of Gharar in Rahn (mortgage), suretyship (Kafalah) and agency (Wakalah) contracts.

Summary

Gharar is a key principle against which Shariah acceptability of a contract is tested. It refers to the state of uncertainty that may exist during the process of concluding a contract when it includes unknown elements.

Shariah permissibility of any contract depends on the extent of uncertainty allowed based on the type or nature of the underlying contract. A contract which contains an impermissible degree of Gharar may be considered void, therefore appropriate care needs to be exercised in order to ensure that the impressible Gharar is avoided when draft ing Shariah nominate contracts for products and transactions.

This very important standard therefore provides rules to assess Gharar in transactions.

Some of the applications of the standard in banking and ﬁ nance transactions

Draft ing product and transaction documentation.

Highlights

Gharar under Shariah Gharar is a state of uncertainty that exists during the process of concluding a contract where it involves an unknown aspect. It is impermissible in Shariah to conclude a contract or stipulate a condition that involves a degree of Gharar which could jeopardize the fulﬁ llment of the contract conditions. Gharar which violates Gharar violates the transaction when: transactions a) it is involved in an exchange-based contract or any contract of that nature b) it is excessive in degree c) it relates to the primary subject matt er of the contract, and d) it is not justiﬁ ed by a Shariah-recognizable necessity. Gharar which does not A degree of Gharar may be tolerated in the following types of contracts: violate transactions a) Rahn (mortgage) b) Kafalah (suretyship), and c) Wakalah (agency).

From awareness to action

By Daud Vicary Abdullah, the managing years, this has started to change and audience at the RFI Summit, was the use director of DVA Consulting and ex-CEO we, as an industry, have started to have of Islamic social fi nance, whereby Zakat of the International Centre of Education dialogues about real issues and how contributions from a Malaysian state in Islamic Finance (INCEIF), The Global Islamic fi nance can be diff erentiated were applied for drought and famine University of Islamic Finance. and provide real solutions to these relief in a county in Kenya. The money challenges. went predominantly to non-Muslims and In the last month, I managed a trip to helped provide clean water and produce Switzerland for some meetings with I have been fortunate that during the a sustainable cash crop that was worth 10 the International Federation of Red course of this year, I have had times the value of the Zakat contribution. Cross and Red Crescent Societies the opportunity to work Not only were 1.2 million lives impacted (IFRC) in Geneva and to att end with the strategy and positively by this project, but the original the 3rd annual RFI-Foundation innovation team at the recipients are paying back the Zakat from Summit in Geneva. I IFRC. This has been an their own harvest proceeds so that the would like to share some enriching experience as funds may be recycled for the one million observations regarding this we have actually tackled people in the next county who are in dire trip and some of the work I some real challenges straits. have been doing in the last and come up with few months. real solutions, for The RFI conference and the Islamic example, a blockchain fi nance and green fi nance conference For too many years now, application that has that I have just att ended are sett ing a I have been att ending been used to track new trend in conferences which I like. conferences which had a donations to refugees and They may still be around 30% about focus on Islamic fi nance but which allows the donor to awareness creation, but they are 70% seemed to just talk about the see to whom his donation about case studies and practical examples same old thing. It was almost has gone and how it has of solutions that have worked using always about creating awareness been spent. This has been Islamic fi nance. The demonstration eff ect about ourselves and drawing piloted for a Syrian refugee is starting to rule and audiences now att ention to the fact that we are camp in Lebanon and won have something practical to take away. diff erent. We then tended to the recent IDB prize for So, we now have a level of maturity that go into a discussion on what technical innovation and has allowed us to grow from ‘awareness’ the instruments and products application. to ‘action’. are and if we were lucky, we managed to get a case study regarding Another IFRC project, whose As always, there is much to do and not a the latest Sukuk issuance. In recent case study wowed the moment to lose.

Islamic Trade Finance Open Seminar

18th July 2018 1st August 2018 KUALA LUMPUR, MALAYSIA DUBAI, UAE

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Islamic banks in Morocco: Looking for a IFN Country Correspondents AFGHANISTAN: Manezha Sukhanyar former head of Islamic banking, Maiwand Bank place in the car ϐinancing market ALGERIA: Dr Ahmed Tahiri Jouti COO, Al Maali Consultancy Group MOROCCO days. Therefore, it was an occasion AUSTRALIA: Christopher Aylward partner, Finance and Major Transactions, Madison Marcus for Islamic banks to get in touch with By Dr Ahmed Tahiri Jouti Law Firm a huge number of prospects. BAHRAIN: Dr Hatim El-Tahir director of Islamic Finance Knowledge Center, Deloitt e & The car fi nancing market in Morocco Touche • All the well-known car brands is a competitive and tough market for BANGLADESH: Md Shamsuzzaman participated in the exhibition. additional managing director, head of operations wing, new entrants. Indeed, it is dominated Islami Bank Bangladesh For Islamic banks, it was also an by conventional fi nance companies that BOSNIA HERZEGOVINA: Amer Bukvic opportunity to test the processes in CEO, Bosna Bank International have built very strong relationships relation with the car vendors and BRAZIL: Fábio Amaral Figueira throughout the years with car vendors make them more fl uid. partner, Veirano Advogados allowing them to apply att ractive rates CANADA: Rehan Huda and prices. Moreover, some carmakers managing director, Amana Canada Holdings • The exhibition represented a real EGYPT: Dr Walid Hegazy in Morocco have created their own opportunity for Islamic banks and managing partner, Hegazy & Associates fi nance company to package the car and GERMANY: Ahmet Kudsi Arslan car vendors to defi ne the needs of its fi nancing all in one. CEO, KT Bank the segments of customers interested HONG KONG: Wilson Yeung in Shariah compliant fi nancing and member, The Taxation Institute of Hong Kong INDIA: Ali M Shervani to build a win-win partnership. partner, Consigliori Consultants The exhibition INDONESIA: Irwan Abdalloh For CEOs of Islamic banks, the head of Islamic Capital Market, Indonesia Stock Exchange represented objectives of the exhibition were IRAN: Majid Pireh Islamic fi nance expert, Securities & Exchange Organization achieved and the demand for Shariah of Iran a real opportunity compliant car fi nancing products is ITALY: Stefano Padovani partner & head of banking and fi nance, NCTM Studio signifi cant and they are willing to keep Legale Associato for Islamic banks developing their products in order to JAPAN: Dr Etsuaki Yoshida have a share in this market. project associate professor, Kyoto University and car vendors to KENYA: Mohamed Abdi Shariah manager Islamic Banking- Barclays Kenya It is worth noting that Islamic banks KUWAIT: Thuwaini Al Thuwaini deϔine the needs worked with the government in order to executive manager of investments, Warba Bank adapt the administrative procedures and MALAYSIA: Ruslena Ramli of the segments head, Islamic fi nance, RAM Rating the legal aspects to the Shariah MALDIVES: Aishath Muneeza of customers requirements that will make the deputy minister, Ministry of Islamic Aff airs processes more fl uid and credible. MALTA: Reuben Butt igieg president, Malta Institute of Management interested in Shariah MOROCCO: Dr Ahmed Tahiri Jouti Dr Ahmed Tahiri Jouti is COO of Al Maali COO, Al Maali Consultancy Group compliant ϔinancing Consulting Group. He can be contacted at NIGERIA: Hajara Adeola [email protected]. managing director and CEO, Lotus Capital OFFSHORE CENTERS: Manuela Belmontes and to build a partner, Maples & Calder (Dubai) OMAN: Kemal Rizadi Arbi expert/advisor, Capital Market Authority of Oman win-win PAKISTAN: Muhammad Shoaib Ibrahim managing director & CEO, First Habib Modaraba partnership PHILIPPINES: Rafael A Morales managing partner, Morales & Lumagui QATAR: Amjad Hussain partner, K&L Gates RUSSIA: Dr Ilyas Zaripov member, Partnership Banking Working Group, Central In this context, the Higher Council of Bank of the Russian Federation Ulemas approved the Murabahah model SAUDI ARABIA: Nabil Issa of contracts for car and equipment partner, King & Spalding SENEGAL: Abdoulaye Lam fi nancings. Five out of the eight Islamic president & CEO, Global Islamic Finance & Transactions banks have already started off ering SRI LANKA: Suresh R I Perera Murabahah car fi nancing and four of principal, Tax & Regulatory, KPMG TUNISIA: Mohamed Araar them participated in the Car Exhibition General directorate of External Financing and Sett lements, 2018 held in Casablanca. The event deputy director of Private Financing and International Relations Department, Central Bank of Tunisia was an opportunity for Islamic banks UAE: Anita Yadav to test their products and to compare senior director, head of fi xed income research, Emirates them to those of conventional fi nance NBD UK: Suhail Ahmad companies. The following are some founder of the Financial Network and partner, Gateway details of the exhibition: Islamic Advisory IFN Correspondents are experts in their respective fi elds and are selected by Islamic Finance news to contribute designated short country reports. For more information about becoming • According to the organizers, the an IFN Correspondent please contact sasikala.thiagaraja@ number of visitors was 210,000 in 10 redmoneygroup.com

Pre-Ramadan ϐlurry

QATAR QNB Group also recently announced announced a cash dividend distribution that it has signed a landmark merchant of QAR1 (27.18 US cents) per unit. This By Amjad Hussain agreement with Qatar Rail, which will is the fi rst Islamic ETF (exchange-traded see the bank join as a strategic partner fund) in Qatar and its progress is being As we near the holy month of Ramadan and the offi cial acquirer bank for all carefully monitored by commentators. and the summer months, the Qatari travel card and fare media payments. market (as is the trend each year) enters This agreement will ensure that Qatar Finally, Capital Intelligence Ratings, the into a quiet period until the later part of Rail will be able to accept payments international credit rating agency, has the year. Yet, ahead of the quiet period, made with all major credit and debit affi rmed the fi nancial strength rating of a number of major announcements cards issued in Qatar and worldwide. Qatar Islamic Bank (QIB) at ‘A’ with a were made by a number of fi nancial stable outlook, with long and short-term institutions within the Qatari banking The Commercial Bank of Qatar (CBQ) foreign currency ratings affi rmed at ‘A+’ sector that give cause for much has mandated BofA Merrill Lynch, Al and ‘A2’. Meanwhile, Fitch Ratings has optimism for the post-Ramadan season. Khalĳ i, Barclays, QNB Capital, Standard affi rmed the long-term issuer default Chartered Bank and Wells Fargo as the rating of QIB at ‘A’. Perhaps the most important joint lead managers to arrange a series announcement that was made this of fi xed income investor meetings in The announcements that were made month relates to QNB Group, as its Asia and Europe in preparation for in recent weeks are an indication of shareholders have approved the increase issuing a benchmark fi ve-year fi xed the ongoing activity within the Qatari of the non-Qatari ownership limit from rate US dollar-denominated senior banking sector. 25% to 49% and also approved the unsecured Regulation S bond (in increase of the single ownership limit registered form) transaction under It is hoped that the positive trend from 2% to 5%, in accordance with the CBQ's US$5 billion euro medium- continues during the course of the applicable laws and regulations. This is a term note program, subject to market summer months and the market resumes landmark announcement that is expected conditions. in full force aft er the summer. to stimulate and encourage foreign investors and other institutional investors In other news, the recently listed Al Amjad Hussain is a partner at K&L Gates. to acquire signifi cant shareholdings in Rayan Qatar ETF, represented by the He can be contacted at Amjad.Hussain@ QNB (one of the largest banks in the founder, Masraf Al Rayan, and the klgates.com. region) going forward. fund manager, Al Rayan Investment,

Strengthening Al-Amanah Islamic Investment Bank

THE PHILIPPINES fi nancing products” as well as “to be leaseback or cost-plus-profi t Murabahah a fully Islamic bank” by doing away arrangements. In addition, AIIB is By Rafael A Morales with its conventional banking products empowered to carry out “Musharakah and focusing on “Wadiah current joint ventures or decreasing The proposed Philippine Islamic accounts, Wadiah savings accounts, participation”. Financing Act (Senate Bill No 668) general investment accounts under [a] contains several provisions aimed at profi t-sharing scheme and its [Mecca] The 50-year term of existence of AIIB strengthening Al-Amanah Islamic pilgrimage savings plan”. In fact, under will be expected to start from the date Investment Bank (AIIB), the country’s its existing charter, AIIB is authorized to of approval of the proposed law, and only existing Islamic bank, in order “to engage in Wadiah transactions where a “renewable upon resolution of the service a broader market”. gift (Hibah) is paid in lieu of interest. general shareholders meeting called for said purpose”. Under the proposed law, the authorized The aforementioned profi t-sharing capital stock of AIIB will be increased scheme presumably refers to At present, AIIB is owned by the to PHP10 billion (US$191.1 million). Mudarabah, Murabahah or Musharakah Development Bank of the Philippines, a However, the Monetary Board of the arrangements. AIIB is authorized by government-owned fi nancial institution. Bangko Sentral ng Pilipinas, upon the its charter to “carry out fi nancing and Under the proposed law, AIIB will not be recommendation of the secretary of joint operations by way of Mudarabah precluded from privatizing its ownership fi nance and with the approval of the purchasing for others on a cost-plus and “any limitation on the transfer of president of the Philippines, can request fi nancing arrangement, and to invest shares shall not be applicable with to further “increase the authorized funds directly in various projects or respect to the existing shareholdings of capital stock and total capitalization of through the use of funds whose owners the government or any of its AIIB up to amounts as may be necessary desire to invest jointly with other instrumentalities”. to att ain the objectives of this [Philippine resources available to [AIIB] on a joint Islamic Financing] Act”. According to Mudarabah basis”. AIIB is also allowed Rafael A Morales is the managing partner of Alex Bangcola, AIIB’s chairman and to provide fi nancing with or without Morales & Justiniano. He can be contacted at CEO, the fresh capital would help the collateral by way of leasing, sale and [email protected]. bank reach its goals “to expand Halal

Hong Kong is ideal for SPVs in Islamic ϐinance: A tax perspective

HONG KONG arrangements, which helps to strengthen Hong Kong as an ideal location for By Wilson Yeung sett ing up SPVs for Sukuk issuance. Hong Kong is emerging as one of the The practice note essentially deals with most important centers for Islamic the tax treatment of Ijarah, Murabahah, fi nance around the world and was Musharakah and Mudarabah. It further the fi rst Chinese region to become an enhances the att ractiveness of Hong associate member of the IFSB. Hong Kong as a hub for Islamic fi nance Kong’s involvement in the Islamic activities. It confi rms Hong Kong’s fi nance sector started over 10 years ago, approach to Islamic fi nance and clarifi es with three successful sovereign Sukuk Muslim and non-Muslim countries such the tax treatment of Sukuk. It also issuances and amendments of its profi t as Brunei, Indonesia, Kuwait, Malaysia, confi rms the pragmatic approach to tax and stamp duties legislation to Pakistan, Qatar, Saudi Arabia, the UAE, be followed in Hong Kong in the near cater to Islamic fi nance development, Japan and the UK, which are keen on future as the market develops, thus focusing on the Sukuk space. Islamic fi nance and have very good facilitating the development of Shariah potential to list their Sukuk in Hong compliant products and structures as Apart from the amendments of its Inland Kong. On the other hand, Hong Kong is well as ensuring clarity and security as Revenue Ordinance and Stamp Duty in the midst of having CDTA discussions to the tax treatment of Sukuk, which is Ordinance in 2013 as well as its Loans with Bahrain, Cambodia, Nigeria important for Islamic fi nance operators Ordinance in 2014, Hong Kong further and Turkey which are also promising and investors. Last but not the least, att empted to boost its Islamic fi nance in having excellent Islamic fi nance the practice note demonstrates a clear development in terms of the regulatory collaborations in terms of Sukuk in the commitment on the part of the Hong and legal framework by issuing its non- long run. Kong government and the IRD to binding Departmental Interpretation position Hong Kong as a signifi cant hub Practice Note No 50 on the Taxation of Taking all of the aforementioned for Sukuk. Specifi ed Alternative Bond Schemes in together, the continuous improvement of July 2014. Hong Kong’s taxation system would Hong Kong’s double tax treaties network strongly enhance its comparative also makes the city a favorable place The practice note provides the Hong advantage for Sukuk SPVs. for Sukuk SPVs. Up to March 2018, Kong Inland Revenue Department 39 comprehensive double taxation (IRD)’s views on the correct Wilson Yeung is a certifi ed tax advisor and agreements (CDTAs), including 13 out of interpretation of the legislation a member of the Taxation Institute of Hong the top 20 trading partners, have already introduced to allow for greater tax parity Kong. He can be contacted at wyeu002@ been signed. Among them, there are between conventional bond and Sukuk gmail.com.

The formation of the Malta Islamic Finance Association

MALTA The movement for Islamic fi nance has a fundamental role in the establishment gained momentum in recent weeks of this technology which seems to have By Reuben Butt igieg following the clear political willingness the same principal objectives as Islamic to invest in the sector shown in London fi nance. The Malta Islamic Finance Association by Prime Minister Dr Joseph Muscat (MIFA) has been formed. The MIFA’s goal and the parliamentary secretary within Malta seems to also be taking the lead is to serve as a body that will liaise with the Prime Minister’s Offi ce responsible in this respect. Indeed, there will be a offi cials and authorities in Malta together for fi nancial services, Silvio Schembri. conference on the 26th June 2018, to be with their international counterparts and This willingness has been expressed inaugurated by Schembri, which will the private sectors in order to establish during the Commonwealth Heads of discuss Islamic finance and Malta as an Islamic fi nancial center for Government Meeting that took place last cryptocurrencies among other topics. international trade and investment. month in London. The conference has attracted various interest particularly that of funds in The aim is to promote genuine Islamic Malta is rebranding itself as the cryptocurrencies given also the fi nance practices as espoused by blockchain island and many companies services available on the island in this the MIFA’s underlying ethical value are approaching the island in order sense. proposition with the concurrent to look at the upcoming legislation in promulgation of best practices, good the sector including the regulation of Reuben Butt igieg is the president of the governance, full transparency and cryptocurrencies. There are various Malta Institute of Management. He can be compliance with international industry discussions going on particularly in contacted at [email protected]. standards that are prevalent in the global relation to how Islamic fi nance can play Islamic fi nance markets.

Mizuho’s deal implies something more than ϐinance

JAPAN Usually, it is hard to expect an Islamic fi nance transaction to happen in Japan, By Dr Etsuaki Yoshida due to the scarce Muslim population and relatively fewer ties with the Islamic On the 4th May 2018, Mizuho Bank business community compared to other Malaysia, a local subsidiary of one of advanced economies. So, most Islamic Japan’s so-called megabanks, signed an fi nance deals tend to happen outside Islamic fi nancing agreement with local of Japan. This ‘Malaysia-Malaysia’ borrower Serba Dinamik International transaction is one of the major forms of amounting to US$20 million. Islamic fi nance practice in the Japanese expensive products. I hope Serba, as fi nancial industry. The borrower is under the umbrella of well as other followers, will be a good Serba Dinamik Holdings, an engineering catalyst for the globalization of Japanese What I would like to focus on in this deal company for resource projects. Recently, corporates. is the comment by the Serba CEO at the Serba has been expanding its overseas business, including in the Middle East signing ceremony. He reportedly said Sohei Nakayama, the ex-president of the and Central Asia, which may have this deal is “more than just a borrower- then Industrial Bank of Japan, a partial involved an inclination toward Islamic lender relationship” and “Mizuho will predecessor of Mizuho Bank, promoted a fi nancing. help us connect with fi rst-tier Japanese business relationship with the Middle manufacturers”. Serba expects an East for the sake of Japan, mainly to The US$20 million amount might expanding business relationship with secure energy resources and not just the be relatively small for a corporate big Japanese corporates in Japan and bank’s short-term profi t. I hope this deal deal, but the US dollar-denomination other parts of the world, and expects will become a model of Japanese banks is noteworthy for Malaysia, as the Mizuho to be a catalyst in promoting off ering Islamic fi nancial services, acting authorities would like to diversify its coordination with them for Serba. as catalysts between Islamic and Japanese Islamic fi nancial markets. industries. Generally speaking, Japanese corporates At fi rst sight, I thought this was just are regarded as being good in technology Dr Etsuaki Yoshida is the project associate another Islamic fi nancing deal off ered and quality, though poor in exploring professor at Kyoto University. He can be by a Japanese fi nancial institution. new markets and off ering not-too- contacted at [email protected].

Islamic leasing spreading across the globe as a ϐinancial powerhouse tool

ISLAMIC LEASING NASDAQ Dubai which is further Terrorism Policy for Digital Currencies evidence of the bank’s expansion of its (Sector 6) which focuses on the By Shoeb M Sharieff Islamic leasing and Shariah compliant obligations imposed on digital currency activities throughout its network across exchangers. BNM reiterated that the A number of Islamic leasing fi nancial the country. It was reported as well that invocation of reporting obligations on institutions in the MENA region have SIB is looking to establish an Islamic digital currency exchange businesses become part of the largest fi ntech hub, leasing international presence by taking does not in any way connote the the newly-launched Bahrain Fintech the fi rst step in adopting international authorization, licensing, endorsement or Bay which already has 20 partners top-notch regulatory standards. validation by the apex bank of any dealing in various sectors of fi nancial entities involved in the provision of technology including Islamic leasing Experts are also seeing the move as digital currency exchange services. banking and investment products. further evidence that Dubai is quickly Cryptocurrencies and blockchain becoming the global capital of the Islamic technology have been instrumental to Australian Islamic fund management economy. Dubai has been making moves some modern Islamic leasing companies and leasing company Crescent Wealth to cement its position as an Islamic lately. The move falls under the Anti- has brought on Malaysia’s CIMB leasing center since 2013 when Sheikh Money Laundering and Counter Principal Islamic Asset Management Mohammed Rashid Al Maktoum, the Financing of Terrorism Policy for Digital to run its Islamic leasing fund, a move vice-president and prime minister of the Currencies and primarily focuses on the that marks the establishment of the only UAE and the ruler of Dubai, launched reporting obligations involved in these Shariah compliant product of its kind the initiative. digital exchange businesses. Overall, in Australia. This comes at a time when Islamic leasing products are still available there’s a negative tax environment in Bank Negara Malaysia (BNM), which through other channels. Australia for certain kinds of Shariah recently announced that digital compliant and Islamic leasing deals. currencies are not legal tender in the Shoeb M Sharieff is the president and CEO of nation, issued the Anti-Money Ijara Community Development Corp. He can Sharjah Islamic Bank (SIB) has listed Laundering and Counter Financing of be contacted at shoeb@ĳ aracdc.com. a US$500 million Sukuk facility on

Supporting economic recovery and IFN Sector Correspondents welfare with Islamic microϐinance in CROWDFUNDING: Craig Moore Chechnya CEO, Beehive DEBT CAPITAL MARKETS: Imran Muft i partner, Hogan Lovells ISLAMIC families raising orphaned or disabled MICROFINANCE children and to households living in EDUCATION: Dr Kamola Bayram, project director for poverty. In addition, it has helped more training and research at the International Council of Islamic By Dr Mohammed Kroessin Finance Educators than 120 business start-ups acquire

productive assets through Islamic sales While the economic situation in ISLAMIC LEASING: Shoeb Sharieff contracts (Murabahah). president, ĳ ara CDC, ĳ ara Community Development Corp Chechnya has improved considerably since 2000, substantial eff orts are still LAW: Paul McViety Last year, Barakat won the national required to support reconstruction partner, head of Islamic fi nance, DLA Piper Middle East competition among microfi nance and economic recovery, especially institutions for the best project for MERGERS & ACQUISITIONS: Burak Gencoglu as the economic crisis in the Russian vulnerable people. In late April 2018, partner, Gencoglu Law Firm Federation has aff ected the Chechen Barakat’s executive director, Selima economy considerably since 2013. MICROFINANCE: Mohammed R Kroessin Salamova, was invited to lead a session head of Islamic microfi nance, Islamic Relief Worldwide att ended by more than 200 participants Offi cial statistics show that Chechnya's at the All-Russia VII Annual Forum PRIVATE EQUITY & VENTURE CAPITAL: unemployment was over 50% in James R Stull, partner, King & Spalding of Microfi nance Institutions in Kazan, the mid-2000s and fell to less than the capital of the Republic of Tatarstan. a quarter over a 10-year period, but REAL ESTATE: Philip Churchill She shared her experience of Islamic founder partner, 90 North Real Estate Partners undoubtedly more progress is required microfi nance as a poverty reduction for rebuilding — with over 70% of the tool and took part in a number of media RETAIL ASSET MANAGEMENT: Muzzammil Dhedhy, chief operating offi cer, Hejaz Financial Services housing stock damaged or destroyed interviews aft er the presentation and in the war — and equitable growth. said: “I love Islamic microfi nance because RISK MANAGEMENT: Dr Ken Baldwin Microfi nance has been the tool promoted unlike any other program we implement, senior lecturer in fi nance, Coventry University for economic growth through enterprise it allows vulnerable people to maintain creation and development which fuel SHARIAH & CORPORATE GOVERNANCE: their dignity. In Chechnya, people don't Prof Dr Mohamad Akram Laldin self-employment and in turn create take grants even if entitled to them; they executive director, International Shariah Research Academy jobs. There are currently 15 registered take loans because that allows them to for Islamic Finance microfi nance institutions operational retain their self-respect.” SRI ETHICAL & GREEN: Dr Mohamed Wail Aaminou, in the Chechen Republic but only one general manager, Al Maali Consulting Group is fully Shariah compliant in a Muslim- Another provider of Islamic products majority country with a population of 1.2 (Murabahah and Mudarabah), along TAKAFUL & RE-TAKAFUL (ASIA): Marcel Omar Papp head of Retakaful, Swiss Re Retakaful million. with conventional loans, is Zayed Fund which is, however, not registered as a TAKAFUL & RE-TAKAFUL (EUROPE): Ezzedine Barakat has been operational in the microfi nance institution with the Bank of Ghlamallah director, Solutions Insurance and Islamic Finance (SAAFI) Chechen capital of Grozny since 2012 Russia as it is headed by the Chechen and out of 2,214 institutions registered government with funding provided by TAKAFUL & RE-TAKAFUL (MIDDLE EAST): with Bank of Russia, the Russian central the UAE. Dr Sutan Emir Hidayat assistant professor, head of Business Administration and bank, Barakat is still the only licensed Humanities Department, University College of Bahrain microfi nance institution providing Dr Mohammed Kroessin is the head of the Islamic microfi nance in the whole of the Islamic Microfi nance Business Unit of the IFN Correspondents are experts in their respective fi elds and are selected by Islamic Finance news to contribute Russian Federation. Since its inception, International Programs Division at Islamic designated short sector reports. For more information about Barakat has provided more than 2,000 Relief Worldwide. He can be contacted at becoming an IFN Correspondent, please contact sasikala. [email protected] benevolent loans (Qard Hasan) to [email protected].

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Islamic impact investing: Breaking the ‘return versus impact’ trade-off paradigm

SRI ETHICAL & GREEN Some investors are making the case that customers are expecting Islamic fi nance ‘impact’ may represent a fundamental institutions to be very active on the By Dr Mohamed Wail Aaminou insight that the rest of the market does social front and fi nally, Islamic fi nance not yet fully value, raising the possibility players are still struggling to move Islamic impact investing is a Shariah of achieving or even beating existing beyond a ‘Shariah compliance’ value compliant investment that covers market returns. These investors reject the proposition. a range of fi nancial instruments in trade-off between impact and fi nancial various industries and geographies and returns. I personally argue that Islamic with a focus on positive impact ( see fi nance has the potential to reconcile the Table 1). impact and return perspectives. Taking the

The ‘return versus impact’ paradigm Islamic fi nance has the legitimacy to Islamic impact is a dominant view in the impact- play a leading role in impact investing investing universe. That is, the higher by bringing a fresh perspective to this industry to the the economic, social and environmental blossoming industry. Firstly, the ethical impact, the lower the risk-adjusted perspective is natively built into the next level requires returns. At the tail of the investment DNA of Islamic fi nance. Secondly, spectrum, we portray philanthropy Islamic fi nance is inherently embedded combined and on one side (a loss from a fi nancial into the real economy and can be perspective) and traditional investment easily integrated into diff erent sectorial coordinated efforts on the other side (a pure focus on ecosystems. Thirdly, Waqf and Zakat fi nancial returns). In between, there are institutions have the necessary levers from asset owners, diff erent combinations of ‘risk-adjusted to channel capital to ‘below market returns’ and ‘impact’ investments (see return’ projects through subsidizing asset managers, Figure 1). or guaranteeing schemes. Fourthly, demand-side players

Table 1: Perspectives of impact investing and service Perspective Details providers Shariah compliant Unlike a donation, there is an expectation of a return on capital with investment a range of possible returns. Expected returns could range from below market rate to market rate, or even to above market rates. During the last three years, the market Financial An impact investment is made through many asset classes: Sukuk, witnessed promising initiatives especially instrument equity, Islamic bank deposits, investment in an Islamic fund. in the green and social Sukuk fi eld. Industry and Impact investing can take place in many industries (health, real estate, Nonetheless, the industry has just geography green energy, etc) and many countries/regions. scratched the surface of the immense economic, social and environmental Positive impact The intention to generate measureable social or environmental impact puts an explicit focus on positive impact, which distinguishes impact challenges faced by OIC countries. investing from traditional fi nance. Taking the Islamic impact industry to the next level requires combined and Source: Author’s own coordinated eff orts from asset owners (Islamic fi nance institutions, Waqf and ȱŗǱȱ ȱȱȱ¢ȱȱęȱȬȱ Zakat funds, institutional investors, etc), asset managers (investment advisors, Impact Islamic fi nance institutions, government investment programs, etc), demand-side players (social enterprises, microentrepreneurs, Islamic microfi nance institutions, etc) and service providers (research institutions, standard-sett ing ȱęȱ ȱę bodies, training providers, consultants, Financial Philantropy ȱę ȱ goals only etc). Most importantly, these eff orts have returns impact to converge toward a clear impact investing vision that the industry still needs to clarify.

Dr Mohamed Wail Aaminou is the general manager of Al Maali Consulting Group. Ȭȱ He can be contacted at w.aaminou@ Source: Author’s own almaaligroup.com.

VBI: A new phase for Islamic banking and ϐinance in Malaysia

Many things have changed since the advent of Islamic banking and fi nance in Malaysia in 1983. Aft er rapidly growing for nearly four decades, the Islamic banking and fi nance industry can no longer be called an infant. The fi rst three decades saw how the Islamic banking and fi nance industry learned to crawl and walk, guided mainly by Shariah rules and principles, as well as by duplicating its ‘parent’ – the conventional banking institution. The Islamic banking and fi nance industry has been replicating its conventional counterpart especially in developing its own products and services. This has helped Islamic banking and fi nance identify the right steps to take under the umbrella of Shariah compliance parameters. AHMAD MUKARRAMI AB MUMIN delves further.

Ahmad Mukarrami Ab distinguish its own objectives and Mumin is the head of the values and not merely target profi t Shariah Advisory maximization. Although it has built a Division at RHB Islamic solid foundation based on compliance Bank. He can be with Shariah rules and principles, it still contacted at ahmad.mukarrami@ needs to go beyond the existing structure rhbgroup.com. Afi qah Nur Yahya, shaped by the conventional system. the section head of Shariah advisory in the same organization, assisted in As such, BNM in collaboration with the authoring this article. industry, issued a strategy paper titled ‘Value-based Intermediation (VBI): Strengthening the Roles and Impact of Within a short span of time, the Islamic banks that collaborated with Islamic Finance’ in July 2017 with an Islamic banking and fi nance industry BNM to develop a scorecard to measure update issued in March 2018. The paper has picked up pace, which can be both fi nancial and non-fi nancial progress states that VBI is an intermediation seen by the rapid growth of its retail, of Islamic banks in VBI adoption. The function that aims to deliver intended corporate and institutional client base. scorecard consists of both quantitative outcomes of Shariah through practices, For instance, from a market share of and qualitative elements that measure conduct and off erings that have a only 5.3% in 2000, Islamic fi nancing diff erent segments of both fi nancial positive and sustainable impact on the now accounts for 34.9% of total loans and non-fi nancial institutions. The economy, community and environment, and fi nancing, according to Bank non-fi nancial aspects may include consistent with shareholders’ sustainable Negara Malaysia (BNM). We can the facilitation of entrepreneurship, returns and long-term interests. As also see that the Shariah compliant improved treatment toward employees, such, Islamic fi nancial institutions are product portfolio has been expanding customers and public as well as an expected to be more impact-driven in the to include a wide range of competitive enhanced community standard of living. and innovative products, ie deposits, design and off ering of products and in their dealings with customers while not business and household fi nancing, to These collaborations by industry compromising on the fi nancial returns to complement product solutions off ered players are important to drive the shareholders. by conventional banks. implementation of VBI at the individual level since diff erent Islamic banks may The issuance of the strategy paper has The key growth driver was the strong have diff erent business models, maturity, gained traction among Islamic banking support by the regulators through levels of readiness and capacity to initiate and fi nance industry players in Malaysia. initiatives in strengthening the Shariah and sustain the adoption of VBI. governance framework and regulations As of the fi rst quarter of 2018, many Islamic fi nancial institutions have already for the Islamic banking and fi nance Although the journey toward VBI has implemented VBI initiatives in various industry. For example, BNM rolled out just started, its spirit has been there since forms. 13 Shariah standards (known as policy the launch of Islamic banking and fi nance documents) to guide Islamic fi nancial as it is in line with the purpose (Maqasid) For example, six Islamic banks have institutions on the following: Hibah, of Shariah. As such, the Islamic banking collaborated on the Waqf front by Ijarah, Istisnah, Kafalah, Mudarabah, and fi nance industry can proudly signing the Waqf Fund Strategic Murabahah, Musharakah, Qard, embrace the VBI agenda without any Collaboration Agreement in August 2017. Wakalah, Tawarruq, Wadiah, Waad hesitation, although it may take time The banks were RHB Islamic Bank, Affi n and Bai Al Sarf in the fi rst quarter of for the Islamic banking and fi nance Islamic Bank, Bank Islam Malaysia, Bank 2018. industry to adapt the VBI as the new Muamalat Malaysia, Bank Kerjasama engine in continuing the journey. Rakyat Malaysia and Maybank Islamic. The Islamic banking and fi nance industry However, with strong values and a is now redefi ned with a stronger strong agenda promoted by VBI, we The Community of Practitioners is identity and vision. Through experience believe that the Islamic banking and another collaboration to spearhead and observation, the Islamic banking fi nance industry can accelerate, VBI implementation. It comprises nine and fi nance industry has learned to overtake and lead in no time.

‘One Belt, One Road’ initiative – what’s in it for Malaysia’s Islamic ϐinance industry

Strong macroeconomic fundamentals, solid aggregate demand (consumption), a geostrategic location in the Straits of Malacca and modern infrastructure are the main factors that keep Malaysia on the radar of global investors for their strategic investment in the long run. Apart from Malaysia, countries that are in the ‘One Belt, One Road (OBOR)’ initiative due to their geostrategic location are Indonesia, Pakistan, the Philippines, Russia, Turkey, Mongolia, Djibouti, Egypt and Iran. SHAN SAEED explores the signiﬁ cance of the OBOR initiative for Islamic ﬁ nance in Malaysia.

Shan Saeed is the chief people from various countries. Total Table 1: GDP size of selected countries investments in the BRI are tantamount to economist at IQI Global. Country GDP size in US$ (trillion) US$1.4 trillion in the next 10 to 15 years, He can be contacted at China 38 shan.saeed@iqi-group. 12 times bigger than the Marshall Plan com. for Europe in 1952. During the World US 23.5 Bank/IMF annual meeting last October India 19.5 in Washington, the main focus was on Malaysia’s strategic location Japan 5.6 the BRI equation and infrastructure geographically provides a huge Indonesia 5.4 advantage as 80% of China’s trade development globally. President Xi has passed through the Straits of Jinping said that the BRI is not a private UK 3.63 garden for the Chinese to benefi t. It’s Malacca. Global investors continue to Turkey 2.99 a public garden for everyone’s benefi t view Malaysia’s location signifi cantly, Pakistan 1.87 particularly from China, with huge globally. Australia 1.66 investment earmarked for development based on the geographical advantage. According to the latest report by PwC, Malaysia 1.51 Malaysia will join the elite group of Infrastructure investment has a strong Netherlands 1.05 economies with its GDP surpassing that correlation with the GDP growth rate Source: Business Insider, UK of the economy, according to Nobel of Singapore by 2030. laureate the late Professor Robert Fogel 2018 from the Booth School of Business at Most of the growth areas would be in manufacturing, agriculture, construction, • Bank Negara Malaysia to keep the the University of Chicago in the US discount rate between 2.75% and who wrote a paper in 1964. real estate and technology, according to an IQI Global Market intelligence report. 3.25% Most smart investors would be taking • Infl ation will remain subdued under The OBOR initiative’s US$1.4 a long position in the aforementioned 3% due to the appreciating ringgit. trillion-worth of investments sectors. Economic confi dence is the A simple rule in economics – an The OBOR initiative, also known as the key for Malaysia’s GDP to remain in appreciating currency takes care of ‘Belt and Road’ (BRI) initiative, is the a growth trajectory. Confi dence in the infl ation, but on the other hand, a only winning infrastructure investment Malaysian ringgit is back and is expected depreciating currency brings along strategy to spur global economic growth to remain solid. In the last 17 months, infl ation and negatively aff ects your to uplift the masses. This will usher in investments from countries like China living standard a new era of economic and regional and Saudi Arabia had a huge impact • Oil prices will hover around US$60 prosperity for the on Malaysia’s economy. The RM175 and US$87 per barrel benefi t of billion (US$44.04 billion) investment that • As mentioned earlier, the ringgit will includes RM144 billion (US$36.24 billion) be trading in the fair value range, ie from China and RM31 billion (US$7.8 between 3.75 and 4.25 against the US billion) from Saudi Arabia would dollar be benefi cial to Malaysia in • The real estate market will remain the long run. att ractive to sophisticated investors as it has become the new global Malaysia’s currency. economic outlook for 2018 is What’s next for Islamic expected to be as ϐinance in the OBOR initiative follows: In the next two to three years, most • GDP to countries involved in the OBOR initiative remain between will be using the ‘petroyuan’ for their 4.9% and 5.4% energy transactions. The utilization of • Export Murabahah fi nancing such as Tawarruq numbers to (commodity Murabahah) will go up remain solid in

Continued exponentially as more and more energy corporates resort to these yuan-backed energy deals. It is not a surprise if Murabahah oil transactions touch US$300 billion to US$750 billion in the next ﬁ ve years. The market is moving in that direction and ASEAN and Malaysia would particularly beneﬁ t from the petroyuan which will become the new global reality. Malaysia is poised to become the economic corridor and trade 5th September 2018 hub of ASEAN for China which is the new global and economic power. Mansion House, London

The utilization of Murabahah ϔinancing such as Tawarruq (commodity Murabahah) will go up exponentially as more and more energy corporates resort to these yuan- backed energy deals IFN returns to the UK once again to build on the exceptional success of 2017, providing a unique platform for regional players to explore all that The Islamic fi nance industry would Europe has to offer in terms of Islamic finance opportunities. continue to leverage from technology which is dramatically changing the banking landscape with enhanced SUPPORTED BY MULTILATERAL STRATEGIC PARTNERS productivity of the labor force. In the next two to three years, one can foresee more traction in this sector with average growth PARTNERS around 4-5% per annum. More and more productive labor force will be entering the market, equipped with the latest expertise and technological leverage to consolidate the dominance of the Islamic fi nance ASSET MANAGEMENT BREAKOUT PARTNER HOST MEDIA PARTNERS industry in Malaysia as well as the ASEAN region. Regulators have played an important role in making the industry MEDIA PARTNERS vibrant/pragmatic which is changing the landscape of the banking industry. Positive thoughts and a positive atmosphere are in the air with regards to the progress of REGISTER FREE NOW Islamic fi nance which will be moving aggressively in the coming months and www.redmoneyevents.com [email protected] 603 2162 7800 ext. 62 #IFNUKW18 years. Let’s watch this space.

Takaful digital transformation

Takaful plays an important part in wealth planning. This is especially true in the context of wealth preservation and wealth distribution as it creates an instant estate with a small premium. Takaful is one of life’s necessities and probably the least-understood ﬁ nancial product. MUHAMMAD SHODIQ writes.

Muhammad Shodiq is in the sector with a highly marketed the vice-president of focus on customer experience. This new MSMEs and the head of wave of brands appeals to the needs of the Shariah Academy a digitally-savvy younger generation, Group at CIMB Niaga and has been promoted through a surge Indonesia. He can be contacted at in the quantity of independent ﬁ nancial [email protected]. content available to consumers.

Insurance and Takaful reimburses The Takaful industry should create a people for insured/covered losses in the robust digital business model with more event of an outward incident such as an emphasis on customer experience by seamlessly embedding fi nance with their have multiple customer touchpoints, illness, accident or death. At the same from an in-branch visit down to time, it can provide investment capital, customer daily transactions which off er a wide range of user-centric services in individual transactions, providing them lend money and help to reduce anxiety with vast quantities of data. Therefore, it for individuals and society at large. places. There are four components to make a successful digital transformation: is important to have the ability to collect structure, technology, process and people. data and process the ‘big data’, and use it A Takaful contract is diff erent from an to inform product development and take insurance contract in that there is an action in real time. inherent element of unilateralism whereby Structure participants ‘donate’ to a Takaful fund Takaful operators are fi nding that it Targeting, personalization and customer based on Tabarru’ (donation) principles. is even more challenging to make the journey management are the highest Total global Takaful contributions were organizational changes required to priorities for Takaful marketers. The estimated at US$14.9 billion in 2015, support digital initiatives than to adopt quest for a good customer experience representing a double-digit growth the technologies available to support means that the content produced rate of 14% in 2015. The lack of market them, namely social, mobile, analytics needs to be consistent across channels. penetration represents a signifi cant growth and cloud. Customer perceptions have improved opportunity both for General Takaful as a result, bringing open-mindedness as well as Family Takaful. Although the Technology toward new products and companies. majority of the population in Indonesia are Over the past couple of years, the Muslims, the Takaful penetration rate is forefront of the industry has been much lower than conventional insurance. People delivering digital-fi rst and mobile-only The progress of Takaful in many There are signifi cant opportunities for insurance platforms. The forerunners countries is driven by society’s awareness Takaful operators to increase their market are likely to be those utilizing artifi cial toward the importance of insurance and penetration rate. intelligence (AI) to further improve the a growing demand from Muslims for customer experience, such as robo- Shariah-based products. On the other Digital fi nancial institutions are not just advisors and chatbots, but reticence hand, the acceptance of the Indonesian more hype about the next big thing in the remains in the majority, who see the risks society toward insurance is less favorable market. Digitizing is a necessary part of outweighing the rewards. in general. Shariah insurers need to every fi nancial institution’s agenda as a develop the professional competency way to overcome outdated approaches Technology improvements – particularly among its personnel, who should be and mismanaged client relationships. in data collection and analytics – and knowledgeable and skillful in both Digital transformation in this industry has advances in mobile and wearable conventional and Shariah systems. This resulted in the ability to provide services technologies have disrupted the industry. will enable them to be more creative and and experiences in real time. Disruptive In insurance, AI could be a free personal innovative in product development, and technologies force virtually all industries to insurance ‘concierge’. An innovation ready to compete in a global digital era. fundamentally revise their business models on insurance comparison engines, AI or even defi ne new ones. It is a fact that provides a more personalized service to Employers need to invest a certain the insurance sector has historically lagged fi nd the right insurance policy. percentage of their revenue in training slightly behind other sectors in terms of for their staff to ensure continuous digital capabilities. Process learning takes place. Increased team training is needed, as organizations The last few years have seen a shake- Established organizations are forced to att empt to catch up with the newcomers up of the insurance industry as well innovate or fi nd other ways to compete riding on a wave of digital disruption. as the Takaful industry due to a drive with start-up brands. Takaful is no in innovation caused by digital-fi rst diff erent from the wider marketing The views expressed here are the author’s start-ups that are making their mark community when it comes to prioritizing customer experience. Takaful providers own.

BNM sells short-term papers US$500 million fi ve-year Sukuk facility DEALS MALAYSIA: Bank Negara Malaysia in the international market, according to Peninsula Qatar. Indonesia issues Sukuk (BNM) has sold four Money Market Tender Qard (MMTQ) facilities for INDONESIA: Indonesia has fl oated the total amount of RM17.53 billion Dr Abdulbasit was quoted as saying that a new series of Sukuk, PBS-014, via (US$4.43 billion), according to separate feedback from the Asian markets was private placement. According to an announcements. very positive, but the bank decided to announcement, the series was issued wait for the right market moment due to with a nominal value of IDR1 trillion BNM also sold a MMTQ facility, a a confusing interest rate environment in (US$71.12 million). The three-year MMTQ-Islamic Range Maturity (MMTQ- the market at present. He also mentioned tradable paper was printed with a yield IRMA) instrument and a Bank Negara that the bank is not in a hurry to print the of 6.9%. Interbank Bill — Islamic (BNIBI) paper paper. The Sukuk will be arranged by for the total amount of RM20.1 billion Qatar National Bank, Standard Chartered Separately, the Ministry of Finance also (US$5.08 billion). and some Malaysian banks. raised IDR4.06 trillion (US$288.76 million) from its latest sale of Shariah BNM further sold one MMTQ instrument securities. Bids worth IDR9.11 trillion KFH to launch Sukuk program and one MMTQ-IRMA paper for (US$647.93 million) were received for the UAE: Kuwait Finance House (KFH) will the total amount of RM15.14 billion six securities. be establishing a Sukuk program worth (US$3.81 billion). Both papers were fully US$3 billion via its SPV, KFH Sukuk subscribed. Company SPC. According to a statement, Matrix prints 92-day ICP the proceeds of the Sukuk will be used by MALAYSIA: Matrix Concepts has BNM in addition sold three MMTQ KFH to acquire a benefi cial interest in a printed an Islamic commercial paper facilities for the total amount of RM11.11 portfolio of Shariah compliant assets, (ICP) for RM50 million (US$12.63 billion (US$2.79 billion). All transactions which will form part of its Wakalah and million), according to an announcement were fully subscribed. Murabahah portfolios. The program has on the Bond and Sukuk Information been assigned provisional senior Exchange. The ICP, which matures on BNM also separately sold two MMTQ unsecured long-term ratings (foreign and th the 15 August 2018, was arranged by facilities and a Money Market Tender local currency) of ‘(P)A1’ by Moody’s Maybank Investment Bank. Murabahah-Murabahah Acceptance tool Investors Service. for the total amount of RM9.88 billion Sabah Credit Corporation (US$2.48 billion). Kuwait issues liquidity sells ICP management tools MALAYSIA: Sabah Credit Corporation Noor Bank lists Sukuk on KUWAIT: The Central Bank of Kuwait has issued a RM60 million (US$15.15 NASDAQ Dubai has printed conventional bonds and million) Islamic commercial paper (ICP) UAE: NASDAQ Dubai has admitt ed related Tawarruq facilities for the total th maturing on the 16 November 2018, Noor Bank’s US$500 million fi ve-year amount of KWD160 million (US$528.05 according to an announcement on the Sukuk, according to a press release. The million), according to an announcement. Bond and Sukuk Information Exchange Sukuk facility, which was oversubscribed The off erings, which received KWD2.01 The paper, arranged by AmInvestment 2.1 times, brings the current value of billion (US$6.63 billion) in bids, have a Bank, is rated ‘P1’ by RAM Ratings. Sukuk listings on NASDAQ Dubai to three-month tenor and carry a profi t rate US$59.72 billion. of 2.25%. Sabah Credit Corporation separately printed a 184-day ICP for the amount of QIIB not in a hurry to issue RM60 million (US$15.08 million). The Telekom Malaysia issues facility will be maturing on the 21st Sukuk IMTN November 2018 and AmInvestment Bank QATAR: QIIB’s CEO, Dr Abdulbasit MALAYSIA: Telekom Malaysia has acted as the lead arranger and facility Ahmed Al Shaibei, has said that the bank issued a 10-year Islamic medium-term agent. is waiting for the “right time” to fl oat its note (IMTN) worth RM250 million

DEAL TRACKER Full Deal Tracker on page 34

EXPECTED COMPANY'S NAME SIZE STRUCTURE ANNOUNCEMENT DATE DATE

TBA Kuwait Finance House US$3 billion Sukuk program 22nd May 2018 TBA Jordan Islamic Bank TBA Sukuk 22nd May 2018 TBA Union Properties AED1 billion Non-convertible and 21st May 2018 unlisted 10-year Sukuk TBA Manazel Real Estate AED2.6 billion Sukuk 10th May 2018 2018/2019 Dubai Aerospace US$500 million Sukuk 2nd May 2018 Enterprise 12th June 2018 Turkish Treasury TRY500 million CPI-indexed Sukuk 2nd May 2018

(US$62.92 million) with a 4.73% profi t IRR8 trillion (US$189.89 million) on the Shariah approval, World Finance rate, according to an announcement on Tehran Stock Exchange. According to reported. the Bond and Sukuk Information the Securities and Exchange News Exchange. Agency, the proceeds from the four-year CBG plans Sukuk Salam paper will be used to fi nance the TCI’s GAMBIA: The Central Bank of Gambia AEON prints 32-day ICP working capital. The facility has a 16% (CBG) on the 23rd May will be selling MALAYSIA: AEON has printed an annual yield paid every quarter. three-month and six-month Sukuk Salam Islamic commercial paper (ICP) for facilities for GMD10 million (US$210,316) RM100 million (US$25.17 million), STSSB sells 315th ICP each, as well as a one-year paper for according to an announcement on the MALAYSIA: Sunway Treasury Sukuk GMD5 million (US$105,158). Tenders for Bond and Sukuk Information Exchange. (STSSB) has issued its 315th Islamic the issuances were accepted until the 22nd The ICP, which matures on the 19th June commercial paper (ICP) for the amount May 2018. 2018, was arranged by Maybank of RM150 million (US$37.7 million). The Investment Bank. 31-day paper will mature on the 21st June Gambia’s apex bank also sold Sukuk 2018, has an average yield of 3.91% and is Salam with tenors of three-months and CBB’s Sukuk Salam fully rated ‘MARC-1IS(cg)’, according to an six months for GMD10 million each, and announcement on Bank Negara a one-year off ering for GMD5 million, subcribed Malaysia’s website. The paper received according to an announcement. Both the BAHRAIN: The Central Bank of Bahrain subscriptions worth RM475 million three-month and six-month papers were (CBB) has announced in a statement that (US$119.4 million), more than thrice its oversubscribed, whereas the one-year its monthly 91-day Sukuk Salam issuance original size. paper was undersubscribed by GMD3.55 worth BHD43 million (US$112.93 million) million (US$74,740.5). has been fully subscribed. The issuance carries an expected return of 3.4% and will Union Properties to issue mature on the 22nd August 2018. Sukuk Cagamas ϐloats IMTN and ICP UAE: Union Properties has received the MALAYSIA: Cagamas has issued an K-Electric to make proϐit approval of its shareholders to privately Islamic medium-term note (IMTN) and place a 10-year AED1 billion (US$272.23 an Islamic commercial paper (ICP) payments for Sukuk million) Sukuk facility, either through totaling a combined RM1.81 billion PAKISTAN: K-Electric has announced in one issuance, several issuances or a (US$454.71 million), according to a separate bourse fi lings that it will be program. According to a statement, the statement. The fi ve-year IMTN was making the profi t payments for its facility will be non-convertible and issued for RM1.5 billion (US$376.83 Sukuk-3 and Sukuk-4 thus the trading of unlisted, and will have a profi t of not million) and the three-month ICP was the Sukuk on the Pakistan Stock more than 9%. fl oated for RM305 million (US$76.62 th Exchange will be suspended from the 6 million). The IMTN received high th to the 19 June for the former and from demand, enabling Cagamas to tighten its th th Jordan Islamic Bank plans to the 5 to the 17 June for the latt er. pricing by 5bps from 4.55% to 4.5%, and issue and list Sukuk to upsize the paper from an initial RM1 TCI ϐloats Sukuk Ijarah JORDAN: Jordan Islamic Bank is billion (US$251.22 million) to RM1.5 IRAN: The Telecommunications planning to issue and list Sukuk, while billion. The ICP was competitively priced Company of Iran (TCI) has fl oated an continuing to develop new products for at 3.69% on par with the existing three- equity-based Sukuk Ijarah facility for the banking market as they obtain month KLIBOR benchmark rate.

Tun Razak Exchange (TRX) and Bandar AFRICA ASIA Malaysia projects, while RM2.16 billion PMO seeks same tax for Auditor-general declassiϐies (US$545.45 million) went to 1MDB. The US$3 billion secured via issuing notes Islamic ϐinance 1MDB report was also not channeled to the TRX KENYA: The Islamic Finance Project MALAYSIA: The offi cial report on 1MDB project. Management Offi ce (PMO) of Kenya is has been declassifi ed by the Auditor- proposing same tax on Islamic fi nance General’s Offi ce and made available Meanwhile, the Sungai Besi airbase products with conventional off erings to the public. According to the report, relocation, initially scheduled to be to boost the att ractiveness of Shariah 1MDB obtained three domestic loans completed by 2016, was delayed as compliant products. amounting to RM1.58 billion (US$398.99 the contractor was owed RM396.42 million) and a term loan of US$150 million (US$100.11 million) in arrears According to the Business Daily Africa, million, besides issuing notes to raise up to September 2015. This was because other measures should include an US$3 billion and a Sukuk facility to raise RM1.93 billion (US$487.37 million) from issuance of sovereign Sukuk and RM2.4 billion (US$606.06 million), for the amount raised from loans and Sukuk development of Islamic liquidity the acquisition of real estate. From the to fund the airbase relocation and the management solutions for Shariah total amount of RM3.98 billion (US$1.01 development of Bandar Malaysia were governance. billion) raised via the three loans and advanced to 1MDB. The report also Sukuk, only RM246 million (US$62.12 mentioned that a total of RM42.26 billion million) went into the development of the (US$10.67 billion) is needed to fully repay

1MDB’s principal costs and loan interest Al Baraka would aid HCBF in press release, the other two indices are until 2039. developing curriculum besides the IDX High Dividend 20 and IDX conducting informative sessions on the BUMN20. Separately, Bloomberg reported that the workings, prospects and challenges of Offi ce of the Att orney-General of Islamic banking in Pakistan. In turn, Proposal to take its toll on Switzerland as well as the Commercial HCBF will conduct seminars to create Aff airs Department and the Monetary awareness among the public. The Islamic Malaysian Sukuk Authority of Singapore are keen to bank will arrange for the placement of MALAYSIA: The new Malaysian reopen talks with Malaysian authorities graduate students and will also provide government’s proposed intention to on the 1MDB investigation. them with internship opportunities at its abolish the imposition of highway tolls diff erent branches. will impact the Sukuk and bonds issued by toll-road concessionaires, believes OJK admits new Islamic RAM Ratings. shares Indonesian banks to enhance INDONESIA: The shares of Guna Timur Hajj services “Cashfl ow matching is a key rating Raya have been classifi ed as Shariah INDONESIA: BNI Syariah is targeting driver for toll-road concessionaires. As compliant by Otoritas Jasa Keuangan to collect IDR2.37 trillion (US$166.5 concession terms are not uniform across (OJK) and entered onto the list of Shariah million) via third-party funds from Hajj the sector, the issue rating for each toll securities, according to an offi cial registrations this year. According to road would have to be assessed on a statement. Republika.co.id quoting Dhias Widhiyati, case-by-case basis, with an emphasis on the business director of BNI Syariah, the timing of and the eventual payment Amana Bank expands to additional third-party funds from new amount from the government, weighed Hajj pilgrims were recorded at IDR550 against the fi nancial obligations of the Thihariya billion (US$38.64 million) as of March concessionaires,” highlights Chong Van SRI LANKA: Amana Bank, an Islamic 2018. Nee, RAM’s co-head of infrastructure bank, has announced in a statement that and utilities ratings. it has launched its third self-banking Separately, John Kosasih, the president center in Thihariya. director of BCA Syariah, said that BCA As at the 15th May 2018, the sector Syariah has been appointed by the comprised 23 issuers, with a notable Punjab launches Islamic crop Hajj Fund Management Agency as the RM52.83 billion (US$13.28 billion) of insurance receiving bank for Hajj deposit fees for bonds and Sukuk (excluding loan stocks) PAKISTAN: The Punjab government three categories: deposit recipient bank, outstanding (RM39.79 billion (US$10 has introduced a Shariah compliant placement bank and investment partner billion) of which are rated). Pending crop insurance scheme to protect the bank. John added that the bank is looking further details, RAM believes that the income of farmers against unfavorable to start the services in the second quarter government will balance its plan against circumstances, The News International of the year. any implications to the bond market. reported. CIMB Niaga is also developing a Hajj Amana Bank inks deal with This scheme will be applicable during its registration service which will allow mCash fi rst phase for cott on and rice fi elds. In customers to register for Hajj through CIMB Clicks. SRI LANKA: Amana Bank has entered the second phase, the Takaful scheme into a partnership with mCash, a will be applicable for more crops payment platform off ered by Mobitel, including sugar cane, maize, wheat, IDX launches new Islamic to provide the bank’s customers a orchards and vegetables. Compensation index convenient solution to pay a host of will be given in cases of natural INDONESIA: The Indonesian Stock utility and service bills at the Islamic calamities or low yields. Exchange (IDX) has launched three new bank’s branches. indices including the Jakarta Islamic HCBF and Al Baraka sign MoU Index 70 which tracks 70 Shariah According to a press release, the PAKISTAN: Punjab University Hailey compliant shares, selected from the agreement will also allow customers to College of Banking & Finance (HCBF) Indonesia Shariah Shares Index, with donate to charity projects such as and Al Baraka Bank have signed an MoU, high market capitalization and high Helpage and SOS Children’s Village. according to Urdu Point. As per the deal, transaction liquidity. According to a

two initial acquisitions, namely EUROPE Privatzahnarztklinik Schloss Receive all the latest news via the Investcorp invests in Schellenstein, a center for implantology and dental surgery in North Rhine- No.1 Islamic ﬁ nance based feed Germany’s dental sector Westphalia, and Acura Kliniken, a GERMANY: Investcorp, which oﬀ ers licensed hospital in Albstadt. According Shariah compliant solutions, has to a statement, Investcorp is looking to established a platform to enter the make further investments in the dental German dental sector. Under the market as part of a wider consolidation platform, the company has completed strategy.

Group, which is involved in the property non-binding discussions with foreign GLOBAL development of Pantai Indah Kapuk 2 institutional investors for a proposed Denizbank’s sale expected to Sedayu Indo City Indonesia. Nikko divestment of 9.59% of Meezan Bank’s Sekuritas Indonesia is an investment capital, according to a bourse fi ling. conclude in May banking fi rm. GLOBAL: Emirates NBD’s talks with Investors in talks to buy stake Russia-based Sberbank to acquire Emirates NBD joins Denizbank is still ongoing and is in Meezan Bank expected to be concluded this month, CCRManager GLOBAL: Six institutional investors Reuters reported citing Denizbank CEO GLOBAL: Emirates NBD, which off ers from the US and Europe, including New Hakan Ates. Islamic solutions, has joined York-based Ruane, Cunniff & Goldfarb, CCRManager, a fi ntech platform London-based RWC Partners and Islamic ϐinancial district in supporting the origination and Swedish asset manager Tundra Fonder, distribution of trade assets, CPI Financial are in talks with Kuwait’s Noor Financial the making in Jakarta reported. Investment to buy a combined 9.59% GLOBAL: Matrix Concepts Holdings has stake in Pakistan’s Shariah compliant signed an MoU with Bangun Kosambi Noor Financial in discussions Meezan Bank from the Gulf company, Sukses and Nikko Sekuritas Indonesia to Reuters reported citing sources familiar look into the possibility of developing an to divest Meezan stake with the matt er. Islamic fi nancial district in Pantai Indah GLOBAL: Kuwait’s Noor Financial Kapuk 2, Jakarta, The Star reported. Investment, which owns 49.11% of the None of the six investors would buy issued and paid-up capital of Pakistan’s more than 5% of the lender, to facilitate a Bangun Kosambi Sukses is jointly owned Meezan Bank, a fully-fl edged Islamic quick approval from the banking by Agung Sedayu Group and Salim bank, has entered into preliminary regulator.

Bank in relation to a proposed merger Securities and Exchange Organization MIDDLE EAST have reached an advanced stage, (SEO) of Iran. Online platforms are US sanctions hit Iran’s central according to a bourse fi ling. The boards expected to be launched soon in the of SABB and Alawwal have reached a Iranian capital market to make bank governor preliminary, non-binding agreement investments easier for the public. IRAN: The US has imposed sanctions on on the share exchange ratio, subject to Valiollah Seif, Iran’s central bank a number of important steps (including Al Yusr Islamic Banking governor, and Iraq-based Al Bilad the completion of confi rmatory due Islamic Bank for “moving millions of US diligence, fi nalization of the merger provides ϐinancing dollars” for Iran’s elite Revolutionary agreement and agreement on a number OMAN: Amjaad Group has signed an Guard, Reuters reported citing US of other commercial issues). agreement with Al Yusr Islamic Banking Treasury Secretary Steven Mnuchin. Ali for the fi nancing of its new project, the Tarzali, the assistant director of the Based on the agreement, Alawwal Movenpick Hotel Bausher, Muscat Daily international department of Iran’s central shareholders would receive 0.49 SABB reported. bank, and Aras Habib, the chairman of shares for each Alawwal share. As per Al-Bilad Islamic Bank, have also been the closing price of SAR33.5 (US$8.93) Iranian banks reluctant to blacklisted. per SABB share on the last day of disclose ϐinancial statements trading, the merger would value each IRAN: More than a dozen Iranian banks Noor Bank launches Noor Alawwal share at SAR16.3 (US$4.34) and are reluctant to disclose their fi nancial Home Alawwal existing issued ordinary share statements with regards to IFRS capital at approximately SAR18.6 billion UAE: Noor Bank, a fully-fl edged Islamic standards, Agah Group reported citing (US$4.96 billion). bank, has launched a new home fi nance the Central Bank of Iran. The Iranian proposition called Noor Home, according banks claim that the Iranian version of A binding agreement is yet to be entered to a press release. Noor Home’s suite of the IFRS standards has structural defects into between SABB and Alawwal. Any products includes fi nance for ready while analysts are said to believe that binding agreement to proceed with the property purchases and off -plan projects, most banks due to their shady activities merger will be subject to a number of as well as capital for commercial are not good with the new IFRS standard conditions, including approvals of the property and non-resident fi nance for a reporting scheme. Saudi Arabian Monetary Authority, maximum tenor of 25 years. Moreover, other regulatory authorities and the proposition also provides equity shareholders. DAE obtains Islamic and release and buyout options. conventional credit facility Fiqh committee approves UAE: Dubai Aerospace Enterprise (DAE) Proposed SABB-Alawwal has secured a four-year unsecured merger at advanced stage crowdfunding rule revolving credit facility with an initial IRAN: A regulation on crowdfunding SAUDI ARABIA: Saudi British Bank commitment of US$480 million, which has been ratifi ed by the Fiqh committ ee, (SABB)’s discussions with Royal Bank includes both Islamic and conventional Agah Group reported citing Dr Shapour of Scotland Group-backed Alawwal tranches. According to a statement, Mohammadi, the chairman of the the deal has an accordion feature that

allows the facility to be increased to up include moving from a volume weighted company’s fi xed services rollout and to US$800 million at any time aft er the average price to an auction method 5G deployment across the country. The initial closing. for determining closing prices and transaction’s fl exible fi nancing features enhancing the opening price auction in are the fi rst of its kind in Qatar. Both The transaction, arranged by Al Ahli line with practices adopted by most other parties will also partner to exchange Bank of Kuwait, First Abu Dhabi Bank major markets. other innovative solutions and and Noor Bank, is one of the largest products. transactions of its kind in the UAE and Opening prices will continue to be will aid future fi nancing needs of the determined by auction but market orders Iraq cuts ties with Al Bilad business. shall be displayed unpriced at the top of IRAQ: The Central Bank of Iraq has cut the orderbook during the auction period, ties with Al Bilad Islamic Bank for “This facility further diversifi es our and a single index opening value will be Investment and Finance and its CEO, funding sources and adds to the published aft er all orderbooks have Aras Habib Karim, aft er they were added unsecured component of our liquidity uncrossed. Both the market open and to a US Treasury sanctions list. profi le increasing our unsecured market close times will be randomized According to The National, the apex revolving credit facilities to US$1,125- within 30 seconds aft er offi cial open (10 bank has ordered fi nancial institutions to US$1,445 million depending on the fi nal am local time in Riyadh) and close (3:10 cease dealing with the bank and Aras. committ ed amount of this facility,” the pm local time in Riyadh) times to further The US Treasury’s decision was due to company said. enhance investor protection and market allegations that the bank provided soundness. support to designated terrorists. Aras has Tadawul introduces new price vowed to challenge the decision. mechanism Vodafone receives Islamic SAUDI ARABIA: Saudi Arabia’s stock ϐinancing facility GFH reaches settlement exchange, Tadawul, has announced that QATAR: Barwa Bank has entered into BAHRAIN: GFH in a bourse fi ling previously disclosed enhancements to an agreement with Vodafone Qatar, announced that it has received US$22.5 its opening and closing price mechanism which will see the former providing million in cash as part of a sett lement in a will be implemented on the 27th May a six-year medium-term revolving legal claim; no further details on the 2018, according to a statement. credit facility worth QAR911 million sett lement can be disclosed due to (US$248.17 million) to the latt er. confi dentiality clauses. The recovery will Changes to the methodology for have a positive impact on the determining opening and closing prices According to the Gulf Times, the profi tability of the Islamic banking group apply to both the main market and amount obtained will be used to and will be refl ected in its second quarter the Nomu parallel market. Changes accelerate the telecommunication fi nancial results.

for the fi rst quarter of 2018 (Q1 2018) to increased to US$1.65 billion in Q1 2018 RESULT US$8.2 million from US$6.4 million from US$1.56 billion recorded at the end Bank ABC Islamic recorded in the fi rst quarter of 2017 (Q1 of 2017. Total operating income rose to 2017). The bank announced in a US$11 million, a 27.91% growth over the BAHRAIN: Bank ABC Islamic has statement that its total assets also US$8.6 million recorded in Q1 2017. realized a 28.13% increase in its net profi t

They can also invest in a range of immediately lease it back for an initial cryptocurrency options including period of 27 years. Equitativa expects ASSET bitcoin, bitcoin cash and Ethereum via the transaction to generate an estimated Blossom’s US Delaware-based fund. The internal rate of return in excess of 12% MANAGEMENT fund will also accept regular US dollar and provide an initial net yield of 9.75%. Blossom Finance debuts investments. Islamic microϐinance fund LFJM assigned the interest on the land INDONESIA: Blossom Finance has Emirates REIT increases leasehold plot to Emirates REIT and announced the launch of its fi rst entered into an Istisnah agreement to education portfolio fund the construction of the extension publicly available Islamic microfi nance UAE: Equitativa, the manager of fund, according to a press release. of facilities in two phases, with the Emirates REIT, an Islamic REIT, has construction of the fi rst extension to signed a buy and leaseback agreement commence immediately. The fund, which is now open for with Lycee Francais Jean Mermoz enrollment, will see investors receive (LFJM). profi t-sharing from Blossom’s network The latest acquisition will see Emirates of microfi nance partners in Central Java, REIT’s educational sector portfolio According to a press release, the deal increase to AED875 million (US$238.19 which in turn will use the funds for will allow Emirates REIT to acquire microbusinesses — especially traditional million), representing 27% of the total LFJM’s premises in Dubai for AED75 portfolio. market sellers — to meet the increased million (US$20.42 million), and demand during the Ramadan holidays.

business. The general insurance business, (US$26.66 million), according to a bourse TAKAFUL post-completion of the acquisition of Al fi ling. Al Ahlia and Gulf Union get Hilal Takaful, will be rebranded as ‘tinsure’. This new brand launch is Saudi Takaful ϐirms announce SAMA’s nod supported with a move to a new state-of- SAUDI ARABIA: Al Ahlia Cooperative the-art offi ce in Umm Al Sheif. Takaful reduction in capital Insurance Company has signed an MoU Emarat has also rolled out a new SAUDI ARABIA: According to separate with Gulf Union Cooperative Insurance individual medical plan called ‘Personal fi lings on Tadawul, Saudi Enaya Company on the proposed merger Health +’. Cooperative Insurance Company has between them, according to a bourse obtained the approval of the Capital fi ling. Market Authority (CMA) to reduce its Wafa Insurance receives capital from SAR200 million (US$53.26 Separately, Al Ahlia has received the SAMA’s approval million) to SAR100 million (US$26.63 Saudi Arabian Monetary Authority SAUDI ARABIA: Saudi Indian million) while MetLife AIG ANB has (SAMA)’s approval for the proposed Cooperative Insurance Company, also reduced its accumulated losses to merger. known as Wafa Insurance, has received SAR21.27 million (US$5.66 million) or the Saudi Arabian Monetary Authority 11.82% of the company’s capital. The Takaful Emarat rebrands (SAMA)’s lett er approving the reduction decrease is due to the reduction of the of the capital of the company by SAR22 company’s capital from SAR350 million UAE: Takaful Emarat has announced in a million (US$5.86 million) so that the (US$93.21 million) to SAR180 million press release that it has launched the capital aft er reduction is SAR100 million (US$47.94 million). ‘tlife’ brand for its life and health

continued weak investment performance According to a press release, banks and RATINGS of its equity products. development fi nance institutions using MARC afϐirms IMR-2 rating on the standardized approach of the Basel MARC afϐirms PLUS’s Sukuk framework are allowed to use credit Kenanga Islamic Investors ratings assigned by JCR-VIS and PACRA MALAYSIA: MARC has affi rmed in a program for capital adequacy ratio calculation statement the investment manager rating MALAYSIA: MARC has affi rmed its purposes. (IMR) of IMR-2 on Kenanga Investors ‘AAAIS’ rating on Projek Lebuhraya (KIB) and Kenanga Islamic Investors Usahasama (PLUS)’s RM23.35 billion Brunei’s global and regional (KIIB). The IMR rating on KIIB refl ects (US$5.87 billion) Sukuk Musharakah the signifi cant integration with parent program, with a stable outlook. ratings reafϐirmed KIB through shared resources and According to a statement, the rating BRUNEI: RAM has reaffi rmed infrastructure. KIIB focuses on providing affi rmation incorporates a two-notch Brunei’s global and ASEAN-scale only Shariah compliant investment rating uplift from PLUS’s stand-alone ratings of ‘gA1(pi)/Stable/gP1(pi)’ management services. rating of ‘AA’ on the back of the and ‘seaAAA(pi)/Stable/seaP1(pi)’ government’s support with respect to the respectively. According to a press release, Moody’s downgrades Sukuk. the reaffi rmation of the ratings is due to the country’s solid net assets position, Mashreq Capital SBP renews status of both backed by sizeable sovereign reserves. UAE: Moody’s has announced in a statement that it has revised Mashreq JCR-VIS and PACRA “Brunei’s sturdy sovereign balance sheet Capital’s investment manager quality PAKISTAN: The State Bank of Pakistan is a signifi cant anchor to counter the assessment from ‘MQ3’ to ‘MQ2’. The (SBP) has renewed the status of both JCR- energy sector’s volatilities, considering downgrade is on the back of VIS Credit Rating Company (JCR-VIS) the country’s heavy reliance on deterioration in management quality due and Pakistan Credit Rating Agency hydrocarbons for its fi scal and external to senior management turnover, a drop (PACRA) as recognized external credit performance,” said Esther Lai, RAM’s in assets under management, as well as assessment institutions for 2018. head of sovereign ratings.

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Over6,955 individual companies directly involved in the Islamic ﬁ nance industry

Meethaq Islamic Banking United Cooperative Assurance MOVES OMAN: Abdulkader Thomas has Company Danajamin Nasional resigned from Meethaq Islamic Banking’s SAUDI ARABIA: United Cooperative MALAYSIA: Danajamin Nasional has Shariah supervisory board citing Assurance Company intends to appoint announced in a press release that four personal reasons, according to a bourse Ahmed Tarek Abdul Rahman Murad as independent non-executive directors, fi ling. His resignation was eff ective from an independent member of its board of th namely Mohammed Hussein, Abdul the 15 May 2018. The Shariah directors. The decision is subject upon Kadir Md Kassim, Albert Yeoh Beow supervisory board will continue to the approval of shareholders and the Tit and Philip Tan Puay Koon, will be perform its duties with the existing four regulator, according to a bourse fi ling. retiring from their posts this month, members. whereas Ahmad Badri Mohd Zahir, the Amlak Finance non-independent non-executive director, Bank Al Falah UAE: Amlak Finance has announced in a will be retiring in June. PAKISTAN: Bank Al Falah, which off ers bourse fi ling that it has appointed Ali Islamic fi nancial services, has appointed Ibrahim Mohamed as the chairman and Separately, the fi nancial guarantee Sheikh Nahayan Mabarak Al Nahayan, Essamudin Hussain Galadari as the insurer also welcomed Suresh Menon as Abdulla Nasser Hawaileel Al Mansoori, vice-chairman of its board of directors. a director. Menon has 30 years of Abdulla Khalil Al Mutawa, Khalid Arif Abdulla Alharmi was appointed as experience in various dynamic sectors Mana Saeed Al Otaiba, Efstratios the company’s new managing director. and is a nominee director of Credit Georgios Arapoglou, Shehzad Naqvi, Guarantee Corporation. Dr Ayesha Khan, Gyorgy Tamas Ladics and Nauman Ansari as directors of its Ahli Bank AIBIM board, according to a bourse fi ling. OMAN: Ahli Bank’s board of directors has appointed Said Al Hatmi, the MALAYSIA: Adissadikin Ali, the current senior general manager, as its managing director/CEO of RHB Islamic Bank Sohar new CEO eff ective from the 17th June Bank, has been appointed as the OMAN: Ahmed Al Musallami has been 2018 following the resignation of Lloyd president of the Association of Islamic appointed as CEO of Bank Sohar, Maddock for personal reasons. Banking Institutions (AIBIM), which eff ective the 20th May 2018, according to a recently rebranded to become the bourse fi ling. Ahmed was previously The appointment of Said is subject to the Association of Islamic Banking and CEO of the National Bank of Oman; he approval of the Central Bank of Oman. Financial Institutions Malaysia, replaces acting CEO Sasi Kumar who Ahli Bank off ers Shariah compliant confi rmed a press statement. Adissadikin resigned in April along with a member of products and services through its Islamic succeeds Mohd Redza Shah Abdul the board of directors, Abdullah Humaid window Al Hilal Islamic Banking. Wahid, CEO of Bank Muamalat Al-Ma’mary. Malaysia.

TREASURY MANAGEMENT FOR ISLAMIC BANKS: Documentation, Assurance, Risk & Strategic Management 18th July 2018, KUALA LUMPUR

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Expected date Company's name Size Structure Announcement Date TBA Kuwait Finance House US$3 billion Sukuk program 22nd May 2018 TBA Jordan Islamic Bank TBA Sukuk 22nd May 2018 TBA Union Properties AED1 billion Non-convertible and unlisted 21st May 2018 10-year Sukuk TBA Manazel Real Estate AED2.6 billion Sukuk 10th May 2018 2018/2019 Dubai Aerospace Enterprise US$500 million Sukuk 2nd May 2018 12th June 2018 Turkish Treasury TRY500 million CPI-indexed Sukuk 2nd May 2018 TBA IDB TBA Euro-denominated Sukuk 2nd May 2018 TBA Byrne Group TBA Sukuk 26th April 2018 TBA Pakarab Fertilizers PKR1 billion Sukuk Musharakah 23rd April 2018 TBA Niger NGN21.5 billion Sukuk 17th April 2018 TBA Pakistan US$3 billion Sukuk 16th April 2018 Second half of 2018 Saudi Arabia TBA US dollar Sukuk 13th April 2018 2018 Morocco TBA Sukuk 11th April 2018 TBA Agha Steel Industries PKR5 billion Sukuk 11th April 2018 2018 Sudan US$1 billion Sukuk 6th April 2018 2018 Ghana US$2.5 billion Sukuk and bonds 6th April 2018 TBA Tunisia TBA Sukuk 3rd April 2018 TBA Ziraat Bank US$500 million Sukuk 3rd April 2018 TBA Drake & Scull International AED450 million Convertible Sukuk 29th March 2018 TBA Alizz Islamic Bank OMR100 million Sukuk 27th March 2018 2018 QIIB US$300-500 million Sukuk 27th March 2018 TBA Turkiye Finans US$450 million Sukuk 27th March 2018 TBA UMW Holdings RM2 billion Sukuk 23rd March 2018 TBA UiTM Solar Power RM240 million Green SRI Sukuk 23rd March 2018 May 2018 Pakistan PKR100 billion Sukuk 20th March 2018 TBA Saipa IRR20 trillion Sukuk 16th March 2018 TBA Iran Social Security Organization IRR390 billion Sukuk 16th March 2018 TBA Iran Air IRR5 trillion Sukuk 16th March 2018 TBA Babak Iranian Copper Company IRR3 trillion Sukuk 14th March 2018 TBA Butia Iranian Steel Company IRR3.6 trillion Sukuk 14th March 2018 TBA Sirjan Iranian Steel Company IRR4 trillion Sukuk 14th March 2018 June 2018 Nigerian Mortgage Reﬁ nancing NGN1 billion Sukuk 13th March 2018 Company 2019 Boubyan Bank TBA Sukuk 12th March 2018 TBA OSK Holdings TBA Islamic medium-term note 12th March 2018 Fiscal year starting the South Africa TBA Sukuk 6th March 2018 1st April 2018 TBA Alborz Railways Equipment IRR1.05 trillion Sukuk 20th February 2018 TBA Meezan Bank PKR7 billion Tier 1 Sukuk 15th February 2018 TBA Al Dhazab Assets RM180 million Sukuk 14th February 2018 TBA The Sultanate of Oman TBA Sukuk 9th February 2018 TBA Central Bank of Iran TBA Foreign currency Shariah 8th February 2018 securities 2018 Republic of Maldives TBA Maldivian ruﬁ yaa denominated 5th February 2018 Sukuk Second quarter of 2018 Government of Kuwait TBA Bonds and Sukuk 31st January 2018 TBA Axis REIT TBA 10-year Sukuk 30th January 2018 TBA Al Salam Bank Algeria TBA Sukuk Istithmar 29th January 2018 TBA Government of Nigeria TBA Sukuk 26th January 2018 TBA Riyad REIT SAR1 billion Sukuk program 26th January 2018

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 1650

2090 1460

1680 1270

1270 1080

860 890

450 700 Dec Jan Feb Mar Apr May Dec Jan Feb Mar Apr May

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 2000

1130 1680

960 1360

790 1040

620 720

450 400 Dec Jan Feb Mar Apr May Dec Jan Feb Mar Apr May

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 2500

1000 2200

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400 1000 Dec Jan Feb Mar Apr May Dec Jan Feb Mar Apr May

SAMI Halal Food Participation (All Cap) 6 months

2350

2190

2030

1870

1710

1550 Dec-2017 Jan-2018 Feb-2018 Mar-2018 Apr-2018 May-2018

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 1650 1650

1430 1400

1210 1150

990 900

770 650

550 400 Dec Jan Feb Mar Apr May Dec Jan Feb Mar Apr May

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 2450 2500

2110 2080

1770 1660

1430 1240

1090 820

750 400 Dec Jan Feb Mar Apr May Nov Dec Jan Feb Mar Apr May

REDmoney Global Shariah

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

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

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

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

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

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

Eurekahedge Middle East/Africa Islamic Fund Index Eurekahedge Islamic Fund Gold Index

140 120

120 100 100 80 80 60 60 Percentage Percentage 40 40

20 20

0 0 Jul-14 Jul-14 Jan-17 Jun-17 Jan-17 Jun-17 Oct-15 Feb-14 Sep-13 Oct-15 Feb-14 Sep-13 Dec-14 Dec-14 Apr-13 Apr-18 Apr-13 Apr-18 Aug-16 Mar-16 Mar-16 Aug-16 Nov-17 Nov-17 May-15 May-15

Top 10 Annualized Returns for ALL Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 Atlas Pension Islamic - Equity Sub Atlas Asset Management 19.38 Pakistan 2 Meezan Tahaﬀ uz Pension - Equity Sub Al Meezan Investment Management 16.67 Pakistan 3 Atlas Islamic Stock Atlas Asset Management 14.48 Pakistan 4 Al-Ameen Shariah Stock UBL Fund Managers 14.25 Pakistan 5 Old Mutual Albaraka Equity - Class A Old Mutual Investment Group 14.03 South Africa 6 Jadwa Saudi Equity - ClassB Jadwa Investment 11.88 Saudi Arabia 7 AlAhli Saudi Trading Equity NCB Capital Company 11.79 Saudi Arabia 8 WSF Global Equity - USD I Cogent Asset Management 11.18 Guernsey 9 Al Raed Saudi Equity Samba Financial Group 10.59 Saudi Arabia 10 Att ĳ ari Al Moucharaka Att ĳ ariWafa Bank 10.57 Morocco Eurekahedge Islamic Fund Index 3.11 Based on 62.9% of funds which have reported April 2018 returns as at the 21st May 2018 Top 10 Annualized Standard Deviations for ALL Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 Boubyan KD Money Market II Boubyan Capital Investment 0.08 Kuwait 2 Boubyan USD Liquidity Boubyan Capital Investment 0.08 Kuwait 3 CIMB Islamic Deposit CIMB-Principal Asset Management 0.15 Malaysia 4 PB Islamic Cash Management Public Mutual 0.15 Malaysia 5 Emirates Islamic Money Market Limited Institutional Emirates NBD Asset Management 0.22 Jersey Share Class I USD 6 CIMB Islamic Money Market CIMB-Principal Asset Management 0.24 Malaysia 7 Jadwa Saudi Riyal Murabaha Jadwa Investment 0.34 Saudi Arabia 8 Al Yusr Saudi Riyal Morabaha Alawwal Invest 0.44 Saudi Arabia 9 Al Badr Murabaha SAR Banque Saudi Fransi 0.49 Saudi Arabia 10 AlAhli Diversiﬁ ed US Dollar NCB Capital 0.51 Saudi Arabia Eurekahedge Islamic Fund Index 7.85 Based on 62.9% of funds which have reported April 2018 returns as at the 21st May 2018 Top Annualized Returns for Islamic Gold Funds Fund Fund Manager Performance Measure Fund Domicile 1 Deutsche Noor Precious Metals Securities - Class A DWS Noor Islamic Funds -5.81 Ireland Eurekahedge Islamic Fund Index -5.89 Based on 33.33% of funds which have reported April 2018 returns as at the 21st May 2018

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

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

115 102

100 110

98 105 96

Percentage 100 Percentage 94

95 92

90 90 Jul-17 Jul-14 Jan-18 Jan-17 Jun-17 Jun-17 Oct-17 Feb-18 Sep-17 Oct-15 Feb-14 Sep-13 Dec-17 Dec-14 Apr-17 Apr-13 Aug-17 Aug-16 Mar-18 Mar-16 Nov-17 May-17 Nov-17 May-15

Top 10 Islamic Fixed Income Funds by 3 Months Returns Fund Fund Manager Performance Measure Fund Domicile 1 MNC Dana Syariah MNC Asset Management 1.65 Indonesia 2 Meezan Islamic Income Al Meezan Investment Management 1.20 Pakistan 3 Atlas Pension Islamic - Debt Sub Atlas Asset Management 0.92 Pakistan 4 PB Islamic Bond Public Mutual 0.90 Malaysia 5 Al-Ameen Islamic Aggressive Income UBL Fund Managers 0.81 Pakistan 6 Meezan Tahaff uz Pension - Debt Sub Al Meezan Investment Management 0.77 Pakistan 7 Pacifi c Dana Murni Pacifi c Mutual Fund 0.74 Malaysia 8 Libra AsnitaBond Libra Invest 0.73 Malaysia 9 Manulife Investment As-Saad Manulife Asset Management Services 0.60 Malaysia 10 AlAhli Diversifi ed Saudi Riyal NCB Capital Company 0.41 Saudi Arabia Eurekahedge Islamic Fund Index -0.49 Based on 70.59% of funds which have reported April 2018 returns as at the 21st May 2018 Top 10 Sharpe Ratios for ALL Islamic Funds Fund Fund Manager Performance Measure Fund Domicile 1 PB Islamic Cash Management Public Mutual 18.13 Malaysia 2 Boubyan KD Money Market II Boubyan Capital Investment 16.26 Kuwait 3 Boubyan USD Liquidity Boubyan Capital Investment 9.45 Kuwait 4 Meezan Tahaff uz Pension - Money Market Sub Al Meezan Investment Management 8.03 Pakistan 5 Atlas Pension Islamic - Debt Sub Atlas Asset Management 5.95 Pakistan 6 Meezan Tahaff uz Pension - Debt Sub Al Meezan Investment Management 5.68 Pakistan 7 MNC Dana Syariah MNC Asset Management 5.47 Indonesia 8 Emirates Islamic Money Market Limited Institutional Emirates NBD Asset Management 5.06 Jersey Share Class I USD 9 AlAhli International Trade NCB Capital Company 4.70 Saudi Arabia 10 Al Badr Murabaha SAR Banque Saudi Fransi 4.52 Saudi Arabia Eurekahedge Islamic Fund Index 0.14 Based on 62.9% of funds which have reported April 2018 returns as at the 21st May 2018

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 2016, 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 30-Apr-18 Yinson Holdings Malaysia Sukuk Domestic market 242 AmInvestment Bank, Maybank public issue 24-Apr-18 MKD Kencana Malaysia Sukuk Domestic market 333 Maybank public issue 24-Apr-18 Al-'Aqar Healthcare Malaysia Sukuk Domestic market 150 AmInvestment Bank, Maybank Real Estate public issue Investment Trust 19-Apr-18 Kuantan Port Malaysia Sukuk Domestic market 167 Maybank Consortium public issue 18-Apr-18 DanaInfra Nasional Malaysia Sukuk Domestic market 643 AmInvestment Bank, Bank Islam Malaysia, public issue CIMB Group, Kenanga Investment Bank, Maybank, RHB Bank 17-Apr-18 Noor Bank UAE Sukuk Euro market 500 Citigroup, Deutsche Bank, Dubai Islamic Bank, public issue Emirates NBD, Noor Bank, Sharjah Islamic Bank, Standard Chartered Bank, Warba Bank 12-Apr-18 UMW Holdings Malaysia Sukuk Domestic market 284 CIMB Group, Maybank public issue 11-Apr-18 Sharjah Islamic Bank UAE Sukuk Euro market 500 Arab Banking, Dubai Islamic Bank, Emirates public issue NBD, First Abu Dhabi Bank, HSBC, Noor Bank, Standard Chartered Bank 11-Apr-18 DAMAC Properties UAE Sukuk Euro market 400 Barclays, Dubai Islamic Bank, Emirates NBD, Dubai public issue HSBC, Kuwait Projects, Mashreqbank, Sharjah Islamic Bank 02-Apr-18 Employees Provident Malaysia Sukuk Domestic market 594 AmInvestment Bank, RHB Bank Fund public issue 28-Mar-18 Bahrain Bahrain Sukuk Euro market 1,000 BNP Paribas, Citigroup, Gulf International Bank, public issue National Bank of Bahrain, Standard Chartered Bank 27-Mar-18 Lembaga Pembiayaan Malaysia Sukuk Domestic market 769 Aﬃ n Hwang Capital, AmInvestment Bank, Bank Perumahan Sektor public issue Islam Malaysia, CIMB Group, Maybank, OCBC, Awam RHB Bank 15-Mar-18 Emirates Group UAE Sukuk Euro market 600 Abu Dhabi Islamic Bank, BNP Paribas, public issue Citigroup, Dubai Islamic Bank, Emirates NBD, First Abu Dhabi Bank, HSBC, JPMorgan, Noor Bank, Standard Chartered Bank 15-Mar-18 Putrajaya Holdings Malaysia Sukuk Domestic market 154 AmInvestment Bank, CIMB Group, Maybank public issue 15-Mar-18 MMC Malaysia Sukuk Domestic market 256 RHB Bank public issue 14-Mar-18 Dar Al-Arkan Real Saudi Sukuk Euro market 500 Alkhair Capital (Dubai), Deutsche Bank, Dubai Estate Development Arabia public issue Islamic Bank, Emirates NBD, Goldman Sachs, Nomura, Noor Bank, Standard Chartered Bank 14-Mar-18 Khazanah Nasional Malaysia Sukuk Domestic market 513 CIMB Group, RHB Bank public issue 13-Mar-18 Gamuda Malaysia Sukuk Domestic market 102 AmInvestment Bank, CIMB Group public issue 08-Mar-18 Islamic Development Saudi Sukuk Euro market 1,250 CIMB Group, Citigroup, Emirates NBD, Gulf Bank Arabia public issue International Bank, HSBC, Natixis, Standard Chartered Bank, Sumitomo Mitsui Financial Group 07-Mar-18 Sharjah UAE Sukuk Euro market 1,000 Dubai Islamic Bank, HSBC, Sharjah Islamic public issue Bank, Standard Chartered Bank

Global Sukuk Volume by Month Global Sukuk Volume by Quarter

US$bn US$bn US$bn Volume Average deal value US$bn 14 1.0 20 0.7 Volume 12 0.9 18 0.6 Average deal value 0.8 16 10 0.7 14 0.5 8 0.6 12 0.4 0.5 10 6 0.4 8 0.3 4 0.3 6 0.2 4 0.2 0.1 2 0.1 2 0 0.0 0 0.0 4321 5 9876 11 1210 4321 5 1Q 2Q 3Q 4Q 1Q 4Q3Q2Q 4Q3Q2Q1Q 2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q 2017 2018 2013 2014 2015 2016 2017 2018

Top 30 Issuers of Global Sukuk 12 Months Issuer Nationality Market US$ (mln) Tranches Managers Indonesia Indonesia Euro market 3,000 2 Deutsche Bank, First Abu Dhabi Bank, HSBC, Mandiri Sekuritas, public issue Standard Chartered Bank Oman Oman Euro market 2,000 1 Alizz Islamic Bank, Citigroup, Dubai Islamic Bank, Gulf public issue International Bank, HSBC, JPMorgan, Standard Chartered Bank Islamic Development Saudi Arabia Euro market 1,250 1 Emirates NBD, Goldman Sachs, Gulf International Bank, HSBC, Bank public issue Maybank, National Bank of Kuwait, Natixis, Standard Chartered Bank Islamic Development Saudi Arabia Euro market 1,250 1 Dubai Islamic Bank, First Abu Dhabi Bank, Gulf International Bank, Bank public issue HSBC, Maybank, Natixis, Standard Chartered Bank, Warba Bank China General Nuclear Malaysia Domestic market 1,246 33 CIMB Group, Maybank, RHB Capital Power public issue DanaInfra Nasional Malaysia Domestic market 1,022 5 AmInvestment Bank, CIMB Group, HSBC, Maybank, RHB Capital public issue Pakistan Pakistan Euro market 1,000 1 Citigroup, Deutsche Bank, Dubai Islamic Bank, Industrial & public issue Commercial Bank of China, Noor Bank, Standard Chartered Bank Dubai Islamic Bank UAE Euro market 1,000 1 Arab Banking, Dubai Islamic Bank, First Abu Dhabi Bank, HSBC, public issue JPMorgan, Kuwait Finance House, Sharjah Islamic Bank, Standard Chartered Bank Sharjah UAE Euro market 1,000 1 Dubai Islamic Bank, HSBC, Sharjah Islamic Bank, Standard public issue Chartered Bank Bahrain Bahrain Euro market 1,000 1 BNP Paribas, Citigroup, Gulf International Bank, National Bank of public issue Bahrain, Standard Chartered Bank Prasarana Malaysia Malaysia Domestic market 951 6 CIMB Group, Maybank public issue Saudi Arabian Mining - Saudi Arabia Domestic market 933 1 BNP Paribas, HSBC, Saudi National Commercial Bank Ma'aden public issue Tenaga Nasional Malaysia Domestic market 869 28 CIMB Group, Maybank public issue Bahrain Bahrain Euro market 850 1 BNP Paribas, Citigroup, Gulf International Bank, JPMorgan, public issue National Bank of Bahrain Lembaga Pembiayaan Malaysia Domestic market 816 5 AmInvestment Bank, CIMB Group, Maybank, RHB Capital Perumahan Sektor public issue Awam Lembaga Pembiayaan Malaysia Domestic market 769 4 Affi n Hwang Capital, AmInvestment Bank, Bank Islam Malaysia, Perumahan Sektor public issue CIMB Group, Maybank, OCBC, RHB Bank Awam Prasarana Malaysia Malaysia Domestic market 767 5 Affi n Hwang Capital, AmInvestment Bank, CIMB Group, Kenanga public issue Investment Bank, Maybank DanaInfra Nasional Malaysia Domestic market 710 5 AmInvestment Bank, CIMB Group, Hong Leong Financial Group, public issue Maybank, RHB Capital First Abu Dhabi Bank UAE Euro market 650 1 Citigroup, First Abu Dhabi Bank, Kuwait Finance House, Saudi public issue National Commercial Bank, Standard Chartered Bank DanaInfra Nasional Malaysia Domestic market 643 4 AmInvestment Bank, Bank Islam Malaysia, CIMB Group, Kenanga public issue Investment Bank, Maybank, RHB Bank Emirates Group UAE Euro market 600 1 Abu Dhabi Islamic Bank, BNP Paribas, Citigroup, Dubai Islamic public issue Bank, Emirates NBD, First Abu Dhabi Bank, HSBC, JPMorgan, Noor Bank, Standard Chartered Bank PR1MA Corporation Malaysia Domestic market 593 2 AmInvestment Bank, CIMB Group, Maybank, RHB Capital Malaysia public issue Khazanah Nasional Malaysia Domestic market 513 1 CIMB Group, RHB Bank public issue Arab Petroleum Saudi Arabia Euro market 500 1 Arab Banking, Credit Agricole, Emirates NBD, First Abu Dhabi Investments public issue Bank, HSBC, Kuwait Finance House, Standard Chartered Bank Mazoon Electricity Oman Euro market 500 1 JPMorgan public issue Dar Al-Arkan Real Saudi Arabia Euro market 500 1 Alkhair Capital (Dubai), Deutsche Bank, Dubai Islamic Bank, Estate Development public issue Emirates NBD, Goldman Sachs, Nomura, Noor Bank, Standard Chartered Bank Sharjah Islamic Bank UAE Euro market 500 1 Arab Banking, Dubai Islamic Bank, Emirates NBD, First Abu Dhabi public issue Bank, HSBC, Noor Bank, Standard Chartered Bank Noor Bank UAE Euro market 500 1 Citigroup, Deutsche Bank, Dubai Islamic Bank, Emirates NBD, Noor public issue Bank, Sharjah Islamic Bank, Standard Chartered Bank, Warba Bank Prasarana Malaysia Malaysia Domestic market 490 3 Affi n Hwang Capital, AmInvestment Bank, CIMB Group, Kenanga public issue Investment Bank, Maybank Pengurusan Aset Air Malaysia Domestic market 489 3 Bank Islam Malaysia, Maybank, RHB Bank public issue

Top Global Islamic Bookrunners 12 Months Sukuk Volume by Currency US$ (billion) 12 Months Bookrunner Parents US$ (mln) Iss % Indonesian Rupiah 1 Maybank 6,494 48 16.01 Great Britain Pound 2 CIMB Group 6,146 43 15.16 Saudi Riyal

3 RHB Bank 3,049 30 7.52 US Dollar

Malaysian Ringgit 4 AmInvestment Bank 2,672 27 6.59 0 5 10 15 20 25 5 HSBC 2,515 15 6.20

6 Standard Chartered Bank 2,308 20 5.69 Sukuk Volume by Issuer Nation US$ (billion) 12 Months

7 Dubai Islamic Bank 2,120 14 5.23 Mali UK 8 Citigroup 1,831 9 4.51 Pakistan China Bahrain 9 JPMorgan 1,140 5 2.81 Oman Indonesia 10 Gulf International Bank 968 5 2.39 Saudi Arabia UAE 11 A ﬃ n Hwang Capital 807 11 1.99 Malaysia 02468101214161820 12 Emirates NBD 805 11 1.99

13 BNP Paribas 741 4 1.83 Global Sukuk Volume by Sector 12 Months

14 First Abu Dhabi Bank 713 7 1.76 Finance

15 Abu Dhabi Islamic Bank 660 2 1.63 Government Others 16 Noor Bank 587 8 1.45 Real Estate / Property Utility & Energy 17 Kenanga Investment Bank 566 7 1.40 Transportation 18 Sharjah Islamic Bank 561 5 1.38 03691215

19 Hong Leong Financial Group 484 7 1.19 Global Sukuk Volume - US$ Analysis 20 Saudi National Commercial Bank 441 2 1.09 US$bn 40 21 Kuwait Finance House 406 5 1.00 Non-US$ US$ 35 22 Warba Bank 385 4 0.95 30 25 23 Bank Islam Malaysia 380 3 0.94 20 15 24 National Bank of Bahrain 370 2 0.91 10 5 0 25 Arab Banking 365 5 0.90 1Q 2Q 3Q 4Q 1Q 4Q3Q2Q 4Q3Q2Q1Q 2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q 26 Natixis 313 2 0.77 2013 2014 2015 2016 2017 2018

27 Deutsche Bank 291 3 0.72 Top Islamic Finance Related Project Finance Mandated Lead Arrangers 12 Months 28 Alizz Islamic Bank 286 1 0.70 Mandated Lead Arranger US$ (million) No % 29 Islamic Development Bank 285 1 0.70 1 NATIXIS 227.27 2 5.10 Industrial & Commercial Bank of 2 Arab National Bank 197.27 1 4.42 30 185 2 0.46 China 2 Bank Albilad 197.27 1 4.42 2 HSBC 197.27 1 4.42 Top Islamic Finance Related Project Financing Legal Advisors 12 Months 2 National Commercial Bank 197.27 1 4.42 Legal Advisor US$ (million) No % 2 Riyad Bank 197.27 1 4.42 1 Cliﬀ ord Chance 1,516.81 2 31.50 2 Samba Capital & Investment 197.27 1 4.42 Management 2 Shearman & Sterling 1,398.06 1 29.03 2 Saudi Fransi Capital 197.27 1 4.42 3 Allen & Overy 712.72 2 14.80 9 First Abu Dhabi Bank 192.75 2 4.32 4 Baker & McKenzie 593.97 1 12.33 10 Bank of China 127.02 1 2.85 4 Freshﬁ elds 593.97 1 12.33 10 Deutsche Bank 127.02 1 2.85

Top Islamic Finance Related Financing Mandated Lead Arrangers Top Islamic Finance Related Financing Bookrunners 12 Months 12 Months Mandated Lead Arranger US$ (mln) No % Bookrunner US$ (mln) No % 1 Standard Chartered Bank 1,400 7 11 1 Dubai Islamic Bank 1,144 7 5 2 Abu Dhabi Islamic Bank 994 5 8 2 Emirates NBD 1,009 8 5 3 First Abu Dhabi Bank 916 5 7 4 Mitsubishi UFJ Financial Group 841 2 7 3 Standard Chartered Bank 1,005 8 5 5 Citigroup 823 2 6 5 HSBC 823 2 6 4 Mashreqbank 963 7 5 5 Industrial & Commercial Bank of 823 2 6 5 HSBC 825 3 4 China 8 Bank of China 765 1 6 6 Abu Dhabi Islamic Bank 802 8 4 8 Credit Agricole 765 1 6 8 JPMorgan 765 1 6 7 SG Corporate & Investment Banking 797 3 4

8 Noor Bank 723 7 3 Top Islamic Finance Related Financing Deal List 12 Months

9 Mitsubishi UFJ Financial Group 691 3 3 Credit Date Borrower Nationality US$ (mln) 19th Mar 2018 Saudi Arabia Saudi Arabia 7,650 10 Bank of China 676 2 3 16th Mar 2018 Canakkale Otoyol Ve Turkey 2,238 11 Citigroup 673 3 3 Koprusu Insaat Yatirim Ve Isletme Industrial & Commercial Bank of th 12 669 3 3 15 Aug 2017 Al Motasaliha UAE 1,835 China 18th Dec 2017 Ma'aden Aluminum Saudi Arabia 1,782 13 Maybank 632 5 3 3rd Dec 2017 GEMS MENASA (Cayman) UAE 1,250 21st Mar 2018 ICD UAE 1,200 14 BNP Paribas 614 2 3 13th Oct 2017 DanaInfra Nasional Malaysia 948 14 Mizuho 614 2 3 3rd Jul 2017 ME Investments UAE 681 11th Oct 2017 PR1MA Corporation Malaysia 592 14 Sumitomo Mitsui Financial Group 614 2 3 Malaysia nd 17 Credit Agricole 588 1 3 2 Oct 2017 Kuwait Food (Americana) Kuwait 592

17 Goldman Sachs 588 1 3 Top Islamic Finance Related Financing by Sector 12 Months

17 JPMorgan 588 1 3

20 CIMB Group 569 4 3 Finance

21 Commercial Bank of Dubai 501 2 2 Transportation 22 AmInvestment Bank 385 2 2

22 RHB Bank 385 2 2 0US$bln 0.5 1.51.0 4.03.53.02.52.0 24 First Abu Dhabi Bank 360 6 2 Global Islamic Financing - Years to Maturity (YTD Comparison) 25 Kuwait Finance House 358 3 2 2014

26 Abu Dhabi Commercial Bank 290 5 1 2015

27 Arab Banking Corporation 254 7 1 2016

28 Saudi National Commercial Bank 226 2 1 2017

29 National Bank of Fujairah 223 2 1 2018 0% 20% 40% 60% 80% 100% 30 ICICI Bank 200 2 1 0-2yrs 3-5yrs 6-10yrs 11-15yrs 16-20yrs 20+yrs

Are your deals listed here? If you feel that the information within these tables is inaccurate, you may contact the following directly: Mayumi Ohira (Media Relations) Email: [email protected] Tel: +852 3698 4757

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